FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, which we refer to in this quarterly report as the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, which we refer to in this quarterly report as the Exchange Act. Forward-looking statements are not statements of historical fact but rather reflect our current expectations, estimates and predictions about future results and events. These statements may use words such as "anticipate," "believe," "estimate," "expect," "intend," "predict," "project" and similar expressions as they relate to us or our management. When we make forward-looking statements, we are basing them on our management's beliefs and assumptions, using information currently available to us. These forward-looking statements are subject to risks, uncertainties and assumptions, including but not limited to, risks, uncertainties and assumptions discussed in this quarterly report. Factors that can cause or contribute to these differences include those described under the headings "Risk Factors" and "Management Discussion and Analysis and Plan of Operation."

If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary materially from what we projected. Any forward-looking statement you read in this quarterly report reflects our current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, growth strategy and liquidity. All subsequent written and oral forward-looking statements attributable to us or individuals acting on our behalf are expressly qualified in their entirety by this paragraph. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this quarterly report. The Company expressly disclaims any obligation to release publicly any updates or revisions to these forward-looking statements to reflect any change in its views or expectations. The Company can give no assurances that such forward-looking statements will prove to be correct.





Company

The Auto Parts 4Less Group Inc. ("FLES", the "Company", "we" or "us"), the Company described herein, was incorporated under the laws of the State of Nevada on December 5, 2007, with offices located at 106 W Mayflower, Las Vegas, Nevada 89030. Our phone number is (702) 267-7100.

Nature of Business - Auto Parts 4Less Group Inc.., formerly known The 4Less Group, Inc.and as MedCareers Group, Inc. (the "Company", "MCGI"), was incorporated under the laws of the State of Nevada on December 5, 2007.

On November 29, 2018, the Company entered into a transaction (the "Share Exchange"), pursuant to which the Company acquired 100% of the issued and outstanding equity securities of The 4Less Corp. ("4LESS"), in exchange for the issuance of (i) nineteen thousand (19,000) shares of Series B Preferred Stock, (ii) six thousand seven hundred fifty (6,750) shares of Series C Preferred Stock, and (iii) 870 shares of Series D Preferred Stock. The Series C Preferred Shares have a right to convert into common stock of the Company by multiplying the number of issued and outstanding shares of common stock by 2.63 on the conversion date. The Share Exchange closed on November 29, 2018. As a result of the Share Exchange, the former shareholders of 4LESS became the controlling shareholders of the Company. The Share Exchange was accounted for as a reverse takeover/recapitalization effected by a share exchange, wherein 4LESS is considered the acquirer for accounting and financial reporting purposes. The capital, share price, and earnings per share amount in these consolidated financial statements for the period prior to the reverse merger were restated to reflect the recapitalization in accordance with the shares issued as a result of the reverse merger except otherwise noted.

On November 19, 2019 The 4Less Group acquired the URL Autoparts4Less.com and changed the name of their wholly owned subsidiary from the 4Less Corp. to Auto Parts 4Less, Inc. On April 28, 2022 the Company changed its name from The 4LESS Group, Inc. to Auto Parts 4Less Group, Inc.





Our Business

Like many small businesses, Christopher Davenport, the founder of Auto Parts 4Less ("4Less") previously named The 4less Corp., the wholly owned subsidiary of Auto Parts 4Less Group, Inc., began selling auto parts on eBay and shipping those items out of his garage in 2013. What started out as a hobby, quickly grew into a fully functioning ecommerce aftermarket auto parts company that required a significant technical staff and facilities to support their growth. In June of 2015, they leased their first office.

Originally the company listed their auto parts in the different marketplaces such as Amazon, eBay, Walmart and Jet.





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Starting in 2016 the company began investing to become their own ecommerce platform thereby allowing their auto parts to be direct listed across marketplace and social media sites. Technical achievements including CRM system, warehouse integration API, warehouse inventory software to name a few.

In 2019, shortly after the share exchange with MedCareers Group, Inc., with technology upgrades in place, 4Less began successfully moving majority of sales from third party marketplaces direct to their proprietary ecommerce web site Liftkits4Less.com. By doing so the company saves 8%-10% in fees charged by the major marketplace's such as e-Bay and Amazon as well as further building the 4less brand as a leading ecommerce site for auto parts.

On November 19, 2019 the Company acquired the URL Autoparts4Less.com and changed the name of their wholly owned subsidiary from the 4Less Corp. to Auto Parts 4Less, Inc. With the acquisition of the URL AutoParts4Less.com, the Company also began focusing all of their efforts and resources on building out a flagship automotive marketplace with the potential to offer buyers a wide range of automotive parts for cars, trucks, boats, motorcycles and RV's on a single platform.

In August 2021 the Company launched a beta test version of Autoparts4less.com. In a short period of time after the beta launch the company realized that with the amount of interest received from numerous types of larges sellers, which included not only ecommerce sites presently selling parts online, but also interest from other large parts sellers such as warehouse distributors, new car dealers with large inventories of parts as well as brick and mortar parts retailers looking to move sales online, the platform originally created would soon be inadequate. As such, the Company made the decision to upgrade to a larger and more advanced platform solution so they immediately began implementation of the AWS Fargate serverless platform solution.

The platform upgrade was completed in the 1st quarter FYE 2023, with marketplace sales expected to begin in 2nd quarter 2023.

On April 28. 2022 the Company changed its name from The 4Less Group, Inc. to Auto Parts 4Less Group, Inc.





Competition

We directly compete for buyers to use our web sites over current e-commerce sites as well as sellers that utilize major marketplaces such as Amazon and eBay. However, we believe our specialty ecommerce website liftkits4less.com offers substantial value-added content including installation guides, install videos, high impact photos, order customization and live chat with a technical expert.

Additionally, we believe that our automotive parts marketplace AutoParts4less.com, with no known large challengers presently in the space outside of "all things to all people" online marketplaces Amazon and eBay, has the opportunity to quickly be branded when launched as the auto part's industry premier marketplace just as sites like Etsy, Wayfair, Uber and Chewey's have been able to successfully do in their industries.

Results of Operations for the Three Months Ended April 30, 2022 Compared to the Three Months Ended April 30, 2021





The following table shows our results of operations for the three months ended
April 30, 2022 and 2021. The historical results presented below are not
necessarily indicative of the results that may be expected for any future
period.



                                                                   Change
                                   2022          2021            $           %
Total Revenues                 $  1,729,930     3,728,784   $ (1,998,854 )  (54% )
Gross Profit                        261,927       962,206       (700,279 )  (73% )

Total Operating Expenses 1,282,955 2,204,564 (921,609 ) (42% ) Total Other Income (Expense) (1,573,130 ) 674,801 (2,247,931 ) (333% ) Net Income (Loss)

$ (2,594,158 ) $  (567,557 ) $ (2,026,601 ) (357% )




Revenue

The following table shows revenue split between proprietary and third-party website revenue for the three months ended April 30, 2022 and 2021:



                                                                Change
                                 2022          2021            $          %
Proprietary website revenue   $ 1,236,243     2,123,101   $   (886,858 ) (42% )
Third-party website revenue       493,687     1,605,683     (1,111,996 ) (69% )
Total Revenue                 $ 1,729,930   $ 3,728,784   $ (1,998,854 ) (54% )




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We had total revenue of $1,729,930 for the three months ended April 30, 2022, compared to $3,728,784 for the three months ended April 30, 2021. Sales decreased by $1,998,854 primarily due to present economic conditions reducing consumer demand. In the prior year's quarter, sales were driven by high consumer demand as a result of economic stimulus packages provided during the pandemic and an aggressive marketing push by the Company. In the current fiscal we are still dealing with supply issues as we have less product available for sale as a result. The Company also recorded $332,823 in deferred revenue for the three months ended April 30, 2022, which will be recognized as revenue next quarter and recognized $425,560 out of the total $665,143 from last quarter. The deferred revenue represents orders paid by customers this period but delivered in the following period due to back orders and processing and delivery times. The Company also recorded $291,684 in customer deposits for the three months ended April 30, 2022 and recognized $324,211 from the prior quarter out of a total of $530,900. The customer deposits are orders that were either cancelled and payment refunded to the customers subsequent to April 30, 2022 or shall remain as deposits until the item is either delivered and recorded as revenue or cancelled and refunded.

The Company's focus continues in growing its proprietary website revenues and the Company was successful in that, increasing its proprietary website revenue to 71% of total sales this current quarter from 57% the previous year's quarter.





Gross Profit

We had gross profit of $261,927 for the three months ended April 30, 2022, compared to gross profit of $962,206 for the three months ended April 30, 2021. Gross profit decreased by $700,279 as a result of the decreased revenues explained above and also due to an increase in cost because the Company had to purchase goods at higher product costs from distributers rather than the usual manufacturers for many of the new available products or some of the products that were not available from the usual manufacturers due to still existing supply chain issues.





Operating Expenses



The following table shows our operating expenses for the three months ended
April 30, 2022 and 2021:



                                                                             Change
                                               2022          2021           $         %
Depreciation                                $    12,938   $    10,735        2,203    21%
Postage, Shipping and Freight                    74,698       193,187     (118,489 ) (61% )
Marketing and Advertising                       274,427       608,034     (333,607 ) (55% )
E Commerce Services, Commissions and Fees       330,697       416,127      (85,430 ) (21% )
Operating lease cost                             30,479        30,479            -     0%
Personnel Costs                                 205,299       297,493      (92,194 ) (31% )
General and Administrative                      354,417       648,509     (294,092 ) (45% )
Total Operating Expenses                    $ 1,282,955   $ 2,204,564     (921,609 ) (42% )

• Depreciation increased by $2,203 due to full depreciation on the two new vehicles acquired last year's quarter.





•  Postage shipping and freight decreased by $118,489 due to lower sales.

• Marketing and advertising decreased by $333,607 due to aggressive promotional efforts in 2021 to drive sales to our proprietary websites and build our brands. For the quarter ended April 30, 2022 the spending has resumed to usual levels.

• E Commerce Services, Commissions and Fees decreased by $85,430 due to lower sales.

• Personnel Costs decreased by $92,194 due to staff reductions as a result of lower demand.

• General and Administrative decreased by $294,092 due to a decrease of $272,320 in investor relations costs as a result of the REG A subscription offering in the prior year's quarter and a reduction of $57,516 in professional fees due to associated reporting and business requirements of the afore mentioned REG A subscription from the prior year's quarter. These decreases were partially offset by increases in insurance costs.





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Other Income (Expense)

The following table shows our other income and expenses for the three months ended April 30, 2022 and 2021:





                                                                    Change
Other Income (Expense)              2022          2022           $            %
Gain (Loss) on Derivatives      $   (337,737 ) $    4,187       (341,924 ) (8,166% )
Gain on Settlement of Debt             3,589      914,049       (910,460 )   (100% )

Amortization of Debt Discount (725,280 ) (128,528 ) (596,752 ) 464% Interest Expense

                    (513,702 )   (114,907 )     (398,795 )    347%

Total Other Income (Expense) $ (1,573,130 ) $ 674,801 (2,247,931 ) (333% )

The changes above can be explained by the increase in convertible debt this quarter ended April 30,2022. Convertible debt increased to $5,603,400 from $521,500 so accordingly there were large increases in amortization expense and interest expense. As a result of the debt exchanges and settlements for the quarter ended April 30, 2021, the gain on settlement of debt was higher. The higher loss on derivatives is a function of the market factors in the valuation of the derivative liability described in Note 8.

We had a net loss of $2,594,158 for three months ended April 30, 2022, compared to net income of $567,557 for three months ended April 30, 2021. The decrease in net income was mainly due to the lower sales and higher financing costs for the current year's quarter as well as the gain on settlement in debt that occurred in the three months ended April 30, 2021. These changes were partially offset by a large decrease in operating expenses for reason set out above.

Liquidity and Capital Resources

Management believes that we will continue to incur losses for the immediate future. Therefore, we will need additional equity or debt financing until we can achieve profitability and positive cash flows from operating activities, if ever. These conditions raise substantial doubt about our ability to continue as a going concern. Our unaudited consolidated financial statements do not include any adjustments relating to the recovery of assets or the classification of liabilities that may be necessary should we be unable to continue as a going concern.

As of April 30, 2022, we had a cash balance of $461,060, inventory of $398,881 and $10,429,545 in current liabilities. At the current cash consumption rate, we will need to consider additional funding sources going forward. We are taking proactive measures to reduce operating expenses and drive growth in revenue.

The successful outcome of future activities cannot be determined at this time and there is no assurance that, if achieved, we will have sufficient funds to execute our intended business plan or generate positive operating results.





Capital Resources

The following table summarizes total current assets, liabilities and working capital (deficit) for the periods indicated:





                              April 30, 2022     January 31, 2022
Current assets               $        899,253   $          564,615
Current liabilities                10,429,545            8,890,462

Working capital (deficits) $ (9,530,292 ) $ (8,325,847 )

Net cash used in operations for the three months ended April 30, 2022 was $1,725,709 as compared to net cash used in operations of $820,458 for the three months ended April 30, 2021. Net cash used in investing activities for the three months ended April 30, 2022 was $1,142 as compared to $35,000 for the same period in 2021. Net cash provided by financing activities for the three months ended April 30, 2022 was $2,110,413 as compared to $1,920,115 for the three months ended April 30, 2021.





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