| SCHEDULE OF DISAGGREGATION OF REVENUES, NET | The
Company’s revenue, net is disaggregated based on the following categories: SCHEDULE
OF DISAGGREGATION OF REVENUES, NET
April 2, 2022 April 3, 2021
Revenue by channel
Subscription boxes $ 3,483,851 $ 4,584,612
Amazon sales 549,500 608,250
Online website sales 292,646 127,671
Total revenue $ 4,325,997 $ 5,320,533 General You
should read the following discussion and analysis of our financial condition and results of operations together with the condensed interim
financial statements and related notes that are included elsewhere in this Quarterly Report on Form 10-Q and the audited financial statements
and the notes to those financial statements for the fiscal year ended January 1, 2022, which were included in our Annual Report on Form
10-K, filed with the Securities and Exchange Commission on April 1, 2022. The following discussion contains forward-looking statements
regarding future events and the future results of the Company that are based on current expectations, estimates, forecasts, and projections
about the industry in which the Company operates and the beliefs and assumptions of the management of the Company. See also “Cautionary
Statement Regarding Forward-Looking Information”, above. Words such as “expects,” “anticipates,” “targets,”
“goals,” “projects,” “intends,” “plans,” “believes,” “seeks,”
“estimates,” variations of such words, and similar expressions are intended to identify such forward-looking statements.
These forward-looking statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict.
Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. Factors that might
cause or contribute to such differences include, but are not limited to, those discussed elsewhere in this Quarterly Report and in other
reports we file with the SEC. The Company undertakes no obligation to revise or update publicly any forward-looking statements for any
reason, except as otherwise provided by law. The
following discussion is based upon our financial statements included elsewhere in this Quarterly Report, which have been prepared in
accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates
and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingencies.
In the course of operating our business, we routinely make decisions as to the timing of the payment of invoices, the collection of receivables,
the shipment of products, the fulfillment of orders, the purchase of supplies, and the building of inventory, among other matters. Each
of these decisions has some impact on the financial results for any given period. In making these decisions, we consider various factors
including contractual obligations, customer satisfaction, competition, internal and external financial targets and expectations, and
financial planning objectives. On an on-going basis, we evaluate our estimates, including those related to sales returns, allowance for
doubtful accounts, impairment of long-term assets, especially goodwill and intangible assets, assumptions used in the valuation of stock-based
compensation, and litigation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable
under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Kidpik
Corp. (the “Company”) uses a 52–53-week fiscal year ending on the Saturday nearest to December 31 each year. The year
ended December 31, 2022 is a 52-week year and referred to herein as fiscal “2022”. The years ended January 1, 2022 and January
2, 2021 were 52- and 53-week years, respectively. These years are referred to herein as fiscal “2021” and “2020”,
respectively. The Company’s fiscal quarters are generally 13 weeks in duration. When the Company’s fiscal year is 53 weeks
long, the corresponding fourth quarter is 14 weeks in duration. References to the first quarter of fiscal 2022 and the first quarter
of fiscal 2021, refer to the 13 weeks ended April 2, 2022 and April 3, 2021, respectively. Certain
capitalized terms used below but not otherwise defined, are defined in, and shall be read along with the meanings given to such terms
in, the notes to the unaudited financial statements of the Company for the 13 weeks ended April 2, 2022 and April 3, 2021, above. References
to our websites and those of third parties below are for information purposes only and, unless expressly stated below, we do not desire
to incorporation by reference into this Report information in such websites. Unless
the context otherwise requires, references in this Report to “we,” “us,” “our,” the “Registrant”,
the “Company,” “kidpik” and “Kidpik Corp.” refer to Kidpik Corp. In
addition:
● “Active
subscriptions” mean individuals who are scheduled to receive future boxes;
● “Boxes” mean
the Company’s subscription clothing, shoe and accessories boxes;
● “Customers”
means anyone who has received at least one shipment through subscription, direct or indirect sale from the Company;
● “Exchange Act”
refers to the Securities Exchange Act of 1934, as amended;
● “Members” means
customers who registered at least one subscription;
● “NASDAQ” means
the NASDAQ Capital Market;
● “SEC” or the
“Commission” refers to the United States Securities and Exchange Commission;
● “Securities Act”
refers to the Securities Act of 1933, as amended; and
● “Subscriptions”
mean orders for recurring box shipments. Available
Information The
Company makes available free of charge through its internet website, https://investor.kidpik.com/sec-filings, its annual reports on Form
10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports filed or furnished pursuant to Section
or 15(d) of the Exchange Act, as soon as reasonably practicable after the Company electronically files such material with, or furnishes
it to, the SEC. Our SEC filings are also available to the public at the SEC’s web site at http://www.sec.gov. Information
contained in, or that can be accessed through, our website is not a part of, and is not incorporated into, this Report . Introduction Our
Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is provided in addition to the
accompanying financial statements and notes to assist readers in understanding our results of operations, financial condition, and cash
flows. MD&A is organized as follows:
● Overview.
● Key Performance Indicators.
● Factors Affecting Our Future Performance.
● Components of Results of Operations.
● Results of Operations.
● Liquidity and Capital Resources.
● Critical Accounting and Estimates. Overview We
began operations in 2016 as a subscription-based e-commerce company on the proposition of making shopping easy, convenient, and accessible
for parents by delivering fashionable and customized outfits in a box, for kids. Kidpik provides kids clothing subscription boxes for
boys and girls (sizes 2-16) that include mix-&-match, Staying
ahead in an emerging industry requires constant innovation in product and services. After launching with our girls’ subscription
box for sizes 4-14 in 2016, we have continued to expand our product offering and marketing channels. We expanded into boys’ clothing,
added larger sizes for boys and girls—up to 16 for apparel and 6 youth for shoes—added toddler sizes down to 2T & 3T
for apparel and 7 & 8 toddler shoes, launched shop.kidpik.com, where we sell individual apparel items and shoes, introduced gift.kidpik.com,
where we sell gift boxes featuring pre-styled outfits and gift cards. We also expanded our distribution by selling our branded products
on Amazon.com, as well as Fulfilled by Amazon (FBA) and Fulfilled by Merchant (FBM) for pre-packs and individual items. We
launched our debut toddler collection in the first quarter of 2021, introducing sizes 2T and 3T apparel, and size 7 and 8 toddler shoes
for boys and girls, which we began to ship in April 2021. We also introduced an “add-on” option for all members pursuant
to which they can add additional items of their choosing to their next subscription box order. We plan to broaden the assortment of add-on
items offered in an effort to increase the box transaction size and gross margin per box. We have recently expanded our subscription
box offerings, introducing a 12-piece box option, adding to the customer experience, and providing an opportunity to drive additional
revenue. We have also expanded our seasonal pre-styled fashion box assortment available on our e-commerce website, which provides an
upsell opportunity for existing members and additional variety for our e-commerce customers. As
of the date of this Report, we provide e-commerce services only throughout the 48 contiguous U.S. states and Army Post Offices (APOs)
and Fleet Post Offices (FPOs). We
have started initiatives to expand our offerings into newborn sizes, including 12 and 18 months, as well as husky/plus and slim sizes.
We currently anticipate launching husky/plus, slim and newborn sizes during Q3 of 2022. We plan to continue to analyze the marketplace
for interest in new products and may further invest in expanding our current lines. We
have added new channels to our paid advertising strategy, including TikTok, Tap Joy and new affiliate partnerships, with the goal of
increasing new member growth. In addition, we have focused on other revenue share marketing opportunities, such as scaling our influencer
ambassador program and soft launching a consumer-facing brand ambassador program. We are also pursuing new awareness strategies, such
as cross-promotional opportunities with children’s companies with brand synergies. In
November 2021, the Company completed an initial public offering (the “IPO”), in which the Company issued and sold 2,117,647
shares of its authorized common stock for $8.50 per share for net proceeds of $16.1 million, after deducting underwriting discounts and
commissions, and offering costs. Key
Performance Indicators Key
performance indicators that we use to evaluate our business, measure our performance, identify trends affecting our business, formulate
financial projections and make strategic decisions include gross margin, shipped items, and average shipment keep rate, each described
in greater detail below. We
also use the following metrics to assess the progress of our business, make decisions on where to allocate capital, time and technology
investments and assess the near-term and longer-term performance of our business. Gross
Margin Gross
profit is equal to our net sales less cost of goods sold. Gross profit as a percentage of our net sales is referred to as gross margin.
Cost of sales consists of the purchase price of merchandise sold to customers and includes import duties and other taxes, freight in,
returned from customers, inventory write-offs, and other miscellaneous shrinkage.
For the 13 weeks ended
April 2, 2022 April 3, 2021
Gross margin 59.9 % 60.9 % Adjusted
EBITDA In
addition to our results calculated under generally accepted accounting principles in the United States (“U.S. GAAP”),
and to provide investors with additional information regarding our financial results, we have disclosed in the table below and elsewhere
in this Report, Adjusted EBITDA, a non-U.S. GAAP financial measure that we calculate as net loss before other expense, net, interest,
taxes, depreciation and amortization, adjusted to exclude the effects of equity-based compensation expense, and certain non-routine items.
We have provided below a reconciliation of Adjusted EBITDA to net loss, the most directly comparable generally accepted accounting principles,
or U.S. GAAP, financial measure. We
have included Adjusted EBITDA in this report because it is a key measure used by our management and board of directors to evaluate our
operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. In particular,
the exclusion of certain expenses in calculating Adjusted EBITDA facilitates operating performance comparisons on a period-to-period
basis and, in the case of exclusion of the impact of equity-based compensation, excludes an item that we do not consider to be indicative
of our core operating performance. Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in
understanding and evaluating our operating results in the same manner as our management and board of directors. Adjusted
EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results
as reported under U.S. GAAP. Some of these limitations are: ●
Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the
future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure
requirements; ●
Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; ●
Adjusted EBITDA does not consider the potentially dilutive impact of equity-based compensation; ●
Adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us; ●
Adjusted EBITDA does not reflect certain non-routine items that may represent a reduction in cash available to us; and ●
Other companies, including companies in our industry, may calculate Adjusted EBITDA differently, which reduces its usefulness as a comparative
measure. Because
of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures, including various cash flow
metrics, net loss and our other U.S. GAAP results. Our
financial results include certain items that we consider non-routine and not reflective of the underlying trends in our core business
operations. A
reconciliation of net loss to Adjusted EBITDA is as follows:
For the 13 weeks Ended
April 2, 2022 April 3, 2021
Net loss $ (1,810,675 ) $ (1,497,986 )
Add (deduct):
Interest expense 21,674 160,627
Other (income) expense, net (286,794 ) 316
Provision for income taxes - 507
Depreciation and amortization 5,665 9,721
Equity-based compensation 617,164 -
Adjusted EBITDA $ (1,452,966 ) $ (1,326,815 ) Shipped
Items We
define shipped items as the total number of items shipped in a given period to our customers through our active subscription, amazon
and online website sales.
For the 13 weeks ended
(In thousands)
April 2, 2022 April 3, 2021
Shipped Items 371 543 Average
Shipment Keep Rate Average
shipment keep rate is calculated as the total number of items kept by our customers divided by total number of shipped items in a given
period.
For the 13 weeks ended
April 2, 2022 April 3, 2021
Average Shipment Keep Rate 70.4 % 67.7 % Factors
Affecting Our Future Performance We
believe that our performance and future success depend on several factors that present significant opportunities for us, but also pose
risks and challenges, including those discussed and in the section titled “Risk Factors.” Overall
Economic Trends The
overall economic environment and related changes in consumer behavior have a significant impact on our business. In general, positive
conditions in the broader economy promote customer spending on our sites, while economic weakness, which generally results in a reduction
of customer spending, may have a more pronounced negative effect on spending on our sites. Macroeconomic factors that can affect customer
spending patterns, and thereby our results of operations, include employment rates, inflation, business conditions, changes in the housing
market, the availability of credit, interest rates and fuel and energy costs. In addition, during periods of low unemployment, we generally
experience higher labor costs. Growth
in Brand Awareness and Site Visits We
intend to continue investing in our brand marketing efforts. Since 2016 we have made significant investments to strengthen the “ kidpik Acquisition
of New Subscriptions Our
ability to attract new subscriptions through marketing and the development of our brand is a key factor for our future growth. If we
are unable to acquire sufficient new subscriptions in the future, our revenue might decline. New subscriptions could be negatively impacted
if our marketing efforts are less effective in the future. Increases in advertising rates could also negatively impact our ability to
acquire new subscriptions cost effectively. Consumer tastes, preferences, and sentiment for our brand may also change and result in decreased
demand for our products and services. Laws and regulations relating to privacy, data protection, marketing and advertising, and consumer
protection are evolving and subject to potentially differing interpretations. These requirements may be interpreted and applied in a
manner that is inconsistent from one jurisdiction to another or may conflict with other rules or our practices and procedures. Social
networks are important as a source of new clients and as a means by which to connect with current clients, and their importance may be
increasing. We may be unable to effectively maintain a presence within these networks, which could lead to lower than anticipated brand
affinity and awareness, and in turn could adversely affect our operating results. Further, mobile
operating system and web browser providers, such as Apple and Google, have implemented product changes to limit the ability of advertisers
to collect and use data to target and measure advertising. For example, Apple made a change in iOS 14 that required apps to get a user’s
opt-in permission before tracking or sharing the user’s data across apps or websites owned by companies other than the app’s
owner. Google intends to further restrict the use of third-party cookies in its Chrome browser in 2023, consistent with similar actions
taken by the owners of other browsers, such as Apple in its Safari browser, and Mozilla in its Firefox browser. These changes have reduced
and will continue to reduce our ability to efficiently target and measure advertising, in particular through online social networks,
making our advertising less cost effective and successful. We expect to continue to be impacted by these changes. Retention
of Existing Subscribers Our
ability to retain subscribers is a also key factor in our ability to generate revenue growth. Most of our current subscribers purchase
products through subscription-based plans, where subscribers are billed and sent products on a recurring basis. The recurring nature
of this revenue provides us with a certain amount of predictability for future revenue. If customer behavior changes, and customer retention
decreases in the future, then future revenue will be negatively impacted. Inventory
Management To
ensure sufficient availability of merchandise, we generally enter into purchase orders well in advance and frequently before apparel
trends are confirmed by client purchases. As a result, we are vulnerable to demand and pricing shifts and to suboptimal selection and
timing of merchandise purchases. We incur inventory write-offs and changes in inventory reserves that impact our gross margins. Because
our merchandise assortment directly correlates to client success, we may at times optimize our inventory to prioritize long-term client
success over short-term gross margin impact. Moreover, our inventory investments will fluctuate with the needs of our business. For example,
entering new categories or adding new fulfillment centers will require additional investments in inventory. Investments
in Growth We
expect to continue to focus on long-term growth through investments in product offerings and the kids and parent experience. We expect
to make significant investments in marketing to acquire new subscribers and customers. Additionally, we intend to continue to invest
in our fulfillment and operating capabilities. In the short term, we expect these investments to increase our operating expenses in the
future and cannot be certain that these efforts will grow our customer base or be cost-effective; however, in the long term, we anticipate
that these investments will positively impact our results of operations. Components
of Results of Operations Note
that our classification of the various items making up cost of goods sold, shipping and handling, payroll and related costs and equity-based
compensation and general and administrative costs may vary from other companies in our industry and as such, may not be comparable
to a competitor’s. Revenue We
generate revenue in two categories: 1) the sale items in our subscription boxes, and 2) the sale of one-time purchases via shop.kidpik.com,
and other marketplaces. We refer to these revenue classification as “Subscription boxes” and “one-time purchases”,
respectively. Net revenue is revenue less promotional discounts, actual customer credits and refunds as well as customer credits and
refunds expected to be issued, and sales tax. When we use the term revenue in this Report, we are referring to net revenue, unless otherwise
stated. We also recognize revenue resulting upon the use of gift cards. Customers who decide to return some or all of the merchandise
they receive in each kidpik box, may return such items within 10 days of receipt of the box. Customers are charged for subscription merchandise
which is not returned, or which is accepted and are charged for general merchandise (non-subscription) when they purchase such merchandise;
however, they are able to receive a refund on returned merchandise. Cost
of Goods Sold Cost
of goods sold consists of the costs of manufacturing merchandise and the expenses of shipping and importing (duty payments) such merchandise
to our warehouse for distribution, and inventory write-offs, offset by the recoverable cost of merchandise estimated to be returned. Shipping
and Handling Shipping
and handling, includes the costs of shipping merchandise to our customers, and back to us, as well as the cost of fulfillment and return
processing, and the materials used for packing. Payroll
and Related Costs Payroll
and related costs represent employee salaries, taxes, benefits and fees to our payroll provider. General
and Administrative Expenses General
and administrative expenses consist primarily of marketing, professional fees, Amazon seller fees, bad debt expense and credit card fees,
among others. Depreciation
and Amortization Depreciation
and amortization expenses consist of depreciation expense for leasehold improvements and equipment. Interest
Expense Interest
expense consists primarily of interest expense associated with our lines of credit, outstanding notes payable, and amortization of deferred
expense related to our line of credit. Other
Non-Operating Income Other
non-operating income related to the forgiveness of prior Paycheck Protection Loan. Provision
for Income Taxes Our
provision for income taxes consists of an estimate of federal and state income taxes based on enacted federal and state tax rates, as
adjusted for allowable credits, deductions, uncertain tax positions, and changes in the valuation allowance of our net federal and state
deferred tax assets. Results
of Operations Novel
Coronavirus (COVID-19) In
December 2019, a novel strain of coronavirus, which causes the infectious disease known as COVID-19, was reported in Wuhan, China. The
World Health Organization declared COVID-19 a “ Public Health Emergency of International Concern During
the majority of March and April 2020, we closed our California warehouse due to stay-at-home orders which were issued in the State of
California. We resumed shipping April 17, 2020, following safety protocols and Centers for Disease Control and Prevention (CDC) guidelines,
which we strictly adhered to. On aggregate basis we lost about two weeks of potential revenue during this period where we were unable
to ship products. For the months of March and April 2020, our new member acquisitions were reduced dramatically. Beginning in early May
2020, through the month of June 2020, our new member acquisitions grew significantly, most likely due to stay-at-home orders when consumers
shifted to shopping online, before leveling off to expected growth numbers. The full extent of the impact of COVID-19 on our business
and operations currently cannot be estimated and will depend on a number of factors including the scope and duration of the global pandemic. Since
the start of the pandemic, we have taken steps to prioritize the health and safety of our employees. Some of our employees continue to
work remotely as a result of the COVID-19 pandemic. Currently we believe that we have sufficient cash on hand, and will generate sufficient
cash through operations, to support our operations for the near term; however, we will continue to evaluate our business operations based
on new information as it becomes available and will make changes that we consider necessary in light of any new developments regarding
the ongoing pandemic. Although
COVID-19 has had a major impact on businesses around the world, to date, other than in March and April 2020, during which period, as
described above, our warehouse was shut down, the pandemic has not had a significant negative impact on our business. Since then, our
warehouse returned to working at full capacity; however, the full extent to which COVID-19 will ultimately impact us depends on future
unknowable developments, including the duration and spread of the virus, as well as potential new seasonal outbreaks, virus mutations,
the efficacy of vaccines, and the willingness of individuals to take such vaccines, all of which are uncertain and cannot be predicted. We
have, however, experienced shipping delays to and from our customers as a result of our shipping vendors’ challenges fulfilling
higher eCommerce shipping demand, which may negatively impact our results of operations. We also have been affected by, and expect to
continue to be affected by, COVID-related freight delays and difficulties sourcing materials. Additionally, we may be negatively impacted
if consumers shift back to traditional brick-and-mortar apparel retailers following the pandemic. RESULTS
OF OPERATIONS Comparison
of the thirteen weeks ended April 2, 2022 and April 3, 2021 Revenue Our
revenue for the 13 weeks ended April 2, 2022, decreased by 18.7% to $4,325,997, compared to $5,320,533 for the 13 weeks
ended April 3, 2021, a decrease of $994,536 from the prior period. The revenue breakdown by sales channel for the 13 weeks ended
April 2, 2022, and April 3, 2021, is summarized in the tables below:
13 weeks ended 13 weeks ended Change Change
Revenue by channel
Subscription boxes $ 3,483,851 $ 4,584,612 $ (1,100,761 ) (24.0 )%
Amazon sales 549,500 608,250 (58,750 ) (9.7 )%
Online website sales 292,646 127,671 164,975 129.2 %
Total revenue $ 4,325,997 $ 5,320,533 $ (994,536 ) (18.7 )% The
revenue from subscription boxes for the 13 weeks ended April 2, 2022 and April 3, 2021, was generated from active subscriptions recurring
boxes revenue and new subscriptions first box revenue, as summarized in the tables below:
13 weeks ended 13 weeks ended Change Change
Subscription boxes revenue from
Active subscriptions – recurring boxes $ 3,136,569 3,733,722 (597,153 ) (16.0 )%
New subscriptions - first box 347,282 $ 850,890 $ (503,608 ) (59.2 )%
Total subscription boxes revenue $ 3,483,851 $ 4,584,612 $ (1,100,761 ) (24.0 )% The
decrease in revenue was primarily driven by a decrease in subscription boxes sales. The revenue breakdown by product line for the 13
weeks ended April 2, 2022 and April 3, 2021 is summarized in the tables below:
13 weeks ended 13 weeks ended Change Change
Revenue by product line
Girls’ apparel $ 3,256,893 $ 4,182,652 $ (925,761 ) (22.1 )%
Boys’ apparel 867,794 1,130,474 (262,680 ) (23.2 )%
Toddlers’ apparel 201,310 7,407 193,903 2,618 %
Total revenue $ 4,325,997 $ 5,320,533 $ (994,536 ) (18.7 )% The
number of items shipped to our customers decreased by 31.7%, from approximately 543,000 for the 13 weeks ended April 3, 2021, to approximately
371,000 for the 13 weeks ended April 2,2022. The average shipment keep rate increased to 70.4% in the 13 weeks ended April 2, 2022, compared
to 67.7% in the 13 weeks ended April 3, 2021. Cost
of Goods Sold Our
cost of goods sold decreased by 16.7% to $1,733,914 for the 13 weeks ended April 2, 2022, compared to $2,082,202 for the
13 weeks ended April 3, 2021, a decrease of $348,288. The
decrease in cost of goods sold for the 13 weeks ended April 2, 2022, compared to the same period in fiscal 2021, was primarily attributable
to the decrease in our subscription box sales as discussed above. Gross
Profit and Gross Profit as a Percentage of Revenue Our
gross profit was $2,592,083 for the 13 weeks ended April 2, 2022, compared to gross profit of $3,238,331 for the 13 weeks ended
April 3, 2021. The decrease in gross profit for the 13 weeks ended April 2, 2022, compared to the same period in fiscal 2021, was primarily
attributable to the decrease in our subscription box sales. Gross
profit as a percentage of revenue was 59.9% for the 13 weeks ended April 2, 2022, compared to 60.9% for the 13 weeks ended April
3, 2021. Operating
Expenses Our
operating expenses for the 13 weeks ended April 2, 2022 and April 3, 2021, are summarized in the tables below:
13 weeks ended 13 weeks ended Change Change
Expenses
Shipping and handling $ 1,132,084 $ 1,534,454 $ (402,370 ) (26.2 )%
Payroll,
related costs and equity-based compensation 1,599,236 958,639 640,597 66.8 %
General and administrative 1,930,893 2,072,053 (141,160 ) (6.8 )%
Depreciation and amortization 5,665 9,721 (4,056 ) (41.7 )%
Total expenses $ 4,667,878 $ 4,574,867 $ 93,011 2.0 % Our
operating expenses include general and administrative expenses, salaries and benefits, shipping and handling, and depreciation and amortization,
as shown in the tables above. Our operating expenses for the 13 weeks ended April 2, 2022, increased by $93,011 or 2.0% to $4,667,878,
compared to $4,574,867 for the 13 weeks ended April 3, 2021. This increase was mainly a result of (i) an increase in payroll and related
costs of $640,597, mainly due to non-cash, equity-based compensation of $617,164 recorded in the first quarter of 2022, (ii) offset
by a decrease in shipping and handling of $402,370, which was due to lower subscription box sales — our shipping and handling expenses
were 23.9% of total revenue in the current period, compared to 28.8% of total revenue in the previous period and (iii) a $141,160
decrease in general and administrative expenses, mainly due to a decrease in marketing expenses and a decrease in third party fees
due to the decrease in sales. Loss
from Operations Loss
from operations increased from $1,336,536 for the 13 weeks ended April 3, 2021, to $2,075,795 for the 13 weeks ended April 2,
2022. The increase in loss from operations was largely due to non-cash compensation of $617,164 and decrease in sales. Other
Expenses Total
other (income)/expenses were ($265,120) and $160,943 for the 13 weeks ended April 2, 2022 and April 3, 2021, respectively.
The decrease in interest expense was due to the decrease in our debt balances, and increase in other income for the 13 weeks ended
April 2, 2022 was due to settlement of insurance claim related to business interruption of damaged inventory. Provision
for Income Taxes We
had a nominal or no provision for income taxes during both the 13 weeks ended April 2, 2022 and April 3, 2021. Net
Loss We
had a net loss of $1,810,675 for the 13 weeks ended April 2, 2022, compared to a net loss of $1,497,986 for the 13 weeks ended April
3, 2021, an increase in net loss of $312,689 or 20.9%. The increase in net loss was primarily due to an increase in non-cash, equity-based
compensation expense of $617,164 and decrease in revenue, offset by a decrease in general and administrative expenses of $141,160
and a decrease in interest expenses of $138,953, each as discussed in greater detail above. LIQUIDITY
AND CAPITAL RESOURCES
April 2, 2022 January 1, 2022 Change ($) Change (%)
Cash $ 5,430,075 $ 8,415,797 $ (2,985,722 ) (35.5 )%
Working Capital $ 13,261,930 $ 14,700,691 $ (1,438,761 ) (9.8 )%
Short-term debt, related party $ 2,200,000 $ 2,200,000 $ - - On
April 2, 2 |
