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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Kaspien Holdings Inc | NASDAQ:KSPN | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 0.2014 | 0.3015 | 0.3099 | 0 | 01:00:00 |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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State or Other Jurisdiction of Incorporation or Organization
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I.R.S. Employer Identification No.
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Address of Principal Executive Offices
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Zip Code
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Large accelerated filer ☐
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Accelerated filer ☐
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Smaller reporting company
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Emerging growth company
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Form 10-Q
Page No.
|
PART I. FINANCIAL INFORMATION
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|
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Item 1 – Interim Condensed Consolidated Financial Statements (Unaudited)
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4 | |
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5 | |
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6 | |
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7 | |
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8 | |
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9 | |
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22 |
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29 | |
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29 | |
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PART II. OTHER INFORMATION
|
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30
|
|
|
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30
|
|
|
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30
|
|
|
|
30
|
|
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30
|
|
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30
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31
|
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32
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July 29,
|
January 28,
|
July 30,
|
||||||||||
2023
|
2023
|
2022
|
||||||||||
ASSETS |
Unaudited
|
Unaudited
|
||||||||||
CURRENT ASSETS
|
||||||||||||
Cash and cash equivalents
|
$
|
|
$
|
|
$
|
|
||||||
Restricted cash
|
|
|
|
|||||||||
Accounts receivable
|
|
|
|
|||||||||
Merchandise inventory
|
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|||||||||
Prepaid expenses and other current assets
|
|
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|||||||||
Total current assets
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|
|||||||||
Restricted cash
|
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|
|||||||||
Fixed assets, net
|
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|
|
|||||||||
Operating lease right-of-use assets
|
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|
|
|||||||||
Cash Surrender Value
|
|
|
|
|||||||||
Other assets
|
|
|
|
|||||||||
TOTAL ASSETS
|
$
|
|
$
|
|
$
|
|
||||||
LIABILITIES
|
||||||||||||
CURRENT LIABILITIES
|
||||||||||||
Accounts payable
|
$
|
|
$
|
|
$
|
|
||||||
Short-term borrowings
|
|
|
|
|||||||||
Short-term debt
|
||||||||||||
Accrued expenses and other current liabilities
|
|
|
|
|||||||||
Current portion of operating lease liabilities
|
|
|
|
|||||||||
Total current liabilities
|
|
|
|
|||||||||
Operating lease liabilities
|
|
|
|
|||||||||
Long-term debt
|
|
|
|
|||||||||
Other long-term liabilities
|
|
|
|
|||||||||
TOTAL LIABILITIES
|
|
|
|
|||||||||
SHAREHOLDERS’ EQUITY (DEFICIT)
|
||||||||||||
Preferred stock ($
|
|
|
|
|||||||||
Common stock ($
|
|
|
|
|||||||||
Additional paid-in capital
|
|
|
|
|||||||||
Treasury stock at cost (
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Accumulated other comprehensive loss
|
|
|
(
|
)
|
||||||||
Accumulated deficit
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
TOTAL SHAREHOLDERS’ EQUITY (DEFICIT)
|
(
|
)
|
(
|
)
|
|
|||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
|
$
|
|
$
|
|
$
|
|
Thirteen Weeks Ended
|
Twenty-Six Weeks Ended
|
|||||||||||||||
July 29,
|
July 30,
|
July 29,
|
July 30,
|
|||||||||||||
2023 |
2022 | 2023 |
2022 |
|||||||||||||
Net revenue
|
$
|
|
$
|
|
$ | $ | ||||||||||
Cost of sales
|
|
|
||||||||||||||
Gross profit
|
|
|
||||||||||||||
Selling, general and administrative expenses
|
|
|
||||||||||||||
Loss from operations
|
(
|
)
|
(
|
)
|
( |
) | ( |
) | ||||||||
Interest expense
|
|
|
||||||||||||||
Other income |
( |
) | ( |
) | ||||||||||||
Loss before income tax expense
|
(
|
)
|
(
|
)
|
( |
) | ( |
) | ||||||||
Income tax expense
|
|
|
||||||||||||||
Net loss
|
|
(
|
)
|
|
(
|
)
|
( |
) | ( |
) | ||||||
BASIC AND DILUTED LOSS PER SHARE:
|
||||||||||||||||
Basic and diluted loss per common share
|
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
Weighted average number of common shares outstanding – basic and diluted |
Thirteen Weeks Ended
|
Twenty-Six Weeks Ended |
|||||||||||||||
July 29,
|
July 30,
|
July 29,
|
July 30,
|
|||||||||||||
2023 |
2022 |
2023 |
2022 |
|||||||||||||
Net loss
|
$
|
(
|
)
|
$
|
(
|
)
|
$ | ( |
) | $ | ( |
) | ||||
Amortization of pension gain
|
|
|
||||||||||||||
Comprehensive loss
|
$
|
(
|
)
|
$
|
(
|
)
|
$ | ( |
) | $ | ( |
) |
Thirteen Weeks Ended July 29, 2023 | ||||||||||||||||||||||||||||||||
Number of shares outstanding
|
Accumulated
|
Retained
|
||||||||||||||||||||||||||||||
Additional
|
Treasury
|
Other
|
Earnings
|
|||||||||||||||||||||||||||||
Common
|
Treasury
|
Common
|
Paid-in
|
Stock
|
Comprehensive
|
(Accumulated
|
Shareholders’
|
|||||||||||||||||||||||||
Shares
|
Shares
|
Stock
|
Capital
|
At Cost
|
Loss
|
Deficit)
|
Equity (Deficit)
|
|||||||||||||||||||||||||
Balance as of April 29, 2023
|
|
(
|
)
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
||||||||||||||
Net Loss
|
-
|
-
|
|
|
|
|
(
|
)
|
(
|
)
|
||||||||||||||||||||||
Amortization of unearned compensation/restricted stock amortization
|
-
|
-
|
|
|
|
|
|
|
||||||||||||||||||||||||
Balance as of July 29, 2023
|
|
$ |
(
|
)
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
Twenty-six Weeks Ended July 29, 2023
|
||||||||||||||||||||||||||||||||
Number of shares outstanding
|
Accumulated
|
Retained
|
||||||||||||||||||||||||||||||
Additional
|
Treasury
|
Other
|
Earnings
|
|||||||||||||||||||||||||||||
Common
|
Treasury
|
Common
|
Paid-in
|
Stock
|
Comprehensive
|
(Accumulated
|
Shareholders’
|
|||||||||||||||||||||||||
Shares
|
Shares
|
Stock
|
Capital
|
At Cost
|
Loss
|
Deficit)
|
Equity (Deficit)
|
|||||||||||||||||||||||||
Balance as of January 28,2023
|
|
(
|
)
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
||||||||||||||
Net Loss
|
-
|
-
|
|
|
|
|
(
|
)
|
(
|
)
|
||||||||||||||||||||||
Amortization of unearned compensation/restricted stock amortization
|
-
|
-
|
|
|
|
|
|
|
||||||||||||||||||||||||
Balance as of July 29, 2023
|
|
$ |
(
|
)
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
Thirteen Weeks Ended July 30,
2022
|
||||||||||||||||||||||||||||||||
Number of shares outstanding
|
Accumulated
|
Retained
|
||||||||||||||||||||||||||||||
Additional
|
Treasury
|
Other
|
Earnings
|
|||||||||||||||||||||||||||||
Common
|
Treasury
|
Common
|
Paid-in
|
Stock
|
Comprehensive
|
(Accumulated
|
Shareholders’
|
|||||||||||||||||||||||||
Shares
|
Shares
|
Stock
|
Capital
|
At Cost
|
Loss
|
Deficit)
|
Equity
|
|||||||||||||||||||||||||
Balance as of April 30, 2022
|
|
(
|
)
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
||||||||||||||
Net income
|
-
|
-
|
|
|
|
|
(
|
)
|
(
|
)
|
||||||||||||||||||||||
Issuance of shares, net of expenses
|
( |
) | ||||||||||||||||||||||||||||||
Common stock issued- Director grants
|
||||||||||||||||||||||||||||||||
Amortization of unearned compensation/restricted stock amortization
|
-
|
-
|
|
|
|
|
|
|
||||||||||||||||||||||||
Balance as of July 30, 2022
|
|
$ |
(
|
)
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
Twenty-six Weeks Ended July 30, 2022
|
||||||||||||||||||||||||||||||||
Number of shares outstanding
|
Accumulated
|
Retained
|
||||||||||||||||||||||||||||||
Additional
|
Treasury
|
Other
|
Earnings
|
|||||||||||||||||||||||||||||
Common
|
Treasury
|
Common
|
Paid-in
|
Stock
|
Comprehensive
|
(Accumulated
|
Shareholders’
|
|||||||||||||||||||||||||
Shares
|
Shares
|
Stock
|
Capital
|
At Cost
|
Loss
|
Deficit)
|
Equity
|
|||||||||||||||||||||||||
Balance as of January 29, 2022
|
|
(
|
)
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
||||||||||||||
Net Loss
|
-
|
-
|
|
|
|
|
(
|
)
|
(
|
)
|
||||||||||||||||||||||
Issuance of shares, net of expenses
|
( |
) | ||||||||||||||||||||||||||||||
Issuance of warrants |
- | - | ||||||||||||||||||||||||||||||
Common stock issued-
Director grants
|
||||||||||||||||||||||||||||||||
Amortization of unearned compensation/restricted stock amortization
|
-
|
-
|
|
|
|
|
|
|
||||||||||||||||||||||||
Balance as of July 30, 2022
|
|
(
|
)
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
Twenty-Six Weeks Ended |
||||||||
July 29,
|
July 30,
|
|||||||
2023 |
2022 |
|||||||
OPERATING ACTIVITIES:
|
||||||||
Net loss
|
$
|
(
|
)
|
$
|
(
|
)
|
||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
Depreciation of fixed assets
|
|
|
||||||
Amortization of intangible assets
|
||||||||
Stock-based compensation
|
|
|
||||||
Amortization of ROU asset
|
||||||||
Amortization of warrant interest
|
||||||||
Interest on long term debt
|
|
|
||||||
Change in cash surrender value
|
(
|
)
|
|
|||||
Changes in operating assets and liabilities that provide (use) cash:
|
||||||||
Accounts receivable
|
(
|
)
|
|
|||||
Merchandise inventory
|
|
(
|
)
|
|||||
Prepaid expenses and other current assets
|
|
|
||||||
Other long-term assets
|
|
|
||||||
Accounts payable
|
|
|
||||||
Accrued expenses and other current liabilities
|
(
|
)
|
(
|
)
|
||||
Other long-term liabilities
|
(
|
)
|
(
|
)
|
||||
Net cash used in operating activities
|
(
|
)
|
(
|
)
|
||||
INVESTING ACTIVITIES:
|
||||||||
Purchases of fixed assets
|
( |
) | ( |
) | ||||
Net cash provided by (used in) investing activities
|
( |
) | ( |
) | ||||
FINANCING ACTIVITIES:
|
||||||||
Payments of short term borrowings
|
( |
) | ( |
) | ||||
Proceeds from long term borrowings
|
|
|
||||||
Proceeds from issuance of shares, net of expense
|
||||||||
Net cash provided by (used in) financing activities
|
(
|
)
|
|
|||||
Net increase (decrease) in cash, cash equivalents, and restricted cash
|
(
|
)
|
(
|
)
|
||||
Cash, cash equivalents, and restricted cash, beginning of period
|
|
|
||||||
Cash, cash equivalents, and restricted cash, end of period
|
$
|
|
$
|
|
||||
Supplemental disclosures and non-cash investing and financing activities: |
||||||||
Interest paid |
$ | $ | ||||||
Warrants issued with debt |
$ |
$ |
•
|
We are partner obsessed. Our customers are our partners. Every decision is focused on building mutually beneficial relationships that deliver results.
|
•
|
We are insights driven. We make data actionable. Our curiosity drives us to discover opportunities early and often.
|
•
|
We create simplicity. We challenge the status quo. We take the complicated and simplify it.
|
•
|
We take ownership. We make things happen. We hold ourselves accountable and have a bias for action.
|
•
|
We empower each other. We welcome and learn from diverse experiences. Our empathy ignites innovation and empowers meaningful change.
|
July 29,
|
January 28,
|
July 30,
|
||||||||||
2023 | 2023 | 2022 |
||||||||||
Cash and cash equivalents
|
$
|
|
$
|
|
$
|
|
||||||
Restricted cash
|
|
|
|
|||||||||
Total cash, cash equivalents and restricted cash
|
$
|
|
$
|
|
$
|
|
Employee Stock Award Plans |
||||||||||||||||||||
Number of
Shares
Subject To
Option
|
Weighted
Average
Exercise
Price
|
Weighted
Average
Remaining
Contractual
Term
|
Other
Share
Awards (1)
|
Weighted
Average
Grant Fair
Value
|
||||||||||||||||
Balance January 28, 2023
|
|
$
|
|
|
$ | |||||||||||||||
Granted
|
|
|
-
|
|||||||||||||||||
Forfeited
|
(
|
)
|
(
|
)
|
-
|
|||||||||||||||
Canceled
|
(
|
)
|
(
|
)
|
-
|
|||||||||||||||
Exercised
|
|
|
-
|
|||||||||||||||||
Balance July 29, 2023
|
|
$
|
|
|
$ | |||||||||||||||
Exercisable July 29, 2023
|
|
$
|
|
|
Exercise
|
Number
|
|||||
Price
|
Outstanding
|
|||||
$
|
|
|
||||
$
|
|
|
||||
|
Thirteen Weeks Ended
|
Twenty-six Weeks Ended
|
|||||||||||||||
(amounts in thousands)
|
July 29,
|
July 30,
|
July 29,
|
July 30,
|
||||||||||||
|
2023 |
2022 |
2023 |
2022 |
||||||||||||
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Net periodic pension cost
|
$
|
|
$
|
|
$
|
|
$
|
|
•
|
We are partner obsessed. Our customers are our partners. Every decision is focused on building mutually beneficial relationships that deliver results.
|
•
|
We are insights driven. We make data actionable. Our curiosity drives us to discover opportunities early and often.
|
•
|
We create simplicity. We challenge the status quo. We take the complicated and simplify it.
|
•
|
We take ownership. We make things happen. We hold ourselves accountable and have a bias for action.
|
•
|
We empower each other. We welcome and learn from diverse experiences. Our empathy ignites innovation and empowers meaningful change.
|
Thirteen Weeks Ended
|
Change
|
Twenty-Six Weeks Ended
|
Change
|
|||||||||||||||||||||||||||||
(amounts in
thousands)
|
July 29,
2023
|
July 30,
2022
|
$ |
|
%
|
July 29,
2023 |
July 30,
2022
|
$ |
|
%
|
||||||||||||||||||||||
Net Revenue
|
$
|
33,136
|
$
|
33,907
|
$
|
(771
|
)
|
-2.3
|
%
|
$
|
66,068
|
$
|
65,697
|
$
|
371
|
0.6
|
%
|
|||||||||||||||
Gross profit
|
7,318
|
6,729
|
589
|
8.8
|
%
|
14,771
|
13,579
|
1,192
|
8.8
|
%
|
||||||||||||||||||||||
% to sales
|
22.1
|
%
|
19.8
|
%
|
22.4
|
%
|
20.7
|
%
|
Thirteen weeks ended
|
Twenty-six weeks ended
|
|||||||||||||||||||||||||||||||||||||||
July 29, 2023
|
July 30, 2022
|
Change
|
July 29, 2023
|
July 30, 2022
|
Change
|
|||||||||||||||||||||||||||||||||||
Amazon US
|
$
|
32,119
|
96.9
|
%
|
$
|
31,978
|
94.3
|
%
|
0.4
|
%
|
$
|
63,763
|
96.5
|
%
|
$
|
61,598
|
93.8
|
%
|
3.5
|
%
|
||||||||||||||||||||
Amazon International
|
492
|
1.5
|
%
|
992
|
2.9
|
%
|
-50.4
|
%
|
1,026
|
1.6
|
%
|
2,279
|
3.5
|
%
|
-55.0
|
%
|
||||||||||||||||||||||||
Other Marketplaces
|
402
|
1.2
|
%
|
350
|
1.0
|
%
|
14.9
|
%
|
878
|
1.3
|
%
|
780
|
1.2
|
%
|
12.6
|
%
|
||||||||||||||||||||||||
Subtotal Retail as a Service
|
33,013
|
99.6
|
%
|
33,320
|
98.3
|
%
|
-0.9
|
%
|
65,668
|
99.4
|
%
|
64,657
|
98.4
|
%
|
1.6
|
%
|
||||||||||||||||||||||||
Subscriptions
|
123
|
0.4
|
%
|
587
|
1.7
|
%
|
-79.0
|
%
|
400
|
0.6
|
%
|
1,040
|
1.6
|
%
|
-61.5
|
%
|
||||||||||||||||||||||||
Net revenue
|
$
|
33,136
|
100.0
|
%
|
$
|
33,907
|
100.0
|
%
|
-2.3
|
%
|
$
|
66,068
|
100.0
|
%
|
$
|
65,697
|
100.0
|
%
|
0.6
|
%
|
Thirteen Weeks Ended
|
Change
|
Twenty six Weeks
|
Change
|
|||||||||||||||||||||||||||||
(amounts in thousands)
|
July 29, 2023
|
July 30, 2022
|
$ |
|
%
|
July 29, 2023
|
July 30, 2022
|
$ |
|
%
|
||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
Merchandise margin
|
$
|
13,162
|
$
|
14,121
|
$
|
(959
|
)
|
-6.8
|
%
|
$
|
26,621
|
$
|
28,167
|
$
|
(1,546
|
)
|
-5.5
|
%
|
||||||||||||||
% of net revenue
|
39.7
|
%
|
41.6
|
%
|
-2.0
|
%
|
40.3
|
%
|
42.9
|
%
|
-2.6
|
%
|
||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
Fulfillment fees
|
(3,945
|
)
|
(4,654
|
)
|
709
|
-15.2
|
%
|
(8,057
|
)
|
(9,222
|
)
|
1,165
|
-12.6
|
%
|
||||||||||||||||||
Warehousing and freight
|
(1,899
|
)
|
(2,738
|
)
|
839
|
-30.6
|
%
|
(3,793
|
)
|
(5,366
|
)
|
1,573
|
-29.3
|
%
|
||||||||||||||||||
Gross profit
|
$
|
7,318
|
$
|
6,729
|
$
|
589
|
8.8
|
%
|
$
|
14,771
|
$
|
13,579
|
$
|
1,192
|
8.8
|
%
|
||||||||||||||||
|
||||||||||||||||||||||||||||||||
% of net revenue
|
22.1
|
%
|
19.8
|
%
|
22.4
|
%
|
20.7
|
%
|
Thirteen Weeks Ended
|
Change
|
Twenty-Six Weeks Ended
|
Change
|
|||||||||||||||||||||||||||||
(amounts in thousands)
|
July 29,
2023
|
July 30,
2022
|
$ |
%
|
July 29,
2023
|
July 30,
2022
|
$ |
|
%
|
|||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
Selling expenses
|
$
|
4,472
|
$
|
4,876
|
$
|
(404
|
)
|
-8.3
|
%
|
$
|
9,103
|
$
|
9,477
|
$
|
(374
|
)
|
-3.9
|
%
|
||||||||||||||
General and administrative expenses
|
3,779
|
5,325
|
(1,546
|
)
|
-29.0
|
%
|
7,858
|
11,242
|
(3,384
|
)
|
-30.1
|
%
|
||||||||||||||||||||
Total SG&A expenses
|
$
|
8,251
|
$
|
10,201
|
$
|
(1,950
|
)
|
-19.1
|
%
|
$
|
16,961
|
$
|
20,719
|
$
|
(3,758
|
)
|
-18.1
|
%
|
||||||||||||||
As a % of total revenue
|
24.9
|
%
|
30.1
|
%
|
25.7
|
%
|
31.5
|
%
|
As of or for the
Twenty-Six Weeks Ended |
Change | |||||||||||
(amounts in thousands)
|
July 29,
2023 |
July 30,
2022 |
|
$ |
||||||||
Operating Cash Flows
|
$
|
(719
|
)
|
$
|
(5,893
|
)
|
$
|
5,174
|
||||
Investing Cash Flows(1)
|
(137
|
)
|
(616
|
)
|
479
|
|||||||
Financing Cash Flows
|
(15
|
)
|
6,026
|
(6,041
|
)
|
|||||||
|
||||||||||||
Capital Expenditures(1)
|
(137
|
)
|
(616
|
)
|
479
|
|||||||
|
||||||||||||
Cash, Cash Equivalents, and Restricted Cash (2)
|
2,755
|
4,340
|
(1,585
|
)
|
||||||||
Merchandise Inventory
|
26,055
|
26,672
|
(617
|
)
|
||||||||
|
||||||||||||
(1) Consists entirely of capital expenditures
|
||||||||||||
|
||||||||||||
(2) Cash and cash equivalents per condensed consolidated balance sheets
|
$
|
282
|
$
|
1,309
|
$
|
(1,027
|
)
|
|||||
Add: restricted cash
|
2,473
|
3,031
|
(558
|
)
|
||||||||
Cash, cash equivalents, and restricted cash
|
$
|
2,755
|
$
|
4,340
|
$
|
(1,585
|
)
|
Exhibit No.
|
Description
|
4.1 |
Asset Purchase Agreement dated as of June 6, 2023 by and among Kaspien Inc. and Channel Key LLC. (Incorporated by reference to Exhibit 2.1 to Form 8-K Filed
June 6, 2023)* |
Chief Executive Officer certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
Chief Financial Officer certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
Certification pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
101.INS
|
XBRL Instance Document (furnished herewith)
|
101.SCH
|
XBRL Taxonomy Extension Schema (furnished herewith)
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase (furnished herewith)
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase (furnished herewith)
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase (furnished herewith)
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase (furnished herewith)
|
104
|
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).
|
September 12, 2023
|
By: /s/ Brock Kowalchuk
|
|
Brock Kowalchuk
|
||
Principal Executive Officer
|
||
(Principal Executive Officer)
|
||
September 12, 2023
|
By: /s/ Edwin Sapienza
|
|
Edwin Sapienza
|
||
Chief Financial Officer
|
||
(Principal and Chief Accounting Officer)
|
(1) |
I have reviewed this report on Form 10–Q of the Registrant;
|
(2) |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
|
(3) |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
|
(4) |
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c. |
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
|
d. |
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
(5) |
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
|
a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report
financial information; and
|
b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Dated: September 12, 2023
|
/s/ Brock Kowalchuk |
|
Brock Kowalchuk
|
||
Principal Executive Officer
|
||
Kaspien Holdings Inc.
|
(1) |
I have reviewed this report on Form 10–Q of the Registrant;
|
(2) |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
|
(3) |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
|
(4) |
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c. |
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
|
d. |
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
(5) |
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
|
a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report
financial information; and
|
b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Dated: September 12, 2023
|
/s/ Edwin Sapienza |
|
Edwin Sapienza
|
||
Chief Financial Officer
|
||
Kaspien Holdings Inc.
|
(1) |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ Brock Kowalchuk |
/s/ Edwin Sapienza |
||
Brock Kowalchuk
|
Edwin Sapienza
|
||
Principal Executive Officer
|
Chief Financial Officer
|
||
September 12, 2023
|
September 12, 2023
|
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares |
Jul. 29, 2023 |
Jan. 28, 2023 |
Jul. 30, 2022 |
---|---|---|---|
SHAREHOLDERS' EQUITY (DEFICIT) | |||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (in shares) | 5,000,000 | 5,000,000 | 5,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 200,000,000 | 200,000,000 | 200,000,000 |
Common stock, shares issued (in shares) | 5,432,072 | 5,432,072 | 3,911,985 |
Treasury stock (in shares) | 467,069 | 467,069 | 1,410,378 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jul. 29, 2023 |
Jul. 30, 2022 |
Jul. 29, 2023 |
Jul. 30, 2022 |
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS [Abstract] | ||||
Net revenue | $ 33,136 | $ 33,907 | $ 66,068 | $ 65,697 |
Cost of sales | 25,818 | 27,178 | 51,297 | 52,118 |
Gross profit | 7,318 | 6,729 | 14,771 | 13,579 |
Selling, general and administrative expenses | 8,251 | 10,201 | 16,961 | 20,719 |
Loss from operations | (933) | (3,472) | (2,190) | (7,140) |
Interest expense | 954 | 901 | 1,848 | 1,663 |
Other income | (777) | 0 | (777) | 0 |
Loss before income tax expense | (1,110) | (4,373) | (3,261) | (8,803) |
Income tax expense | 51 | 43 | 51 | 43 |
Net loss | $ (1,161) | $ (4,416) | $ (3,312) | $ (8,846) |
BASIC AND DILUTED LOSS PER SHARE: | ||||
Basic loss per common share (in dollars per share) | $ (0.23) | $ (1.69) | $ (0.67) | $ (3.47) |
Diluted loss per common share (in dollars per share) | $ (0.23) | $ (1.69) | $ (0.67) | $ (3.47) |
Weighted average number of common shares outstanding - basic (in shares) | 4,965 | 2,613 | 4,965 | 2,553 |
Weighted average number of common shares outstanding - diluted (in shares) | 4,965 | 2,613 | 4,965 | 2,553 |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jul. 29, 2023 |
Jul. 30, 2022 |
Jul. 29, 2023 |
Jul. 30, 2022 |
|
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS [Abstract] | ||||
Net loss | $ (1,161) | $ (4,416) | $ (3,312) | $ (8,846) |
Amortization of pension gain | 0 | 0 | 0 | 0 |
Comprehensive loss | $ (1,161) | $ (4,416) | $ (3,312) | $ (8,846) |
Nature of Operations |
6 Months Ended | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jul. 29, 2023 | ||||||||||||||||
Nature of Operations [Abstract] | ||||||||||||||||
Nature of Operations |
Note 1. Nature of Operations
Kaspien Holdings Inc.,
which, together with its consolidated subsidiaries, is referred to herein as “Kaspien”, “the Company”, “we”, “us” and “our”, was incorporated in New York in 1972. We own 100% of the outstanding common stock of Kaspien Inc, through which our principal operations are conducted. Kaspien is a third-party marketplace retailer. The Company
leverages in-house expertise, technology, and services to generate revenue through marketplace transactions. Kaspien provides account management, brand development, listings management, data reporting, joint business planning, and comprehensive
marketing support services to our vendor partners. Our target partners are enterprise-level large growth brands that derive margins based on pricing.
We are guided by 5 core principles:
On June 6, 2023,
Kaspien entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”), pursuant to which Kaspien sold substantially all of the assets of and certain of the liabilities relating to Kaspien’s agency business model through which
Kaspien provides support services for account management, media planning, media analytics, search strategy, business planning, and data reporting to its partners (the “Business” and the transaction, the “Transaction”). The Transaction closed on
June 6, 2023.
Liquidity and Cash Flows:
The Company’s primary sources of liquidity are its borrowing
capacity under its Credit Facility, available cash and cash equivalents, and to a lesser extent, cash generated from operations. Our cash requirements relate primarily to working capital needed to operate Kaspien, including funding operating
expenses, the purchase of inventory and capital expenditures.
The Company incurred a net loss of $3.3 million and $8.8 million for the
twenty-six weeks ended July 29, 2023 and July 30, 2022, respectively. The decrease in the net loss was primarily attributable to a decrease in sales and gross margin. In addition, the Company has an accumulated deficit of $143.3 million as of July 29, 2023 and net cash used in operating activities for the twenty-six weeks ended July 29, 2023 was $0.7 million. Net cash used in operating activities for the twenty-six weeks ended July 30, 2022 was $5.9 million.
As disclosed in the Company’s Annual Report on Form 10-K filed
April 28, 2023, the Company experienced negative cash flows from operations during fiscal 2022 and 2021 and we expect to incur net losses in fiscal 2023.
Our ability to achieve profitability and meet future liquidity
needs and capital requirements will depend upon numerous factors, including the timing and amount of our revenue; the timing and amount of our operating expenses; the timing and costs of working capital needs; and successful implementation of our
strategy and planned activities. There can be no assurance that we will be successful in further implementing our business strategy or that the strategy, including the completed initiatives, will be successful in sustaining acceptable levels of
sales growth and profitability. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.
The unaudited condensed consolidated financial statements for
the twenty-six weeks ended July 29, 2023 were prepared pursuant to the rules and regulations of the Securities and Exchange Commission. The information furnished in these unaudited condensed consolidated financial statements reflects all normal,
recurring adjustments which, in the opinion of management, are necessary for the fair presentation of such financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The ability of the Company to meet its liabilities and to continue as a going concern is dependent on improved profitability, the
strategic initiatives for Kaspien and the availability of future funding. Based on recurring losses from operations, negative cash flows from operations, the expectation of continuing operating losses for the foreseeable future, and uncertainty
with respect to any available future funding, the Company has concluded that there is substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
As of July 29, 2023, we had cash and cash equivalents of $0.3 million, a net working deficit of $0.7
million, and $8.8 in borrowings on our revolving credit facility, as further discussed below.
As of January 28, 2023, the Company had borrowings of $8.8 million under the Credit Facility. As of April 29, 2023 and April 30, 2022, the Company had no outstanding letters of credit. The Company had $3.4
million and $7.7 million available for borrowing under the Credit Facility as of July 29, 2023 and July 30, 2022, respectively.
Credit Facility
On February 20, 2020, Kaspien Inc. entered into a Loan and
Security Agreement (as subsequently amended, the “Loan Agreement”) with Eclipse Business Capital LLC (f/k/a Encina Business Credit, LLC) (“Eclipse”), as administrative agent, under which the lenders party thereto committed to provide up to $25 million in loans under a four-year, secured revolving
credit facility (the “Credit Facility”).
On March 30, 2020, the Company and Kaspien Inc. (the “Loan
Parties”) entered into Amendment No. 1 to the Loan Agreement (the “Amendment”). Pursuant to the Amendment, among other things, (i) the Company was added as “Parent” under the Amended Loan Agreement, (ii) the Company granted a first priority
security interest in substantially all of the assets of the Company, including inventory, accounts receivable, cash and cash equivalents and certain other collateral, and (iii) the Loan Agreement was amended to (a) permit the incurrence of
certain subordinated indebtedness under the Subordinated Loan Agreement (as defined below) and (b) limit the Company’s ability to incur additional indebtedness, create liens, make investments, make restricted payments or specified payments and
merge or acquire assets.
On April 7, 2021, the Loan Parties entered into Amendment No. 2 to the Loan Agreement (the “Second Amendment”.
Pursuant to the Second Amendment, the In-Transit Inventory Sublimit (as defined in the Loan Agreement) was increased from $2,000,000
to $2,500,000.
On September 17, 2021, the Loan Parties entered into
Amendment No. 3 to the Loan Agreement (the “Third Amendment”). Pursuant to the Third Amendment, among other things, (i) the maturity of the Credit Facility was extended to February 20, 2024, and the early termination fees were accordingly reset; (ii) the LIBOR floor was reduced to 1.00%; (iii) up to $4,000,000 of acquisitions are now
allowed without Eclipse’s consent, subject to satisfaction of various conditions, including the Company having a trailing twelve month
fixed charge coverage ratio of 1.20x and Excess Availability greater than the greater of (x) 20% of the average Borrowing Base for each 30
day period immediately prior to, and pro forma for, the purchase and (y) $1,500,000.
On March 2, 2022, the Loan Parties entered into Amendment No. 4 to the Loan Agreement (the “Fourth Amendment”).
Pursuant to the Fourth Amendment, among other things, the Credit Facility was amended to permit the incurrence of the Additional Subordinated Loan (as defined below) under the Subordinated Loan Agreement (as defined below).
On November 1, 2022, the Loan Parties entered into Amendment No. 5 to the loan agreement (the “Fifth
Amendment”). Pursuant to the Fifth Amendment, the Credit Facility was amended to replace LIBOR with the Secured Overnight Funding Rate (“SOFR”).
As of July 29, 2023 and July 30, 2022, the Company had
borrowings of $8.8 and $3.9
million under the Credit Facility, respectively.
Subordinated Debt Agreement On March 30, 2020, the
Loan Parties entered into a Subordinated Loan and Security Agreement (the “Subordinated Loan Agreement”) with the lenders party thereto from time to time (the “Lenders”) and TWEC Loan Collateral Agent, LLC (the “Collateral Agent”), as collateral
agent for the Lenders, pursuant to which the Lenders made a $5.2 million secured term loan (the “Subordinated Loan”) to Kaspien with a scheduled maturity date of May 22, 2023. As of July 29, 2023, unamortized debt issuance costs of $0.1
million are included in “Long Term Debt” on the unaudited condensed consolidated balance sheet.
Directors Jonathan Marcus, Thomas Simpson, and Michael
Reickert are the chief executive officer of Alimco Re Ltd. (“Alimco”), the managing member of Kick-Start III, LLC and Kick-Start IV, LLC (“Kick-Start”), and a trustee of the Robert J. Higgins TWMC Trust (the “Trust”), an affiliate of RJHDC, LLC
(“RJHDC” and together with Alimco and Kick-Start, “Related Party Entities”), respectively. The Related Party Entities are parties to the Subordinated Loan Agreement.
Amendment No. 2 to Subordinated Loan and Security Agreement
On March 2, 2022, the Loan Parties entered into that certain Amendment No. 2 to Subordinated Loan and Security
Agreement (“Amendment No. 2”) with the “Lenders and the Collateral Agent. Pursuant to Amendment No. 2, among other things, Alimco Re Ltd. (the “Tranche B Lender”) made an additional $5,000,000 secured term loan (the “Additional Subordinated Loan”) with a scheduled maturity date of March 31, 2024, which is the same maturity date as the existing loans under the Subordinated Loan Agreement.
Interest
on the Additional Subordinated Loan accrues, subject to certain terms and conditions under the Subordinated Loan Agreement, at the rate of fifteen percent (15.0%) per annum, compounded on the last day of each calendar quarter by becoming a part of the principal amount of the Additional Subordinated Loan.
The Additional Subordinated Loan is also secured by a second priority security interest in substantially all of the
assets of the Loan Parties, including inventory, accounts receivable, cash and cash equivalents and certain other collateral of the borrowers and guarantors under the Subordinated Loan Agreement. The Company will provide a limited guarantee of
Kaspien’s obligations under the Additional Subordinated Loan.
Among other things, the Subordinated Loan Agreement limits the Loan Parties’ ability to incur additional indebtedness,
create liens, make investments, make restricted payments or specified payments and merge or acquire assets.
The Subordinated Loan Agreement contains customary events of default, including, but not limited to, payment defaults,
breaches of representations and warranties, covenant defaults, cross-defaults to other obligations, customary ERISA defaults, certain events of bankruptcy and insolvency, judgment defaults, the invalidity of liens on collateral, change in
control, cessation of business or the liquidation of material assets of the borrowers and guarantors thereunder taken as a whole and the occurrence of an uninsured loss to a material portion of collateral.
The Loan Parties paid certain customary fees and expenses in connection with the Additional Subordinated Loan and
Amendment No. 2.
In addition to the aforementioned current sources of
existing working capital, the Company may explore certain other strategic alternatives that may become available to the Company, as well continuing our efforts to generate additional sales and increase margins. However, at this time the
Company has no commitments to obtain any additional funds, and there can be no assurance such funds will be available on acceptable terms or at all, should we require such additional funds. If the Company is unable to improve its operations,
it may be required to obtain additional funding, and the Company’s financial condition and results of operations may be materially adversely affected.
Furthermore, broad market and industry factors may
seriously harm the market price of our common stock, regardless of our operating performance, and may adversely impact our ability to raise additional funds, should we require such additional funds.
|
Basis of Presentation |
6 Months Ended |
---|---|
Jul. 29, 2023 | |
Basis of Presentation [Abstract] | |
Basis of Presentation |
Note 2. Basis of Presentation
The accompanying interim condensed
consolidated financial statements consist of Kaspien Holdings Inc., its wholly owned subsidiaries, Kaspien NY, LLC (f/k/a Trans World NY Sub, Inc. (f/k/a Record Town, Inc.)) and its subsidiaries, and Kaspien, Inc. All intercompany accounts and
transactions have been eliminated.
The interim condensed consolidated financial
statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. The information furnished in these unaudited interim condensed consolidated financial statements reflects all normal, recurring
adjustments which, in the opinion of management, are necessary for the fair presentation of such financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of
America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported
amounts of net revenue and expenses during the reporting period. Actual results could differ from those estimates. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been condensed or omitted pursuant to rules and regulations applicable to interim financial statements.
The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated
financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations as of and for the year ended January 28, 2023 contained in the Company’s Annual Report on Form 10-K filed April 28,
2023. The results of operations for the thirteen weeks ended July 29, 2023 are not necessarily indicative of the results to be expected for the entire fiscal year ending February 3, 2024.
The Company’s significant accounting policies are the same as those described in Note 1 to the Company’s Consolidated Financial
Statements on Form 10-K for the fiscal year ended January 28, 2023.
|
Recently Adopted Accounting Pronouncements |
6 Months Ended |
---|---|
Jul. 29, 2023 | |
Recently Adopted Accounting Pronouncements [Abstract] | |
Recently Adopted Accounting Pronouncements |
Note 3. Recently Adopted Accounting
Pronouncements
In June 2016, the FASB issued ASU No.
2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which introduced an expected credit loss model for the impairment of financial assets measured at amortized cost. The model
replaces the probable, incurred loss model for those assets and instead, broadens the information an entity must consider in developing its expected credit loss estimate for assets measured at amortized cost. This standard will be effective for
smaller reporting companies for fiscal years beginning after December 15, 2022. We have completed our evaluation and have determined that the update will not have a material impact on our consolidated financial condition, results of operations,
or cash flows.
In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”). ASU 2020-04 provides optional expedients and exceptions for applying U.S. GAAP to contract modifications and hedging relationships that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. ASU 2020-04 provides, among other things, guidance that modifications of contracts within the scope of Topic 470, Debt, should be accounted for by prospectively adjusting the effective interest rate; modifications of contracts within the scope of Topic 840, Leases, should be accounted for as a continuation of the existing contract; and, changes in the critical terms of hedging relationships, caused by reference rate reform, should not result in the de-designation of the instrument, provided certain criteria are met. The Company’s exposure to LIBOR rates includes its credit facility. The amendments are effective as of March 12, 2020 through December 31, 2022. We have completed our evaluation and have determined that the update will not have a material impact on our consolidated financial condition, results of operations, or cash flows. Recent accounting pronouncements pending adoption not discussed above are either not applicable or are not expected to have a material impact on our consolidated financial condition, results of operations, or cash flows. |
Depreciation and Amortization |
6 Months Ended |
---|---|
Jul. 29, 2023 | |
Depreciation and Amortization [Abstract] | |
Depreciation and Amortization |
Note 4. Depreciation
and Amortization
Depreciation and
amortization included in selling, general and administrative expenses of the interim condensed consolidated statements of operations for the thirteen weeks ended July 29, 2023 and July 30, 2022 was $0.2 million and $0.3 million, respectively.
Depreciation and
amortization included in selling, general and administrative expenses of the interim condensed consolidated statements of operations for the twenty-six weeks ended July 29, 2023 and July 30, 2022 was $0.4 million and $0.6 million, respectively.
|
Restricted Cash |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 29, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted Cash [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted Cash |
Note 5. Restricted Cash
As a result of the death of its former
Chairman, the Company holds $2.5 million in a rabbi trust, of which $1.2 million is classified as restricted cash in current assets and $1.3
million is classified as restricted cash in other assets on the accompanying interim condensed consolidated balance sheet as of July 29, 2023.
A summary of cash, cash equivalents and restricted cash is as follows (amounts in
thousands):
|
Debt |
6 Months Ended |
---|---|
Jul. 29, 2023 | |
Debt [Abstract] | |
Debt |
Note 6. Debt
Credit Facility
On February 20, 2020, Kaspien Inc. entered
into a Loan and Security Agreement (as subsequently amended, the “Loan Agreement”) with Eclipse Business Capital LLC (f/k/a Encina Business Credit, LLC) (“Eclipse”), as administrative agent, under which the lenders party thereto committed to
provide up to $25 million in loans under a four-year, secured revolving credit facility (the “Credit Facility”).
The commitments by the lenders under the
Credit Facility are subject to borrowing base and availability restrictions. Up to $5.0 million of the Credit Facility may be used for
the making of swing line loans.
Interest under the Credit Facility accrues,
subject to certain terms and conditions under the Loan Agreement, at a SOFR Rate or Base Rate, plus, in each case, an Applicable Margin, which is determined by reference to the level of Availability as defined in the Loan Agreement, with the
Applicable Margin for SOFR Rate loans ranging from 4.00% to 4.50% and the Applicable Margin for Base Rate loans ranging from 3.00%
to 3.50%.
The Credit Facility is secured by a first
priority security interest in substantially all of the assets of Kaspien, including inventory, accounts receivable, cash and cash equivalents and certain other collateral of the borrowers and guarantors under the Credit Facility (collectively,
the “Credit Facility Parties”) and by a first priority pledge by the Company of its equity interests in Kaspien. The Company will provide a limited guarantee of Kaspien’s obligations under the Credit Facility.
Among other things, the Loan Agreement limits
Kaspien’s ability to incur additional indebtedness, create liens, make investments, make restricted payments or specified payments and merge or acquire assets. The Loan Agreement also requires Kaspien to comply with a financial maintenance
covenant.
The Loan Agreement contains
customary events of default, including, but not limited to, payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to other obligations, customary ERISA defaults, certain events of bankruptcy and
insolvency, judgment defaults, the invalidity of liens on collateral, change in control, cessation of business or the liquidation of material assets of the Credit Facility Parties taken as a whole, the occurrence of an uninsured loss to a
material portion of collateral and failure of the obligations under the Credit Facility to constitute senior indebtedness under any applicable subordination or intercreditor agreements.
On March 30, 2020, the Company
and Kaspien (the “Loan Parties”) entered into Amendment No. 1 to the Loan Agreement (the “Amendment”). Pursuant to the Amendment, among other things, (i) the Company was added as “Parent” under the Amended Loan Agreement, (ii) the Company
granted a first priority security interest in substantially all of the assets of the Company, including inventory, accounts receivable, cash and cash equivalents and certain other collateral, and (iii) the Loan Agreement was amended to (a)
permit the incurrence of certain subordinated indebtedness under the Subordinated Loan
Agreement (as defined below)
and (b) limit the Company’s ability to incur additional indebtedness, create liens, make investments, make restricted payments or specified payments and merge or acquire assets.
On April 7, 2021, Loan
Parties entered into Amendment No. 2 to the Loan Agreement (the “Second Amendment”. Pursuant to the Second Amendment, the In-Transit Inventory Sublimit (as defined in the Loan Agreement) was increased from $2,000,000 to $2,500,000.
On September 17, 2021,
the Loan Parties entered into Amendment No. 3 to the Loan Agreement (the “Third Amendment”). Pursuant to the Third Amendment, among other things, (i) the maturity of the Credit Facility was extended to February 20, 2024, and the early termination fees were accordingly reset; (ii) the LIBOR floor was reduced to 1.00%; (iii) up to $4,000,000 of acquisitions are now allowed without
Eclipse’s consent, subject to satisfaction of various conditions, including the Company having a trailing twelve month fixed charge
coverage ratio of 1.20x and Excess Availability greater than the greater of (x) 20% of the average Borrowing Base for each 30 day period
immediately prior to, and pro forma for, the purchase and (y) $1,500,000.
On March 2, 2022, the
Loan Parties entered into Amendment No. 4 to the Loan Agreement (“Fourth Amendment”). Pursuant to the Fourth Amendment, among other things, the Credit Facility was amended to permit the incurrence of the Additional Subordinated Loan (as defined
below) under the Subordinated Loan Agreement (as defined below).
On November 1, 2022,
the Loan Parties entered into Amendment No. 5 to the Loan Agreement (the “Fifth Amendment”). Pursuant to the Fifth Amendment, the Credit Facility was amended to replace LIBOR with the Secured Overnight Funding Rate (“SOFR”).
As of
July 29, 2023, the Company had borrowings of $8.8 million under the Credit Facility. The
Company had borrowings of $3.9 million as of July 30, 2022. As of July 29, 2023, unamortized debt issuance costs of $0.1 million related to the Credit Facility
are included in Other assets on the unaudited condensed consolidated balance sheet.
The Company records short term borrowings at
cost, in which the carrying value approximates fair value due to its short-term maturity.
Subordinated Loan
Agreement
On March 30, 2020, the Loan Parties entered
into a Subordinated Loan and Security Agreement (the “Subordinated Loan Agreement”) with the lenders party thereto from time to time (the “Lenders”) and TWEC Loan Collateral Agent, LLC (the “Collateral Agent”), as collateral agent for the
Lenders, pursuant to which the Lenders made a $5.2 million secured term loan (the “Subordinated Loan”) to Kaspien. On September 17, 2021, the Loan Parties entered into Amendment No. 1 to
the Subordinated Loan Agreement which extended the maturity of the loan to March 31, 2024. As of October 29, 2022, unamortized debt
issuance costs of $0.1 million are included in “Long-Term Debt” on the consolidated
balance sheet.
Interest on the Subordinated Loan accrues,
subject to certain terms and conditions under the Subordinated Loan Agreement, at the rate of twelve percent (12.0%) per annum,
compounded on the last day of each calendar quarter by becoming a part of the principal amount of the Subordinated Loan.
The Subordinated Loan is secured by a second
priority security interest in substantially all of the assets of the Loan Parties, including inventory, accounts receivable, cash and cash equivalents and certain other collateral of the borrowers and guarantors under the Subordinated Loan
Agreement (collectively, the “Second Lien Credit Facility Parties”). The Company will provide a limited guarantee of Kaspien ’s obligations under the Subordinated Loan.
Among
other things, the Subordinated Loan Agreement limits the Loan Parties’ ability to incur additional indebtedness, create liens, make investments, make restricted payments or specified payments and merge or acquire assets.
The Subordinated Loan Agreement contains
customary events of default, including, but not limited to, payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to other obligations, customary ERISA defaults, certain events of bankruptcy and
insolvency, judgment defaults, the invalidity of liens on collateral, change in control, cessation of business or the liquidation of material assets of the Second Lien Credit Facility Parties taken as a whole and the occurrence of an uninsured
loss to a material portion of collateral.
In conjunction with the
Subordinated Debt Agreement, the Company issued warrants to purchase up to 244,532 shares of Common Stock to the Related Party
Entities (127,208 shares for Alimco, 23,401
shares for Kick-Start, and 93,923 shares for RJHDC), subject to adjustment in accordance with the terms of the Warrants, at an
exercise price of $0.01 per share. As of July 29, 2023, 5,126 warrants remain outstanding.
The value of the warrants of $0.8 million was allocated against the principal proceeds of the Subordinated Debt Agreement, $0.1 million of which was unamortized as of July 29, 2023.
On March 2, 2022, the
Loan Parties entered into that certain Amendment No. 2 to Subordinated Loan and Security Agreement (“Amendment No. 2”) the “Lenders and Collateral Agent. Pursuant to Amendment No. 2, among other things, Alimco Re Ltd. (the “Tranche B Lender”)
made an additional $5,000,000 secured term loan (the “Additional Subordinated Loan”) with a scheduled maturity date of March 31, 2024, which is the same maturity date as the existing loans under the Subordinated Loan Agreement.
Interest on the
Additional Subordinated Loan accrues, subject to certain terms and conditions under the Subordinated Loan Agreement, at the rate of fifteen percent (15.0%)
per annum, compounded on the last day of each calendar quarter by becoming a part of the principal amount of the Additional Subordinated Loan.
The Additional
Subordinated Loan is also secured by a second priority security interest in substantially all of the assets of the Loan Parties, including inventory, accounts receivable, cash and cash equivalents and certain other collateral of the borrowers
and guarantors under the Subordinated Loan Agreement. The Company will provide a limited guarantee of Kaspien’s obligations under the Additional Subordinated Loan.
Among other things,
the Subordinated Loan Agreement limits the Loan Parties’ ability to incur additional indebtedness, create liens, make investments, make restricted payments or specified payments and merge or acquire assets.
The Subordinated Loan
Agreement contains customary events of default, including, but not limited to, payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to other obligations, customary ERISA defaults, certain events of
bankruptcy and insolvency, judgment defaults, the invalidity of liens on collateral, change in control, cessation of business or the liquidation of material assets of the borrowers and guarantors thereunder taken as a whole and the occurrence
of an uninsured loss to a material portion of collateral.
In conjunction with
the Subordinated Debt Agreement, the Company issued warrants to purchase up to warrants to purchase up to 320,000 shares of common
stock of the Company (subject to adjustment in accordance with the terms of the Warrants, the “Warrant Shares”) at an exercise price of $0.01
per share. The Warrants are exercisable during the period commencing on March 2, 2022 and ending on the earlier of (a) 5:00 p.m. Eastern Standard Time on the five (5)-year anniversary thereof, or if such day is not a business day on the next
succeeding business day, or (b) the occurrence of certain consolidations, mergers or similar extraordinary events involving the Company. As of October 29, 2022, all of the warrants remain outstanding.
The value of the
warrants of $1.6 million was allocated against the principal proceeds of the Subordinated Debt Agreement, of which $0.6 million was unamortized as of July 29, 2023. The value of the warrants was recognized as a discount based on the relative fair value of the
consideration received, as an offset to APIC, which will be amortized over the life of the loan.
|
Stock Based Compensation |
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Jul. 29, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Based Compensation [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Based Compensation |
Note 7. Stock Based
Compensation
The Company has
outstanding awards under four employee stock award plans: the 2005 Long Term Incentive and Share Award Plan; the Amended and Restated
2005 Long Term Incentive and Share Award Plan; the 2005 Long Term Incentive and Share Award Plan (as amended and restated April 5, 2017 (the “Old Plans”); and Kaspien Holdings Inc. 2005 Long Term Incentive and Share Award Plan (as amended and
restated on August 2, 2022) (the “New Plan”). Collectively, these plans are referred to herein as the Stock Award Plans. The Company no longer issues stock options under the Old Plans.
Equity awards authorized for issuance under the New Plan total 500,000. As of July 29, 2023, of the awards authorized for issuance under the Stock Award Plans, approximately 195,005 were granted and are outstanding, 35,042 of which were vested and exercisable. Shares available for future grants of options and other share-based awards under the New Plan as of January 28, 2023 were 391,137. The following table summarizes stock award activity during the thirteen weeks ended
July 29, 2023:
(1) Other Share Awards include deferred shares granted to executives and directors.
As of July 29, 2023,
the intrinsic value of stock awards outstanding and stock awards exercisable was $0.
|
Shareholders' Equity (Deficit) |
6 Months Ended | |||||||||||||||||||||||||||||||||||
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Jul. 29, 2023 | ||||||||||||||||||||||||||||||||||||
Shareholders' Equity [Abstract] | ||||||||||||||||||||||||||||||||||||
Shareholders' Equity |
Note 8. Shareholders’ Equity (Deficit)
On July 12, 2022, the Company entered into a Securities Purchase Agreement (the “PIPE
Purchase Agreement”) with a single institutional investor for a private placement offering (“Private Placement”) of the Company’s common stock (the “Common Stock”) or pre-funded warrants, with each pre-funded warrant exercisable for one share of Common Stock (the “Pre-Funded Warrants”), and warrants exercisable for one share of Common Stock (the “Investor Warrants”). Pursuant to the PIPE Purchase Agreement, the Company has agreed to issue and sell 1,818,182 shares (the “Shares”) of its Common Stock or Pre-Funded Warrants in lieu thereof together with Investor Warrants to purchase up to 2,457,160 shares of Common Stock. Each share of Common Stock and accompanying Investor Warrant will be sold together at a combined offering price of $3.30 per share.
As of July 29, 2023 all of the Prefunded Warrants were exercised in full.
The Investor Warrants have an exercise price of $3.13 per share (subject to adjustment as set forth in the warrant), are exercisable upon issuance and will expire five years from the date of issuance. The Investor Warrants contain standard adjustments to the exercise price including for stock splits, stock
dividend, rights offerings and pro rata distributions.
The Private Placement closed on July 14, 2022. The Company received approximately $6 million in gross proceeds from the Private Placement, before deducting discounts and commissions and estimated offering expenses. The Company intends
to use the net proceeds from the private placement for working capital and other general corporate purposes.
On July 12, 2022, the Company also entered into a Securities Purchase Agreement (the
“Registered Purchase Agreement”) with a single institutional investor, pursuant to which the Company agreed to issue and sell 638,978
shares (the “Registered Shares”) of its Common Stock or Pre-Funded Warrants in lieu thereof, with each Pre-Funded Warrant exercisable for one
share of Common Stock (the “Offering”). The Company received approximately $2 million in gross proceeds from the Offering, before
deducting discounts and commissions and estimated offering expenses. The Company intends to use the net proceeds from the private placement for working capital and other general corporate purposes.
Net proceeds from the Private Placement and the Offering, after deducting placement
agent fees and other estimated offering expenses payable by the Company of $0.9 million, were approximately $7.1 million.
The following table summarizes information with respect to outstanding
warrants to purchase common stock of the Company, all of which were exercisable, as of April 29, 2023:
There were no warrant transactions during the quarter and the weighted
average exercise price for the outstanding warrants is $2.77. As of July 29, 2023, the intrinsic value of the warrants was $60,000 with a weighted average remaining term of 4
years.
|
Accumulated Other Comprehensive Loss |
6 Months Ended |
---|---|
Jul. 29, 2023 | |
Accumulated Other Comprehensive Loss [Abstract] | |
Accumulated Other Comprehensive Loss |
Note 9. Accumulated Other
Comprehensive Loss
Accumulated other comprehensive loss that the
Company reports in the interim condensed consolidated balance sheets represents net loss, adjusted for the difference between the accrued pension liability and accrued benefit cost, net of taxes, associated with the Company’s defined benefit
plan. Comprehensive loss consists of net loss for all periods presented.
|
Defined Benefit Plan |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 29, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Defined Benefit Plan [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Defined Benefit Plan |
Note 10. Defined Benefit Plan
The Company maintains a non-qualified Supplemental Executive Retirement Plan (“SERP”) for certain executive
officers of the Company. The SERP provides eligible executives defined pension benefits that supplement benefits under other retirement arrangements. As of February 28, 2020, no active employees were participants in the SERP. During the
thirteen weeks ended July 29, 2023, the Company did not make any cash contributions to the SERP and presently expects to pay
approximately $1.2 million in benefits relating to the SERP during fiscal 2023.
The measurement date for the SERP is the fiscal year end, using actuarial techniques which reflect estimates for
mortality, turnover and expected retirement. In addition, management makes assumptions concerning future salary increases. Discount rates are generally established as of the measurement date using theoretical bond models that select high-grade
corporate bonds with maturities or coupons that correlate to the expected payouts of the applicable liabilities.
The following represents the components of the net periodic pension cost related to the Company’s SERP for the
respective periods:
|
Basic and Diluted Loss Per Share |
6 Months Ended |
---|---|
Jul. 29, 2023 | |
Basic and Diluted Loss Per Share [Abstract] | |
Basic and Diluted Loss Per Share |
Note 11. Basic and Diluted
Loss Per Share
Basic loss
per share is calculated by dividing net loss by the weighted average common shares outstanding for the period. Diluted loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common stock (net of any assumed repurchases) that then shared in the earnings of the Company, if any. It is computed by dividing net loss by the sum of the weighted
average shares outstanding and additional common shares that would have been outstanding if the dilutive potential common shares had been issued for the Company’s common stock awards from the Company’s Stock Award Plans.
For the thirteen-week and twenty-six week periods ended July 29, 2023 and July 30, 2022, the impact of all outstanding stock awards was not considered because the Company reported net losses in those periods and such impact would be anti-dilutive. Accordingly, basic and diluted loss per share was the same. Total anti-dilutive stock awards for the thirteen and twenty-six weeks ended July 29, 2023 and thirteen and twenty-six weeks ended July 29, 2023 were approximately 0.1 million shares for all periods. Total anti-dilutive warrants for the thirteen weeks and twenty-six week periods ended July 29, 2023 were approximately 2.8 million shares for both periods. |
Income Taxes |
6 Months Ended |
---|---|
Jul. 29, 2023 | |
Income Taxes [Abstract] | |
Income Taxes |
Note 12. Income Taxes
In assessing the realizability of
deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent on the generation of future
taxable income. Management considers the scheduled reversal of taxable temporary differences, projected future taxable income and tax planning strategies in making this assessment. Based on available objective evidence, management concluded that
a full valuation allowance should continue to be recorded against the Company’s deferred tax assets. Management will continue to assess the need for and amount of the valuation allowance against the deferred tax assets by considering all
available evidence to the Company’s ability to generate future taxable income in its conclusion of the need for a full valuation allowance. Any reversal of the Company’s valuation allowance will favorably impact its results of operations in the
period of reversal. The Company is currently unable to determine whether or when that reversal might occur, but it will continue to assess the realizability of its deferred tax assets and will adjust the valuation allowance if it is more likely
than not that all or a portion of the deferred tax assets will become realizable in the future. The Company has significant net operating loss carry forwards and other tax attributes that are available to offset projected taxable income and
current taxes payable, if any, for the year ending January 28, 2023. The deferred tax impact resulting from the utilization of the net operating loss carry forwards and other tax attributes will be offset by a reduction in the valuation
allowance. As of January 28, 2023, the Company had a net operating loss carry forward of $369.1 million for federal income tax purposes
and approximately $224.4 million for state income tax purposes that expire at various times through 2040 and are subject to certain limitations and statutory expiration periods. The Company has not changed its overall conclusion with respect to
the need for a valuation allowance against its net deferred tax assets, which remain fully reserved.
|
Commitments and Contingencies |
6 Months Ended |
---|---|
Jul. 29, 2023 | |
Commitments and Contingencies [Abstract] | |
Commitments and Contingencies |
Note 13. Commitments and Contingencies
Legal Proceedings
The Company is subject to legal proceedings and claims that have
arisen in the ordinary course of its business and have not been finally adjudicated. Although there can be no assurance as to the ultimate disposition of these matters, it is management’s opinion, based upon the information available at this
time, that the expected outcome of these matters, individually and in the aggregate, will not have a material adverse effect on the results of operations and financial condition of the Company. As a result, the liability for the cases listed
below is remote.
On June 18, 2021, Vijuve
Inc. filed a lawsuit against Kaspien Inc. in the United States District Court for the Eastern District of Washington (Case No. 2:21-cv-00192-SAB) concerning a Retailer Agreement that the parties entered into in September of 2020. Vijuve
manufactures skin care products and face massagers. The parties agreed that Kaspien would sell Vijuve’s products on Amazon. The complaint alleged that Kaspien breached the Retailer Agreement when it declined to acquiesce to Vijuve’s demand that
Kaspien purchase over $700,000 of products. In total, Vijuve sought $774,000 in damages. Kaspien denied that it breached the agreement and filed various counterclaims. Kaspien sought at least $229,000 from Vijuve for breach of contract and/or specific performance. On June 26, 2023, the Court granted our motion for summary judgment and dismissed Vijuve’s claim
against Kaspien.
Contingent Value Rights
On March 30, 2020, the Company entered into the
Contingent Value Rights Agreement (the “CVR Agreement”), pursuant to which the Related Party Entities received contingent value rights (“CVRs”) representing the contractual right to receive cash payments from the Company in an amount equal, in
the aggregate, to 19.9% of the proceeds (10.35% for Alimco, 1.90% for Kick-Start, and 7.64% for RJHDC) received by the Company in respect of certain intercompany indebtedness owing to it by Kaspien and/or its equity interest in
Kaspien. The Company does not anticipate these contingencies being met in Fiscal 2023.
On March 2, 2022, the Company entered into a Contingent Value Rights Agreement (the “Second CVR Agreement”) with the Tranche B Lender under the Subordinated Loan
Agreement, pursuant to which the Tranche B Lender received contingent value rights (“Second CVRs”) representing the contractual right to receive cash payments from the Company in an amount equal, in the aggregate, to 9.0% of the proceeds received by the Company in respect of certain distributions by the Company or Kaspien; recapitalizations or financings of the
Company or Kaspien (with appropriate carve out for trade financing in the ordinary course); repayment of intercompany indebtedness owing to the Company by Kaspien; or sale or transfer of any stock of the Company or Kaspien.
The CVRs terminate upon the earlier to occur of (i) certain consolidations, mergers or similar extraordinary events involving Kaspien (and, if applicable, the making
of a cash payment by the Company to the Lenders pursuant to the CVR Agreement in connection therewith) and (ii) March 2, 2032.
|
Nature of Operations (Policies) |
6 Months Ended | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jul. 29, 2023 | ||||||||||||||||
Nature of Operations [Abstract] | ||||||||||||||||
Nature of Operations |
Kaspien Holdings Inc.,
which, together with its consolidated subsidiaries, is referred to herein as “Kaspien”, “the Company”, “we”, “us” and “our”, was incorporated in New York in 1972. We own 100% of the outstanding common stock of Kaspien Inc, through which our principal operations are conducted. Kaspien is a third-party marketplace retailer. The Company
leverages in-house expertise, technology, and services to generate revenue through marketplace transactions. Kaspien provides account management, brand development, listings management, data reporting, joint business planning, and comprehensive
marketing support services to our vendor partners. Our target partners are enterprise-level large growth brands that derive margins based on pricing.
We are guided by 5 core principles:
On June 6, 2023,
Kaspien entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”), pursuant to which Kaspien sold substantially all of the assets of and certain of the liabilities relating to Kaspien’s agency business model through which
Kaspien provides support services for account management, media planning, media analytics, search strategy, business planning, and data reporting to its partners (the “Business” and the transaction, the “Transaction”). The Transaction closed on
June 6, 2023.
|
|||||||||||||||
Liquidity and Cash Flows |
Liquidity and Cash Flows:
The Company’s primary sources of liquidity are its borrowing
capacity under its Credit Facility, available cash and cash equivalents, and to a lesser extent, cash generated from operations. Our cash requirements relate primarily to working capital needed to operate Kaspien, including funding operating
expenses, the purchase of inventory and capital expenditures.
The Company incurred a net loss of $3.3 million and $8.8 million for the
twenty-six weeks ended July 29, 2023 and July 30, 2022, respectively. The decrease in the net loss was primarily attributable to a decrease in sales and gross margin. In addition, the Company has an accumulated deficit of $143.3 million as of July 29, 2023 and net cash used in operating activities for the twenty-six weeks ended July 29, 2023 was $0.7 million. Net cash used in operating activities for the twenty-six weeks ended July 30, 2022 was $5.9 million.
As disclosed in the Company’s Annual Report on Form 10-K filed
April 28, 2023, the Company experienced negative cash flows from operations during fiscal 2022 and 2021 and we expect to incur net losses in fiscal 2023.
Our ability to achieve profitability and meet future liquidity
needs and capital requirements will depend upon numerous factors, including the timing and amount of our revenue; the timing and amount of our operating expenses; the timing and costs of working capital needs; and successful implementation of our
strategy and planned activities. There can be no assurance that we will be successful in further implementing our business strategy or that the strategy, including the completed initiatives, will be successful in sustaining acceptable levels of
sales growth and profitability. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.
The unaudited condensed consolidated financial statements for
the twenty-six weeks ended July 29, 2023 were prepared pursuant to the rules and regulations of the Securities and Exchange Commission. The information furnished in these unaudited condensed consolidated financial statements reflects all normal,
recurring adjustments which, in the opinion of management, are necessary for the fair presentation of such financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The ability of the Company to meet its liabilities and to continue as a going concern is dependent on improved profitability, the
strategic initiatives for Kaspien and the availability of future funding. Based on recurring losses from operations, negative cash flows from operations, the expectation of continuing operating losses for the foreseeable future, and uncertainty
with respect to any available future funding, the Company has concluded that there is substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
As of July 29, 2023, we had cash and cash equivalents of $0.3 million, a net working deficit of $0.7
million, and $8.8 in borrowings on our revolving credit facility, as further discussed below.
As of January 28, 2023, the Company had borrowings of $8.8 million under the Credit Facility. As of April 29, 2023 and April 30, 2022, the Company had no outstanding letters of credit. The Company had $3.4
million and $7.7 million available for borrowing under the Credit Facility as of July 29, 2023 and July 30, 2022, respectively.
|
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Credit Facility |
Credit Facility
On February 20, 2020, Kaspien Inc. entered into a Loan and
Security Agreement (as subsequently amended, the “Loan Agreement”) with Eclipse Business Capital LLC (f/k/a Encina Business Credit, LLC) (“Eclipse”), as administrative agent, under which the lenders party thereto committed to provide up to $25 million in loans under a four-year, secured revolving
credit facility (the “Credit Facility”).
On March 30, 2020, the Company and Kaspien Inc. (the “Loan
Parties”) entered into Amendment No. 1 to the Loan Agreement (the “Amendment”). Pursuant to the Amendment, among other things, (i) the Company was added as “Parent” under the Amended Loan Agreement, (ii) the Company granted a first priority
security interest in substantially all of the assets of the Company, including inventory, accounts receivable, cash and cash equivalents and certain other collateral, and (iii) the Loan Agreement was amended to (a) permit the incurrence of
certain subordinated indebtedness under the Subordinated Loan Agreement (as defined below) and (b) limit the Company’s ability to incur additional indebtedness, create liens, make investments, make restricted payments or specified payments and
merge or acquire assets.
On April 7, 2021, the Loan Parties entered into Amendment No. 2 to the Loan Agreement (the “Second Amendment”.
Pursuant to the Second Amendment, the In-Transit Inventory Sublimit (as defined in the Loan Agreement) was increased from $2,000,000
to $2,500,000.
On September 17, 2021, the Loan Parties entered into
Amendment No. 3 to the Loan Agreement (the “Third Amendment”). Pursuant to the Third Amendment, among other things, (i) the maturity of the Credit Facility was extended to February 20, 2024, and the early termination fees were accordingly reset; (ii) the LIBOR floor was reduced to 1.00%; (iii) up to $4,000,000 of acquisitions are now
allowed without Eclipse’s consent, subject to satisfaction of various conditions, including the Company having a trailing twelve month
fixed charge coverage ratio of 1.20x and Excess Availability greater than the greater of (x) 20% of the average Borrowing Base for each 30
day period immediately prior to, and pro forma for, the purchase and (y) $1,500,000.
On March 2, 2022, the Loan Parties entered into Amendment No. 4 to the Loan Agreement (the “Fourth Amendment”).
Pursuant to the Fourth Amendment, among other things, the Credit Facility was amended to permit the incurrence of the Additional Subordinated Loan (as defined below) under the Subordinated Loan Agreement (as defined below).
On November 1, 2022, the Loan Parties entered into Amendment No. 5 to the loan agreement (the “Fifth
Amendment”). Pursuant to the Fifth Amendment, the Credit Facility was amended to replace LIBOR with the Secured Overnight Funding Rate (“SOFR”).
As of July 29, 2023 and July 30, 2022, the Company had
borrowings of $8.8 and $3.9
million under the Credit Facility, respectively.
Subordinated Debt Agreement On March 30, 2020, the
Loan Parties entered into a Subordinated Loan and Security Agreement (the “Subordinated Loan Agreement”) with the lenders party thereto from time to time (the “Lenders”) and TWEC Loan Collateral Agent, LLC (the “Collateral Agent”), as collateral
agent for the Lenders, pursuant to which the Lenders made a $5.2 million secured term loan (the “Subordinated Loan”) to Kaspien with a scheduled maturity date of May 22, 2023. As of July 29, 2023, unamortized debt issuance costs of $0.1
million are included in “Long Term Debt” on the unaudited condensed consolidated balance sheet.
Directors Jonathan Marcus, Thomas Simpson, and Michael
Reickert are the chief executive officer of Alimco Re Ltd. (“Alimco”), the managing member of Kick-Start III, LLC and Kick-Start IV, LLC (“Kick-Start”), and a trustee of the Robert J. Higgins TWMC Trust (the “Trust”), an affiliate of RJHDC, LLC
(“RJHDC” and together with Alimco and Kick-Start, “Related Party Entities”), respectively. The Related Party Entities are parties to the Subordinated Loan Agreement.
Amendment No. 2 to Subordinated Loan and Security Agreement
On March 2, 2022, the Loan Parties entered into that certain Amendment No. 2 to Subordinated Loan and Security
Agreement (“Amendment No. 2”) with the “Lenders and the Collateral Agent. Pursuant to Amendment No. 2, among other things, Alimco Re Ltd. (the “Tranche B Lender”) made an additional $5,000,000 secured term loan (the “Additional Subordinated Loan”) with a scheduled maturity date of March 31, 2024, which is the same maturity date as the existing loans under the Subordinated Loan Agreement.
Interest
on the Additional Subordinated Loan accrues, subject to certain terms and conditions under the Subordinated Loan Agreement, at the rate of fifteen percent (15.0%) per annum, compounded on the last day of each calendar quarter by becoming a part of the principal amount of the Additional Subordinated Loan.
The Additional Subordinated Loan is also secured by a second priority security interest in substantially all of the
assets of the Loan Parties, including inventory, accounts receivable, cash and cash equivalents and certain other collateral of the borrowers and guarantors under the Subordinated Loan Agreement. The Company will provide a limited guarantee of
Kaspien’s obligations under the Additional Subordinated Loan.
Among other things, the Subordinated Loan Agreement limits the Loan Parties’ ability to incur additional indebtedness,
create liens, make investments, make restricted payments or specified payments and merge or acquire assets.
The Subordinated Loan Agreement contains customary events of default, including, but not limited to, payment defaults,
breaches of representations and warranties, covenant defaults, cross-defaults to other obligations, customary ERISA defaults, certain events of bankruptcy and insolvency, judgment defaults, the invalidity of liens on collateral, change in
control, cessation of business or the liquidation of material assets of the borrowers and guarantors thereunder taken as a whole and the occurrence of an uninsured loss to a material portion of collateral.
The Loan Parties paid certain customary fees and expenses in connection with the Additional Subordinated Loan and
Amendment No. 2.
In addition to the aforementioned current sources of
existing working capital, the Company may explore certain other strategic alternatives that may become available to the Company, as well continuing our efforts to generate additional sales and increase margins. However, at this time the
Company has no commitments to obtain any additional funds, and there can be no assurance such funds will be available on acceptable terms or at all, should we require such additional funds. If the Company is unable to improve its operations,
it may be required to obtain additional funding, and the Company’s financial condition and results of operations may be materially adversely affected.
Furthermore, broad market and industry factors may
seriously harm the market price of our common stock, regardless of our operating performance, and may adversely impact our ability to raise additional funds, should we require such additional funds.
|
Recently Adopted Accounting Pronouncements (Policies) |
6 Months Ended |
---|---|
Jul. 29, 2023 | |
Recently Adopted Accounting Pronouncements [Abstract] | |
Recently Adopted Accounting Pronouncements |
In June 2016, the FASB issued ASU No.
2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which introduced an expected credit loss model for the impairment of financial assets measured at amortized cost. The model
replaces the probable, incurred loss model for those assets and instead, broadens the information an entity must consider in developing its expected credit loss estimate for assets measured at amortized cost. This standard will be effective for
smaller reporting companies for fiscal years beginning after December 15, 2022. We have completed our evaluation and have determined that the update will not have a material impact on our consolidated financial condition, results of operations,
or cash flows.
In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”). ASU 2020-04 provides optional expedients and exceptions for applying U.S. GAAP to contract modifications and hedging relationships that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. ASU 2020-04 provides, among other things, guidance that modifications of contracts within the scope of Topic 470, Debt, should be accounted for by prospectively adjusting the effective interest rate; modifications of contracts within the scope of Topic 840, Leases, should be accounted for as a continuation of the existing contract; and, changes in the critical terms of hedging relationships, caused by reference rate reform, should not result in the de-designation of the instrument, provided certain criteria are met. The Company’s exposure to LIBOR rates includes its credit facility. The amendments are effective as of March 12, 2020 through December 31, 2022. We have completed our evaluation and have determined that the update will not have a material impact on our consolidated financial condition, results of operations, or cash flows. Recent accounting pronouncements pending adoption not discussed above are either not applicable or are not expected to have a material impact on our consolidated financial condition, results of operations, or cash flows. |
Restricted Cash (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 29, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted Cash [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash, Cash Equivalents and Restricted Cash |
A summary of cash, cash equivalents and restricted cash is as follows (amounts in
thousands):
|
Stock Based Compensation (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 29, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Based Compensation [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Option Activity Under Stock Award Plans |
The following table summarizes stock award activity during the thirteen weeks ended
July 29, 2023:
(1) Other Share Awards include deferred shares granted to executives and directors.
|
Shareholders' Equity (Deficit) (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jul. 29, 2023 | ||||||||||||||||||||||||||||||||||||
Shareholders' Equity [Abstract] | ||||||||||||||||||||||||||||||||||||
Summary of Warrant Activity |
The following table summarizes information with respect to outstanding
warrants to purchase common stock of the Company, all of which were exercisable, as of April 29, 2023:
|
Defined Benefit Plan (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 29, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Defined Benefit Plan [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Periodic Pension Cost |
The following represents the components of the net periodic pension cost related to the Company’s SERP for the
respective periods:
|
Nature of Operations, Summary (Details) |
6 Months Ended |
---|---|
Jul. 29, 2023 | |
Kaspien Inc. [Member] | |
Subsidiary Information [Abstract] | |
Ownership interest | 100.00% |
Nature of Operations, Liquidity and Cash Flows (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||||
---|---|---|---|---|---|---|---|
Jul. 29, 2023 |
Jul. 30, 2022 |
Jul. 29, 2023 |
Jul. 30, 2022 |
Apr. 29, 2023 |
Jan. 28, 2023 |
Apr. 30, 2022 |
|
Liquidity and Cash Flows [Abstract] | |||||||
Net loss | $ (1,161) | $ (4,416) | $ (3,312) | $ (8,846) | |||
Accumulated deficit | (143,250) | (129,740) | (143,250) | (129,740) | $ (139,938) | ||
Net cash used in operating activities | (719) | (5,893) | |||||
Cash and cash equivalents | 282 | 1,309 | 282 | 1,309 | 1,130 | ||
Net working capital (deficit) | (700) | (700) | |||||
Borrowings | 8,797 | 3,855 | 8,797 | 3,855 | 8,812 | ||
Credit Facility [Member] | |||||||
Liquidity and Cash Flows [Abstract] | |||||||
Borrowings | 8,800 | 3,900 | 8,800 | 3,900 | $ 8,800 | ||
Outstanding letters of credit | $ 0 | $ 0 | |||||
Available borrowings | $ 3,400 | $ 7,700 | $ 3,400 | $ 7,700 |
Depreciation and Amortization (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jul. 29, 2023 |
Jul. 30, 2022 |
Jul. 29, 2023 |
Jul. 30, 2022 |
|
Depreciation and Amortization [Abstract] | ||||
Depreciation and amortization | $ 0.2 | $ 0.3 | $ 0.4 | $ 0.6 |
Restricted Cash (Details) - USD ($) $ in Thousands |
Jul. 29, 2023 |
Jan. 28, 2023 |
Jul. 30, 2022 |
Jan. 29, 2022 |
---|---|---|---|---|
Restricted Cash and Cash Equivalents [Abstract] | ||||
Restricted cash, current asset | $ 1,158 | $ 1,158 | $ 1,158 | |
Cash Equivalents and Restricted Cash [Abstract] | ||||
Cash and cash equivalents | 282 | 1,130 | 1,309 | |
Restricted cash | 2,473 | 2,496 | 3,031 | |
Total cash, cash equivalents and restricted cash | 2,755 | $ 3,626 | $ 4,340 | $ 4,823 |
Rabbi Trust [Member] | ||||
Restricted Cash and Cash Equivalents [Abstract] | ||||
Restricted cash, current asset | 1,200 | |||
Restricted cash, long-term asset | 1,300 | |||
Cash Equivalents and Restricted Cash [Abstract] | ||||
Restricted cash | $ 2,500 |
Shareholders' Equity (Deficit) (Details) - USD ($) |
6 Months Ended | ||
---|---|---|---|
Jul. 12, 2022 |
Jul. 29, 2023 |
Apr. 29, 2023 |
|
Shareholders' Equity [Abstract] | |||
Proceeds from equity | $ 7,100,000 | ||
Offering expenses | $ 900,000 | ||
Outstanding Warrants to Purchase Common Stock [Abstract] | |||
Number Outstanding (in shares) | 2,782,286 | ||
PIPE Purchase Agreement [Member] | |||
Shareholders' Equity [Abstract] | |||
Proceeds from issuance of private placement | $ 6,000,000 | ||
PIPE Purchase Agreement [Member] | Pre-Funded Warrants [Member] | |||
Shareholders' Equity [Abstract] | |||
Warrant exercisable (in shares) | 1 | ||
Outstanding Warrants to Purchase Common Stock [Abstract] | |||
Exercise Price (in dollars per share) | $ 0.01 | ||
Number Outstanding (in shares) | 1,818,182 | 325,126 | |
PIPE Purchase Agreement [Member] | Investor Warrants [Member] | |||
Shareholders' Equity [Abstract] | |||
Warrant exercisable (in shares) | 1 | ||
Share price (in dollars per share) | $ 3.3 | ||
Warrants exercise price (in dollars per share) | $ 3.13 | ||
Warrants expiration period | 5 years | ||
Outstanding Warrants to Purchase Common Stock [Abstract] | |||
Exercise Price (in dollars per share) | $ 3.13 | ||
Number Outstanding (in shares) | 2,457,160 | ||
Registered Purchase Agreement [Member] | |||
Shareholders' Equity [Abstract] | |||
Warrants exercise price (in dollars per share) | $ 2.77 | ||
Proceeds from equity | $ 2,000,000 | ||
Intrinsic value of warrants | $ 60,000 | ||
Weighted average remaining term of warrants | 4 years | ||
Registered Purchase Agreement [Member] | Pre-Funded Warrants [Member] | |||
Shareholders' Equity [Abstract] | |||
Warrant exercisable (in shares) | 1 | ||
Outstanding Warrants to Purchase Common Stock [Abstract] | |||
Number Outstanding (in shares) | 638,978 |
Defined Benefit Plan (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jul. 29, 2023 |
Jul. 30, 2022 |
Jul. 29, 2023 |
Jul. 30, 2022 |
|
Net Periodic Pension Cost [Abstract] | ||||
Defined Benefit Plan, Net Periodic Benefit Cost (Credit), Interest Cost, Statement of Income or Comprehensive Income [Extensible Enumeration] | Interest Income (Expense), Net | |||
Supplemental Executive Retirement Plan [Member] | ||||
Contributions by Employer [Abstract] | ||||
Cash contributions by employer | $ 0 | |||
Expected cash contributions by employer | 1,200 | $ 1,200 | ||
Net Periodic Pension Cost [Abstract] | ||||
Interest cost | 139 | $ 89 | 278 | $ 178 |
Net periodic pension cost | $ 139 | $ 89 | $ 278 | $ 178 |
Basic and Diluted Loss Per Share (Details) - shares shares in Millions |
3 Months Ended | 6 Months Ended |
---|---|---|
Jul. 29, 2023 |
Jul. 29, 2023 |
|
Basic and Diluted Loss Per Share [Abstract] | ||
Total anti-dilutive stock awards (in shares) | 0.1 | 0.1 |
Warrant [Member] | ||
Basic and Diluted Loss Per Share [Abstract] | ||
Total anti-dilutive stock awards (in shares) | 2.8 | 2.8 |
Income Taxes (Details) - USD ($) $ in Millions |
6 Months Ended | |
---|---|---|
Jul. 29, 2023 |
Jan. 28, 2023 |
|
Federal [Member] | ||
Operating Loss Carryforwards Components [Abstract] | ||
Net operating loss carryforwards | $ 369.1 | |
Operating loss carryforward expiration year | 2040 | |
State [Member] | ||
Operating Loss Carryforwards Components [Abstract] | ||
Net operating loss carryforwards | $ 224.4 | |
Operating loss carryforward expiration year | 2040 |
Commitments and Contingencies (Details) - USD ($) |
Jul. 18, 2022 |
Jun. 18, 2021 |
Mar. 02, 2022 |
Mar. 30, 2020 |
---|---|---|---|---|
Legal Proceedings [Abstract] | ||||
Percentage of CVR to receive cash payment | 9.00% | 19.90% | ||
Alimco [Member] | ||||
Legal Proceedings [Abstract] | ||||
Percentage of CVR to receive cash payment | 10.35% | |||
Kick-Start [Member] | ||||
Legal Proceedings [Abstract] | ||||
Percentage of CVR to receive cash payment | 1.90% | |||
RJHDC [Member] | ||||
Legal Proceedings [Abstract] | ||||
Percentage of CVR to receive cash payment | 7.64% | |||
Vijuve Inc. [Member] | ||||
Legal Proceedings [Abstract] | ||||
Purchase of product expected as part of agreement | $ 700,000 | |||
Damages sought value | $ 774,000 | |||
Vijuve Inc. [Member] | Minimum [Member] | ||||
Legal Proceedings [Abstract] | ||||
Damages claims value | $ 229,000 |
1 Year Kaspien Chart |
1 Month Kaspien Chart |
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