NEW YORK — Shares of Delia’s Corp. spiked sharply upward Monday after the firm announced that a $2.7 million equity investment by its management would allow it to file its annual report on time and without auditor qualification.
Stephen Kahn, chief executive officer, and three others acquired about 7.3 million new shares of Delia’s for 37 cents a share, 1 cent above Friday’s closing price. In Nasdaq trading Monday, Delia’s shares picked up 13 cents, or 36.1 percent, to end the session at 49 cents, their highest closing price since Jan. 8.
Christopher Edgar, vice chairman; Evan Guillemin, chief financial officer, and Geraldine Karetsky, director, also participated in the cash infusion.
Alleviating other concerns that might cause it to file its annual report to the Securities and Exchange Commission with a qualification from its auditors, Delia’s said it had received a standby commitment from the same four investors under which they would purchase the firm’s Hanover, Pa., distribution center if the firm is unable to refinance or extend the $2.9 million mortgage on the facility or execute a sale-leaseback arrangement prior to the mortgage’s maturity on Aug. 6. The firm issued warrants to the investors allowing them to purchase a total of 600,000 of Delia’s stock at 37 cents a share should such a situation unfold.
As reported, Delia’s said last Friday that it was working to secure financing that would enable it to file its annual report with the SEC without any qualification from its auditors. The Form 10-K was originally due to be filed with the SEC by April 30 and, after extending the deadline, is now due this Friday. The standby agreement will allow the firm additional time to negotiate optimal terms for the distribution facility without risking either auditor qualification or lateness in the 10-K, several sources familiar with the arrangements said.
In a statement. Kahn said, “While the environment remains challenging, we feel we’ve made significant strides along the path to recovery and are looking forward to demonstrating much improved second-half performance.”
In February, Delia’s received $16.5 million in cash against future royalties to be gleaned from the licensing of its name to JLP Daisy LLC, an affiliate of Schottenstein Stores Corp. Peter J. Solomon Co. has been working with the multichannel tween retailer, originally a direct marketer, to help extract it from a series of problems that have beset it since its foray into traditional stores. As reported, it lost $34.4 million on sales of $137.6 million during the year ended Feb. 1.