Tuesday Morning (TUEMQ) Risk Analysis
Risk Overview Q2, 2022
Source: the company's latest filing for the period ended Jul 02, 2022, filed Sep 28, 2022
Risk Change Over Time
No filing history is available.
- Share Price & Shareholder Rights - Risk 1We are a "controlled company" and, as a result, qualify for, and may rely on, exemptions from certain corporate governance requirements. In addition, the SPV's interests may conflict with our interests and the interests of other stockholders.
Following completion of the Private Placement, and the conversion of a portion of the Convertible Debt by the SPV into 90 million shares of the Company's common stock, the SPV acquired control of the voting power of a majority of our common stock. As a result, we are a "controlled company" within the meaning of the applicable stock exchange corporate governance standards. Under the rules of Nasdaq, a company of which more than 50% of the outstanding voting power is held by an individual, group or another company is a "controlled company" and may elect not to comply with certain stock exchange corporate governance requirements, including: - the requirement that a majority of our board of directors consists of independent directors;- the requirement that nominating and corporate governance matters be decided solely by independent directors; and - the requirement that employee and officer compensation matters be decided solely by independent directors. So long as the SPV controls a majority of the voting power of our common stock, we may utilize these exemptions. As a result, we may not have a majority of independent directors and our nominating and corporate governance and compensation functions may not be decided solely by independent directors. Accordingly, our stockholders would not have the same protections afforded to stockholders of companies that are subject to all of the stock exchange corporate governance requirements. The interests of SPV and its affiliates, which include REV, Pier 1 and Ayon Capital, could conflict with or differ from our interests or the interests of our other stockholders. For example, the concentration of ownership held by the SPV could delay, defer or prevent a change of control of our Company or impede a merger, takeover or other business combination which may otherwise be favorable for us and our other stockholders. Additionally, the affiliates of the SPV are in the business of making investments in companies and may, from time to time, acquire and hold interests in businesses that compete, directly or indirectly with us. The SPV and its affiliates may also pursue acquisition opportunities that may be complementary to our business, and as a result, those acquisition opportunities may not be available to us. So long as the SPV continues to directly or indirectly own a significant amount of our common stock, even if such amount is less than a majority thereof, the SPV will continue to be able to substantially influence or effectively control our ability to enter into corporate transactions.
- Share Price & Shareholder Rights - Risk 2We may fail to satisfy all applicable requirements for continued listing on The Nasdaq Capital Market
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.
- Accounting & Financial Operations - Risk 3If we are not able to generate cash flows from our operations, remain in compliance with our debt agreements, and continue to access credit markets, we will not be able to support capital expenditure requirements, operations or debt repayment.
Our business is dependent upon our operations generating sufficient cash flows to support capital expenditure requirements and general operating activities. We also have relied on a revolving credit facility to support our liquidity needs. On May 9, 2022, we entered into the New ABL Credit Agreement, which increased our borrowing capacity with the addition of two first-in-last out term facilities in an aggregate amount of $10.0 million. The New ABL Credit Agreement includes customary conditions to borrowing, affirmative and negative covenants and events of default, and requires us to maintain minimum borrowing availability under the New ABL Credit Agreement. On July 11, 2022, the New ABL Credit Agreement was amended in connection with our borrowing of an additional $5 million under the first-in-last out facilities. The amendment to the New ABL Credit Agreement also provided that, until certain minimum borrowing availability levels are satisfied as described in the amendment, we will be subject to additional reporting obligations, we will retain a third-party business consultant acceptable to the administrative agent, and the administrative agent may elect to apply amounts in controlled deposit accounts to the repayment of outstanding borrowings. In addition, pursuant to the amendment, we agreed to enter into and maintain a supply agreement with Gordon Brothers Retail Partners, LLC (the "Program Agent"), an affiliate of a first-in-last out lender, pursuant to which the Program Agent supplies inventory to us. On September 20, 2022, the Company incurred additional indebtedness through the Convertible Debt. The Convertible Debt includes covenants and events of default customary for this type of financing. In connection with the issuance of the Convertible Debt, the Company entered into an amendment to the New ABL Credit Agreement. The amendment restricts certain actions by the Company for the next two years, including making certain acquisitions and debt prepayments. In addition, the amendment requires that the Company engage and retain (at the Company's expense) Gordon Brothers Retail Partners for a certain period of time for the purpose of performing appraisal validations, monitoring and evaluating the Company's inventory mix and other services. While we believe the New ABL Credit Agreement will provide us with sufficient liquidity for the next 12 months, our ability to meet our capital expenditure, operating and debt service requirements will be dependent upon our ability to generate sufficient cash flows, maintain compliance with the requirements of our debt agreements and continue to access the credit markets as necessary. If we are unable to generate sufficient cash flows and maintain compliance with the requirements of the New ABL Agreement, the Term Loan Credit Agreement and the Convertible Debt, we can provide no assurance that we will be able to secure additional or alternative financing sufficient to meet our liquidity needs.
Risk Highlights Q2, 2022
Risk Word Cloud
Risk Factors Full Breakdown - Total Risks 30
- Manufacturing - Risk 1We face risks with respect to product liability claims and product recalls, which could adversely affect our reputation, our business, and our consolidated results of operations.
We purchase merchandise from third parties and directly import a limited amount of product as importer of record and offer this merchandise to customers for sale. Merchandise could be subject to recalls and other actions by regulatory authorities. Changes in laws and regulations could also impact the type of merchandise we offer to customers. We have experienced, and may in the future experience, issues that result in recalls of merchandise. In addition, in the past, individuals have asserted claims, and may in the future assert claims, that they have sustained injuries from third-party merchandise offered by us, and we may be subject to future lawsuits relating to these claims. There is a risk that these claims or liabilities may exceed, or fall outside the scope of, our insurance coverage. Any of the issues mentioned above could result in damage to our reputation, diversion of development and management resources, or reduced sales and increased costs, any of which could harm our business.
See a full breakdown of risk according to category and subcategory. The list starts with the category with the most risk. Click on subcategories to read relevant extracts from the most recent report.
