Vince.(VNCE) - 2026 Q2 - Quarterly Report

Introductory Note This section outlines Vince Holding Corp.'s history, including its IPO, IP sale, and P180 acquisition, and defines key terms - Vince Holding Corp. (VHC) completed an IPO in November 2013, separating non-Vince businesses[8] - V Opco, a subsidiary, sold its intellectual property assets related to the Vince brand to ABG-Vince, LLC on May 25, 2023[9] - P180 Vince Acquisition Co. acquired a majority stake in the Company from affiliates of Sun Capital Partners, Inc. on January 22, 2025[10] Disclosures Regarding Forward-Looking Statements This section outlines forward-looking statements, noting actual results may differ materially due to various risks and uncertainties - Forward-looking statements are subject to risks and uncertainties, and actual results may differ materially from expectations[13] - Key risks include changes in trade policies and tariffs, ability to maintain cash flow and credit facility availability, general economic conditions, and ability to maintain wholesale partners[14] - Other risks involve the license agreement with ABG Vince, strategic initiative benefits, lease payments, internal control weaknesses, and NYSE listing compliance[14] PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements This section presents unaudited condensed consolidated financial statements and their accompanying notes a) Unaudited Condensed Consolidated Balance Sheets%20Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) | (in thousands) | August 2, 2025 | February 1, 2025 | | :--------------- | :------------- | :--------------- | | Assets | | | | Total current assets | $112,071 | $96,576 | | Total assets | $238,972 | $222,735 | | Liabilities & Stockholders' Equity | | | | Total current liabilities | $69,736 | $73,546 | | Long-term debt | $31,096 | $19,156 | | Total stockholders' equity | $49,295 | $41,759 | | Total liabilities and stockholders' equity | $238,972 | $222,735 | - Total assets increased by $16,237 (7.3%) from February 1, 2025, to August 2, 2025, primarily driven by an increase in inventories[16] - Total stockholders' equity increased by $7,536 (18.0%) from February 1, 2025, to August 2, 2025[16] b) Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)%20Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)) | (in thousands, except per share data) | Three Months Ended August 2, 2025 | Three Months Ended August 3, 2024 | Six Months Ended August 2, 2025 | Six Months Ended August 3, 2024 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net sales | $73,241 | $74,169 | $131,174 | $133,340 | | Gross profit | $36,938 | $35,131 | $66,101 | $65,044 | | Income from operations | $11,151 | $1,130 | $6,713 | $6,734 | | Net income | $12,060 | $569 | $7,257 | $4,949 | | Basic earnings per share | $0.93 | $0.05 | $0.56 | $0.39 | | Diluted earnings per share | $0.93 | $0.05 | $0.56 | $0.39 | - Net sales decreased by 1.3% for the three months ended August 2, 2025, and by 1.6% for the six months ended August 2, 2025, compared to the prior year periods[19] - Net income significantly increased to $12,060 thousand for the three months ended August 2, 2025, from $569 thousand in the prior year, and to $7,257 thousand for the six months, from $4,949 thousand[19] c) Unaudited Condensed Consolidated Statements of Stockholders' Equity%20Unaudited%20Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) | (in thousands, except share amounts) | Balance as of February 1, 2025 | Balance as of August 2, 2025 | | :----------------------------------- | :----------------------------- | :--------------------------- | | Common Stock (Number of Shares) | 12,758,852 | 12,968,548 | | Common Stock (Par Value) | $128 | $130 | | Additional Paid-In Capital | $1,158,279 | $1,158,508 | | Accumulated Deficit | $(1,116,681) | $(1,109,424) | | Accumulated Other Comprehensive Income (Loss) | $33 | $81 | | Total Stockholders' Equity | $41,759 | $49,295 | - Total stockholders' equity increased by $7,536 from February 1, 2025, to August 2, 2025, primarily due to net income of $12,060 and share-based compensation expense[24] - The number of common shares outstanding increased from 12,758,852 to 12,968,548 during the six-month period[24] d) Unaudited Condensed Consolidated Statements of Cash Flows%20Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) | (in thousands) | Six Months Ended August 2, 2025 | Six Months Ended August 3, 2024 | | :--------------- | :------------------------------ | :------------------------------ | | Net cash used in operating activities | $(7,615) | $(7,072) | | Net cash used in investing activities | $(3,530) | $(1,421) | | Net cash provided by financing activities | $11,319 | $8,081 | | Increase (decrease) in cash, cash equivalents, and restricted cash | $174 | $(412) | | Cash and cash equivalents per balance sheet at end of period | $777 | $711 | - Net cash used in operating activities increased slightly to $7,615 thousand for the six months ended August 2, 2025, from $7,072 thousand in the prior year, primarily due to increased inventories[30] - Net cash used in investing activities more than doubled to $3,530 thousand, driven by higher capital expenditures[30] e) Notes to Unaudited Condensed Consolidated Financial Statements%20Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Note 1. Description of Business and Basis of Presentation This note describes Vince Holding Corp.'s business, recent transactions, financial statement basis, liquidity, and revenue recognition - The Company operates the Vince brand, a global luxury apparel and accessories brand, after divesting Rebecca Taylor and Parker brands[32][34][35] - A strategic partnership with Authentic Brands Group (ABG) involved the sale of Vince IP for cash and a 25% membership interest in ABG Vince, granting V Opco an exclusive, long-term license[33] - P180 acquired a majority stake in the Company on January 22, 2025, leading to amendments in credit agreements and a significant pay-down of subordinated debt[36][37] - The Company's liquidity sources include cash, operations, the 2023 Revolving Credit Facility, and capital markets access, with primary cash needs for working capital, debt service, and capital expenditures[43] Note 2. Recent Transactions This note details the Rebecca Taylor wind-down, Vince IP sale to ABG Vince, and P180 Acquisition, outlining their financial implications - The Rebecca Taylor business was wound down, and its intellectual property was sold in December 2022. The remaining shares of Rebecca Taylor, Inc. were sold in May 2024, resulting in a gain on sale of subsidiary of $7,634 thousand for the six months ended August 3, 2024[51][53] - The Vince intellectual property was sold to ABG-Vince LLC for $76,500 thousand cash and a 25% membership interest, with the Company accounting for this investment using the equity method[54][56] - The P180 Acquisition involved P180 purchasing a majority stake (67%) in the Company for approximately $19,800 thousand and included a $20,000 thousand pay-down of the Third Lien Credit Facility by V Opco and a $7,000 thousand debt forgiveness by P180, leading to a debt extinguishment gain of $11,575 thousand recorded as a capital contribution[65][67][69] - Under the License Agreement with ABG Vince, V Opco has an exclusive, long-term license to use the Vince brand IP in specified territories and for certain products, with an annual guaranteed minimum royalty of $11,000 thousand[59][62] Note 3. Fair Value Measurements This note defines fair value, outlines the three-level hierarchy for financial instruments, and discusses non-financial asset impairment - Fair value is defined as the amount received from selling an asset or paid to transfer a liability in an orderly transaction[71] - The Company's financial assets and liabilities are measured using a three-level fair value hierarchy: Level 2 for revolving credit facilities (variable rates, frequent activity) and Level 3 for the Third Lien Credit Facility (variable rates, unobservable inputs)[71] - Non-financial assets, such as operating lease ROU assets and property and equipment, are assessed for impairment periodically, with no impairment identified for the three and six months ended August 2, 2025[73] Note 4. Long-Term Debt and Financing Arrangements This note details the Company's long-term debt, including credit facilities, their terms, and the impact of the P180 Acquisition | (in thousands) | August 2, 2025 | February 1, 2025 | | :--------------- | :------------- | :--------------- | | Revolving Credit Facilities | $22,862 | $11,413 | | Third Lien Credit Facility | $8,234 | $7,743 | | Total long-term debt | $31,096 | $19,156 | - The 2023 Revolving Credit Facility provides up to $85,000 thousand, maturing on June 23, 2028, with interest rates based on SOFR or Base Rate plus applicable margins, and requires Excess Availability to be no less than the greater of 10.0% of the Loan Cap or $7,500 thousand[79][80][82] - The Third Lien Credit Facility, initially $20,000 thousand, was significantly reduced by approximately $27,000 thousand through the Sun Debt Paydown and P180 Debt Forgiveness in connection with the P180 Acquisition, resulting in $7,500 thousand remaining outstanding and a debt extinguishment gain of $11,575 thousand[96][97] - As of August 2, 2025, the Company was in compliance with applicable covenants, with $42,607 thousand available under the 2023 Revolving Credit Facility and a weighted average interest rate of 6.9% on outstanding borrowings[86] Note 5. Inventory This note provides the net finished goods inventory values for the reported periods | (in thousands) | August 2, 2025 | February 1, 2025 | | :--------------- | :------------- | :--------------- | | Finished goods, net of reserves | $76,705 | $59,146 | - Finished goods inventory, net of reserves, increased by $17,559 (29.7%) from February 1, 2025, to August 2, 2025[98] Note 6. Share-Based Compensation This note details share-based compensation plans, including stock option and RSU activity, and recognized compensation expense - The Vince 2013 Incentive Plan allows for grants of stock options, restricted stock, and other awards, with 229,962 shares available for future grants as of August 2, 2025[99] | Stock Options Activity (Six Months Ended August 2, 2025) | Number of Options | | :--------------------------------------- | :---------------- | | Outstanding at February 1, 2025 | — | | Granted | 403,650 | | Forfeited or expired | (3,300) | | Outstanding at August 2, 2025 | 400,350 | | Restricted Stock Units Activity (Six Months Ended August 2, 2025) | Number of Units | | :---------------------------------------- | :-------------- | | Non-vested at February 1, 2025 | 366,399 | | Granted | 5,000 | | Vested | (167,425) | | Non-vested at August 2, 2025 | 203,974 | - Share-based compensation expense was $96 thousand for the three months ended August 2, 2025 (vs. $255 thousand in prior year) and $242 thousand for the six months ended August 2, 2025 (vs. $250 thousand in prior year)[102] Note 7. Stockholders' Equity This note describes the Company's At-the-Market Offering program for common stock sales through Virtu Americas LLC - The Company has an At-the-Market Offering program with Virtu Americas LLC, allowing it to sell up to $10 million of common stock under the 2024 S-3 Registration Statement[104] - No offerings or sales of common stock were made under the Virtu At-the-Market Offering during the three and six months ended August 2, 2025[105] - As of August 2, 2025, $2,925 thousand was available under the Virtu At-the-Market Offering[105] Note 8. Earnings Per Share This note explains basic and diluted earnings per share calculation and reconciles weighted average shares outstanding | Weighted Average Shares Outstanding | Three Months Ended August 2, 2025 | Three Months Ended August 3, 2024 | Six Months Ended August 2, 2025 | Six Months Ended August 3, 2024 | | :---------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Basic | 12,906,045 | 12,569,488 | 12,863,100 | 12,538,695 | | Diluted | 12,958,739 | 12,617,085 | 12,950,828 | 12,606,575 | - Basic EPS is calculated by dividing net income by weighted average common shares outstanding, while diluted EPS includes the dilutive effect of share-based awards[106] - Certain weighted average shares were excluded from diluted EPS computation due to their anti-dilutive effect: 522,638 for the three months and 182,809 for the six months ended August 2, 2025[107] Note 9. Commitments and Contingencies This note addresses legal proceedings, contingencies, and details the recognition and receipt of Employee Retention Tax Credits (ERC) - The Company is involved in ordinary course legal proceedings and believes their ultimate outcome will not materially impact financial position or results[108] - In the second quarter of fiscal 2025, the Company received $7,173 thousand in payments for Employee Retention Tax Credits (ERC) from the CARES Act, including $1,560 thousand in interest[110] - The ERC benefit of $5,613 thousand was recorded as an offset to compensation expense within SG&A, and the $1,560 thousand interest was recorded as Other (income)[110] Note 10. Income Taxes This note explains the Company's income tax provision, deferred tax assets, and the impact of the One Big Beautiful Bill Act (OBBBA) - The Company recorded a discrete tax expense of $58 thousand for the three and six months ended August 2, 2025, related to interest received from the ERC[112] - Despite year-to-date ordinary pre-tax losses, the Company anticipates annual ordinary pre-tax income, but has determined that the tax benefit of year-to-date losses is unlikely to be realized in the current or future years[112] - The Company maintains a full valuation allowance against its deferred tax assets, which will remain until sufficient positive evidence supports their realization[115] - The recently enacted One Big Beautiful Bill Act (OBBBA) did not have a material impact on the Company's income tax provision for the three and six months ended August 2, 2025, and no material effect is anticipated for the full fiscal year[116] Note 11. Leases This note outlines the Company's operating lease accounting, detailing ROU assets, lease liabilities, total lease cost, and future maturities - The Company has operating leases for real estate, with ROU assets and operating lease liabilities recognized based on the present value of future lease payments using an estimated incremental borrowing rate[117][118] | (in thousands) | Three Months Ended August 2, 2025 | Six Months Ended August 2, 2025 | | :--------------- | :-------------------------------- | :------------------------------ | | Operating lease cost | $5,765 | $11,445 | | Variable operating lease cost | $29 | $94 | | Sublease income | $(216) | $(432) | | Total lease cost | $5,578 | $11,107 | | Future Maturity of Lease Liabilities (as of August 2, 2025) | | :------------------------------------ | | Fiscal 2025: $10,222 thousand | | Fiscal 2026: $22,499 thousand | | Fiscal 2027: $19,400 thousand | | Fiscal 2028: $18,581 thousand | | Fiscal 2029: $17,335 thousand | | Thereafter: $41,711 thousand | | Total operating lease liabilities: $102,821 thousand | Note 12. Segment Financial Information This note identifies Vince Wholesale and Direct-to-consumer segments, providing summary financial information and unallocated corporate expenses - The Company operates two reportable segments: Vince Wholesale (distributing to department and specialty stores) and Vince Direct-to-consumer (distributing through branded retail stores, outlet stores, and e-commerce)[124] | (in thousands) | Vince Wholesale (3M Aug 2, 2025) | Vince Direct-to-consumer (3M Aug 2, 2025) | Total (3M Aug 2, 2025) | | :--------------- | :------------------------------- | :---------------------------------------- | :--------------------- | | Net Sales | $44,762 | $28,479 | $73,241 | | Total segment income before income taxes and equity in net income of equity method investment | $17,058 | $211 | $17,269 | | (in thousands) | Vince Wholesale (6M Aug 2, 2025) | Vince Direct-to-consumer (6M Aug 2, 2025) | Total (6M Aug 2, 2025) | | :--------------- | :------------------------------- | :---------------------------------------- | :--------------------- | | Net Sales | $75,052 | $56,122 | $131,174 | | Total segment income (loss) before income taxes and equity in net income of equity method investment | $26,455 | $(589) | $25,866 | - Unallocated corporate expenses include SG&A expenses for corporate activities and other charges not directly attributable to segments, and for the three and six months ended August 2, 2025, include an ERC benefit of $7,173 thousand[123][130] Note 13. Related Party Transactions This note details related party transactions, including agreements with ABG Vince, P180 reimbursements, and past dealings with CaaStle and SK Financial - The Company received cash distributions of $252 thousand and $2,028 thousand from ABG Vince under the Operating Agreement for the three and six months ended August 2, 2025, respectively[133] - Royalty payments to ABG Vince under the License Agreement were $550 thousand and $8,463 thousand for the three and six months ended August 2, 2025, respectively, with an annual guaranteed minimum royalty of $11,000 thousand[134][135] - P180 agreed to reimburse the Company for approximately $599 thousand in fees and expenses related to the P180 Acquisition, recorded as trade receivables[136] - CaaStle, previously a related party due to its relationship with P180, is no longer considered a related party, and the Vince Unfold program and platform services agreement were terminated on April 24, 2025[137][139] - SK Financial, an affiliate of Sun Capital and former related party, was involved in the Third Lien Credit Facility, which was significantly reduced and is no longer a related party post-P180 Acquisition[140] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on operating results, financial condition, liquidity, seasonality, and critical accounting estimates Executive Overview This overview describes Vince Holding Corp.'s operations of the Vince brand through wholesale and direct-to-consumer channels - Vince Holding Corp. operates the Vince brand, a global luxury apparel and accessories business, through wholesale and direct-to-consumer channels[150][151] - Recent strategic transactions include a partnership with Authentic Brands Group for Vince IP and the acquisition of a majority stake by P180 Vince Acquisition Co.[152][153] - The Company previously owned and operated Rebecca Taylor and Parker brands, which have since been wound down and sold[154][155] Results of Operations Three Months Ended August 2, 2025 Compared to Three Months Ended August 3, 2024 | (in thousands, except per share data) | August 2, 2025 | August 3, 2024 | Change ($) | Change (%) | | :------------------------------------ | :------------- | :------------- | :--------- | :--------- | | Net sales | $73,241 | $74,169 | $(928) | (1.3)% | | Gross profit | $36,938 | $35,131 | $1,807 | 5.1% | | Gross margin | 50.4% | 47.4% | 3.0 pp | | | Selling, general and administrative expenses | $25,787 | $34,001 | $(8,214) | (24.2)% | | Income from operations | $11,151 | $1,130 | $10,021 | 886.8% | | Interest expense, net | $849 | $1,647 | $(798) | (48.5)% | | Other (income) | $(1,560) | — | $(1,560) | N/A | | Net income | $12,060 | $569 | $11,491 | 2020.0% | | Diluted earnings per share | $0.93 | $0.05 | $0.88 | 1760.0% | - Gross margin rate increased by 3.0 pp, driven by lower product costing and higher pricing (340 bps positive impact) and lower discounting (210 bps positive impact), partially offset by higher tariffs (170 bps negative impact) and increased freight costs (100 bps negative impact)[161][163] - SG&A expenses decreased significantly by $8,214 thousand, primarily due to a $5,613 thousand ERC benefit recorded as an offset to compensation expense and decreased severance costs[161] Performance by Segment (Three Months) | (in thousands) | Vince Wholesale (Aug 2, 2025) | Vince Wholesale (Aug 3, 2024) | Change ($) | Change (%) | | :--------------- | :---------------------------- | :---------------------------- | :--------- | :--------- | | Net sales | $44,762 | $47,184 | $(2,422) | (5.1)% | | Income from operations | $17,058 | $16,663 | $395 | 2.4% | | (in thousands) | Vince Direct-to-consumer (Aug 2, 2025) | Vince Direct-to-consumer (Aug 3, 2024) | Change ($) | Change (%) | | :--------------- | :------------------------------------- | :------------------------------------- | :--------- | :--------- | | Net sales | $28,479 | $26,985 | $1,494 | 5.5% | | Income (loss) from operations | $211 | $(1,398) | $1,609 | N/A | - Vince Direct-to-consumer comparable sales, including e-commerce, increased by $1,950 thousand or 8.1%, driven by both e-commerce and retail store volume[174] - The Company closed three net stores since August 3, 2024, bringing the total retail store count to 58 (44 full-price, 14 outlet) as of August 2, 2025[174] Six Months Ended August 2, 2025 Compared to Six Months Ended August 3, 2024 | (in thousands, except per share data) | August 2, 2025 | August 3, 2024 | Change ($) | Change (%) | | :------------------------------------ | :------------- | :------------- | :--------- | :--------- | | Net sales | $131,174 | $133,340 | $(2,166) | (1.6)% | | Gross profit | $66,101 | $65,044 | $1,057 | 1.6% | | Gross margin | 50.4% | 48.8% | 1.6 pp | | | Gain on sale of subsidiary | — | $(7,634) | $7,634 | N/A | | Selling, general and administrative expenses | $59,388 | $65,944 | $(6,556) | (9.9)% | | Income from operations | $6,713 | $6,734 | $(21) | (0.3)% | | Interest expense, net | $1,705 | $3,293 | $(1,588) | (48.2)% | | Other (income) | $(1,560) | — | $(1,560) | N/A | | Net income | $7,257 | $4,949 | $2,308 | 46.6% | | Diluted earnings per share | $0.56 | $0.39 | $0.17 | 43.6% | - Gross margin rate increased by 1.6 pp, primarily due to lower product costing and higher pricing (330 bps positive impact) and lower discounting (70 bps positive impact), partially offset by increased freight costs (150 bps negative impact) and higher tariffs (100 bps negative impact)[177][180] - SG&A expenses decreased by $6,556 thousand, mainly due to a $5,613 thousand ERC benefit and decreased severance costs, partially offset by increased legal expenses[178] - Equity in net income (loss) of equity method investment improved from a loss of $173 thousand to an income of $747 thousand, related to the 25% interest in ABG Vince[184] Performance by Segment (Six Months) | (in thousands) | Vince Wholesale (Aug 2, 2025) | Vince Wholesale (Aug 3, 2024) | Change ($) | Change (%) | | :--------------- | :---------------------------- | :---------------------------- | :--------- | :--------- | | Net sales | $75,052 | $77,441 | $(2,389) | (3.1)% | | Income from operations | $26,455 | $26,847 | $(392) | (1.5)% | | (in thousands) | Vince Direct-to-consumer (Aug 2, 2025) | Vince Direct-to-consumer (Aug 3, 2024) | Change ($) | Change (%) | | :--------------- | :------------------------------------- | :------------------------------------- | :--------- | :--------- | | Net sales | $56,122 | $55,899 | $223 | 0.4% | | Loss from operations | $(589) | $(1,462) | $873 | N/A | - Vince Direct-to-consumer comparable sales, including e-commerce, increased by $2,650 thousand or 5.5%, due to increased volume in both e-commerce and retail stores[190] - The Vince Direct-to-consumer segment reduced its operating loss from $1,462 thousand to $589 thousand, primarily due to improved gross margin[191] Liquidity and Capital Resources - The Company's liquidity sources include cash, cash flows from operations, borrowings under the 2023 Revolving Credit Facility, and access to capital markets[192] - Primary cash needs are for working capital, royalty payments, debt service, and capital expenditures for new stores and leasehold improvements[192] | (in thousands) | Six Months Ended August 2, 2025 | Six Months Ended August 3, 2024 | | :--------------- | :------------------------------ | :------------------------------ | | Net cash used in operating activities | $(7,615) | $(7,072) | | Net cash used in investing activities | $(3,530) | $(1,421) | | Net cash provided by financing activities | $11,319 | $8,081 | - Net cash used in operating activities for the six months ended August 2, 2025, was $7,615 thousand, primarily due to a $17,521 thousand increase in inventories[195] - The 2023 Revolving Credit Facility provides up to $85,000 thousand, with $42,607 thousand available as of August 2, 2025, and $22,862 thousand outstanding[202][210] - The Third Lien Credit Facility was reduced by approximately $27,000 thousand through the Sun Debt Paydown and P180 Debt Forgiveness, with $7,500 thousand remaining outstanding[220] Seasonality - The apparel and fashion industry is cyclical, with revenues affected by general economic conditions, consumer spending, and seasonal trends[222] - Fluctuations in quarterly sales are influenced by the timing of seasonal wholesale shipments and direct-to-consumer sales, indicating that quarterly results may not predict annual performance[222] Critical Accounting Estimates - Management's discussion relies on condensed consolidated financial statements prepared using critical accounting policies that require judgments and estimates[223] - No material changes to critical accounting estimates have occurred as of August 2, 2025, from those disclosed in the 2024 Annual Report on Form 10-K[224] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a 'smaller reporting company,' Vince Holding Corp. is exempt from providing quantitative and qualitative market risk disclosures - The Company is exempt from providing quantitative and qualitative disclosures about market risk due to its status as a 'smaller reporting company' under the Securities Exchange Act of 1934[225] Item 4. Controls and Procedures This section addresses disclosure controls and internal control over financial reporting, noting a material weakness in user access controls and ongoing remediation Evaluation of Disclosure Controls and Procedures - Management, with CEO and CFO participation, concluded that disclosure controls and procedures were not effective as of August 2, 2025, due to an identified material weakness[228] - Despite the material weakness, management believes the condensed consolidated financial statements fairly state the Company's financial condition, results of operations, and cash flows due to additional analysis and substantive testing[229] Material Weakness in Internal Control over Financial Reporting - A material weakness was identified in internal control over financial reporting due to inadequate user access controls, which failed to ensure appropriate segregation of duties and restrict access to financial applications and data[230] - This material weakness did not result in a material misstatement to the financial statements but could impact the effectiveness of IT-dependent controls[231] Remediation Efforts to Address the Material Weakness - Remediation efforts include modifying system access rights to limit generic IDs, implementing a full recertification of AX user access rights, and improving operational processes for user provisioning and de-provisioning[232] - The Company continues to follow a comprehensive remediation plan, including routine reviews of user system access and timely removal of access rights upon termination[233] Limitations on the Effectiveness of Disclosure Controls and Procedures - Control systems provide only reasonable, not absolute, assurance that objectives are met due to inherent limitations[235] - Projections of effectiveness to future periods are subject to risks that controls may become inadequate or compliance may deteriorate[237] Changes in Internal Control over Financial Reporting - There were no changes in internal control over financial reporting during the fiscal quarter ended August 2, 2025, that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting[238] PART II. OTHER INFORMATION Item 1. Legal Proceedings The Company is involved in ordinary course legal proceedings, which management believes will not materially impact its financial position or results - The Company is a party to legal proceedings, compliance matters, environmental, wage and hour, and other labor claims in the ordinary course of business[239] - Management believes the ultimate outcome of these items will not have a material adverse impact on the Company's financial position, results of operations, or cash flows[239] Item 1A. Risk Factors This section highlights unchanged risk factors from the 2024 Annual Report, focusing on the risk of not maintaining NYSE listing due to non-compliance - The Company's risk factors have not materially changed from those disclosed in its 2024 Annual Report on Form 10-K[240] - A significant risk is the potential inability to maintain the listing of its common stock on the NYSE, as the Company received a notice of non-compliance with the $50,000 thousand market capitalization or stockholders' equity requirement[241][242] - The NYSE accepted the Company's business plan, granting it until November 6, 2026, to regain compliance, but there is no assurance this will be achieved[244][245] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This item confirms no unregistered sales of equity securities or use of proceeds occurred during the reporting period - No unregistered sales of equity securities or use of proceeds occurred during the reporting period[248] Item 3. Defaults Upon Senior Securities This item indicates that there were no defaults upon senior securities to report - No defaults upon senior securities were reported[249] Item 4. Mine Safety Disclosures This item is not applicable to the Company - Mine Safety Disclosures are not applicable to the Company[250] Item 5. Other Information This item confirms no directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements - No directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the quarter ended August 2, 2025[251] Item 6. Exhibits This section lists all exhibits filed as part of the Quarterly Report on Form 10-Q, including CEO/CFO certifications and Inline XBRL data - The report includes CEO and CFO Certifications pursuant to Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002[252] - Inline XBRL Instance, Taxonomy Extension Schema, Calculation, Presentation, and Definition files are provided as exhibits[252]