The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of our condensed
consolidated results of operations and financial condition. The discussion
should be read in conjunction with the unaudited condensed consolidated
financial statements and notes thereto contained in this Quarterly Report on
Form 10-Q and the audited consolidated financial statements and notes thereto
for the year ended March 31, 2021 contained in the Current Report on Form 8-K
filed with the SEC on June 7, 2021. This discussion contains forward-looking
statements and involves numerous risks and uncertainties, including, but not
limited to, those described in the "Risk Factors" sections of our Annual Report
on Form 10-K for the year ended March 31, 2021, as amended, and of this
Quarterly Report on Form 10-Q. Actual results may differ materially from those
contained in any forward-looking statements. Unless the context otherwise
requires, references to "we", "us", "our", "the Company" and "BARK" are intended
to mean the business and operations of The Original BARK Company and its
condensed consolidated subsidiaries. The unaudited condensed consolidated
financial statements for the three and six months ended September 30, 2021 and
2020, respectively, present the financial position and results of operations of
The Original BARK Company and its wholly-owned subsidiaries.
Overview
Founded in 2012, BARK is one of the largest digitally native, and vertically
integrated dog brands in the world today. Our dog-obsessed team is devoted to
making all dogs happy through innovative products across the Play, Food, Health,
and Home categories. We foster lifelong relationships with our customers and
their pups, which drives strong customer retention and lifetime value. BARK
loyally serves dogs with themed toys and treats subscriptions, BarkBox and BARK
Super Chewer; custom product collections through retail partners, including
Target and Amazon; its highly-personalized nutrition and meal plans with BARK
Eats; and health and wellness products with BARK Bright. As a direct to
consumer-first company, our growing data and machine-learning capabilities
inform future product development and enable BARK to provide highly personalized
experiences and product offerings for dog parents nationwide. At BARK, we want
to make dogs as happy as they make us because dogs and humans are better
together.
Impact of COVID-19
The extent to which the COVID-19 pandemic will continue to impact our business
will depend on future developments related to the geographic spread of the
disease, the duration and severity of the outbreak, travel restrictions,
required social distancing, governmental mandates, business closures or
governmental or business disruptions, and the effectiveness of actions taken in
the United States and other countries to prevent, contain and treat the virus
and any additional government stimulus programs. These impacts are highly
uncertain and cannot be predicted with certainty.
As this crisis unfolded, we monitored conditions closely and adapted our
operations to meet federal, state and local standards, while continuing to meet
the needs of the dogs and dog parents we serve and to ensure the safety and
well-being of our team members. While conditions appear to be improving, we are
still unable to predict the duration of the COVID-19 pandemic, including the
emergence and spread of variants of COVID-19, and therefore what the ultimate
impact of the COVID-19 pandemic will be on the broader economy or our operating
results, financial condition and cash flows. As such, risks still remain. Please
refer to the "Special Note Regarding Forward-Looking Statements" and the "Risk
Factors" in this Quarterly Report on Form 10-Q.
BARK continued to experience increases in inbound freight costs due to the
challenges in the current import market, as transpacific ships and trade lanes
continue to be overburdened with volume and experience a significant shortage of
equipment and capacity due to the COVID-19 pandemic. BARK also began to
experience supply chain disruptions, including increased demurrage fees related
to freight, during the second quarter of fiscal year 2022.
                                       25
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Key Performance Indicators
We use the following key financial and operating metrics to evaluate our
business and operations, measure our performance, identify trends affecting our
business, project our future performance, and make strategic decisions. These
key financial and operating metrics should be read in conjunction with the
following discussion of our results of operations and financial condition
together with our condensed consolidated financial statements and the related
notes and other financial information included elsewhere in this Quarterly
Report on Form 10-Q.
                                                          Three Months Ended                               Six Months Ended
                                                             September 30,                                   September 30,
                                                     2021                     2020                     2021                   2020
Subscription Shipments (in thousands)                       3,593                   2,675                  7,201               5,043
Average Monthly Subscription Shipment Churn                  7.1%                    5.3%                    7.2  %              5.7  %
Active Subscriptions (in thousands)                         2,089                   1,499                  2,089               1,499
New Subscriptions (in thousands)                              271                     252                    551                 555
CAC                                           $             51.71       $           43.98       $             50.01       $       36.80
LTV:CAC                                                      4.9x                    7.4x                      5.0x                8.4x
Average Order Value                           $             29.73       $           28.18       $             29.47       $       28.25


Subscription Shipments
We define Subscription Shipments as the total number of subscription product
shipments shipped in a given period. Subscription Shipments does not include
gift subscriptions or one-time subscription shipments.
Average Monthly Subscription Shipment Churn
Average Monthly Subscription Shipment Churn is calculated as the average number
of subscription shipments that have been cancelled in the last three months,
divided by the average monthly active subscription shipments in the last three
months. The number of cancellations used to calculate Average Monthly
Subscription Shipment Churn is net of the number of subscriptions reactivated
during the last three months.
Active Subscriptions
Our ability to expand the number of Active Subscriptions is an indicator of our
market penetration and growth. We define Active Subscriptions as the total
number of unique product subscriptions with at least one shipment during the
last 12 months. Active Subscriptions does not include gift subscriptions or
one-time subscription purchases.
New Subscriptions
We define New Subscriptions as the number of unique subscriptions with their
first shipment occurring in a period.
Customer Acquisition Cost
Customer Acquisition Cost ("CAC") is a measure of the cost to acquire New
Subscriptions in our Direct to Consumer business segment. This unit economic
metric indicates how effective we are at acquiring each New Subscription. CAC is
a monthly measure defined as media spend in our Direct to Consumer business
segment in the period indicated, divided by total New Subscriptions in such
period. Direct to Consumer media spend is primarily comprised of internet and
social media advertising fees.
Lifetime Value
Lifetime Value ("LTV") is the dollar value of each subscription as measured by
the cumulative Direct to Consumer Gross Profit for the average life of the
subscription.
                                       26
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Average Order Value
Average Order Value ("AOV") is Direct to Consumer revenue for the period divided
by Subscription Shipments for the same period.
Components of Our Results of Operations
We operate in two reportable segments: Direct to Consumer and Commerce, to
reflect the way our chief operating decision maker ("CODM") reviews and assesses
the performance of the business.
Revenue
Direct to Consumer
Direct to Consumer revenue consists of product sales through our monthly
subscription boxes, as well as sales through our website, BarkShop.com
("BarkShop"):
Toys and Treats Subscriptions-Our principal revenue generating products consist
of a tailored assortment of premium and highly durable toys and treats sold
through our BarkBox and Super Chewer monthly subscriptions. BarkBox and Super
Chewer subscription rates vary based on the type of subscription plan selected
by the customer, with Super Chewer's price point being slightly higher based on
additional costs of the more durable product, but resulting in similar gross
margins. Subscription plans are offered as monthly, six month or annual
commitments. Subscription revenue is recognized at a point in time as control is
transferred to the subscriber upon delivery of each monthly box.
On a monthly basis, toys and treats subscription customers have the option to
purchase additional toys, treats, or essential products to add to their
respective subscription boxes, through our add to box ("ATB") offering. ATB
revenue is recognized at a point in time as control is transferred to the
customer upon delivery of goods to the subscriber.
BARK Bright-BARK Bright revenue consists of sales of our health and wellness
solutions, with our initial product being a dental solution, sold primarily
through monthly subscriptions. Subscription revenue is recognized at a point in
time as control is transferred to the subscriber upon delivery of each monthly
box. Revenue for BARK Bright sales to retailers and through marketplaces is
recognized at a point in time upon delivery of goods.
BARK Eats-BARK Eats revenue consists of sales of personalized and nutritious
meals for dogs sold at a meal per day price. Revenue is recognized at a point in
time, as control is transferred to the customer upon delivery of goods.
BarkShop-BarkShop revenue consists of sales of individual toys, treats and other
products through our website, BarkShop. Revenue relating to the sale of goods on
BarkShop is recognized at a point in time as control is transferred to the
customer upon delivery of goods.
Commerce
We also generate revenue from product sales to retailers and through
marketplaces. See below for additional information on each offering.
Retail-Retail revenue consists of sales of individual BARK toys, treats, and
BARK Bright health and wellness solutions, mainly through major retailers.
Revenue is recognized upon delivery to retailer.
Online Marketplaces-Online marketplaces revenue consists of sales of BARK Bright
health and wellness solutions and BARK Home products sold through major
marketplaces. BARK Home consists of an assortment of proprietary essential
products for daily life, including dog beds, bowls, collars, harnesses and
leashes. Online marketplaces revenue is recognized upon delivery of goods to the
end customer.
                                       27
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Cost of Revenue
Cost of revenue primarily consists of the purchase price of inventory sold,
inbound freight costs associated with inventory, shipping supply costs, and
inventory shrinkage costs.
Operating Expenses
Operating expenses consist of general and administrative and advertising and
marketing expenses.
General and Administrative
General and administrative expenses consists primarily of compensation and
benefits costs, including stock-based compensation expense, office expense,
including rent, insurance, professional service fees, and other general overhead
costs including depreciation and amortization of fixed and intangible assets,
account management support teams, and commissions. General and administrative
expenses also includes fees charged by third parties that provide payment
processing services, fulfillment costs, which represent costs incurred in
operating and staffing fulfillment and customer service centers, including costs
attributable to receiving, inspecting, picking, packaging and preparing customer
orders for shipment, outbound freight costs associated with shipping orders to
customers, and responding to inquiries from customers.
We expect to incur additional general and administrative expenses as a result of
becoming a public company, including expenses related to compliance and
reporting obligations of public companies, and increased costs for insurance,
investor relations expenses, and professional services. As a result, we expect
that our general and administrative expenses will increase in absolute dollars
in future periods and vary from period to period as a percentage of revenue.
Advertising and Marketing
Advertising and marketing expense consists primarily of internet advertising,
promotional items, agency fees, other marketing costs and compensation and
benefits expenses, including stock-based compensation expense, for employees
engaged in advertising and marketing.
Interest Expense
Interest expense primarily consists of interest incurred under our line of
credit, term loan and convertible promissory notes agreements, and amortization
of debt issuance costs.
Other Income (Expense), Net
Other income (expense), net, primarily consists of changes in the fair value of
our warrant liabilities and loss on extinguishment of debt.
                                       28
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Results of Operations
We operate in two reportable segments to reflect the way our chief operating
decision maker ("CODM") reviews and assesses the performance of the business.
See Note 2, "Summary of Significant Accounting Policies," in our condensed
consolidated financial statements for the three and six months ended
September 30, 2021 and 2020 included elsewhere in this Quarterly Report on Form
10-Q.
                                            Three Months Ended                                                   Six Months Ended
                                               September 30,                                                       September 30,
                                       2021                    2020                % Change                2021                     2020                 % Change
                                              (in thousands)
Condensed Consolidated Statement
of Operation Data:
Revenue
Direct to Consumer                   $106,817                 $75,368               41.7%            $212,193                  $142,468                       48.9  %
Commerce                              13,345                  11,045                20.8%            25,575                    18,753                         36.4  %
Total revenue                        120,162                  86,413                39.1%            237,768                   161,221                        47.5  %
Cost of revenue
Direct to Consumer                    42,499                  29,052                46.3%            83,319                    53,168                         56.7  %
Commerce                              7,777                    5,807                33.9%            14,772                    9,579                          54.2  %
Total cost of revenue                 50,276                  34,859                44.2%            98,091                    62,747                         56.3  %
Gross profit                          69,886                  51,554                35.6%            139,677                   98,474                         41.8  %
Operating expenses:
General and administrative            68,235                  39,279                73.7%                 137,734                   71,315                    93.1  %
Advertising and marketing             17,075                  12,958                31.8%            34,225                    24,533                         39.5  %
Total operating expenses              85,310                  52,237                63.3%            171,959                   95,848                         79.4  %
Income (Loss) from operations        (15,424)                  (683)                 N/M             (32,282)                  2,626                       N/M
Interest expense                     (1,296)                  (1,906)               -32.0%           (2,857)                   (3,420)                    -16.5%
Other income (expense), net           23,175                   1,211                 N/M             16,790                    1,432                    

N/M


Net Income (Loss) before income
taxes                                 6,455                   (1,378)                N/M             (18,349)                  638                         N/M
Provision for income taxes              -                 -                          0.0%            -                         -                           0.0%
Net Income (Loss)                     $6,455                 $(1,378)                N/M             $(18,349)                 $638                        0.0%

N/M means not meaningful.


                                       29
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Comparison of the Three Months Ended September 30, 2021 and September 30, 2020
Revenue
                            Three Months Ended
                               September 30,
                            2021           2020         $ Change      % Change
                                     ( in thousands)
Revenue
Direct to Consumer      $ 106,817       $ 75,368       $ 31,449         41.7  %
Commerce                   13,345         11,045          2,300         20.8  %
Total revenue           $ 120,162       $ 86,413       $ 33,749         39.1  %
Percentage of Revenue
Direct to Consumer           88.9  %        87.2  %
Commerce                     11.1  %        12.8  %



Direct to Consumer revenue increased by $31.4 million, or 41.7%, for the three
months ended September 30, 2021 compared to the three months ended September 30,
2020. This increase was primarily driven by the 34.3% or 0.9 million increase in
Subscription Shipments, in addition to a 5.5% increase in average order value.
Commerce revenue increased by $2.3 million for the three months ended
September 30, 2021 compared to the three months ended September 30, 2020. This
increase was primarily driven by the addition of new retail partners since
September 30, 2020, as well as volume increases amongst existing retailer
partners.
Gross Profit
                            Three Months Ended
                              September 30,
                           2021           2020         $ Change      % Change
                                    ( in thousands)
Gross Profit
Direct to Consumer        64,318         46,316         18,002         38.9 

%


Commerce                   5,568          5,238            330          6.3 

%

Total gross profit $ 69,886 $ 51,554 $ 18,332 35.6

%

Percentage of revenue 58.2 % 59.7 %




Direct to Consumer and Commerce gross profit increased by $18.0 million and $0.3
million, respectively, for the three months ended September 30, 2021 compared to
the three months ended September 30, 2020, driven by the $33.7 million increase
in revenue during the period.
Gross profit as a percentage of revenue decreased 1.5% for the three months
ended September 30, 2021 compared to the three months ended September 30, 2020.
This decrease was primarily due to increased costs related to inbound freight,
partially offset by lower product costs during the period.
                                       30
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Operating Expenses
General and Administrative Expense
                                                    Three Months Ended September 30,
                                                        2021                   2020              $ Change              % Change
                                                                       ( in thousands)
General and administrative                       $        68,235           $   39,279          $   28,956                73.7%
Percentage of revenue                                       56.8   %             45.5  %


General and administrative expense increased by $29.0 million, or 73.7%, for the
three months ended September 30, 2021 compared to the three months ended
September 30, 2020. This increase during the period was primarily due to:
increased fulfillment and shipping costs of $15.6 million; increased
compensation expense of $8.4 million, including $3.7 million of stock-based
compensation; and increased other general and administrative expenses of $5.0
million primarily related to increased insurance, audit, professional, and legal
fees due to growth of operations and requirements as a new publicly traded
company.

Advertising and Marketing
                                                    Three Months Ended September 30,
                                                        2021                   2020               $ Change              % Change
                                                                       ( in thousands)
Advertising and marketing                        $        17,075           $   12,958          $     4,117                31.8%
Percentage of revenue                                       14.2   %             15.0  %


Advertising and marketing expense increased by $4.1 million, or 31.8%, for the
three months ended September 30, 2021 compared to the three months ended
September 30, 2020. This increase was primarily due to additional media
advertising spend to acquire New Subscriptions during the period, as well as the
increase in CAC of $7.73 due to media rates exceeding pre-COVID levels during
the period.
Interest Expense
                                Three Months Ended September 30,
                               2021                             2020       

$ Change % Change


                                                ( in thousands)
Interest expense        $        (1,296)                     $ (1,906)      $     610        -32.0%
Percentage of revenue              (1.1)  %                      (2.2) %


Interest expense decreased by $0.6 million, or -32.0%, for the three months
ended September 30, 2021 compared to the three months September 30, 2020. This
decrease was due primarily to lower non-cash interest in connection with our
convertible promissory notes during the period.
                                       31
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Other Income (Expense), Net


                                                     Three Months Ended September 30,
                                                         2021                   2020              $ Change              % Change
                                                                       ( in thousands)
Other income (expense), net                      $         23,175           $    1,211          $   21,964                 N/M
Percentage of revenue                                        19.3   %              1.4  %
N/M means not meaningful.


Other income (expense) increased by $22.0 million for the three months ended
September 30, 2021 compared to the three months ended September 30, 2020. This
increase in other income (expense), net, was primarily due to the $23.4 million
of income related to the changes in fair value of our warrant liabilities during
the period.

Comparison of the Six Months Ended September 30, 2021 and September 30, 2020
Revenue
                              Six Months Ended
                               September 30,
                            2021            2020         $ Change      % Change
                                     ( in thousands)
Revenue
Direct to Consumer      $ 212,193       $ 142,468       $ 69,725         48.9%
Commerce                $  25,575       $  18,753       $  6,822         36.4%
Total revenue           $ 237,768       $ 161,221       $ 76,547         47.5%
Percentage of Revenue
Direct to Consumer           89.2  %         88.4  %
Commerce                     10.8  %         11.6  %



Direct to Consumer revenue increased by $69.7 million, or 48.9%, for the six
months ended September 30, 2021 compared to the six months ended September 30,
2020. This increase was primarily driven by the 42.8% or 2.2 million increase in
Subscription Shipments, in addition to a 4.3% increase in average order value
during the period.
Commerce revenue increased by $6.8 million for the six months ended
September 30, 2021 compared to the six months ended September 30, 2020. This
increase was primarily driven by the addition of new retail partners since
September 30, 2020, as well as volume increases amongst existing retailer
partners during the period.
                                       32
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Gross Profit
                             Six Months Ended
                               September 30,
                            2021           2020         $ Change      % Change
                                     ( in thousands)
Gross Profit
Direct to Consumer      $ 128,874       $ 89,300       $ 39,574         44.3%
Commerce                $  10,803       $  9,174       $  1,629         17.8%

Total gross profit $ 139,677 $ 98,474 $ 41,203 41.8% Percentage of revenue 58.7 % 61.1 %




Direct to Consumer and Commerce gross profit increased by $39.6 million and $1.6
million, respectively, for the six months ended September 30, 2021 compared to
the six months ended September 30, 2020, driven by the $76.5 million increase in
revenue during the period.
Gross profit as a percentage of revenue decreased 2.3% for the six months ended
September 30, 2021 compared to the six months ended September 30, 2020. This
decrease was primarily due to increased costs related to inbound freight during
the period.
Operating Expenses
General and Administrative Expense
                                                     Six Months Ended September 30,
                                                        2021                   2020              $ Change              % Change
                                                                       ( in thousands)
General and administrative                       $       137,734           $   71,315          $   66,419                93.1%
Percentage of revenue                                       57.9   %             44.2  %


General and administrative expense increased by $66.4 million, or 93.1%, for the
six months ended September 30, 2021 compared to the six months ended
September 30, 2020. This increase during the period was primarily due to:
increased fulfillment and shipping costs of $32.9 million; increased
compensation expense of $18.4 million, including $6.8 million of stock-based
compensation; and increased other general and administrative expenses of $9.9
million primarily related to increased insurance, audit, professional, and legal
fees due to growth of operations and requirements as a new publicly traded
company.

Advertising and Marketing
                                                     Six Months Ended September 30,
                                                        2021                  2020               $ Change              % Change
                                                                       ( in thousands)
Advertising and marketing                        $       34,225           $   24,533          $     9,692                39.5%
Percentage of revenue                                      14.4   %             15.2  %

Advertising and marketing expense increased by $9.7 million, or 39.5%, for the six months ended September 30, 2021 compared to the six months ended September 30, 2020. This increase was primarily due to


                                       33
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additional media advertising spend to acquire New Subscriptions during the
period, as well as the increase in CAC of $13.21 due to media rates exceeding
pre-COVID levels during the period.
Interest Expense
                               Six Months Ended September 30,
                               2021                          2020         $ Change       % Change
                                              ( in thousands)
Interest expense        $       (2,857)                   $ (3,420)      $     563        -16.5%
Percentage of revenue             (1.2)  %                    (2.1) %


Interest expense decreased by $0.6 million, or -16.5%, for the six months ended
September 30, 2021 compared to the six months September 30, 2020. This decrease
was due primarily to lower non-cash interest in connection with our convertible
promissory notes during the period.
Other Income (Expense), Net
                                                     Six Months Ended September 30,
                                                        2021                   2020              $ Change              % Change
                                                                       ( in thousands)
Other income (expense), net                      $        16,790           $    1,432          $   15,358                 N/M
Percentage of revenue                                        7.1   %              0.9  %
N/M means not meaningful.


Other income (expense), net increased by $15.4 million for the six months ended
September 30, 2021 compared to the six months ended September 30, 2020. This
increase in other income (expense), net, was primarily due to the $19.5 million
of other income related to the changes in fair value of our warrant liabilities,
offset by $2.6 million of expense related to the loss on extinguishment of debt
incurred from conversion of the 2019 and 2020 Notes in connection with the
Merger.
Non-GAAP Financial Measures
We report our financial results in accordance with GAAP. However, management
believes that Adjusted Net Income (Loss), Adjusted Net Income (Loss) Margin,
Adjusted Net Income (Loss) Per Common Share, Adjusted EBITDA and Adjusted EBITDA
Margin, all non-GAAP financial measures (together the "Non-GAAP Measures"),
provide investors with additional useful information in evaluating our
performance.
We calculate Adjusted Net Income (Loss) as net income (loss), adjusted to
exclude: (1) stock-based compensation expense, (2) change in fair value of
warrants and derivatives, (3) sales and use tax expense, (4) one-time
transaction costs associated with the financing and merger, (5) demurrage fees
related to freight and (6) other one-time items.
We calculate Adjusted Net Income (Loss) Margin by dividing Adjusted Net Income
(Loss) for the period by Revenue for the period.
We calculate Adjusted Net Income (Loss) Per Common Share by dividing Adjusted
Net Income (Loss) for the period by weighted average common shares used to
compute net loss per share attributable to common stockholders for the period.
We calculate Adjusted EBITDA as net income (loss), adjusted to exclude: (1)
interest expense, (2) depreciation and amortization, (3) stock-based
compensation expense, (4) change in fair value of warrants and derivatives, (5)
sales and use tax expense, (6) one-time transaction costs associated with the
financing and merger, (7) demurrage fees related to freight and (8) other
one-time items.
                                       34
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We calculate Adjusted EBITDA Margin by dividing Adjusted EBITDA for the period
by revenue for the period.
The Non-GAAP Measures are financial measures that are not required by, or
presented in accordance with GAAP. We believe that the Non-GAAP Measures, when
taken together with our financial results presented in accordance with GAAP,
provides meaningful supplemental information regarding our operating performance
and facilitates internal comparisons of our historical operating performance on
a more consistent basis by excluding certain items that may not be indicative of
our business, results of operations or outlook. In particular, we believe that
the use of the Non-GAAP Measures are helpful to our investors as they are
measures used by management in assessing the health of our business, determining
incentive compensation and evaluating our operating performance, as well as for
internal planning and forecasting purposes.
The Non-GAAP Measures are presented for supplemental informational purposes
only, have limitations as an analytical tool and should not be considered in
isolation or as a substitute for financial information presented in accordance
with GAAP. Some of the limitations of the Non-GAAP Measures include that (1) the
measures do not properly reflect capital commitments to be paid in the future,
(2) although depreciation and amortization are non-cash charges, the underlying
assets may need to be replaced and Adjusted EBITDA and Adjusted EBITDA Margin do
not reflect these capital expenditures, (3) Adjusted EBITDA and Adjusted EBITDA
Margin do not consider the impact of stock-based compensation expense, which is
an ongoing expense for our company and (4) Adjusted EBITDA and Adjusted EBITDA
Margin do not reflect other non-operating expenses, including interest expense.
In addition, our use of the Non-GAAP Measures may not be comparable to similarly
titled measures of other companies because they may not calculate the Non-GAAP
Measures in the same manner, limiting its usefulness as a comparative measure.
Because of these limitations, when evaluating our performance, you should
consider the Non-GAAP Measures alongside other financial measures, including our
net income (loss) and other results stated in accordance with GAAP.
The following table presents a reconciliation of Adjusted Net Income (Loss) to
Net Income (Loss), the most directly comparable financial measure stated in
accordance with GAAP, and the calculation of net income (loss)
                                       35
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margin, Adjusted Net Income (Loss) Margin and Adjusted Net Income (Loss) Per
Common Share for the periods presented:
Adjusted Net Income (Loss)
                                  Three months ended September 30,          

Six months ended September 30,


                                       2021                2020                2021                2020
                                                    (in thousands, except per share data)
Net income (loss)                 $    6,455           $  (1,378)         $  (18,349)          $      638
Stock-based compensation expense       3,729               1,004               6,827                1,392
Change in fair value of warrants
and derivatives                      (23,407)             (1,229)            (19,508)              (1,263)
Sales and use tax expense (1)              -                 243                   -                  841
Transaction costs (2)                    442                   -               5,640                    -
Demurrage fees                           735                   -                 735                    -
Other one-time items (3)               1,014                   -               3,612                    -
Adjusted net income (loss)        $  (11,032)          $  (1,360)         $  (21,043)          $    1,608
Less: Earnings attributable to
participating securities                   -                   -                   -               (1,608)
Net income (loss) attributable to
common stockholders-basic and
diluted                           $  (11,032)          $  (1,360)         $  (21,043)          $        -
Net income (loss) margin                5.37   %           (1.59) %            (7.72)  %             0.40  %
Adjusted net income (loss) margin      (9.18)  %           (1.57) %            (8.85)  %             1.00  %

Adjusted net income (loss) per
common share - basic and diluted  $    (0.07)          $   (0.03)         $    (0.15)          $        -
Weighted average common shares
used to compute net loss per
share attributable to common
stockholders - basic and diluted     169,173,509         45,889,103         

139,133,082 45,704,365


                                       36
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The following table presents a reconciliation of Adjusted EBITDA to net loss,
the most directly comparable financial measure stated in accordance with GAAP,
and the calculation of net loss margin and Adjusted EBITDA margin for the
periods presented:
Adjusted EBITDA
                                         Three Months Ended                         Six Months Ended
                                            September 30,                             September 30,
                                      2021                 2020                 2021                 2020
                                           (in thousands)                            (in thousands)
Net income (loss)                $     6,455          $    (1,378)         $   (18,349)         $       638
Interest expense                       1,296                1,906                2,857                3,420
Depreciation and amortization
expense                                  957                  528                1,801                1,036
Stock-based compensation expense       3,729                1,004                6,827                1,392
Change in fair value of warrants
and derivatives                      (23,407)              (1,229)             (19,508)              (1,263)
Sales and use tax expense (1)              -                  243                    -                  841
Transaction costs (2)                    442                    -                5,640                    -
Demurrage fees                           735                    -                  735                    -
Other one-time items (3)               1,014                    -                3,612                    -
Adjusted EBITDA                  $    (8,778)         $     1,074          $   (16,385)         $     6,064
Net loss margin                         5.37  %             (1.59) %             (7.72) %              0.40  %
Adjusted EBITDA margin                 (7.31) %              1.24  %             (6.89) %              3.76  %



(1) Sales and use tax expense relates to recording a liability for sales and use
tax we did not collect from our customers. Historically, we had collected state
or local sales, use, or other similar taxes in certain jurisdictions in which we
only had physical presence. On June 21, 2018, the U.S. Supreme Court decided, in
South Dakota v. Wayfair, Inc. that state and local jurisdictions may, at least
in certain circumstances, enforce a sales and use tax collection obligation on
remote vendors that have no physical presence in such jurisdiction. A number of
states have positioned themselves to require sales and use tax collection by
remote vendors and/or by online marketplaces. The details and effective dates of
these collection requirements vary from state to state and accordingly, we
recorded a liability in those periods in which we created economic nexus based
on each state's requirements. Accordingly, we now collect, remit, and report
sales tax in all states that impose a sales tax.
(2)Transactions costs represent non-recurring consulting and advisory costs with
respect to the merger agreement entered into with Northern Star Acquisition
Corp. on December 16, 2020.

(3)For the three months ended September 30, 2021, other one-time items is
comprised of SOX implementation fees of $0.3 million, executive transition
costs, including recruiting, bonus and relocation related expense of $0.3
million, loss on exercise of warrants of $0.3 million and restructuring related
expenses of $0.1 million. For the six months ended September 30, 2021, other
one-time items is comprised of loss on extinguishment of debt of $2.6 million,
SOX implementation fees of $0.3 million, executive transition costs, including
recruiting, bonus and relocation related expenses of $0.3 million, loss on
exercise of warrants of $0.3 million and restructuring related expenses of $0.1
million.

Liquidity and Capital Resources
Since inception, we have funded our operations with proceeds from sales of our
capital stock and proceeds from borrowings in addition to cash generated by our
operations. As of September 30, 2021, we had cash and cash equivalents of
approximately $272.6 million. We expect that our cash and cash equivalents,
together with cash provided by our operating activities and proceeds from
borrowings (as defined below), will be sufficient to fund our operations for at
least the next 12 months. We are required to comply with certain financial and
non-financial covenants related to our borrowing agreements, which we expect to
be in compliance with during the next 12 months. Our future capital requirements
will depend on many factors, including our pace of new and existing customer
growth and our investments in partnerships and unexplored channels. We may be
required to seek additional equity or debt financing.
                                       37
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Western Alliance Bank-Line of Credit and Term Loan
In October 2017, we entered into a new loan and security agreement (the "Western
Alliance Agreement") and issued a warrant to purchase preferred stock to Western
Alliance Bank ("Western Alliance"), which provides for a secured revolving line
of credit (the "Credit Facility") in an aggregate principal amount of up to
$35.0 million with a maturity date of October 12, 2020.
On December 7, 2018, we amended the Western Alliance Agreement, which included
the issuance of a warrant to purchase common stock to Western Alliance. The
modification to the agreement provided for an additional term loan of $10.0
million at issuance and an incremental seasonal loan of $5.0 million. The
seasonal loan matured and was repaid on March 31, 2020.
On July 31, 2020, we amended the Western Alliance Agreement, and extended the
expiration of the warrants to July 31, 2030. The modification to the Western
Alliance Agreement amended the maturity date of the Credit Facility to August
12, 2021.
On November 27, 2020, we repaid the outstanding $10.0 million principal of the
term loan with Western Alliance Bank, as well as $0.2 million of early repayment
fees, using proceeds from the issuance of the 2025 Convertible Notes (the "2025
Convertible Notes"). See further discussion of the 2025 Convertible Notes
issuance below.
In conjunction with the 2025 Convertible Notes issuance, the Company amended the
Western Alliance Agreement to extend the Credit Facility repayment date from
August 12, 2021 to December 31, 2021.
On January 22, 2021, we amended the Western Alliance Agreement to extend the
Credit Facility maturity date to May 31, 2022.
On June 15, 2021, in connection with the Merger, the Company repaid the
outstanding balance on the Credit Facility, and as of September 30, 2021 there
are no outstanding borrowings under the Credit Facility. The full amount of the
Credit Facility of $35.0 million remains available to be borrowed by the Company
if or when needed through the termination date of the agreement of May 31, 2022.
On October 29, 2021, the Company and Western Alliance entered into the eleventh
loan and security modification agreement, which increased the sublimit for
foreign exchange services and export, import, and standby letters of credit
under the Company's existing loan and security agreement with Western Alliance
to $2.7 million
The interest rate for borrowings under the Credit Facility, as amended, is equal
to (i) the greater of the prime rate that is published in the Money Rates
section of The Wall Street Journal from time to time (the "Prime Rate") and
5.25%, plus (ii) half of one percent (0.50%), per annum. As of March 31, 2021
and 2020 the weighted-average interest rate for the Western Alliance Credit
Facility and term loans was 5.75% and 6.09%, respectively.
The Credit Facility has a borrowing base subject to an amount equal to eighty
percent (80%) of our trailing three months of subscription revenue. Western
Alliance has a first lien perfected security interest in substantially all of
our assets, including our rights to our intellectual property.
Under the terms of this Credit Facility, we are required to comply with certain
financial and nonfinancial covenants, including covenants to maintain certain
liquidity amounts, as defined in the Western Alliance Agreement, as amended.
Convertible Promissory Notes
On December 19, 2019, we entered into a note purchase agreement and issued
individual convertible promissory notes thereunder, with an option for
subsequent closings through May 1, 2020 for up to $10.0 million in aggregate
principal. We received gross proceeds of $3.9 million in two December 2019
closings. The notes bore interest at a rate of 7% per year, capitalized
quarterly, and payable in kind. The notes have a maturity date of December 19,
2024, unless previously converted into equity securities pursuant to the terms
of the note purchase agreement.
                                       38
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On March 31, 2020, we entered into a note purchase agreement and issued
individual convertible promissory notes thereunder, with an option for
subsequent closings through May 1, 2020 for up to $10.0 million in aggregate
principal. We received gross proceeds of $1.5 million from the initial closing
of the note purchase agreement on March 31, 2020 with employees, founders, and
existing investors, representing a related party transaction. The agreement
consisted of both Pro Rata Notes and Super Pro Rata Notes. Pro-Rata Notes are
defined as one or more promissory notes issued to each lender with respect to
the amount of the lender's consideration, up to the lender's pro rata amount as
set forth in the note purchase agreement. Super Pro-Rata Notes are defined as
one or more promissory notes issued to each lender with respect to the lender's
amount of consideration paid in excess of their pro rata amount. The Super Pro
Rata Notes bore interest at a rate of 10% per year, capitalized quarterly, and
payable in kind, while the Pro Rata Notes bear interest at a rate of 8% per
year, capitalized quarterly, and payable in kind. Both the Pro Rata and Super
Pro Rata notes have a maturity date of March 30, 2023, unless previously
converted into equity securities pursuant to the terms of the note purchase
agreement.
On May 1, 2020, we received gross proceeds of $1.0 million from the second
closing of the March 31, 2020 note purchase agreement with existing investors.
On June 18, 2020, we amended a previously existing term loan agreement, which
extended the initial principal repayment period. In consideration of the
modification, we issued to the lender convertible promissory notes under the
March 31, 2020 note purchase agreement of $0.8 million from the third closing of
the March 31, 2020 note purchase agreement.
On December 16, 2020, in connection with the execution of the Merger Agreement,
we amended the note purchase agreements associated with the convertible notes
issued in 2019 and 2020 to amend the conversion terms of the notes.
On June 1, 2021, in connection with the closing of the Merger, the outstanding
principal and interest of the 2019 Notes and 2020 Notes were converted to
1,135,713 shares of our common stock, with a fair value of $12.7 million. The
conversion of the notes resulted in a loss on extinguishment of $2.6 million
recorded to other expense included in other income, net on the condensed
consolidated statement of operations and comprehensive loss, as well as a
capital contribution of $0.7 million recorded to additional paid-in-capital on
the condensed consolidated balance sheet for the portion of the loss associated
with the 2020 Notes which were with related parties.
Paycheck Protection Program
On April 24, 2020, we received funds of $5.2 million under the Paycheck
Protection Program ("PPP"), a part of the CARES Act. The loan was serviced by
Western Alliance Bank, and the application for these funds required us to, in
good faith, certify that the current economic uncertainty made the loan
necessary to support ongoing operations. On June 11, 2021, we voluntarily repaid
the outstanding principal and interest amounts outstanding of the PPP loan.
2025 Convertible Notes
On November 27, 2020, we issued $75.0 million aggregate principal amount of 2025
Convertible Notes to Magnetar Capital, LLC ("Magnetar"). We received net
proceeds of approximately $74.7 million from the sale of the 2025 Convertible
Notes, after deducting fees and expenses of approximately $0.3 million.
We used approximately $27.6 million of the net proceeds from the sale of the
2025 Convertible Notes to repay the outstanding term loans with Western Alliance
Bank and Pinnacle Ventures, LLC ("Pinnacle"), which included $2.0 million of
early repayment fees related to the Pinnacle loan.
The 2025 Convertible Notes are governed by an indenture, dated as of November
27, 2020, between us and U.S. Bank National Association, as trustee and
collateral agent. The 2025 Convertible Notes will bear interest at the annual
rate of 5.50%, payable annually on December 1st commencing December 1, 2021,
compounded annually. The 2025 Convertible Notes will mature on December 1, 2025,
unless earlier converted, redeemed or repurchased.

                                       39
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Cash Flows
Comparison of the Six Months Ended September 30, 2021 and 2020.
The following table summarizes our cash flows for the six months ended
September 30, 2021 and 2020:
                                                                Six Months Ended September 30,
                                                                  2021                     2020
                                                                        (in thousands)

Net cash (used in) provided by operating activities $ (108,019) $ 8,481 Net cash used in investing activities

                               (11,003)                (2,838)
Net cash provided by financing activities                           354,168                  6,253
Net increase in cash and restricted cash                  $         235,146 

$ 11,896




Cash flows provided by/used in Operating Activities
Net cash flows in operating activities represent the cash receipts and
disbursements related to our activities other than investing and financing
activities.
Net cash flows used in operating activities is derived by adjusting our net loss
for:
•non-cash operating items such as depreciation and amortization, stock-based
compensation and other non-cash income or expenses;
•changes in operating assets and liabilities reflect timing differences between
the receipt and payment of cash associated with transactions.
For the six months ended September 30, 2021, net cash used in operating
activities was $108.0 million. The $108.0 million of net cash used in operating
activities consisted of net loss of $18.3 million adjusted for non-cash charges
totaling $12.3 million and a net decrease of $77.3 million in our net operating
assets and liabilities. The non-cash charges primarily consisted of $24.4
million for changes in fair value of warrants, $6.8 million for stock based
compensation, $2.6 million loss on extinguishment of debt and $1.8 million for
depreciation and amortization. The decrease in our net operating assets and
liabilities was driven by the changes in inventory of $52.9 million to support
current demand, accounts payable and accrued expenses of $15.3 million related
to increased expenditures to support general business growth, as well as the
timing of payments, other liabilities of $5.9 million, and prepaid expenses and
other current assets of $2.2 million. The decrease in our net operating assets
and liabilities was partially offset by the change in deferred revenue of $1.2
million, and accounts receivable of $2.0 million.
For the six months ended September 30, 2020, net cash provided by operating
activities was $8.5 million. The $8.5 million of net cash used in operating
activities consisted of net income of $0.6 million adjusted for non-cash charges
totaling $2.2 million and a net increase of $5.7 million in our net operating
assets and liabilities. The non-cash charges primarily consisted of $1.0 million
for depreciation and amortization, $1.4 million for stock based compensation and
$1.0 million for amortization of debt discount and deferred issuance costs. The
decrease in our net operating assets and liabilities was driven by the changes
in inventory of $23.0 million to support demand and accounts payable and accrued
expenses of $17.4 million related to expenditures to support general business
operations, as well as the timing of payments. The decrease in our net operating
assets and liabilities was partially offset by the change in deferred revenue of
$5.5 million and other liabilities of $8.2 million.
Cash flows used in Investing Activities
For the six months ended September 30, 2021 and 2020, net cash used in investing
activities was $11.0 million and $2.8 million, respectively, primarily due to
capital expenditures.
                                       40
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Cash flows provided by Financing Activities
For the six months ended September 30, 2021, net cash provided by financing
activities was $354.2 million, primarily due to proceeds of $227.1 million
proceeds from the Merger and proceeds from the PIPE of $200.0 million. The
increase in cash provided by financing activities was partially offset by the
repayments of outstanding borrowings on our line of credit of $34.3 million,
payments of transaction costs of $24.9 million, payment of deferred underwriting
fees $8.9 million, and repayment of the outstanding PPP loan of $5.2 million.
For the six months ended September 30, 2020, net cash provided by financing
activities was $6.3 million, primarily due to proceeds from debt of $5.2
million, proceeds from convertible notes of $1.0 million and proceeds from the
exercise of stock options of $0.4 million.
Critical Accounting Policies and Estimates
Our management's discussion and analysis of our financial condition and results
of operations is based on our condensed consolidated financial statements, which
have been prepared in accordance with U.S. GAAP. The preparation of these
condensed consolidated financial statements requires us to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the condensed
consolidated financial statements, as well as the reported revenue generated and
expenses incurred during the reporting periods. Our estimates are based on our
historical experience and various other factors that we believe are reasonable
under the circumstances, the results of which form the basis for making
judgments about items that are not readily apparent from other sources. Actual
results may differ from these estimates under different assumptions or
conditions.
Except as described in Note 2, "Summary of Significant Accounting Policies -
Recent Accounting Pronouncement Issued but Not Yet Adopted," to our condensed
consolidated financial statements included in this Quarterly Report on Form
10-Q, there have been no material changes to our critical accounting policies
and estimates as compared to the critical accounting policies and estimates
disclosed in our audited consolidated financial statements and notes thereto for
the year ended March 31, 2021 contained in the Current Report on Form 8-K filed
with the SEC on June 7, 2021.
Recent Accounting Pronouncements
A description of recently issued accounting pronouncements that may potentially
impact our financial position and results of operations is disclosed in Note 2
in our condensed consolidated financial statements contained in this Quarterly
Report on Form 10-Q.
JOBS Act Accounting Election
In April 2012, the JOBS Act was enacted. Section 107 of the JOBS Act provides
that an "emerging growth company" may take advantage of the extended transition
period provided in Section 7(a)(2)(B) of the Securities Act for complying with
new or revised accounting standards. Therefore, an emerging growth company can
delay the adoption of certain accounting standards until those standards would
otherwise apply to private companies. We have elected to use the extended
transition period under the JOBS Act. Accordingly, our financial statements may
not be comparable to the financial statements of public companies that comply
with such new or revised accounting standards.
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