• | a clawback agreement from each purchaser, whereby each purchaser agrees that in the event of an uncured breach of any of the IWCA Letter Agreement or Vendor Exclusivity Agreement, the warrants will be immediately cancelled and, for the shares purchased by Invicta Media, Michael and Leah Friedman and Timothy Peterman, we will have the right to repurchase the shares of common stock issued pursuant to the purchase agreement at a price of $3.73 per share or, if such shares have already been sold, we will be entitled to a cash payment equal
to $3.77 per share. |
Pursuant to the purchase agreement, on the Effective Date, Mr. Peterman purchased 16,666 shares of our common stock and a warrant to purchase 7,291 shares of our common stock for an aggregate purchase price of $125,000. Mr. Lalo is the owner of IWCA, which is the sole owner of Invicta Media. Mr. Friedman is an owner of Vendor. Pursuant to the purchase agreement, on the Effective Date, Invicta Media purchased 400,000 shares of our common stock and a warrant to purchase 252,656 shares of our common stock for an aggregate purchase price of $3,000,000. Pursuant to the purchase agreement, on the Effective Date, Michael and Leah Friedman purchased 180,000 shares of our common stock and a warrant to purchase 84,218 shares of our common stock for an aggregate purchase price of
$1,350,000.
In fiscal 2019 and fiscal 2020 we purchased products, net of customary promotional funding and markdowns, from Vendor, an affiliate of Mr. Friedman, totaling $58.7 million and $51.0 million, respectively. In addition, during the first quarter of fiscal 2019, we subsidized the cost of a promotional cruise for Invicta branded and other vendors’ products. As of the end of fiscal 2020, we had a net trade payable balance owed to Vendor of $825,000. In fiscal 2020 we accrued royalties of $307,000 to IWCA.
Under the purchase agreement, we agreed to recommend that our shareholders vote to re-elect each of Eyal Lalo and Michael Friedman as a
director of
the Company at the 2019 annual meeting of shareholders for a term of office expiring at the 2020 annual meeting of shareholders, and to reflect such recommendation in the proxy statement for the 2019 annual meeting and solicit proxies in favor thereof. Messrs. Lalo and Friedman were re-elected by
the Company’s shareholders at the 2019 annual meeting. For their service as non-employee members of the board of directors, Messrs. Friedman and Lalo receive compensation under
the Company’s non-employee director compensation policy. Each director receives $65,000 in a cash retainer annually for service on our board. In addition,
the
Company’s non-employee directors receive an RSU award that vests on the day immediately prior to the next annual meeting of shareholders. On
May 2, 2019, Messrs. Friedman and Lalo each received a prorated grant for the partial year, which resulted in an award of 2,044 RSUs, valued at $7,500, that vested on
July 11, 2019. On
July 12, 2019, Messrs. Friedman and Lalo were each granted an award of 7,558 RSUs, valued at $32,500, that will vest on the day immediately prior to
the Company’s next annual meeting of shareholders.
Transactions with Retailing Enterprises,
LLC
During fiscal 2019,
the Company entered into an agreement, which was subsequently amended, to liquidate obsolete inventory to Retailing Enterprises, LLC for a total purchase price of $1.4 million. The inventory is currently stored at
the Company’s fulfillment center under a bill and hold arrangement. The terms of the agreement provide for 12 monthly payments. During the third quarter of fiscal 2020,
the Company sold additional inventory to Retailing Enterprises, LLC for a purchase price of $365,000. As of
January 30,
2021,
the Company had a net trade receivable balance owed from Retailing Enterprises of $641,000. During fiscal 2020,
the Company accrued commissions of $263,000 to Retailing Enterprises, LLC for Company sales of the Invincible Guarantee program. The Invincible Guarantee program is an Invicta watch offer whereby customers receive credit on watch trade-ins within a five-year period. The program is serviced by Retailing Enterprises, LLC. In addition,
the Company provided third party logistic services and warehousing to Retailing Enterprises, LLC, totaling $747,000 during fiscal 2020.
Transactions
with Famjams Trading
The Company purchased products from Famjams Trading LLC (
“Famjams Trading”), an affiliate of Mr. Friedman, in the aggregate amount of $48.8 million and $2.2 million during fiscal 2020 and fiscal 2019. In addition,
the Company provided third party logistic services and warehousing to Famjams Trading, totaling $59,000 and $42,000 in fiscal 2020 and fiscal 2019. As of
January 30, 2021,
the Company’s net trade payable balance with Famjams Trading was a debit balance of $4.3 million,
which primarily resulted from $3.0 million paid to Famjams Trading for a 2021 spring season advance to help finance the upfront cash commitments FamJams would have to make to its vendors in January 2021 to fulfill iMedia’s entire contemplated seasonal purchase plan. Famjams Trading will repay the $3.0 million in funding over four equal quarterly installments during fiscal 2021.