UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

~~WASHINGTON,~~Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 ~~FOR THE QUARTERLY PERIOD ENDED OCTOBER 28, 2017~~

		For the quarterly period endedNovember 2, 2019

		or

	o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT ~~FOR THE TRANSITION PERIOD FROM ………… TO …………~~OF 1934
		For the transition period from ___________ to ___________

~~COMMISSION FILE NUMBER:~~Commission File Number 0-14818

TRANS WORLD ENTERTAINMENT CORPORATION

(Exact ~~name~~Name of ~~registrant~~Registrant as ~~specified~~Specified in its ~~charter)~~Charter)

	New York		14-1541629
(	State or ~~other jurisdiction~~Other Jurisdiction of ~~incorporation~~ Incorporation or ~~organization)~~Organization	(	I.R.S. Employer Identification ~~Number)~~No.

	38 Corporate Circle Albany, New York		12203
	Address of Principal Executive Offices		Zip Code

~~38 Corporate Circle~~

~~Albany, New York 12203~~

~~(Address of principal executive offices, including zip code)~~

(518) 452-1242

(Registrant’s ~~telephone number, including area code)~~Telephone Number, Including Area Code

Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.01 par value per share	TWMC	NASDAQ Stock Market

Indicate by a check mark whether the ~~Registrant~~registrant (1) has filed all reports required to be filed by ~~Sections~~Section 13 or ~~15 (d)~~15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the ~~Registrant~~registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesx Noo

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, ~~or a~~ smaller reporting company, or an emerging growth company. See the ~~definition~~definitions of “large accelerated ~~filer”,~~filer,” “accelerated ~~filer”~~filer,” “smaller reporting company,” and ~~“smaller reporting~~“emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filero	Accelerated filerx	~~Non-accelerated filer~~ o
Non-accelerated filerx	Smaller reporting companyox
	Emerging growth companyo

~~Indicate by check mark whether the registrant is~~If an emerging growth company, ~~as defined in Rule 450 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-1 of this chapter).~~

~~Emerging growth company~~ o

~~Indicate~~indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the ~~Exchange~~ Act). Yeso Nox

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes o No o

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock, $.01 par value,

~~36,208,844~~1,816,311 shares outstanding as of ~~October 28, 2017~~December 13, 2019

TRANS WORLD ENTERTAINMENT CORPORATION AND SUBSIDIARIES

QUARTERLY REPORT ON FORM 10-Q

INDEX TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

	Form 10-Q Page No.

PART I. FINANCIAL INFORMATION

Item 1 – Interim Condensed Consolidated Financial Statements (Unaudited)

Condensed Consolidated Balance Sheets at ~~October 28, 2017,~~November 2, 2019, February 2, 2019 and November 3, 2018
~~January 28, 2017 and October 29, 2016~~	3

Condensed Consolidated Statements of Operations – Thirteen and Thirty-Nine Weeks Ended November 2, 2019 and November 3, 2018
~~Thirteen and Thirty-nine Weeks Ended October 28, 2017 and October 29, 2016~~	4

Condensed Consolidated Statements of Comprehensive ~~Income (Loss)~~Loss – Thirteen and Thirty-Nine Weeks Ended November 2, 2019 and November 3, 2018		5

Condensed Consolidated Statements of Shareholders’ Equity – Thirteen and ~~Thirty-nine~~Thirty-Nine Weeks Ended ~~October 28, 2017~~November 2, 2019 and ~~October 29, 2016~~November 3, 2018	5	6

Condensed Consolidated Statements of Cash Flows – Thirty-Nine Weeks Ended November 2, 2019 and November 3, 2018		7
~~Thirty-nine Weeks Ended October 28, 2017 and October 29, 2016~~	6

Notes to Interim Condensed Consolidated Financial Statements	7	8

Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations	18	21

Item 3 – Quantitative and Qualitative Disclosures about Market Risk	29	30

Item 4 – Controls and Procedures	29	30

PART II. OTHER INFORMATION

Item 1 – Legal Proceedings	30	31

Item 1A- Risk Factors	30	31

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds	30	31

Item 3 – Defaults Upon Senior Securities	30	31

Item 4 – Mine Safety Disclosures	30	32

Item 5 – Other Information	30	32

Item 6 – Exhibits	31	32

Signatures	32	33

TRANS WORLD ENTERTAINMENT CORPORATION AND SUBSIDIARIES

PART 1. FINANCIAL INFORMATION

Item 1 – Interim Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share and share amounts)

(unaudited)

	October 28,			January 28,			October 29,			November 2,			February 2,			November 3,
	2017			2017			2016			2019			2019			2018
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	3,924		$	27,974		$	4,708		$	3,073		$	4,355		$	4,497
Restricted cash		1,503			-			-			950			4,126			4,122
Accounts receivable											4,284			5,383			5,659
Merchandise inventory		144,754			126,004			157,827			101,130			94,842			131,285
Prepaid expenses and other assets		13,184			15,356			13,903			4,719			6,657			9,227
Total current assets		163,365			169,334			176,438			114,156			115,363			154,790

Restricted cash		10,731			16,103			16,100			5,139			5,745			5,944
Net fixed assets		43,472			45,097			41,902
Fixed assets, net											4,987			7,529			12,177
Operating lease right-of-use assets											8,978			—			—
Goodwill		39,191			39,191			39,800			—			—			39,191
Net intangible assets		24,940			27,857			28,737
Intangible assets, net											2,810			3,668			21,052
Other assets		7,247			10,228			10,272			5,410			5,708			5,907
TOTAL ASSETS	$	288,946		$	307,810		$	313,249			141,480			138,013			239,061

LIABILITIES
CURRENT LIABILITIES
Accounts payable	$	45,378		$	52,307		$	61,956		$	29,994		$	34,329		$	42,272
Short-term borrowings		5,000			-			5,936			27,771			—			27,440
Accrued expenses and other current liabilities		9,805			9,198			9,116			5,584			8,132			8,624
Deferred revenue		7,231			9,228			7,813			5,989			6,955			6,454
Current portion of operating lease liabilities											9,440			—			—
Total current liabilities		67,414			70,733			84,821			78,778			49,416			84,790

Contingent consideration		2,115			8,552			10,381
Other long-term liabilities		29,236			30,589			28,927
Operating lease liabilites											16,227			—			—
Other long-term liabilites											21,600			24,867			25,853
TOTAL LIABILITIES		98,765			109,874			124,129			116,605			74,283			110,643

SHAREHOLDERS’ EQUITY
Preferred stock ($0.01 par value; 5,000,000 shares authorized; none issued)		-			-			-			—			—			—

Common stock ($0.01 par value; 200,000,000 shares authorized; 64,255,171, 64,252,671 and 64,252,671 shares issued, respectively)		643			643			643

Common stock ($0.01 par value; 200,000,000 shares authorized; 3,225,627, 3,221,834 and 3,221,834 shares issued, respectively)											32			32			32
Additional paid-in capital		340,391			338,075			337,439			345,043			344,826			344,123

Treasury stock at cost (28,138,116, 28,137,283 and 28,137,283 shares, respectively)		(230,144	)		(230,144	)		(230,144	)

Treasury stock at cost (1,409,316, 1,408,892 and 1,408,043 shares, respectively)											(230,168	)		(230,166	)		(230,167	)
Accumulated other comprehensive loss		(788	)		(802	)		(658	)		(720	)		(735	)		(1,013	)

Retained earnings		80,079			90,164			81,840
(Accumulated deficit) Retained earnings											(89,312	)		(50,227	)		15,443
TOTAL SHAREHOLDERS’ EQUITY		190,181			197,936			189,120			24,875			63,730			128,418
TOTAL LIABILITIES AND EQUITY	$	288,946		$	307,810		$	313,249
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY										$	141,480		$	138,013		$	239,061

See Accompanying Notes to Interim Condensed Consolidated Financial Statements.

TRANS WORLD ENTERTAINMENT CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share ~~amounts)~~data)

(unaudited)

	Thirteen Weeks Ended						Thirty-nine Weeks Ended
	October 28,			October 29,			October 28,			October 29,			Thirteen Weeks Ended						Thirty-nine Weeks Ended
	2017			2016			2017			2016			November 2, 2019			November 3, 2018			November 2, 2019			November 3, 2018

Net sales	$	91,817		$	65,039		$	293,482		$	203,127		$	68,592		$	90,877		$	223,100		$	287,148
Other revenue		1,184			1,242			3,964			3,232			864			1,107			2,510			3,613
Total revenue		93,001			66,281			297,446			206,359			69,456			91,984			225,610			290,761

Cost of sales		61,420			39,409			194,390			121,960			46,377			64,598			152,025			199,514
Gross profit		31,581			26,872			103,056			84,399			23,079			27,386			73,585			91,247
Selling, general and administrative expenses		40,558			34,680			122,763			97,415			29,921			41,140			95,470			122,550
Income from joint venture		(866	)		-			(1,038	)		-
Asset impairment charges														16,035			—			16,035			—
Loss from operations		(8,111	)		(7,808	)		(18,669	)		(13,016	)		(22,877	)		(13,754	)		(37,920	)		(31,303	)

Interest expense		83			179			200			523			228			277			554			444
Other income		(59	)		(51	)		(8,824	)		(1,068	)

Other (income) loss														(30	)		(43	)		388			(171	)
Loss before income tax expense		(8,135	)		(7,936	)		(10,045	)		(12,471	)		(23,075	)		(13,988	)		(38,862	)		(31,576	)
Income tax (benefit) expense		(64	)		(7,452	)		40			(7,358	)
Income tax expense														80			64			223			136
Net loss	$	(8,071	)	$	(484	)	$	(10,085	)	$	(5,113	)	$	(23,155	)	$	(14,052	)	$	(39,085	)	$	(31,712	)

BASIC AND DILUTED LOSS PER SHARE:
Basic and diluted loss per share	$	(0.22	)	$	(0.02	)	$	(0.28	)	$	(0.17	)
Basic and diluted loss per common share													$	(12.73	)	$	(7.74	)	$	(21.51	)	$	(17.48	)

Weighted average number of common shares outstanding – basic and diluted		36,190			31,434			36,181			30,854			1,819			1,815			1,817			1,814

See Accompanying Notes to Interim Condensed Consolidated Financial Statements.

TRANS WORLD ENTERTAINMENT CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE ~~INCOME (LOSS)~~LOSS

(in thousands)

(unaudited)

	Thirteen Weeks Ended						Thirty-nine Weeks Ended
	October 28,			October 29,			October 28,			October 29,			Thirteen Weeks ended						Thirty-nine Weeks Ended
	2017			2016			2017			2016			November 2, 2019			November 3, 2018			November 2, 2019			November 3, 2018

Net loss	$	(8,071	)	$	(484	)	$	(10,085	)	$	(5,113	)	$	(23,155	)	$	(14,052	)	$	(39,085	)	$	(31,712	)

Amortization of pension costs		(5	)		51			(15	)		154
Amortization of pension gain														5			5			15			15
Comprehensive loss	$	(8,076	)	$	(433	)	$	(10,100	)	$	(4,959	)	$	(23,150	)	$	(14,047	)	$	(39,070	)	$	(31,697	)

See Accompanying Notes to Interim Condensed Consolidated Financial Statements.

TRANS WORLD ENTERTAINMENT CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(dollars and shares in thousands)

Thirteen Weeks Ended November 2, 2019
Number of shares
outstanding Accumulated
Common
Shares Treasury
Shares Common
Stock Additional
Paid-in
Capital Treasury
Stock
At Cost Other
Comprehensive
Loss Accumulated
Deficit Shareholders’
Equity
Balance as of August 3, 2019 3,224 (1,409 ) $ 32 $ 344,983 $ (230,168 ) $ (725 ) $ (66,157 ) $ 47,965
Net Loss — — — — — — (23,155 ) (23,155 )
Other comprehensive income — — — — — 5 — 5
Vested restricted shares 2 — — — — — — —
Amortization of unearned compensation/restricted stock amortization — — — 60 — — — 60
Balance as of November 2, 2019 3,226 (1,409 ) $ 32 $ 345,043 $ (230,168 ) $ (720 ) $ (89,312 ) $ 24,875

Thirty-nine Weeks Ended November 2, 2019
Number of shares
outstanding Accumulated
Common
Shares Treasury
Shares Common
Stock Additional
Paid-in
Capital Treasury
Stock
At Cost Other
Comprehensive
Loss Accumulated
Deficit Shareholders’
Equity
Balance as of February 2, 2019 3,222 (1,409 ) $ 32 $ 344,826 $ (230,166 ) $ (735 ) $ (50,227 ) $ 63,730
Net Loss — — — — — — (39,085 ) (39,085 )
Other comprehensive income — — — — — 15 — 15
Vested restricted shares 4 — — 3 (2 ) — — 1
Amortization of unearned compensation/restricted stock amortization — — — 214 — — — 214
Balance as of November 2, 2019 3,226 (1,409 ) $ 32 $ 345,043 $ (230,168 ) $ (720 ) $ (89,312 ) $ 24,875

Thirteen Weeks Ended November 3, 2018
Number of shares
outstanding Accumulated Retained
Common
Shares Treasury
Shares Common
Stock Additional
Paid-in
Capital Treasury
Stock
At Cost Other
Comprehensive
Loss Earnings
(Accumulaed
Deficit) Shareholders’
Equity
Balance as of August 4, 2018 3,219 (1,408 ) $ 32 $ 343,322 $ (230,149 ) $ (1,008 ) $ 29,495 $ 141,692
Net Loss — — — — — — (14,052 ) (14,052 )
Other comprehensive loss — — — — — (5 ) — (5 )
Vested restricted shares 3 — — 3 (18 ) — — (15 )
Amortization of unearned compensation/restricted stock amortization — — — 798 — — — 798
Balance as of November 3, 2018 3,222 (1,408 ) $ 32 $ 344,123 $ (230,167 ) $ (1,013 ) $ 15,443 $ 128,418

Thirty-nine Weeks Ended November 3, 2018
Number of shares
outstanding Accumulated Retained
Common
Shares Treasury
Shares Common
Stock Additional
Paid-in
Capital Treasury
Stock
At Cost Other
Comprehensive
Loss Earnings
(Accumulaed
Deficit) Shareholders’
Equity
Balance as of February 3, 2018 3,215 (1,408 ) $ 32 $ 341,714 $ (230,145 ) $ (998 ) $ 47,611 $ 158,214
Adjustment for adoption of accounting standard, ASU 2014-09 — — — — — — (456 ) (456 )
Net Loss — — — — — — (31,712 ) (31,712 )
Other comprehensive loss — — — — — (15 ) — (15 )
Vested restricted shares 4 — — 9 (22 ) — — (13 )
Common stock issued-new grants 3 — — 75 — — — 75
Amortization of unearned compensation/restricted stock amortization — — — 2,325 — — — 2,325
Balance as of November 3, 2018 3,222 (1,408 ) $ 32 $ 344,123 $ (230,167 ) $ (1,013 ) $ 15,443 $ 128,418
6
TRANS WORLD ENTERTAINMENT CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

As of or for the
Thirty-nine Weeks Ended
October 28, 2017 October 29, 2016
OPERATING ACTIVITIES:
Net loss ($ 10,085 ) ($ 5,113 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation of fixed assets 7,558 5,436
Amortization of intangible assets 2,917 174
Amortization of lease valuations, net (12 ) -
Deferred tax benefit - (7,502 )
Long term incentive compensation 2,314 670
Adjustment to contingent consideration (1,437 ) -
Loss on disposal of fixed assets 459 703
Gain on sale of investments - (800 )
Increase in cash surrender value (227 ) (790 )
Gain on insurance proceeds (8,733 ) -
Changes in operating assets and liabilities:
Merchandise inventory (18,750 ) (23,111 )
Prepaid expenses and other current assets 2,172 (5,311 )
Other assets (497 ) 6,359
Accounts payable (6,929 ) 5,281
Accrued expenses, deferred revenue and other current liabilities (1,390 ) (8,345 )
Other long-term liabilities (1,307 ) 2,470
Net cash used in operations (33,947 ) (29,879 )

INVESTING ACTIVITIES:
Acquisition of a business - (36,600 )
Purchases of fixed assets (6,392 ) (16,726 )
Proceeds from company owned life insurance and SERP death benefits 14,363 -
Investment in joint venture (2,575 ) -
Proceeds from sale of investments - 1,600
Purchases of investments - (500 )
Capital distributions from joint venture 632 -
Net cash provided by (used in) investing activities 6,028 (52,226 )

FINANCING ACTIVITIES:
Exercise of long term equity awards - 39
Payments to shareholders (5,000 ) -
Payments of long term borrowings - (4,727 )
Proceeds from short term borrowings 5,000 5,936
Purchase of treasury stock - (2,646 )
Net cash provided by (used in) financing activities - (1,398 )

Net decrease in cash and cash equivalents (27,919 ) (83,503 )
Cash, cash equivalents, and restricted cash, beginning of year 44,077 104,311
Cash, cash equivalents, and restricted cash, end of year $ 16,158 $ 20,808

Supplemental disclosures and non-cash investing and financing activities:

Interest paid $ 200 $ 523

Fair value of assets acquired, including cash acquired - 93,152
Liabilities assumed - (24,256 )
Net assets acquired - 68,896
Less: Contingent consideration not yet paid - (10,381 )
Less: Fair value of shares issued as consideration - (20,415 )
Less: Indemnity liability not yet paid - (1,500 )
Acquisition of a business $ - $ 36,600
Issuance of restricted performance based awards / deferred / restricted shares under deferred / restricted stock agreements - 6,074
Thirty-nine Weeks Ended
November 2,
2019 November 3,
2018
OPERATING ACTIVITIES:
Net loss $ (39,085 ) $ (31,712 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation of fixed assets 2,272 3,893
Amortization of intangible assets 858 2,915
Amortization of right-of-use assets 6,171 —
Stock-based compensation 214 2,387
Write down of investment 500 —
Adjustment to contingent consideration — (272 )
Loss on disposal of fixed assets 27 327
Loss on impairment of long lived assets 16,035 —
Change in cash surrender value (189 ) 90
Changes in operating assets and liabilities that provide (use) cash:
Accounts receivable 1,099 (1,190 )
Merchandise inventory (6,288 ) (21,908 )
Prepaid expenses and other current assets 1,190 (2,251 )
Other long-term assets (129 ) (163 )
Accounts payable (4,335 ) 492
Accrued expenses and other current liabilities (852 ) (642 )
Deferred revenue (966 ) (2,010 )
Other long-term liabilities (7,344 ) (3,293 )
Net cash used in operating activities (30,822 ) (53,337 )

INVESTING ACTIVITIES:
Purchases of fixed assets (2,128 ) (2,851 )
Capital distributions from joint venture 115 1,305
Net cash used in investing activities (2,013 ) (1,546 )

FINANCING ACTIVITIES:
Proceeds from short term borrowings 27,771 27,440
Payments to etailz shareholders — (1,500 )
Net cash provided by financing activities 27,771 25,940

Net decrease in cash, cash equivalents, and restricted cash (5,064 ) (28,943 )
Cash, cash equivalents, and restricted cash, beginning of period 14,226 43,506
Cash, cash equivalents, and restricted cash, end of period $ 9,162 $ 14,563

See Accompanying Notes to Interim Condensed Consolidated Financial Statements.
67
TRANS WORLD ENTERTAINMENT CORPORATION AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
~~October 28, 2017~~November 2, 2019 and ~~October 29, 2016~~November 3, 2018

Note 1. Nature of Operations

Trans World Entertainment Corporation and subsidiaries (“the Company”) operates in two reportable segments: fye and etailz. The fye segment operates a chain of retail entertainment stores and e-commerce sites,www.fye.comandwww.secondspin.com. As of ~~October 28, 2017,~~November 2, 2019, the fye segment operated ~~268~~206 stores totaling approximately ~~1.5~~1.1 million square feet in the United States, the District of Columbia and the U.S. Virgin Islands. The etailz segment is a ~~leading~~ digital marketplace retailer and generates substantially all of its revenue through Amazon Marketplace. The Company’s business is seasonal in nature for both segments, with the peak selling period being the holiday season which falls in the Company’s fourth fiscal quarter.

Liquidity and Cash ~~Flows:~~Flows Considerations:
The unaudited condensed consolidated financial statements for the thirteen and thirty-nine weeks ended November 2, 2019 were prepared on the basis of a going concern which contemplates that the Company will be able to realize assets and satisfy liabilities and commitments in the normal course of business. The ability of the Company to meet its liabilities and to continue as a going concern is dependent on improved profitability, the continued implementation of the performance improvement plan for the etailz segment, the availability of future funding and the completion of other strategic alternatives. The unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.
The Company incurred net losses of $39.1 million and $31.7 million for the thirty-nine weeks ended November 2, 2019 and November 3, 2018, respectively, and has an accumulated deficit of $89.3 million at November 2, 2019. In addition, net cash used in operating activities for the thirty-nine weeks ended November 2, 2019 was $30.8 million. Net cash used in operating activities for the thirty-nine weeks ended November 3, 2018 was $53.3 million. The Company also experienced negative cash flows from operations during fiscal 2018 and 2017, and expects to incur net losses in the foreseeable future. Based on its recurring losses from operations, expectation of continuing operating losses for the foreseeable future, and uncertainty with respect to any available future funding, as well as the completion of other strategic alternatives, the Company has concluded that there is substantial doubt about the Company’s ability to continue as a going concern for a period of one year after the date of filing of this Quarterly Report on Form 10-Q.
Management has plans to address the Company’s current liquidity position. As disclosed in the Company’s Annual Report on Form 10-K filed May 14, 2019, the Company implemented strategic initiatives on December 11, 2018, aimed at improving organizational efficiencies and conserving working capital needed to support the growth of the etailz segment (the “performance improvement plan”). As a result of the initiative, and inventory management in the fye segment, the Company was able to reduce cash used in operations by $22.5 million for the thirty-nine weeks ended November 2, 2019 as compared to the thirty-nine weeks ended November 2, 2018. We anticipate continued improvement in cash flows used in operations for the remainder of fiscal 2019. In addition, the Company continues to evaluate other strategic initiatives including establishing a credit facility at the etailz segment which could provide additional liquidity. At November 2, 2019, we had cash and cash equivalents of $3.1 million, net working capital of $35.4 million, short-term borrowings in the amount of $27.8 million on our revolving credit facility and $11.0 million of availability on our revolving credit facility. This compares to $4.5 million in cash and cash equivalents, net working capital of $70.0 million, short-term borrowings in the amount of $27.4 million on the Company’s revolving credit facility at November 3, 2018, and $22.1 million of availability on our revolving credit facility.

The Company’s primary sources of ~~working capital~~liquidity are ~~cash provided by operations and~~its borrowing capacity under its revolving credit ~~facility. The Company’s~~facility, available cash ~~flows fluctuate~~and cash equivalents, and to a lesser extent, cash generated from ~~quarter~~operations. Our cash requirements relate primarily to ~~quarter due~~working capital needed to ~~various items,~~operate our business, including ~~seasonality~~funding operating expenses, the purchase of ~~sales and associated earnings and losses in those periods, timing of merchandise~~ inventory ~~purchases and the related terms of those purchases, as well as merchandise inventory returns~~ and capital expenditures. ~~Management believes it~~Our ability to achieve profitability and meet future liquidity needs and capital requirements will ~~have adequate resources to fund its cash needs for~~depend upon numerous factors, including the ~~foreseeable future, including its~~timing and amount of our revenue; the timing and amount of our operating expenses; the timing and costs of working capital ~~spending, its seasonal increase~~needs; and in ~~merchandise inventory~~the implementation of our strategy and ~~other operating cash requirements and commitments.~~planned activities.

~~Management anticipates~~In addition to the aforementioned current sources of existing working capital, the Company is continuing its efforts to generate additional sales and increase margins. There can be no assurance that any ~~cash requirements due~~of the initiatives or strategic alternatives described above will be implemented, successful or consummated.
8
Reverse Stock Split:
On August 15, 2019, the Company effected a reverse stock split of its outstanding shares of common stock at a ratio of one-for-twenty pursuant to a ~~shortfall in cash from operations will be funded~~Certificate of Amendment to the Company’s Certificate of Incorporation filed with the Secretary of State of the State of New York. The reverse stock split was reflected on the Nasdaq Capital Market (“Nasdaq”) beginning with the opening of trading on August 15, 2019. The primary purpose of the reverse stock split, which was approved by the Company’s ~~revolving credit facility, as discussed in note 9~~stockholders at the Company’s Annual Stockholders Meeting on June 27, 2019, was to enable the Company to regain compliance with the $1.00 minimum bid price requirement for continued listing on Nasdaq. Pursuant to the reverse stock split, every twenty shares of the Company’s issued and outstanding shares of common stock were automatically combined into one issued and outstanding share of common stock, without any change in the ~~interim condensed consolidated financial statements.~~
~~In connection with~~par value per share of the ~~preparation~~common stock. Unless otherwise indicated, all share and per share amounts of ~~these~~the common stock included in the accompanying interim condensed consolidated financial statements have been retrospectively adjusted to give effect to the reverse stock split for all periods presented, including reclassifying an amount equal to the reduction in par value to additional paid-in capital. Amounts of common stock resulting from the reverse stock split were rounded up to the nearest whole share. The reverse stock split affected all issued and outstanding shares of the Company’s common stock, and the respective numbers of shares of common stock underlying outstanding stock options, and the Company’s equity incentive plans were proportionately adjusted.
Asset Impairment Charges:
During the thirty nine weeks ended November 2, 2019, the Company ~~conducted~~concluded, based on continued operating losses within the fye segment driven by lower than expected third quarter sales that triggering events had occurred, and an evaluation of the fye long-lived assets for impairment was required. Fixed assets and operating lease right-of-use assets, primarily at the Company’s retail store locations, as well as certain fixed assets at the corporate location, consisting of the home office and the Albany distribution center, where impairment was determined to ~~whether there~~exist were ~~conditions and events, considered~~written down to their estimated fair values as of the end of November 2, 2019, resulting in the ~~aggregate, which raised substantial doubt as to~~recording of fixed assets and operating lease right-of-use assets impairment charges of $2.4 million and $13.6 million, respectively. Estimated fair values for long-lived assets at these locations, including operating lease right of use assets, store fixtures, equipment, and leasehold improvements were determined based on a measure of discounted future cash flows over the ~~entity’s ability to continue as~~remaining lease terms at the respective locations. Future cash flows were estimated based on individual store and corporate level plans and were discounted at a ~~going concern within one year after~~rate approximating the ~~date~~Company’s cost of the issuance, or the date of availability, of the interim condensed consolidated financial statements to be issued, noting that there did not appear to be evidence of substantial doubt of the entity’s ability to continue as a going concern.capital. Management believes its assumptions were reasonable and consistently applied.

Note 2. Basis of Presentation

The accompanying interim condensed consolidated financial statements consist of Trans World Entertainment Corporation, Record Town, Inc. (“Record Town”), Record Town’s subsidiaries and etailz, Inc., all of which are wholly-owned. All intercompany accounts and transactions have been eliminated.

The interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. The information furnished in these unaudited interim condensed consolidated financial statements reflects all normal, recurring adjustments which, in the opinion of management, are necessary for the fair
9
presentation of such financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Certain information and footnote disclosures normally included in the financial statements prepared
7
in accordance with ~~U.S. GAAP~~accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to rules and regulations applicable to interim financial statements.

The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto ~~and Management’s Discussion and Analysis of Financial Condition and Results of Operations~~ as of and for the year ended ~~January 28, 2017~~February 2, 2019 contained in the Company’s Annual Report on Form 10-K filed ~~April 13, 2017.~~ May 14, 2019.
The results of operations for the thirteen and thirty-nine weeks ended ~~October 28, 2017~~November 2, 2019 are not necessarily indicative of the results to be expected for the entire fiscal year ending February ~~3, 2018.~~1, 2020.

~~The~~As goodwill was fully impaired during fiscal 2018, the Company no longer considers goodwill to be a significant accounting policy. With the exception of goodwill, the Company’s significant accounting policies are the same as those described in Note 1 to the Company’s Consolidated Financial Statements on Form 10-K for the fiscal year ended ~~January 28, 2017.~~
~~There have been no material changes to the accounting policies applied to our consolidated results and footnote disclosures.~~February 2, 2019.

Note 3. ~~Recent~~Recently Adopted Accounting Pronouncements
In June 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. This ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for the Company’s fiscal year beginning February 4, 2018. Based upon our preliminary assessment, we do not expect the adoption of this ASU will have a material impact on our consolidated financial statements. The Company has determined that the adoption of this ASU will impact the timing of revenue recognition for gift card breakage. Gift card breakage is currently recognized at the point gift card redemption becomes remote. In accordance with this ASU, the Company will recognize gift card breakage in proportion to the pattern of rights exercised by the customer. Additionally, the Company has assessed and determined that our revenue recognition practices related to our current vendor-direct sales arrangements, for which the Company is the principal and recorded on a gross basis, will remain unchanged upon adoption. Based upon our preliminary assessment of potential impacts to the presentation of our consolidated financial statements primarily related to sales return reserves, our customer loyalty program, and certain other promotional programs, the Company expects to use a modified retrospective approach upon adoption of this ASU during the first quarter of fiscal 2018. The Company is continuing to evaluate the impact of the ASU’s expanded disclosure requirements upon adoption.

In February 2016, the ~~FASB~~Financial Accounting Standards Board (the “FASB”) issued ASU ~~No.~~ 2016-02, ~~“Leases”, which will replace most existing~~Leases (Topic 842). Lessees are required to recognize a right-of-use asset and a lease ~~accounting guidance~~liability for virtually all of their leases (other than leases that meet the definition of a short-term lease). The liability is equal to the present value of lease payments. The asset is based on the liability, subject to certain adjustments, such as for initial direct costs. For income statement purposes, a dual model was retained, requiring leases to be classified as either operating or finance leases. Operating leases result in U.S. GAAP. The core principle of this ASU is that an entity should recognize the rights and obligations resulting from leases as assets and liabilities. The new standard requires qualitative and specific quantitative disclosuresstraight-line expense (similar to supplement the amounts recorded in the financial statements so that users can understand more about the nature of an entity’s leasing activities, including significant judgments and changes in judgments. The new standard will be effective for the Company’s fiscal year beginning February 3, 2019, and requires the modified retrospective method of adoption. Early adoption is permitted. The Company is in the process of determining the method and timing of adoption and assessing the impact of ASU 2016-02 on its consolidated financial statements. Given the nature of the operating leases ~~for~~under the ~~Company’s home office, distribution center, and stores,~~prior accounting standard) while finance leases result in a frontloaded expense pattern (similar to capital leases under the ~~Company expects an increase to the carrying value of its assets and liabilities.~~
In January 2017, the FASB issued ASU 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,” which simplifies how an entity is required to test goodwill for impairment
8
by eliminating step two from the goodwill impairment test whereby a goodwill impairment loss is determined by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Rather, an entity will perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognizing an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. ASU 2017-04 is effective for the Company in fiscal 2020, applied on a prospective basis, and early adoption is allowed for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.
In March 2017, the FASB issued ASU 2017-07, “Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” which is intended to improve the presentation of net periodic pension cost and net periodic post-retirement benefit cost in an entity’s financial statements by requiring the service cost component be disaggregated from other components of net benefit costs and presented in the same line item or items as other compensation costs for the employees. Additionally, only the service cost component of net benefit cost is eligible for capitalization when applicable. ASU 2017-07 is effective for the Company’s fiscal year beginning February 3, 2019, and must be applied retrospectively. ASU 2017-07 is permitted for early adoption, but only at the beginning of an annual period for which financial statements have not been issued or made available for issuance. The Company is currently evaluating the impact that this ASU will have on its reporting and asset recognition.
In May 2017, the FASB issued ASU 2017-09, “Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting,” which provided clarity as to what changes to the terms or conditions of share-based payment awards require an entity to apply modificationprior accounting in Topic 718. ASU 2017-09 is effective for the Company for interim and annual periods in fiscal year beginning February 3, 2019, with early adoption permitted and is applied prospectively to changes in terms or conditions of awards occurring on or after the adoption date.
~~Note 4. Acquisition and Investment~~
~~Business Combination-etailz~~
On October 17, 2016, the Company completed the purchase of all of the issued and outstanding shares of etailz, Inc. (etailz), an innovative and leading digital marketplace retailer. etailz operates both domestically and internationally. They use a data driven approach to digital marketplace retailing utilizing proprietary software and ecommerce insight coupled with a direct customer relationship engagement to identify new distributors and wholesalers, isolate emerging product trends, and optimize price positioning and inventory purchase decisions.standard).

The Company ~~paid $32.3 million~~adopted this new accounting standard on February 3, 2019 on a modified retrospective basis and applied the new standard to all leases greater than one year. As a result, comparative financial information has not been restated and continues to be reported under the accounting standards in effect for those periods. The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which includes, among other things, the ability to carry forward the existing lease classification. The Company does not engage in any Lessor transactions, and as a Lessee, the Company does not have any finance leases. As a result, the new standard had a material impact on the unaudited condensed consolidated balance sheet, but did not materially impact the Company’s consolidated operating results and did not materially impact the Company’s cash ~~issued 5.7 million shares~~flows.
The following is a discussion of ~~Trans World Entertainment Corporation stock (TWMC Stock)~~the Company’s lease policy under the new lease accounting standard:
The Company determines if an arrangement contains a lease at ~~closing~~the inception of a contract. Right-of-use assets represent the Company’s right to ~~the shareholders of etailz (the selling shareholders) as consideration~~use an underlying asset for the ~~selling shareholders’ ownership,~~lease term and ~~paid $4.3 million in cash advances~~lease liabilities represent the Company’s obligation to ~~settle obligations~~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 ~~selling shareholders. Based~~remaining future minimum lease payments. As the interest rate implicit in the Company’s leases is not readily determinable, the Company utilizes its incremental borrowing rate to discount the lease payments. The operating lease right-of-use assets also include lease payments made before commencement and reduced by lease incentives. Leases with an initial term of 12 months or less are not recorded on the ~~fair value~~consolidated balance sheet and lease expense is recognized on a straight-line basis over the term of ~~$3.56 per share of TWMC Stock on~~ the acquisition date, the shares had a value of $20.4 million. An earn-out of up to a maximum of $14.6 million would be payable in fiscal 2018 and fiscal 2019 subject to the achievement by etailz of $6.0 million in operating income in fiscal 2017 and $7.5 million in fiscal 2018 as outlined in the share purchase agreement prior to its amendment as discussed in the following paragraph. In connection with the acquisition,short-term lease.
For real estate leases, the Company ~~assumed the liability of the selling shareholders~~accounts for ~~etailz’s employee retention bonus plan, of~~lease components and non-lease components as a single lease component. Certain real estate leases require additional payments based on reimbursement for real estate taxes, common area maintenance and insurance, which ~~$1.9 million was due~~are expensed as incurred as variable lease costs. Other real estate leases contain one fixed lease payment that includes real estate taxes, common area maintenance and ~~payable at closing and funded as~~insurance. These fixed payments are considered part of the ~~cash advances~~lease payment and the remaining $2.3 million will be earned over a two year service period. The acquisition and related costs were funded primarily from the Company’s cash on hand and short term borrowings under its revolving credit facility. The acquisition was accounted for using the purchase method of accounting.
During the Company’s second quarter, the share purchase agreement with the selling shareholders of etailz was amended to provide that $11.5 million be released from the earnout escrow account and the $3.1 million
9
remaining in the earnout escrow account may be payable in cash to the selling shareholders in 2019, subject to the achievement by etailz of operating income in excess of $15.5 million during the twenty-four month period ending February 2, 2019. In the event that etailz achieves operating income in excess of $13.5 million, but less than $15.5 million, an earnout of $1.6 million would be payable in 2019. If etailz operating income is below $13.5 million, the $3.1 million escrow would be returned to the Company.
The amount released from escrow was disbursed during the Company’s second quarter as follows: $5.0 million to the Company for future investment to support growth initiatives, $5.0 million to the selling shareholders, and $1.5 million to the Company (to be allocated to increase the maximum amount available under the etailz employee retention bonus plan from $4.2 million to $5.7 million).
During the Company’s second quarter, the Company recorded a $1.4 million benefit related to its contingent consideration liability. The decrease in the value of the contingent consideration liability resulted from the actual financial results of etailz and the amendment of the earnout agreement as described in the paragraph above. This benefit is recorded in selling, general, and administrative expenses in the Company’s condensed consolidated statements of operations.
~~The results of operations of etailz are reported in the Company’s etailz segment and have been~~ included in the ~~consolidated results of operations of the Company from the date of acquisition. The following unaudited pro forma financial information for the thirteen~~right-of-use assets and thirty-nine weeks ended October 29, 2016, presents consolidated information as if the etailz acquisition had occurred on February 1, 2016. Because of different fiscal period ends, and in order to present results for comparable periods, the unaudited pro forma consolidated financial information for the thirty-nine weeks ended October 29, 2016, combines (i) the Company’s historical statement of operations for the thirty-nine weeks ended October 29, 2016, and (ii) etailz historical statement of income for the period from January 1, 2016 through August 31, 2016 and October 1, 2016 through October 16, 2016. The unaudited pro forma financial information for the thirteen weeks ended October 29, 2016, combines (i) the Company’s historical statement of operations for the thirteen weeks ended October 29, 2016; and (ii) etailz historical statement of income for the period from July 1, 2016 through August 31, 2016 and October 1, 2016 through October 16, 2016. The unaudited pro forma financial information is presented after giving effect to certain adjustments for acquisition-related costs, depreciation, amortization of definite lived intangible assets, interest expense on acquisition financing, and related income tax effects. The unaudited pro forma financial information is based upon currently available information and upon certain assumptions that the Company believes are reasonable under the circumstances. The unaudited pro forma financial information does not purport to present what the Company’s results of operations would actually have been if the aforementioned transaction had in fact occurred on such date or at the beginning of the period indicated, nor does it project the Company’s financial position or results of operations at any future date or for any future period.lease liabilities.
Thirteen Weeks Ended Thirty-nine Weeks Ended
October 29,
2016 October 29,
2016

Pro forma total revenue $ 90,655 $ 287,060
Pro forma net loss (6,945 ) (13,513 )

Pro forma basic and diluted loss per share $ (0.19 ) $ (0.37 )

Pro forma weighted average number of common shares outstanding – basic and diluted 36,157 36,257
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~~Joint Venture~~We elected the following package of practical expedients permitted under the lease standard: We do not record leases with an initial term of 12 months or less on the balance sheet but continue to expense them on a straight-line basis over the lease term. As of November 2, 2019, 153 leases were short-term in nature and were exempt from being recorded on the balance sheet.
~~On April 11, 2017,~~
The Company leases its 181,300 square foot distribution center/office facility in Albany, New York from an entity controlled by the estate of Robert J. Higgins, its former Chairman and largest shareholder. The distribution center/office lease commenced on January 1, 2016, and expires on December 31, 2020. Under the lease, accounted for as an operating lease, the Company ~~entered into an agreement with another party~~is responsible for the purpose of acquiring and selling certain retail merchandise. etailz holds a 50% economic interest in the arrangement as of October 28, 2017. The initial cash investment was $2.6 million dollars. During the thirty-nine weeks ended October 28, 2017, the Company received distributionsmonthly payments in the amount of ~~$1.7 million from~~$103 thousand per month. Under the ~~joint venture,~~terms of ~~which $0.7 million~~the lease agreement, the Company is also responsible for property taxes and other operating costs with respect to the premises.
During the thirty nine weeks ended November 2, 2019, the Company concluded, based on continued operating losses within the fye segment driven by lower than expected third quarter sales that triggering events had occurred, and an evaluation of the fye operating lease right-of-use asset for impairment was ~~a return of capital and $1.0 million was~~required. Operating lease right-of-use assets, primarily at the Company’s ~~share~~retail store locations, where impairment was determined to exist were written down to their estimated fair values as of ~~joint venture income. The remaining investment~~the end of ~~$1.9 million was included in other assets~~November 2, 2019, resulting in the ~~interim condensed consolidated balance sheets as~~recording of ~~October 28, 2017.~~
~~Note 5. Goodwill and Other Intangible Assets~~
~~Goodwill and intangible assets with indefinite useful lives are not amortized, but are tested for~~asset impairment charges of $13.7 million. Estimated fair values at ~~least annually. Goodwill represents the excess~~these locations were determined based on a measure of ~~the purchase price~~discounted future cash flows over the ~~fair value~~remaining lease terms at the respective locations. Future cash flows were estimated based on individual store and corporate level plans and were discounted at a rate approximating the Company’s cost of ~~the net tangible~~capital. Management believes its assumptions were reasonable and ~~identifiable intangible assets acquired in each business combination.~~
Determining the fair value of a reporting unit requires the use of significant estimates and assumptions, including revenue growth rates, operating margins, discount rates, and future market conditions, among others. Goodwill and other long-lived assets are reviewed for impairment if circumstances indicate that the carrying amount may not be recoverable.
~~We are continuing to amortize certain vendor relationships, technology, and trade names and trademarks that have finite lives.~~
~~Identifiable intangible assets as of October 28, 2017 consisted of the following (in thousands, except weighted-average amortization period):~~consistently applied.
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October 28, 2017
Amortization
Period
(in months) Gross
Carrying
Amount Accumulated
Amortization Net Carrying
Amount

Vendor relationships 120 $ 19,100 $ 2,010 $ 17,090
Technology 60 6,700 1,403 5,297
Trade names and trademarks 60 3,200 647 2,553
$ 29,000 $ 4,060 $ 24,940

The changes in net intangibles and goodwill from January 28, 2017 to October 28, 2017 were as follows:

(in thousands) January 28,
2017 Amortization October 28, 2017
Amortized intangible assets:
Vendor relationships $ 18,522 $ 1,432 $ 17,090
Technology 6,302 1,005 5,297
Trade names and trademarks 3,033 480 2,553
Net amortized intangible assets $ 27,857 $ 2,917 $ 24,940

Unamortized intangible assets:
Goodwill $ 39,191 - $ 39,191
Total unamortized intangible assets $ 39,191 - $ 39,191
Impact of New Lease Standard on Balance Sheet Line Items
As a result of applying the new lease standard using a modified retrospective method, the following adjustments were made to accounts on the condensed consolidated balance sheet as of February 3, 2019:

Impact of Change in Accounting Policy
As Reported
February 2,
2019 Adjustments Adjusted
February 3,
2019
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 4,355 $ — $ 4,355
Restricted cash 4,126 — 4,126
Accounts receivable 5,383 — 5,383
Merchandise inventory 94,842 — 94,842
Prepaid expenses and other current assets 6,657 (748 ) 5,909
Total current assets 115,363 (748 ) 114,615

Restricted cash 5,745 — 5,745
Fixed assets, net 7,529 — 7,529
Operating lease right-of-use assets — 28,044 28,044
Intangible assets, net 3,668 — 3,668
Other assets 5,708 — 5,708
TOTAL ASSETS $ 138,013 $ 27,296 $ 165,309

LIABILITIES
CURRENT LIABILITIES
Accounts payable $ 34,329 $ — $ 34,329
Accrued expenses and other current liabilities 8,132 (1,319 ) 6,813
Deferred revenue 6,955 — 6,955
Current portion of operating lease liabilites — 9,064 9,064
Total current liabilities 49,416 7,745 57,161

Operating lease liabilities — 22,728 22,728
Other long-term liabilities 24,867 (3,177 ) 21,690
TOTAL LIABILITIES 74,283 27,296 101,579

SHAREHOLDERS’ EQUITY
Preferred stock ($0.01 par value; 5,000,000 shares authorized; none issued) — — —
Common stock ($0.01 par value; 200,000,000 shares authorized; 3,221,834 shares issued) 32 — 32
Additional paid-in capital 344,826 — 344,826
Treasury stock at cost (1,408,892 shares) (230,166 ) — (230,166 )
Accumulated other comprehensive loss (735 ) — (735 )
Accumulated deficit (50,227 ) — (50,227 )
TOTAL SHAREHOLDERS’ EQUITY 63,730 — 63,730
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 138,013 $ 27,296 $ 165,309
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The following table is a summary of the Company’s components of net lease cost for the thirteen and thirty-nine week periods ended November 2, 2019:
Lease Cost
Thirteen
Weeks Ended Thirty-nine
Weeks Ended
(amounts in thousands) Classification November 2,
2019 November 2,
2019
Short-term operating lease cost SG&A $ 4,838 $ 10,043
Operating lease cost SG&A 1,753 7,013
Variable lease cost SG&A 127 369
Net lease cost $ 6,718 $ 17,425
During the thirteen and thirty-nine weeks ended November 3, 2018, the Company recorded minimum rentals of $7.2 million and $21.9 million, respectively, and did not record any contingent rentals.
As of November 2, 2019, the maturity of lease liabilities is as follows:
(amounts in thousands) Operating Leases
2019 $ 2,656
2020 10,502
2021 7,312
2022 3,181
2023 2,278
Thereafter 2,116
Total lease payments 28,045
Less: amounts representing interest (2,378 )
Present value of lease liabilities $ 25,667
Lease term and discount rate are as follows:
November 2, 2019
Weighted-average remaining lease term (years) Operating leases 1.06
Weighted-average discount rate
Operating leases 5 %

Other information:
Thirty-nine
Weeks Ended
(amounts in thousands) November 2, 2019

Cash paid for amounts included in the measurement of operating lease liabilities
Operating cash flows from operating leases $ 6,582
As determined prior to the adoption of the new lease standard, the future minimum lease payments under operating leases in effect as of February 2, 2019 were as follows:
(amounts in thousands)
2019 $   24,426
2020 8,393
2021 5,239
2022 1,881
2023 1,137
Thereafter 1,060
Total minimum lease payments $ 42,136
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Note 4. Intangible Assets
The determination of the fair value of intangible assets acquired in a business acquisition, including the Company’s acquisition of etailz in 2016, is subject to many estimates and assumptions. Our identifiable intangible assets that resulted from our acquisition of etailz consisted of vendor relationships, technology and tradenames. We review amortizable intangible asset groups for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable.
During fiscal 2018, the Company concluded, based on continued operating losses for the etailz segment driven by lower than expected operating results culminating in the fourth quarter of fiscal 2018 that a triggering event had occurred, and an evaluation of intangible assets for impairment was required. Intangible assets related to technology and vendor relationships were written down to their estimated fair value at the end of fiscal 2018 resulting in the recognition of asset impairment charges of $16.4 million.
Identifiable intangible assets as of November 2, 2019 consisted of the following:
November 2, 2019
(amounts in thousands) Weighted
Average
Amortization
Period
(in months) Original
Gross
Carrying
Amount Accumulated
Impairment Accumulated
Amortization Net Carrying
Amount

Vendor relationships 120 $ 19,100 $ 13,822 $ 4,485 $ 793
Technology 60 6,700 2,587 3,369 744
Trade names and trademarks 60 3,200 — 1,927 1,273
$ 29,000 $ 16,409 $ 9,781 $ 2,810

The changes in net intangibles from February 2, 2019 to November 2, 2019 were as follows:

(amounts in thousands) February 2,
2019 Impairment Expense Amortization Expense November 2,
2019

Amortized intangible assets:
Vendor relationships $ 880 $ — $ 87 $ 793
Technology 1,035 — 291 744
Trade names and trademarks 1,753 — 480 1,273
Net amortized intangible assets $ 3,668 $ — $ 858 $ 2,810
Amortization expense of intangible assets for the thirteen and thirty-nine weeks ended November 2, 2019 and November 3, 2018 consisted of the following:
Thirteen Weeks Ended Thirty-nine Weeks Ended
(amounts in thousands) November 2,
2019 November 3,
2018 November 2,
2019 November 3,
2018

Amortized intangible assets:
Vendor relationships $ 29 $ 477 $ 87 $ 1,430
Technology 97 335 291 1,005
Trade names and trademarks 160 160 480 480
Total amortization expense $ 286 $ 972 $ 858 $ 2,915
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Estimated amortization expense for the remainder of fiscal ~~2017~~2019 and the five succeeding fiscal years and thereafter is as follows:

Year Annual
Amortization
( in thousands)
2017 $ 971
2018 3,890
2019 3,890
2020 3,890
2021 3,325
2022 1,910
Thereafter 7,064
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Year Annual
Amortization
(amounts in thousands)
2019 $286
2020 1,143
2021 847
2022 115
2023 115
2024 115
Thereafter 189
Note 6.5. Depreciation and Amortization

Depreciation and amortization included in selling, general and administrative expenses of the interim condensed consolidated statements of operations isfor the thirteen weeks ended November 2, 2019 and November 3, 2018 was $1.1 million and $2.3 million, respectively. Depreciation and amortization included in selling, general and administrative expenses of the interim condensed consolidated statements of operations for the thirty-nine weeks ended November 2, 2019 and November 3, 2018 was $3.1 million and $6.8 million, respectively. The decrease was primarily due to a $4.1 million net decrease in carrying value of fixed assets and a $16.4 million net decrease in carrying value of intangible assets, resulting from impairment charges recorded during the fourth quarter of fiscal 2018. For a discussion of the Company’s impairment charges, see “Nature of Operations and Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K as ~~follows:~~of and for the year ended February 2, 2019.

Thirteen Weeks Ended Thirty-nine Weeks Ended
October 28, October 29, October 28, October 29,
2017 2016 2017 2016
(in thousands) (in thousands)
Cost of sales $ 163 $ 104 $ 474 $ 301
Selling, general and administrative expenses 3,425 2,222 9,989 5,309
Total $ 3,588 $ 2,326 $ 10,463 $ 5,610
As noted within Footnote 1, the Company recorded $2.4 million in fixed asset impairment during the third fiscal quarter of 2019.
15
Note 7.6. Segment Data

As described in Note 1 to the interim condensed consolidated financial statements, we operate in two reportable segments as shown in the following ~~table. Results for~~table:
Thirteen Weeks Ended Thirty-nine Weeks Ended
(amounts in thousands) November 2,
2019 November 3,
2018 November 2,
2019 November 3,
2018
Total Revenue
fye $ 40,840 $ 47,865 $ 127,602 $ 152,473
etailz 28,616 44,119 98,008 138,288
Total Company $ 69,456 $ 91,984 $ 225,610 $ 290,761

Gross Profit
fye $ 16,155 $ 18,276 $ 50,670 $ 61,181
etailz 6,924 9,110 22,915 30,066
Total Company $ 23,079 $ 27,386 $ 73,585 $ 91,247

Loss From Operations
fye $ (21,524 ) $ (9,493 ) $ (34,280 ) $ (21,495 )
etailz (1,353 ) (4,261 ) (3,640 ) (9,808 )
Total Company $ (22,877 ) $ (13,754 ) $ (37,920 ) $ (31,303 )

Total Assets November 2,
2019 February 2,
2019 November 3,
2018
fye $ 107,707 $ 101,785 $ 132,699
etailz 33,773 36,228 106,362
Total Company $ 141,480 $ 138,013 $ 239,061
Note 7. Restricted Cash
As of November 2, 2019, the Company had restricted cash of $1.0 million and $5.1 million reported in current assets and other assets on the accompanying condensed consolidated balance sheet, respectively. As of November 3, 2018, the Company had restricted cash of $4.1 million and $5.9 million reported in current assets and other assets on the accompanying condensed consolidated balance sheet, respectively. The decrease in these restricted cash balances during the thirty-nine weeks ended November 2, 2019, was primarily due to the return of the $3.2 million earn-out escrow balance to the Company as a result of the etailz ~~are included~~segment not achieving the earnings target, as described in the ~~consolidated results for all periods presented for fiscal 2017. For periods presented for fiscal 2016, results for~~amended etailz ~~are included in consolidated results from October 17, 2016 through October 29, 2016.~~acquisition share purchase agreement.

Thirteen Weeks Ended Thirty-nine Weeks Ended
(in thousands) October 28, 2017 October 29, 2016 October 28, 2017 October 29, 2016
Total Revenue
fye $ 52,105 $ 62,457 $ 176,006 $ 202,535
etailz 40,896 3,824 $ 121,440 $ 3,824
Total Company $ 93,001 $ 66,281 $ 297,446 $ 206,359

Gross Profit
fye $ 21,347 $ 25,932 $ 73,342 $ 83,459
etailz 10,234 940 29,714 940
Total Company $ 31,581 $ 26,872 $ 103,056 $ 84,399

Loss From Operations
fye $ (7,858 ) $ (5,083 ) $ (17,703 ) $ (10,291 )
etailz (253 ) (2,725 ) (966 ) (2,725 )
Total Company $ (8,111 ) $ (7,808 ) $ (18,669 ) $ (13,016 )

Total Assets
fye $ 186,869 $ 222,362
etailz 102,077 90,887
Total Company $ 288,946 $ 313,249
The restricted cash reported as of November 2, 2019 is comprised entirely of a $6.1 million rabbi trust, which is restricted for SERP payments as described in note 11.
1316
~~Note 8. Restricted Cash~~
~~As of October 28, 2017 and October 29, 2016, the Company had restricted cash of $12.2 million and $16.1 million, respectively.~~
In connection with the acquisition of etailz and under the terms of the share purchase agreement, as amended (see Note 4), the Company designated $1.5 million of the restricted cash to be made available to satisfy any indemnification claims within 18 months from the date of acquisition and $3.2 million of the restricted cash to equal the maximum earn-out amount that could be paid to the selling shareholders of etailz in accordance with the share purchase agreement, as amended.
In addition, as a result of the death of its former Chairman, the Company received $7.5 million which is held in a rabbi trust and was classified as restricted cash on the accompanying condensed consolidated balance sheet as of October 28, 2017.
A summary of cash, cash equivalents and restricted cash is as follows ~~(in~~(amounts in thousands):

October 28, January 28, October 29,
2017 2017 2016
Cash and cash equivalents $ 3,924 $ 27,974 $ 4,708
Restricted cash 12,234 16,103 16,100
Total cash, cash equivalents and restricted cash $ 16,158 $ 44,077 $ 20,808
November 2,
2019 February 2,
2019 November 3,
2018
Cash and cash equivalents $ 3,073 $ 4,355 $ 4,497
Restricted cash 6,089 9,871 10,066
Total cash, cash equivalents and restricted cash $ 9,162 $ 14,226 $ 14,563

Note ~~9. Line of Credit~~8. Short Term Borrowings

In January 2017, the Company ~~entered into a $50 million asset based~~amended and restated its revolving credit facility (“Credit Facility”) ~~which amended~~. The Credit Facility provides for commitments of $50 million subject to increase up to $75 million during the ~~previous credit facility.~~months of October to December of each year, as needed. The availability under the Credit Facility is subject to limitations based on ~~merchandise~~receivables and inventory levels. The principal amount of all outstanding loans under the Credit Facility together with any accrued but unpaid interest, are due and payable in January 2022, unless otherwise paid earlier pursuant to the terms of the Credit Facility. Payments of amounts due under the Credit Facility are secured by the assets of the Company.
The Credit Facility contains ~~a provision~~customary affirmative and negative covenants, including incurrence of additional indebtedness and acquisitions and covenants around the net number of store closings and restrictions related to ~~increase availability up~~the payment of cash dividends and share repurchases, including limiting the amount of dividends to ~~$75~~$5.0 million ~~during October to~~annually and not allowing borrowings under the amended facility for the six months before or six months after the dividend payment.
The Credit Facility also includes customary events of default, including, among other things, material adverse effect, bankruptcy, and certain changes of control. On December ~~of each year, as needed. During the third quarter of fiscal 2017,~~17, 2019, the Company ~~exercised~~entered into a letter agreement with Wells Fargo in accordance with the ~~right to increase its availability to $60 million subject~~Credit Facility in which Wells Fargo provided consent to the ~~same limitations noted above.~~Company with respect to late delivery of the Quarterly Financial Statements. As of November 2, 2019, the Company was compliant with all covenants.

Interest under the Credit Facility will accrue, at the election of the Company, at a Base Rate or LIBO Rate, plus, in each case, an Applicable Margin, which is determined by reference to the level of availability, with the Applicable Margin for LIBO Rate loans ranging from ~~2.25%~~1.75% to ~~2.75%~~2.00% and the Applicable Margin for Prime Rate loans ranging from 0.75% to ~~1.25%~~1.00%. In addition, a ~~commitment~~ fee ~~ranging from 0.375% to 0.50%~~of 0.25% is also payable on unused commitments.

~~The Credit Facility contains customary affirmative and negative covenants, including restrictions on dividends and share repurchases, incurrence~~As of additional indebtedness and acquisitions, covenants around the net number of store closings, and restrictions related to the payment of cash dividends, including limiting the amount of dividends and share repurchases to $5.0 million annually and not allowingNovember 2, 2019, borrowings under the ~~amended facility~~Credit Facility were $27.8 million as compared to $27.4 million as of November 3, 2018. The Company had $11.0 million available for ~~the six months before or six months after the dividend payment.~~
borrowing as of November 2, 2019. As of ~~October 28, 2017,~~November 2, 2019 and November 3, 2018, the Company ~~had $5.0 million~~did not have any outstanding letters of credit. The Company records short term borrowings at cost, in ~~outstanding borrowings under~~which the revolving credit facility and $49.0 million was available for borrowing. As of October 29, 2016, the Company had $5.9 million in outstanding borrowings under the revolving credit facility and $53.7 million was available for borrowing. The weighted average interest rate on total, LIBO Rate and Prime Rate, outstanding borrowings for the thirteen week period ended October 28, 2017 and October 29, 2016 was 2.69% and 3.73%, respectively.carrying value approximates fair value due to its short term maturity.
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Note ~~10.~~9. Stock Based Compensation

As of ~~October 28, 2017,~~November 2, 2019, there was approximately ~~$0.9 million~~$338 thousand of unrecognized compensation cost related to stock option awards ~~that is~~comprised of the following: $245 thousand was related to stock option awards listed in the table below and expected to be recognized as expense over a weighted average period of ~~2.7~~1.4 years, and $94 thousand was related to restricted stock option awards expected to be recognized as expense over a weighted average period of 2.9 years.

~~As of October 28,~~The Company has outstanding awards under three employee stock award plans, the 2005 Long Term Incentive and Share Award Plan, the Amended and Restated 2005 Long Term Incentive and Share Award Plan (the “Old Plans”); and the 2005 Long Term Incentive and Share Award Plan (as amended and restated April 5, 2017 (the “New Plan”). Collectively, these
17
plans are referred to herein as the Stock Award Plans. Additionally, the Company had a stock award plan for non-employee directors (the “1990 Plan”). The Company no longer issues stock options under the Old Plans or the 1990 Plan.
Equity awards authorized for issuance under the ~~Company’s current long term equity incentive plans totaled 5.0 million shares. There are certain authorized stock awards for which~~New Plan total 250 thousand. As of November 2, 2019, of the ~~Company no longer grants awards. Of these~~ awards authorized for issuance ~~2.6 million shares~~under the Stock Award Plans, approximately 129 thousand were granted and are outstanding, ~~1.5 million shares~~99 thousand of which were vested and exercisable. ~~Awards~~Shares available for future grants ~~at October 28, 2017 were 5.0 million shares.~~
~~The table below outlines the assumptions that the Company used to estimate the fair value~~ of ~~stock~~options and other share based awards ~~granted during~~under the ~~thirty-nine weeks ended October 28, 2017:~~New Plan at November 2, 2019 were 213 thousand.
~~Dividend yield~~ 0%
~~Expected stock price volatility~~ ~~40.0%-40.6%~~
~~Risk-free interest rate~~ ~~1.74%-1.83%~~
~~Expected award life (in years)~~ ~~5.64-5.71~~
~~Weighted average fair value per share of awards granted during the period~~ ~~$0.74~~

The following table summarizes stock award activity during the thirty-nine weeks ended ~~October 28, 2017:~~November 2, 2019:

Number of
Shares
Subject
To Option Weighted
Average
Exercise
Price Weighted
Average
Remaining
Contractual
Term Other
Share
Awards (1) Weighted
Average
Grant Fair
Value
Balance January 28, 2017 2,459,564 $ 3.58 7.3 170,927 $ 3.87
Granted 620,000 1.84 - 65,000 1.85
Forfeited (288,750 ) 3.07 - - -
Cancelled (164,150 ) 5.43 - (5,000 ) 3.53
Exercised - - - (52,500 ) 3.50
Balance October 28, 2017 2,626,664 $ 3.11 7.2 178,427 $ 3.26

Exercisable October 28, 2017 1,361,164 $ 3.32 5.8 63,427 $ 4.50
Employee and Director Stock Award Plans
Number of Shares Subject To Option Weighted Average Exercise Price Weighted Average Remaining Contractual Term Other Share Awards⁽¹⁾ Weighted Average Grant Fair Value/ Exercise Price
Balance February 2, 2019 138,921 $ 55.00 5.8 13,571 $ 33.60
Granted 5,750 3.76 — — —
Cancelled/Forfeited (15,475 ) 57.68 — — —
Exercised — — — (3,626 ) 5.66
Balance November 2, 2019 129,196 $ 52.11 6.1 9,945 $ 36.75
Exercisable November 2, 2019 99,040 $ 59.29 5.4 5,757 $ 44.92

⁽¹⁾ Other Share Awards include deferred shares granted to Directors and restricted share units granted to executive officers.

As of ~~October 28, 2017, the intrinsic value of~~November 2, 2019, all stock awards outstanding ~~was approximately $1 thousand. All~~and exercisable ~~options~~ had ~~an exercise price below the closing stock price as of October 28, 2017.~~
~~In connection with the acquisition of etailz, the Company issued 1,572,552 restricted shares of Company stock to a key etailz employee, with~~ a grant ~~date fair value~~price higher than the market price of ~~$3.56 per share. These shares vest ratably through January 2019. As of October 28, 2017,~~ the Company recognized $2.6 million of compensation cost related to these shares, of which $1.9 million was recorded in fiscal 2017. As of October 28, 2017, there was approximately $3.0 million of unrecognized compensation cost related to these restricted shares that is expected to be recognized as expense over the next 15 months.stock and had no intrinsic value.
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Note ~~11.~~10. Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss that the Company reports in the condensed consolidated balance sheets represents net loss, adjusted for the difference between the accrued pension liability and accrued benefit cost, net of taxes, associated with the Company’s defined benefit plan. Comprehensive loss consists of net loss and the amortization of pension costs ~~(gain)~~ associated with Company’s defined benefit plan for the thirteen and thirty-nine weeks ended ~~October 28, 2017~~November 2, 2019 and ~~October 29, 2016.~~November 3, 2018.

Note ~~12.~~11. Defined Benefit Plan

The Company maintains a non-qualified Supplemental Executive Retirement Plan (“SERP”) for a limited number of executive officers of the Company. The SERP provides eligible executives defined pension benefits that supplement benefits under other retirement arrangements. During the thirty-nine weeks ended ~~October 28, 2017,~~November 2, 2019, the Company did not make any cash contributions to the SERP and paid out approximately $0.9 million in retirement benefits. The Company presently expects to pay approximately $1.2 million in benefits relating to the SERP during fiscal ~~2017.~~2019.

The measurement date for the SERP is the fiscal year end, using actuarial techniques which reflect estimates for mortality, turnover and expected retirement. In addition, management makes assumptions concerning future salary increases. Discount rates are generally established as of the measurement date using theoretical bond models that select high-grade corporate bonds with maturities or coupons that correlate to the expected payouts of the applicable liabilities.
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The following represents the components of the net periodic pension cost related to the Company’s SERP for the respective periods:

Thirteen Weeks Ended Thirty-nine Weeks Ended
October 28, October 29, October 28, October 29,
2017 2016 2017 2016
(in thousands) (in thousands)
Service cost $ 16 $ 15 $ 48 $ 45
Interest cost 139 137 417 411
Amortization of prior service costs 4 55 12 166
Amortization of net gain⁽¹⁾ (9 ) (4 ) (27 ) (12 )
Net periodic pension cost $ 150 $ 203 $ 450 $ 610
Thirteen Weeks Ended Thirty-nine Weeks Ended
(amounts in thousands) November 2,
2019 November 3,
2018 November 2,
2019 November 3,
2018
Service cost $ 14 $ 14 $ 42 $ 42
Interest cost 142 140 426 420
Amortization of net gain⁽¹⁾ (5 ) (5 ) (15 ) (15 )
Net periodic pension cost $ 151 $ 149 $ 453 $ 447

(1) The amortization of net gain is related to a director retirement plan previously provided by the Company.

Note ~~13.~~12. Basic and Diluted Loss Per Share

Basic ~~income~~loss per share is calculated by dividing net ~~income~~loss by the weighted average common shares outstanding for the period. Diluted ~~income~~loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock (net of any assumed repurchases) that then shared in the earnings of the Company, if any. It is computed by dividing net ~~income (loss)~~loss by the sum of the weighted average shares outstanding and additional common shares that would have been outstanding if the dilutive potential common shares had been issued for the Company’s common stock awards from the Company’s Stock Award Plans.

For the thirteen and thirty-nine week periods ended ~~October 28, 2017~~November 2, 2019 and ~~October 29, 2016,~~November 3, 2018, the impact of all outstanding stock awards was not considered because the Company reported a net loss and such impact would be anti-dilutive. Accordingly, basic and diluted loss per share is the same. Total anti-dilutive stock awards for ~~both,~~the thirteen and thirty-nine weeks ended ~~October 28, 2017,~~November 2, 2019 were approximately ~~2.6 million~~126 thousand shares and 132 thousand shares, as
16
compared to ~~1.9 million~~157 thousand shares and ~~1.8 million~~148 thousand shares, respectively, for the thirteen and thirty-nine weeks ended ~~October 29, 2016.~~November 3, 2018. See note 1 in the interim condensed consolidated financial statements for information on the reverse stock split effected by the Company in August of the current fiscal year.

Note ~~14.~~13. Income Taxes

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.  The ultimate realization of deferred tax assets is dependent on the generation of future taxable income. Management considers the scheduled reversal of taxable temporary differences, projected future taxable income and tax planning strategies in making this assessment.  Based on available objective evidence, management concluded that a full valuation allowance should continue to be recorded against the Company’s deferred tax assets. Management will continue to assess the need for and amount of the valuation allowance against the deferred tax assets by giving consideration to all available evidence to the Company’s ability to generate future taxable income in its conclusion of the need for a full valuation allowance.  Any reversal of the Company’s valuation allowance will favorably impact its results of operations in the period of reversal.  The Company is currently unable to determine whether or when that reversal might occur, but it will continue to assess the realizability of its deferred tax assets and will adjust the valuation allowance if it is more likely than not that all or a portion of the deferred tax assets will become realizable in the future.  The Company has significant net operating loss carry forwards and other tax attributes that are available to offset projected taxable income and current taxes payable, if any, for the year ending February ~~3, 2018.~~1, 2020. The deferred tax impact resulting from the utilization of the net operating loss carry forwards and other tax attributes will be offset by a reduction in the valuation allowance. As of ~~January 28, 2017,~~November 2, 2019, the Company had a net operating loss carry forward of ~~$181.4~~$246.9 million for federal income tax purposes and approximately ~~$243~~$265.2 million for state income tax purposes that expire at various times through ~~2036~~2038 and are subject to certain limitations and statutory expiration periods. The Company has not changed its overall conclusion with respect to the need for a valuation allowance against its net deferred tax assets, which remain fully reserved.
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Note ~~15.~~14. Commitments and Contingencies

Legal Proceedings

The Company is subject to legal proceedings and claims that have arisen in the ordinary course of its business and have not been finally adjudicated. Although there can be no assurance as to the ultimate disposition of these matters, it is management’s opinion, based upon the information available at this time, that the expected outcome of these matters, individually and in the aggregate, will not have a material adverse effect on the results of operations and financial condition of the Company. As a result, the liability for the cases listed below is remote.
Loyalty Memberships and Magazine Subscriptions Class Action
On November 14, 2018, three consumers filed a punitive class action complaint against the Company and Synapse Group, Inc. in the United States District Court for the District of Massachusetts, Boston Division (Case No.1:18-cv-12377-DPW) concerning enrollment in the Company’s Backstage Pass VIP loyalty program and associated magazine subscriptions. The complaint alleged, among other things, that the Company’s “negative option marketing” misled consumers into enrolling for membership and subscriptions without obtaining the consumers’ consent. The complaint sought to represent a nationwide class of “all persons in the United States” who were enrolled in and/or charged for Backstage Pass VIP memberships and/or magazine subscriptions, and to obtain statutory and actual damages on their behalf.
On April 11, 2019, the plaintiffs voluntarily dismissed their lawsuit. On May 8, 2019, two of the plaintiffs from the dismissed lawsuit filed a similar punitive class action in Massachusetts state court (Civ. Act. No. 197CV00331, Mass. Super. Ct. Hampden Cty.), based on the same allegations, but this time seeking to represent only a class of “FYE customers in Massachusetts” who were charged for VIP Backstage Pass Memberships and/or magazine subscriptions. The Company believes it has meritorious defenses to the plaintiffs’ claims and, if the new case is not dismissed in full, the Company intends to vigorously defend the action.

Store Manager Class Actions
~~Two former Store Managers filed actions alleging claims of entitlement to unpaid compensation for overtime. In one action, the plaintiff seeks to represent a~~There are two pending class of allegedly similarly situated employees who performed the same position (Store Manager and Senior Assistant Manager) while the other plaintiff seeks to represent a class of allegedly similarly situated employees who performed the same position (Store Manager).
~~Specifically, Carol~~actions. The first, Spack ~~filed a complaint against~~v. Trans World Entertainment ~~Corporation (Trans World)~~Corp. was originally filed in the ~~United States District Court,~~ District of New Jersey, on April ~~20,~~ 2017 ~~(Case No.: 3:17-cv-02687-BRM-LHG) alleging~~(the “Spack Action”). The Spack Action alleges that ~~she is entitled to unpaid compensation for overtime under~~ the ~~federal Fair Labor Standards Act (FLSA). She brings a nationwide collective action under the FLSA on behalf of all~~Company misclassified Store Managers ~~and~~(“SMs”) as exempt nationwide. It also alleges that Trans World improperly calculated overtime for Senior Assistant ~~Managers. She~~Managers “SAMs” nationwide, and that both SMs and SAMs worked “off-the-clock.” It also ~~brings class action claims under~~alleges violations of New Jersey and Pennsylvania ~~law on behalf of all persons who worked as Store Managers in New Jersey or Senior Assistant Managers in Pennsylvania.~~
~~On May 19, 2017, Natasha~~State Law with respect to calculating overtime for SAMs. The second, Roper ~~filed a complaint against~~v. Trans World Entertainment Corp., was filed in ~~the U.S. District Court for~~ the Northern District of New York, ~~(Case No.: 1:17-cv-0553-TJM-CFH) in which she~~May 2017 (the “Roper Action”). The Roper Action also ~~alleges that she is entitled to unpaid compensation for overtime under the FLSA. Ms. Roper brings~~asserts a nationwide ~~collective action under the FLSA~~misclassification claim on behalf of ~~all similarly situated~~ Store Managers. Both actions were consolidated into the Northern District of New York, with the Spack Action being the lead case.
Plaintiffs moved for conditional certification of a collective of SMs in June 2018, and that motion was partially granted in January 2019. The opt-in period for the collective that was certified was closed on April 6, 2019.  Opt-in discovery relating to that potential collective has commenced. The Company believes it has meritorious defenses to the plaintiffs’ claims and intends to vigorously defend the action.
Note 15. Related Party Transactions
The Company leases its 181,300 square foot distribution center/office facility in Albany, New York from an entity controlled by the estate of Robert J. Higgins, its former Chairman and largest shareholder. The distribution center/office lease commenced on January 1, 2016, and expires on December 31, 2020. Under the lease accounted for as an operating lease, for the thirteen and thirty-nine week periods ended November 2, 2019 and November 3, 2018, the Company paid $0.3 million and $0.9 million, respectively, during both fiscal periods. Under the terms of the lease agreement, the Company is responsible for property taxes and other operating costs with respect to the premises.
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TRANS WORLD ENTERTAINMENT CORPORATION AND SUBSIDIARIES
PART 1. FINANCIAL INFORMATION
Item 2 - Management’s Discussion and Analysis of Financial Condition and
Results of Operations
~~October 28, 2017~~November 2, 2019 and ~~October 29, 2016~~November 3, 2018

Overview
Management’s Discussion and Analysis of Financial Condition and Results of Operations provides information that the Company’s management believes necessary to achieve an understanding of its financial statements and results of operations. To the extent that such analysis contains statements which are not of a historical nature, such statements are forward-looking statements, which involve risks and uncertainties. These risks include, but are not limited to, changes in the competitive environment, availability of new products, change in vendor policies or relationships, general economic factors in markets where the Company’s merchandise is sold; and other factors discussed in the Company’s filings with the Securities and Exchange Commission. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited interim condensed consolidated financial statements and related notes included elsewhere in this report and the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K as of and for the fiscal year ended ~~January 28, 2017.~~February 2, 2019.

The Company operates in two reportable segments: fye and etailz. The fye segment operates a chain of retail entertainment stores and e-commerce sites,www.fye.comandwww.secondspin.com. As of ~~October 28, 2017,~~November 2, 2019, the fye segment operated ~~268~~206 stores totaling approximately ~~1.5~~1.1 million square feet in the United States, the District of Columbia and the U.S. Virgin Islands. ~~fye stores offer predominantly entertainment products.~~ The etailz segment is a ~~leading~~ digital marketplace retailer and generates substantially all of its revenue through Amazon Marketplace. The Company’s business is seasonal in nature for both segments, with the peak selling period being the holiday season which falls in the Company’s fourth fiscal quarter.

The Company’s results have been, and will continue to be, contingent upon management’s ability to understand industry trends and to manage the business in response to those trends and general economic trends. Management monitors a number of key performance indicators to evaluate its performance, including:

Net ~~sales~~Sales and ~~comparable store net sales:~~Comparable Store Net Sales: The fye segment measures ~~and reports~~ the rate of ~~change in~~ comparable store net ~~sales.~~sales change. A store is included in comparable store net sales calculations at the beginning of its thirteenth full month of operation. Stores ~~relocated/~~relocated, expanded or downsized are excluded from comparable store ~~net~~ sales if the change in square footage is greater than 20%. until the thirteenth full month following relocation, expansion or downsizing. Closed stores that were open for at least thirteen months are included in comparable ~~stores net~~store sales through the month immediately preceding the month of closing. Stores that are temporarily closed are excluded from the calculation of comparable stores sales for the applicable periods in the year of closure and the subsequent year. Included in comparable store net sales are sales from the fye segment websites. The fye segment further analyzes net sales by store format and by product category. The etailz segment measures total year over year ~~performance in net sales.~~sales growth by product category and evaluates product sales by supplier.
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Cost of Sales and Gross Profit: Gross profit is calculated based on the cost of product in relation to its retail selling value. Changes in gross profit are impacted primarily by ~~the~~net sales levels, mix of products sold, byvendor discounts ~~negotiated with vendors, discounts offered to customers,~~ and ~~fulfillment fees paid to Amazon. The Company records its~~allowances, shrinkage, obsolescence and distribution ~~and product shrink expenses in cost of sales.~~costs. Distribution expenses include those costs associated with receiving, ~~shipping,~~ inspecting ~~and~~& warehousing ~~product~~merchandise, Amazon fulfillment fees, and costs associated with product returns to vendors. ~~Warehousing cost of sales also includes obsolescence costs and is reduced by the benefit of vendor allowances, net of direct reimbursements of expense.~~

Selling, General and Administrative (“SG&A”) Expenses: Included in SG&A expenses are payroll and related costs, occupancy charges, ~~Amazon commissions,~~ general operating and overhead expenses and depreciation ~~charges (excluding those related to distribution operations, as disclosed in Note 6 to the condensed consolidated financial statements). Selling, general and administrative~~charges. SG&A expenses also include fixed ~~asset write offs~~assets write-offs associated with store closures, ~~and change in square footage,~~ if any, ~~gift card breakage,~~ and ~~etailz related amortization~~miscellaneous income and ~~compensation costs.~~expense items, other than interest.

Balance Sheet and Ratios: The Company views cash ~~net inventory investment (merchandise inventory less accounts payable)~~ and working capital (current assets less current liabilities) as relevant indicators of its financial position. See Liquidity and ~~Capital Resources~~Cash Flows section for further discussion of these items.
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RESULTS OF OPERATIONS

Thirteen and Thirty-nine Weeks Ended ~~October 28, 2017~~November 2, 2019
Compared to the Thirteen and Thirty-nine Weeks Ended ~~October 29, 2016~~November 3, 2018

Segment ~~Highlights:~~Highlights(amounts in thousands):
~~etailz results included in~~
Thirteen Weeks Ended Thirty-nine Weeks Ended
November 2,
2019 November 3,
2018 November 2,
2019 November 3,
2018
Total Revenue
fye $ 40,840 $ 47,865 $ 127,602 $ 152,473
etailz 28,616 44,119 98,008 138,288
Total Company $ 69,456 $ 91,984 $ 225,610 $ 290,761

Gross Profit
fye $ 16,155 $ 18,276 $ 50,670 $ 61,181
etailz 6,924 9,110 22,915 30,066
Total Company $ 23,079 $ 27,386 $ 73,585 $ 91,247

Loss From Operations
fye $ (21,524 ) $ (9,493 ) $ (34,280 ) $ (21,495 )
etailz (1,353 ) (4,261 ) (3,640 ) (9,808 )
Total Company $ (22,877 ) $ (13,754 ) $ (37,920 ) $ (31,303 )

Reconciliation of etailz Loss from Operations to etailz Adjusted Loss from Operations
etailz loss from operations $ (1,353 ) $ (4,261 ) $ (3,640 ) $ (9,808 )
Acquisition related amortization and compensation expenses⁽¹⁾ 286 1,722 924 5,906
etailz adjusted loss from operations⁽²⁾ $ (1,067 ) $ (2,539 ) $ (2,716 ) $ (3,902 )

Reconciliation of fye Loss From Operations to fye Adjusted Loss From Operations
fye Loss From Operations $ (21,524 ) $ (9,493 ) $ (34,280 ) $ (21,495 )
Asset impairment charges 16,035 — 16,035 —
fye Adjusted Loss From Operations⁽²⁾ $ (5,489 ) $ (9,493 ) $ (18,245 ) $ (21,495 )
⁽¹⁾ For the ~~tables below are for the period when etailz was acquired, therefore, etailz results are only included in the thirteen and thirty-nine~~13 weeks ended ~~October 28, 2017~~.
Thirteen Weeks Ended Thirty-nine Weeks Ended
October 28, 2017 October 29, 2016 October 28, 2017 October 29, 2016
Total Revenue
fye $ 52,105 $ 62,457 $ 176,006 $ 202,535
etailz 40,896 3,824 121,440 3,824
Total Company $ 93,001 $ 66,281 $ 297,446 $ 206,359

Gross Profit
fye $ 21,347 $ 25,932 $ 73,342 $ 83,459
etailz 10,234 940 29,714 940
Total Company $ 31,581 $ 26,872 $ 103,056 $ 84,399

Loss From Operations
fye $ (7,858 ) $ (5,083 ) $ (17,703 ) $ (10,291 )
etailz (253 ) (2,725 ) (966 ) (2,725 )
Total Company $ (8,111 ) $ (7,808 ) $ (18,669 ) $ (13,016 )

Reconciliation of etailz Loss from Operations to etailz Adjusted Income (Loss) from Operations
etailz loss from operations $ (253 ) $ (2,725 ) $ (966 ) $ (2,725 )
Acquisition related transaction expenses - 2,228 - 2,228
Acquisition related amortization and compensation expenses (1) 2,087 $ 303 4,613 303
etailz adjusted income (loss) from operations (2) $ 1,834 $ (194 ) $ 3,647 $ (194 )
~~(1)Acquisition~~November 2, 2019, acquisition related expenses ~~for the thirteen weeks ended October 28, 2017~~ consisted of amortization expense of intangible assets of ~~$1 million and compensation expense of $1.1 million. Acquisition~~$286 thousand. For the 39 weeks ended November 2, 2019, acquisition related expenses ~~for the thirty-nine weeks ended October 28, 2017~~ consisted of amortization expense of intangible assets of ~~$2.9 million~~$858 thousand and compensation expense of ~~$3.1million, net~~$66 thousand. For the 13 weeks ended November 3, 2018, acquisition related expenses consisted of ~~a $1.4 million benefit resulted from a contingent consideration liability adjustment.~~
amortization expense of intangible assets of $972 thousand and compensation expense of $750 thousand. For the 39 weeks ended November 3, 2018, acquisition related expenses consisted of amortization expense of intangible assets of $2,915 thousand and compensation expense of $2,991 thousand.
⁽²⁾In addition to the results of operations determined in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”), we reported non-GAAP adjusted operating ~~income~~loss for the etailz ~~segment~~and the fye segments as shown above.

Total Revenue.The following table sets forth a year-over-year comparison of the Company’s total revenue:

Thirteen Weeks Ended Change Thirty-nine Weeks Ended Change Thirteen Weeks Ended Change Thirty-nine Weeks Ended Change
October 28,
2017 October 29,
2016 $ % October 28,
2017 October 29,
2016 $ %
(in thousands)
(amounts in thousands) November 2,
2019 November 3,
2018 $ % Comp
Store Net
Sales November 2,
2019 November 3,
2018 $ % Comp
Store Net
Sales
fye revenue $ 52,105 $ 62,457 $ (10,352 ) -16.6 % $ 176,006 $ 202,535 $ (26,529 ) -13.1 % $ 40,840 $ 47,865 $ (7,025 ) -14.7 % -5.2 % $ 127,602 $ 152,473 $ (24,871 ) -16.3 % -2.1 %
etailz revenue 40,896 3,824 37,072 n/a 121,440 3,824 117,616 n/a 28,616 44,119 (15,503 ) -35.1 % 98,008 138,288 (40,280 ) -29.1 %
Total revenue $ 93,001 $ 66,281 $ 26,720 40.3 % $ 297,446 $ 206,359 $ 91,087 44.1 % $ 69,456 $ 91,984 $ (22,528 ) -24.5 % $ 225,610 $ 290,761 $ (65,151 ) -22.4 %

Total revenue ~~increased 40.3%~~decreased 24.5% and ~~44.1%~~22.4% for the thirteen and thirty-nine weeks ended ~~October 28, 2017~~November 2, 2019 as compared to the same period last year. The increase was driven by $40.9 million and $121.4 million in revenue for the thirteen and thirty-nine weeks ended October 28, 2017 as a result of the acquisition of etailz in October 2016, which offsets the decline in fye revenue.
2022
fye Segment
The following table sets forth a period over period comparison of net fye sales by merchandise category:

Thirteen Weeks Ended Change Thirty-nine Weeks Ended Change Thirteen Weeks Ended Change Thirty-nine Weeks Ended Change
(amounts in thousands, except store count) November 2,
2019 November 3,
2018 $ % Comp
Store Net
Sales November 2,
2019 November 3,
2018 $ % Comp
Store Net
Sales
October 28,
2017 October 29,
2016 $ % Comp
Store Net
Sales October 28,
2017 October 29,
2016 $ % Comp
Store Net
Sales
(in thousands, except store data)
fye net sales $ 50,921 61,215 $ (10,294 ) -16.8 % -11.0 % $ 172,042 199,303 $ (27,261 ) -13.7 % -8.0 % $ 39,988 $ 46,758 $ (6,770 ) -14.5 % -5.2 % $ 127,602 $ 149,975 $ (22,373 ) -14.9 % -2.1 %
Other revenue 1,184 1,242 (58 ) (4.7 %) 3,964 3,232 732 22.6 % 852 1,107 (255 ) -23.0 % — 2,498 (2,498 ) -100.0 %
Total revenue $ 52,105 $ 62,457 $ (10,352 ) -16.6 % $ 176,006 $ 202,535 $ (26,529 ) -13.1 % $ 40,840 $ 47,865 $ (7,025 ) -14.7 % $ 127,602 $ 152,473 $ (24,871 ) -16.3 %

As a % of fye net sales

Lifestyle 38.0 % 32.3 % 0.2 % 35.4 % 28.6 % 9.2 %
Trend / Lifestyle 46.2 % 41.9 % 6.3 % 45.2 % 40.1 % 8.4 %
Video 32.3 % 35.2 % -15.4 % 32.9 % 37.3 % -15.8 % 25.8 % 29.6 % -17.7 % 26.2 % 30.2 % -13.7 %
Music 18.9 % 21.7 % -23.0 % 20.4 % 23.8 % -20.6 % 17.7 % 17.9 % -9.4 % 17.7 % 18.4 % -5.8 %
Electronics 10.4 % 10.1 % -4.3 % 10.8 % 9.4 % 4.3 % 10.3 % 10.6 % -7.4 % 10.9 % 11.3 % -3.9 %
Video Games 0.4 % 0.7 % -41.0 % 0.5 % 0.9 % -43.9 %
100.0 % 100.0 % 100.0 % 100.0 %

Store Count: 268 294 (26 ) -8.8 % 206 227 (21 ) -9.3 %
Total Square footage (in thousands) 1,491 1,649 (158 ) -9.6 %

Total Square footage 1,145 1,268 (123 ) -9.7 %

~~Net~~fye net sales. Net sales decreased ~~16.8%~~14.5% and ~~13.7%~~16.0% during the thirteen weeks and thirty-nine weeks ended ~~October 28, 2017,~~November 2, 2019, respectively, as compared to the same ~~period~~periods last year. The decline in net sales resulted from ~~an 8.8%~~a 9.3% decline in total stores in operation ~~for the thirty-nine weeks ended October 28, 2017 as compared to the same period last year,~~ and ~~an 11.0%~~a 5.2% and ~~8.0%~~2.1% decline in comparable store net sales for the thirteen and thirty-nine weeks ended ~~October 28, 2017,~~November 2, 2019, respectively.

Trend/Lifestyle:
Comparable store net sales in the trend/lifestyle ~~(trend)~~ category increased ~~0.2%~~6.3% and 8.4% during the thirteen ~~weeks ended October 28, 2017. During the~~and thirty-nine weeks ended ~~October 28, 2017,~~ November 2, 2019, respectively. Trend/lifestyle ~~category increased 9.2%. Lifestyle~~ products represented ~~38.0%~~46.2% and ~~35.4%~~45.2% of total net sales for the thirteen and thirty-nine weeks ended ~~October 28, 2017,~~November 2, 2019, respectively, compared to ~~32.3%~~41.9% and ~~28.6%~~40.1% in the comparable periods last year. The Company ~~is focused on identifying, creating~~continues to take advantage of opportunities to strengthen its selection and ~~delivering merchandise that differentiates its customer experience and brand with unique and engaging products.~~
~~Media Categories:~~
~~Media categories, which consist of Video and Music, continue to experience industry wide declines due to non-physical options. As a result, the fye segment is shifting its~~shift product mix to growing categories of ~~entertainment and pop culture related merchandise, which is categorized as Lifestyle.~~entertainment-related merchandise.

Video:
Comparable store sales in the video category decreased ~~15.4%~~17.7% and ~~15.8%~~13.7% during the thirteen and thirty-nine week periods ended ~~October 28, 2017,~~November 2, 2019, respectively. The video category represented ~~32.3%~~25.8% and ~~32.9%~~26.2% of total net sales for the thirteen and thirty-nine weeks ended ~~October 28, 2017,~~November 2, 2019, respectively, compared to ~~35.2%~~29.6% and ~~37.3%~~30.2% in the comparable periods last ~~year.~~year due to continued industry-wide decline in physical media sales.

Music:
During the thirteen and thirty-nine weeks ended ~~October 28, 2017,~~November 2, 2019, music sales in comparable stores decreased ~~23.0%~~9.4% and ~~20.6%~~5.8%, respectively, versus the thirteen and thirty-nine weeks ended ~~October 29, 2016.~~November 3, 2018. The music category represented ~~18.9% and 20.4%~~17.7% of total net sales for both thirteen and thirty-nine weeks ended November 2, 2019, respectively, compared to 17.9% and 18.4% for the thirteen and thirty-nine weeks ended ~~October 28, 2017, respectively, compared~~November 3, 2018 due to ~~21.7% and 23.8% for the thirteen and thirty-nine weeks ended October 29, 2016.~~continued industry-wide decline in physical media sales.
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Electronics:
Comparable store net sales in the electronics category decreased ~~4.3%~~7.4% and ~~increased 4.3%~~3.9% during the thirteen and thirty-nine weeks ended ~~October 28, 2017, respectively due to lower average retail prices.~~November 2, 2019, respectively. Electronics net sales represented ~~10.4%~~10.3% and ~~10.8%~~10.9% of total net sales for the thirteen and thirty-nine weeks ended ~~October 28, 2017,~~November 3, 2019, respectively, compared to ~~10.1%~~10.6% and ~~9.4% in~~11.3% of total net sales for the comparable periods last year.
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Other Revenue.Other revenue, which was primarily related to commissions and fees earned from third parties for the fye segment, was approximately ~~$1.2~~$0.9 million and ~~$4.0~~$2.5 million for the thirteen and thirty-nine weeks ended ~~October 28, 2017,~~November 2, 2019, respectively, compared to ~~$1.2~~$1.1 million and ~~$3.2~~$3.6 million in the comparable periods last year. The decline in other revenue was primarily due to lower number of stores in operation.

etailz Segment
etailz reported ~~$40.9~~sales of $28.6 million and ~~$121.4~~$98.0 million ~~sales~~ for the thirteen and thirty-nine weeks ended ~~October 28, 2017, respectively.~~November 2, 2019, respectively, compared to $44.1 million and $138.3 million for the thirteen and thirty-nine weeks ended November 3, 2018. etailz generates revenue across a broad array of product lines primarily through the Amazon Marketplace. Categories include: apparel, baby, beauty, electronics, health & personal care, home/kitchen/grocery, pets, sporting goods, toys & art. During the thirty-nine weeks ended November 2, 2019, etailz sold approximately 28,000 unique SKUs from approximately 1,600 suppliers, compared to approximately 38,000 unique SKUs from approximately 2,100 suppliers during the thirty-nine weeks ended November 3, 2018. The decline in sales was attributable to the vendor remediation performance improvement plan which was implemented during the fourth quarter of 2018 for the etailz segment, as discussed in Note 1 to the interim condensed consolidated financial statements included elsewhere in this Form 10-Q.
22
Gross Profit.The following table sets forth a year-over-year comparison of the Company’s ~~gross profit:~~Gross Profit:

Thirteen Weeks ended Thirty-nine Weeks Ended Thirteen Weeks Ended Change Thirty-nine Weeks Ended Change
Change Change
October 28,
2017 October 29,
2016 $ % October 28,
2017 October 29,
2016 $ %
(amounts in thousands) November 2, 2019 November 3, 2018 $ % November 2, 2019 November 3, 2018 $ %
(in thousands) (in thousands)
fye gross profit $ 21,347 $ 25,932 ($ 4,585 ) -17.7 % $ 73,342 $ 83,459 ($ 10,117 ) -12.1 % $ 16,155 $ 18,276 $ (2,121 ) -11.6 % $ 50,670 $ 61,181 $ (10,511 ) -17.2 %
etailz gross profit 10,234 940 $ 9,294 n/a 29,714 940 $ 28,774 n/a 6,924 9,110 (2,186 ) -24.0 % 22,915 30,066 (7,151 ) -23.8 %
Total gross profit $ 31,581 $ 26,872 $ 4,709 17.5 % $ 103,056 $ 84,399 $ 18,657 22.1 % $ 23,079 $ 27,386 $ (4,307 ) -15.7 % $ 73,585 $ 91,247 $ (17,662 ) -19.4 %

fye gross profit as a % of fye revenue 41.0 % 41.5 % 41.7 % 41.2 % 39.6 % 38.2 % 39.7 % 40.1 %
etailz gross profit as a % of etailz revenue 25.0 % 24.6 % 24.5 % 24.6 % 24.2 % 20.6 % 23.4 % 21.7 %
Total gross profit as a % of total revenue 34.0 % 40.5 % 34.6 % 40.9 % 33.2 % 29.8 % 32.6 % 31.4 %

Gross profit ~~increased 17.5%~~decreased 15.7% to ~~$31.6~~$23.1 million for the thirteen weeks ended ~~October 28, 2017~~November 2, 2019 compared to ~~$26.9~~$27.4 million for the thirteen weeks ended ~~October 29, 2016.~~November 3, 2018. For the thirty-nine weeks ended ~~October 28, 2017,~~November 2, 2019, gross profit ~~increased 22.1%~~decreased 19.4% to ~~$103.1~~$73.6 million compared to ~~$84.4~~$91.2 million for the comparable period last year. ~~The increase in gross profit is primarily the result of the acquisition of etailz in October 2016, which offset the decline in fye gross profit.~~

fye Segment
~~Total~~fye gross profit as a percentage of total revenue for the thirteen and thirty-nine weeks ended ~~October 28, 2017~~November 2, 2019 was ~~41.0%~~39.6% and ~~41.7%~~39.7%, respectively, compared to ~~41.5%~~38.2% and ~~41.2%~~40.1% for the comparable periods last year. The increase in the gross profit percentage for the thirteen weeks ended November 2, 2019, as compared to the thirteen weeks ended November 3, 2018, was primarily attributable to increased merchandise margin in the Trend/Lifestyle category.

etailz Segment
etailz ~~reported~~ gross profit as a percentage of ~~$10.2 million and $29.7 million~~total revenue for the thirteen and thirty-nine weeks ended ~~October 28, 2017. etailz~~November 2, 2019 was 24.2% and 23.4%, respectively, compared to 20.6% and 21.7% for the comparable periods last year. The increase in the gross profit asrate was a ~~percentage~~result of ~~revenue was 25.0% and 24.5%~~the performance improvement plan implemented during the fourth quarter of 2018. See Note 1 to the interim condensed consolidated financial statements, included elsewhere in this Form 10-Q for the ~~thirteen and thirty-nine weeks ended October 28, 2017, respectively.~~description of the etailz segment performance improvement plan.

24
SG&A Expenses.The following table sets forth a period over period comparison of the Company’s SG&A expenses:
23
Thirteen Weeks ended Thirty-nine Weeks Ended
Change Change
October 28,
2017 October 29,
2016 $ % October 28,
2017 October 29,
2016 $ %
(in thousands) (in thousands)
fye SG&A, excluding depreciation, amortization, and acquistion related transaction costs $ 26,790 $ 28,968 $ (2,178 ) -7.5 % $ 84,102 $ 88,616 ($ 4,514 ) -5.1 %
As a % of total FYE revenue 51.4 % 46.4 % 5.0 % 47.8 % 43.8 % 4.0 %

etailz SG&A, excluding depreciation, amortization, and acquistion related compensation expenses 9,225 959 8,266 n/a 26,964 959 26,005 n/a
etailz acquisition related compensation expenses,  net of a contingency adjustment 1,118 303 815 n/a 1,708 303 1,405 n/a

Depreciation and amortization 3,425 2,222 1,203 54.1 % 9,989 5,309 4,680 88.2 %
etailz acquisition related transaction costs - 2,228 (2,228 ) n/a - 2,228 (2,228 ) n/a

Total SG&A $ 40,558 $ 34,680 $ 5,878 16.9 % $ 122,763 $ 97,415 $ 25,348 26.0 %

As a % of total revenue 43.6 % 52.3 % 41.3 % 47.2 %
Thirteen Weeks Ended Change Thirty-nine Weeks Ended Change
(amounts in thousands) November 2,
2019 November 3,
2018 $ % November 2,
2019 November 3,
2018 $ %
fye SG&A, excluding depreciation and amortization $ 21,012 $ 26,620 $ (5,608 ) -21.1 % $ 67,094 $ 79,214 $ (12,120 ) -15.3 %
As a % of total fye revenue 51.4 % 55.6 % 52.6 % 52.0 %

etailz SG&A, excluding depreciation and amortization 7,812 12,217 (4,405 ) -36.1 % 25,246 36,528 (11,282 ) -30.9 %
As a % of total etailz revenue 27.3 % 27.7 % 25.8 % 26.4 %

Depreciation and amortization 1,097 2,303 (1,206 ) -52.4 % 3,130 6,808 (3,678 ) -54.0 %

Total SG&A $ 29,921 $ 41,140 $ (11,219 ) -27.3 % $ 95,470 $ 122,550 $ (27,080 ) -22.1 %

As a % of total revenue 43.1 % 44.7 % 42.3 % 42.1 %

SG&A expenses ~~increased $5.9~~decreased $11.2 million and $27.1 million for the thirteen ~~weeks ended October 28, 2017 due to expenses for etailz, acquisition related compensation expenses,~~ and ~~higher depreciation and amortization expenses, offset slightly by lower fye expenses. SG&A expenses increased $25.3 million for the~~ thirty-nine weeks ended October 28, 2017 due to expenses for etailz, acquisition related compensation expenses, and higher depreciation and amortization expenses, offset slightly by lower fye expenses, and a benefit recorded to the Company’s contingent consideration.November 2, 2019, respectively.

fye Segment
fye SG&A, excluding depreciation and amortization ~~and acquisition related transaction costs~~expenses, decreased ~~$2.2~~$5.6 million, or ~~7.5%~~21.1%, and ~~$4.5~~$12.1 million, or ~~5.1%~~15.3%, for the thirteen and thirty-nine weeks ended ~~October 28, 2017,~~November 2, 2019, respectively. As a percentage of fye revenue, SG&A expenses ~~excluding depreciation, amortization, and acquisition related transaction costs~~in the fye segment for the thirteen and thirty-nine weeks ended ~~October 28, 2017~~November 2, 2019 were 51.4% and ~~47.8%~~52.6%, respectively, compared to ~~46.4%~~55.6% and ~~43.8%~~52.0% for the same ~~period~~periods last year. The ~~increase~~decline in SG&A expenses was due to lower sales primarily as a result of fewer stores in operation. The decrease in SG&A expenses as a percentage of revenue for the ~~rate~~thirteen weeks ended November 2, 2019 was primarily due to a decrease in outside consulting and professional fees. The increase in SG&A expenses as a percentage of revenue for the ~~comp sales decline~~thirty-nine weeks ended November 2, 2019 was primarily due to higher outside consulting and ~~expenses to support~~professional fees during the ~~upgrading~~first and second quarters of ~~the Company’s digital and data capability, including the re-platforming of fye.com.~~fiscal 2019.

etailz Segment
etailz ~~reported~~ SG&A, excluding depreciation and amortization ~~and acquisition related compensation~~ expenses, ~~of $9.2~~decreased $4.4 million and ~~$27.0~~$11.3 million for the thirteen and thirty-nine weeks ended ~~October 28, 2017,~~November 2, 2019, respectively. As a percentage of etailz revenue, SG&A expenses in the etailz segment for the thirteen and thirty-nine weeks ended November 2, 2019 were 27.3% and 25.8%, respectively, ~~which~~compared to 27.7% and 26.4% for the same periods last year. The decrease was primarily ~~includes commission fees~~due to expense reduction initiatives implemented in the fourth quarter of 2018.
Asset Impairment charges. During the thirty nine weeks ended November 2, 2019, the Company concluded, based on continued operating losses within the fye segment driven by lower than expected third quarter sales that triggering events had occurred, and ~~payroll costs.~~an evaluation of the fye long-lived assets for impairment was required. Fixed assets and operating lease right-of-use assets, primarily at the Company’s retail store locations, as well as certain fixed assets at the fye corporate location, consisting of the home office and the Albany distribution center, where impairment was determined to exist were written down to their estimated fair values as of the end of November 2, 2019, resulting in the recording of fixed assets and operating lease right-of-use assets impairment charges of $2.4 million and $13.6 million, respectively. Estimated fair values for long-lived assets at these locations, including operating lease right of use assets, store fixtures, equipment, and leasehold improvements were determined based on a measure of discounted future cash flows over the remaining lease terms at the respective locations. Future cash flows were estimated based on individual store and corporate level plans and were discounted at a rate approximating the Company’s cost of capital. Management believes its assumptions were reasonable and consistently applied.

Depreciation and ~~Amortization.~~amortization.Consolidated depreciation and amortization expense ~~increased~~decreased $1.2 million and ~~$4.7~~$3.7 million for the thirteen and thirty-nine weeks ended October 28, 2017, respectively. Amortization of intangibles, as described in Note 5 to the condensed consolidated financial statements, increased $0.8 million and $2.8 million for the thirteen and thirty-nine weeks ended October 28, 2017, respectively. Depreciation expense increased $0.4 million and $1.9 million for the thirteen and thirty-nine weeks ended October 28, 2017,November 2, 2019, respectively, primarily due to the ~~fye segment’s investments~~$4.1 million decrease in ~~technology enhancements, new and remodeled stores~~carrying value of fixed assets and the ~~chain wide rollout~~$16.4 million decrease in intangible assets resulting from impairment charges recorded during the fourth quarter of ~~new marketplace fixtures to support~~fiscal 2018. For a discussion of the ~~fye segment’s shift in merchandising assortment from media categories to its lifestyle category.~~Company’s
2425
~~Income from Joint Venture.~~~~etailz segment is a party~~impairment charges, see “Nature of Operations and Summary of Significant Accounting Policies” in the Notes to ~~a Joint Venture Agreement as described~~Consolidated Financial Statements in ~~Note 4 to~~ the Company’s ~~condensed consolidated financial statements. Income from the joint venture was $866 thousand~~Annual Report on Form 10-K as of and ~~$1,038 thousand~~ for the ~~thirteen and thirty-nine weeks~~year ended ~~October 28, 2017, respectively.~~February 2, 2019.

Interest Expense.Interest expense was ~~$83~~$228 thousand and ~~$200~~$554 thousand during the thirteen and thirty-nine weeks ended ~~October 28, 2017,~~November 2, 2019, respectively. Interest expense consisted primarily of ~~unused commitment fees and the amortization of fees related to~~interest payments resulting from borrowings under the Company’s credit ~~facility.~~facility and unused commitment fees. Interest expense during the thirteen and thirty-nine weeks ended ~~October 29, 2016~~November 3, 2018 was ~~$179~~$277 thousand and ~~$523~~$444 thousand, respectively. The ~~reduction~~decrease in interest expense for the thirteen weeks ended November 2, 2019 was due to ~~lower commitment fees and lower~~a decrease in interest rates ~~resulted from the amendment of the credit facility as discussed in Note 9 to the interim condensed consolidated financial statements.~~
~~Gain (Loss) on Insurance Proceeds.~~The gain on insurance proceeds related to the death of the Company’s former Chairman was $8.7 million during the thirty-nine weeks ended October 28, 2017, which consisted of an $8.8 million gain recorded during the first fiscal quarter of 2017 and a loss of $129 thousand recorded during the second fiscal quarter of 2017.
~~Other Income.~~ ~~Other income was $59 thousand and $91 thousand during the thirteen and thirty-nine weeks ended October 28, 2017, respectively, compared to $51 thousand and $1.1 million~~ for the ~~same periods last year. Other income~~borrowings under our credit facility. The increase in interest expense for the thirty-nine weeks ended ~~October 29, 2016 included an $800 thousand gain on the sale~~November 2, 2019 was due to 9 months of ~~an investment.~~borrowings during fiscal 2019 as compared to 4 months of borrowings during fiscal 2018.

Other Loss (Income).As of November 2, 2019, other (income) loss consisted of the following:
Thirteen Weeks Ended Thirty-nine Weeks Ended
(amounts in thousands) November 2,
2019     November 3,
2018      November 2,
2019     November 3,
2018
Investment write down $ — $ — $ 500 $ —
Interest income (30 ) (43 ) (112 ) (171 )
Other (income) loss $ (30 ) $ (43 ) $ 388 $ (171 )
Income Tax Expense. During the third quarter of fiscal 2016, in connection with the acquisition of etailz, the Company recognized a tax benefit of $7.5 million related to the reduction of its valuation allowance equivalent to the net deferred tax liabilities recorded on the etailz opening balance sheet. In assessing the realizability of the net deferred tax assets at the time of the acquisition of etailz, management considered whether it is more likely than not that some portion or all of the remaining deferred tax assets will not be realizable. Management considered the scheduled reversal of taxable temporary differences, projected future taxable income when combining Trans World Entertainment projected income or loss with etailz projected income or loss, and tax planning strategies when making this assessment. Based on ~~the~~ available objective evidence, management concluded that a full valuation allowance should be recorded against ~~its~~the Company’s deferred tax ~~assets net of the deferred tax liabilities recorded in connection with the etailz acquisition. As a result, there~~assets. There were insignificant tax expense ~~(benefit)~~ amounts recorded during the thirteen and thirty-nine weeks ended ~~October 28, 2017.~~November 2, 2019 and comparative periods last year.
25
Net Loss. The following table sets forth a period over period comparison of the Company’s net loss:

Thirteen Weeks Ended Thirty-nine Weeks Ended
Change Change
October 28,
2017 October 29,
2016 $ October 28,
2017 October 29,
2016 $
(in thousands) (in thousands)
Loss before income tax $ (8,135 ) $ (7,936 ) $ (199 ) $ (10,045 ) $ (12,471 ) $ 2,426
Income tax expense (benefit) (64 ) (7,452 ) 7,388 40 (7,358 ) 7,398
Net loss $ (8,071 ) $ (484 ) $ (7,587 ) $ (10,085 ) $ (5,113 ) $ (4,972 )
For the thirteen and thirty-nine weeks ended October 28, 2017, the Company’s net loss increased $7.6 million and $5.0 million, respectively. The increase in net loss was primarily due to the income tax benefit recorded in the third quarter of 2016.
~~LIQUIDITY~~
~~Liquidity and Cash Flows:~~
In connection with the preparation of the condensed consolidated financial statements, the Company conducted an evaluation as to whether there were conditions and events, considered in the aggregate, which raised substantial doubt as to the entity’s ability to continue as a going concern within one year after the date of the issuance, or the date of availability, of the financial statements to be issued, noting that there did not appear to be evidence of substantial doubt of the entity’s ability to continue as a going concern.
The Company’s primary sources of working capital are cash provided by operations and borrowing capacity under its revolving credit facility. The Company’s cash flows fluctuate from quarter to quarter due to various items, including seasonality of sales and earnings, merchandise inventory purchases and returns, the related terms on the purchases and capital expenditures. Management believes it will have adequate resources to fund its cash needs for the foreseeable future, including its capital spending, its seasonal increase in merchandise inventory and other operating cash requirements and commitments.
Management anticipates any cash requirements due to a shortfall in cash from operations will be funded by the Company’s revolving credit facility, discussed in Note 9 to the Company’s interim condensed consolidated financial statements.
Thirteen Weeks Ended Thirty-nine Weeks Ended
(amounts in thousands) November 2,
2019 November 2,
2018 $
Change November 2,
2019 November 2,
2018 $ Change

Loss before income tax $ (21,003 ) $ (13,988 ) $ (7,015 ) $ (15,666 ) $ (31,576 ) $ 15,910
Income tax expense 80 64 16 223 136 87
Net loss $ (21,083 ) $ (14,052 ) $ (7,031 ) $ (15,889 ) $ (31,712 ) $ 15,823
26
LIQUIDITY
Liquidity and Cash Flows Considerations:
The unaudited condensed consolidated financial statements for the thirteen and thirty-nine weeks ended November 2, 2019 were prepared on the basis of a going concern which contemplates that the Company will be able to realize assets and satisfy liabilities and commitments in the normal course of business. The ability of the Company to meet its liabilities and to continue as a going concern is dependent on improved profitability, the continued implementation of the performance improvement plan for the etailz segment, the availability of future funding and the completion of other strategic alternatives. The unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.
The Company incurred net losses of $39.1 million and $31.7 million for the thirty-nine weeks ended November 2, 2019 and November 3, 2018, respectively, and has an accumulated deficit of $89.3 million at November 2, 2019. In addition, net cash used in operating activities for the thirty-nine weeks ended November 2, 2019 was $30.8 million. Net cash used in operating activities for the thirty-nine weeks ended November 3, 2018 was $53.3 million. The Company also experienced negative cash flows from operations during fiscal 2018 and 2017, and expects to incur net losses in the foreseeable future. Based on its recurring losses from operations, expectation of continuing operating losses for the foreseeable future, and uncertainty with respect to any available future funding as well as the completion of other strategic alternatives, the Company has concluded that there is substantial doubt about the Company’s ability to continue as a going concern for a period of one year after the date of filing of this Quarterly Report on Form 10-Q.
Management has plans to address the Company’s current liquidity position. As disclosed in the Company’s Annual Report on Form 10-K filed May 14, 2019, the Company implemented strategic initiatives on December 11, 2018, aimed at improving organizational efficiencies and conserving working capital needed to support the growth of the etailz segment (the “performance improvement plan”). As a result of the initiative, and inventory management in the fye segment, the Company was able to reduce cash used in operations by $22.5 million for the thirty-nine weeks ended November 2, 2019 as compared to the thirty-nine weeks ended November 2, 2018. We anticipate continued improvement in cash flows used in operations for the remainder of fiscal 2019. In addition, the Company continues to evaluate other strategic initiatives, including establishing a credit facility at the etailz segment, which could provide additional liquidity. At November 2, 2019, we had cash and cash equivalents of $3.1 million, net working capital of $35.4 million, short-term borrowings in the amount of $27.8 million on our revolving credit facility, and $11.0 million of availability on our revolving credit facility. This compares to $4.5 million in cash and cash equivalents, net working capital of $70.0 million, short-term borrowings in the amount of $27.4 million on the Company’s revolving credit facility at November 3, 2018, and $22.1 million of availability on our revolving credit facility.
The Company’s primary sources of liquidity are its borrowing capacity under its revolving credit facility, available cash and cash equivalents, and to a lesser extent, cash generated from operations. Our cash requirements relate primarily to working capital needed to operate our business, including funding operating expenses, the purchase of inventory and capital expenditures. Our ability to achieve profitability and meet future liquidity needs and capital requirements will depend upon numerous factors, including the timing and amount of our revenue; the timing and amount of our operating expenses; the timing and costs of working capital needs; and in the implementation of our strategy and planned activities.
In addition to the aforementioned current sources of existing working capital, the Company is continuing its efforts to generate additional sales and increase margins. There can be no assurance that any of the initiatives or strategic alternatives described above will be implemented, successful or consummated.
27
The following table sets forth a summary of key components of cash flow and working capital:

As of or for the
Thirty-nine Weeks Ended Change
(in thousands) October 28,
2017 October 29,
2016 $
Operating Cash Flows (33,947 ) (29,879 ) (4,068 )
Investing Cash Flows 6,028 (52,226 ) 58,254
Financing Cash Flows - (1,398 ) 1,398

Capital Expenditures (1) (6,392 ) (16,726 ) 10,334
Purchases of business, net of cash acquired (1) - (36,600 ) 36,600
Cash, Cash Equivalents, and Restricted Cash (2) 16,158 20,808 (4,650 )
Merchandise Inventory 144,754 157,827 (13,073 )
Working Capital 95,951 91,617 4,334

(1) Included in Investing Cash Flows

(2) Cash and cash equivalents per condensed consolidated balance sheets $ 3,924 $ 4,708 $ (784 )
Add: restricted cash 12,234 16,100 (3,866 )
Cash, cash equivalents, and restricted cash $ 16,158 $ 20,808 $ (4,650 )
As of or for the
Thirty-nine Weeks Ended Change
(amounts in thousands) November 2,
2019 November 3,
2018 $
Operating Cash Flows $ (30,822 ) $ (53,337 ) $ 22,515
Investing Cash Flows (2,013 ) (1,546 ) (467 )
Financing Cash Flows 27,771 25,940 1,831

Capital Expenditures ⁽¹⁾ (2,128 ) (2,851 ) 723

Cash, Cash Equivalents, and Restricted Cash ⁽²⁾ 9,162 14,563 (5,401 )
Merchandise Inventory 101,130 131,285 (30,155 )
Working Capital 35,378 70,000 (34,622 )

⁽¹⁾ Included in Investing Cash Flows

⁽²⁾ Cash and cash equivalents per condensed consolidated balance sheets $ 3,073 $ 4,497
Add: restricted cash 6,089 10,066
Cash, cash equivalents, and restricted cash $ 9,162 $ 14,563

Cash used in operations was ~~$34.0~~$30.8 million for the thirty-nine weeks ended ~~October 28, 2017~~November 2, 2019, primarily due to a net loss of ~~$10.1~~$39.1 million, adding back loss on impairment of long lived assets of $16.0 million, depreciation and amortization of ~~$10.5~~$3.1 million, ~~and non-cash compensation of $2.3~~a $6.3 million ~~less seasonable~~seasonal increase in ~~merchandise~~ inventory, ~~of $18.7~~a $1.2 million ~~the adjustment to the contingent consideration liability of $1.4~~decrease in prepaid expenses and other current assets, and a $0.1 million ~~the gain on insurance proceeds of $8.7 million, and reductions~~decrease in other long-term assets, combined with a reduction in accounts payable, accrued expenses and other current liabilities, deferred revenue, and other long-term liabilities of ~~$6.9~~$4.3 million, $0.9 million, $1.0 million, and ~~$2.9~~$7.3 million, respectively. The Company’s merchandise inventory and accounts payable are influenced by the seasonality of its business.

Cash ~~provided by~~used in investing activities was ~~$6.0~~$2.0 million for the thirty-nine weeks ended ~~October 28, 2017,~~November 2, 2019, which consisted primarily of ~~Company owned life insurance and SERP benefits proceeds of $14.4 million, less $6.4 million in~~ capital ~~expenditures, and a $2.6 million investment in a joint venture.~~expenditures.

Cash provided by financing activities for the thirty-nine weeks ended November 2, 2019, was comprised of ~~$5.0~~$27.8 million proceeds from short-term borrowings. ~~Cash used in financing activities was comprised of $5.0 million payment to the etailz shareholders in connection with the amendment to the share purchase agreement.~~
In January 2017, the Company entered into a $50 million asset based credit facility (“Credit Facility”) which amended the previous credit facility. The availability under the Credit Facility is subject to limitations based on inventory levels. The principal amount of all outstanding loans under the Credit Facility, together with any accrued but unpaid interest, are due and payable in January 2022, unless otherwise paid earlier pursuant to the terms of the Credit Facility. Payments of amounts due under the Credit Facility are secured by the assets of the Company. The Credit Facility contains a provision to increase availability to $75 million during October to December of each year, as needed. During the third quarter of fiscal 2017, the Company exercised the right to increase its borrowing base to $60 million, subject to the same limitations noted above.
Interest under the Credit Facility will accrue, at the election of the Company, at a Base Rate or LIBO Rate, plus, in each case, an Applicable Margin, which is determined by reference to the level of availability, with the Applicable Margin for LIBO Rate loans ranging from 2.25% to 2.75% and the Applicable Margin for Prime Rate loans ranging from 0.75% to 1.25%. In addition, a commitment fee ranging from 0.375% to 0.50% is also payable on unused commitments.
The Credit Facility contains customary affirmative and negative covenants, including restrictions on dividends and share repurchases, incurrence of additional indebtedness and acquisitions, covenants around the net
27
number of store closings, and restrictions related to the payment of cash dividends, including limiting the amount of dividends and share repurchases to $5.0 million annually and not allowing borrowings under the amended facility for the six months before or six months after the dividend payment.
~~Refer to footnote 9 in the interim condensed consolidated financial statements for further information regarding the Company’s Credit Facility.~~

Capital Expenditures.During the thirteen and thirty-nine weeks ended ~~October 28, 2017,~~November 2, 2019, the Company made capital expenditures of ~~$2.2~~$0.6 million and ~~$6.4~~$2.1 million, respectively. The ~~Company’s planned annual fiscal 2017~~Company currently plans to spend approximately $3.0 million for capital expenditures ~~is approximately $8.0 million.~~during fiscal 2019.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires that management apply accounting policies and make estimates and assumptions that affect results of operations and the reported amounts of assets and liabilities in the consolidated financial statements. Management continually evaluates its estimates and judgments including those related to merchandise inventory and return costs and income taxes. Management bases its estimates and judgments on historical experience and other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Form 10-K as of and for the year ended ~~January 28, 2017~~February 2, 2019 includes a summary of the critical accounting policies and methods used by the Company in the preparation of its interim condensed consolidated financial statements. ~~There~~As goodwill was fully impaired during fiscal 2018, the Company no longer considers goodwill to be a critical accounting policy. With the exception of goodwill, there have been no material changes or modifications to the critical accounting policies since ~~January 28, 2017.~~February 2, 2019.
28
Recent Accounting Pronouncements:

The information set forth under Note 3, Recently Adopted Accounting Pronouncements section contained in Item 1, ~~“Notes to Condensed Consolidated Financial Statements”,~~included elsewhere in the Form 10-Q, is incorporated herein by reference.

Non-GAAP Measures:

This Form 10-Q contains certain non-GAAP metrics, including: adjusted operating ~~income~~loss for the etailz segment and SG&A excluding depreciation ~~amortization,~~ and ~~acquisition related transaction and compensation~~amortization expenses, for each reporting segment. A non-GAAP measure is not a recognized measure of financial performance under GAAP in the United States, and should not be considered as a substitute for SG&A expenses, operating earnings, net earnings from continuing operations or cash flows from operating activities, as determined in accordance with GAAP. Non-GAAP items are provided because management believes that, when reconciled from the GAAP items to which they relate, they provide additional useful information to investors regarding the Company’s operational performance.

The Company calculates etailz adjusted ~~income~~loss from operations to evaluate its own operating performance and as an integral part of its planning process. The Company presents etailz adjusted ~~income~~loss from operations as a supplemental measure because it believes such a measure provides management and investors with a more complete understanding of its business operating results, including underlying trends, by excluding the effects of certain charges.

The Company calculates SG&A expenses, excluding depreciation and amortization ~~and acquisition related compensation~~ expenses, for each reporting segment to evaluate its own operating performance and as an integral part of its planning process. The Company presents SG&A expenses, excluding depreciation ~~amortization,~~ and ~~acquisition related compensation~~amortization expenses, as a supplemental measure because it believes such a measure provides management and investors with a more complete understanding of its business operating results, including underlying trends, by excluding the effects of certain charges.
2829
TRANS WORLD ENTERTAINMENT CORPORATION AND SUBSIDIARIES
PART I – FINANCIAL INFORMATION

Item 3 - Quantitative and Qualitative Disclosures about Market Risk

The Company does not hold any financial instruments that expose it to significant market risk and does not engage in hedging activities. To the extent the Company borrows under its ~~Credit Facility,~~revolving credit facility, the Company is subject to risk resulting from interest rate fluctuations since interest on the Company’s borrowings under its ~~Credit Facility~~credit facility can be variable.Interest under the Credit Facility will accrue, at the election of the Company, at a Base Rate or LIBO Rate, plus, in each case, an Applicable Margin, which is determined by reference to the level of availability as defined in the Credit Agreement, with the Applicable Margin for LIBO Rate loans ranging from 2.25% to 2.75% and the Applicable Margin for Base Rate loans ranging from 0.75% to 1.25%.variable. If interest rates on the Company’s ~~Credit Facility~~revolving credit facility were to increase by 25 basis points, and to the extent borrowings were outstanding, for every $1,000,000 outstanding on the facility, ~~income before income taxes~~interest expense would be ~~reduced~~increased by $2,500 per year. For a discussion of the Company’s accounting policies for financial instruments and further disclosures relating to financial instruments, see “Nature of Operations and Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K as of and for the year ended ~~January 28, 2017. The Company does not currently hold any derivative instruments.~~February 2, 2019.

Item 4 – Controls and Procedures

(a)    Evaluation of disclosure controls and procedures. The Company’s Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of ~~October 28, 2017,~~November 2, 2019, have concluded that as of such date the Company’s disclosure controls and procedures were effective and designed to ensure that (i) information required to be disclosed by the issuer in the reports that it files or submits under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (ii) information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

(b)    Changes in internal controls. ~~The acquisition of etailz was significant~~There have been no changes in the Company’s internal controls over financial reporting that occurred during the fiscal quarter covered by this quarterly report that have materially affected, or are reasonably likely to materially affect, the Company and was consummated effective October 17, 2016. Upon consummation of the acquisition, etailz became a consolidated subsidiary of the Company. As of October 28, 2017 etailz operations are fully incorporated within the Company, includingCompany’s internal controls over financial reporting.
2930
TRANS WORLD ENTERTAINMENT CORPORATION AND SUBSIDIARIES

PART II - OTHER INFORMATION

Item 1 – Legal Proceedings
The Company is subject to legal proceedings and claims that have arisen in the ordinary course of its business and have not been finally adjudicated. Although there can be no assurance as to the ultimate disposition of these matters, it is management’s opinion, based upon the information available at this time, that the expected outcome of these matters, individually and in the aggregate, will not have a material adverse effect on the results of operations and financial condition of the Company. As a result, the liability for the cases listed below is remote.
Loyalty Memberships and Magazine Subscriptions Class Action
On November 14, 2018, three consumers filed a punitive class action complaint against the Company and Synapse Group, Inc. in the United States District Court for the District of Massachusetts, Boston Division (Case No.1:18-cv-12377-DPW) concerning enrollment in the Company’s Backstage Pass VIP loyalty program and associated magazine subscriptions. The complaint alleged, among other things, that the Company’s “negative option marketing” misled consumers into enrolling for membership and subscriptions without obtaining the consumers’ consent. The complaint sought to represent a nationwide class of “all persons in the United States” who were enrolled in and/or charged for Backstage Pass VIP memberships and/or magazine subscriptions, and to obtain statutory and actual damages on their behalf.
On April 11, 2019, the plaintiffs voluntarily dismissed their lawsuit. On May 8, 2019, two of the plaintiffs from the dismissed lawsuit filed a similar punitive class action in Massachusetts state court (Civ. Act. No. 197CV00331, Mass. Super. Ct. Hampden Cty.), based on the same allegations, but this time seeking to represent only a class of “FYE customers in Massachusetts” who were charged for VIP Backstage Pass Memberships and/or magazine subscriptions. The Company believes it has meritorious defenses to the plaintiffs’ claims and, if the new case is not dismissed in full, the Company intends to vigorously defend the action.

Store Manager Class Actions
~~Two former Store Managers filed actions alleging claims of entitlement to unpaid compensation for overtime. In one action, the plaintiff seeks to represent a~~There are two pending class of allegedly similarly situated employees who performed the same position (Store Manager and Senior Assistant Manager) while the other plaintiff seeks to represent a class of allegedly similarly situated employees who performed the same position (Store Manager).
~~Specifically, Carol~~actions. The first, Spack ~~filed a complaint against~~v. Trans World Entertainment ~~Corporation (Trans World)~~Corp. was originally filed in the ~~United States District Court,~~ District of New Jersey, on April ~~20,~~ 2017 ~~(Case No.: 3:17-cv-02687-BRM-LHG) alleging~~(the “Spack Action”). The Spack Action alleges that ~~she is entitled to unpaid compensation for overtime under~~ the ~~federal Fair Labor Standards Act (FLSA). She brings a nationwide collective action under the FLSA on behalf of all~~Company misclassified Store Managers ~~and~~(“SMs”) as exempt nationwide. It also alleges that Trans World improperly calculated overtime for Senior Assistant ~~Managers. She~~Managers (“SAMs”) nationwide, and that both SMs and SAMs worked “off-the-clock.” It also ~~brings class action claims under~~alleges violations of New Jersey and Pennsylvania ~~law on behalf of all persons who worked as Store Managers in New Jersey or Senior Assistant Managers in Pennsylvania.~~
~~On May 19, 2017, Natasha~~State Law with respect to calculating overtime for SAMs. The second, Roper ~~filed a complaint against~~v. Trans World Entertainment Corp., was filed in ~~the U.S. District Court for~~ the Northern District of New York, ~~(Case No.: 1:17-cv-0553-TJM-CFH) in which she~~May 2017 (the “Roper Action”). The Roper Action also ~~alleges that she is entitled to unpaid compensation for overtime under the FLSA. Ms. Roper brings~~asserts a nationwide ~~collective action under the FLSA~~misclassification claim on behalf of ~~all similarly situated~~ Store Managers. Both actions were consolidated into the Northern District of New York, with the Spack Action being the lead case.
Plaintiffs moved for conditional certification of a collective of SMs in June 2018, and that motion was partially granted in January 2019. The opt-in period for the collective that was certified was closed on April 6, 2019.  Opt-in discovery relating to that potential collective has commenced. The Company believes it has meritorious defenses to the plaintiffs’ claims and intends to vigorously defend the action.

Item 1A – Risk Factors
The ability of the Company to satisfy its liabilities and to continue as a going concern is dependent on improved profitability, the continued implementation of the performance improvement plan at our etailz segment, the availability of future funding and the completion of other strategic alternatives.
The unaudited condensed consolidated financial statements for the thirteen and thirty-nine weeks ended November 2, 2019 included in this report were prepared on the basis of a going concern which contemplates that the Company will be able to realize assets and satisfy liabilities and commitments in the normal course of business.
As disclosed in this report and the Company’s previous filings with the Securities and Exchange Commission, the Company has suffered recurring losses from operations and the Company’s primary sources of liquidity are borrowing capacity under its revolving credit facility, available cash and cash equivalents, and cash generated from operations, all of which are limited. Therefore, the ability of the Company to meet its liabilities and to continue as a going concern is dependent on improved profitability, the continued implementation of the performance improvement plan for the etailz segment, the availability of future funding and the completion of other strategic alternatives. The Company has concluded that there is substantial doubt about the Company’s ability to continue as a going concern for a period of one year after the date of filing of the November 2, 2019 unaudited condensed consolidated financial statements. The financial results for the fiscal quarter ended November 2, 2019 included in this report do not include any adjustments that might result from the outcome of these uncertainties.
Risks relating to the Company’s business and Common Stock are described in detail in Item 1A of the Company’s most recently filed Annual Report on Form 10-K for the year ended ~~January 28, 2017.~~February 2, 2019.

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds
None.

Item 3 – Defaults Upon Senior Securities
None.
31
Item 4 – Mine Safety Disclosure
Not Applicable.

Item 5 – Other Information
None.
30
Item 6 - Exhibits

(A)  Exhibits -
~~(A) Exhibits -~~
Exhibit No. Description
31.1 Chief Executive Officer certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Chief Financial Officer certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32 Certification pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS XBRL Instance Document (furnished herewith)

101.SCH XBRL Taxonomy Extension Schema (furnished herewith)

101.CAL XBRL Taxonomy Extension Calculation Linkbase (furnished herewith)

101.DEF XBRL Taxonomy Extension Definition Linkbase (furnished herewith)

101.LAB XBRL Taxonomy Extension Label Linkbase (furnished herewith)

101.PRE XBRL Taxonomy Extension Presentation Linkbase (furnished herewith)
3132
SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

TRANS WORLD ENTERTAINMENT CORPORATION

December ~~7, 2017~~23, 2019 By: /s/ Michael Feurer
Michael Feurer
Chief Executive Officer
(Principal Executive Officer)

December ~~7, 2017~~23, 2019 By: /s/ ~~John Anderson~~Edwin Sapienza
~~John Anderson~~Edwin Sapienza
Chief Financial Officer
(Principal and Chief Accounting Officer)
3233

	Thirteen Weeks Ended November 2, 2019
	Number of shares outstanding												Accumulated
	Common Shares		Treasury Shares			Common Stock		Additional Paid-in Capital		Treasury Stock At Cost			Other Comprehensive Loss			Accumulated Deficit			Shareholders’ Equity
Balance as of August 3, 2019		3,224		(1,409	)	$	32	$	344,983	$	(230,168	)	$	(725	)	$	(66,157	)	$	47,965
Net Loss		—		—			—		—		—			—			(23,155	)		(23,155	)
Other comprehensive income		—		—			—		—		—			5			—			5
Vested restricted shares		2		—			—		—		—			—			—			—
Amortization of unearned compensation/restricted stock amortization		—		—			—		60		—			—			—			60
Balance as of November 2, 2019		3,226		(1,409	)	$	32	$	345,043	$	(230,168	)	$	(720	)	$	(89,312	)	$	24,875

	Thirty-nine Weeks Ended November 2, 2019
	Number of shares outstanding												Accumulated
	Common Shares		Treasury Shares			Common Stock		Additional Paid-in Capital		Treasury Stock At Cost			Other Comprehensive Loss			Accumulated Deficit			Shareholders’ Equity
Balance as of February 2, 2019		3,222		(1,409	)	$	32	$	344,826	$	(230,166	)	$	(735	)	$	(50,227	)	$	63,730
Net Loss		—		—			—		—		—			—			(39,085	)		(39,085	)
Other comprehensive income		—		—			—		—		—			15			—			15
Vested restricted shares		4		—			—		3		(2	)		—			—			1
Amortization of unearned compensation/restricted stock amortization		—		—			—		214		—			—			—			214
Balance as of November 2, 2019		3,226		(1,409	)	$	32	$	345,043	$	(230,168	)	$	(720	)	$	(89,312	)	$	24,875

	Thirteen Weeks Ended November 3, 2018
	Number of shares outstanding												Accumulated			Retained
	Common Shares		Treasury Shares			Common Stock		Additional Paid-in Capital		Treasury Stock At Cost			Other Comprehensive Loss			Earnings (Accumulaed Deficit)			Shareholders’ Equity
Balance as of August 4, 2018		3,219		(1,408	)	$	32	$	343,322	$	(230,149	)	$	(1,008	)	$	29,495		$	141,692
Net Loss		—		—			—		—		—			—			(14,052	)		(14,052	)
Other comprehensive loss		—		—			—		—		—			(5	)		—			(5	)
Vested restricted shares		3		—			—		3		(18	)		—			—			(15	)
Amortization of unearned compensation/restricted stock amortization		—		—			—		798		—			—			—			798
Balance as of November 3, 2018		3,222		(1,408	)	$	32	$	344,123	$	(230,167	)	$	(1,013	)	$	15,443		$	128,418

	Thirty-nine Weeks Ended November 3, 2018
	Number of shares outstanding												Accumulated			Retained
	Common Shares		Treasury Shares			Common Stock		Additional Paid-in Capital		Treasury Stock At Cost			Other Comprehensive Loss			Earnings (Accumulaed Deficit)			Shareholders’ Equity
Balance as of February 3, 2018		3,215		(1,408	)	$	32	$	341,714	$	(230,145	)	$	(998	)	$	47,611		$	158,214
Adjustment for adoption of accounting standard, ASU 2014-09		—		—			—		—		—			—			(456	)		(456	)
Net Loss		—		—			—		—		—			—			(31,712	)		(31,712	)
Other comprehensive loss		—		—			—		—		—			(15	)		—			(15	)
Vested restricted shares		4		—			—		9		(22	)		—			—			(13	)
Common stock issued-new grants		3		—			—		75		—			—			—			75
Amortization of unearned compensation/restricted stock amortization		—		—			—		2,325		—			—			—			2,325
Balance as of November 3, 2018		3,222		(1,408	)	$	32	$	344,123	$	(230,167	)	$	(1,013	)	$	15,443		$	128,418

	As of or for the
	Thirty-nine Weeks Ended
	October 28, 2017			October 29, 2016
OPERATING ACTIVITIES:
Net loss	($	10,085	)	($	5,113	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation of fixed assets		7,558			5,436
Amortization of intangible assets		2,917			174
Amortization of lease valuations, net		(12	)		-
Deferred tax benefit		-			(7,502	)
Long term incentive compensation		2,314			670
Adjustment to contingent consideration		(1,437	)		-
Loss on disposal of fixed assets		459			703
Gain on sale of investments		-			(800	)
Increase in cash surrender value		(227	)		(790	)
Gain on insurance proceeds		(8,733	)		-
Changes in operating assets and liabilities:
Merchandise inventory		(18,750	)		(23,111	)
Prepaid expenses and other current assets		2,172			(5,311	)
Other assets		(497	)		6,359
Accounts payable		(6,929	)		5,281
Accrued expenses, deferred revenue and other current liabilities		(1,390	)		(8,345	)
Other long-term liabilities		(1,307	)		2,470
Net cash used in operations		(33,947	)		(29,879	)

INVESTING ACTIVITIES:
Acquisition of a business		-			(36,600	)
Purchases of fixed assets		(6,392	)		(16,726	)
Proceeds from company owned life insurance and SERP death benefits		14,363			-
Investment in joint venture		(2,575	)		-
Proceeds from sale of investments		-			1,600
Purchases of investments		-			(500	)
Capital distributions from joint venture		632			-
Net cash provided by (used in) investing activities		6,028			(52,226	)

FINANCING ACTIVITIES:
Exercise of long term equity awards		-			39
Payments to shareholders		(5,000	)		-
Payments of long term borrowings		-			(4,727	)
Proceeds from short term borrowings		5,000			5,936
Purchase of treasury stock		-			(2,646	)
Net cash provided by (used in) financing activities		-			(1,398	)

Net decrease in cash and cash equivalents		(27,919	)		(83,503	)
Cash, cash equivalents, and restricted cash, beginning of year		44,077			104,311
Cash, cash equivalents, and restricted cash, end of year	$	16,158		$	20,808

Supplemental disclosures and non-cash investing and financing activities:

Interest paid	$	200		$	523

Fair value of assets acquired, including cash acquired		-			93,152
Liabilities assumed		-			(24,256	)
Net assets acquired		-			68,896
Less: Contingent consideration not yet paid		-			(10,381	)
Less: Fair value of shares issued as consideration		-			(20,415	)
Less: Indemnity liability not yet paid		-			(1,500	)
Acquisition of a business	$	-		$	36,600
Issuance of restricted performance based awards / deferred / restricted shares under deferred / restricted stock agreements		-			6,074

	Thirteen Weeks Ended			Thirty-nine Weeks Ended
	October 29, 2016			October 29, 2016

Pro forma total revenue	$	90,655		$	287,060
Pro forma net loss		(6,945	)		(13,513	)

Pro forma basic and diluted loss per share	$	(0.19	)	$	(0.37	)

Pro forma weighted average number of common shares outstanding – basic and diluted		36,157			36,257

	October 28, 2017
	Amortization Period (in months)		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount

Vendor relationships		120	$	19,100	$	2,010	$	17,090
Technology		60		6,700		1,403		5,297
Trade names and trademarks		60		3,200		647		2,553
			$	29,000	$	4,060	$	24,940

The changes in net intangibles and goodwill from January 28, 2017 to October 28, 2017 were as follows:

(in thousands)				January 28, 2017		Amortization		October 28, 2017
Amortized intangible assets:
Vendor relationships			$	18,522	$	1,432	$	17,090
Technology				6,302		1,005		5,297
Trade names and trademarks				3,033		480		2,553
Net amortized intangible assets			$	27,857	$	2,917	$	24,940

Unamortized intangible assets:
Goodwill			$	39,191		-	$	39,191
Total unamortized intangible assets			$	39,191		-	$	39,191

	Impact of Change in Accounting Policy
	As Reported February 2, 2019			Adjustments			Adjusted February 3, 2019
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	4,355		$	—		$	4,355
Restricted cash		4,126			—			4,126
Accounts receivable		5,383			—			5,383
Merchandise inventory		94,842			—			94,842
Prepaid expenses and other current assets		6,657			(748	)		5,909
Total current assets		115,363			(748	)		114,615

Restricted cash		5,745			—			5,745
Fixed assets, net		7,529			—			7,529
Operating lease right-of-use assets		—			28,044			28,044
Intangible assets, net		3,668			—			3,668
Other assets		5,708			—			5,708
TOTAL ASSETS	$	138,013		$	27,296		$	165,309

LIABILITIES
CURRENT LIABILITIES
Accounts payable	$	34,329		$	—		$	34,329
Accrued expenses and other current liabilities		8,132			(1,319	)		6,813
Deferred revenue		6,955			—			6,955
Current portion of operating lease liabilites		—			9,064			9,064
Total current liabilities		49,416			7,745			57,161

Operating lease liabilities		—			22,728			22,728
Other long-term liabilities		24,867			(3,177	)		21,690
TOTAL LIABILITIES		74,283			27,296			101,579

SHAREHOLDERS’ EQUITY
Preferred stock ($0.01 par value; 5,000,000 shares authorized; none issued)		—			—			—
Common stock ($0.01 par value; 200,000,000 shares authorized; 3,221,834 shares issued)		32			—			32
Additional paid-in capital		344,826			—			344,826
Treasury stock at cost (1,408,892 shares)		(230,166	)		—			(230,166	)
Accumulated other comprehensive loss		(735	)		—			(735	)
Accumulated deficit		(50,227	)		—			(50,227	)
TOTAL SHAREHOLDERS’ EQUITY		63,730			—			63,730
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	138,013		$	27,296		$	165,309

		Thirteen Weeks Ended		Thirty-nine Weeks Ended
(amounts in thousands)	Classification	November 2, 2019		November 2, 2019
Short-term operating lease cost	SG&A	$	4,838	$	10,043
Operating lease cost	SG&A		1,753		7,013
Variable lease cost	SG&A		127		369
Net lease cost		$	6,718	$	17,425

(amounts in thousands)	Operating Leases
2019	$	2,656
2020		10,502
2021		7,312
2022		3,181
2023		2,278
Thereafter		2,116
Total lease payments		28,045
Less: amounts representing interest		(2,378	)
Present value of lease liabilities	$	25,667

	November 2, 2019
Weighted-average remaining lease term (years) Operating leases		1.06
Weighted-average discount rate Operating leases		5	%

Other information:
	Thirty-nine Weeks Ended
(amounts in thousands)	November 2, 2019

Cash paid for amounts included in the measurement of operating lease liabilities
Operating cash flows from operating leases	$	6,582

2019	$	24,426
2020		8,393
2021		5,239
2022		1,881
2023		1,137
Thereafter		1,060
Total minimum lease payments	$	42,136

	November 2, 2019
(amounts in thousands)	Weighted Average Amortization Period (in months)	Original Gross Carrying Amount		Accumulated Impairment			Accumulated Amortization			Net Carrying Amount

Vendor relationships	120	$	19,100		$	13,822		$	4,485		$	793
Technology	60		6,700			2,587			3,369			744
Trade names and trademarks	60		3,200			—			1,927			1,273
		$	29,000		$	16,409		$	9,781		$	2,810

The changes in net intangibles from February 2, 2019 to November 2, 2019 were as follows:

(amounts in thousands)		February 2, 2019		Impairment Expense			Amortization Expense			November 2, 2019

Amortized intangible assets:
Vendor relationships		$	880		$	—		$	87		$	793
Technology			1,035			—			291			744
Trade names and trademarks			1,753			—			480			1,273
Net amortized intangible assets		$	3,668		$	—		$	858		$	2,810

Year	Annual Amortization
( in thousands)
2017	$	971
2018		3,890
2019		3,890
2020		3,890
2021		3,325
2022		1,910
Thereafter		7,064

~~Dividend yield~~		0%
~~Expected stock price volatility~~		~~40.0%-40.6%~~
~~Risk-free interest rate~~		~~1.74%-1.83%~~
~~Expected award life (in years)~~		~~5.64-5.71~~
~~Weighted average fair value per share of awards granted during the period~~		~~$0.74~~

	Number of Shares Subject To Option			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Other Share Awards (1)			Weighted Average Grant Fair Value
Balance January 28, 2017		2,459,564		$	3.58		7.3		170,927		$	3.87
Granted		620,000			1.84		-		65,000			1.85
Forfeited		(288,750	)		3.07		-		-			-
Cancelled		(164,150	)		5.43		-		(5,000	)		3.53
Exercised		-			-		-		(52,500	)		3.50
Balance October 28, 2017		2,626,664		$	3.11		7.2		178,427		$	3.26

Exercisable October 28, 2017		1,361,164		$	3.32		5.8		63,427		$	4.50

	Employee and Director Stock Award Plans
	Number of Shares Subject To Option			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Other Share Awards⁽¹⁾			Weighted Average Grant Fair Value/ Exercise Price
Balance February 2, 2019		138,921		$	55.00		5.8		13,571		$	33.60
Granted		5,750			3.76		—		—			—
Cancelled/Forfeited		(15,475	)		57.68		—		—			—
Exercised		—			—		—		(3,626	)		5.66
Balance November 2, 2019		129,196		$	52.11		6.1		9,945		$	36.75
Exercisable November 2, 2019		99,040		$	59.29		5.4		5,757		$	44.92

	Thirteen Weeks Ended				Change						Thirty-nine Weeks Ended				Change						Thirteen Weeks Ended				Change									Thirty-nine Weeks Ended				Change
	October 28, 2017		October 29, 2016		$			%			October 28, 2017		October 29, 2016		$			%
(in thousands)
(amounts in thousands)																					November 2, 2019		November 3, 2018		$			%			Comp Store Net Sales			November 2, 2019		November 3, 2018		$			%			Comp Store Net Sales
fye revenue	$	52,105	$	62,457	$	(10,352	)		-16.6	%	$	176,006	$	202,535	$	(26,529	)		-13.1	%	$	40,840	$	47,865	$	(7,025	)		-14.7	%		-5.2	%	$	127,602	$	152,473	$	(24,871	)		-16.3	%		-2.1	%
etailz revenue		40,896		3,824		37,072			n/a			121,440		3,824		117,616			n/a			28,616		44,119		(15,503	)		-35.1	%					98,008		138,288		(40,280	)		-29.1	%
Total revenue	$	93,001	$	66,281	$	26,720			40.3	%	$	297,446	$	206,359	$	91,087			44.1	%	$	69,456	$	91,984	$	(22,528	)		-24.5	%				$	225,610	$	290,761	$	(65,151	)		-22.4	%

			As of or for the Thirty-nine Weeks Ended							Change
	(in thousands)			October 28, 2017			October 29, 2016			$
	Operating Cash Flows			(33,947	)		(29,879	)		(4,068	)
	Investing Cash Flows			6,028			(52,226	)		58,254
	Financing Cash Flows			-			(1,398	)		1,398

	Capital Expenditures	(1)		(6,392	)		(16,726	)		10,334
	Purchases of business, net of cash acquired	(1)		-			(36,600	)		36,600
	Cash, Cash Equivalents, and Restricted Cash	(2)		16,158			20,808			(4,650	)
	Merchandise Inventory			144,754			157,827			(13,073	)
	Working Capital			95,951			91,617			4,334


(1)	Included in Investing Cash Flows

(2)	Cash and cash equivalents per condensed consolidated balance sheets		$	3,924		$	4,708		$	(784	)
	Add: restricted cash			12,234			16,100			(3,866	)
	Cash, cash equivalents, and restricted cash		$	16,158		$	20,808		$	(4,650	)

			As of or for the Thirty-nine Weeks Ended						Change
	(amounts in thousands)		November 2, 2019			November 3, 2018			$
	Operating Cash Flows		$	(30,822	)	$	(53,337	)	$	22,515
	Investing Cash Flows			(2,013	)		(1,546	)		(467	)
	Financing Cash Flows			27,771			25,940			1,831

	Capital Expenditures	⁽¹⁾		(2,128	)		(2,851	)		723

	Cash, Cash Equivalents, and Restricted Cash	⁽²⁾		9,162			14,563			(5,401	)
	Merchandise Inventory			101,130			131,285			(30,155	)
	Working Capital			35,378			70,000			(34,622	)

⁽¹⁾	Included in Investing Cash Flows

⁽²⁾	Cash and cash equivalents per condensed consolidated balance sheets		$	3,073		$	4,497
	Add: restricted cash			6,089			10,066
	Cash, cash equivalents, and restricted cash		$	9,162		$	14,563

~~(A) Exhibits -~~ Exhibit No.		Description
	31.1	Chief Executive Officer certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	31.2	Chief Financial Officer certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	32	Certification pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

	101.INS	XBRL Instance Document (furnished herewith)

	101.SCH	XBRL Taxonomy Extension Schema (furnished herewith)

	101.CAL	XBRL Taxonomy Extension Calculation Linkbase (furnished herewith)

	101.DEF	XBRL Taxonomy Extension Definition Linkbase (furnished herewith)

	101.LAB	XBRL Taxonomy Extension Label Linkbase (furnished herewith)

	101.PRE	XBRL Taxonomy Extension Presentation Linkbase (furnished herewith)

December ~~7, 2017~~23, 2019	By: /s/ Michael Feurer
	Michael Feurer
	Chief Executive Officer
	(Principal Executive Officer)

December ~~7, 2017~~23, 2019	By: /s/ ~~John Anderson~~Edwin Sapienza
	~~John Anderson~~Edwin Sapienza
	Chief Financial Officer
	(Principal and Chief Accounting Officer)