UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

~~For the quarterly period ended~~ ~~October 31, 2020~~

For the quarterly period ended October 30, 2021

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

~~For the transition period from ___________ to ___________~~

For the transition period from ___________ to ___________

Commission File Number 0-14818

Kaspien Holdings Inc.

(Exact Name of Registrant as Specified in its Charter)

New York		14-1541629
State or Other Jurisdiction of Incorporation or Organization		I.R.S. Employer Identification No.

2818 N. Sullivan Rd. Ste 30
130 Spokane Valley, WA ~~99216~~		99216
Address of Principal Executive Offices		Zip Code

(855) 300-2710

Registrant’s Telephone Number, Including Area Code

~~Trans World Entertainment Corporation~~

~~38 Corporate Circle~~

~~Albany, New York~~

Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.01 par value per share	KSPN	NASDAQ Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☐ No ☐

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock, $.01 par value,

~~1,905,198~~2,492,568 shares outstanding as of December 1, ~~2020~~2021

KASPIEN HOLDINGS INC. AND SUBSIDIARIES

QUARTERLY REPORT ON FORM 10-Q

~~INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

	Form 10-Q Page No.

PART I. FINANCIAL INFORMATION

Item 1 – Interim Condensed Consolidated Financial Statements (Unaudited)	3

	Condensed Consolidated Balance Sheets at October 30, 2021, January 30, 2021 and Octobert 31, 2020 ~~February 1, 2020 and November 2, 2019~~	34

	Condensed Consolidated Statements of Operations – Thirteen and Thirty-nine Weeks Ended October 30, 2021 and October 31, 2020 ~~and November 2, 2019~~	45

	Condensed Consolidated Statements of Comprehensive ~~Income (loss)~~Loss – Thirteen and Thirty-nine Weeks Ended October 30, 2021 and October 31, 2020 ~~and November 2, 2019~~	56

	Condensed Consolidated Statements of Shareholders’ Equity – Thirteen and Thirty-nine Weeks Ended October 30, 2021 and October 31, 2020 ~~and November 2, 2019~~	67

	Condensed Consolidated Statements of Cash Flows – Thirteen and Thirty-nine Weeks Ended October 30, 2021 and October 31, 2020 ~~and November 2, 2019~~	78

	Notes to Interim Condensed Consolidated Financial Statements	89

Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations	23

Item 3 – Quantitative and Qualitative Disclosures about Market Risk	2830

Item 4 – Controls and Procedures	2830

PART II. OTHER INFORMATION

Item 1 – Legal Proceedings	2831

Item 1A- Risk Factors	2932

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds	2932

Item 3 – Defaults Upon Senior Securities	2932

Item 4 – Mine Safety Disclosures	2932

Item 5 – Other Information	2932

Item 6 – Exhibits	2932

Signatures	3133

Index

FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, particularly in the discussion under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” All statements other than statements of historical fact are forward-looking. Examples of forward-looking statements include, but are not limited to, statements regarding future business, future results of operations or financial condition, new or planned features, products or services, management strategies, our competitive position and the COVID-19 pandemic. You can identify many forward-looking statements by words such as “may,” “will,” “would,” “should,” “could,” “expect,” “aim,” “anticipate,” “believe,” “estimate,” “intend,” “plan,” “predict,” “project,” “seek,” “potential,” “opportunities” and other similar expressions and the negatives of such expressions. However, not all forward-looking statements contain these words. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that could cause our actual results to differ materially from those expressed or implied by the forward-looking statements contained herein. Such risks and uncertainties include, among others, changes in the competitive environment, availability of new products, changes in vendor policies or relationships, general economic factors in markets where the Company’s merchandise is sold, as well as those risks discussed under the caption “Risk Factors” in our most recently filed Annual Report on Form 10‑K, which was filed with the Securities and Exchange Commission (the “SEC”) on April 30, 2021 (the “2021 Form 10-K”), and in our consolidated financial statements, related notes, and the other information appearing elsewhere in the 2021 Form 10‑K, this quarterly report on Form 10-Q and our other filings with the SEC. Given these risks and uncertainties, you should not place undue reliance on any forward-looking statements. The forward-looking statements contained in this quarterly report on Form 10-Q are made only as of the date hereof, and we do not intend, and, except as required by law, we undertake no obligation to update any forward-looking statements contained herein after the date of this report to reflect actual results or future events or circumstances.

Index

KASPIEN HOLDINGS INC. AND SUBSIDIARIES

PART 1. FINANCIAL INFORMATION

Item 1 - Interim Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share and share amounts)

										October 30,			January 30,			October 31,
	October 31, 2020			February 1, 2020			November 2, 2019			2021			2021			2020
ASSETS	Unaudited						Unaudited			Unaudited						Unaudited
CURRENT ASSETS
Cash and cash equivalents	$	2,396		$	2,977		$	3,073		$	1,754		$	1,809		$	2,396
Restricted cash		950			950			950			1,158			1,184			950
Accounts receivable		2,465			4,139			2,182			2,566			2,718			2,465
Merchandise inventory		27,204			17,836			22,522			30,248			24,515			27,204
Prepaid expenses and other current assets		836			2,974			857			760			564			836
Assets held for discontinued operations		-			51,189			94,286
Total current assets		33,851			80,065			123,870			36,486			30,790			33,851

Restricted cash		4,082			4,925			5,139			2,732			3,562			4,082
Fixed assets, net		2,343			2,190			2,102			2,251			2,268			2,343
Operating lease right-of-use assets		2,887			3,311			3,404			2,284			2,742			2,887
Intangible assets, net		989			1,760			2,810			0			732			989
Cash Surrender Value		3,438			3,353			3,212			4,413			3,856			3,438
Other assets		1,787			2,202			943			1,074			1,342			1,787
TOTAL ASSETS	$	49,377		$	97,806		$	141,480		$	49,240		$	45,292		$	49,377

LIABILITIES
CURRENT LIABILITIES
Accounts payable	$	8,559		$	14,447		$	10,169		$	6,743		$	8,894		$	8,559
Short-term borrowings		8,483			13,149			27,771			5,858			6,339			8,483
Accrued expenses and other current liabilities		4,745			3,521			1,717			2,685			2,512			4,745
Current portion of operating lease liabilities		583			534			523
Current portion of PPP loan		1,356			-			-
Liabilities held for discontinued operations		-			39,410			54,138
Current portion of operating lease liabilites											636			596			583
Current portion of PPP Loan											0			1,687			1,356
Total current liabilities		23,726			71,061			94,318			15,922			20,028			23,726

Operating lease liabilities		2,412			2,204			2,952			1,764			2,258			2,412
PPP loan		662			-			-
PPP Loan											0			330			662
Long-term debt		4,581			-			-			4,161			5,000			4,581
Other long-term liabilities		15,857			20,026			19,335			15,515			16,187			15,857
TOTAL LIABILITIES		47,238			93,291			116,605			37,362			43,803			47,238

SHAREHOLDERS' EQUITY
Preferred stock ($0.01 par value; 5,000,000 shares authorized; none issued)		-			-			-
Common stock ($0.01 par value; 200,000,000 shares authorized; 3,235,576, 3,225,627 and 3,225,627 shares issued, respectively)		32			32			32
SHAREHOLDERS’ EQUITY
Preferred stock ($0.01 par value; 5,000,000 shares authorized; NaN issued)											0			0			0
Common stock ($0.01 par value; 200,000,000 shares authorized; 3,902,985, 3,336,576 and 3,235,576 shares issued, respectively)											39			33			32
Additional paid-in capital		346,470			345,102			345,043			359,100			346,495			346,470
Treasury stock at cost (1,410,378, 1,409,316 and 1,409,316 shares, respectively)		(230,169	)		(230,169	)		(230,168	)
Treasury stock at cost (1,410,417, 1,410,378 and 1,410,378 shares, respectively)											(230,170	)		(230,169	)		(230,169	)
Accumulated other comprehensive loss		(1,470	)		(1,479	)		(720	)		(2,007	)		(2,007	)		(1,470	)
Accumulated deficit		(112,724	)		(108,971	)		(89,312	)		(115,084	)		(112,863	)		(112,724	)
TOTAL SHAREHOLDERS' EQUITY		2,139			4,515			24,875
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	49,377		$	97,806		$	141,480
TOTAL SHAREHOLDERS’ EQUITY											11,878			1,489			2,139
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY										$	49,240		$	45,292		$	49,377

See Accompanying Notes to Interim Condensed Consolidated Financial Statements.

Index

KASPIEN HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(amounts in thousands)

(unaudited)

	October 30, 2021			October 31, 2020			October 30, 2021			October 31, 2020

Net revenue	$	32,172		$	38,913		$	107,680		$	112,799

Cost of sales		24,168			29,312			81,044			84,595
Gross profit		8,004			9,601			26,636			28,204
Selling, general and administrative expenses		10,018			10,213			30,886			34,487
Loss from operations		(2,014	)		(612	)		(4,250	)		(6,283	)
Interest expense		439			381			1,455			1,015
Other income		(1,567	)		0			(3,530	)		0
Income (loss) before income tax expense		(886	)		(993	)		(2,175	)		(7,298	)
Income tax expense (benefit)		0			(3,545	)		46			(3,545	)
Net income (loss)	$	(886	)	$	2,552		$	(2,221	)	$	(3,753	)

BASIC AND DILUTED INCOME PER SHARE:
Basic income (loss) per common share	$	(0.36	)	$	1.40		$	(0.92	)	$	(2.06	)

Weighted average number of common shares outstanding – basic		2,491			1,825			2,404			1,823

Diluted income (loss) per common share	$	(0.36	)	$	1.39		$	(0.92	)	$	(2.06	)

Weighted average number of common shares outstanding – diluted		2,491			1,829			2,404			1,823

See Accompanying Notes to Interim Condensed Consolidated Financial Statements.

Index

KASPIEN HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED ~~STATEMENTS OF OPERATIONS~~

~~(amounts in thousands)~~

~~(unaudited)~~

Thirteen Weeks Ended Thirty-nine Weeks Ended

October 31,
2020

November 2,
2019

October 31,
2020

November 2,
2019

Net revenue $ 38,913 $ 28,616 $ 112,799 $ 98,008

Cost of sales 35,022 25,896 101,173 89,424
Gross profit 3,891 2,720 11,626 8,584
Selling, general and administrative expenses 4,503 5,604 17,909 19,248
Loss from continuing operations (612 ) (2,884 ) (6,283 ) (10,664 )
Interest expense 381 200 1,015 508
Loss from continuing operations before income tax benefit (993 ) (3,084 ) (7,298 ) (11,172 )
Income tax (benefit) expense (3,545 ) 10 (3,545 ) 26
Income (loss) from continued operations 2,552 (3,094 ) (3,753 ) (11,198 )
Loss from fye business, net of tax - (20,061 ) - (27,887 )
Net income (loss) $ 2,552 $ (23,155 ) (3,753 ) (39,085 )

BASIC INCOME (LOSS) PER SHARE:
Basic and diluted income (loss) per common share $ 1.40 $ (12.73 ) $ (2.06 ) $ (21.51 )

Weighted average number of common shares outstanding – basic 1,825 1,819 1,823 1,817

DILUTED LOSS PER SHARE:
Diluted income (loss) per common share $ 1.39 $ (12.73 ) $ (2.06 ) $ (21.51 )

Weighted average number of common shares outstanding – diluted 1,829 1,819 1,823 1,817

~~See Accompanying Notes to Interim Condensed Consolidated Financial Statements.~~

~~Index~~

~~KASPIEN HOLDINGS INC. AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED~~ STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(amounts in thousands)

(unaudited)

	Thirteen Weeks Ended							Thirty-nine Weeks Ended								Thirteen Weeks Ended					Thirty-nine Weeks Ended
	October 31, 2020			November 2, 2019				October 31, 2020				November 2, 2019				October 30, 2021			October 31, 2020		October 30, 2021			October 31, 2020

Net income (loss)		$	2,552		$	(23,155	)		$	(3,753	)		$	(39,085	)	$	(886	)	$	2,552	$	(2,221	)	$	(3,753	)
Amortization of pension gain			1			5				3				15			0			1		0			3
Comprehensive income (loss)		$	2,553		$	(23,150	)		$	(3,750	)		$	(39,070	)	$	(886	)	$	2,553	$	(2,221	)	$	(3,750	)

See Accompanying Notes to Interim Condensed Consolidated Financial Statements.

Index

KASPIEN HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(dollars and shares in thousands)

(unaudited)

Thirteen Weeks Ended October 31, 2020
Number of shares outstanding
Common
Stock

Additional
Paid-in
Capital

Treasury
Stock
At Cost

Accumulated
Other
Comprehensive
Loss

Retained
Earnings
(Accumulated
Deficit)

Shareholders’
Equity

Common
Shares

Treasury
Shares

Balance as of May 2, 2020 3,236 (1,410 ) $ 32 $ 346,457 $ (230,169 ) $ (1,473 ) $ (115,276 ) $ (430 )
Net income - - - - - - 2,552 2,552
Other comprehensive income - - - - - 3 - 3
Amortization of unearned compensation/restricted stock amortization - - - 13 - - - 13
Balance as of October 31, 2020 3,236 $ (1,410 ) $ 32 $ 346,470 $ (230,169 ) $ (1,470 ) $ (112,724 ) $ 2,139

	Thirteen Weeks Ended October 30, 2021
	Number of shares outstanding												Accumulated Other Comprehensive Loss			Retained Earnings (Accumulated Deficit)			Shareholders’ Equity
	Common Shares		Treasury Shares			Common Stock		Additional Paid-in Capital		Treasury Stock At Cost			Accumulated Other Comprehensive Loss			Retained Earnings (Accumulated Deficit)			Shareholders’ Equity
Balance as of July 31, 2021		3,903		(1,410	)	$	39	$	359,016	$	(230,170	)	$	(2,007	)	$	(114,198	)	$	12,680
Net income		-		-			0		0		0			0			(886	)		(886	)
Issuance of warrants		0		-			0		0		0			0			0			0
Exercise of stock options		0		0			0		0		0			0			0			0
Common stock issued- Director grants		0		0			0		0		0			0			0			0
Amortization of unearned compensation/restricted stock amortization		-		-			0		84		0			0			0			84
Balance as of October 30, 2021		3,903	$	(1,410	)	$	39	$	359,100	$	(230,170	)	$	(2,007	)	$	(115,084	)	$	11,878

	Thirty-nine Weeks Ended October 31, 2020																						Thirty-nine Weeks Ended October 30, 2021
	Number of shares outstanding					Common Stock		Additional Paid-in Capital			Treasury Stock At Cost			Accumulated Other Comprehensive Loss			Retained Earnings (Accumulated Deficit)			Shareholders’ Equity			Number of shares outstanding												Accumulated Other Comprehensive Loss			Retained Earnings (Accumulated Deficit)			Shareholders’ Equity
	Common Shares		Treasury Shares			Common Stock		Additional Paid-in Capital			Treasury Stock At Cost			Accumulated Other Comprehensive Loss			Retained Earnings (Accumulated Deficit)			Shareholders’ Equity			Common Shares		Treasury Shares			Common Stock		Additional Paid-in Capital		Treasury Stock At Cost			Accumulated Other Comprehensive Loss			Retained Earnings (Accumulated Deficit)			Shareholders’ Equity
Balance as of February 1, 2020		3,226		(1,409	)	$	32	$	345,102		$	(230,169	)	$	(1,479	)	$	(108,971	)	$	4,515
Balance as of January 30, 2021																								3,337		(1,410	)	$	33	$	346,495	$	(230,169	)	$	(2,007	)	$	(112,863	)	$	1,489
Net Loss		-		-			-		-			-			-			(3,753	)		(3,753	)		-		-			0		0		0			0			(2,221	)		(2,221	)
Other comprehensive income		-		-			-		-			-			9			-			9
Issuance of warrants		-		-			-		836			-			-			-			836			138		-			2		0		(1	)		0			0			1
Vested restricted shares		4		(1	)		-		(9	)		-			-			-			(9	)
Sales of shares, net of expense																								417		0			4		12,227		0			0			0			12,231
Exercise of stock options																								2		0			0		51		0			0			0			51
Common stock issued- Director grants		6		-			-		243			-			-			-			243			9		0			0		184		0			0			0			184
Amortization of unearned compensation/restricted stock amortization		-		-			-		298			-			-			-			298			-		-			0		143		0			0			0			143
Balance as of October 31, 2020		3,236	$	(1,410	)	$	32	$	346,470		$	(230,169	)	$	(1,470	)	$	(112,724	)	$	2,139
Balance as of October 30, 2021																								3,903		(1,410	)	$	39	$	359,100	$	(230,170	)	$	(2,007	)	$	(115,084	)	$	11,878

Thirteen Weeks Ended November 2, 2019
Number of shares outstanding
Common
Stock

Additional
Paid-in
Capital

Treasury
Stock
At Cost

Accumulated
Other
Comprehensive
Loss

Accumulated
Deficit

Shareholders’
Equity

Common
Shares

Treasury
Shares

Balance as of August 3, 2019 3,224 (1,409 ) $ 32 $ 344,983 $ (230,168 ) $ (725 ) $ (66,157 ) $ 47,965
Net Loss - - - - - - (23,155 ) (23,155 )
Other comprehensive income - - - - - 5 - 5
Vested restricted shares 2 - - - - - - -
Amortization of unearned compensation/restricted stock amortization - - - 60 - - - 60
Balance as of November 2, 2019 3,226 (1,409 ) $ 32 $ 345,043 $ (230,168 ) $ (720 ) $ (89,312 ) $ 24,875

	Thirty-nine Weeks Ended November 2, 2019																					Thirteen Weeks Ended October 31, 2020
	Number of shares outstanding					Common Stock		Additional Paid-in Capital		Treasury Stock At Cost			Accumulated Other Comprehensive Loss			Accumulated Deficit			Shareholders’ Equity			Number of shares outstanding												Accumulated Other Comprehensive Loss			Retained Earnings (Accumulated Deficit)			Shareholders’ Equity
	Common Shares		Treasury Shares			Common Stock		Additional Paid-in Capital		Treasury Stock At Cost			Accumulated Other Comprehensive Loss			Accumulated Deficit			Shareholders’ Equity			Common Shares		Treasury Shares			Common Stock		Additional Paid-in Capital		Treasury Stock At Cost			Accumulated Other Comprehensive Loss			Retained Earnings (Accumulated Deficit)			Shareholders’ Equity
Balance as of February 2, 2019		3,222		(1,409	)	$	32	$	344,826	$	(230,166	)	$	(735	)	$	(50,227	)	$	63,730
Balance as of August 1, 2020																							3,236		(1,410	)	$	32	$	346,457	$	(230,169	)	$	(1,473	)	$	(115,276	)	$	(429	)
Net Loss		-		-			-		-		-			-			(39,085	)		(39,085	)		-		-			0		0		0			0			2,552			2,552
Other comprehensive income		-		-			-		-		-			15			-			15			-		-			0		0		0			3			0			3
Vested restricted shares		4		-			-		3		(2	)		-			-			1
Amortization of unearned compensation/restricted stock amortization		-		-			-		214		-			-			-			214			-		-			0		13		0			0			0			13
Balance as of November 2, 2019		3,226		(1,409	)	$	32	$	345,043	$	(230,168	)	$	(720	)	$	(89,312	)	$	24,875
Balance as of October 31, 2020																							3,236	$	(1,410	)	$	32	$	346,470	$	(230,169	)	$	(1,470	)	$	(112,724	)	$	2,139

	Thirty-nine Weeks Ended October 31, 2020
	Number of shares outstanding													Accumulated Other Comprehensive Loss			Retained Earnings (Accumulated Deficit)			Shareholders’ Equity
	Common Shares		Treasury Shares			Common Stock		Additional Paid-in Capital			Treasury Stock At Cost			Accumulated Other Comprehensive Loss			Retained Earnings (Accumulated Deficit)			Shareholders’ Equity
Balance as of February 1, 2020		3,226		(1,409	)	$	32	$	345,102		$	(230,169	)	$	(1,479	)	$	(108,971	)	$	4,515
Net Loss		-		-			0		0			0			0			(3,753	)		(3,753	)
Other comprehensive income		-		-			0		836			0			9			0			845
Vested restricted shares		4		(1	)		0		(9	)		0			0			0			(9	)
Common stock issued- Director grants		6		0			0		243			0			0			0			243
Amortization of unearned compensation/restricted stock amortization		-		-			0		298			0			0			0			298
Balance as of October 31, 2020		3,236	$	(1,410	)	$	32	$	346,470		$	(230,169	)	$	(1,470	)	$	(112,724	)	$	2,139

Index

KASPIEN HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(amounts in thousands)

(unaudited)

	Thirty-nine Weeks Ended						Thirty-nine Weeks Ended
	October 31, 2020			November 2, 2019 ⁽¹⁾			October 30, 2021			October 31, 2020
OPERATING ACTIVITIES:
Net income loss	$	(3,753	)	$	(39,085	)
Net loss							$	(2,221	)	$	(3,753	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation of fixed assets		783			2,272			1,064			783
Amortization of intangible assets		771			858			732			771
Stock-based compensation		296			214			327			296
Loss on disposal of fixed assets		-			27
Write down investment		-			500
Loss on impairment of long-lived assets		-			16,035
Amortization of ROU asset		424			-			458			424
Amortization of warrant interest								191			0
Interest on long term debt								570			0
Change in cash surrender value		(84	)		(189	)		(557	)		(84	)
Reversal of ASC 740 liability		(3,545	)					0			(3,545	)
Forgiveness of PPP Loan								(1,963	)		0
Changes in operating assets and liabilities that provide (use) cash:
Accounts receivable		1,695			1,099			150			1,695
Merchandise inventory		(9,367	)		(6,288	)		(5,732	)		(9,367	)
Prepaid expenses and other current assets		2,531			1,190			(196	)		2,531
Other long-term assets		-			5,274			268			0
Accounts payable		679			(4,335	)		(2,150	)		679
Accrued expenses and other current liabilities		(5,295	)		(852	)		236			(5,295	)
Deferred revenue		-			(966	)
Other long-term liabilities		(407	)		(6,576	)		(1,166	)		(407	)
Net cash used in operating activities		(15,272	)		(30,822	)		(9,990	)		(15,272	)

INVESTING ACTIVITIES:
Purchases of fixed assets		(935	)		(2,128	)		(1,046	)		(935	)
Proceeds from sale of fye business		11,779			-			0			11,779
Capital distribution from joint venture		-			115
Net cash provided by (used in) investing activities		10,844			(2,013	)		(1,046	)		10,844

FINANCING ACTIVITIES:
Proceeds from short term borrowings		8,483			27,771			5,858			8,483
Proceeds from long term borrowings		4,581			-			0			4,581
Proceeds from issuance of warrants		836			-			0			836
Proceeds from PPP loan		2,018			-			0			2,018
Proceeds from stock offering								12,231			0
Proceeds from exercise of stock options								51			0
Payments of PPP loan								(76	)		0
Issuance of director deferred shares and RSUs		235			-			0			235
Payment of short-term borrowings		(13,149	)		-
Net cash provided by (used in) financing activities		3,004			27,771
Payment of long term borrowings								(1,600	)		0
Payment of short term borrowings								(6,339	)		(13,149	)
Net cash provided by financing activities								10,125			3,004

Net increase (decrease) in cash, cash equivalents, and restricted cash		(1,424	)		(5,064	)		(911	)		(1,424	)
Cash, cash equivalents, and restricted cash, beginning of period		8,852			14,226			6,555			8,852
Cash, cash equivalents, and restricted cash, end of period	$	7,428		$	9,162		$	5,644		$	7,428

~~(1)~~

~~The cash flows related to discontinued operations have not been segregated and are included in the Consolidated Statements of Cash Flows. See footnote 3.~~

See Accompanying Notes to Interim Condensed Consolidated Financial Statements.

Index

~~Index~~

KASPIEN HOLDINGS INC. AND SUBSIDIARIES

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

October 30, 2021 and October 31, 2020 ~~and November 2, 2019~~

Note 1. Nature of Operations

Kaspien Holdings Inc., ~~formerly Trans World Entertainment Corporation,~~ 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., formerly etailz,~~ Inc, ~~(“Kaspien”),~~ through which our principal operations are conducted. Kaspien provides a platform of software and services to empower brands to grow their online distribution channels on digital marketplaces such as Amazon, Walmart, Target, eBay, among others. The Company helps brands achieve their online retail goals through its innovative and proprietary technology, tailored strategies, and mutually beneficial partnerships.

Our mission is to optimize and grow brands on today’s leading online marketplaces. To deliver this mission, we provide a platform of software and services to empower brands to grow their online distribution channel on digital marketplaces. Our proprietary software platform of marketplace solutions has been developed with a tech-first approach over the last decade. Through our platform, more than a decade of marketplace expertise, and our subject matter expertise, Kaspien ~~is positioning~~empowers brands to achieve their online retail goals. Through our diversified and flexible partnership approach, Kaspien supports brands all across their brands’ life cycle and maturity online.

The Company has positioned itself to be a brand’s ultimate online growth ~~partner and is~~partner. We are guided by seven core principles:

•	Partner Obsession	•	~~Results~~Insights Driven
•Simplicity	~~Insights Driven~~Innovation
•Results	Ownership
•	~~Simplicity~~	•	Diversity and Teamwork
•	~~Innovation~~

~~Previously, the Company also operated fye, a chain of retail entertainment stores and e-commerce sites,~~ ~~www.fye.com~~ ~~and~~ ~~www.secondspin.com~~. On February 20, 2020, the Company consummated the sale of substantially all of the assets and certain of the liabilities relating to fye to a subsidiary of 2428391 Ontario Inc. o/a Sunrise Records (“Sunrise Records”) pursuant to an Asset Purchase Agreement (as amended, the “Asset Purchase Agreement”) dated January 23, 2020, by and among the Company, Record Town, Inc., Record Town USA LLC, Record Town Utah LLC, Trans World FL LLC, Trans World New York, LLC, 2428392 Inc., and Sunrise Records. (the “FYE Transaction”).

Liquidity and Cash Flows:

The Company’s primary sources of liquidity are its borrowing capacity under its revolving credit facility, available cash and cash equivalents, funds raised through equity offerings and to a lesser extent, cash generated from operations. Our cash requirements relate primarily to working capital needed to operate and grow our business, including funding operating expenses and the purchase of inventory. Our ability to achieve profitability and meet future liquidity needs and capital requirements will depend upon numerous factors, including the timing and amount of our net revenue; the timing and amount of our operating expenses; the timing and costs of working capital needs; successful implementation of our strategy and planned activities; and our ability to overcome the impact of the COVID-19 pandemic.

The Company incurred a net loss of $2.2 million and $3.8 million for the thirty-nine weeks ended October 30, 2021 and October 31, 2020, respectively. The decrease in the net loss was primarily attributable to an increase in net revenue and lower SG&A expenses, as well as the forgiveness of the PPP Loan discussed below. In addition, the Company has an accumulated deficit of $115.1 million as of October 30, 2021 and net cash used in operating activities for the thirty-nine weeks ended October 30, 2021 was $10.0 million. Net cash used in operating activities for the thirty-nine weeks ended October 31, 2020 was $15.3 million.

Index

As disclosed in the ~~Company's~~Company’s Annual Report on Form 10-K filed ~~June 15, 2020,~~April 30, 2021, the Company experienced negative cash flows from operations during fiscal ~~2019~~2020 and ~~2018~~2019 and we expect to incur net losses in ~~2020.~~fiscal 2021.

~~The~~

Our ability to achieve profitability and meet future liquidity needs and capital requirements will depend upon numerous factors, including the timing and amount of our revenue; the ~~Company to meet its liabilities~~timing and ~~to continue as a going concern is dependent on improved profitability,~~amount of our operating expenses; the ~~continued~~timing and costs of working capital needs; successful implementation of ~~the strategic initiative~~our strategy and planned activities; and our ability to reposition Kaspien as a platform of software and services, the availability of future funding, implementation of one or more corporate initiatives to reduce costs at the parent company level (which could include a voluntary delisting from NASDAQ and deregistering of our Common Stock in order to substantially eliminate the costs associated with being a public company), satisfying all unassumed liabilities of the fye segment and other strategic alternatives, including selling all or part of the remaining business or assets of the Company, and overcomingovercome the impact of the COVID-19 pandemic.

~~Index~~

There can be no assurance that we will be successful in further implementing our business strategy or that the strategy ~~including the completed initiatives,~~ will be successful in sustaining acceptable levels of sales growth and profitability. ~~In addition, the proceeds from the PPP Loan (as defined below) are subject to audit and there is a risk of repayment.~~ The unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

On August 4, 2020, the Company received a letter from the Listing Qualifications staff of The Nasdaq Stock Market (“Nasdaq”) notifying the Company that it is no longer in compliance with the minimum stockholders’ equity requirement (the “Stockholders’ Equity Requirement”) for continued listing on the Nasdaq Capital Market. Nasdaq Listing Rule 5550(b)(1) requires listed companies to maintain stockholders’ equity of at least $2,500,000 and as of August 4, 2020, the Company did not meet the alternative compliance standards relating to the market value of listed securities or net income from continuing operations.

The notification letter has no immediate effect on the Company’s listing on the Nasdaq Capital Market. On September 18, 2020, the Company submitted to Nasdaq a plan to regain compliance with the Stockholders’ Equity Requirement (the “Compliance Plan”). On September 30, 2020, the Company received another notice from Nasdaq that it had approved the Compliance Plan and granted the Company an extension period to February 1, 2021 to regain compliance with the Stockholders’ Equity Requirement. If the Company does not regain compliance in the timeframe required by Nasdaq, the Nasdaq staff could provide notice that the Company’s Common Stock is subject to delisting.

In addition to the below current sources of existing working capital, the Company may explore certain other strategic alternatives that may become available to the Company, as well as continuing our efforts to generate additional sales and increase margins. However, at this time the Company has no commitments to obtain any additional funds, and there can be no assurance such funds will be available on acceptable terms or at all, should we require such additional funds. If the Company is unable to improve its operations, it may be required to obtain additional funding, and the Company’s financial condition and results of operations may be materially adversely affected. Furthermore, broad market and industry factors may seriously harm the market price of our Common Stock, regardless of our operating performance, and may adversely impact our ability to raise additional funds, should we require such additional funds. Similarly, if our Common Stock is delisted from the Nasdaq Capital Market, it may also limit our ability to raise additional funds.

The unaudited condensed consolidated financial statements for the ~~thirteen~~thirty-nine weeks ended October ~~31, 2020~~30, 2021 were prepared onpursuant to the ~~basis~~rules and regulations of ~~a going concern~~the Securities and Exchange Commission. The information furnished in these unaudited condensed consolidated financial statements reflects all normal, recurring adjustments which, ~~contemplates~~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 ~~Company will be able to realize~~reported amounts of assets and ~~discharge~~ liabilities inand disclosure of contingent assets and liabilities at the ~~normal course of business. The ability~~date of the ~~Company to meet its liabilities and to continue as a going concern is dependent on continued improved profitability~~financial statements, and the ~~other factors set forth in~~reported amounts of revenues and expenses during the ~~preceding paragraphs.~~reporting period. Actual results could differ from those estimates. For the next 12 months, management believes that the Company’s existing liquidity will be adequate to fund its working capital needs. The ability of the Company to meet its liabilities is dependent on continued improved profitability and the other factors set forth in the preceding paragraph. Management anticipates any cash requirements due to a shortfall in cash from operations will be funded by the Company’s revolving credit facility, as discussed in note 97 in the interim condensed consolidated financial statements.

As of October ~~31, 2020,~~30, 2021, we had cash and cash equivalents of ~~$7.4~~$1.8 million, net working capital of ~~$10.1~~$20.6 million, and outstanding borrowings ~~of $8.5 million~~ on our revolving credit facility of $5.9 million, as further discussed below.

~~Index~~

~~New~~As of January 30, 2021, the Company had borrowings of $6.3 million under the Credit Facility. As of October 30, 2021 and October 31, 2020, the Company had 0 outstanding letters of credit. The Company had $6.8 million and $3.8 million available for borrowing under the Credit Facility as of October 30, 2021 and October 31, 2020, respectively.

On March 18, 2021, the Company closed an underwritten offering of 416,600 shares of common stock of the Company, at a price to the public of $32.50 per share. The gross proceeds of the offering were approximately $13.5 million, prior to deducting underwriting discounts and commissions and estimated offering expenses. The Company intends to use the net proceeds from the offering for general corporate purposes, including working capital to implement its strategic plans focused on brand acquisition, investments in technology to enhance its scalable platform and its core retail business.

On February 20, 2020, the Company and Kaspien Inc. entered into a Loan and Security Agreement (the “Loan Agreement”) with Eclipse Business Capital LLC (f/k/a Encina Business Credit, ~~LLC~~LLC) (“~~Encina”~~Eclipse”), as administrative agent, under which the lenders party thereto committed to provide up to $25 million in loans under a three-year, secured revolving credit facility (the ~~“New Credit~~“Credit Facility”). ~~Concurrent with the FYE Transaction, the~~The Company borrowed $3.3 million under the ~~New~~ Credit Facility in order to satisfy the remaining obligations of the Company under ~~the Credit Facility (as defined below).~~its previous credit facility.

The commitments by the lenders under the ~~New~~ Credit Facility are subject to borrowing base and availability restrictions. Up to $5.0 million of the ~~New~~ Credit Facility may be used for the making of swing line loans.

As of October 31, 2020, borrowings under the New Credit Facility were $8.5 million. The Company had $3.8 million available for borrowing as of October 31, 2020. As of October 31, 2020, unamortized debt issuance costs of $0.9 million are included in “Other assets” on the unaudited condensed consolidated balance sheet.

~~Subordinated Debt Agreement~~

On March 30, 2020, the Company and Kaspien Inc. (the “Loan Parties”) entered into Amendment No. 1 to the Loan Agreement (the “Amendment”). Pursuant to the Amendment, among other things, (i) the Company was added as “Parent” under the Amended Loan Agreement, (ii) the Company granted a first priority security interest in substantially all of the assets of the Company, including inventory, accounts receivable, cash and cash equivalents and certain other collateral, and (iii) the Loan Agreement was amended to (a) permit the incurrence of certain subordinated indebtedness under the Subordinated Loan Agreement (as defined below) and (b) limit the Company’s ability to incur additional indebtedness, create liens, make investments, make restricted payments or specified payments and merge or acquire assets.

On September 17, 2021, the Company and Kaspien Inc. entered into Amendment No. 3 to Loan and Security Agreement (the “Third Amendment”), pursuant to which the parties thereto amended the Loan Agreement. Pursuant to the Third Amendment, among other things, (i) the maturity of the credit facility has been extended to February 20, 2024, and the early termination fees have been accordingly reset; (ii) the LIBOR floor has been reduced to 1.00%; (iii) up to $4,000,000 of acquisitions are now allowed without Eclipse’s consent, subject to satisfaction of various conditions, including the Company having a trailing twelve month fixed charge coverage ratio of 1.20x and Excess Availability greater than the greater of (x) 20% of the average Borrowing Base for each 30 day period immediately prior to, and pro forma for, the purchase and (y) $1,500,000.

As of October 30, 2021, the Company had borrowings of $5.9 million under the Credit Facility. The Company had $6.8 million available for borrowing as of October 30, 2021.

Subordinated Debt Agreement

On March 30, 2020, the Loan Parties entered into a Subordinated Loan and Security Agreement (the “Subordinated Loan Agreement”) with the lenders party thereto from time to time (the “Lenders”) and TWEC Loan Collateral Agent, LLC (“Collateral Agent”), as collateral agent for the Lenders, pursuant to which the Lenders made a $5.2 million secured term loan (the “Subordinated Loan”) to Kaspien Inc. with a scheduled maturity date of May 22, 2023. During the thirteen-weeks ended October 30, 2021, the Company received proceeds of $1.6 million related to the settlement of an insurance claim which was used to pay down the Subordinated Loan. On September 17, 2021, the Loan Parties entered into Amendment No. 1 to Subordinated Loan and Security Agreement which extended the maturity of the loan to March 31, 2024. As of October ~~31, 2020,~~30, 2021, unamortized debt issuance costs of ~~$0.2~~$0.1 million are included in ~~“Other Current Liabilities”~~“Long Term Debt” on the unaudited condensed consolidated balance sheet.

Directors Jonathan Marcus, Thomas Simpson, and Michael Reickert are the chief executive officer of Alimco Re Ltd. (“Alimco”), the managing member of Kick-Start III, LLC and Kick-Start IV, LLC (“Kick-Start”), and a trustee of the Robert J. Higgins TWMC Trust (the “Trust”), an affiliate of RJHDC, LLC (“RJHDC” and together with Alimco and Kick-Start, “Related Party Entities”), respectively. The Related Party Entities are parties to the Subordinated Loan Agreement.

On March 30, 2020, in conjunction with the Subordinated Loan Agreement, the Company issued warrants to purchase up to 244,532 shares of common stock with an aggregate grant date fair value of $0.8 million recorded as a discount to the Subordinated Loan Agreement, $0.5 million of which was unamortized as of January 30, 2021. As of October 30, 2021, 5,126 warrants remain outstanding.

1011

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Paycheck Protection Program

On April 17, 2020, Kaspien received loan proceeds of $2.0 million (the “PPP Loan”) pursuant to the Paycheck Protection Program (“PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). ~~The PPP Loan, which was in~~On June 15, 2021, the ~~form of a promissory note (the “Note”~~Small Business Administration (“SBA”)~~, dated April 10, 2020, between Kaspien and First Interstate Bank, as~~ approved the ~~lender, matures on April 17, 2022, bears interest at a fixed rate of 1% per annum, and is payable in monthly installments of $112,975.55. While under the terms~~Company’s application for forgiveness of the PPP ~~some or all~~Loan. The amount of the ~~PPP Loan~~forgiveness was $1.9 million in principal and interest, which was the amount ~~may be forgiven if the PPP Loan proceeds are used for qualifying expenses as described~~requested in the ~~CARES Act~~forgiveness application and was less than the ~~Note, such as payroll costs, benefits, rent, and utilities, there is no assurance that~~original principal balance due. Following the grant of forgiveness, an outstanding balance of $76,452 was paid during the second quarter.

In addition to the aforementioned current sources of existing working capital, the Company ~~will be successful in qualifying for and receiving forgiveness on the PPP Loan amount. On August 20, 2020,~~may explore certain other strategic alternatives that may become available to the Company, ~~submitted an application for forgiveness~~as well continuing our efforts to ~~the SBA. On October 30, 2020, the Company received a follow up letter requesting~~generate additional ~~information related to its forgiveness application. The Company submitted the requested information on November 9, 2020. As of December 15, 2020,~~net revenue and increase margins. However, at this time the Company has ~~not received a decision~~no commitments to obtain any additional funds, and there can be no assurance such funds will be available on ~~its PPP loan forgiveness request.~~

~~FYE Transaction~~

~~On February 20, 2020,~~acceptable terms or at all, should we require such additional funds. If the Company ~~consummated the sale of substantially all of the assets and certain of the liabilities relating~~is unable to ~~fye~~improve its operations, it may be required to a subsidiary of Sunrise Records pursuant to an Asset Purchase Agreement dated January 23, 2020, by and among the Company, Record Town, Inc., Record Town USA LLC, Record Town Utah LLC, Trans World FL LLC, Trans World New York, LLC, 2428392 Inc., and Sunrise Records.

~~The fye business is reported as discontinued operations in our Consolidated Statements of Income,~~obtain additional funding, and the ~~related assets~~Company’s financial condition and ~~liabilities have been presented as held-for-sale in~~results of operations may be materially adversely affected.

Furthermore, broad market and industry factors may seriously harm the ~~Consolidated Balance Sheets, through their dates~~market price of ~~disposal. These changes have been applied~~our common stock, regardless of our operating performance, and may adversely impact our ability to ~~all periods presented. Unless otherwise noted, discussion within these notes to the consolidated financial statements relates to continuing operations. Refer to Note 3 for~~raise additional ~~information on discontinued operations.~~funds, should we require such additional funds.

Impact of COVID-19

To date, as a direct result of COVID-19, most of our employees are working remotely. The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition, including expenses, reserves and allowances, and employee-related amounts, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19, ~~and~~including the actions taken to contain or treat it, as well as the economic impact on local, regional, national and international customers and markets, which are highly uncertain and cannot be predicted at this time. Management is actively monitoring this situation and the possible effects on its financial condition, liquidity, operations, industry, and workforce. Given the daily evolution of the COVID-19 outbreak and the response to curb its spread, currently we are not able to estimate the effects of the COVID-19 outbreak to our results of operations, financial condition, or liquidity.

~~Index~~

In response to the rapidly evolving COVID-19 pandemic, we activated our business continuity program, led by our Executive Team in conjunction with Human Resources, to help us manage the situation. In mid-March of 2020, we transitioned our corporate office staff to work 100% remotely. This process was aided through the implementation of a flexible work from home policy rolled out to the organization in fiscal 2019, having a companywide communication platform for instant messaging and video conferencing, and cloud-based critical business applications. However, whileWhile our business is not dependent on physical office locations nor travel, having a ~~mostly~~100% remote workforce does present increased operational risk. Our leadership team believes we have the necessary controls in place to mitigate these impacts and allow the team to continue to operate effectively remotely as long as required by State guidelines.

While e-commerce has largely benefited from the closure of brick-and-mortar locations as consumer spending has been pushed online to marketplaces such as Amazon and Walmart, neither the industry nor our organization has been immune to the impact to our supply chains. ~~For instance,~~During the second quarter of 2021, the Company noticed changes in ~~March, Amazon~~consumer buying habits that may have reduced replenishment in their fulfillment centers to essential items which limited a significant percentage of SKUs carried by Kaspien and a number of Kaspien’s partners shut their warehouses or suffered limited processing capacitydemand for its products due to ~~COVID-19. While Amazon has since lifted~~recent re-openings of physical retail outlets and lifting of many restrictions by governmental authorities.

Index

Also during the third quarter of 2021, the Company experienced increased inventory stock outs due to freight demands, lack of shipping containers and general international freight congestion due to the continued increased demand for goods being sold on ecommerce marketplaces. The COVID-19 pandemic continues to bring uncertainty to consumer demand as price increases related to raw materials, the importing of goods, including tariffs, and the ~~leadership team executed contingency plans~~cost of delivering goods to ~~mitigate~~consumers has led to inflation across the ~~adverse impact from these restrictions, this highlights~~United States.

It is not possible to determine the ~~fluid nature of COVID-19 across supply chains.~~

~~Additionally, since the beginning~~duration and scope of the pandemic, ~~tens~~the scale and rate of ~~millions~~economic recovery from the pandemic, any ongoing effects on consumer demand and spending patterns, or other impacts of ~~Americans have lost their jobs, significantly increasing~~ the ~~risk~~pandemic, and whether these or other currently unanticipated consequences of ~~near-term economic contraction in~~ the ~~United States that may~~pandemic are reasonably likely to materially affect ~~e-commerce sales.~~our results of operations. The ~~risk of additional waves or increased numbers of positive COVID-19 cases also presents further risk to supply chains. Leadership~~Company is actively monitoring the situation and potential impacts on its financial condition, liquidity, operations and workforce but the full extent of the impact is still highly uncertain.

Note 2. Basis of Presentation

The accompanying interim condensed consolidated financial statements consist of Kaspien Holdings Inc., its wholly owned subsidiaries, Kaspien NY, LLC (f/k/a Trans World NY Sub, Inc. (f/k/a Record Town, Inc. ~~(“Record Town”~~)~~, Record Town’s~~) and its subsidiaries, and Kaspien, Inc.~~, all of which are wholly owned.~~ All intercompany accounts and transactions have been eliminated.

The interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. The information furnished in these unaudited interim 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 (“U.S. GAAP”) 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 net revenue and expenses during the reporting period. Actual results could differ from those estimates. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to rules and regulations applicable to interim financial statements.

~~Index~~

The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto and ~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations as of and for the year ended ~~February 1, 2020~~January 30, 2021 contained in the ~~Company's~~Company’s Annual Report on Form 10-K filed ~~June 15, 2020.~~April 30, 2021. The results of operations for the ~~thirteen~~thirty-nine weeks ended October ~~31, 2020~~30, 2021 are not necessarily indicative of the results to be expected for the entire fiscal year ending ~~February 3, 2021.~~January 29, 2022.

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 ~~February 1, 2020.~~

~~Note 3. Discontinued Operations~~

~~On February 20, 2020,~~January 30, 2021. In order to conform with industry practice, effective with the ~~Company consummated the sale~~first quarter of substantially all of the assets and certain of the liabilities relating to fye to a subsidiary of Sunrise Records pursuant to an Asset Purchase Agreement dated January 23, 2020, by and among the Company, Record Town, Inc., Record Town USA LLC, Record Town Utah LLC, Trans World FL LLC, Trans World New York, LLC, 2428392 Inc., and Sunrise Records.

~~The results for fye~~fiscal year 2021, commission fees from online marketplaces, which were previously reported as cost of goods sold on the consolidated statements of operations, are now included in ~~the fye segment. Certain corporate overhead costs and segment costs previously allocated to fye for segment reporting purposes did not qualify for classification within discontinued operations and~~SG&A expense. Prior periods have been ~~reallocated~~reclassified to ~~continuing operations.~~conform to the current period presentation. Commission fees for the thirteen-week periods ended October 30, 2021 and October 31, 2020 were $4.6 million and $5.7 million, respectively. Commission fees for the thirty-nine week periods ended October 30, 2021 and October 31, 2020 were $15.6 million and $16.6 million respectively.

~~The following table summarizes the major line items for fye that are included in the income from discontinued operations, net of tax line item in the Consolidated Statements of Income:~~

Thirteen Weeks Ended Thirty-nine Weeks Ended
(In thousands)
October 31,
2020

November 2,
2019

October 31,
2020

November 2,
2019

Net revenue $ — $ 40,840 $ — $ 127,602
Cost of goods sold — 24,685 — 76,932
Selling, general and administrative expenses — 20,114 — 61,891
Impairment of long-lived assets — 16,035 — 16,035
Interest expense — 28 — 46
Other expense (income) — (31 ) — 388
Loss from discontinued operations before income taxes — (19,991 ) — (27,690 )
Income tax expense — 70 — 197
Loss from discontinued operations, net of tax $ — $ (20,061 ) $ — $ (27,887 )

~~The following table summarizes the carrying amounts of major classes of assets and liabilities of discontinued operations for each of the periods presented:~~

(In thousands)
October 31,
2020

February 1,
2020

November 2,
2019

Cash $ — $ — $ —
Accounts receivable, net — 62 2,102
Inventories — 50,122 78,608
Other current assets — 1,005 3,862
Property, plant and equipment, net — — 2,885
Operating lease right-to-use asset — — 5,574
Other assets — — 1,255
Total assets of discontinued operations $ — $ 51,189 $ 94,286

Accounts payable $ — $ 9,769 $ 19,825
Accrued liabilities — 779 3,867
Deferred revenue — 6,764 5,989
Current portion of lease liabilities — 8,976 8,917
Operating lease liabilities — 11,059 13,275
Other liabilities — 2,063 2,265
Total liabilities of discontinued operations $ — $ 39,410 $ 54,138

Index

The cash flows related to discontinued operations have not been segregated and are included in the Consolidated Statements of Cash Flows. The following table summarizes the cash flows for discontinued operations that are included in the Consolidated Statements of Cash Flows:

Note ~~4. Sale of fye business~~

On February 20, 2020, the Company consummated the sale of substantially all of the assets and certain of the liabilities relating to fye to a subsidiary of Sunrise Records pursuant to an Asset Purchase Agreement dated January 23, 2020, by and among the Company, Record Town, Inc., Record Town USA LLC, Record Town Utah LLC, Trans World FL LLC, Trans World New York, LLC, 2428392 Inc., and Sunrise Records. The following table reconciles the assets sold to and liabilities assumed by Sunrise to cash proceeds received:

~~The Company did not recognize a gain/loss upon the sale of the fye business as the assets of fye were impaired to the fair value of the assets as of February 1, 2020.~~

~~Note 5.~~3. Recently ~~Adopted~~Announced Accounting Pronouncements

~~Compensation – Retirement Benefits~~

In March 2017, the FASB issued ASU 2017-07, “Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” which is intended to improve the presentation of net periodic pension cost and net periodic post-retirement benefit cost in an entity’s financial statements by requiring the service cost component be disaggregated from other components of net benefit costs and presented in the same line item or items as other compensation costs for the employees. Additionally, only the service cost component of net benefit cost is eligible for capitalization when applicable. ASU 2017-07 was effective for the Company’s fiscal year beginning February 3, 2019. This standard did not have a material effect on the Company’s consolidated financial statements.

~~Compensation – Stock Compensation~~

In August 2017, the FASB issued ASU 2017-09, “Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting,” which provided clarity as to what changes to the terms or conditions of share-based payment awards require an entity to apply modification accounting in Topic 718. ASU 2017-09 was effective for the Company for interim and annual periods in fiscal year beginning February 3, 2019. This standard did not have a material effect on the Company’s consolidated financial statements.

~~Recently Adopted and Issued Accounting Pronouncements~~

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which introduced an expected credit loss model for the impairment of financial assets measured at amortized cost. The model replaces the probable, incurred loss model for those assets and instead, broadens the information an entity must consider in developing its expected credit loss estimate for assets measured at amortized cost. This standard will be effective for smaller reporting companies for fiscal years beginning after December 15, 2022, however early adoption is permitted. We are currently evaluating the impact of this new standard on the consolidated financial statements.

In August 2018, the FASB issued ASU 2018-14, “Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework— Changes to the Disclosure Requirements for Defined Benefit Plans”, which removes certain disclosures that are no longer cost beneficial and also includes additional disclosures to improve the overall usefulness of the disclosure requirements to financial statement users. This standard will be effective for public entities for fiscal years beginning after December 15, 2020, however early adoption is permitted. ~~We are currently evaluating the impact of this~~The new standard has an immaterial impact on the consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes” (Topic 740), which simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740 related to the approach for ~~intraperiod~~intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The standard also simplifies aspects of the enacted changes in tax laws or rates. This standard will be effective for public entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, however early adoption is permitted. ~~We are currently evaluating the impact of this~~The new standard has an immaterial impact on the consolidated financial statements.

In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”). ASU 2020-04 provides optional expedients and exceptions for applying U.S. GAAP to contract modifications and hedging relationships that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. ASU 2020-04 provides, among other things, guidance that modifications of contracts within the scope of Topic 470, Debt, should be accounted for by prospectively adjusting the effective interest rate; modifications of contracts within the scope of Topic 840, Leases, should be accounted for as a continuation of the existing contract; and, changes in the critical terms of hedging relationships, caused by reference rate reform, should not result in the de-designation of the instrument, provided certain criteria are met. The Company’s exposure to LIBOR rates includes its credit facility. The amendments are effective as of March 12, 2020 through December 31, 2022. Adoption is permitted at any time. The Company is currently evaluating the impact this update will have on its Condensed Consolidated Financial Statements.

Recent accounting pronouncements pending adoption not discussed above are either not applicable or are not expected to have a material impact on our consolidated financial condition, results of operations, or cash flows.

Note 6.4. Intangible Assets

The determination of the fair value of intangible assets acquired in a business acquisition, including the Company’s acquisition of Kaspien Inc. in 2016, is subject to many estimates and assumptions. Our identifiable intangible assets that resulted from our acquisition of Kaspien Inc. consist of vendor relationships, technology and tradenames. We review amortizable intangible asset groups for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable.

~~During fiscal 2019, the Company fully impaired its vendor relationships and the Company recognized an impairment loss of $0.8 million.~~

During fiscal 2018, the Company concluded, based on continued operating losses for the Kaspien segment driven by lower than expected operating results culminating in the fourth quarter of fiscal 2018 that a triggering event had occurred, and an evaluation of intangible assets for impairment was required. Intangible assets related to technology and vendor relationships were written down to their estimated fair value at the end of fiscal 2018 resulting in the recognition of asset impairment charges of $16.4 million.

1514

Index

Identifiable intangible assets as of October ~~31, 2020~~30, 2021 consisted of the following (amounts in thousands):

October 31, 2020

Weighted
Average
Amortization
Period
(in months)

Original
Gross
Carrying
Amount

Accumulated
Impairment

Accumulated
Amortization

Net Carrying
Amount

Vendor relationships 120 $ 19,100 $ 14,587 $ 4,513 $ -
Technology 60 6,700 2,587 3,757 356
Trade names and trademarks 60 3,200 - 2,567 633
$ 29,000 $ 17,174 $ 10,837 $ 989

	October 30, 2021
	Weighted Average Amortization Period (in months)		Original Gross Carrying Amount		Accumulated Impairment		Accumulated Amortization		Net Carrying Amount

Technology		60	$	6,700	$	2,587	$	4,113	$	0
Trade names and trademarks		60		3,200		0		3,200		0
			$	9,900	$	2,587	$	7,313	$	0

The changes in net intangibles and goodwill from ~~February 1, 2010~~January 30, 2021 to October ~~31, 2020~~30, 2021 were as follows:

(amounts in thousands)
February 1,
2020

Impairment
Expense

Amortization
Expense

October 31,
2020

Amortized intangible assets:
Technology $ 647 $ - $ 291 $ 356
Trade names and trademarks 1,113 - 480 633
Net amortized intangible assets $ 1,760 $ - $ 771 $ 989

(amounts in thousands)	January 30, 2021		Impairment Expense		Amortization Expense		October 30, 2021

Amortized intangible assets:
Technology	$	259	$	0	$	259	$	0
Trade names and trademarks		473		0		473		0
Net amortized intangible assets	$	732	$	0	$	732	$	0

Amortization expense of intangible assets for the thirteen and thirty-nine ~~week periods~~weeks ended October 30, 2021 and October 31, 2020 ~~and November 2, 2019~~ consisted of the following:

Thirteen Weeks Ended Thirty-nine Weeks Ended
(amounts in thousands)
October 31,
2020

November 2,
2019

October 31,
2020

November 2,
2019

Amortized intangible assets:
Vendor relationships $ - $ 29 $ - $ 87
Technology 97 97 291 291
Trade names and trademarks 160 160 480 480
Total amortization expense $ 257 $ 286 $ 771 $ 858

~~Estimated amortization expense for~~

	Thirteen Weeks Ended				Thirty-nine Weeks Ended
(amounts in thousands)	October 30, 2021		October 31, 2020		October 30, 2021		October 31, 2020

Amortized intangible assets:
Technology	$	65	$	97	$	259	$	291
Trade names and trademarks		153		160		473		480
Total amortization expense	$	218	$	257	$	732	$	771

As of October 30, 2021, the ~~remainder of fiscal 2020 and the five succeeding fiscal years and thereafter is as follows:~~intangible assets are fully amortized.

Fiscal Year Amortization

2020 $ 257
2021 732
2022 -
2023 -
2024 -
Thereafter -

~~Index~~

Note 7.5. Depreciation and Amortization

Depreciation and amortization included in selling, general and administrative expenses of the interim condensed consolidated statements of operations for the thirteen weeks ended October 30, 2021 and October 31, 2020 was $0.6 million and ~~November 2, 2019 was~~ $0.5 million, ~~for both periods.~~

respectively.

Depreciation and amortization included in selling, general and administrative expenses of the interim condensed consolidated statements of operations for the thirty-nine weeks ended October 30, 2021 and October 31, 2020 ~~and November 2, 2019~~ was ~~$1.5~~$1.8 million and ~~$1.3~~$1.5 million, respectively.

Index

Note 8.6. Restricted Cash

As a result of the death of its former Chairman, the Company holds ~~$5.0~~$3.9 million in a rabbi trust, of which ~~$1.0~~$1.2 million is classified as restricted cash in current assets and ~~$4.0~~$2.7 million is classified as restricted cash in other assets on the accompanying interim condensed consolidated balance sheet as of October ~~31, 2020.~~30, 2021.

A summary of cash, cash equivalents and restricted cash is as follows (amounts in thousands):

	October 31, 2020		February 1, 2020		November 2, 2019		October 30, 2021		January 30, 2021		October 31, 2020
Cash and cash equivalents	$	2,396	$	2,977	$	3,073	$	1,754	$	1,809	$	2,396
Restricted cash		5,032		5,875		6,089		3,890		4,746		5,032
Total cash, cash equivalents and restricted cash	$	7,428	$	8,852	$	9,162	$	5,644	$	6,555	$	7,428

Note 9.7. Debt

Credit Facility

In January 2017, the Company amended and restated its revolving credit facility (“Credit Facility”). The Credit Facility provided for commitments of $50 million subject to increase up to $75 million during the months of October to December of each year, as needed.

On February 20, 2020, ~~in conjunction with the FYE Transaction,~~ the Company ~~fully satisfied its obligations under the Credit Facility through proceeds received from the sale of the fye business~~ and ~~borrowings under the new Kaspien credit facility, as further discussed below. Accordingly, the Credit Facility is no longer available to the Company.~~

~~As of November 2, 2019, borrowings under the Credit Facility were $27.8 million.~~

~~New Credit Facility~~

~~On February 20, 2020,~~ Kaspien Inc. entered into a Loan and Security Agreement (the “Loan Agreement”) with Eclipse Business Capital LLC (f/k/a Encina Business Credit, LLC) (“Eclipse”), as administrative agent, under which the lenders party thereto committed to ~~the New Credit Facility.~~ provide up to $25 million in loans under a three-year, secured revolving credit facility (the “Credit Facility”). Concurrent with the sale of the fye business, the Company borrowed $3.3 million under the ~~New~~ Credit Facility to satisfy the remaining obligations of the Company under ~~the aforementioned Credit Facility.~~its previous credit facility.

Interest under the ~~New~~ Credit Facility accrues, subject to certain terms and conditions under the Loan Agreement, at a LIBOR Rate or Base Rate, plus, in each case, an Applicable Margin, which is determined by reference to the level of Availability as defined in the Loan Agreement, with the Applicable Margin for LIBOR Rate loans ranging from 4.00% to 4.50% and the Applicable Margin for Base Rate loans ranging from 3.00% to 3.50%.

The ~~New~~ Credit Facility is secured by a first priority security interest in substantially all of the assets of Kaspien Inc., including inventory, accounts receivable, cash and cash equivalents and certain other collateral of the borrowers and guarantors under the ~~New~~ Credit Facility (collectively, the “Credit Facility Parties”) and by a first priority pledge by the Company of its equity interests in ~~Kaspien.~~Kaspien Inc. The Company will provide a limited guarantee of ~~Kaspien’s~~Kaspien Inc.’s obligations under the ~~New~~ Credit Facility.

Among other things, the Loan Agreement limits ~~Kaspien’s~~Kaspien Inc.’s ability to incur additional indebtedness, create liens, make investments, make restricted payments or specified payments and merge or acquire assets. The Loan Agreement also requires Kaspien Inc. to comply with a financial maintenance covenant.

The Loan Agreement contains customary events of default, including, but not limited to, payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to other obligations, customary ERISA defaults, certain events of bankruptcy and insolvency, judgment defaults, the invalidity of liens on collateral, change in control, cessation of business or the liquidation of material assets of the Credit Facility Parties taken as a whole, the occurrence of an uninsured loss to a material portion of collateral and failure of the obligations under the New Credit Facility to constitute senior indebtedness under any applicable subordination or intercreditor agreements.

1716

Index

As of October ~~31, 2020,~~30, 2021, the Company had borrowings of $5.9 million under the ~~New~~ Credit ~~Facility were $8.5 million.~~Facility. The Company had ~~$3.8~~$6.8 million available for borrowing as of October ~~31, 2020.~~30, 2021. As of October ~~31, 2020,~~30, 2021, unamortized debt issuance costs of ~~$0.9~~$0.1 million related to the ~~New~~ Credit Facility are included in Other ~~Current Liabilities~~assets on the unaudited condensed consolidated balance sheet.

The Company records short term borrowings at cost, in which the carrying value approximates fair value due to its short-term maturity.

Subordinated Loan Agreement

On March 30, 2020, the Loan Parties entered into a Subordinated Loan and Security Agreement (the “Subordinated Loan Agreement”) with the lenders party thereto from time to time (the “Lenders”) and TWEC Loan Collateral Agent, LLC (“Collateral Agent”), as collateral agent for the Lenders, pursuant to which the Lenders made a $5.2 million secured term loan (the “Subordinated Loan”) to Kaspien Inc. with a scheduled maturity date of May 22, 2023.On September 17, 2021, the Loan Parties entered into Amendment No. 1 to Subordinated Loan and Security Agreement which extended the maturity of the loan to March 31, 2024. As of October 30, 2021, unamortized debt issuance costs of $0.1 million are included in “Long Term Debt” on the unaudited condensed consolidated balance sheet. As of October 30, 2021, unamortized debt issuance costs of $0.1 million are included in “Long-term Debt” on the unaudited condensed consolidated balance sheet.

Interest on the Subordinated Loan accrues, subject to certain terms and conditions under the Subordinated Loan Agreement, at the rate of twelve percent (12.0%) per annum, compounded on the last day of each calendar quarter by becoming a part of the principal amount of the Subordinated Loan.

Index

The Subordinated Loan is secured by a second priority security interest in substantially all of the assets of the Loan Parties, including inventory, accounts receivable, cash and cash equivalents and certain other collateral of the borrowers and guarantors under the Subordinated Loan Agreement (collectively, the “Second Lien Credit Facility Parties”). The Company will provide a limited guarantee of ~~Kaspien’s~~Kaspien Inc.’s obligations under the Subordinated Loan.

Among other things, the Subordinated Loan Agreement limits the Loan Parties’ ability to incur additional indebtedness, create liens, make investments, make restricted payments or specified payments and merge or acquire assets.

The Subordinated Loan Agreement contains customary events of default, including, but not limited to, payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to other obligations, customary ERISA defaults, certain events of bankruptcy and insolvency, judgment defaults, the invalidity of liens on collateral, change in control, cessation of business or the liquidation of material assets of the Second Lien Credit Facility Parties taken as a whole and the occurrence of an uninsured loss to a material portion of collateral.

In conjunction with the Subordinated Debt Agreement, the Company issued warrants to purchase up to 244,532 shares of ~~Common Stock~~common stock to the Related Party Entities (127,208 shares for Alimco, 23,401 shares for Kick-Start, and 93,923 shares for RJHDC), subject to adjustment in accordance with the terms of the Warrants, at an exercise price of $0.01 per share. The value of the warrants of $0.8 million was allocated against the principal proceeds of the Subordinated Debt ~~Agreement. On November 6, 2020, RJHDC exercised 80,000 warrants.~~
Agreement, $0.5 million of which was unamortized as of October 30, 2021. As of October 30, 2021, 5,126 warrants remain outstanding.

Paycheck Protection Program

On April 17, 2020, Kaspien received ~~the PPP Loan~~loan proceeds of $2.0 million (the “PPP Loan”) pursuant to ~~CARES Act. The PPP Loan, which was in~~ the ~~form of a promissory note (the “Note”~~Paycheck Protection Program (“PPP”), dated April 10, 2020, between Kaspien and First Interstate Bank, as the lender, matures on April 17, 2022, bears interest at a fixed rate of 1% per annum, and is payable in monthly installments of $112,976 commencing on November 10, 2020. While under the ~~terms~~Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). On June 15, 2021, the Small Business Administration (“SBA”) approved the Company’s application for forgiveness of the PPP ~~some or all~~Loan. The amount of the ~~PPP Loan~~forgiveness was $1.9 million in principal and interest, which was the amount ~~may be forgiven if the PPP Loan proceeds are used for qualifying expenses as described~~requested in the ~~CARES Act~~forgiveness application and was less than the ~~Note, such as payroll costs, benefits, rent, and utilities, there is no assurance that~~original principal balance due. Following the ~~Company will be successful in qualifying for and receiving~~grant of forgiveness, onan outstanding balance of $76,452 was paid during the PPP Loan amount. On August 20, 2020, the Company submitted an application for forgiveness to the SBA. On October 30, 2020, the Company received a follow up letter requesting additional information related to its forgiveness application. The Company submitted the requested information on November 9, 2020. As of December 15, 2020, the Company has not received a decision on its PPP loan forgiveness request.second quarter.

Note ~~10.~~8. Stock Based Compensation

The Company has outstanding awards under ~~three~~3 employee stock award plans, the 2005 Long Term Incentive and Share Award Plan, the Amended and Restated 2005 Long Term Incentive and Share Award Plan (the “Old Plans”); and the 2005 Long Term Incentive and Share Award Plan (as amended and restated April 5, 2017 (the “New Plan”). Collectively, these plans are referred to herein as the Stock Award Plans. ~~Additionally, the Company had a stock award plan for non-employee directors (the “1990 Plan”).~~ The Company no longer issues stock options under the Old ~~Plans or~~Plans.

Compensation expense related to the ~~1990 Plan.~~

~~Index~~

~~The FYE Transaction~~grant of stock options recognized in ~~February 2020 constituted a change of control and vesting on all unvested options~~the thirty-nine weeks ended October 30, 2021 was ~~accelerated. As a result, unrecognized~~$0.1 million. In addition, compensation expense of $0.2 million related to the grant of restricted shares was recognized in the ~~first quarter of fiscal 2020.~~thirty-nine weeks ended October 30, 2021. Total compensation expense recognized in the thirty-nine weeks ended October 31, 2020 was ~~$0.2~~$0.3 million.

Equity awards authorized for issuance under the New Plan total 250,000. As of October ~~31, 2020,~~30, 2021, of the awards authorized for issuance under the Stock Award Plans, ~~130,574 options~~141,713 share-based awards were granted and are outstanding, ~~46,900~~34,152 of which were vested and exercisable. Shares available for future grants of options and other share-based awards under the New Plan ~~as of~~at October ~~31, 2020~~30, 2021 were ~~155,075.~~102,509.

Index

The following table summarizes stock award activity during the ~~thirteen~~thirty-nine weeks ended October ~~31, 2020:~~30, 2021:

	Employee and Director Stock Award Plans												Number of Shares Subject To Option			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Other Share Awards			Weighted Average Grant Fair Value
	Number of Shares Subject To Option			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Other Share Awards (1)			Weighted Average Grant Fair Value
Balance February 1, 2020		129,196		$	52.11		5.8		9,945		$	36.75
Balance January 30, 2021														133,356		$	20.41		7.3		0		$	0
Granted		90,402			7.04		9.9		-			-		6,637			25.69		9.8		43,000			19.24
Forfeited														(6,977	)		10.04		9.0		0
Canceled		(89,024	)		51.31		-		-			-		(28,900	)		53.29		-		0			0
Exercised		-			-		-		(9,945	)		36.75		(2,403	)		7.12		9.0		(3,000	)		20.41
Balance October 31, 2020		130,574		$	21.46		7.0		-		$	-
Exercisable October 31, 2020		46,900		$	47.18		3.0		-		$	-
Balance October 30, 2021														101,713		$	12.44		8.4		40,000		$	18.98
Exercisable October 30, 2021														34,152		$	18.88		7.5		0		$	0

~~(1)~~

~~Other Share Awards include deferred shares granted to Directors and restricted share units granted to executive officers.~~

As of October ~~31, 2020,~~30, 2021, the intrinsic value of stock awards outstanding was ~~$0.4~~$0.6 million and the intrinsic value of stock awards exercisable was ~~$38,700.~~$195,000.

Note ~~11.~~9. Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss that the Company reports in the interim condensed consolidated balance sheets represents net loss, adjusted for the difference between the accrued pension liability and accrued benefit cost, net of taxes, associated with the Company’s defined benefit plan. ~~Comprehensive~~For the thirteen and thirty-nine weeks ended October 30, 2021, comprehensive loss consists of net loss. For the thirteen and thirty-nine weeks ended October 31, 2020, comprehensive Loss consists of net loss and the amortization of pension gains associated with Company’s defined ~~benefit plan for the thirteen and thirty-nine weeks ended October 31, 2020 and November 2, 2019.~~benefit.

Note ~~12.~~10. Defined Benefit Plan

The Company maintains a non-qualified Supplemental Executive Retirement Plan (“SERP”) for certain executive officers of the Company. The SERP provides eligible executives defined pension benefits that supplement benefits under other retirement arrangements. During the ~~thirteen~~thirty-nine weeks ended October ~~31, 2020,~~30, 2021, the Company did ~~not~~0t make any cash contributions to the SERP and presently expects to pay approximately $1.2 million in benefits relating to the SERP during fiscal ~~2020.~~2021.

The measurement date for the SERP is the fiscal year end, using actuarial techniques which reflect estimates for mortality, turnover and expected retirement. In addition, management makes assumptions concerning future salary increases. Discount rates are generally established as of the measurement date using theoretical bond models that select high-grade corporate bonds with maturities or coupons that correlate to the expected payouts of the applicable liabilities.

~~Index~~

The following represents the components of the net periodic pension cost related to the Company’s SERP for the respective periods:

Thirteen Weeks Ended Thirty-nine Weeks Ended
(amounts in thousands)
October 31,
2020

November 2,
2019

October 31,
2020

November 2,
2019

Service cost $ - $ 14 $ - $ 42
Interest cost 89 142 267 426
Amortization of net gain⁽¹⁾
(3 ) (5 ) (9 ) �� (30 )
Net periodic pension cost $ 86 $ 151 $ 258 $ 438

~~(1)~~

~~The amortization of net gain is related to a director retirement plan previously provided by the Company.~~

	Thirteen Weeks Ended					Thirty-nine Weeks Ended
(amounts in thousands)	October 30, 2021		October 31, 2020			October 30, 2021		October 31, 2020

Interest cost	$	63	$	89		$	189	$	266
Amortization of net gain⁽¹⁾		0		(3	)		0		(9	)
Net periodic pension cost	$	63	$	86		$	189	$	257

⁽¹⁾ The amortization of net gain is related to a director retirement plan previously provided by the Company.

Index

Note ~~13.~~11. Basic and Diluted Loss Per Share

Basic loss per share is calculated by dividing net loss by the weighted average common shares outstanding for the period. Diluted loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into ~~Common Stock~~common stock or resulted in the issuance of ~~Common Stock~~common stock (net of any assumed repurchases) that then shared in the earnings of the Company, if any. It is computed by dividing net loss by the sum of the weighted average shares outstanding and additional ~~Common Shares~~common shares that would have been outstanding if the dilutive potential common shares had been issued for the Company’s ~~Common Stock~~common stock awards from the Company’s Stock Award Plans.

~~For the thirteen-week periods ended October 31, 2020 the dilutive effect of employee stock options was 3,425 shares.~~

For the thirteen-week period ~~November 2, 2019~~ended October 30, 2021 and the thirty-nine week periods ended October 30, 2021 and October 31, 2020, ~~and November 2, 2019,~~ the impact of all outstanding stock awards was not considered because the Company reported net losses in those periods and such impact would be anti-dilutive. Accordingly, basic and diluted loss per share was the same. Total anti-dilutive stock awards for the ~~thirteen~~thirty-nine weeks ended ~~November 2, 2019 were approximately 126,446 shares, respectively. Total anti-dilutive stock awards for the~~October 30, 2021 and thirteen and thirty-nine weeks ended October 31, 2020 ~~and November 2, 2019~~ were approximately ~~83,718 and 148,433, respectively.~~17,762 shares for both periods.

20For the thirteen-week period ended October 31, 2020, the dilutive effect of employee stock options was 4,000 shares.

~~Index~~

~~The following represents basic and diluted loss per share for continuing operations, loss from discontinued operations and net loss for the respective periods:~~

Thirteen Weeks Ended Thirty-nine Weeks Ended
(in thousands, except per share amounts)
October 31,
2020

November 2,
2019

October 31,
2020

November 2,
2019

Income (loss) from continuing operations $ 2,552 $ (3,094 ) $ (3,753 ) $ (11,198 )

Basic income (loss) per common share from continuing operations $ 1.40 $ (1.70 ) $ (2.06 ) $ (6.16 )

Diluted income (loss) per common share from continuing operations $ 1.39 $ (1.70 ) $ (2.06 ) $ (6.16 )

Loss from discontinued operations $ - $ (20,061 ) $ - $ (27,887 )
Basic and diluted loss per common share from discontinued operations $ - $ (11.03 ) $ - $ (15.35 )

Net income (loss) $ 2,552 $ (23,155 ) $ (3,753 ) $ (39,085 )

Basic income (loss) per common share $ 1.40 $ (12.73 ) $ (2.06 ) $ (21.51 )

Weighted average number of common shares outstanding – basic 1,825 1,819 1,823 1,817

Diluted income (loss) per common share $ 1.39 $ (12.73 ) $ (2.06 ) $ (21.51 )

Weighted average number of common shares outstanding – diluted 1,829 1,819 1,823 1,817

Note ~~14.~~12. Income Taxes

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent on the generation of future taxable income. Management considers the scheduled reversal of taxable temporary differences, projected future taxable income and tax planning strategies in making this assessment. Based on available objective evidence, management concluded that a full valuation allowance should continue to be recorded against the ~~Company's~~Company’s deferred tax assets. Management will continue to assess the need for and amount of the valuation allowance against the deferred tax assets by giving consideration to all available evidence to the Company’s ability to generate future taxable income in its conclusion of the need for a full valuation allowance. Any reversal of the Company’s valuation allowance will favorably impact its results of operations in the period of reversal. The Company is currently unable to determine whether or when that reversal might occur, but it will continue to assess the realizability of its deferred tax assets and will adjust the valuation allowance if it is more likely than not that all or a portion of the deferred tax assets will become realizable in the future. The Company has significant net operating loss carry forwards and other tax attributes that are available to offset projected taxable income and current taxes payable, if any, for the year ending ~~February 1, 2020.~~January 30, 2021. The deferred tax impact resulting from the utilization of the net operating loss carry forwards and other tax attributes will be offset by a reduction in the valuation allowance. As of ~~February 1, 2020,~~January 30, 2021, the Company had a net operating loss carry forward of ~~$288.1~~$346.7 million for federal income tax purposes and approximately ~~$280.2~~$219.5 million for state income tax purposes that expire at various times through ~~2039~~2040 and are subject to certain limitations and statutory expiration periods. The Company has not changed its overall conclusion with respect to the need for a valuation allowance against its net deferred tax assets, which remain fully reserved.

During the thirteen weeks ended October 31, 2020, the Company recorded an income tax benefit of $3.5 million related to the reversal of liabilities accrued per ASC 740-10 Accounting for Uncertain Tax Positions.

Note ~~15.~~13. Commitments and Contingencies

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.

2120

Index

Loyalty Memberships and Magazine Subscriptions Class Action

On November 14, 2018, ~~three~~3 consumers filed a punitive class action complaint against the Company and Synapse Group, Inc. in the United States District Court for the District of Massachusetts, Boston Division (Case No.1:18-cv-12377-DPW) concerning enrollment in the Company’s Backstage Pass VIP loyalty program and associated magazine subscriptions. The complaint alleged, among other things, that the Company’s “negative option marketing” misled consumers into enrolling for membership and subscriptions without obtaining the consumers’ consent. The complaint sought to represent a nationwide class of “all persons in the United States” who were enrolled in and/or charged for Backstage Pass VIP memberships and/or magazine subscriptions, and to obtain statutory and actual damages on their behalf.

On April 11, 2019, the plaintiffs voluntarily dismissed their lawsuit. On May 8, 2019, ~~two~~2 of the plaintiffs from the dismissed lawsuit filed a similar ~~punitive~~putative class action in Massachusetts state court (Civ. Act. No. 197CV00331, Mass. Super. Ct. Hampden Cty.), based on the same allegations, but this time seeking to represent only a class of “FYE customers in Massachusetts” who were charged for VIP Backstage Pass Memberships and/or magazine subscriptions. The Company ~~believes it has meritorious defenses~~removed that lawsuit back to federal court on June 12, 2019, and then filed a motion to dismiss and/or strike the plaintiff’s class action allegations on June 28, 2019. On February 2, 2021 the court granted the Company’s motion, struck the class action allegations, and dismissed the individual plaintiffs’ claims for lack of jurisdiction. Plaintiffs appealed the court’s decision on February 24, 2021. The parties participated in a mandatory court-annexed mediation session on April 8, 2021. The parties agreed on terms to resolve the matter fully and iffinally, and the ~~new case is not~~appeal was dismissed ~~in full,~~without material impact on the ~~Company intends to vigorously defend~~financial results of the ~~action.~~Company.

Store Manager Class Actions

There are ~~two~~2 pending class actions. The first, Spack v. Trans World Entertainment Corp. was originally filed in the District of New Jersey, April 2017 (the “Spack Action”). The Spack Action alleges that the Company misclassified Store Managers (“SMs”) as exempt nationwide. It also alleges that Trans World improperly calculated overtime for Senior Assistant Managers (“SAMs”) nationwide, and that both SMs and SAMs worked “off-the-clock.” It also alleges violations of New Jersey and Pennsylvania State Law with respect to calculating overtime for SAMs. The second, Roper v. Trans World Entertainment Corp., was filed in the Northern District of New York, ~~August~~May 2017 (the “Roper Action”). The Roper Action also asserts a nationwide misclassification claim on behalf of SMs. Both actions were consolidated into the Northern District of New York, with the Spack Action being the lead case.

The Company has reached a settlement with the plaintiffs for both store manager class ~~actions.~~actions, which has received approval from the court. The Company reserved ~~$425,000~~$0.4 million for the settlement as of January 30, 2021. During the second quarter of fiscal 2021, the Company paid the final settlement and the matter is fully resolved.

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 is seeking $774,000 in damages. Kaspien believed, and still believes, that Vijuve attempted to artificially inflate its sales on Amazon to support that demand. On July 19, 2021, Kaspien filed counterclaims and alleged that Vijuve breached the contract, including by refusing to buy back inventory from Kaspien upon termination of the Retailer Agreement. Kaspien is seeking at least $229,000 from Vijuve for breach of contract and/or specific performance.

On August 9, 2021, Vijuve filed a motion to dismiss Kaspien’s counterclaims. On September 3, 2021, Kaspien filed a motion for judgment on the pleadings that seeks to dismiss Vijuve’s complaint. On October ~~31, 2020.~~22, 2021, the Court denied the motion. It also denied Vijuve’s attempt to dismiss the Company’s counterclaims. A scheduling conference has been scheduled for December 16, 2021. With the resolution of the motions currently pending, the impact on Kaspien (if any) is not presently known.

Index

Contingent Value Rights

On March 30, 2020, the Company entered into the Contingent Value Rights Agreement (the “CVR Agreement”), pursuant to which the Related Party Entities received contingent value rights (“CVRs”) representing the contractual right to receive cash payments from the Company in an amount equal, in the aggregate, to 19.9% of the proceeds (10.35% for Alimco, 1.90% for Kick-Start, and 7.64% for RJHDC) received by the Company in respect of certain intercompany indebtedness owing to it by Kaspien Inc. and/or its equity interest in ~~Kaspien.~~Kaspien Inc. The Company does not anticipate these contingencies being met in fiscal ~~2020.~~2021.

Index

KASPIEN HOLDINGS INC. AND SUBSIDIARIES

PART 1. FINANCIAL INFORMATION

Item 2 - Management’s Discussion and Analysis of Financial Condition and

Results of Operations

October 30, 2021 and October 31, 2020 ~~and November 2, 2019~~

Overview

Management’s Discussion and Analysis of Financial Condition and Results of Operations provides information that the Company’s management believes necessary to achieve an understanding of its financial statements and results of operations. To the extent that such analysis contains statements which are not of a historical nature, such statements are forward-looking statements, which involve risks and uncertainties. These risks include, but are not limited to, changes in the competitive environment, availability of new products, change in vendor policies or relationships, general economic factors in markets where the Company’s merchandise is sold; and other factors discussed in the Company’s filings with the Securities and Exchange Commission.uncertainties The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited interim condensed consolidated financial statements and related notes included elsewhere in this report and the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K as of and for the fiscal year ended ~~February 1, 2020.~~January 30, 2021.

The Company operates Kaspien Inc., which provides a platform of software and services to grow a brand’s online distribution channel on digital marketplaces such as Amazon, Walmart, and eBay, among others. Kaspien empowers brands to achieve their online retail goals through its innovative, proprietary technology, tailored strategies, and mutually beneficial partnerships.

Kaspien is positioning itself to be a brand’s ultimate online growth partner and is guided by seven core ~~principles:~~

principles:

•	Partner Obsession	•	~~Results~~
•	Insights Driven • Simplicity • Innovation	•	Results • Ownership
•	~~Simplicity~~	•	Diversity and Teamwork
•	~~Innovation~~

Previously, the Company also operated fye, a chain of retail entertainment stores and e-commerce sites, www.fye.com and www.secondspin.com. On February 20, 2020, the Company consummated the sale of substantially all of the assets and certain of the liabilities relating to fye to a subsidiary of 2428391 Ontario Inc. o/a Sunrise Records (“Sunrise Records”) pursuant to ~~the~~an Asset Purchase Agreement (as amended, the “Asset Purchase Agreement”) dated January 23, 2020, by and among the Company, Record Town, Inc., Record Town USA LLC, Record Town Utah LLC, Trans World FL LLC, Trans World New York, LLC, 2428392 Inc., and Sunrise Records. (the “FYE Transaction”).

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~~net revenue performance through several key performance indicators including number of partners and active product listings and ~~sales~~net revenue 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~~revenues levels, mix of products sold, obsolescence, distribution costs and Amazon ~~commissions~~fulfillment fees.

Index

Gross Merchandise Value (“GMV”): The total value of merchandise sold over a given time period through a customer-to-customer exchange site. It is the measurement of merchandise value sold across all channels and ~~fulfillment fees.~~partners within our platform.

Selling, General and Administrative (“SG&A”) Expenses: Included in SG&A expenses are payroll and related costs, ~~occupancy charges,~~third party commissions, 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.

~~Index~~

RESULTS OF OPERATIONS

Thirteen ~~Weeks~~ and Thirty-nine Weeks Ended October ~~31, 2020~~30, 2021

Compared to the Thirteen and Thirty-nine Weeks Ended ~~November 2, 2019~~October 31, 2020

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				Thirteen Weeks Ended						Change					Thirty-nine Weeks Ended						Change
(amounts in thousands)	October 31, 2020			November 2, 2019			$		%		October 31, 2020			November 2, 2019			$		%		October 30, 2021			October 31, 2020			$			%		October 30, 2021			October 31, 2020			$			%

Net Revenue	$	38,913		$	28,616		$	10,297	36.0	%	$	112,799		$	98,008		$	14,791	15.1	%	$	32,172		$	38,913		$	(6,741	)	-17.3	%	$	107,680		$	112,799		$	(5,119	)	-4.5	%

Gross profit		3,891			2,720			1,171	43.1	%		11,626			8,584			3,042	35.4	%		8,004			9,601			(1,597	)	-16.6	%		26,636			28,204			(1,568	)	-5.6	%
% to sales		10.0	%		9.5	%						10.3	%		8.8	%						24.9	%		24.7	%							24.7	%		25.0	%

Net Revenue. Net revenue was ~~$38.9~~$32.2 million for the thirteen weeks ended October ~~31, 2020,~~30, 2021, a ~~36.0% increase~~17.3% decrease from the comparable prior year period. The ~~increase~~decrease in net revenue was primarily attributable to ~~increased velocity~~ongoing supply chain challenges in the FBA US Segment. Total Active Partner count as of October 30, 2021 was 781, including 628 retail partners and ~~improved average sales price for merchandise sold on the Fulfilled By Amazon US marketplace (“FBA US”).~~153 subscription partners.

Net revenue was ~~$112.8~~$107.7 million for the thirty-nine weeks ended October ~~31, 2020~~30, 2021, a ~~15.1% increase~~4.5% decrease from the comparable prior year period. ~~The increase in net revenue was primarily attributable to strength on the Amazon US marketplace.~~

The primary source of revenue is the Retail as a Service (“RaaS”) model, which represented ~~99%~~98.5% of net revenue in the thirteen weeks ended October ~~31, 2020. As part of~~30, 2021. For the ~~Company’s diversification strategic initiative, net~~thirteen weeks ended October 30, 2021, Net revenue from non-Amazon US marketplaces increased to ~~5.8%~~1.7% of net revenue from ~~3.5%~~0.6% of net revenue in the comparable period from the prior year. The increase was attributable to ~~Amazon International,~~Target, Walmart and Other Marketplaces. Subscriptions ~~and~~& Other share of net revenue increased to ~~1.0%~~1.5% of net revenue ~~in the period~~ during the thirteen weeks ended October ~~31, 2020.~~30, 2021. The increase was attributable anto a 14.9% increase in ~~the number of partners and higher gross merchandise value (“GMV”) of partner revenue~~Subscription GMV flowing through the platform Amazon Marketplace. Subscription GMV represented 47.3% of total GMV during the thirteen weeks ended October 30, 2021. For the same period, total GMV decreased 5.0% compared to the thirteen weeks ending October 31, 2020 due to a 17.8% decline in Retail GMV. The following table sets forth net revenue by marketplace as a percentage of total net revenue:

Thirteen Weeks Ended Thirty-Nine Weeks Ended
October 31, 2020 November 2, 2019 Change October 31, 2020 November 2, 2019 Change
Amazon US 93.2 % 96.1 % -2.9 % 94.3 % 96.0 % -1.7 %
Amazon International 5.3 % 3.3 % 2.0 % 4.5 % 3.3 % 1.2 %
Walmart & Other Marketplaces 0.5 % 0.2 % 0.3 % 0.5 % 0.3 % 0.2 %
Subtotal Retail 99.0 % 99.6 % -0.6 % 99.3 % 99.6 % -0.4 %
Subscriptions & Other 1.0 % 0.4 % 0.6 % 0.7 % 0.4 % 0.4 %
Total 100.0 % 100.0 % 100.0 % 100.0 %

Index

	Thirteen weeks ended											Thirty-nine weeks ended
	October 30, 2021				October 31, 2020				Change			October 30,2021				October 31, 2020				Change
Amazon US	$	30,423	94.6	%	$	36,221	93.1	%		-16.0	%	$	100,581	93.4	%	$	106,369	94.3	%		-5.4	%
Amazon International		738	2.3	%		2,078	5.3	%		-65.5	%		4,295	4.0	%		5,076	4.5	%		-15.4	%
Other Marketplaces		543	1.7	%		240	0.6	%		126.5	%		1,428	1.3	%		564	0.5	%		153.2	%
Subtotal Retail as a Service		31,704	98.5	%		38,524	99.0	%		-17.7	%		106,304	98.7	%		112,009	99.3	%		-5.1	%
Subscriptions		468	1.5	%		389	1.0	%		20.4	%		1,375	1.3	%		790	0.7	%		74.1	%
Net revenue	$	32,172	100.0	%	$	38,913	100.0	%		-17.3	%	$	107,679	100.0	%	$	112,799	100.0	%		-4.5	%

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 30, 2021			October 30, 2020			$			%		October 30, 2021			October 30, 2020			$			%

Merchandise margin	$	14,653		$	17,978		$	(3,325	)	-18.5	%	$	49,309		$	51,879		$	(2,570	)	-5.0	%
% of net revenue		45.5	%		46.2	%		-0.7	%				45.8	%		46.0	%		-0.2	%

Fulfillment fees		(4,375	)		(6,479	)		2,104		-32.5	%		(16,218	)		(18,343	)		2,125		-11.6	%
Warehousing and freight		(2,274	)		(1,898	)		(376	)	19.8	%		(6,455	)		(5,332	)		(1,123	)	21.1	%
Gross profit	$	8,004		$	9,601		$	(1,597	)	-16.6	%	$	26,636		$	28,204		$	(1,568	)	-5.6	%

% of net revenue		24.9	%		24.7	%							24.7	%		25.0	%

Gross profit ~~increased~~was $8.0 million for the thirteen weeks ended October 30, 2021, as compared to ~~$3.9~~$9.6 million ~~or 10%~~for the comparable prior year period. The decrease in gross profit was primarily attributable to a reduction in net revenue on the Amazon US Platform. Gross profit as a percentage of net revenue was 24.9%, as compared to 24.7% for the thirteen weeks ended October 31, ~~2020,~~2020. Merchandise margin for the thirteen- week period ending October 30, 2021 was 45.5% as compared to ~~$2.7~~46.2% for the comparable prior year period. The decline in merchandise margin rate was offset by the leveraging of Fulfillment fees and Warehousing and freight expenses.

Gross profit for the thirty-nine weeks ended October 30, 2021 was $26.6 million, or ~~9.5%~~24.7% of net revenue, as compared to $28.2 million, or 25.0% of net revenue for the comparable prior year ~~period. The~~period as increased ~~profit was primarily attributable to a reduction in the cost of sales on the Amazon US Platform and operational efficiencies.~~

~~Gross profit increased to $11.6 million, or 10.3% of~~ net revenue ~~for the thirty-nine weeks ended October 31, 2020, as compared to $8.6 million, or 8.8% of net revenue for the comparable prior year period. The increased profit~~ was ~~primarily attributable to operational efficiencies~~offset by higher warehousing and ~~improved inventory management.~~freight expenses.

~~Index~~

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					Thirteen Weeks Ended						Change					Thirty-Nine Weeks Ended						Change
(amounts in thousands)	October 31, 2020			November 2, 2019			$			%		October 31, 2020			November 2, 2019			$			%		October 30, 2021			October 31, 2020			$			%		October 30, 2021			October 31, 2020			$			%

Kaspien SG&A	$	4,123		$	4,139		$	(16	)	(0.4	)%	$	12,320		$	12,223		$	97		0.1	%
Corporate SG&A expenses		380			1,465			(1,085	)	(74.1	)%		5,589			7,025			(1,436	)	(20.4	)%
Selling expenses																							$	4,580		$	5,710		$	(1,130	)	-19.8	%	$	15,571		$	16,578		$	(1,007	)	-6.1	%
General and administrative expenses																								5,438			4,503			935		20.8	%		15,315			17,909			(2,594	)	-14.5	%
Total SG&A expenses	$	4,503		$	5,604		$	(1,101	)	(19.6	)%	$	17,909		$	19,248		$	(1,339	)	(7.0	)%	$	10,018		$	10,213		$	(195	)	-1.9	%	$	30,886		$	34,487		$	(3,601	)	-10.4	%

As a % of total revenue		11.6	%		19.6	%							15.9	%		19.6	%							31.1	%		26.2	%							28.7	%		30.6	%

For the thirteen weeks ended October ~~31, 2020,~~30, 2021, SG&A expenses decreased ~~$1.1~~$0.2 million or ~~19.6%~~1.9%. The decrease in SG&A expenses was due to a $1.1 million in decrease in ~~corporate SG&A expenses.~~

~~Kaspien SG&A~~selling expenses ~~decreased $16,000 for the thirteen weeks ended October 31, 2020 as compared~~related to the ~~comparable prior year period.~~decline in net revenue.

Index

Consolidated depreciation and amortization expense for the thirteen weeks ended October ~~31, 2020~~30, 2021 was ~~$0.5~~$0.6 million as compared to ~~$0.4~~$0.5 million for the comparable prior year period.

For the thirty-nine weeks ended October ~~31, 2020,~~30, 2021, SG&A expenses decreased ~~$1.3~~$3.6 million or ~~7.0%~~10.4%.

~~Kaspien~~ The decrease in SG&A expenses ~~increased $97,000 for the thirty-nine weeks ended October 31, 2020 as compared~~was due to a $1.0 million decrease in selling expenses related to the ~~comparable prior year period.~~decline in net revenue and a $2.6 million decline in General and administrative expenses.

Consolidated depreciation and amortization expense for the thirty-nine weeks ended October ~~31, 2020~~30, 2021 was ~~$1.6~~$1.8 million as compared to ~~$1.3~~$1.6 million for the comparable prior year period.

Interest Expense. Interest expense was $0.4 million for the thirteen weeks ended October ~~31, 2020,~~30, 2021, the same level as ~~compared to $0.2 million for~~ the thirteen weeks ended ~~November 2, 2019.~~October 31, 2020.

Interest expense was $1.5 million for the thirty-nine weeks ended October 30, 2021 compared to $1.0 million for the thirty-nine weeks ended October 31, ~~2020 compared to $0.5 million for the thirty-nine weeks ended November 2, 2019.~~2020. The increase in interest expense was due to increased long-term borrowings. See Note 97 to the Condensed Consolidated Financial Statements for further detail on the Company’s debt.

~~Loss From Discontinued Operations.~~ ~~For~~Other Income. During the thirteen-weeks ended ~~November 2, 2019,~~October 30, 2021, the Company recognized ~~a loss from discontinued operations~~income of ~~$20.1~~$1.6 million related to the ~~fye transaction. For~~settlement of an insurance claim.

On June 15, 2021, the Small Business Administration (“SBA”) approved the Company’s application for forgiveness of the PPP Loan. The amount of the forgiveness was $1.9 million in principal and interest, which was the amount requested in the forgiveness application and was less than the original principal balance due. Following the grant of forgiveness, an outstanding balance of $76,452 was paid during the thirty-nine ~~weeks ended November 2, 2019, the Company recognized a loss from continuing operations of $27.9 million related to the fye transaction.~~

~~See Note 3 to the Condensed Consolidated Financial Statements for more information on the loss from discontinued operations.~~

~~Income Tax Benefit (Expense).~~ ~~During the thirteen and thirty-nine weeks~~week period ended October 31, 2020, based on the Company’s on an evaluation of new information that occurred in the current financial reporting period, the Company recorded an income tax benefit of $3.5 million related to the recognition of previously unrecognized income tax benefits pursuant to ASC 740-10-25, Accounting for 2021.

Income Taxes – Recognition. Prior to the current financial reporting period, the Company had accrued the liabilities for unrecognized income tax benefits, including accrued interest and penalties related to tax positions created by the fye business. As a result of the fye transaction and a reorganization of the Company’s corporate structure, the Company will not utilize the tax attributes attributable to the tax positions and the corporate entities associated with the tax positions have been liquidated.

Tax Expense.Based on available objective evidence, management concluded that a full valuation allowance should be recorded against the ~~Company's~~Company’s deferred tax ~~assets~~assets. As a result, there were insignificant tax expense amounts recorded during the thirteen ~~weeks~~and thirty-nine week periods ended ~~November 2, 2019~~October 30, 2021 and ~~the thirty-nine weeks ended November 2, 2019.~~October 31, 2020.

~~Net Income (Loss).~~Net income (loss). Net loss for the thirteen weeks ended October ~~31, 2020~~30, 2021 was ~~$2.6~~$0.9 million as compared to a net ~~loss~~income of ~~$23.2~~$2.6 million for the comparable prior year period.

The net loss for the thirty-nine weeks ended October ~~31, 2020~~30, 2021 was ~~$3.8~~$2.2 million as compared to ~~$39.1~~$3.8 million for the comparable prior year period.

~~Index~~

LIQUIDITY

Liquidity and Cash Flows:

As disclosed in the Company’s Annual Report on Form 10-K filed April 30, 2021, the Company experienced negative cash flows from operations during fiscal 2020 and 2019 and we expect to incur net losses in fiscal 2021.

Index

Our ability to achieve profitability and meet future liquidity needs and capital requirements will depend upon numerous factors, including the timing and amount of our ~~net~~ revenue; the timing and amount of our operating expenses; the timing and costs of working capital needs; successful implementation of our strategy and planned activities; and our ability to overcome the impact of the COVID-19 pandemic.

As disclosed in the Company's Annual Report on Form 10-K filed June 15, 2020, The Company experienced negative cash flows from operations during fiscal 2019 and 2018 and we expect to incur net losses in 2020.

The ability of the Company to meet its liabilities and to continue as a going concern is dependent on improved profitability, the continued implementation of the strategic initiative to reposition Kaspien as a platform of software and services, the availability of future funding, implementation of one or more corporate initiatives to reduce costs at the parent company level (which could include a voluntary delisting from NASDAQ and deregistering of our Common Stock in order to substantially eliminate the costs associated with being a public company), satisfying all unassumed liabilities of the fye segment and other strategic alternatives, including selling all or part of the remaining business or assets of the Company, and overcoming the impact of the COVID-19 pandemic.

There can be no assurance that we will be successful in further implementing our business strategy or that the strategy ~~including the completed initiatives,~~ will be successful in sustaining acceptable levels of sales growth and profitability. ~~In addition, the proceeds from the PPP Loan are subject to audit and there is a risk of repayment.~~ The unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

On August 4, 2020, the Company received a letter from the Listing Qualifications staff of the Nasdaq notifying the Company that it is no longer in compliance with the minimum stockholders’ equity requirement for continued listing on the Nasdaq Capital Market. Nasdaq Listing Rule 5550(b)(1) requires listed companies to maintain stockholders’ equity of at least $2,500,000 and as of August 4, 2020, the Company did not meet the alternative compliance standards relating to the market value of listed securities or net income from continuing operations.

The notification letter has no immediate effect on the Company’s listing on the Nasdaq Capital Market. On September 18, 2020, the Company submitted to Nasdaq the Compliance Plan. On September 30, 2020, the Company received another notice from Nasdaq that it had approved the Compliance Plan and granted the Company an extension period to February 1, 2021 to regain compliance with the Stockholders’ Equity Requirement. If the Company does not regain compliance in the timeframe required by Nasdaq, the Nasdaq staff could provide notice that the Company’s Common Stock is subject to delisting.

The unaudited condensed consolidated financial statements for the ~~thirteen~~thirty-nine weeks ended October ~~31, 2020~~30, 2021 were prepared onpursuant to the ~~basis~~rules and regulations of ~~a going concern~~the Securities and Exchange Commission. The information furnished in these unaudited condensed consolidated financial statements reflects all normal, recurring adjustments which, ~~contemplates~~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 ~~Company will be able to realize~~reported amounts of assets and ~~discharge~~ liabilities inand disclosure of contingent assets and liabilities at the ~~normal course of business. The ability~~date of the ~~Company to meet its liabilities and to continue as a going concern is dependent on continued improved profitability~~financial statements, and the ~~other factors set forth in~~reported amounts of revenues and expenses during the ~~preceding paragraph.~~reporting period. Actual results could differ from those estimates. For the next 12 months, management believes that the Company’s existing liquidity will be adequate to fund its working capital ~~needs.~~needs. The ability of the Company to meet its liabilities is dependent on continued improved profitability and the other factors set forth in the preceding paragraph. Management anticipates any cash requirements due to a shortfall in cash from operations will be funded by the Company’s revolving credit facility, as discussed in note 97 in the interim condensed consolidated financial statements.

Furthermore, broad market and industry factors may seriously harm the market price of our Common Stock, regardless of our operating performance, and may adversely impact our ability to raise additional funds, should we require such additional funds. Similarly, if our Common Stock is delisted from the Nasdaq Capital Market, it may also limit our ability to raise additional funds.

2627

Index

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					As of or for the Thirty-Nine Weeks Ended						Change
	(amounts in thousands)		October 31, 2020			November 2, 2019				$		(amounts in thousands)		October 30, 2021			October 31, 2020			$
	Operating Cash Flows		$	(15,272	)	$	(39,085	)	$	23,813		Operating Cash Flows		$	(9,990	)	$	(15,272	)	$	5,282
	Investing Cash Flows			10,884			(2,013	)		12,897		Investing Cash Flows			(1,047	)		10,884			(11,931	)
	Financing Cash Flows			3,004			27,771			(24,767	)	Financing Cash Flows			10,125			3,004			7,121

	Capital Expenditures	⁽¹⁾		(935	)		(2,128	)		1,193		Capital Expenditures⁽¹⁾			(1,047	)		(935	)		(112	)

	Cash, Cash Equivalents, and Restricted Cash	⁽²⁾		7,428			9,162			(1,734	)	Cash, Cash Equivalents, and Restricted Cash	(2)		5,644			7,428			(1,784	)
	Merchandise Inventory			27,204			22,522			4,682		Merchandise Inventory ⁽²⁾			30,248			27,204			3,044

⁽¹⁾	Included in Investing Cash Flows											Included in Investing Cash Flows

⁽²⁾	Cash and cash equivalents per condensed consolidated balance sheets		$	2,396		$	3,073			(677	)	Cash and cash equivalents per condensed consolidated balance sheets		$	1,754		$	2,396
	Add: restricted cash			5,032			6,089			(1,057	)	Add: restricted cash			3,890			5,032
	Cash, cash equivalents, and restricted cash		$	7,428		$	9,162		$	(1,734	)
												Cash, cash equivalents, and restricted cash		$	5,644		$	7,428

Cash used in operations was ~~$15.3~~$10.0 million for the thirty-nine weeks ended October 30, 2021, primarily due to net loss of ~~$3.8~~$2.2 million, net of the PPP forgiveness of $1.9 million, a ~~$5.3 million decrease in accrued expenses and a $9.4 million increase in inventory partially offset by a $1.7~~$2.2 million decrease in accounts ~~receivable,~~payable and a ~~$2.5~~$5.7 million ~~decrease~~increase in ~~prepaid expenses and other current assets. The decrease~~inventory.

Cash used in ~~accrued expenses is primarily attributable to~~investing activities was $1.0 million for the ~~payment~~thirty-nine weeks ended October 30, 2021, which consisted entirely of ~~obligations related to the fye business.~~

capital expenditures. Cash provided by investing activities was $10.9 million for the thirty-nine weeks ended October ~~31, 2020,~~30, 2021, which primarily consisted of proceeds from the sale of the fye business, partially offset by capital expenditures of $0.9 million. ~~Cash used in investing activities was $2.0 million for the thirty-nine weeks ended November 2, 2019, which primarily consisted of capital expenditures.~~

Cash provided by financing activities was ~~$30~~$10.1 million for the thirty-nine weeks ended October 30, 2021. The primary source of cash was an underwritten offering of 416,600 shares of common stock of the Company, at a price to the public of $32.50 per share. The net proceeds of the offering were approximately $12.2 million. The Company used $6.3 million of the proceeds to pay down its Credit Facility. Cash provided by financing activities was $3.0 million for the thirty-nine weeks ended October 31, 2020. The primary source of cash was borrowings ~~from~~under the ~~New~~ Credit Facility of $8.5 million, the Subordinated Loan Agreement of $5.2 million and borrowings from the ~~PPP~~Payroll Protection Program of $2.0 million, partially offset by the payoff of the ~~Credit Facility~~previous credit facility of $13.1 million. ~~Cash used in financing activities was $27.8 million for the thirty-nine weeks ended November 2, 2019, which was comprised entirely of proceeds from short term borrowings.~~

Capital Expenditures. During the thirty-nine weeks ended October ~~31, 2020,~~30, 2021, the Company made capital expenditures of ~~$0.9~~$1.0 million. The Company currently plans to spend approximately $1.5 million for capital expenditures during fiscal ~~2020~~2021.

Index

CRITICAL ACCOUNTING POLICIES AND 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 ~~February 1, 2020~~January 30, 2021 includes a summary of the critical accounting policies and methods used by the Company in the preparation of its interim condensed consolidated financial statements. ~~There~~In order to conform with industry practice, effective with the first quarter of fiscal year 2021, commission fees from online marketplaces, which were previously reported as cost of goods sold on the consolidated statements of operations, are now included in SG&A expense. Prior periods have been ~~no material changes or modifications~~reclassified to conform to the ~~policies since February 1,~~current period presentation. Commission fees for the 13-week period ended October 30, 2021 were $5.1 million and commission fees of $6.3 million were reclassified for the 13-weeks ended October 31, 2020. Commission fees for the 26-week period ended October 30, 2021 were $11.0 million and commission fees of $10.9 million were reclassified for the 26-weeks ended October 31, 2020.

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.

2729

Index

KASPIEN HOLDINGS INC. AND SUBSIDIARIES

PART I – FINANCIAL INFORMATION

Item 3 -– Quantitative and Qualitative Disclosures about Market Risk

The Company does not hold any financial instruments that expose it to significant market risk and does not engage in hedging activities. To the extent the Company borrows under its revolving credit facility, the Company is subject to risk resulting from interest rate fluctuations since interest on the Company’s borrowings under its credit facility can be variable. If interest rates on the Company’s revolving credit facility were to increase by 25 basis points, and to the extent borrowings were outstanding, for every $1,000,000 outstanding on the facility, interest expense would be increased by $2,500 per year. For a discussion of the Company’s accounting policies for financial instruments and further disclosures relating to financial instruments, see “Nature of Operations and Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K as of and for the year ended ~~February 1, 2020.~~January 30, 2021.

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 ~~31, 2020,~~30, 2021, have concluded that as of such date the Company’s disclosure controls and procedures were 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.

Index

KASPIEN HOLDINGS INC. AND SUBSIDIARIES

PART II - OTHER INFORMATION

Item 1 – Legal Proceedings

Loyalty Memberships and Magazine Subscriptions Class Action

On November 14, 2018, three consumers filed a punitive class action complaint against the Company and Synapse Group, Inc. in the United States District Court for the District of Massachusetts, Boston Division (Case No.1:18-cv-12377-DPW) concerning enrollment in the Company’s Backstage Pass VIP loyalty program and associated magazine subscriptions. The complaint alleged, among other things, that the Company’s “negative option marketing” misled consumers into enrolling for membership and subscriptions without obtaining the consumers’ consent. The complaint sought to represent a nationwide class of “all persons in the United States” who were enrolled in and/or charged for Backstage Pass VIP memberships and/or magazine subscriptions, and to obtain statutory and actual damages on their behalf.

On April 11, 2019, the plaintiffs voluntarily dismissed their lawsuit. On May 8, 2019, two of the plaintiffs from the dismissed lawsuit filed a similar ~~punitive~~putative class action in Massachusetts state court (Civ. Act. No. 197CV00331, Mass. Super. Ct. Hampden Cty.), based on the same allegations, but this time seeking to represent only a class of “FYE customers in Massachusetts” who were charged for VIP Backstage Pass Memberships and/or magazine subscriptions. The Company ~~believes it has meritorious defenses~~removed that lawsuit back to federal court on June 12, 2019, and then filed a motion to dismiss and/or strike the plaintiff’s class action allegations on June 28, 2019. On February 2, 2021 the court granted the Company’s motion, struck the class action allegations, and dismissed the individual plaintiffs’ claims for lack of jurisdiction. Plaintiffs appealed the court’s decision on February 24, 2021. The parties participated in a mandatory court-annexed mediation session on April 8, 2021. The parties agreed on terms to resolve the matter fully and iffinally, and the ~~new case is not~~appeal was dismissed ~~in full,~~on May 3, 2021,without material impact on the ~~Company intends to vigorously defend~~financial results of the ~~action.~~Company.

Store Manager Class Actions

There are two pending class actions. The first, Spack v. Trans World Entertainment Corp. was originally filed in the District of New Jersey, April 2017 (the “Spack Action”). The Spack Action alleges that the Company misclassified Store Managers (“SMs”) as exempt nationwide. It also alleges that Trans World improperly calculated overtime for Senior Assistant Managers (“SAMs”) nationwide, and that both SMs and SAMs worked “off-the-clock.” It also alleges violations of New Jersey and Pennsylvania State Law with respect to calculating overtime for SAMs. The second, Roper v. Trans World Entertainment Corp., was filed in the Northern District of New York, ~~August~~May 2017 (the “Roper Action”). The Roper Action also asserts a nationwide misclassification claim on behalf of SMs. Both actions were consolidated into the Northern District of New York, with the Spack Action being the lead case.

~~Index~~

The Company has reached a settlement with the plaintiffs for both store manager class ~~actions.~~actions, which has received approval from the court. The Company reserved ~~$425,000~~$0.4 million for the settlement as of ~~February 2,~~January 30, 2021. During the second quarter of fiscal 2021, the Company paid the final settlement and the matter is fully resolved as of June 17, 2021.

Index

Retailer Agreement Dispute

On August 9, 2021, Vijuve filed a motion to dismiss Kaspien’s counterclaims. On September 3, 2021, Kaspien filed a motion for judgment on the pleadings that seeks to dismiss Vijuve’s complaint. On October 22, 2021, the Court denied the motion. It also denied Vijuve’s attempt to dismiss the Company’s counterclaims. A scheduling conference has been scheduled for December 16, 2021. With the resolution of the motions currently pending, the impact on Kaspien (if any) is not presently known.

Item 1A – Risk Factors

Risks relating to the Company’s business and ~~Common Stock~~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 ~~February 1, 2020.~~January 30, 2021.

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

None.

~~Index~~

Item 6 ~~- Exhibits~~–

Exhibits

(A) Exhibits - Exhibit No.
~~Exhibit No.~~	Description
~~3.1~~	~~Certificate of~~ 10.1		Amendment ~~of Certificate of Incorporation of Trans World Entertainment Corporation,~~No. 3 to Loan and Security Agreement dated September ~~3, 2020~~ –17, 2021 - incorporated ~~herein~~ by reference to Exhibit ~~3.1~~10.1 to the ~~Company’s~~Company's Form ~~8-K filed~~8-K. Filed on September ~~3, 2020.~~ 20, 2021. Commission File No. 0-14818.

~~3.2~~	10.2		Amendment No. 21 to ~~Bylaws of Kaspien Holdings Inc.,~~Subordinated Loan and Security Agreement dated September ~~3, 2020~~ –17, 2021 - incorporated ~~herein~~ by reference to Exhibit ~~3.2~~10.2 to the ~~Company’s~~Company's Form 8-K ~~filed~~Filed on September ~~3, 2020.~~ 20, 2021. Commission File No. 0-14818.

	31.1		Chief Executive Officer certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	31.2		Chief Financial Officer certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	32		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~~	101.INS		Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).
	101.SCH		Inline XBRL Taxonomy Extension Schema ~~(furnished herewith)~~Document.

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase ~~(furnished herewith)~~Document.

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase ~~(furnished herewith)~~Document.

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase ~~(furnished herewith)~~Document.

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase ~~(furnished herewith)~~Document.
	104		Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

3032

Index

SIGNATURES

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 ~~15, 2020~~	14, 2021	By: /s/ Kunal Chopra
	Kunal Chopra
	~~Principal~~Chief Executive Officer
	(Principal Executive Officer)

December ~~15, 2020~~	14, 2021	By: /s/ Edwin Sapienza
	Edwin Sapienza
	~~Chief Financial Officer~~
	Chief Financial Officer
	(Principal and Chief Accounting Officer)

3133

	Thirteen Weeks Ended November 2, 2019
	Number of shares outstanding					Common Stock		Additional Paid-in Capital		Treasury Stock At Cost			Accumulated Other Comprehensive Loss			Accumulated Deficit			Shareholders’ Equity
	Common Shares		Treasury Shares			Common Stock		Additional Paid-in Capital		Treasury Stock At Cost			Accumulated Other Comprehensive Loss			Accumulated Deficit			Shareholders’ Equity
Balance as of August 3, 2019		3,224		(1,409	)	$	32	$	344,983	$	(230,168	)	$	(725	)	$	(66,157	)	$	47,965
Net Loss		-		-			-		-		-			-			(23,155	)		(23,155	)
Other comprehensive income		-		-			-		-		-			5			-			5
Vested restricted shares		2		-			-		-		-			-			-			-
Amortization of unearned compensation/restricted stock amortization		-		-			-		60		-			-			-			60
Balance as of November 2, 2019		3,226		(1,409	)	$	32	$	345,043	$	(230,168	)	$	(720	)	$	(89,312	)	$	24,875

	Thirteen Weeks Ended					Thirty-nine Weeks Ended
(In thousands)	October 31, 2020		November 2, 2019			October 31, 2020		November 2, 2019
Net revenue	$	—	$	40,840		$	—	$	127,602
Cost of goods sold		—		24,685			—		76,932
Selling, general and administrative expenses		—		20,114			—		61,891
Impairment of long-lived assets		—		16,035			—		16,035
Interest expense		—		28			—		46
Other expense (income)		—		(31	)		—		388
Loss from discontinued operations before income taxes		—		(19,991	)		—		(27,690	)
Income tax expense		—		70			—		197
Loss from discontinued operations, net of tax	$	—	$	(20,061	)	$	—	$	(27,887	)

Assets sold
Inventory	$	50,122
Accounts receivable		62
Prepaid expenses and other current assets		654
Other assets		351
fye business assets sold	$	51,189


Less liabilities assumed:
Accounts payable		(9,769	)
Deferred revenue		(6,764	)
Accrued expenses and other current liabilities		(779	)
Other long-term liabilities		(2,063	)
Operating lease liabilities		(20,035	)
fye business liabilities assumed	$	39,410

Net proceeds	$	11,779

Fiscal Year	Amortization

2020	$	257
2021		732
2022		-
2023		-
2024		-
Thereafter		-

	Thirteen Weeks Ended					Thirty-nine Weeks Ended
(in thousands, except per share amounts)	October 31, 2020		November 2, 2019			October 31, 2020			November 2, 2019

Income (loss) from continuing operations	$	2,552	$	(3,094	)	$	(3,753	)	$	(11,198	)

Basic income (loss) per common share from continuing operations	$	1.40	$	(1.70	)	$	(2.06	)	$	(6.16	)

Diluted income (loss) per common share from continuing operations	$	1.39	$	(1.70	)	$	(2.06	)	$	(6.16	)

Loss from discontinued operations	$	-	$	(20,061	)	$	-		$	(27,887	)
Basic and diluted loss per common share from discontinued operations	$	-	$	(11.03	)	$	-		$	(15.35	)

Net income (loss)	$	2,552	$	(23,155	)	$	(3,753	)	$	(39,085	)

Basic income (loss) per common share	$	1.40	$	(12.73	)	$	(2.06	)	$	(21.51	)

Weighted average number of common shares outstanding – basic		1,825		1,819			1,823			1,817

Diluted income (loss) per common share	$	1.39	$	(12.73	)	$	(2.06	)	$	(21.51	)

Weighted average number of common shares outstanding – diluted		1,829		1,819			1,823			1,817