Subsequent Events

In March 2020, the World Health Organization classified the novel coronavirus (“COVID-19”) outbreak as a global pandemic, based on the rapid increase in exposure globally. The COVID-19 pandemic has had far-reaching impacts on many aspects of our operations, directly and indirectly, including on consumer behavior, store traffic, production capabilities, timing of deliveries, our people, and the market generally. The scope and nature of these impacts continue to evolve each day. In light of the uncertain and rapidly evolving situation relating to the COVID-19 pandemic, we have taken certain precautionary measures intended to help minimize the risk to our Company, employees, customers, and the communities in which we operate, and to attempt to protect our ability to continue as a going concern, including the following:

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On March 18, 2020, we temporarily closed all 239 of our stores across the United States. In addition, we have closed the distribution center that serves our stores and are not currently accepting shipments from vendors for our stores. We expect that our stores will remain closed to the public for an undetermined period of time, and until permitted by federal, state and local instructions to reopen;


•	On March 24, 2020, we borrowed approximately $23.7 million under our revolving credit facility, which represented the maximum borrowings permitted thereunder, at an interest rate of approximately 1.7% per annum;


•	On March 27, 2020, we furloughed all non-management store associates, a significant majority of our stores' distribution center staff, and a portion of our corporate office staff, and may elect to take further actions with respect to our employees in the future;


•	We identified additional expense reductions that we intend to implement throughout the remainder of fiscal 2020 as necessary;


•	Although our website and e-commerce distribution center currently continue to operate, we continue to evaluate their operations, and may elect, or be required, to shut down their operations temporarily at any time in the future;


•	We have suspended all non-essential travel for our employees; and


•	We are discouraging employee attendance at industry events and in-person work-related meetings, and have encouraged all employees able to work remotely to do so.

In addition to the foregoing actions by the Company, members of management and the Board of Directors have taken the following actions, which we expect will remain in place at least until the Company's stores reopen, or conditions improve:


•	Hezy Shaked, Executive Chairman and Chief Strategy Officer, has elected to forgo his salary;


•	Ed Thomas, President and Chief Executive Officer, has elected to forgo his salary for the month of April 2020, and thereafter will join the Company's management team in taking a temporary reduction in salary;


•	Each of the other members of the Company's management team elected to take a significant temporary reduction in salary based on a graduated scale according to annual salary, effective immediately; and


•	The members of our Board of Directors unanimously elected to forgo their respective quarterly cash retainer fees for their service on our Board.

While we anticipate that the foregoing measures are temporary, we cannot predict the specific duration for which these precautionary measures will stay in effect, and we may elect or need to take additional measures as the information available to us continues to develop, including with respect to our employees, inventory receipts, store leases, and our relationships with our third-party vendors. The extent to which the COVID-19 pandemic, and our precautionary measures in response thereto, may impact our business, financial condition or results of operations will depend on how the COVID-19 pandemic and its impacts to continue to develop, which are highly uncertain and cannot be predicted at this time.

On March 27, 2020, President Trump signed into law the “Coronavirus Aid, Relief and Economic Security (CARES) Act.” The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. We continue to examine the impacts this CARES Act may have on our business.