| Nature of Operations and Summary of Significant Accounting Policies | 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations and Other General Principles Tuesday Morning Corporation, a Delaware corporation, and its wholly-owned subsidiaries, (collectively referred to as “Tuesday Morning”, the “Company”, “we”, “us”, and “our”), is a leading off-price retailer, specializing in name-brand, high-quality products for the home, including upscale textiles, furnishings, housewares, gourmet food, toys and seasonal décor at prices generally below those charged by boutique, specialty and department stores, catalogs and on‑line retailers in the United States. We operated 489 discount retail stores in 40 states as of July 2, 2022 (“fiscal 2022”). We operated in 490 discount retail stores in 40 states as of June 30, 2021 (“fiscal 2021”). We operated 685 discount retail stores in 39 states at June 30, 2020 (“fiscal 2020”). Our customer is a savvy shopper with discerning taste for quality at a value. Our strong value proposition has established a loyal customer base, who we engage regularly with social media, email, and digital media. Listing During the pendency of our bankruptcy proceedings, the Company’s common stock was delisted by the Nasdaq Stock Market, LLC (“Nasdaq”) and began trading on the OTC Pink marketplace under the symbol “TUESQ”. In January 2021, following our emergence from bankruptcy, the Company’s common stock began trading on the OTCQX market under the ticker symbol “TUEM.” On May 24, 2021, Nasdaq approved our application for the relisting of the Company's common stock on The Nasdaq Capital Market. The Company’s common stock was relisted and commenced trading on The Nasdaq Capital Market at the opening of the market on May 25, 2021, under the ticker symbol “TUEM.” On June 6, 2022, the Company received written notice from The Nasdaq Stock Market LLC (“Nasdaq”) that the Company was not in compliance with the Nasdaq’s Listing Rule 5550(a)(2), as the closing bid price of the Company’s common stock had been below $ 1.00 per share for 30 consecutive business days (the “Minimum Bid Price Requirement”). Under Nasdaq Rule 5810(c)(3)(A), the Company will have a compliance period of 180 calendar days, or until December 5, 2022, to regain compliance with the Minimum Bid Price Requirement. To regain compliance, during the 180-calendar day compliance period, the closing bid price of the Company’s common stock must meet or exceed $1.00 per share for a minimum of ten consecutive business days. The notification of noncompliance had no immediate effect on the listing of the Company’s common stock, which continues to be listed and traded on The Nasdaq Capital Market under the symbol “TUEM.” The Company has committed to Nasdaq to seek stockholder approval of a reverse stock split at its next meeting of stockholders and to implement a reverse stock split promptly following such stockholder approval in order to regain compliance with the Minimum Bid Price Requirement. There can be no assurance that the Company will be able to regain compliance with the Minimum Bid Price Requirement or will otherwise be in compliance with other Nasdaq listing criteria. Updates on COVID-19 Pandemic The COVID-19 pandemic has had an adverse effect on our business operations, store traffic, employee availability, financial conditions, results of operations, liquidity and cash flow. On March 25, 2020, we temporarily closed all of our 687 stores nationwide, severely reducing revenues, resulting in significant operating losses and the elimination of substantially all operating cash flow. As allowed by state and local jurisdictions, 685 of our stores gradually reopened as of the end of June 2020, and two stores were permanently closed during the fourth quarter of fiscal year 2020. In accordance with our bankruptcy plan of reorganization, described below, we completed the permanent closure of 197 stores in the first quarter of fiscal 2021 and the closure of our Phoenix, Arizona distribution center (“Phoenix distribution center”) in second quarter of fiscal 2021. In addition, as part of our restructuring, we secured financing to pay creditors in accordance with the plan of reorganization and to fund planned operations and expenditures. The extent to which the COVID-19 pandemic impacts our business, results of operations, cash flows and financial condition will depend on future developments, including future surges in incidences of COVID-19 and the severity of any such resurgence, the rate and efficacy of vaccinations against COVID-19, the length of time that impacts of the COVID-19 pandemic continue, how fast economies will fully recover from the COVID-19 pandemic, the timing and extent of further impacts on traffic and consumer spending in our stores, the extent and duration of ongoing impacts to domestic and international supply chains and the related impacts on the flow, and availability and cost of products. Liquidity and Going Concern The consolidated balance sheets as of July 2, 2022, and June 30, 2021, and the related consolidated statements of operations, changes in stockholders’ equity and cash flows for each of the three years in the period ended July 2, 2022, June 30, 2021, and June 30, 2020 and the related notes (collectively referred to as the “consolidated financial statements”) were prepared on the basis of a going concern, which contemplates that the Company will be able to realize assets and discharge liabilities in the normal course of business. The Company’s results of operations for fiscal year ended July 2, 2022, have been negatively impacted by a variety of factors, including pandemic-related disruptions to supply chains, reduced store traffic and sales as a result of decades high inflation including increased fuel costs, higher freight costs, transportation and other supply chain conditions. As of July 2, 2022, the gross margin decreased from the previous year to 25.6 % compared to 29.8 % at June 30, 2021. The decrease in gross margin as a percentage of net sales was primarily a result of higher supply chain and transportation costs recognized in the current year, partially offset by lower markdowns. These conditions combined with limited remaining borrowing availability under the New ABL Credit Agreement raised substantial doubt as to the Company’s ability to continue as a going concern as of July 2, 2022. In connection therewith, and as discussed further in Note 12 to the consolidated financial statements, the Company made an early borrowing of $ 5 million under the FILO B term loan facility under the New ABL Credit Agreement. In addition, over the last three months, the Company also engaged in an extensive process to obtain additional financing to support the Company’s capital needs. As described further in Note 12 to the consolidated financial statements, on September 20, 2022, the Company completed the Private Placement, which result in an issuance of $ 35 million of convertible debt securities. The proceeds of the Private Placement were used (i) to repay $ 7.5 million of the FILO A term loans and FILO B term loans under the New ABL Credit Agreement; (ii) repayment of a portion of the Borrower’s revolving loans under the New ABL Credit Agreement; and (iii) payment of transaction costs not to exceed $ 5 million. In addition, remaining proceeds will be used for working capital and other general corporate purposes of the Company and its subsidiaries. In evaluating the criteria from ASC 205-40-50, the Company considered several key factors related to changing conditions that impacted the Company’s ability to continue as a going concern such as cash and cash equivalents, ABL availability, total liquidity and additional financing of $ 35 million, and a strategic partnership to bring in a new line of products. Accordingly, the Company re-evaluated its potential going concern disclosure requirements in accordance with ASC 205-40-50 as of the date of filing. Upon completion of this evaluation, the Company has concluded that as a result of the funds generated from the Private Placement, and the funds expected to be generated from operating activities, available cash and cash equivalents, and borrowings under the New ABL Facility will be sufficient to fund its planned operations and capital expenditure requirements for at least twelve months. Management’s expected plans to generate adequate funds from operating activities, include cost management of payroll, reductions in year over year distribution costs, the sale of new product categories, and better alignment of merchandise purchases and receipts with sales demand, among others. The Company believes these actions alleviate the substantial doubt about the Company’s ability to continue as a going concern. This evaluation is based on relevant conditions and events that are currently known or reasonably knowable, as of September 28, 2022. Emergence from Chapter 11 Bankruptcy Proceedings In response to the impacts of the COVID-19 pandemic, on May 27, 2020 (the “Petition Date”), we filed voluntary petitions (the “Chapter 11 Cases”) under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division (the “Bankruptcy Court”). The Chapter 11 Cases were jointly administered for procedural purposes. During the pendency of the Chapter 11 Cases, we continued to operate our businesses as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. In accordance with orders of the Bankruptcy Court, we entered into certain debtor-in-possession financing arrangements to provide financing during the pendency of the Chapter 11 Cases. See Note 3 “Debt” to the consolidated financial statements for additional information regarding these debtor-in-possession financing arrangements. In early June 2020, in accordance with orders of the Bankruptcy Court, we commenced the process to close 132 store locations. By the end of July 2020, all of these stores were permanently closed. In mid-July 2020, we began the process to close an additional 65 stores following negotiations with our landlords, and those store closures were completed in August 2020. In total, we permanently closed 197 stores during the first quarter of fiscal 2021. In addition, we closed our Phoenix, Arizona distribution center ("Phoenix distribution center") in the second quarter of fiscal 2021. On November 16, 2020, the Company and its subsidiaries filed with the Bankruptcy Court a proposed Revised Second Amended Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code (the “Amended Plan”) and a proposed Amended Disclosure Statement (the “Amended Disclosure Statement”) in support of the Amended Plan describing the Amended Plan and the solicitation of votes to approve the same from certain of the Debtors’ creditors with respect to the Chapter 11 Cases. The Amended Plan and the Amended Disclosure Statement contemplated the debt financing transactions described in Note 3 below under the caption “Post-Emergence Debt Financing Arrangements,” the exchange and Rights Offering (defined in Note 7 below) and the sale-leaseback transactions described in Note 8. On December 23, 2020, the Bankruptcy Court entered an order (the “Confirmation Order”) confirming the Amended Plan, with certain modifications described in the Confirmation Order (as modified and confirmed, the “Plan of Reorganization”). On December 31, 2020, all of the conditions precedent to the Plan of Reorganization were satisfied and the Company completed the debt financing and sale-leaseback contemplated in the Plan of Reorganization. However, the closing of the Rights Offering was considered a critical component to the execution of our confirmed Plan of Reorganization, therefore, we continued to apply the requirements of Accounting Standards Codification ("ASC") 852 – Reorganizations until that transaction closed on February 9, 2021. In accordance with the Plan of Reorganization, effective December 31, 2020 (the “Effective Date”), the Company’s board of directors was comprised of nine members, including five continuing directors of the Company, three new directors appointed by the Backstop Party (as defined in Note 7 below) and one director appointed by the equity committee in the Chapter 11 Cases. Pursuant to the Plan of Reorganization, each outstanding share of the Company’s common stock as of the close of business on January 4, 2021, was exchanged for (1) one new share of the Company’s stock and (2) a share purchase right entitling the holder to purchase its pro rata portion of shares available to eligible holders in the Rights Offering described under the caption "Equity Financing under the Plan of Organization" in Note 7. On February 9, 2021, the Company completed the equity financing contemplated by the Plan of Reorganization. On September 29, 2021, the U.S. Bankruptcy Court issued a final decree (the “Final Decree”) closing the Chapter 11 Cases of the Company and its subsidiaries. While the Company emerged from bankruptcy proceedings on December 31, 2020, the Chapter 11 Cases remained opened pending final resolution of all claims of general unsecured creditors. The Company was able to resolve all of the claims for approximately $ 14 million less than the amounts reserved and retained in the Unsecured Creditor Claim Fund. Upon entry of the Final Decree, the approximately $ 14 million remaining in the escrow account was returned to the Company to make a repayment on its ABL credit facility and the Chapter 11 Cases are now final. See Note 2 regarding Bankruptcy Accounting for further discussion. Summary of Significant Accounting Policies (a) Principles of Consolidation and Basis of Presentation —The accompanying consolidated financial statements include the accounts of Tuesday Morning Corporation, and its wholly‑owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. We have one operating segment and one reportable segment as our chief operating decision maker, the Executive Committee composed of the Chief Executive Officer, Chief Finance Officer, and other senior executives, reviews financial information on a consolidated basis for purposes of allocating resources and evaluating financial performance. Certain reclassifications were made to prior period amounts to conform to the current period presentation. None of the reclassifications affected our net earnings/(loss) in any period. We do not present a separate statement of comprehensive income, as we have no other comprehensive income items. On February 23, 2022, the board of directors of the Company approved a change in the fiscal year end from a calendar year ending on June 30 to a 52-53-week year ending on the Saturday closest to June 30, effective beginning with fiscal year 2022. In a 52-week fiscal year, each of the Company’s quarterly periods will comprise 13 weeks. The additional week in a 53- week fiscal year is added to the fourth quarter, making such quarter consist of 14 weeks. The Company made the fiscal year change on a prospective basis and will not adjust operating results for prior periods. (b) Use of Estimates —The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles ("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 consolidated financial statements, and the reported amounts of net sales and expenses during the reporting period. Actual results could differ from those estimates. (c) Cash and Cash Equivalents —Cash and cash equivalents include credit card receivables and all highly liquid instruments with original maturities of three months or less. Cash equivalents are carried at cost, which approximates fair value. At July 2, 2022, and June 30, 2021, credit card receivables from third party consumer credit card providers were $ 6.3 million and $ 3.2 million , respectively. Such receivables generally are collected within one week of the balance sheet date. (d) Restricted Cash —There was no restricted cash as of July 2, 2022 . Restricted cash was $ 22.3 million, as of June 30, 2021 , which was held in the Unsecured Creditor Claims Fund (defined below in Note 2). (e) Inventories —Inventories, consisting of finished goods, are stated at the lower of cost or net realizable value using the retail inventory method for store inventory and the specific identification method for warehouse inventory. We have a perpetual inventory system that tracks on-hand inventory and inventory sold at a stock-keeping unit (“SKU”) level. Inventory is relieved and cost of sales is recorded based on the current calculated cost of the item sold. Buying, distribution, freight and certain other costs are capitalized as part of inventory and are charged to cost of sales as the related inventory is sold. We charged $ 112.2 million , $ 95.1 million , and $ 97.8 million of such capitalized inventory costs to cost of sales for the fiscal years ended July 2, 2022, June 30, 2021, and June 30, 2020, respectively. We have capitalized $ 29.0 million and $ 24.2 million of such costs in inventory at July 2, 2022, and June 30, 2021, respectively. Stores conduct annual physical inventories, staggered during the second half of the fiscal year. During periods in which physical inventory observations do not occur, we utilize an estimate for recording inventory shrink based on the historical results of our previous physical inventories. The estimated shrink rate may require a favorable or unfavorable adjustment to costs of sales based on actual results to the extent that our subsequent actual physical inventory yields a different result. Although inventory shrink rates have not fluctuated significantly in recent years, if the actual rate were to differ from our estimates, then an adjustment to inventory shrink would be required. We review our inventory during and at the end of each quarter to ensure that all necessary pricing actions are taken to adequately value our inventory at the lower of cost or net realizable by recording permanent markdowns to our on-hand inventory. Management believes these markdowns result in the appropriate prices necessary to stimulate demand for the merchandise. Actual recorded permanent markdowns could differ materially from management’s initial estimates based on future customer demand or economic conditions. (f) Property and Equipment —Property and equipment are recorded at cost less accumulated depreciation. Furniture, fixtures, leasehold improvements, finance leases and equipment are depreciated on a straight‑line basis over the estimated useful lives of the assets as follows: Estimated Useful Lives
Furniture and fixtures 3 to 7 years
Leasehold improvements Shorter of useful life or lease term
Equipment 5 to 10 years
Assets under finance lease Shorter of useful life or lease term
Software 3 to 10 years Upon sale or retirement of an asset, the related cost and accumulated depreciation are removed from our balance sheet and any gain or loss is recognized in the statement of operations. Expenditures for maintenance, minor renewals and repairs are expensed as incurred, while major replacements and improvements are capitalized. (g) Deferred Financing Costs — Deferred financing costs represent costs paid in connection with obtaining bank and other long‑term financing. These costs for the term loan are reported in the balance sheet as a direct deduction from the face amount of the term loan and the ABL credit agreements (defined in Note 3 below) are presented as deferred financing costs in the balance sheet. (h) Income Taxes —Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using statutory tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities from a change in tax rates is recognized in income in the period that includes the date of enactment. Valuation allowances are established against deferred tax assets when it is more likely than not that the realization of those deferred tax assets will not occur. Valuation allowances are released when positive evidence becomes available that future taxable income is sufficient to utilize the underlying deferred tax assets. We file our annual federal income tax return on a consolidated basis. Furthermore, we recognize uncertain tax positions when we have determined it is more likely than not that a tax position will be sustained upon examination. However, new information may become available, or applicable laws or regulations may change, thereby resulting in a favorable or unfavorable adjustment to amounts recorded. On March 27, 2020, in an effort to mitigate the economic impact of the COVID-19 pandemic, the U.S. Congress enacted the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”). The CARES Act included certain corporate income tax provisions, which among other things, included a five-year carryback of net operating losses and acceleration of the corporate AMT credit. The Company has evaluated the CARES Act and it did not have a material impact on the income tax provision. The CARES Act also contains provisions for deferral of the employer portion of social security taxes incurred through the end of calendar 2020 and an employee retention credit, a refundable payroll credit for 50% of wages and health benefits paid to employees not providing services due to the pandemic. As a result of the CARES Act, we continued to defer qualified payroll taxes through December 31, 2020. As of July 2, 2022, we have $ 2.6 million in current qualified deferred payroll taxes in “Accrued Liabilities" in the Consolidated Balance Sheets, which are due December 31, 2022. (i) Self-Insurance Reserves —We use a combination of insurance and self‑insurance plans to provide for the potential liabilities associated with workers’ compensation, general liability, property insurance, director and officers’ liability insurance, vehicle liability and employee health care benefits. Our stop loss limits per claim ar e $ 500,000 for workers ’ compensation, $ 250,000 for general liability, and $ 150,000 for medical. Liabilities associated with the risks that are retained by us are estimated, in part, by historical claims experience, severity factors and the use of loss development factors by third-party actuaries. The insurance liabilities we record are primarily influenced by the frequency and severity of claims and include a reserve for claims incurred but not yet reported. Our estimated reserves may be materially different from our future actual claim costs, and, when required adjustments to our estimate reserves are identified, the liability will be adjusted accordingly in that period. Our self‑insurance reserves for workers’ compensation, general liability and medical were $ 6.9 million , $ 0.6 million , and $ 1.0 million , respectively, at July 2, 2022, and $ 7.3 million , $ 1.2 million , and $ 1.0 million , respectively, at June 30, 2021. We recognize insurance expenses based on the date of an occurrence of a loss including the actual and estimated ultimate costs of our claims. Claims are paid from our reserves and our current period insurance expense is adjusted for the difference in prior period recorded reserves and actual payments as well as changes in estimated reserves. Current period insurance expenses also include the amortization of our premiums paid to our insurance carriers. Expenses for workers’ compensation, general liability and medical insurance were $ 2.3 million , $ 3.4 million and $ 7.0 million , respectively, for the fiscal year ended July 2, 2022, $ 1.4 million , $ 3.7 million , and $ 7.8 million , respectively, for the fiscal year ended June 30, 2021, and $ 2.7 million , $ 3.3 million and $ 8.7 million , respectively, for the fiscal year ended June 30, 2020 . (j) Revenue Recognition —Our revenue is earned from sales of merchandise within our stores and is recorded at the point of sale and conveyance of merchandise to customers. Revenue is measured based on the amount of consideration that we expect to receive, reduced by point of sale discounts and estimates for sales returns, and excludes sales tax. Payment for our sales is due at the time of sale. We maintain a reserve for estimated sales returns, and we use historical customer return behavior to estimate our reserve requirements. No impairment of the returns asset was indicated or recorded for the fiscal year ended July 2, 2022. Gift cards are sold to customers in our stores, and we issue gift cards for merchandise returns in our stores. Revenue from sales of gift cards and issuances of merchandise credits is recognized when the gift card is redeemed by the customer, or if the likelihood of the gift card being redeemed by the customer is remote (“gift card breakage”). The gift card breakage rate is determined based upon historical redemption patterns. An estimate of the rate of gift card breakage is applied over the period of estimated performance and the breakage amounts are included in net sales in the Consolidated Statements of Operations. Breakage income recognized was $ 0.7 million , $ 0.4 million , and $ 0.8 million for the fiscal years ended July 2, 2022, June 30, 2021, and 2020, respectively. The gift card liability totals $ 1.1 million and $ 1.0 million included in “Accrued Liabilities” in the Consolidated Balance Sheets at July 2, 2022 and June 30, 2021 , respectively (See Note 5). (k) Advertising —Costs for direct mail, television, radio, newspaper, digital and other media are expensed as the advertised events take place. Advertising expenses for the fiscal years ended July 2, 2022, June 30, 2021, and 2020 were $ 6.6 million , $ 8.3 million , and $ 18.6 million , respectively. We do not and did not receive consideration from vendors to support our advertising expenditures during fiscal 2022, 2021 and 2020 . (l) Share‑Based Compensation — The Company accounts for share-based compensation in accordance ASC 718, Compensation-Stock Compensation , which requires the fair value of share-based payments to be recognized in the consolidated financial statements as share-based compensation expense over the requisite service period. For time-based awards, share-based compensation expense is recognized on a straight-line basis, net of forfeitures, over the requisite service period for awards that actually vest. For performance-based awards, share-based compensation expense is estimated based on achievement of the performance condition and is recognized using the accelerated attribution method over the requisite service period for awards that actually vest. Share-based compensation expense is recorded in the selling, general and administrative expenses line in the consolidated statements of operations. ASC 718 also provides guidance for determining whether certain financial instruments awarded in share-based payment transactions are liabilities. The guidance requires that instruments that include conditions other than service, performance or market conditions that affect their fair value, exercisability or vesting be classified as a liability and be remeasured at fair value at each fiscal period (See Note 7 for further discussion on share-based compensation). During fiscal years ended July 2, 2022, and June 30, 2021, no stock options were granted. The fair value of each stock option granted during the fiscal year ended June 30, 2020, was estimated at the date of grant using a Black‑Scholes option pricing model, using the following assumptions:
Fiscal Years Ended
July 2, June 30, June 30,
2022 2021 2020
Risk-free interest rate — — 2.4 %
Expected term (years) — — 4.6
Expected stock volatility — — 64.8 %
Expected dividend yield — — 0.0 % • Risk‑free interest rate - the risk‑free interest rate is the constant maturity risk-free interest rate for U.S. Treasury instruments with terms consistent with the expected lives of the awards. • Expected term - the expected term of an option is based on our historical review of employee exercise behavior based on the employee class (executive or non‑executive) and based on our consideration of the remaining contractual term if limited exercise activity existed for a certain employee class. • Expected stock volatility - the expected stock volatility is based on both the historical volatility of our stock based on our historical stock prices and implied volatility of our traded stock options. • Expected dividend yield - the expected dividend yield is based on our expectation of not paying dividends on our common stock for the foreseeable future. (m) Net Earnings/(Loss) Per Common Share —Basic net earnings/(loss) per common share for the fiscal years ended July 2, 2022, June 30, 2021, and 2020, was calculated by dividing net earnings/(loss) by the weighted average number of common shares outstanding for each period. Diluted net earnings/(loss) per common share for the fiscal years ended July 2, 2022, June 30, 2021, and 2020 was calculated by dividing net earnings/(loss) by the weighted average number of common shares including the impact of dilutive common stock equivalents and warrants (unless anti-dilutive) as shown in Note 10. (n) Impairment of Long‑Lived Assets and Long‑Lived Assets to Be Disposed Of — Long‑lived assets, principally property and equipment, including leasehold improvements, and lease right-of-use ("ROU") assets are reviewed for impairment when, in management’s judgment, events or changes in circumstances indicate that the carrying amount of an asset (or asset group) may not be recoverable. If the carrying value of the asset or asset group exceeds the undiscounted cash flows expected to result from the use and eventual disposition of the asset group, the Company will write the carrying value down to the fair value in the period identified. Since there is typically no active market for our long-lived tangible assets, we estimate fair values based on the expected future cash flows. We estimate future cash flows based on store-level historical results, current trends, and operating and cash flow projections. We also perform an entity-wide assessment for impairment of shared assets such as our distribution center and corporate right of use assets using the residual cash flow method. While we believe our estimates and judgments about future cash flows are reasonable, future impairment charges may be required if the expected cash flow estimates, as projected, do not occur or if events change requiring us to revise our estimates. Assets subject to fair value measurement under ASC 820, “Fair Value Measurement”, are categorized into one of three different levels of the fair value hierarchy depending on the observability of the inputs employed in the measurement, as follows: • Level 1 – observable inputs that reflect quoted prices (unadjusted) for identical assets in active markets. • Level 2 – inputs that reflect quoted prices for identical assets in markets which are not active; quoted prices for similar assets in active markets; inputs other than quoted prices that are observable for the asset; or inputs that are derived principally from or corroborated by observable market data by correlation or other means. • Level 3 – unobservable inputs reflecting the Company’s own assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. See Note 4 and Note 8 for additional information. (o) Intellectual Property —Our intellectual property primarily consists of indefinite-lived trademarks. We evaluate annually whether the trademarks continue to have an indefinite life. Trademarks and other intellectual property are reviewed for impairment annually in the fourth quarter and may be reviewed more frequently if indicators of impairment are present. Due to change in the Company’s management in the fourth quarter of fiscal 2021 and their |
