UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2023
Or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-41623
PishPosh, Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 88-2267409 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer |
| 1915 Swarthmore Avenue | ||
| Lakewood, New Jersey 08701 | ||
| (Address of Principal Executive Offices) (Zip Code) |
| (813) 659-5921 | ||
| (Registrant’s Telephone Number, Including Area Code) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of Each Exchange on which Registered | ||
| N/A | N/A | N/A |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
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, a 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 a 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the voting and non-voting stock held by non-affiliates of the registrant as of the last business day of the registrant’s most recently completed second fiscal quarter, based on the price at which the common equity was last sold as of June 30, 2023, was $3,813,711. For purposes of this computation only, all officers, directors and 10% or greater stockholders of the registrant are deemed to be “affiliates.”
The number of shares outstanding of each of the registrant’s classes of common stock as of the latest practicable date was: 4,939,345 shares of $0.000001 par value common stock outstanding as of March 28, 2024.
EXPLANATORY NOTE
This Amendment No. 1 to Form 10-K (the “Amendment”) amends the Annual Report on Form 10-K of PishPosh, Inc. (the “Company”) for the fiscal year ended December 31, 2023, originally filed with the U.S. Securities and Exchange Commission (“SEC”) on March 28, 2024 (the “Form 10-K”). The sole purpose of this Amendment is to amend the Form 10-K to supplement certain disclosures in Note 9 to the accompanying notes to the Company’s balance sheets, as related to certain of the Company’s outstanding convertible notes.
In accordance with applicable SEC rules and as required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended, Item 16 of this Amendment reflects a new consent of Morison Cogen LP and currently dated certifications from the Company’s Chief Executive Officer and Chief Financial Officer.
The Form 10-K, as amended by this Amendment, speaks as of the original filing date of the Form 10-K, does not reflect events that may have occurred subsequent to the original filing date of the Form 10-K, and does not modify or update in any way the disclosures made in the Form 10-K except as described above. Accordingly, this Amendment should be read in conjunction with the Form 10-K and the Company’s filings with the SEC subsequent to the original filing date of the Form 10-K.
PishPosh, Inc.
Annual Report on Form 10-K for the Fiscal Year Ended December 31, 2023
TABLE OF CONTENTS
| Page No. | ||
| 8. | Financial Statements and Supplementary Data | 1 |
| 15. | Exhibits and Financial Statement Schedules | 2 |
| Signatures | 5 |
i
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements required to be filed pursuant to this Item 8 are appended to this report and are incorporated herein by reference. An index of those financial statements is found in Item 15 of Part IV of this Annual Report.
1
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
| (a) | The following documents are filed as part of this report: |
| (1) | Financial Statements—See Index to Consolidated Financial Statements at Item 8 of this Annual Report on Form 10-K, beginning on page F-1. |
| (2) | Financial Statement Schedules—Financial statement schedules have been omitted in this Annual Report on Form 10-K because they are not applicable, not required under the instructions, or the information requested is set forth in the consolidated financial statements or related notes thereto. |
| (3) | Exhibits—The exhibits listed in the accompanying index to exhibits are filed as part of, or incorporated by reference into, this Annual Report on Form 10-K. |
EXHIBIT INDEX
2
3
| * | Filed herewith. |
| ** | Furnished herewith. |
4
ITEM 18. SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| PISHPOSH, INC. | ||
| Date: December 3, 2024 | By: | /S/ Chaim (Charlie) Birnbaum |
| Charlie Birnbaum | ||
Chief Executive Officer (Principal Executive Officer) | ||
| Date: December 3, 2024 | By: | /S/ Eric Sherb |
| Eric Sherb | ||
Chief Financial Officer (Principal Financial and Accounting Officer) |
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Amendment No. 1 has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.
| Signature | Title | Date | ||
| /s/ Chaim (Charlie) Birnbaum | Chief Executive Officer and Director (Principal Executive Officer) | December 3, 2024 | ||
| Chaim (Charlie) Birnbaum | ||||
| /s/ Eric Sherb | Chief Financial Officer (Principal Financial and Accounting Officer) | December 3, 2024 | ||
| Eric Sherb | ||||
| * | Chairman and Director | December 3, 2024 | ||
| Jesse Sutton | ||||
| * | Director | December 3, 2024 | ||
| Patrick White | ||||
| * | Director | December 3, 2024 | ||
| Menachem (Mark) Kahn | ||||
| * | Director | December 3, 2024 | ||
| Victor Setton | ||||
| * | Director | December 3, 2024 | ||
| Hank Cohn | ||||
| /s/ Eric Sherb | ||||
| Eric Sherb | Attorney-in-fact | December 3, 2024 |
5
PISHPOSH, INC.
INDEX TO FINANCIAL STATEMENTS
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of PishPosh, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of PishPosh, Inc. (the Company) as of December 31, 2023 and 2022, and the related statements of comprehensive loss, changes in stockholders’ deficit, and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has experienced net losses and negative cash flows from operations for the years ended December 31, 2023 and 2022, which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
| /s/ Morison Cogen LLP | |
| We have served as the Company’s auditor since 2020. | |
| Blue Bell, Pennsylvania | |
| March 28, 2024 |
F-2
PISHPOSH, INC.
BALANCE SHEETS
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 368,242 | $ | 218,605 | ||||
| Accounts receivable | 81,277 | 39,511 | ||||||
| Inventory, net | 2,803,263 | 4,534,877 | ||||||
| Prepaid expenses and other current assets | 101,802 | 346,405 | ||||||
| Deferred offering costs | 1,708,147 | 1,183,350 | ||||||
| Total current assets | 5,062,731 | 6,322,748 | ||||||
| Property and equipment, net | - | 2,722 | ||||||
| Intangible assets, net | 36,537 | 73,075 | ||||||
| Deposits | 10,155 | 10,155 | ||||||
| Right of use asset | 57,128 | 114,796 | ||||||
| Total assets | $ | 5,166,551 | $ | 6,523,496 | ||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 3,863,514 | $ | 2,329,669 | ||||
| Accounts payable, related party | 103,719 | 720,954 | ||||||
| Accrued expenses and other current liabilities | 761,022 | 643,630 | ||||||
| Loans payable, current | 654,287 | 1,843,025 | ||||||
| Notes payable, net of debt discount | 2,273,011 | - | ||||||
| Convertible note payable | 240,135 | 240,135 | ||||||
| Convertible note payable, related party | 1,100,000 | 950,000 | ||||||
| Lease liability - operating, current portion | 58,741 | 57,809 | ||||||
| Total current liabilities | 9,054,429 | 6,785,222 | ||||||
| Lease liability - operating | - | 58,741 | ||||||
| Notes payable, net of debt discount | - | 1,025,000 | ||||||
| Total liabilities | 9,054,429 | 7,868,963 | ||||||
| Commitments and contingencies (Note 12) | ||||||||
| Stockholders’ deficit: | ||||||||
| Preferred stock, $0.000001 par value, 10,000,000 shares authorized, 1,752 shares issued and outstanding as of both December 31, 2023 and 2022 | - | - | ||||||
| Common stock, $0.000001 par value, 100,000,000 shares authorized, 4,939,345 shares issued and outstanding as of both December 31, 2023 and 2022 | 5 | 5 | ||||||
| Additional paid-in capital | 13,130,058 | 5,239,194 | ||||||
| Accumulated deficit | (17,017,941 | ) | (6,584,666 | ) | ||||
| Total stockholders’ deficit | (3,887,878 | ) | (1,345,467 | ) | ||||
| Total liabilities and stockholders’ deficit | $ | 5,166,551 | $ | 6,523,496 | ||||
The accompanying notes are an integral part of these financial statements.
F-3
PISHPOSH, INC.
STATEMENTS OF COMPREHENSIVE LOSS
| Year Ended | ||||||||
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Net revenues | $ | 18,013,771 | $ | 21,986,784 | ||||
| Cost of net revenues | 12,297,098 | 14,735,590 | ||||||
| Gross profit | 5,716,673 | 7,251,194 | ||||||
| Operating expenses: | ||||||||
| General and administrative | 8,901,103 | 5,829,111 | ||||||
| Research and development | 60,000 | 146,022 | ||||||
| Sales and marketing | 5,237,593 | 6,367,245 | ||||||
| Total operating expenses | 14,198,696 | 12,342,378 | ||||||
| Loss from operations | (8,482,023 | ) | (5,091,184 | ) | ||||
| Other income (expense): | ||||||||
| Other income | 410,686 | 159,159 | ||||||
| Interest expense | (668,088 | ) | (209,224 | ) | ||||
| Loss on extinguishment of debt | (1,693,850 | ) | - | |||||
| Total other expense | (1,951,252 | ) | (50,065 | ) | ||||
| Provision for income taxes | - | - | ||||||
| Net loss | $ | (10,433,275 | ) | $ | (5,141,249 | ) | ||
| Weighted average common shares outstanding - basic and diluted | 4,939,345 | 3,538,127 | ||||||
| Net loss per common share - basic and diluted | $ | (2.11 | ) | $ | (1.45 | ) | ||
The accompanying notes are an integral part of these financial statements.
F-4
PISHPOSH, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
| Additional | Total | |||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid-in | Accumulated | Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balances at December 31, 2021 | 80 | $ | - | 1,479,766 | $ | 2 | $ | 431,032 | $ | (1,443,417 | ) | $ | (1,012,383 | ) | ||||||||||||||
| Issuance of shares of common and preferred stock for services | 150 | - | 1,291,922 | 1 | 1,441,921 | - | 1,441,922 | |||||||||||||||||||||
| Conversion of notes and payables and issuance of common and preferred shares for proceeds | 2,270 | - | 731,690 | 1 | 3,001,666 | - | 3,001,667 | |||||||||||||||||||||
| Convertible note payable and warrants issued as offering costs | - | - | - | - | (240,135 | ) | - | (240,135 | ) | |||||||||||||||||||
| Issuance of shares of common stock for cash, net of offering costs | - | - | 538,338 | 1 | 429,710 | - | 429,711 | |||||||||||||||||||||
| Common shares issued as deferred offering costs | - | - | 150,000 | - | 175,000 | - | 175,000 | |||||||||||||||||||||
| Effect of the Exchange Agreement (see Note 9) | 543 | - | (543,456 | ) | (1 | ) | 1 | - | - | |||||||||||||||||||
| Conversion of preferred stock into common stock | (1,291 | ) | - | 1,291,085 | 1 | (1 | ) | - | - | |||||||||||||||||||
| Net loss | (5,141,249 | ) | (5,141,249 | ) | ||||||||||||||||||||||||
| Balances at December 31, 2022 | 1,752 | - | 4,939,345 | 5 | 5,239,194 | (6,584,666 | ) | (1,345,467 | ) | |||||||||||||||||||
| Warrants issued as debt discount | - | - | - | - | 588,367 | - | 588,367 | |||||||||||||||||||||
| Warrants issued in connection with extinguishment of debt | - | - | - | - | 1,685,166 | - | 1,685,166 | |||||||||||||||||||||
| Warrants issued for services | - | - | - | - | 5,617,331 | - | 5,617,331 | |||||||||||||||||||||
| Net loss | - | - | - | - | - | (10,433,275 | ) | (10,433,275 | ) | |||||||||||||||||||
| Balances at December 31, 2023 | 1,752 | $ | - | 4,939,345 | $ | 5 | $ | 13,130,058 | $ | (17,017,941 | ) | $ | (3,887,878 | ) | ||||||||||||||
The accompanying notes are an integral part of these financial statements.
F-5
PISHPOSH, INC.
STATEMENTS OF CASH FLOWS
| Year Ended | ||||||||
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (10,433,275 | ) | $ | (5,141,249 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 39,260 | 40,711 | ||||||
| Stock compensation expense | 5,617,331 | - | ||||||
| Amortization of debt discount | 276,533 | - | ||||||
| Loss on extinguishment of debt | 1,693,850 | - | ||||||
| Change in inventory allowance | (151,738 | ) | 392,860 | |||||
| Amortization of right of use asset | 57,668 | 1,754 | ||||||
| Issuance of shares of common and preferred stock for services | - | 1,441,922 | ||||||
| Issuance of convertible note, related party for services | - | 950,000 | ||||||
| Forgiveness of Payroll Protection Program loan payable | - | (142,597 | ) | |||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (41,766 | ) | 29,930 | |||||
| Inventory | 1,883,352 | (1,631,853 | ) | |||||
| Prepaid expenses and other current assets | 244,603 | (344,846 | ) | |||||
| Deferred offering costs | (524,797 | ) | (809,027 | ) | ||||
| Accounts payable | 1,533,846 | 891,631 | ||||||
| Accounts payable, related party | (617,235 | ) | (87,049 | ) | ||||
| Accrued expenses and other current liabilities | 117,392 | 135,403 | ||||||
| Operating lease liability | (57,809 | ) | - | |||||
| Net cash used in operating activities | (362,785 | ) | (4,272,410 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of property & equipment | - | (3,362 | ) | |||||
| Website development costs | - | (30,400 | ) | |||||
| Net cash used in investing activities | - | (33,762 | ) | |||||
| Cash flows from financing activities: | ||||||||
| Proceeds from notes payable | 2,648,160 | - | ||||||
| Repayments from notes payable | (1,097,000 | ) | - | |||||
| Proceeds from loan payable | 1,081,000 | 7,202,000 | ||||||
| Repayments of loan payable | (2,269,738 | ) | (5,570,794 | ) | ||||
| Proceeds from convertible notes, related party | 150,000 | - | ||||||
| Proceeds from loan payable, related party | 515,000 | - | ||||||
| Repayments of loan payable, related party | (515,000 | ) | - | |||||
| Proceeds from issuance of preferred and common stock in Subsequent Closing | - | 1,689,980 | ||||||
| Issuance of shares of common stock for cash, net of offering costs | - | 429,711 | ||||||
| Net cash provided by financing activities | 512,422 | 3,750,897 | ||||||
| Net change in cash and cash equivalents | 149,637 | (555,275 | ) | |||||
| Cash and cash equivalents at beginning of year | 218,605 | 773,880 | ||||||
| Cash and cash equivalents at end of year | $ | 368,242 | $ | 218,605 | ||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | 293,072 | $ | 168,625 | ||||
| Supplemental disclosure of non-cash investing and financing activities: | ||||||||
| Warrants issued in connection with new notes | $ | 588,367 | $ | - | ||||
| Conversion of accounts payable, related party into equity | $ | - | $ | 250,000 | ||||
| Conversion of notes payable into equity | $ | - | $ | 1,061,687 | ||||
| Convertible note payable and warrants issued as offering costs | $ | - | $ | 240,135 | ||||
| Effect of the Merger on members’ capital and additional paid-in capital | $ | - | $ | 431,032 | ||||
| Common shares issues as deferred offering costs | $ | - | $ | 175,000 | ||||
| Operating lease liability arising for obtaining right of use asset | $ | - | $ | 168,112 | ||||
The accompanying notes are an integral part of these financial statements.
F-6
PISHPOSH, INC.
NOTES TO FINANCIAL STATEMENTS
| 1. | NATURE OF OPERATIONS |
Pish Posh Baby, LLC (“Pish Posh”) was a Delaware limited liability company formed on December 15, 2015. Pish Posh was established via an asset purchase agreement with a related entity, Pish Posh, Inc. (the “Seller”), a Nevada corporation, in January 2016. Pursuant to the asset purchase agreement, Pish Posh purchased certain assets and assumed liabilities from Pish Posh, Inc. and all investors in the Seller were transferred into membership interests in Pish Posh.
On February 25, 2022, PishPosh, Inc. (the “Company”), a Delaware corporation formed on December 16, 2021, merged with Pish Posh (the “Merger”). Pursuant to the Merger Agreement, each issued unit of membership interest of Pish Posh outstanding immediately prior to the effectiveness of the merger was converted into 1.572314286 shares of common stock in the Company. At the option of any shareholder, shares of Series A Preferred Stock of the Company, may be issued in lieu of shares of common stock. Upon the closing of the Merger, PishPosh, Inc. became the surviving corporation.
The Merger is being treated as a reverse acquisition and recapitalization effected by a unit-share exchange for financial accounting and reporting purposes. Pish Posh is treated as the accounting acquirer as its members controlled the Company after the conversion of membership interests into the Company’s common shares, even though the Company was the legal acquirer and surviving corporation. As a result, the assets and liabilities and the historical operations of Pish Posh are reflected in the financial statements of the Company. Since the Company had no operations upon the Merger, the transaction was treated as a recapitalization for accounting purposes and no goodwill or other intangible assets were recorded. The accompanying financial statements have been presented to retroactively present the effect of the Merger, including common and preferred stock and additional paid-in capital.
The Company has a wide array of baby products, including brand-name strollers, car seats and other baby gear & accessories, which are sold via its retail location, website and other e-commerce channels. The Company’s headquarters are in Lakewood, New Jersey.
| 2. | GOING CONCERN |
The Company has evaluated whether there are certain conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued.
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has often not generated profits since inception, has sustained net losses of $10,433,275 and $5,141,249 for the years ended December 31, 2023 and 2022 respectively, and has negative cash flows from operations for the years then ended. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern for the next 12 months from the date of this Annual Report is dependent upon its ability to generate sufficient cash flows from operations to meet its obligations, which it has not been able to accomplish to date, and/or to obtain additional capital financing. Through the date of this Annual Report, the Company has been primarily financed through the issuance of loans and proceeds from the sale of preferred and common stock. The Company is seeking to raise capital via an equity offering. In the event the Company does not complete an offering, the Company expects to seek additional funding through private equity or debt financings. The Company may not be able to obtain financing on acceptable terms, or at all. In the event that the Company cannot generate sufficient revenue to sustain its operations, the Company will need to reduce expenses or obtain financing through the sale of debt and/or equity securities. The issuance of additional equity would result in dilution to existing shareholders. If the Company is unable to obtain additional funds when they are needed or if such funds cannot be obtained on terms acceptable to the Company, the Company would be unable to execute upon the business plan or pay costs and expenses as they are incurred, which would have a material, adverse effect on the business, financial condition and results of operations. No assurance can be given that the Company will be successful in these efforts. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
As of March 28, 2024, the Company has a cash position of approximately $60,000. Based upon the current cash position and the Company’s planned expense run rate, management believes the Company has funds currently to finance its operations through May 2024.
F-7
PISHPOSH, INC.
NOTES TO FINANCIAL STATEMENTS
| 3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Basis of Presentation
The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America (“GAAP”). The Company’s fiscal year end is December 31.
The Company is an emerging growth company as the term is used in The Jumpstart Our Business Startups Act, enacted on April 5, 2021 and has elected to comply with certain reduced public company reporting requirements.
Use of Estimates
The preparation of the Company’s financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions reflected in these financial statements include, but are not limited to, inventory, revenue recognition, and e-commerce accounting considerations. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates when there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ from those estimates.
Significant Risks and Uncertainties
The Company is subject to customary risks and uncertainties including, but not limited to, the need for protection of proprietary technology, dependence on key personnel, costs of services provided by third parties, the need to obtain additional financing, and limited operating history.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents. The Company generally maintains balances in various operating accounts at financial institutions that management believes to be of high credit quality, in amounts that may exceed federally insured limits. The Company has not experienced any losses related to its cash and cash equivalents and does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships. At December 31, 2023 and 2022, all of the Company’s cash and cash equivalents were held at one accredited financial institution.
Concentrations
The Company is dependent on third-party vendors for its inventory purchases. During the years ended December 31, 2023 and 2022, two vendors accounted for 35% and 59% of total purchases, respectively. The loss of these vendors may have a negative short-term impact on the Company’s operations; however, the Company believes there are acceptable substitute vendors that can be utilized longer-term.
Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of three months or less at the date of purchase to be cash equivalents.
Fair Value Measurements
Certain assets and liabilities of the Company are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:
| ● | Level 1—Quoted prices in active markets for identical assets or liabilities. |
| ● | Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data. |
F-8
PISHPOSH, INC.
NOTES TO FINANCIAL STATEMENTS
| ● | Level 3—Unobservable inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques. |
The carrying values of the Company’s accounts receivable, prepaid expenses, accounts payable and accrued expenses approximate their fair values due to the short maturity of these instruments. The Company believes the carrying amount of its convertible notes payable and loan payable approximate fair value based on rates and other terms currently available to the Company for similar debt instruments.
Accounts Receivable
Accounts receivable are uncollateralized obligations due under normal trade terms generally requiring payment within 1 to 30 days from the invoice date. Accounts receivable are presented net of an allowance for credit losses, which is an estimate of amounts that may not be collectible. The Company uses a loss-rate approach based on historical loss information, adjusted for management’s expectations about current and future economic conditions, as the basis to determine expected credit losses. Management exercises significant judgment in determining expected credit losses. Key inputs include macroeconomic factors, industry trends, and the creditworthiness of counterparties. Management believes that the composition of receivables at year-end is consistent with historical conditions as credit terms and practices and the client base has not changed significantly.
The Company determined it was not necessary to record an allowance for credit losses as of December 31, 2023 and 2022.
Inventory
Inventories consist of finished goods and products in transit from the Company’s suppliers. Finished goods inventory includes amounts primarily held at the Company’s warehouse location and at Amazon. Costs of finished goods inventories include all costs incurred to bring inventory to its current condition, including inbound freight and duties. Inventory is recorded at the lower of cost or net realizable value using the first-in-first-out (FIFO) method. If the Company determines that the estimated net realizable value of its inventory is less than the carrying value of such inventory, it records a charge to cost of goods sold to reflect the lower of cost or net realizable value. If actual market conditions are less favorable than those projected by the Company, further adjustments may be required that would increase the cost of goods sold in the period in which such a determination was made. As of December 31, 2023 and 2022, there was a reserve for obsolescence of $634,007 and $482,269, respectively.
Deposits for future inventory purchases are included in prepaid expenses and other current assets. As of December 31, 2023 and 2022, prepaid expenses and other current assets included $101,802 and $330,906, respectively, in inventory deposits.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation. The Company’s property and equipment includes office and computer equipment, furniture and fixtures and leasehold improvements, which are all depreciated using the straight-line method over their respective estimated useful lives. At the time of retirement or other disposition of property and equipment, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in operations.
Intangible Assets
Intangible assets consist of capitalized website development costs less accumulated amortization. Website development costs are capitalized during the application and infrastructure development stage in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 350-50. The Company amortizes these costs using the straight-line method over an estimated useful life of three years.
Impairment of Long-Lived Assets
The Company reviews its long-lived assets (property and equipment and amortizable intangible assets) for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. If the sum of the expected cash flows, undiscounted, is less than the carrying amount of the asset, an impairment loss is recognized as the amount by which the carrying amount of the asset exceeds its fair value.
F-9
PISHPOSH, INC.
NOTES TO FINANCIAL STATEMENTS
Revenue Recognition
In accordance with FASB ASC 606, Revenue from Contracts with Customers¸ the Company determines revenue recognition through the following steps:
| ● | Identification of a contract with a customer; |
| ● | Identification of the performance obligations in the contract; |
| ● | Determination of the transaction price; |
| ● | Allocation of the transaction price to the performance obligations in the contract; and |
| ● | Recognition of revenue when or as the performance obligations are satisfied. |
Revenue is recognized when performance obligations are satisfied through the transfer of control of promised goods to the Company’s customers in an amount that reflects the consideration expected to be received in exchange for transferring goods or services to customers. Control transfers once a customer has the ability to direct the use of, and obtain substantially all of the benefits from, the product. This includes the transfer of legal title, physical possession, the risks and rewards of ownership, and customer acceptance.
The Company derives its revenue primarily from e-commerce transactions. For e-commerce transactions, revenue is recognized at the time the product is shipped to the customer, which is the point in time when control is transferred. The Company generates a small percentage of sales in its showroom, which revenue is recognized at the time the product is sold in store to the customer. There was no breakage income recognized for unredeemed gift cards for the years ended December 31, 2023 and 2022.
The Company deducts discounts, sales tax, and estimated refunds to arrive at net revenue. Sales tax collected from clients is not considered revenue and is included in accrued expenses until remitted to the taxing authorities. Shipping and handling fees charged to customers are included in net revenues. All shipping and handling costs are accounted for as fulfillment costs in sales and marketing expense, and are therefore not evaluated as a separate performance obligation.
Total shipping and handling billed to customers as a component of net revenues was $23,906 and $495,480 for the years ended December 31, 2023 and 2022, respectively.
Cost of Revenue
Cost of revenue consists of the costs of inventory sold, packaging materials costs, inbound freight and customs and duties. The Company includes outbound freight associated with shipping goods to customers as a component of sales and marketing expenses as noted below.
Sales and Marketing
Sales and marketing expenses includes fulfillment center operations, third-party logistics costs, e-commerce selling commissions, marketing and advertising costs as well as public relations.
The Company also includes outbound freight associated with shipping goods to customers as a component of sales and marketing expenses. During the years ended December 31, 2023 and 2022, shipping and handling costs were $1,606,622 and $2,113,300, respectively.
General and Administrative Expenses
General and administrative expenses consist primarily of compensation and benefits costs, professional services and information technology. General and administrative expenses also include payment processing fees, website costs and warehousing fees.
Advertising Costs
Advertising costs are included in sales and marketing expenses and are expensed as incurred. Advertising costs were $1,841,677 and $1,760,166 for the years ended December 31, 2023 and 2022 respectively.
Research and Development Costs
Costs incurred in the research and development of the Company’s products are expensed as incurred.
F-10
PISHPOSH, INC.
NOTES TO FINANCIAL STATEMENTS
Comprehensive Loss
The Company follows FASB ASC 220 in reporting comprehensive income. Comprehensive income is a more inclusive financial reporting methodology that includes disclosure of certain financial information that historically has not been recognized in the calculation of net income. Since the Company has no items of other comprehensive income, comprehensive loss is equal to net loss.
Deferred Offering Costs
The Company complies with the requirements of FASB ASC 340-10-S99-1 with regards to offering costs. Prior to the completion of an offering, offering costs are capitalized. The deferred offering costs are charged to additional paid-in capital or as a discount to debt, as applicable, upon the completion of an offering or to expense if the offering is not completed. As of December 31, 2023 and 2022, the Company had capitalized $1,708,147 and $1,183,350 in deferred offering costs, respectively. Deferred offering costs includes professional fees incurred including legal, accounting, underwriting and advisory in connection with the Company’s anticipated equity offering.
As of December 31, 2023, management assessed the recoverability of the capitalized deferred offering costs. Of the $1,708,147 in deferred offering costs, $1,183,350 pertain to costs incurred in 2022 and 2021 when the Company initiated its public offering efforts. These costs include legal fees and accounting fees related to the Company’s previous audits. Management believes that these costs should not be impaired as of December 31, 2023 as they still provide economic benefits for the Company’s potential public offering. All initial offering costs incurred have enabled the Company to achieve and maintain SEC effectiveness, which is a key component of the Company’s ability to undergo a successful initial public offering. Management will continue to monitor any further delay or abandonment of the contemplated public offering. If any further delays are expected, the Company may have to impair a substantial, or all, of its deferred offering costs.
Accounting for Preferred Stock
ASC 480, Distinguishing Liabilities from Equity, includes standards for how an issuer of equity (including equity shares issued by consolidated entities) classifies and measures on its balance sheet certain financial instruments with characteristics of both liabilities and equity.
Management is required to determine the presentation for the preferred stock as a result of the redemption and conversion provisions, among other provisions in the agreement. Specifically, management is required to determine whether the embedded conversion feature in the preferred stock is clearly and closely related to the host instrument, and whether the bifurcation of the conversion feature is required and whether the conversion feature should be accounted for as a derivative instrument. If the host instrument and conversion feature are determined to be clearly and closely related (both more akin to equity), derivative liability accounting under ASC 815, Derivatives and Hedging, is not required. Management determined that the host contract of the preferred stock is more akin to equity, and accordingly, liability accounting is not required by the Company. The Company has presented preferred stock within stockholders’ deficit.
Costs incurred directly for the issuance of the preferred stock are recorded as a reduction of gross proceeds received by the Company, resulting in a discount to the preferred stock. The discount is not amortized.
Warrant Valuation
Stock warrant valuation models require the input of highly subjective assumptions. The fair value of stock-based payment awards is estimated using the Black-Scholes option model with a volatility figure derived from an index of historical stock prices for comparable entities. The Company accounts for the expected life based on the contractual life of the warrants. The risk-free interest rate is determined from the implied yields of U.S. Treasury zero-coupon bonds with a remaining life consistent with the expected term of the warrants.
F-11
PISHPOSH, INC.
NOTES TO FINANCIAL STATEMENTS
Net Loss per Share
Net earnings or loss per share is computed by dividing net income or loss by the weighted-average number of common shares outstanding during the period, excluding shares subject to redemption or forfeiture. The Company presents basic and diluted net earnings or loss per share. Diluted net earnings or loss per share reflect the actual weighted average of common shares issued and outstanding during the period, adjusted for potentially dilutive securities outstanding. Potentially dilutive securities are excluded from the computation of the diluted net loss per share if their inclusion would be anti-dilutive. As all potentially dilutive securities are anti-dilutive as of December 31, 2023, diluted net loss per share is the same as basic net loss per share. Potentially dilutive items outstanding as of December 31, 2023 and 2022 are as follows:
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Convertible note payable | 240,135 | 240,135 | ||||||
| Convertible note payable, related party (1) | 311,859 | 172,727 | ||||||
| Preferred stock (convertible to common stock) | 1,752,371 | 1,752,371 | ||||||
| Common stock warrants | 6,032,008 | 3,279,508 | ||||||
| Total potentially dilutive securities | 8,336,373 | 5,444,741 | ||||||
| (1) | The potentially dilutive shares from the $1,100,000 convertible note, related party, and accrued interest of $69,473 was estimated using a conversion price of $3.75, which is 100% of the anticipated initial public offering price per share. In 2022, the potentially dilutive shares from the $950,000 note was estimated using a conversion price of $5.50, which was 110% of the anticipated initial public offering price of $5.00 as of December 31, 2022. |
Leases
In accordance with FASB ASC 842, Leases, upon lease commencement the Company recognizes a right-of-use asset and a corresponding lease liability measured at the present value of the fixed future minimum lease payments. The Company calculates operating lease liabilities with a risk-free discount rate, using a comparable period with the lease term. Lease and non-lease components are combined for all leases. Lease payments for leases with a term of 12 months or less are expensed on a straight-line basis over the term of the lease with no lease asset or liability recognized.
Income Taxes
Prior to the Merger in 2022, the Company was a limited liability company. Accordingly, under the Internal Revenue Code, all taxable income or loss flowed through to the members. Therefore, no provision for income tax had been recorded in the statements. Net loss from the Company were reported and taxed to the members on their individual tax returns.
Upon the Merger in 2022, the Company is a corporation. The Company uses the liability method of accounting for income taxes as set forth in ASC 740, Income Taxes. Under the liability method, deferred taxes are determined based on the temporary differences between the financial statement and tax basis of assets and liabilities using tax rates expected to be in effect during the years in which the basis differences reverse. A valuation allowance is recorded when it is unlikely that the deferred tax assets will not be realized. We assess our income tax positions and record tax benefits for all years subject to examination based upon our evaluation of the facts, circumstances and information available at the reporting date. In accordance with ASC 740-10, for those tax positions where there is a greater than 50% likelihood that a tax benefit will be sustained, our policy will be to record the largest amount of tax benefit that is more likely than not to be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where there is less than 50% likelihood that a tax benefit will be sustained, no tax benefit will be recognized in the financial statements.
F-12
PISHPOSH, INC.
NOTES TO FINANCIAL STATEMENTS
Recently Issued and Adopted Accounting Pronouncements
In June 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-13, Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments, as modified by FASB ASU No. 2019-10 and other subsequently issued related ASUs. The amendments in this Update affect loans, debt securities, trade receivables, and any other financial assets that have the contractual right to receive cash. The ASU requires an entity to recognize expected credit losses rather than incurred losses for financial assets. The amendments in this Update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company adopted this new guidance effective January 1, 2023 utilizing the modified retrospective transition method. The adoption of this standard did not have a material impact on the Company’s financial statements, but did change how the allowance for credit losses is determined.
Management does not believe that any other recently issued, but not yet effective, accounting standards could have a material effect on the accompanying financial statements. As new accounting pronouncements are issued, the Company will adopt those that are applicable under the circumstances.
| 4. | PROPERTY AND EQUIPMENT, NET |
Property and equipment, net consists of the following:
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Office and computer equipment | - | $ | 44,264 | |||||
| Furniture and fixtures | - | 21,064 | ||||||
| Leasehold improvements | - | 79,369 | ||||||
| Total | - | 144,697 | ||||||
| Less: Accumulated depreciation | - | (141,975 | ) | |||||
| Property and equipment, net | $ | - | $ | 2,722 | ||||
Depreciation expense was $2,722 and $2,261 for the years ended December 31, 2023 and 2022, respectively.
| 5. | INTANGIBLE ASSETS, NET |
Intangible assets, net consists of the following:
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Website development costs | $ | 127,750 | $ | 127,750 | ||||
| Less: Accumulated amortization | (91,213 | ) | (54,675 | ) | ||||
| Intangible assets, net | $ | 36,537 | $ | 73,075 | ||||
Amortization expense was $36,538 and $38,450 for the years ended December 31, 2023 and 2022, respectively.
F-13
PISHPOSH, INC.
NOTES TO FINANCIAL STATEMENTS
| 6. | ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES |
Accrued expenses and other current liabilities consist of the following:
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Accrued personnel and other expenses | $ | 170,308 | $ | 104,005 | ||||
| Inventory related purchases | - | 80,230 | ||||||
| Gift card liability | 202,453 | 202,453 | ||||||
| Allowance for sales returns | 108,279 | 102,887 | ||||||
| Interest | 176,245 | 50,347 | ||||||
| Security deposit payable | 3,708 | 3,708 | ||||||
| Advances from third parties | 100,000 | 100,000 | ||||||
| Accrued expenses and other current liabilities | $ | 761,022 | $ | 643,630 | ||||
| 7. | LOANS PAYABLE |
Merchant Advances
During 2023 and 2022, the Company entered into several short-term merchant loans with American Express, Amazon and Shopify. The loans mature in six to nine months and bear interest ranging from 8% to 13%. The loans require monthly principal and interest payments. During the years ended December 31, 2023 and 2022, the Company received merchant advances totaling $1,081,000 and $7,202,000, respectively, and made repayments totaling $2,269,738 and $5,570,794, respectively. As of December 31, 2023 and 2022, the Company had $654,287 and $1,843,025, respectively, in outstanding principal pertaining to these merchant loans. Interest expense for the loans totaled $150,957 and $157,322 for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023 and 2022, there was $3,598 and $17,376, respectively, in interest payable pertaining to these loans.
Related Party
During 2023, the Company received loan proceeds of $515,000 from a related party. The loan was unsecured, non-interest bearing and due on demand. As of December 31, 2023, the Company fully repaid this loan.
Paycheck Protection Program
In May 2021, the Company entered into a loan with a lender in an aggregate principal amount of $142,597 pursuant to the Paycheck Protection Program (“PPP”) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The PPP Loan is evidenced by a promissory note (“Note”). Subject to the terms of the Note, the PPP Loan bore interest at a fixed rate of one percent (1%) per annum, with the first nine months of interest deferred, had an initial term of five years, and was unsecured and guaranteed by the Small Business Administration. The Company may apply to the Lender for forgiveness of the PPP Loan, with the amount which may be forgiven equal to the sum of payroll costs, covered rent, and covered utility payments incurred by the Company during the applicable forgiveness period, calculated in accordance with the terms of the CARES Act. The loan proceeds were used for payroll and other covered payments including general operating costs and was fully forgiven in February 2022. As such, the Company recorded a gain of $142,597 included in other income in the statements of comprehensive loss.
| 8. | NOTES PAYABLE, NET OF DEBT DISCOUNT |
Promissory Note
As of December 31, 2023 and 2022, the Company had $1,025,000 outstanding pertaining to a promissory note received in 2021. In December 2022, the Company extended the maturity date to March 31, 2024. Interest expense for the years ended December 31, 2023 and 2022 were $0 and $0, respectively.
From October to December 2023, the Company received proceeds of $1,097,000 in short-term loans, of which all were repaid as of December 31, 2023. Interest expense for the year ended December 31, 2023 pertaining to these notes was $21,269, which was paid.
OID Notes
On January 25, 2023, the Company issued three unsecured original issue discount promissory notes in the aggregate principal amount of $577,500, respectively (the “OID Notes”). The Company received proceeds in the aggregate amount of $550,000 in connection with the issuance of the OID Notes. No interest shall accrue on the OID Note prior to an event of default and after event of default, interest shall accrue at the rate of 24% per annum. The OID Notes provided that the principal and all unpaid interest owed under each OID Note shall be due and payable on the earlier of (i) April 30, 2023, or (ii) three business days after the closing or abandonment of Company’s anticipated initial public offering. In connection with the OID Notes, the Company recognized a debt discount of $27,500.
F-14
PISHPOSH, INC.
NOTES TO FINANCIAL STATEMENTS
In April 2023, the Company entered into Promissory Note Extension Agreements with the noteholders pursuant to which each such holder agreed to extend the maturity date of the OID Notes to September 30, 2023. As of the issuance date of these financial statements, the OID notes are technically in default.
During the year ended December 31, 2023, interest expense on the OID Notes was $32,277, all of which was accrued and unpaid as of December 31, 2023.
In connection with the Promissory Note Extension Agreements, the Company issued a warrant to purchase an aggregate of 200,000 shares of common stock with an exercise price of $0.01 per share to the noteholders (“Debt Extension Warrants”). The Debt Extension Warrants are exercisable at any time after the date that the Company’s shares of common stock have been approved for and are listed for trading on certain trading markets, and at any time up to the date that is five years after their original issuance. The fair value of the warrants was $748,963 as calculated by assumptions used in the Black-Scholes model (Note 11), which was recorded to additional paid-in capital. The Company evaluated the Promissory Note Extension Agreements under ASC 470-50 and determined they meet the criteria as a debt extinguishment. The fair value of the warrants, and the unamortized debt discount of the old OID notes of $8,684, totaled $757,647, which was recorded as a loss on extinguishment of debt on the statements of comprehensive loss.
On August 31, 2023, the Company issued two unsecured original issue discount promissory notes in the aggregate principal amount of $336,000, respectively (the “August OID Notes”). The Company received proceeds in the aggregate amount of $320,000 in connection with the issuance of the August OID Notes. No interest shall accrue on the OID Note prior to an event of default and after event of default, interest shall accrue at the rate of 24% per annum. The principal and all unpaid interest owed under each August OID Note shall be due and payable on the earlier of (i) November 1, 2023, or (ii) three business days after the closing or abandonment of Company’s anticipated initial public offering. In connection with the August OID Notes, the Company recognized a debt discount of $16,000, all of which was amortized to interest expense in 2023. As of December 31, 2023, $0 remained unamortized.
As of the date of these financial statements, the amended maturity dates of the OID and August OID Notes was April 1, 2024.
Investor Bridge Notes
The Company conducted a private offering (the “2023 Bridge Offering”) of up to $1,000,000 of unsecured promissory notes (“Investor Bridge Notes”) and warrants to purchase up to 1,000,000 shares of the Company’s common stock. The Investor Bridge Notes will bear interest at a rate of 6% per annum and will mature (the “Investor Bridge Notes Maturity Date”) on the earlier of two years from the date of the initial closing of such private placement or a liquidity event, as defined in the Investor Bridge Notes, which includes a firm commitment underwritten initial public offering of the Company’s common stock. Each of the Investor Bridge Notes will be coupled with an equal number of warrants (the “Investor Bridge Warrants”) to purchase common stock (up to 1,000,000 warrants) at an exercise price of $1.00 per share. On the Investor Bridge Notes Maturity Date, the Investor Bridge Notes will be automatically repaid, and the proceeds payable shall be automatically applied to the exercise of the Investor Bridge Warrants.
F-15
PISHPOSH, INC.
NOTES TO FINANCIAL STATEMENTS
At the first closing of the 2023 Bridge Offering, which took place on March 24, 2023, the Company issued $650,000 of Investor Bridge Notes and issued Investor Bridge Warrants to purchase 650,000 shares of common stock with an exercise price of $1.00 per share. In connection with the first closing of the 2023 Bridge Offering, the Company paid Boustead Securities, LLC (“Boustead”), its placement agent in such 2023 Bridge Offering, $52,000 in cash and issued the placement agent 5-year warrants to purchase 45,500 shares of common stock (the “Boustead Bridge Warrants”), at an exercise price of $1.00 per share and are exercisable immediately. The Boustead Bridge Warrants are considered as compensation to Boustead pursuant to the rules of FINRA and will not be exercisable until 180 days following the date of commencement of sales of the Company’s common stock pursuant to its initial public offering. Following the first closing of the 2023 Bridge Offering, the Company received net proceeds of $589,705 after deducting fees.
At the second closing of the 2023 Bridge Offering, which took place on April 14, 2023, the Company issued $100,000 of Investor Bridge Notes and issued Investor Bridge Warrants to purchase 100,000 shares of common stock with an exercise price of $1.00 per share. In connection with the second closing of the 2023 Bridge Offering, the Company paid Boustead $8,000 in cash and issued the placement agent 5-year warrants to purchase 7,000 shares of common stock at an exercise price of $1.00 per share and are exercisable immediately. Following the second closing of the 2023 Bridge Offering, the Company received net proceeds of $91,455 after deducting fees.
During the year ended December 31, 2023, interest expense on the 2023 Bridge Offering was $34,422, all of which was accrued and unpaid as of December 31, 2023.
In connection with the Investor Bridge Notes, the Company recognized a debt discount of $657,206, consisting of the relative fair value of the warrants issued of $588,366 (Note 10) and issuance costs of $68,840. The fair value of the warrants was as calculated by assumptions used in the Black-Scholes model (Note 11). The debt discount will be amortized to interest expense over the life of the loan. During the year ended December 31, 2023, $241,716 was amortized to interest expense. As of December 31, 2023, $415,489 remained unamortized.
Notes payable, net of debt discount, consisted of the following:
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Principal | ||||||||
| Promissory note | $ | 1,025,000 | $ | 1,025,000 | ||||
| OID Notes | 913,500 | - | ||||||
| Investor Bridge Notes | 750,000 | - | ||||||
| Total notes payable | 2,688,500 | 1,025,000 | ||||||
| Less: Unamortized debt discount | (415,489 | ) | - | |||||
| Notes payable, net of debt discount | $ | 2,273,011 | $ | 1,025,000 | ||||
| 9. | CONVERTIBLE NOTES |
In November 2021, the Company entered into several convertible promissory notes (the “2021 Notes”) for an aggregate principal amount of $1,061,687. The notes bear interest at 8% per annum and matured on February 28, 2022. The notes were convertible into shares of common stock and/or Series A preferred stock and warrants of the Company.
During the year ended December 31, 2021, the Company incurred $16,562 in interest pertaining to these notes, all of which was accrued and unpaid as of December 31, 2021. Upon the Subsequent Closing and conversion of the Notes at their principal amount, the interest was deemed forgiven and the Company recorded a gain in other income in the statements of comprehensive loss.
In connection with the Subsequent Closing, the Company issued a convertible note to an entity that acted as placement agent for the financings. The principal of the note is $240,135, which bears interest at 8% per annum and matured on March 1, 2023. The note is convertible into 240,135 shares of common stock on a one-for-one basis. The value of the note was recognized as offering costs and charged to additional paid-in capital. The entity also received a warrant to purchase 240,135 shares of common stock, with an exercise price of $1.00 per share and an estimated fair value of approximately $84,000, and the issuance was recognized as offering costs (Note 10). Interest expense for the years ended December 31, 2023 and 2022 pertaining to this note was $19,211 and $16,053, respectively. As of December 31, 2023, interest payable on this note was $35,624. On March 1, 2023, the maturity date was extended to September 1, 2023. On March 15, 2024, the maturity date was further extended to June 30, 2024.
F-16
PISHPOSH, INC.
NOTES TO FINANCIAL STATEMENTS
On August 23, 2022, the Company issued a convertible promissory note to a related party pursuant to services performed in the principal amount of $950,000. The note bears interest at 5% per annum, with principal and interest payments payable monthly, and matured on May 15, 2023. At any time, the investor may convert the outstanding principal amount and accrued but unpaid interest into shares of common stock at a price equal to 100% of the price at which the Company consummates its initial public offering. Pursuant to the terms of the note, the investor may exceed its beneficial ownership limitation upon conversion into shares.
In April 2023, the Company entered into a Promissory Note Extension Agreement with the noteholder pursuant to which the holder agreed to extend the maturity date of the note to December 31, 2023. In connection with the Promissory Note Extension Agreement, the Company issued a warrant to purchase an aggregate of 250,000 shares of common stock with an exercise price of $0.01 per share to the noteholder. The Debt Extension Warrants are exercisable at any time after the date that the Company’s shares of common stock have been approved for and are listed for trading on certain trading markets, and at any time up to the date that is five years after their original issuance. The fair value of the warrants was $936,203 as calculated by assumptions used in the Black-Scholes model (Note 11). The Company evaluated the Promissory Note Extension Agreement under ASC 470-50 and determined it meets the criteria as a debt extinguishment. The fair value of the warrants was recorded as a loss on extinguishment of debt on the statements of comprehensive loss.
In August 2023, the Company received $150,000 in proceeds from the same related party with interest accruing thereon at a rate of 10% per annum, subject to the default interest provisions contained therein, and an initial maturity date of February 29, 2024. The conversion rate and number of shares to be issued upon conversion have not yet been finalized. As of the date of these financial statements, the note was technically in default.
Interest expense for the related party notes for the years ended December 31, 2023 was $52,555 and $16,918, respectively. As of December 31, 2023, interest payable on these notes totaled $69,473.
| 10. | STOCKHOLDERS’ EQUITY |
Merger / Recapitalization to PishPosh, Inc.
Prior to the Merger, Pish Posh’s membership interests were represented by Units. As of December 31, 2021, Pish Posh had 1,000,000 units issued and outstanding, comprising $431,034 in contributed capital.
In February 2022, the Company cancelled 580,000 membership units in order to effectuate the Merger. Upon the Merger Agreement, the remaining 420,000 units outstanding immediately prior to the effectiveness of the merger was converted into 1.572314286 shares of common stock in the Company. At the option of any shareholder, shares of Series A preferred stock of the Company may be issued in lieu of shares of common stock. As a result of the Merger, the units were ultimately converted into 580,371 shares of common stock and 80 shares of Series A preferred stock. Furthermore, the Company reissued 899,305 shares of common stock pursuant to the initial cancellation agreement of the 580,000 membership units. As of a result of the Merger, the $431,034 in members’ capital was converted into preferred and common stock and additional paid-in capital.
Preferred Stock
The Company’s Amended Certificate of Incorporation authorizes the Board to establish and to issue from time to time one or more series of preferred stock, par value $0.000001 per share, covering up to an aggregate of 10,000,000 shares of preferred stock. Each series of preferred stock will cover the number of shares and will have the powers, preferences, rights, qualifications, limitations and restrictions determined by the board of directors, which may include, among others, dividend rights, liquidation preferences, voting rights, conversion rights, pre-emptive rights and redemption rights. As of December 31, 2023, 20,000 shares of preferred stock are designated as Series A preferred stock.
Voting Rights
The Series A preferred stock shall have no voting rights.
Dividend Rights
Holders of Series A preferred stock shall be entitled to receive, and the Company shall pay, dividends on shares of Series A Preferred Stock equal (on an as-if-converted-to-common-stock basis) to and in the same form as dividends actually paid on shares of the common stock when, as and if such dividends are specifically declared by the Board to be payable to the holders of the common stock. No other dividends shall be paid on shares of Series A preferred stock; and the Company shall pay no dividends on shares of the common stock unless it simultaneously complies with the above. For so long as any Series A preferred stock is outstanding, dividends may not be paid in the form of common stock without the written consent of the holders of Series A preferred stock holding a majority of the then issued and outstanding Series A preferred stock.
F-17
PISHPOSH, INC.
NOTES TO FINANCIAL STATEMENTS
Liquidation Rights
Upon our voluntary or involuntary liquidation, dissolution, distribution of assets or other winding up, holders of shares of Series A preferred stock shall be entitled to receive the amount of cash, securities or other property to which such holder would be entitled to receive with respect to such shares of Series A preferred stock if such shares had been converted to common stock immediately prior to such liquidation, dissolution, distribution of assets or other winding up, subject to the preferential rights of holders of any senior securities of the Company.
Conversion Rights
At any time, each holder of Series A preferred stock is entitled to convert any portion of such holder’s outstanding Series A preferred stock into shares of common stock at a rate of 1,000 shares of common stock for every one (1) share of Series A preferred stock.
Other Matters
Each share of Series A preferred stock has a stated value of $1,000. In the event that the Company does not have sufficient available shares of common stock available to issue to the holder of shares of Series A preferred stock upon conversion of such holder’s shares, the Company is then required to pay cash to redeem the shares of Series A preferred stock that could not be converted at a price based in part on the then recent closing sale prices of the Company’s common stock.
Common Stock
The Company’s Amended Certificate of Incorporation authorizes 100,000,000 shares of common stock, par value $0.000001 per share.
Voting Rights
Holders of shares of common stock are entitled to one vote per share held of record on all matters to be voted upon by the stockholders. At each election for directors every stockholder entitled to vote at such election shall have the right to vote, in person or by proxy, the number of shares owned by such stockholder for as many persons as there are directors to be elected at that time and for whose election such stockholder has a right to vote.
Dividend Rights
Holders of shares of common stock are entitled to ratably receive dividends when and if declared by the Board out of funds legally available for that purpose, subject to any prior rights and preferences that may be applicable to any outstanding preferred stock.
Liquidation Rights
Upon our voluntary or involuntary liquidation, dissolution, distribution of assets or other winding up, holders of shares of common stock are entitled to receive ratably the assets available for distribution to the stockholders after payment of liabilities and the liquidation preference of any of outstanding shares of preferred stock.
2022 Stock Transactions
In February 2022, the Company issued 150 shares of Series A preferred stock and 1,291,922 shares of common stock to management and advisors pursuant to services performed. The fair value of $1,441,922, or $1.00 per share (including the as-converted shares of preferred stock), was included in general and administrative expenses in the statements of comprehensive loss.
In March 2022, the Company received proceeds of $1,689,980 pursuant to the Subsequent Closing. Simultaneously with the proceeds from the Subsequent Closing, the 2021 Notes and $250,000 in related party accounts payable (Note 12) converted into shares of common stock and preferred stock on a one-for-one basis (based on the as-converted calculation of preferred stock). Altogether, the Company issued 2,270 shares of preferred stock and 731,690 shares of common stock pursuant to an aggregate value of $3,001,667, consisting of the March 2022 Subsequent Closing and the note and payable conversions as stated above.
On September 13, 2022, the Company conducted the first closing of a private placement offering of its common stock to accredited investors (the “Pre-IPO Offering”). Pursuant to the Pre-IPO Offering, the Company sold an aggregate of 538,338 shares of common stock at a price of $1.08 per share for net proceeds of $429,711, after deducting costs paid to the placement agent. In connection with the Pre-IPO Offering, the Company issued warrants to purchase 37,683 shares of common stock to the placement agreement as additional offering costs (Note 11).
F-18
PISHPOSH, INC.
NOTES TO FINANCIAL STATEMENTS
In October 2022, the Company issued 150,000 shares of common stock pursuant to professional fees incurred for the Company’s anticipated public offering. The value of the professional fees, $175,000, was capitalized as deferred offering costs as of December 31, 2022.
On October 19, 2022, the majority of all of the holders of (i) the issued and outstanding shares of common stock (the “Common Holders”) and (ii) the issued and outstanding shares of Series A Preferred Stock (the “Preferred Holders”), and all of the Purchasers under the Securities Purchase Agreement (together with the Common Holders and the Preferred Holders, the “Holders”) entered into an Omnibus Waiver, Consent and Exchange Agreement, pursuant to which the Holders agreed to, (1) amend and restate the Company’s Certificate of Incorporation and the Certificate of Designation of its Series A Preferred Stock to, among other things, increase the number of authorized shares of Preferred Stock designated as Series A Preferred Stock and to increase the Beneficial Ownership Limitation from 4.99% to 9.99%, (2) terminate all prior lock-up agreements to which the Preferred Holders were a party pertaining to the Company’s equity securities and replace and supersede all prior lock-up agreements to which the Common Holders were a party pertaining to the Company’s equity securities with a new lock-up agreement to be entered into in connection with the IPO underwriting agreement, (3) permit the Preferred Holders to exchange an aggregate of 543,456 shares of Common Stock held by the Preferred Holders for shares of the Company’s Series A Preferred Stock (the “Exchanged Series A Preferred Stock”), and (4) forever waive all registration rights granted to the Holders under the Securities Purchase Agreement.
Following the exchange of the Preferred Holders’ shares of Common Stock into Exchanged Series A Preferred Stock, the Preferred Holders converted 1,291.085 shares of Series A Preferred Stock back into 1,291,085 shares of Common Stock.
As of December 31, 2023 and 2022, there were 1,752.37 shares of preferred stock and 4,939,345 shares of common stock issued and outstanding.
2022 Equity Incentive Plan
The board and stockholders adopted the 2022 Equity Incentive Plan (the “2022 Equity Incentive Plan”) on September 1, 2022 and October 19, 2022, respectively. The 2022 Equity Incentive Plan governs equity awards to employees, directors, officers, consultants, and other eligible participants. Under the 2022 Equity Incentive Plan there are 350,000 shares of common stock reserved for issuance. The types of awards permitted under the 2022 Equity Incentive Plan include nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, and other awards. Each option shall be exercisable at such times and subject to such terms and conditions as the Board may specify. As of December 31, 2023, the Company has not granted any awards under the 2022 Equity Incentive Plan.
| 11. | WARRANTS |
2022 Warrants
In addition to the issuance of shares of common stock and Series A preferred stock upon the Subsequent Closing, investors also received common stock purchase warrants representing the right to purchase 2,751,690 shares of common stock of the Company, which is equal to 100% on a fully diluted basis of the amount of shares of common stock that would be issued to such investor at the Subsequent Closing.
The warrants have an exercise price of $1.00 per share and are exercisable at any time after the date that the Company’s shares of common stock have been approved for and are listed for trading on certain trading markets, including the Nasdaq Capital Market, and at any time up to the date that is five years after their original issuance.
In connection with the Pre-IPO Offering, the Company issued warrants to purchase 37,683 shares of common stock to the placement agreement. The warrants have an exercise price of $1.08 per share, are exercisable at any time, and expire in five years.
2023 Warrants
In connection with the first and second closing of the 2023 Bridge Offering, the Company granted 750,000 Investor Bridge Warrants and 52,500 Boustead Bridge Warrants. Both the Investor Bridge Warrants and the Boustead Bridge Warrants have an exercise price of $1.00 per share and are exercisable immediately. In the event that a holder of an Investor Bridge Warrant has not elected to exercise such Investor Bridge Warrant prior to the earlier of the Investor Bridge Notes Maturity Date or the consummation of an initial public offering of the Company’s common stock and listing or trading of its common stock on a trading market or national securities exchange (“IPO”), such Investor Bridge Warrant shall automatically be deemed to have been exercised upon the consummation of the IPO and, at such time, as payment of the aggregate exercise price under such Investor Bridge Warrant, the principal of such holder’s corresponding Investor Bridge Note will be deemed repaid in full, and such deemed repayment will be considered payment in full of the aggregate exercise price of the Investor Bridge Warrant, pursuant to the terms of such Investor Bridge Warrant. The relative fair value of the warrants was $588,366, which was included as a debt discount and will be amortized to interest expense over the life of the Investor Bridge Notes (Note 7).
F-19
PISHPOSH, INC.
NOTES TO FINANCIAL STATEMENTS
In April 2023, the Company entered into two side letter agreements with stockholders pursuant to which, in consideration for advisory services and/or time, effort and non-accountable expenses expended by such stockholders in connection with the Company, the Company issued such stockholders warrants to purchase an aggregate of 1,500,000 of shares of common stock at an exercise price equal to $0.01 per share. The Advisory Warrants are exercisable at any time after the date that the Company’s shares of common stock have been approved for and are listed for trading on certain trading markets, and at any time up to the date that is five years after their original issuance. During the year ended December, 2023, the Company recognized a fair value of $5,617,331 as stock compensation expense pertaining to fair value of these warrants.
In April 2023, the Company issued an aggregate of 450,000 Debt Extension Warrants (Note 7 and 8). The Debt Extension Warrants are exercisable at any time after the date that the Company’s shares of common stock have been approved for and are listed for trading on certain trading markets, and at any time up to the date that is five years after their original issuance. The aggregate fair value of the Debt Extension Warrants was $1,693,850, which was recorded as a loss on extinguishment of debt on the statements of comprehensive loss.
The following table presents, on a weighted average basis, the assumptions used in the Black-Scholes option-pricing model to determine the grant-date fair value of warrants granted during the year ended December 31, 2023:
| Risk-free interest rate | 3.68 | % | ||
| Expected term (in years) | 4.18 | |||
| Expected volatility | 161.0 | % | ||
| Expected dividend yield | 0 | % | ||
| Estimate fair value of common stock | 3.75 |
The estimated fair value of common stock was based on the anticipated price of the Company’s common stock in its planned equity offering at the time of the grant which was $3.75.
The following is a summary of warrant activity for the years ended December 31, 2023 and 2022:
| Warrants | Weighted Average Exercise Price | Intrinsic Value | ||||||||||
| Outstanding as of December 31, 2021 | - | $ | - | |||||||||
| Conversion of 2021 Notes and issuance of common and preferred stock in Subsequent Closing | 2,751,690 | 1.00 | ||||||||||
| Conversion of related party accounts payable into equity | 250,000 | 1.00 | ||||||||||
| Placement agent consideration for Subsequent Closing | 240,135 | 1.00 | ||||||||||
| Granted in connection with common stock issuance | 37,683 | 1.08 | ||||||||||
| Outstanding as of December 31, 2022 | 3,279,508 | $ | 1.00 | $ | 13,115,017 | |||||||
| Granted in connection with New Notes | 750,000 | 1.00 | ||||||||||
| Placement agent consideration for New Notes | 52,500 | 1.00 | ||||||||||
| Granted in connection with Notes Extension | 450,000 | 0.01 | ||||||||||
| Issued for services | 1,500,000 | 0.01 | ||||||||||
| Outstanding as of December 31, 2023 | 6,032,008 | $ | 0.68 | $ | 18,518,522 | |||||||
| Exercisable as of December 31, 2023 | 840,183 | $ | 1.00 | $ | 2,307,489 | |||||||
The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the anticipated price of the Company’s common stock in its planned equity raise of $3.75 and $5.00 as of December 31, 2023 and 2022.
| 12. | RELATED PARTY TRANSACTIONS |
The Company received advances for purchases which were charged on credit cards owned by the previous Managing Member of Pish Posh. As of December 31, 2023 and 2022, there were net advances of $353,719 and $830,783 outstanding, respectively, which are reflected as accounts payable – related party on the balance sheets.
In connection with the Subsequent Closing, in March 2022 the previous Managing Member converted $250,000 in advances owed into 250,000 shares of common stock and 250,000 warrants to purchase common stock.
F-20
PISHPOSH, INC.
NOTES TO FINANCIAL STATEMENTS
Refer to Note 7 and 8 for detail on related party loans.
On September 8, 2023, the Board authorized the increase from five to six directors and elected Hank Cohn as a director.
| 13. | COMMITMENTS AND CONTINGENCIES |
Lease Commitments
The Company’s leases consist solely of retail showroom and office space in Lakewood, New Jersey which matures in October 2024.
The Company determines whether an arrangement is or contains a lease at inception by evaluating potential lease agreements including services and operating agreements to determine whether an identified asset exists that the Company controls over the term of the arrangement. Lease commencement is determined to be when the lessor provides access to, and the right to control, the identified asset.
The rental payments for the Company’s leases are typically structured as either fixed or variable payments. Fixed rent payments include stated minimum rent and stated minimum rent with stated increases. The Company considers lease payments that cannot be predicted with reasonable certainty upon lease commencement to be variable lease payments, which are recorded as incurred each period and are excluded from the calculation of lease liabilities.
Management uses judgment in determining lease classification, including determination of the economic life and the fair market value of the identified asset. The fair market value of the identified asset is generally estimated based on comparable market data provided by third-party sources.
The Company has three sublease arrangements for total sublease income of approximately $2,600 per month. All subleases are month to month.
The Company’s lease noted above is currently classified as an operating lease.
The components of the Company’s lease costs, which are included in general and administrative expenses on the accompanying statement of comprehensive loss for the year ended December 31, 2023, are as follows:
| Year Ended | ||||||||
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Operating lease cost | $ | 89,276 | $ | 88,279 | ||||
| Sublease income | (28,561 | ) | (30,464 | ) | ||||
| Total lease cost | $ | 60,715 | $ | 57,815 | ||||
Additional information related to the Company’s lease for the years ended December 31, 2023 and 202 is as follows:
| Year Ended | ||||||||
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Operating cash flows from operating lease | $ | 60,574 | $ | 59,569 | ||||
| Right-of-use assets obtained in exchange for new operating lease liabilities | $ | - | $ | 168,112 | ||||
| Remaining lease term - operting lease | 0.8 years | 1.8 years | ||||||
| Discount rate - operating lease | 8.0 | % | 8.0 | % | ||||
As of December 31, 2023, the future minimum lease payments under operating lease liabilities are as follows:
| Year Ended December 31, | ||||
| 2024 | 61,116 | |||
| Total | $ | 61,116 | ||
Contingencies
The Company may be subject to pending legal proceedings and regulatory actions in the ordinary course of business. The results of such proceedings cannot be predicted with certainty, but the Company does not anticipate that the final outcome, if any, arising out of any such matters will have a material adverse effect on its business, financial condition or results of operations.
F-21
PISHPOSH, INC.
NOTES TO FINANCIAL STATEMENTS
| 14. | INCOME TAXES |
As of December 31, 2023 and 2022, the Company had estimated federal and state net operating loss carryforwards (“NOLs”) of $6,677,000 and $3,833,000. The federal net operating loss carryforwards do not expire but are limited to 80% of each subsequent year’s net income. The state net operating loss carryforwards expire in 20 years, starting in 2042. There was no provision for federal and state income taxes for the years ended December 31, 2023 and 2022 due to the net taxable loss. The utilization of these NOL’s to reduce future income taxes will depend on the generation of sufficient taxable income prior to their expiration. The Company has established a 100% valuation allowance of $3,861,360 and $1,482,829 at December 31, 2023 and December 31, 2022 for the deferred tax assets due to the uncertainty of their realization. In assessing the realization 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 upon the generation of future taxable income during the periods in which the net operating losses and temporary differences become deductible. Management considered projected future taxable income and tax planning strategies in making this assessment.
The income tax (benefit) provision consists of the following:
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Income tax benefit: | ||||||||
| Federal tax benefit | $ | (597,278 | ) | (804,966 | ) | |||
| State tax benefit | (202,221 | (272,539 | ) | |||||
| Deferred tax benefit | (1,579,032 | ) | (405,324 | ) | ||||
| $ | (2,378,532 | ) | $ | (1,482,829 | ) | |||
| Change in valuation allowance | 2,378,532 | 1,482,829 | ||||||
| $ | - | $ | - | |||||
The reconciliation of the statutory federal rate to the Company’s effective income tax rate is as follows:
| Years Ended December 31, | ||||||||||||||||
| 2023 | 2022 | |||||||||||||||
| Amount | % | Amount | % | |||||||||||||
| Income tax at U.S. federal income tax rate | $ | (2,190,988 | ) | (21.0 | ) | $ | (1,078,177 | ) | (21.0 | ) | ||||||
| State income taxes, net of federal benefit | (741,806 | ) | (6.8 | ) | (404,652 | ) | (7.9 | ) | ||||||||
| Change in valuation allowance | 2,932,794 | 27.8 | 1,482,829 | 28.9 | ||||||||||||
| Effective income tax | $ | - | - | $ | - | - | ||||||||||
The primary components of the Company’s deferred tax assets and related valuation allowance as of December 31, 2023 and 2022 are as follows:
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Deferred tax assets: | ||||||||
| Net operating losses | $ | 1,877,004 | $ | 1,077,505 | ||||
| Stock compensation and shares issued for services | 1,984,356 | 405,324 | ||||||
| 3,861,360 | 1,482,829 | |||||||
| Valuation allowance | (3,861,360 | ) | (1,482,829 | ) | ||||
| Net deferred tax assets | $ | - | $ | - | ||||
F-22
PISHPOSH, INC.
NOTES TO FINANCIAL STATEMENTS
The timing and manner in which the Company can utilize operating loss carryforwards in any year may be limited by provisions of the Internal Revenue Code regarding changes in ownership of corporations. Such limitation may have an impact on the ultimate realization of its carryforwards and future tax deductions.
The Company follows FASB ASC 740-10, which provides guidance for the recognition and measurement of certain tax positions in an enterprise’s financial statements. Recognition involves a determination of whether it is more likely than not that a tax position will be sustained upon examination with the presumption that the tax position will be examined by the appropriate taxing authority having full knowledge of all relevant information.
The Company’s policy is to record interest and penalties associated with unrecognized tax benefits as additional income taxes in the statement of comprehensive income. As of January 1, 2023, the Company had no unrecognized tax benefits and no charge during 2023, and accordingly, the Company did not recognize any interest or penalties during 2023 related to unrecognized tax benefits. There is no accrual for uncertain tax positions as of December 31, 2023.
The Company files U.S income tax returns and a state income tax return. With some exceptions, the U.S. and state income tax returns filed for the tax years ending on December 31, 2020 and thereafter are subject to examination by the relevant taxing authorities.
| 15. | SUBSEQUENT EVENTS |
From January 1, 2024 through March 28 2024, the Company has received merchant advance proceeds of approximately $907,000 and made repayments totaling $712,000.
From January 1, 2024 through March 28, 2024, the Company has received proceeds from short-term loans of $625,000.
F-23
