KASPIEN HOLDINGS INC. AND SUBSIDIARIES
PART 1. FINANCIAL INFORMATION
Item 2 - Management’s Discussion and Analysis of Financial Condition and
Results of Operations
October 28, 2023 and October 29, 2022
Overview
Kaspien Holdings Inc., which, together with its consolidated subsidiaries, is referred to herein as “Kaspien”, “the Company”, “we”, “us” and “our”, was incorporated in New York in 1972. We own 100% of the outstanding common stock of Kaspien Inc,
through which our principal operations are conducted. Kaspien is a third-party marketplace retailer. The Company leverages in-house expertise, technology, and services to generate revenue through marketplace transactions. Kaspien provides account
management, brand development, listings management, data reporting, joint business planning, and comprehensive marketing support services to our vendor partners. Our target partners are enterprise-level large growth brands that derive margins
based on pricing.
The Company’s results have been, and will continue to be, contingent upon management’s ability to understand industry trends and to manage the business in response to those trends and general economic trends. Management monitors several key
performance indicators to evaluate its performance, including:
Net Revenue: The Company measures total year over year sales growth. The Company measures its sales performance through several key
performance indicators including number of partners, active product listings and sales per listing.
Cost of Sales and Gross Profit: Gross profit is calculated based on the cost of product in relation to its retail selling value.
Changes in gross profit are impacted primarily by net sales levels, mix of products sold, obsolescence, distribution costs, and Amazon commissions and fulfillment fees.
Selling, General and Administrative (“SG&A”) Expenses: Included in SG&A expenses are payroll and related costs, occupancy
charges, general operating and overhead expenses and depreciation charges.
Balance Sheet and Ratios: The Company views cash and working capital (current assets less current liabilities) as relevant
indicators of its financial position. See Liquidity and Cash Flows section for further discussion of these items.
RESULTS OF OPERATIONS
Thirteen Weeks Ended October 28, 2023
Compared to the Thirteen Weeks Ended October 29, 2022
Net revenue and Gross profit. The following table sets forth a year-over-year comparison of the Company’s Net
revenue and Gross profit:
|
|
Thirteen Weeks Ended
|
|
|
Change
|
|
|
Thirty-nine Weeks Ended
|
|
|
Change
|
|
(amounts in thousands)
|
|
October 28,
2023
|
|
|
October 29,
2022
|
|
|
$ |
|
|
|
%
|
|
|
October 28, 2023
|
|
|
October 29, 2022
|
|
|
$ |
|
|
%
|
|
Net Revenue
|
|
$
|
26,434
|
|
|
$
|
29,145
|
|
|
$
|
(2,711
|
)
|
|
|
-9.3
|
%
|
|
$
|
92,502
|
|
|
$
|
94,843
|
|
|
$
|
(2,341
|
)
|
|
-2.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
6,116
|
|
|
|
6,575
|
|
|
|
(459
|
)
|
|
|
-7.0
|
%
|
|
|
20,887
|
|
|
|
20,155
|
|
|
|
732
|
|
|
3.6
|
%
|
% to sales
|
|
|
23.1
|
%
|
|
|
22.6
|
%
|
|
|
|
|
|
|
|
|
|
|
22.6
|
%
|
|
|
21.3
|
%
|
|
|
|
|
|
|
|
Net Revenue. Net revenue was $26.4 million for the thirteen weeks ended October 28, 2023 a 9.3% decrease from the comparable prior
year period. Net revenue was $92.5 million for the thirty-nine weeks ended October 28, 2023 a 2.5% increase from the comparable prior year period.
The primary source of revenue is the Retail as a Service (“RaaS”) model, which represented 98.7% of net revenue in the thirteen weeks ended October 28, 2023. The Company generates revenue across a broad array of product lines primarily through
the Amazon Marketplace. Categories include apparel, baby, beauty, health & personal care, home/kitchen/grocery and pet supplies.
Total active partner count as of October 28, 2023 was approximately 92.
|
|
|
|
|
Thirteen weeks ended
|
|
|
|
|
|
|
|
|
Thirty-nine weeks ended
|
|
|
|
|
|
|
October 28, 2023
|
|
|
October 29, 2022
|
|
|
Change
|
|
|
October 28, 2023
|
|
|
October 29, 2022
|
|
|
Change
|
|
Amazon US
|
|
$
|
25,861
|
|
|
|
97.8
|
%
|
|
$
|
27,883
|
|
|
|
95.7
|
%
|
|
|
-7.3
|
%
|
|
$
|
89,624
|
|
|
|
96.9
|
%
|
|
$
|
89,480
|
|
|
|
94.3
|
%
|
|
|
0.2
|
%
|
Amazon International
|
|
|
229
|
|
|
|
0.9
|
%
|
|
|
528
|
|
|
|
1.8
|
%
|
|
|
-56.6
|
%
|
|
|
1,255
|
|
|
|
1.4
|
%
|
|
|
2,807
|
|
|
|
3.0
|
%
|
|
|
-55.3
|
%
|
Other Marketplaces
|
|
|
333
|
|
|
|
1.3
|
%
|
|
|
350
|
|
|
|
1.2
|
%
|
|
|
-4.9
|
%
|
|
|
1,212
|
|
|
|
1.3
|
%
|
|
|
1,131
|
|
|
|
1.2
|
%
|
|
|
7.1
|
%
|
Subtotal Retail as a Service
|
|
|
26,423
|
|
|
|
100.0
|
%
|
|
|
28,761
|
|
|
|
98.7
|
%
|
|
|
-8.1
|
%
|
|
|
92,091
|
|
|
|
99.6
|
%
|
|
|
93,418
|
|
|
|
98.5
|
%
|
|
|
-1.4
|
%
|
Subscriptions
|
|
|
11
|
|
|
|
0.0
|
%
|
|
|
384
|
|
|
|
1.3
|
%
|
|
|
-97.1
|
%
|
|
|
411
|
|
|
|
0.4
|
%
|
|
|
1,425
|
|
|
|
1.5
|
%
|
|
|
-71.1
|
%
|
Net revenue
|
|
$
|
26,434
|
|
|
|
100.0
|
%
|
|
$
|
29,145
|
|
|
|
100.0
|
%
|
|
|
-9.3
|
%
|
|
$
|
92,502
|
|
|
|
100.0
|
%
|
|
$
|
94,843
|
|
|
|
100.0
|
%
|
|
|
-2.5
|
%
|
On June 6, 2023, Kaspien entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”), pursuant to which Kaspien sold substantially all of the assets of and certain of the liabilities relating to Kaspien’s agency business model
through which Kaspien provides support services for account management, media planning, media analytics, search strategy, business planning, and data reporting to its partners (the “Business” and the transaction, the “Transaction”). The
Transaction closed on June 6, 2023.
Gross Profit. The following table sets forth a period over period comparison of the Company’s gross profit:
|
|
Thirteen Weeks Ended
|
|
|
Change
|
|
|
Thirty-nine Weeks Ended
|
|
|
Change
|
|
(amounts in thousands)
|
|
October 28,
2023
|
|
|
October 29,
2022
|
|
|
$ |
|
|
|
%
|
|
|
October 28,
2023
|
|
|
October 29,
2022
|
|
|
$ |
|
|
|
%
|
|
Merchandise margin
|
|
$
|
11,359
|
|
|
$
|
12,691
|
|
|
$
|
(1,332
|
)
|
|
|
-10.5
|
%
|
|
$
|
37,980
|
|
|
$
|
40,858
|
|
|
$
|
(2,878
|
)
|
|
|
-7.0
|
%
|
% of net revenue
|
|
|
43.0
|
%
|
|
|
43.5
|
%
|
|
|
-0.7
|
%
|
|
|
|
|
|
|
41.1
|
%
|
|
|
43.1
|
%
|
|
|
-2.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fulfillment fees
|
|
|
(3,325
|
)
|
|
|
(3,888
|
)
|
|
|
563
|
|
|
|
-14.5
|
%
|
|
|
(11,382
|
)
|
|
|
(13,110
|
)
|
|
|
1,728
|
|
|
|
-13.2
|
%
|
Warehousing and freight
|
|
|
(1,918
|
)
|
|
|
(2,228
|
)
|
|
|
310
|
|
|
|
-13.9
|
%
|
|
|
(5,711
|
)
|
|
|
(7,593
|
)
|
|
|
1,882
|
|
|
|
-24.8
|
%
|
Gross profit
|
|
$
|
6,116
|
|
|
$
|
6,575
|
|
|
$
|
(459
|
)
|
|
|
-7.0
|
%
|
|
$
|
20,887
|
|
|
$
|
20,155
|
|
|
$
|
732
|
|
|
|
3.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of net revenue
|
|
|
23.1
|
%
|
|
|
22.6
|
%
|
|
|
|
|
|
|
|
|
|
|
22.6
|
%
|
|
|
21.3
|
%
|
|
|
|
|
|
|
|
|
Gross profit was $6.1 million for the thirteen weeks ended October 28, 2023, as compared to $6.6 million for the comparable prior year period. The decrease in gross profit was primarily attributable to lower sales and a decline in merchandise
margin as a percentage of sales partially offset by a reduction in fulfillment fees and warehousing and freight expenses. Gross profit as a percentage of net revenue was 23.1% as compared to 22.6% for the thirteen weeks ended October 29, 2022.
Merchandise margin for the thirteen-week period ending October 28, 2023 was 43.0% as compared to 43.5% for the comparable prior year period.
Gross profit for the thirty-nine weeks ended October 28, 2023 was $20.9 million, or 22.6% of net revenue, as compared to $20.2 million, or 21.3% of net revenue for the comparable prior year period as increased net
revenue and reduced warehousing and freight expenses were partially offset by a lower merchandise margin.
SG&A Expenses. The following table sets forth a period over period comparison of the Company’s SG&A expenses:
|
|
Thirteen Weeks Ended
|
|
|
Change
|
|
|
Thirty-Nine Weeks Ended
|
|
|
Change
|
|
(amounts in thousands)
|
|
October 28,
2023
|
|
|
October 29,
2022
|
|
|
$ |
|
|
|
%
|
|
|
October 28,
2023
|
|
|
October 29,
2022
|
|
|
$ |
|
|
|
%
|
|
Selling expenses
|
|
$
|
3,711
|
|
|
$
|
4,206
|
|
|
$
|
(495
|
)
|
|
|
-11.8
|
%
|
|
$
|
12,814
|
|
|
$
|
13,683
|
|
|
$
|
(869
|
)
|
|
|
-6.4
|
%
|
General and administrative expenses
|
|
|
3,217
|
|
|
|
5,049
|
|
|
|
(1,832
|
)
|
|
|
-36.3
|
%
|
|
|
11,074
|
|
|
|
16,292
|
|
|
|
(5,218
|
)
|
|
|
-32.0
|
%
|
Total SG&A expenses
|
|
$
|
6,928
|
|
|
$
|
9,255
|
|
|
$
|
(2,327
|
)
|
|
|
-25.1
|
%
|
|
$
|
23,888
|
|
|
$
|
29,975
|
|
|
$
|
(6,087
|
)
|
|
|
-20.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As a % of total revenue
|
|
|
26.2
|
%
|
|
|
31.8
|
%
|
|
|
|
|
|
|
|
|
|
|
25.8
|
%
|
|
|
31.6
|
%
|
|
|
|
|
|
|
|
|
For the thirteen weeks ended October 28, 2023, SG&A expenses were $6.9 million as compared to $9.3 million for the comparable prior year period. Selling expenses decreased $0.5 million for the thirteen weeks ended
October 28, 2023. General and administrative expenses decreased $1.8 million for the thirteen weeks ended October 28, 2023 primarily due to lower payroll, marketing expenses and professional fees.
Consolidated depreciation and amortization expense for the thirteen weeks ended October 28, 2023 was $0.2 million as compared to $0.3 million for the comparable prior year period.
For the thirty-nine weeks ended October 28, 2023, SG&A expenses were $23.9 million as compared to $30.0 million for the comparable prior year period. Selling expenses decreased $0.9 million for the thirty-nine
weeks ended October 28, 2023. General and administrative expenses decreased $5.2 million for the thirty-nine weeks ended October 29, 2022 primarily due to lower payroll, marketing expenses and professional fees.
Consolidated depreciation and amortization expense for the thirty-nine weeks ended October 29, 2022 was $0.5 million as compared to $1.0 million for the comparable prior year period.
Interest Expense. Interest expense was $1.0 million for the thirteen weeks ended October 28, 2023 compared to $0.9 million for
the thirteen weeks ended October 29, 2022. The increase in interest expense was due to increased long-term borrowings and higher interest rates on short term borrowings.
Interest expense was $2.8 million for the thirty-nine weeks ended October 28, 2023 compared to $2.5 million for the thirty-nine weeks ended October 29, 2022. The increase in interest expense was due to long-term borrowings and higher interest
rates on short term borrowings. See Note 6 to the Condensed Consolidated Financial Statements for further detail on the Company’s debt.
Other Income. Other income for the thirty-nine week periods ended October 28, 2023 was $0.8 million and represented proceeds from an
insurance claim.
Income Tax Expense. Based on available objective evidence, management concluded that a full valuation allowance should be recorded
against the Company's deferred tax assets As a result, there were insignificant tax expense amounts recorded during the thirteen weeks ended October 28, 2023 and October 29, 2022.
Net Loss. The net loss for the thirteen weeks ended October 28, 2023 was $1.8 million as compared to $3.6 million for the comparable
prior year period.
LIQUIDITY
Liquidity and Cash Flows:
The Company’s primary sources of liquidity are its borrowing capacity under its Credit Facility and available cash and cash equivalents. The Company incurred a net loss of $5.1
million and $12.4 million for the thirty-nine weeks ended October 28, 2023 and October 29, 2022, respectively. The decrease in the net loss was primarily attributable to an increase gross margin and a decrease in selling, general and
administrative Expenses. In addition, the Company has an accumulated deficit of $145.0 million as of October 28, 2023 and net cash used in operating activities for the thirty-nine weeks ended October 28, 2023 was $0.9 million. Net cash used in
operating activities for the thirty-nine weeks ended October 29, 2022 was $12.2 million.
As disclosed in the Company's Annual Report on Form 10-K filed April 28, 2023, the Company experienced negative cash flows from operations during fiscal 2022 and 2021 and we
expect to incur net losses in fiscal 2023.
Subsequent to the balance sheet date, after an assessment of its current cash and liquidity position and near-term debt maturities, the Company has initiated a plan to wind down
the Company’s operations in an orderly fashion (the “Plan”), which is expected to be substantially complete by May 1, 2024. The Plan includes the following:
|
• |
The sell through of current on hand inventory through the current channels;
|
|
• |
the collection of outstanding receivables due to the Company;
|
|
• |
a reduction in force of substantially all of our employees other than a core group of employees. We expect to substantially complete the workforce reduction prior to the end of January
2024;
|
|
• |
marketing for sale of unrecognized assets including private label brands, trademarks and other intangible assets; and
|
|
• |
the settlement of all liabilities of the Company.
|
During the duration of the Plan, the Board may authorize the Company to pay all costs and expenses, including without limitation, retention and severance expenses, professional
and other fees and expenses of persons rendering services, including legal counsel, accountants and tax advisors, to the Company in connection with the collection, sale, exchange or other disposition of the Company's property and assets and the
implementation of the plan. The Company intends to wind down its operations in an orderly manner without the need for a bankruptcy filing.
As a result of the approval of the Plan, the Company adopted the Liquidation Basis of Accounting. This basis of accounting is considered appropriate when,
among other things, liquidation of the Company is imminent, as defined in ASC 205-30 “Presentation of Financial Statements – Liquidation Basis of Accounting”. Under the Liquidation Basis of Accounting the following financial statements are no
longer presented (except for periods prior to the adoption of the Liquidation Basis of Accounting): a consolidated condensed balance sheet, a consolidated condensed statement of operations and comprehensive loss and a consolidated condensed
statement of cash flows. The consolidated condensed statement of net assets and the consolidated condensed statement of changes in net assets are the principal financial statements presented under the Liquidation Basis of Accounting.
Under the Liquidation Basis of Accounting, all of the Company’s assets have been stated at their estimated net realizable value and are based on current
contracts, estimates and other indications of sales value net of estimated selling costs. These amounts are presented in the accompanying consolidated condensed statement of net assets. These estimates will be periodically reviewed and adjusted
as appropriate. There can be no assurance that these estimated values will be realized. Such amounts should not be taken as an indication of the timing or amount of future distributions or our actual dissolution. The valuation of assets at
their net realizable value and liabilities at their anticipated settlement amount represent estimates, based on present facts and circumstances, of the net realizable value of the assets and the costs associated with carrying out the Plan. The
actual values and costs associated with carrying out the Plan are expected to differ from amounts reflected in the accompanying financial statements because of the plan’s inherent uncertainty. These differences may be material. In particular,
the estimates of our costs will vary with the length of time necessary to complete the Plan.
The table below represents a Conasolidated Condensed Statement of Net Assets presented on a liquidation basis:
CONSOLIDATED CONDENSED STATEMENT OF NET ASSETS
(Liquidation Basis)
(in thousands, except per share and share amounts)
(unaudited)
|
|
As of October 28, 2023
|
|
|
|
(unaudited)
|
|
Cash and cash equivalents
|
|
$
|
6,668
|
|
Accounts receivable
|
|
|
1,017
|
|
Inventory
|
|
|
17,497
|
|
Prepaid expenses and other
|
|
|
20
|
|
Other assets
|
|
|
9
|
|
Accounts payable, trade and other
|
|
|
(5,704
|
)
|
Short-term borrowings
|
|
|
(8,874
|
)
|
Short-term debt
|
|
|
(11,748
|
)
|
Accrued liquidation and other expenses
|
|
|
(5,067
|
)
|
Other long-term liabilities
|
|
|
(11,158
|
)
|
Operating lease liabilities
|
|
|
(1,240
|
)
|
NET ASSETS IN LIQUIDATION
|
|
$
|
(18,581
|
)
|
The table below presents the Consolidated Condensed Statement of Changes in Net Assets as of October 28, 2023:
KASPIEN HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN NET ASSETS
(Liquidation Basis)
(in thousands, except per share and share amounts)
(unaudited)
STOCKHOLDERS' DEFICIT AT OCTOBER 28, 2023 ON A GOING CONCERN BASIS
|
|
$
|
(5,998
|
)
|
|
|
|
|
|
Effects of adopting the liquidation basis of accounting:
|
|
|
|
|
Change in net realizable value of prepaid expenses
|
|
|
(399
|
)
|
Change in net realizable value of inventory
|
|
|
(6,547
|
)
|
Change in net realizable value of fixed assets
|
|
|
(1,637
|
)
|
Change in net realizable value of other assets
|
|
|
(557
|
)
|
Change in net realizable value of right of use assets
|
|
|
(1,015
|
)
|
Change in net realizable value of accounts receivable
|
|
|
(554
|
)
|
Accrued liquidation costs
|
|
|
(1,873
|
)
|
Total effects of adopting the liquidation basis of accounting
|
|
|
(12,583
|
)
|
NET ASSETS IN LIQUIDATION - OCTOBER 28, 2023
|
|
$
|
(18,581
|
)
|
The unaudited condensed consolidated financial statements for the thirty-nine weeks ended October 28, 2023 were prepared pursuant to the rules and regulations of the Securities and Exchange Commission. The information furnished in these unaudited
condensed consolidated financial statements reflects all normal, recurring adjustments which, in the opinion of management, are necessary for the fair presentation of such financial statements. The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America 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 financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The ability of the Company to meet its liabilities and to continue as a going concern
is dependent on improved profitability, the strategic initiatives for Kaspien and the availability of future funding. Based on recurring losses from operations, negative cash flows from operations, the expectation of continuing operating losses for
the foreseeable future, and uncertainty with respect to any available future funding, the Company has concluded that there is substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
As of October 28, 2023, we had cash and cash equivalents of $0.4 million, a net working deficit of $2.6 million, and $8.9 million in borrowings on our revolving credit facility, as further discussed below. As of October 28, 2023 and October 29,
2022, the Company had no outstanding letters of credit. The Company had $2.1 million and $7.7 million available for borrowing under the Credit Facility as of October 28, 2023 and October 29, 2022, respectively.
On July 12, 2022, the Company entered into a Securities Purchase Agreement (the “PIPE Purchase Agreement”) with a single institutional investor for a private placement offering (“Private Placement”) of the Company’s common stock (the “Common
Stock”) or pre-funded warrants, with each pre-funded warrant exercisable for one share of Common Stock (the “Pre-Funded Warrants”), and warrants exercisable for one share of Common Stock (the “Investor Warrants”). Pursuant to the PIPE Purchase
Agreement, the Company has agreed to issue and sell 1,818,182 shares (the “Shares”) of its Common Stock or Pre-Funded Warrants in lieu thereof together with Investor Warrants to purchase up to 2,457,160 shares of Common Stock. Each share of Common
Stock and accompanying Investor Warrant will be sold together at a combined offering price of $3.30 per share.
The Pre-Funded Warrants are immediately exercisable, at a nominal exercise price of $0.001, and may be exercised at any time until all of the Pre-Funded Warrants are exercised in full. As of October 28, 2023 all Pre-Funded Warrants have been
exercised.
The Investor Warrants have an exercise price of $3.13 per share (subject to adjustment as set forth in the warrant), are exercisable upon issuance and will expire five years from the date of issuance. The Investor Warrants contain standard
adjustments to the exercise price including for stock splits, stock dividend, rights offerings and pro rata distributions.
The Private Placement closed on July 14, 2022. The gross proceeds to the Company from the Private Placement, after deducting placement agent fees and other estimated offering expenses payable by the Company, were approximately $7.1 million. The
Company intends to use the net proceeds from the private placement for working capital and other general corporate purposes.
The following table sets forth a summary of key components of cash flow and working capital:
|
|
|
As of or for the
|
|
|
|
|
|
|
|
Thirty-nine Weeks Ended
|
|
|
Change
|
|
|
(amounts in thousands)
|
|
October 28,
2023
|
|
|
October 29,
2022
|
|
|
$
|
|
|
Operating Cash Flows
|
|
$
|
(890
|
)
|
|
$
|
(12,193
|
)
|
|
$
|
11,303
|
|
|
Investing Cash Flows(1)
|
|
|
(173
|
)
|
|
|
(766
|
)
|
|
|
593
|
|
|
Financing Cash Flows
|
|
|
62
|
|
|
|
11,666
|
|
|
|
(11,604
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Expenditures(1)
|
|
|
(173
|
)
|
|
|
(766
|
)
|
|
|
593
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, Cash Equivalents, and Restricted Cash (2)
|
|
|
2,625
|
|
|
|
3,528
|
|
|
|
(903
|
)
|
|
Merchandise Inventory
|
|
|
24,044
|
|
|
|
37,353
|
|
|
|
(13,309
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Consists entirely of capital expenditures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2)
|
Cash and cash equivalents per condensed consolidated balance sheets
|
|
$
|
405
|
|
|
$
|
769
|
|
|
$
|
(364
|
)
|
|
Add: restricted cash
|
|
|
2,220
|
|
|
|
2,759
|
|
|
|
(539
|
)
|
|
Cash, cash equivalents, and restricted cash
|
|
$
|
2,625
|
|
|
$
|
3,528
|
|
|
$
|
(903
|
)
|
Cash used in operations was $0.9 million for the thirty-nine weeks ended October 28, 2023, primarily due to net loss of $5.1 million partially offset by a $2.7 million reduction in inventory.
Cash used by investing activities was $0.2 million for the thirty-nine weeks periods ended October 28, 2023, which consisted entirely of capital expenditures.
Cash used by financing activities was $62,000 for the thirty-nine weeks ended October 28, 2023.
Cash provided by financing activities was $11.7 million for the thirty-nine weeks ended October 29, 2022. The primary source of cash was $5.0 million raised from the issuance of subordinated debt and $7.1 million from the Private Placement
offering partially offset by the payment of short-term borrowings of $6.1 million.
Capital Expenditures. During the thirteen weeks ended October 28, 2023, the Company made capital expenditures of $0.2 million. The
Company currently plans to spend approximately $0.4 million for capital expenditures during fiscal 2023.
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires that management apply accounting policies and make estimates and assumptions that affect
results of operations and the reported amounts of assets and liabilities in the financial statements. Management continually evaluates its estimates and judgments including those related to merchandise inventory and return costs and income taxes.
Management bases its estimates and judgments on historical experience and other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Form 10-K as of and for the year ended January 28, 2023 includes a summary of the critical accounting policies and methods used by the
Company in the preparation of its interim condensed consolidated financial statements. The Company’s significant accounting policies are the same as those described in Note 1 to the Company’s Consolidated Financial Statements on Form 10-K for the
fiscal year ended January 28, 2023.
Recent Accounting Pronouncements:
The information set forth under Note 2, Recently Adopted Accounting Pronouncements section contained in Item 1, “Notes to Interim Condensed Consolidated Financial Statements”, is incorporated herein by reference.
KASPIEN HOLDINGS INC. AND SUBSIDIARIES
PART I – FINANCIAL INFORMATION
Item 3 – Quantitative and Qualitative Disclosures about Market Risk
Not required under the requirements of a Smaller Reporting Company.
Item 4 – Controls and Procedures
(a) Evaluation of disclosure controls and procedures. The Company’s Principal
Executive Officer and Chief Financial Officer, after evaluating the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as
of October 28, 2023, have concluded that as of such date the Company’s disclosure controls and procedures were not effective and designed to ensure that (i) information required to be disclosed by the issuer in the reports that it files or
submits under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (ii) information required to
be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar
functions, as appropriate to allow timely decisions regarding required disclosure.
(b) Changes in internal controls. There have been no changes in the Company’s internal controls over
financial reporting that occurred during the fiscal quarter covered by this quarterly report that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.
KASPIEN HOLDINGS INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1 – Legal Proceedings
The Company is subject to legal proceedings and claims that have arisen in the ordinary course of its business and have not been finally adjudicated. Although there can be no assurance as to the ultimate disposition of these matters, it is
management’s opinion, based upon the information available at this time, that the expected outcome of these matters, individually and in the aggregate, will not have a material adverse effect on the results of operations and financial condition of
the Company. As a result, the liability for the cases listed below is remote.
Retailer Agreement Dispute
On June 18, 2021, Vijuve Inc. filed a lawsuit against Kaspien Inc. in the United States District Court for the Eastern District of Washington (Case No. 2:21-cv-00192-SAB) concerning a Retailer
Agreement that the parties entered into in September of 2020. Vijuve manufactures skin care products and face massagers. The parties agreed that Kaspien would sell Vijuve’s products on Amazon. The complaint alleged that Kaspien breached the
Retailer Agreement when it declined to acquiesce to Vijuve’s demand that Kaspien purchase over $700,000 of products. In total, Vijuve sought $774,000 in damages. Kaspien denied that it breached the agreement and filed various counterclaims. Kaspien
sought at least $229,000 from Vijuve for breach of contract and/or specific performance. On June 26, 2023, the Court granted our motion for summary judgment and dismissed Vijuve’s claim against Kaspien.
Risks relating to the Company’s business and Common Stock are described in detail in Item 1A of the Company’s most recently filed Annual Report on Form 10-K for the fiscal year ended January 28, 2023.
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3 – Defaults Upon Senior Securities
None.
Item 4 – Mine Safety Disclosure
Not Applicable.
Item 5 – Other Information
(c) Insider Trading Arrangements
During the quarter ended October 28, 2023, none of our directors or officers (as defined in Section 16 of the Securities Exchange Act of 1934, as amended), adopted or terminated a “Rule 10b5-1
trading arrangement” or a “non-Rule 10b5-1 trading arrangement” (each as defined in Item 408(a) and (c), respectively, of Regulation S-K).
Exhibit No.
|
Description
|
|
|
|
Chief Executive Officer certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
Chief Financial Officer certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
Certification pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
101.INS
|
XBRL Instance Document (furnished herewith)
|
|
|
101.SCH
|
XBRL Taxonomy Extension Schema (furnished herewith)
|
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase (furnished herewith)
|
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase (furnished herewith)
|
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase (furnished herewith)
|
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase (furnished herewith)
|
|
|
104
|
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).
|
Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
KASPIEN HOLDINGS INC.
|
|
|
|
|
|
December 18, 2023
|
By: /s/ Brock Kowalchuk
|
|
|
Brock Kowalchuk
|
|
|
Principal Executive Officer
|
|
|
(Principal Executive Officer)
|
|
December 18, 2023
|
By: /s/ Edwin Sapienza
|
|
|
Edwin Sapienza
|
|
|
Chief Financial Officer
|
|
|
(Principal and Chief Accounting Officer)
|
|