NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1.ORGANIZATION AND DESCRIPTION OF BUSINESS
BARK, Inc. (the “Company”), a Delaware corporation formerly known as The Original BARK Company and, prior to the Merger, as defined below, Northern Star Acquisition Corp. ("Northern Star"), is an omnichannel brand serving dogs across the four key categories of Play, Food, Health and Home. The Company is located and headquartered in New York, New York.
On June 1, 2021 (the “Closing Date”), Northern Star completed the acquisition of Barkbox, Inc. (“Legacy BARK”), a Delaware corporation, pursuant to that certain Agreement and Plan of Reorganization (the “Merger Agreement”), dated December 16, 2020, by and among Northern Star, NSAC Merger Sub Corp., a Delaware corporation and wholly-owned subsidiary of Northern Star (“Merger Sub”), and Legacy BARK. At the Closing Date, Merger Sub merged with and into Legacy BARK, with Legacy BARK surviving the merger as a wholly owned subsidiary of Northern Star (the “Merger” and, collectively with the other transactions described in the Merger Agreement, the “Business Combination”). Also at the Closing Date, Northern Star changed its name to “The Original BARK Company.” On November 22, 2021, the Company changed its corporate name from The Original BARK Company to BARK, Inc.
The Merger was accounted for as a reverse recapitalization with Legacy BARK as the accounting acquirer and Northern Star as the acquired company for accounting purposes. Accordingly, all historical financial information presented in the audited consolidated financial statements represents the accounts of Legacy BARK and its wholly owned subsidiaries.
Prior to the Merger, Northern Star’s ordinary shares and warrants were traded on the New York Stock Exchange (“NYSE”) under the ticker symbols “STIC” and “STIC WS,” respectively. On the Closing Date, the Company's common stock and warrants began trading on the NYSE under the ticker symbols “BARK” and “BARK WS,” respectively. See Note 3, “Merger,” for additional details.
2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation—The consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America (US GAAP) as determined by the Financial Accounting Standards Board (“FASB”).
Use of Estimates—The preparation of the consolidated financial statements in conformity with US GAAP and regulations of the U.S. Securities and Exchange Commission requires management 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period covered by the financial statements and accompanying notes. The most significant estimates relate to determination of fair value of the Company’s allowance for uncollectible accounts receivable, allowance for inventory obsolescence, stock-based compensation and the valuation of embedded derivatives. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and records adjustments when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ from those estimates.
Principles of Consolidation—The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Impact of the COVID-19 Pandemic—The Company is closely monitoring the impact of the COVID-19 pandemic, including the emergence and spread of variants of COVID-19 on the U.S. and global economies and on
the Company’s operating results, financial condition and cash flows. The estimates of the impact COVID-19 may have on the Company’s business may change based on new information that may emerge concerning COVID-19, the actions to contain it or treat its impact and the economic impact on local, regional, national and international markets. The Company has not incurred any significant impairment losses in the carrying values of its assets as a result of the COVID-19 pandemic and is not aware of any specific related event or circumstance that could require the Company to revise the estimates reflected in its consolidated financial statements.
Liquidity and Capital Resources— Since inception, the Company has funded its operations primarily with cash flows from operations and issuances of preferred stock and convertible notes. On June 1, 2021, the Company completed the Business Combination, and as a result it received gross proceeds of approximately $427.1 million. The Company recognized net loss of $68.3 million, $31.4 million, and $31.4 million for the years ended March 31, 2022, 2021 and 2020, respectively. We expect that the Company’s cash resources will be sufficient to meet our liquidity, capital expenditure, and anticipated working capital requirements through the date which is twelve months from the date of filing this annual report.
As of March 31, 2022, the Company had no obligations, assets or liabilities, which would be considered off-balance sheet arrangements. The Company does not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements.
Segments—The Company has determined that its chief executive officer is the chief operating decision maker (“CODM”). The Company operates and manages the business as two reporting segments: Direct to Consumer and Commerce. See Note 15 for further details.
Fair Value of Financial Instruments—The Company’s financial instruments, including cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable, and accrued expenses, are carried at historical cost. At March 31, 2022 and 2021, the carrying amounts of these instruments approximated their fair values because of their short-term nature. The carrying amounts of the Company’s long-term debt approximate fair value based on consideration of current borrowing rates available to the Company.
Assets and liabilities recorded at fair value on a recurring basis in the consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair values. Fair value is defined as the exchange price that would be received for an asset or an exit price that would be paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The authoritative guidance on fair value measurements establishes a three-tier fair value hierarchy for disclosure of fair value measurements as follows:
Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;
Level 2—Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and
Level 3—Unobservable inputs that are supported by little or no market data for the related assets or liabilities.
The categorization of a financial instrument within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
The following summarizes assets and liabilities that are measured at fair value on a recurring basis, by level, within the fair value hierarchy (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| As of March 31, 2022 |
| Level 1 | | Level 2 | | Level 3 | | Total |
Liabilities | | | | | | | |
Public warrant liability(1) | $ | 5,516 | | | $ | — | | | $ | — | | | $ | 5,516 | |
Private warrant liability(1) | $ | — | | | $ | 2,963 | | | $ | — | | | $ | 2,963 | |
| $ | 5,516 | | | $ | 2,963 | | | $ | — | | | $ | 8,479 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| As of March 31, 2021 |
| Level 1 | | Level 2 | | Level 3 | | Total |
Liabilities | | | | | | | |
Preferred stock warrant liabilities(1) | $ | — | | | $ | — | | | $ | 133 | | | $ | 133 | |
Derivative liabilities(2) | — | | | — | | | $ | 4,883 | | | $ | 4,883 | |
| $ | — | | | $ | — | | | $ | 5,016 | | | $ | 5,016 | |
______________
(1)Included in accrued and other current liabilities.
(2)Included in other long-term liabilities.
A summary of the activity of the Level 3 liabilities carried at fair value on a recurring basis from March 31, 2021 through March 31, 2022 is as follows:
| | | | | |
| |
Balance at March 31, 2021 | $ | 5,016 | |
Change in fair value of preferred stock warrants | 664 | |
Settlement of derivative liability due to 2019 & 2020 Notes conversion | (4,883) | |
Settlement of warrant liability upon exercise of warrant | (797) | |
Balance at March 31, 2022 | $ | — | |
The Company’s outstanding warrants include publicly-traded warrants (the “Public Warrants”) which were issued as one-third of a warrant per unit issued during the Company’s initial public offering on November 10, 2020 (the “IPO”), and warrants sold in a private placement to Northern Star’s sponsor (the “Private Warrants”).
The Company evaluated its warrants under ASC 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity (ASC 815), and concluded that they do not meet the criteria to be classified in stockholders’ equity. Since the Public Warrants and Private Warrants meet the definition of a derivative under ASC 815, the warrants have been recorded as current liabilities on the balance sheet at fair value upon issuance, with subsequent changes in their respective fair values recognized in other income, net on the consolidated statements of operations and comprehensive income (loss) at each reporting date. See further disclosure on the change in fair value of Public and Private Warrant liabilities within Note 13, “Other Income - Net.”
Cash and Cash Equivalents—Cash and cash equivalents represent cash and highly liquid investments with an original contractual maturity at the date of purchase of three months or less. As of March 31, 2022 and 2021, cash consists primarily of checking and operating accounts.
Restricted Cash—The Company has restricted cash with its primary bank related lease security deposits. As of March 31, 2022, 2021 and 2020, the Company has classified $2.3 million and $1.5 million and $0, respectively within prepaid expenses and other current assets, as restricted cash.
Accounts Receivable—Net—Accounts receivable are stated at net realizable value. On a periodic basis, management evaluates its accounts receivable and determines whether to provide an allowance or if any accounts should be written off based on a past history of write-offs, collections and current credit conditions. A receivable is considered past due if the Company has not received payments based on agreed-upon terms. The Company generally does not require any security or collateral to support its receivables. The Company performs ongoing evaluations of its customers. As of March 31, 2022 and 2021, the Company had an allowance for doubtful accounts of approximately $0.3 million and less than $0.1 million, respectively.
Concentration of Credit Risk and Major Customers and Suppliers—Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company maintains cash and cash equivalents with one domestic financial institution of high credit quality.
The Company’s accounts receivable are derived from sales contracts with large retail customers. The Company maintains reserves for potential credit losses on customer accounts when deemed necessary.
Significant customers are those that represent more than 10% of the Company’s total revenues or gross accounts receivable balance at each balance sheet date. For the fiscal years ended March 31, 2022 and 2021, the Company did not have any customers that accounted for 10% or more of total revenues. The Company had two customers that accounted for 59% and three customers that accounted for 84% of gross accounts receivable as of March 31, 2022 and 2021, respectively. The Company’s accounts receivable relates to sales to customers within the Commerce segment, which represented 11.7% and 11.8% of total revenue for the fiscal years ended March 31, 2022 and 2021, respectively.
Significant suppliers are those that represent more than 10% of the Company’s total finished goods purchased or accounts payable at each balance sheet date. During each of the fiscal years ended March 31, 2022 and 2021, the Company had two suppliers that accounted for 27% of total finished goods purchased and two suppliers that accounted for 30% of total finished goods purchased, respectively. The Company had two suppliers that accounted for 26% of the accounts payable balance and two suppliers that accounted for 44% of the accounts payable balance as of March 31, 2022 and 2021, respectively.
Property and Equipment—Net—Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation, and amortization is provided for using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized using the straight-line method over the shorter of the lease term or estimated useful life of the asset. Depreciation, and amortization expense includes the amortization of finance lease assets. Costs of maintenance and repairs that do not improve or extend the lives of the respective assets are expensed as incurred. Upon retirement or sale, the cost and related accumulated depreciation and amortization are removed from the consolidated balance sheets and the resulting gain or loss is reflected in general and administrative expenses in the consolidated statements of operations and comprehensive loss.
The estimated useful lives for significant property and equipment categories are as follows:
| | | | | | | | |
Asset Class | | Useful Life |
Computer equipment, software, and domain names | | 3 years |
Warehouse machinery and equipment | | 5 years |
Furniture and fixtures | | 5 years |
Leased equipment and leasehold improvements | | Shorter of remaining lease term or estimated useful life |
Long-Lived Assets and Intangible Assets—Net—The Company capitalizes qualifying internally-developed software development costs incurred during the application development stage, as long as it is probable the project
will be completed, and the software will be used to perform the function intended. Capitalization of such costs ceases once the project is substantially complete and ready for its intended use. Costs related to maintenance of internal-use software are expensed in the period incurred. Capitalized costs are amortized over the project’s estimated useful life of three years. Software development costs consist primarily of salary and benefits for the Company’s development staff and third-party contractors’ fees. Capitalized software development costs are included in intangible assets on the consolidated balance sheets and amortized to depreciation expense included in general and administrative expenses on the consolidated statement of operations and comprehensive loss for the fiscal years ended March 31, 2022, 2021, and 2020.
The Company assesses long-lived assets for impairment in accordance with the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 360, Property, Plant and Equipment. A long-lived asset (asset group) is tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted future cash flows expected to result from the use and eventual disposition of the asset. The amount of impairment loss, if any, is measured as the difference between the carrying value of the asset and its estimated fair value. The Company estimates fair value based on the best information available, making necessary estimates, judgments and projections. For purposes of these tests, long-lived assets must be grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. There were no impairments of long-lived assets for the fiscal years ended March 31, 2022, 2021, and 2020.
Leases—The Company determine if an arrangement is a lease at inception, and leases are classified at commencement as either operating or finance leases.
Right-of-use (“ROU”) assets and lease liabilities are recognized at commencement date based on the present value of the future minimum lease payments over the lease term. ROU assets also include any lease payments made. Operating lease ROU assets are presented separately in current and non-current assets and finance lease ROU assets are included in property and equipment, net on the Company’s consolidated balance sheets. As the Company’s operating leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on information available at the commencement date in determining the present value of future payments. This rate is an estimate of the collateralized borrowing rate the Company would incur on its future lease payments over a similar term based on the information available at commencement date. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. As of March 31, 2022 and 2021, the Company did not include any options to extend leases in its lease terms as it was not reasonably certain to exercise them. The Company’s lease agreements do not contain residual value guarantees or covenants.
The Company utilizes certain practical expedients and policy elections available under the lease accounting standard. Leases with a term of one year or less are not recognized on its consolidated balance sheets; the Company recognizes lease expense for these leases on a straight-line basis over the lease term. Additionally, the Company has elected to include non-lease components with lease components for contracts containing real estate leases for the purpose of calculating lease ROU assets and liabilities, to the extent that they are fixed. Non-lease components that are not fixed are expensed as incurred as variable lease payments. The Company’s real estate operating leases typically include non-lease components such as common-area maintenance costs.
Income Taxes—The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to operating loss carryforwards and temporary differences between financial statement bases of existing assets and liabilities and their respective income tax bases.
Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in the income tax rates on deferred tax asset and liability balances is recognized in income in the period that includes the enactment date of such rate change. A valuation allowance is recorded for loss carryforwards and other deferred tax assets when it is determined that it is more likely than not that such loss carryforwards and deferred tax
assets will not be realized. The Company recognizes the tax benefits on any uncertain tax positions taken or expected to be taken in the consolidated financial statements when it is more likely than not the position will be realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts. The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The Company recognizes estimated interest and penalties related to uncertain tax positions as a part of the provision for income taxes.
Deferred Financing Costs—Deferred financing fees relate to the external costs incurred to obtain financing for the Company. Deferred financing fees are amortized over the respective term of the financing using the effective interest method. Deferred financing fees are presented on the consolidated balance sheets as a reduction to long-term debt.
Derivative Assets and Liabilities—The Company’s convertible note agreement contains features determined to be embedded derivatives from its host. Embedded derivatives are separated from the host contract and carried at fair value when the embedded derivative possesses economic characteristics that are not clearly and closely related to the economic characteristics of the host contract and a separate, standalone instrument with the same terms would qualify as a derivative instrument. The derivative is measured both initially and in subsequent periods at fair value, with changes in fair value recognized on the statement of operations and comprehensive loss.
Revenue Recognition—The Company recognizes revenue upon the transfer of control of its products and services to its customers. The recognition of revenue is determined through application of the following five-step model:
•Identification of the contract(s) with customers;
•Identification of the performance obligation(s) in the contract;
•Determination of the transaction price;
•Allocation of the transaction price to the performance obligation(s) in the contract; and
•Recognition of revenue when or as the performance obligation(s) are satisfied.
The Company generates revenue through Direct to Consumer channels, which includes the sale of subscription products, sale of BARK Bright products, sale of BARK Food products, and sale of BarkShop products. See below for additional information on each offering.
Toys and Treats Subscriptions—The Company’s principal revenue generating products are a tailored assortment of premium and highly durable toys and treats sold in boxes through BarkBox and Super Chewer monthly subscriptions. Subscription plans are offered as monthly, three month, six month or annual commitments. 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. Each delivered box represents a single performance obligation and the Company bears the risk of loss if a shipment is not received or is damaged. Subscription revenue is recognized at a point in time as control is transferred to the customer upon delivery of each monthly box. Revenue is measured as the amount of consideration the Company expects to be entitled to in exchange for transferring products, which includes an estimate of future returns and chargebacks based on historical rates. The transaction price is inclusive of fixed discounts which represent a reduction to revenue for each performance obligation. There is judgement in utilizing historical trends for estimating future returns. As of March 31, 2022 and 2021, the refund liability related to revenue for subscriptions was $0.9 million and $1.2 million, respectively, and is recorded within accrued and other current liabilities on the consolidated balance sheets.
On a monthly basis, subscription customers have the option to purchase additional toys, treats, or other products to add to their respective subscription boxes. Each add on product represents a single performance obligation and therefore revenue is recognized at a point in time as control is transferred to the customer upon delivery of goods to
the customer. Revenue is measured as the amount of consideration the Company expects to be entitled to in exchange for transferring products.
BARK Bright—The initial product in this product line is a proprietary enzymatic dental solution combined with a treat for dogs to prevent and combat oral health issues, sold through monthly subscriptions. Each delivered box represents a single performance obligation and therefore subscription revenue is recognized at a point in time as control is transferred to the customer upon delivery of each monthly box. Revenue is measured as the amount of consideration the Company expects to be entitled to in exchange for transferring products.
BARK Food—This product line consists of personalized meals for dogs sold at a meal per day price. Subscription revenue is recognized at a point in time, as control is transferred to the customer upon delivery.
BarkShop—The Company sells individual toys and treats through the Company’s website, BarkShop. Revenue relating to the sale of goods on BarkShop is recognized at a point in time upon delivery of goods to the customer. Each delivery represents a single performance obligation and the Company bears the risk of loss if a shipment is not received or is damaged. Revenue is measured as the amount of consideration the Company expects to be entitled to in exchange for transferring products. Customers have the right to return products for thirty days subsequent to delivery.
The Company also generates revenue from product sales through retail commerce channels. See below for additional information on each offering.
Retail—The Company sells toys and treats through major retailers. Revenue is recognized at a point in time, as control is transferred upon delivery of goods to the retailers. Revenue is measured as the amount of consideration the Company expects to be entitled to in exchange for transferring products.
Retail sales are generally recognized upon delivery with adjustments to net sales for customer payment discounts, sales returns, and estimated chargebacks allowances. Similar to Toys and Treats subscriptions, the customer payment discounts, sales returns and chargebacks are considered to be contingent and represents a component of variable consideration. The estimated consideration reflects potential sales returns and chargebacks as a reduction in the transaction price. The Company has determined that the expected value method will provide the best predictor for a refund liability associated with sales returns and chargebacks. The estimate is recorded in total for sales transactions recorded in each period and, in effect, represents a reduction in the transaction price at the time of sale. As of March 31, 2022 and 2021, the refund liability related to retail revenue was $0.4 million and $0.1 million, respectively, recorded within accrued and other current liabilities on the consolidated balance sheet.
Online Marketplaces—Online marketplaces revenue consists of sales of toys, BARK Bright health and wellness solutions and BARK Home products sold through major online 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 at a point in time, as control is transferred, upon delivery of goods to the end customer. Revenue is measured as the amount of consideration the Company expects to be entitled to in exchange for transferring products.
The Company evaluated principal versus agent considerations to determine whether it is appropriate to record seller fees paid to the marketplaces as an expense or as a reduction of revenue. Seller fees charged by third-party marketplaces are recorded as general and administrative expense and are not recorded as a reduction of revenue as the Company owns and controls all the goods before they are transferred to the end customer. The Company can, at any time, direct the marketplaces and similarly with other third-party logistics providers (“Logistics Providers”), to return the Company’s inventory to any location specified by the Company. Any returns made by customers directly to Logistics Providers are the responsibility of the Company to make customers whole and the Company retains the inventory risk. Further, the Company is subject to credit risk (i.e., credit card chargebacks), establishes the prices of its products, can determine who fulfills the goods to the customer (third-party online marketplaces or the Company) and can limit quantities or stop selling the goods at any time. Based on these considerations, the Company is the principal in these arrangements.
The Company earned revenue from the sale of Toys and Treats subscriptions, and the sale of goods through the Company’s BarkShop website. Deferred revenue represented payment for subscription boxes that the Company was contractually obligated to deliver in future periods. Subscription revenue was recognized as each monthly box was delivered to the customer. Revenue was recognized net of cash discounts given to the customer and net of estimated sales returns and chargebacks. Revenue relating to the sale of goods was recognized upon delivery of goods to the customer, as the risk of loss on these sales transfers to the customer upon delivery.
Shipping and Handling—The Company includes costs associated with the outbound shipping and handling of its products as a component of general and administrative expenses in the consolidated statements of operations and comprehensive loss. Shipping and handling fees billed to the customers are recorded as revenue.
Sales Tax—As a part of the Company’s normal course of business, sales taxes are collected from customers. Sales taxes collected are remitted to the appropriate governmental tax authority on behalf of the customer. Sales tax collected from customers is not considered revenue and is included in accrued and other current liabilities until remitted. Total sales tax accrued was $9.2 million and $24.2 million, as of March 31, 2022 and 2021, respectively. As of March 31, 2022 and 2021, $3.1 million and $14.5 million of the sales tax accrued had been collected but not remitted, respectively.
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, the Company recorded a liability in those periods in which it created economic nexus based on each state’s requirements. Total sales tax expense recorded related to economic nexus was $0.6 million, $1.2 million and $5.0 million for the fiscal years ended March 31, 2022, 2021, and 2020, respectively.
Inventories—Consist principally of finished goods, and represent products available for sale and are accounted for using the first-in, first-out (“FIFO”) method and valued at the lower of cost or net realizable value. Inventory costs consist of product and inbound shipping and handling costs. The Company assesses the valuation of inventory and periodically writes down the value for estimated excess and obsolete inventory based upon estimates of future demand and market conditions. Inventory valuation requires the Company to make judgments, based on information available at each reporting period. Inventory valuation losses are recorded as cost of revenues.
The Company reviews current business trends and forecasts, and inventory aging to determine adjustments which it estimates will be needed to liquidate existing excess inventories and record inventories at either the lower of cost or net realizable value or the lower of cost or market, as applicable. The Company believes that all inventory write-downs required at March 31, 2022, have been recorded. The Company’s historical estimates of inventory reserves have not differed materially from actual results. If market conditions were to change, including as a result of the current conflict in Ukraine and its broader macroeconomic implications or the COVID-19 pandemic and the supply chain and logistics disruptions globally, it is possible that the required level of inventory reserves would need to be adjusted.
As of March 31, 2022 and 2021, the Company has recorded reserves to reflect inventories at their estimated net realizable value. The reserve balance as of March 31, 2022 and 2021 was $8.8 million and $1.6 million, respectively.
Cost of Revenues—Cost of revenues includes the purchase price of inventory sold, inbound freight costs associated with inventory, shipping supply costs, and inventory shrinkage costs.
General and Administrative—General and administrative expenses include compensation and benefits costs, including stock-based compensation expense, facility costs, insurance, professional service fees, donations of goods in kind and other general overhead costs including depreciation and amortization and account management support teams, as well as commissions. General and administrative expense also includes processing fees charged by third parties that provide payment processing services for credit cards. For the fiscal years ended March 31, 2022, 2021 and 2020 the Company recorded payment processing fees of $10.8 million, $8.4 million and $5.7 million,
respectively, within general and administrative expenses in the consolidated statements of operations and comprehensive loss.
Fulfillment Cost—Fulfillment costs represent those 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. For the fiscal years ended March 31, 2022, 2021 and 2020, the Company recorded fulfillment costs of $150.5 million, $94.9 million, and $53.4 million, respectively, which are included within general and administrative expenses in the consolidated statements of operation and comprehensive loss.
Advertising Costs—Costs associated with the Company’s advertising and sales promotions are expensed as incurred and are included in advertising and marketing expense in the consolidated statements of operations and comprehensive loss. During the years ended March 31, 2022, 2021, and 2020, the Company expensed $63.7 million, $60.1 million and $39.7 million, respectively, for advertising costs, which is comprised of print and internet advertising, promotional items, and agency fees.
Stock-Based Compensation—The Company measures and records the expense related to stock-based payment awards based on the fair value of those awards as determined on the date of grant. The Company recognizes stock-based compensation expense over the requisite service period of the individual grant, generally equal to the vesting period and uses the straight-line method to recognize stock-based compensation. For stock options with performance conditions, the Company records compensation expense when it is deemed probable that the performance condition will be met. The Company uses the Black-Scholes option-pricing model to determine the fair value of stock awards.
The Company estimates expected forfeitures of stock-based awards at the grant date and recognizes compensation cost only for those awards expected to vest. The Company estimates future forfeitures at the date of grant based on historical experience and revises the estimates, if necessary, in subsequent periods if actual forfeitures differ from those estimates.
For stock-based awards issued to nonemployees, including consultants, the Company records expense related to stock options based on the fair value of the options calculated using the Black-Scholes option-pricing model over the service performance period. The fair value of options granted to nonemployees is remeasured over the vesting period and recognized as an expense over the period the services are rendered.
The Company calculates the fair value of options granted by using the Black-Scholes option-pricing model with the following assumptions:
Expected Volatility—The Company estimated volatility for option grants by evaluating the average historical volatility of a peer group of companies for the period immediately preceding the option grant for a term that is approximately equal to the options’ expected life.
Expected Term—The expected term of the Company’s options represents the period that the stock-based awards are expected to be outstanding. The Company has elected to use the simplified method to compute the expected term, which the Company believes is representative of future behavior. The Company will continue to evaluate the appropriateness of utilizing such method.
Risk-Free Interest Rate—The risk-free interest rate is based on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent remaining term at the grant date.
Dividend Yield—The Company has not declared or paid dividends to date and does not anticipate declaring dividends. As such, the dividend yield has been estimated to be zero.
Common Stock Valuations— Since the closing of the Merger, the fair value of the common stock was determined using the Company’s closing stock price as reported on the New York Stock Exchange. Prior to the Closing of the Merger the Company had historically granted stock options at exercise prices equal to the fair value as determined by the Board of Directors (the “Board”) on the date of grant. In the absence of a public trading market, the Board, with input from management, exercised significant judgment and considered numerous objective
and subjective factors to determine the fair value of the Company’s common stock as of the date of each stock option grant.
In addition, the Board considered the independent valuations completed by a third-party valuation consultant. The valuations of the Company’s common stock were determined in accordance with the guidelines outlined in the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation.
Net Loss Per Share—Basic net loss per share attributable to common stockholders is computed by dividing the loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period, without consideration for potentially dilutive securities. Diluted net loss per share is computed by dividing the loss attributable to common stockholders by the weighted-average number of shares of common stock and potentially dilutive securities outstanding during the period determined using the treasury-stock and if-converted methods. For purposes of the diluted loss per share calculation, stock options, redeemable convertible preferred stock and warrants are considered to be potentially dilutive securities, but were excluded from the calculation of diluted loss per share because their effect would be anti-dilutive and therefore, basic and diluted loss per share were the same for all periods presented.
Related Party Transactions—Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control. Related parties may be individuals or corporate entities. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties. As of March 31, 2022 there were no material related party arrangements. The only material related party arrangement as of March 31, 2021 was the outstanding convertible notes issued to certain employees, founders, and existing investors on March 31, 2020.
Recent Accounting Pronouncements Adopted
In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires an entity to utilize a new impairment model known as the current expected credit loss (“CECL”) model to estimate its lifetime “expected credit loss” and record an allowance that, when deducted from the amortized cost basis of the financial asset, presents the net amount expected to be collected on the financial asset. The CECL model is expected to result in more timely recognition of credit losses. ASU 2016-13 also requires new disclosures for financial assets measured at amortized cost, loans, and available-for-sale debt securities. The Company adopted this ASU in its fourth quarter of the fiscal year ended March 31, 2022, the effects of which were recognized effective April 1, 2021, using a modified retrospective approach. The adoption did not have a material impact on the Company’s consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which introduced and codified new lease accounting guidance under ASC 842. This standard requires lessees to record a lease liability, initially measured at the present value of future lease payments, and a right-of-use asset, associated with operating leases, on its balance sheet. The standard also requires a single lease expense to be recognized within the statement of operations on a straight-line basis over the lease term. The Company adopted this ASU in its fourth quarter of the fiscal year ended March 31, 2022, the effects of which were recognized effective April 1, 2021. The adoption of the ASU resulted in the Company recording lease liabilities for $36.4 million and right-of-use assets for $32.1 million associated with its operating leases and finance leases on its consolidated balance sheet as of March 31, 2022, and did not have a significant effect on the consolidated statement of operations and comprehensive loss or consolidated statement of cash flows. The adoption resulted also in no cumulative adjustment to retained earnings. The Company utilized the modified retrospective transition approach, whereby all prior periods continue to be reported and disclosed under previous lease accounting guidance, ASC Topic 840, Leases. Current periods beginning on or after April 1, 2022 are presented under ASC Topic 842, Leases. See Note 10 for further details.
The Company elected to use the package of practical expedients permitted under the transition guidance. The Company did not reassess (i) whether any expired or existing contracts are or contain leases, (ii) the lease
classification for any expired or existing leases, or (iii) initial direct costs for any existing leases. Additionally, the Company elected to not record on the balance sheet leases with a term of twelve months or less.
Recent Accounting Pronouncements Issued but Not Yet Adopted
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is intended to simplify the accounting for income taxes. This updated removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The new standard will be effective beginning April 1, 2022. The Company does not expect the adoption of ASU 2019-12 to have a material impact on the Company’s consolidated financial statements.
In August 2020, the FASB issued ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40), which simplifies the accounting for convertible instruments by removing major separation models required under current guidance. ASU 2020-06 also removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and simplifies the diluted earnings per share calculation in certain areas. ASU 2020-06 is effective for annual reporting periods beginning after December 15, 2021, including interim periods within those annual reporting periods, with early adoption permitted. The Company is currently evaluating the impact ASU 2020-06 will have on its financial statements and related disclosures. The Company does not expect the adoption of ASU 2020-06 to have a material impact on the Company’s consolidated financial statements.
3.MERGER
On June 1, 2021, the Company consummated the Merger pursuant to the terms of the Merger Agreement, by and among the Company, NSAC Merger Sub, and Legacy BARK.
Immediately upon the consummation of the Merger and the other transactions contemplated by the Merger Agreement (collectively, the “Transactions”), Merger Sub merged with and into Legacy BARK, with Legacy BARK surviving the Business Combination as a wholly-owned subsidiary of the Company. In connection with the Transactions, the Company changed its name to “The Original BARK Company,” and in November 2021 changed its name to BARK, Inc.
The Merger was accounted for as a reverse recapitalization in accordance with U.S. GAAP primarily due to the fact that Legacy BARK stockholders continue to control the Company post the closing of the Merger. Under this method of accounting, Northern Star is treated as the “acquired” company for accounting purposes and the Merger is treated as the equivalent of Legacy BARK issuing stock for the net assets of Northern Star, accompanied by a recapitalization. The net assets of Northern Star are stated at historical cost, with no goodwill or other intangible assets recorded. Reported shares and earnings per share available to holders of the Company’s common stock and equity awards prior to the Business Combination have been retroactively restated reflecting the exchange ratio established pursuant to the Business Combination Agreement (1:8.7425). Treasury stock has also been retrospectively restated to reflect the cancellation and extinguishment of the shares pursuant to the Merger Agreement.
Pursuant to the Merger, on the Closing Date, each stockholder of Legacy BARK’s common and preferred stock, (including stockholders issued common stock as a result of the conversion of Legacy BARK’s outstanding convertible promissory notes issued in 2019 and 2020 (other than the 2025 Convertible Notes - see Note 7, “Debt”)) received 8.7425 shares of the Company’s common stock, par value $0.0001 per share, per share of Legacy BARK’s common stock and preferred stock, respectively, owned by such Legacy BARK stockholder that was outstanding immediately prior to the Closing Date.
In addition, pursuant to the terms of the Merger Agreement, at the Effective Time of the Merger, (1) options to purchase shares of Legacy BARK’s common stock were converted into options to purchase an aggregate of 29,257,576 shares of the Company's common stock and (2) warrants to purchase shares of Legacy BARK’s common and redeemable convertible preferred stock were converted into warrants to purchase an aggregate of 1,897,212 shares of the Company's common stock.
Additionally, at the Closing:
•the conversion obligations with respect to Legacy BARK’s 5.50% convertible senior secured notes due 2025 (the “2025 Convertible Notes”) were assumed by the Company and the 2025 Convertible Notes became convertible at the election of the holders into shares of the Company's common stock. As of the Closing, the 2025 Convertible Notes were convertible at the election of the holder into an aggregate of 7,713,121 shares of the Company's common stock based on the then outstanding principal and accrued interest. The 2025 Convertible Notes are still outstanding as of March 31, 2022;
•certain investors (the “PIPE Investors”) purchased an aggregate of 20,000,000 shares of the Company's common stock in a private placement at a price of $10.00 per share for an aggregate purchase price of $200.0 million (the “PIPE” issuance);
•each of the 6,358,750 outstanding shares of Northern Star’s Class B common stock were converted into a share of the Company's common stock on a one-for-one basis. Each outstanding warrant of Northern Star entitles the holder to purchase shares of the Company's common stock at a price of $11.50 per share beginning on November 13, 2021; and
•the Company amended and restated its amended and restated certificate of incorporation, increasing the number of shares of common stock authorized to issue to 500,000,000 shares.
4.REVENUE FROM CONTRACTS WITH CUSTOMERS
The Company’s standard payment terms vary but do not result in a significant delay between the timing of invoice and payment. The Company occasionally negotiates other payment terms during the contracting process for its retail business. The Company has elected the practical expedient to not adjust the total consideration within a contract to reflect a financing component when the duration of the financing is one year or less.
Disaggregated Revenue
Revenue disaggregated by significant revenue stream for the fiscal years ended March 31, 2022, 2021, and 2020 were as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | |
| | Fiscal Year Ended |
| | March 31, |
| | 2022 | | 2021 | | 2020 |
Revenue | | | | | | |
Direct to Consumer: | | | | | | |
Toys and treats subscription | | $ | 435,389 | | | $ | 325,992 | | | $ | 199,744 | |
Other | | 12,685 | | | 7,978 | | | 4,407 | |
Total Direct to Consumer | | $ | 448,074 | | | $ | 333,970 | | | $ | 204,151 | |
Commerce | | 59,332 | | | 44,634 | | | 20,184 | |
Revenue | | $ | 507,406 | | | $ | 378,604 | | | $ | 224,335 | |
Contract Liability
The Company’s contract liability represents cash collections from its customers prior to delivery of subscription products, which is recorded as deferred revenue on the consolidated balance sheets. Deferred revenue is recognized as revenue upon the delivery of the box or product.
Deferred revenue was $31.5 million and $27.2 million as of March 31, 2022 and 2021, respectively. During the fiscal year ended March 31, 2022, the Company recognized $26.3 million of revenue included in deferred revenue as of March 31, 2021.
Performance Obligations
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account. Performance obligations are satisfied as of a point in time and are supported by contracts with customers. The Company has elected to not disclose information related to remaining performance obligations due to their original expected terms being one year or less.
5. PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS
Property and equipment consisted of the following as of March 31, 2022 and 2021:
| | | | | | | | | | | |
| March 31, |
| 2022 | | 2021 |
Computer equipment, software, and domain names | $ | 4,822 | | | $ | 3,423 | |
Warehouse machinery and equipment | 13,309 | | | 3,292 | |
Furniture and fixtures | 1,195 | | | 992 | |
Leasehold improvements | 12,039 | | | 6,338 | |
Construction in process | 3,596 | | | 3,392 | |
Total property and equipment | 34,961 | | | 17,437 | |
Less: accumulated depreciation | (6,833) | | | (3,972) | |
Property and equipment—net | $ | 28,128 | | | $ | 13,465 | |
Intangible assets consisted of the following as of March 31, 2022 and 2021:
| | | | | | | | | | | |
| March 31, |
| 2022 | | 2021 |
Internally developed software | $ | 6,268 | | | $ | 3,038 | |
Less: accumulated amortization | $ | (2,431) | | | $ | (968) | |
Intangible assets—net | $ | 3,837 | | | $ | 2,070 | |
Total depreciation expense for property and equipment during the fiscal years ended March 31, 2022 and 2021 was $2.9 million and $1.7 million, respectively. Total amortization expense for internally developed software during the fiscal years ended March 31, 2022 and 2021 was $1.5 million and $0.7 million, respectively. Amortization expense related to finance leases amounted to $0.6 million and $0.2 million for fiscal years ended March 31, 2022 and 2021. Depreciation and amortization expense is included in general and administrative expenses on the consolidated statements of operations and comprehensive loss.
As of March 31, 2022 and 2021, equipment that was leased under finance leases and included in property and equipment, net in the consolidated balance sheets was $2.5 million and $3.0 million, respectively.
6. ACCRUED AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consisted of the following as of March 31, 2022 and 2021:
| | | | | | | | | | | |
| March 31, |
| 2022 | | 2021 |
Warrant liability | $ | 8,479 | | | $ | 133 | |
Sales tax payable | 9,163 | | | 24,164 | |
Accrued compensation costs | 3,421 | | | 3,287 | |
Refund liability | 1,275 | | | 1,292 | |
Accrued licensing fees | 190 | | | 209 | |
Accrued deferred financing fees | 3,000 | | | 3,000 | |
Accrued professional and legal fees | 1,246 | | | 2,484 | |
Accrued marketing costs | 464 | | | 4,199 | |
Other accrued expenses | 7,930 | | | 5,837 | |
Accrued and other current liabilities | $ | 35,168 | | | $ | 44,605 | |
7. DEBT
As of March 31, 2022 and 2021, long-term debt consisted of the following:
| | | | | | | | | | | | | | |
| | March 31, |
| | 2022 | | 2021 |
2025 Convertible Notes | | $ | 79,171 | | | $ | 75,000 | |
Western Alliance revolving line of credit & term loan | | — | | | 34,300 | |
Convertible promissory notes | | — | | | 7,167 | |
PPP loan | | — | | | 5,157 | |
| | 79,171 | | | 121,624 | |
Less: deferred financing fees and debt discount | | (2,981) | | | (5,895) | |
Total long-term debt | | $ | 76,190 | | | $ | 115,729 | |
| | | | |
2025 Convertible Notes
On November 27, 2020, the Company issued $75.0 million aggregate principal amount of 2025 Convertible Notes to Magnetar Capital, LLC (“Magnetar”) under an indenture, dated as of November 27, 2020, between Legacy BARK and U.S. Bank National Association, as trustee and collateral agent (the “Indenture”). The Company 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. The Company recorded the expenses as a discount to the note and will amortize over the term of the note. The 2025 Convertible Notes will mature on December 1, 2025, unless earlier converted, redeemed or repurchased.
The Company 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, which included $2.0 million of early repayment fees related to the Pinnacle loan.
The 2025 Convertible Notes are governed by the Indenture. The 2025 Convertible Notes bear interest at the annual rate of 5.50%, payable entirely in payment-in-kind annually on December 1st of each year commencing December 1, 2021, compounded annually. On December 1, 2021, the accrued interest of $4.2 million was paid-in-kind through an increase of the outstanding principal on the 2025 Convertible Notes.
If the 2025 Convertible Notes are not converted into common stock by the maturity date, the Company must repay the outstanding principal amount plus accrued interest.
The 2025 Convertible Notes contain call and put options to be settled in cash contingent upon the occurrence of a change in control and a default interest rate increase of 3.0% applicable upon the occurrence of an event of default that when evaluated under the guidance of ASC 815, Derivatives and Hedging, are embedded derivatives requiring bifurcation at fair value. The fair value calculation includes Level 3 inputs including the estimated fair value of the Company’s common stock and assumptions regarding the probability that the contingent call or put will be exercised or an event of default will occur. Management determined that the probability that the contingent events will occur was near zero at inception and has remained near zero as of March 31, 2022. Therefore, the Company did not record a derivative liability related to these features at March 31, 2022. The Company will continue to assess the probability of occurrence quarterly during the term of the 2025 Convertible Notes.
As of March 31, 2022 and 2021, the Company had $79.2 million and $75.0 million of outstanding borrowings under the 2025 Convertible Notes agreement respectively.
Western Alliance Bank—Line of Credit and Term Loan
In October 2017, the Company entered into a loan and security agreement (the “Western Alliance Agreement”) and issued a warrant to purchase preferred stock (“Initial Western Alliance Warrant”) to Western Alliance Bank (“Western Alliance”), which provided 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, the Company amended the Western Alliance Agreement, which included the issuance of a warrant to purchase common stock (“Subsequent Western Alliance Warrant”) to Western Alliance. The modification to the Western Alliance 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. The term loan had a maturity date of December 31, 2021.
On July 31, 2020, the Company 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, the Company 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, the Company amended the Western Alliance Agreement to extend the Credit Facility maturity date to 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.
On May 27, 2022, the Company and Western Alliance entered into the twelfth loan and security modification agreement, which extended the Credit Facility maturity date to June 30, 2022.
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.
The Credit Facility has a borrowing base subject to an amount equal to eighty percent (80.00%) of the Company’s trailing three months of subscription revenue. Western Alliance has first perfected security in substantially all of the Company’s assets, including its rights to its intellectual property.
As of March 31, 2021, the Company had $34.3 million of outstanding borrowings under the Credit Facility. On June 15, 2021, in connection with the Merger, the Company repaid the outstanding balance on the Credit Facility, and as of March 31, 2022 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.
Under the terms of this Credit Facility, the Company is required to comply with certain financial and nonfinancial covenants, including covenants to maintain certain liquidity amounts, as defined in the amended Western Alliance Agreement. As of March 31, 2022 and 2021, the Company was compliant with its financial covenants.
Convertible Promissory Notes
On December 19, 2019, the Company entered into a note purchase agreement and issued individual convertible promissory notes thereunder (the “2019 Notes”), with an option for subsequent closings through May 1, 2020 for up to $10.0 million in aggregate principal. The Company received gross proceeds of $3.9 million in two December 2019 closings. The 2019 Notes bore interest at a rate of 7% per year, capitalized quarterly, and payable in kind (“PIK Interest”). The 2019 Notes had a maturity date of December 19, 2024, unless previously converted into equity securities pursuant to the terms of the note purchase agreement.
On March 31, 2020, the Company entered into a note purchase agreement and issued individual convertible promissory notes thereunder (the “2020 Notes”), with an option for subsequent closings through May 1, 2020 for up to $10.0 million in aggregate principal. The Company 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 (“PIK Interest”), while the Pro Rata Notes bore interest at a rate of 8% per year, capitalized quarterly, and PIK Interest. The 2020 Notes had 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, the Company received gross proceeds of $1.0 million from the second closing of the March 31, 2020 note purchase agreement with existing investors, representing a related party transaction.
On June 18, 2020, the Company amended the term loan with Pinnacle Ventures, LLC (“Pinnacle”), which extended the initial principal repayment period. In consideration of the modification, the Company issued to Pinnacle 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 November 27, 2020, in connection with the 2025 Convertible Notes issuance, the Company entered into subordination agreements with the holders of the 2019 Notes and 2020 Notes and extended the maturity of the notes to May 30, 2026.
On December 16, 2020, in connection with the execution of the Merger, the Company amended the note purchase agreements associated with the 2019 Notes and 2020 Notes to amend the conversion terms of the notes.
The 2019 Notes and 2020 Notes included the following features that were assessed and determined to meet all of the criteria required to be separated as an embedded derivative from its host:
•In-substance put options upon Qualified or Non-Qualified Equity Financing
•Redemption (put option) upon deemed liquidation event
As of March 31, 2021, the Company had $7.2 million of outstanding borrowings under the 2019 Notes and 2020 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 common shares of the Company, with a fair value of $12.8 million. The conversion of the notes resulted in a loss on extinguishment of $2.0 million recorded to other expense included in other income, net on the consolidated statement of operations and comprehensive loss, as well as a capital contribution of $0.5 million recorded to additional paid-in-capital on the 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, the Company 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 the Company to, in good faith, certify that the current economic uncertainty made the loan necessary to support ongoing operations.
On June 11, 2021, the Company voluntarily repaid in full the outstanding principal and interest amounts of the PPP loan.
8. REDEEMABLE CONVERTIBLE PREFERRED STOCK
The following table summarizes issued and outstanding redeemable convertible preferred stock of Legacy BARK as of both immediately prior to the Closing Date and March 31, 2021 (in thousands, except share and per share information):
| | | | | | | | | | | | | | |
Redeemable Convertible Preferred Stock | | Shares | | Carrying Value |
Series Seed | | 2,057,188 | | | $ | 1,897 | |
Series A | | 2,110,400 | | | 4,948 | |
Series B | | 990,068 | | | 10,285 | |
Series C | | 2,142,188 | | | 34,585 | |
Series C-1 | | 452,671 | | | 8,272 | |
Prior to the completion of the Merger there were no significant changes to the terms of the Redeemable Convertible Preferred Stock. Upon the Closing of the Merger, the Legacy BARK redeemable convertible preferred stock converted into 67,776,888 shares of the Company’s common stock based on the Merger’s exchange ratio of 8.7425. The Company recorded the conversion at the carrying value of the redeemable convertible preferred stock at the time of Closing. There are no shares of redeemable convertible preferred stock authorized or outstanding as of March 31, 2022.
9. STOCK-BASED COMPENSATION PLANS
Equity Incentive Plans
The Barkbox, Inc. 2011 Stock Incentive Plan (as amended from time to time, the “2011 Plan”) provides for the award of stock options and other equity interests in the Company to directors, officers, employees, advisors or consultants of the Company.
On June 1, 2021, in connection with the Merger, the 2021 Equity Incentive Plan (the “2021 Plan”) became effective and 16,929,505 authorized shares of common stock were reserved for issuance thereunder. In addition, pursuant to the terms of the Merger Agreement, on the Closing Date of the Merger, options to purchase shares of Legacy BARK’s common stock previously issued under the 2011 Plan were converted into options to purchase an aggregate of 29,390,344 shares of BARK common stock. As of March 31, 2022, 15,623,772 shares of common stock were available for the Company to grant under the 2021 Stock Plan; there were no remaining shares available for grant under the 2011 Plan.
For each fiscal year beginning on April 1, 2022 and ending on (and including) March 31, 2031, the aggregate number of shares of common stock that may be issued under the 2021 Plan may be increased by a number, determined and approved by the Company's board of directors (the “Board”) on or before May 1st of such fiscal year, not to exceed 5% of the total number of shares of common stock issued and outstanding on the last day of the preceding fiscal year. The Board did not approve an increase for fiscal year 2023.
The 2011 and 2021 Plans (together, the “Plans”) are administered by the Company’s Compensation Committee of its Board (the “Compensation Committee”). The exercise prices, vesting and other restrictions are determined by the Board, except that the exercise price per share of a stock option may not be less than 100% of the fair value of the common share on the date of grant. Stock options awarded under the Plans have vesting conditions of 25% on the first anniversary of the date of grant and 75% on a monthly basis at a rate of 1/36th, unless otherwise determined by the Compensation Committee. The Plans provide that the Compensation Committee shall determine the vesting conditions of awards granted under the Plans, and the Compensation Committee has, from time to time, approved vesting schedules for certain awards that deviate from the vesting conditions contained in the previous sentence.
Stock Option Activity
The following is a summary of stock option activity for the fiscal year ended March 31, 2022:
| | | | | | | | | | | | | | | | | | | | | | | |
| Number Options Outstanding | | Weighted- Average Exercise Price | | Weighted-Average Remaining Contractual Life (Years) | | Aggregate Intrinsic Value |
Outstanding as of March 31, 2021 | 29,454,960 | | | 2.08 | | | 5.34 | | $ | 251,553 | |
Granted | 1,435,386 | | | 7.70 | | | | | |
Exercised | (7,322,815) | | | 0.56 | | | | | |
Cancelled or forfeited | (4,167,331) | | | 3.22 | | | | | |
Expired | (68,564) | | | 0.06 | | | | |
Outstanding as of March 31, 2022 | 19,331,636 | | | $ | 2.83 | | | 7.17 | | $ | 38,332 | |
Vested and expected to vest as of March 31, 2022 | 17,759,831 | | | $ | 2.52 | | | 7.04 | | $ | 37,058 | |
Exercisable as of March 31, 2022 | 13,877,397 | | | $ | 1.71 | | | 6.65 | | $ | 32,724 | |
The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common shares for those stock options that had exercise prices lower than the fair value of the Company’s common shares.
The weighted-average grant-date fair value of options granted during the years ended March 31, 2022, 2021 and 2020 was $4.10, $3.65 and $0.57 respectively. The total intrinsic value of options exercised during the year ended March 31, 2022, 2021 and 2020 was $44.7 million, $23.6 million and $0.3 million respectively.
As of March 31, 2022, 2021 and 2020, there was $11.4 million, $21.9 million, and $2.40 million of unrecognized stock-based compensation expense related to unvested stock options, respectively. The unrecognized stock-based compensation expense is expected to be recognized over a weighted average remaining vesting period of 2.71, 3.44 and 2.87 years at March 31, 2022, 2021 and 2020, respectively.
The Company estimates the fair values of stock options using the Black-Scholes option-pricing model on the date of grant. During the years ended March 31, 2022, 2021, and 2020 the assumptions used in the Black-Scholes option pricing model were as follows:
| | | | | | | | | | | | | | | | | |
| Fiscal Year Ended March 31, |
| 2022 | | 2021 | | 2020 |
Expected term (years) | 5.24 | | 5.26 | | 5.08 |
Expected volatility | 62.96 | % | | 76.48 | % | | 45.65 | % |
Risk-free interest rate | 1.16 | % | | 0.19 | % | | 1.71 | % |
Expected dividend yield | — | % | | — | % | | — | % |
Restricted Stock Award (“RSA”) Activity
The Company awarded 35,000, and 22,616 RSAs during the fiscal years ended March 31, 2021 and 2020, respectively. There were no RSAs granted during the fiscal year ended March 31, 2022. The grant date fair value of the RSAs granted during the fiscal years ended March 31, 2021 and 2020 was recognized as compensation expense over the requisite service period. Of the 35,000 shares of restricted stock issued during the year ended March 31, 2021, 25,000 shares vested immediately upon grant and 10,000 shares of restricted stock vested over 12 equal monthly installments. All of the shares of RSAs granted during the year ended March 31, 2020 had immediate vesting upon grant. To determine the fair value of the RSAs granted during the fiscal years ended March 31, 2021, and 2020, the Company’s Board utilized independent valuations and other available information when estimating the value of the stock underlying the granted RSAs. The weighted-average estimated fair value per share of the RSAs granted during the years ended March 31, 2021, and 2020 was $6.33, and $1.36 respectively. The total stock-based compensation expense associated with the grants of RSAs was $0.8 million $1.10 million and $0.3 million for the fiscal years ended March 31, 2022, 2021 and 2020, respectively. During the fiscal year ended March 31, 2022 the Company withheld 17,605 RSAs upon vesting in connection with the tax election determined by the award recipient. The RSAs withheld for taxes had a $0.2 million impact to additional paid in capital.
Restricted Stock Unit (“RSU”) Activity
During the fiscal year ended March 31, 2022 the Company awarded 4,224,623 RSUs for the purchase of common stock of which 97,835 RSUs were canceled. The Company did not grant any RSUs during the fiscal year ended March 31, 2021, or 2020. Each RSU granted during the fiscal year ended March 31, 2022 will vest based on continued service which is generally four years. The grant date fair value of the RSUs will be recognized as compensation expense over the requisite service period. The weighted-average fair value of restricted stock granted during the fiscal year ended March 31, 2022 was $5.34. The total stock-based compensation expense associated with the grants of restricted stock was $3.3 million. During the fiscal year ended March 31, 2022 the Company withheld
2,941 RSUs upon vesting in connection with the tax election determined by the award recipient. The RSUs withheld for taxes had a less than $0.1 million impact to additional paid in capital.
Stock-Based Compensation
The following table summarizes the total stock-based compensation expense by function for the fiscal years ended March 31, 2022, 2021, and 2020 which includes expense related to options and restricted stock units (in thousands):
| | | | | | | | | | | | | | | | | | | | |
| | Fiscal Year ended |
| | March 31, |
| | 2022 | | 2021 | | 2020 |
General and administrative | | $17,063 | | $6,298 | | $1,757 |
Advertising and marketing | | 797 | | 224 | | 60 |
Total stock-based compensation expense | | $17,861 | | $6,522 | | $1,817 |
Employee Stock Purchase Plan
In June 2021, the 2021 Employee Stock Purchase Plan (the “2021 ESPP”) became effective. The 2021 ESPP authorizes the issuance of shares of common stock pursuant to purchase rights granted to employees. A total of 3,385,901 shares of common stock have been reserved for future issuance under the 2021 ESPP. For each fiscal year beginning on April 1, 2021 and ending on (and including) March 31, 2031, the aggregate number of shares of common stock that may be issued under the 2021 ESPP shall increase by a number, determined and approved by the Board on or before May 1st of such fiscal year, not to exceed the lesser of (i) one percent (1%) of the total number of shares of common stock issued and outstanding on the last day of the preceding fiscal year or (ii) 1,500,000 shares of common stock. If the Board does not determine to increase the aggregate number of shares of common stock in the 2021 ESPP by May 1st of such fiscal year, such increase shall be zero. The Board did not approve an increase for fiscal year 2023. The first offering period under the 2021 ESPP shall commence on June 10, 2022. As of March 31, 2022, no shares have been issued under the 2021 ESPP.
10. LEASES
On March 31, 2022, the Company adopted ASC Topic 842, Leases (ASC 842), using the modified retrospective transition method. The Company elected to apply the package of practical expedients provided under the transition guidance withing ASC 842, and accordingly, did not reassess whether any expired or existing contracts are or contain leases, did not reassess lease classification for expired or existing leases, and did not reassess initial indirect costs for any existing leases. The Company adopted this ASU by applying the new guidance to new and existing leases effective April 1, 2021, with no restatement of comparative periods. Upon adoption, the Company recorded an operating lease right-of-use asset and an operating lease liability on the balance sheet as per table below. In addition, assets under equipment leases previously classified as capital leases within Property and Equipment on the Company’s balance sheet were reclassified to finance lease right-of-use assets upon adoption of the guidance. Right-of-use assets and obligations were recognized based on the present value of remaining lease payments over the lease term. As the Company’s operating lease agreements do not provide an implicit rate or a readily determinable incremental borrowing rate, an estimated incremental borrowing rate was used based on the information available at the adoption date in determining the present value of lease payments. Operating lease cost is recognized on a straight-line basis over the lease term. Finance lease cost is recognized as a combination of the amortization expense for the Right-of-Use (“ROU”) asset and interest expense for the outstanding lease liabilities using the discounted rate discussed above.Variable lease costs such as common area costs and other operating costs are expensed as incurred. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The adoption of this
new guidance did not have a material net impact on the Company’s consolidated statements of operations or consolidated statements of cash flows.
Operating Leases
The Company has operating leases for its offices and fulfillment centers. Rental expense for operating leases was $5.2 million and $3.3 million for the years ended March 31, 2022 and 2021, respectively. Upon adoption of ASC 842, the Company recognized operating lease right-of-use assets of $29.6 million and operating lease liabilities of $33.9 million.
On March 26, 2021, the Company entered into a lease agreement for its fulfillment center in Columbus, Ohio. In accordance with the ASC 842 guidance, the lease is classified as an operating lease. The average monthly cash payment related to the Company’s Columbus, Ohio operating lease is approximately $36,000 per month, and the lease term will expire on July 31, 2026. In connection with the adoption of ASC 842, the Company recorded a right-of-use asset and lease liability related to this lease of $1.4 million and $1.8 million respectively as of March 31, 2022 based on the present value of payments and incremental borrowing rate of 5.5%.
On October 29, 2021, the Company entered into a lease agreement for a new office space. In accordance with the ASC 842 guidance, the lease is classified as an operating lease. The new lease commences on April 1, 2022 and includes escalating rent payments and a 198 month term. Rent expense will be recorded on a straight-line basis over the lease term. Future minimum lease payments required under the operating lease are approximately $51.7 million. In connection with the lease agreement the Company executed a letter of credit of approximately $1.9 million.
On April 23, 2021, the Company entered into a lease agreement for its fulfillment center in Las Vegas, Nevada. In accordance with the ASC 842 guidance, the lease is classified as an operating lease. The average monthly cash payment related to the Company’s Las Vegas, Nevada operating lease is approximately $205,000 per month, and the lease term will expire on March 31, 2029. In connection with the adoption of ASC 842, the Company recorded a right-of-use asset and lease liability related to this lease of $13.3 million and $14.4 million respectively as of March 31, 2022 based on the present value of payments and incremental borrowing rate of 6.2%.
The following schedule represents the components of the Company’s operating and finance lease assets as of March 31, 2022 (in thousands):
| | | | | | | | | | | | | | |
Leases | | Classification | | March 31, 2022 |
| | | | |
Assets | | | | |
Operating | | Operating lease right-of-use assets | | $ | 29,552 | |
Finance | | Property and equipment, net | | 2,538 | |
Liabilities | | | | |
Operating lease liabilities (current) | | Operating lease liabilities, current | | $ | 5,060 | |
Finance lease liabilities (current) | | Accrued and other current liabilities | | 642 | |
Operating lease liabilities (non-current) | | Operating lease liabilities | | $ | 28,847 | |
Finance lease liabilities (non-current) | | Other long-term liabilities | | 1,896 | |
The following schedule represents the components of lease expense for the fiscal year ended March 31, 2022 (in thousands):
| | | | | | | | |
| | March 31, 2022 |
| | |
Finance Lease Costs: | | |
Amortization of right-of-use assets | | $ | 588 | |
Interest on lease liabilities | | 313 | |
Operating lease costs | | 5,554 | |
Sublease income | | (357) | |
Total lease costs | | $ | 6,098 | |
As of March 31, 2022, the Company’s maturity of operating lease liabilities in the years ending up March 31. 2027 and thereafter are as follows (in thousands):
| | | | | | | | | | | |
| Finance Leases | | Operating Leases |
2023 | $ | 890 | | | $ | 6,963 | |
2024 | 890 | | | 6,725 | |
2025 | 890 | | | 6,263 | |
2026 | 383 | | | 6,437 | |
2027 | 9 | | | 5,284 | |
Thereafter | — | | | 9,260 | |
Total lease payments | 3,062 | | | 40,931 | |
Less: imputed interest | (524) | | | (7,024) | |
Present value of lease liabilities | $ | 2,538 | | | $ | 33,907 | |
Other operating leases information:
| | | | | | | | |
| | |
Cash paid for amounts included in the measurement of lease liabilities | | $ | 4,541 | |
Right-of-use assets obtained in exchange for new lease liabilities | | $ | 33,387 | |
Weighted-average remaining term (years) | | 6.2 |
Weighted average discount rate | | 4.6% |
Other finance leases information:
| | | | | | | | |
| | |
Cash paid for amounts included in the measurement of lease liabilities | | $ | 588 | |
Right-of-use assets obtained in exchange for new lease liabilities | | $ | 3,107 | |
Weighted-average remaining term (years) | | 3.5 |
Weighted average discount rate | | 11.0% |
In accordance with ASC 840, the following is a schedule by years of future minimum lease payments required under the operating leases that have initial or noncancelable lease terms in excess of one year as of March 31, 2021.
| | | | | |
Fiscal year ending March 31: | |
2022 | $ | 4,113 | |
2023 | 4,559 | |
2024 | 4,269 | |
2025 | 3,798 | |
2026 | 3,899 | |
Thereafter | 6,459 | |
Total minimum lease payments | $ | 27,097 | |
In accordance with ASC 840, rental expense for operating leases was $3.5 million for the fiscal year ended March 31, 2021.
11. COMMITMENT AND CONTINGENCIES
Lease commitments
The Company entered into various non-cancelable lease agreements related to its corporate offices, warehouses, and certain equipment. For additional information regarding the Company’s lease agreements, see Note 10.
Litigation
The Company is a party to various actions and claims arising in the normal course of business. The Company does not believe that the final outcome of these matters will have a material effect on the Company’s consolidated financial position, results of operations or cash flows. However, no assurance can be given that the final outcome of such proceedings will not materially impact the Company’s consolidated financial condition or results of operations.
12. INCOME TAXES
A reconciliation of the Company’s effective tax rate to the United States federal income tax rate is as follows:
| | | | | | | | | | | | | | | | | |
| March 31, |
| 2022 | | 2021 | | 2020 |
Federal statutory rate | 21.0 | % | | 21.00 | % | | 21.00 | % |
Permanent differences | (1.51) | | | (2.29) | | | (0.88) | |
State taxes, net of federal benefits | 8.85 | | | 3.12 | | | 1.73 | |
Change in valuation allowance | (42.85) | | | (18.26) | | | (22.79) | |
Interest expense | (1.33) | | | — | | | — | |
Warrant mark-to-market | 10.11 | | | — | | | — | |
Stock compensation | 5.64 | | | (1.02) | | | — | |
Other deferred adjustments | 0.09 | | | (2.55) | | | — | |
Other | — | | | — | | | 0.94 | |
Total | — | % | | — | % | | — | % |
The components of the Company’s deferred taxes are as follows (in thousands):
| | | | | | | | | | | |
| As of March 31, |
| 2022 | | 2021 |
Deferred tax assets: | | | |
Net operating loss carryforwards | $ | 45,807 | | | $ | 24,960 | |
Charitable contributions | 723 | | | 155 | |
Interest expense | 3,599 | | | 3,330 | |
Lease Liabilities | 9,259 | | | — | |
UNICAP | 6,340 | | | 3,048 | |
Stock compensation | 4,280 | | | 1,379 | |
Accruals and other | 4,497 | | | 3,861 | |
Total deferred tax assets | 74,505 | | | 36,733 | |
Valuation allowance | (65,892) | | | (36,621) | |
Net deferred tax assets | 8,613 | | | 112 | |
| | | |
Depreciation | (472) | | | (112) | |
Lease Right-of-Use Asset | (8,141) | | | — | |
Total deferred tax liabilities | (8,613) | | | (112) | |
Net deferred tax assets | $ | — | | | $ | — | |
As of March 31, 2022, the Company had federal net operating loss carryforwards (“NOLs”) of approximately $190.1 million, of which $60.5 million begin to expire in 2031 and $129.7 million can be carried forward indefinitely. The Company also had state NOLs of approximately $110.0 million which begin to expire in 2031.
As of March 31, 2021, the Company had federal net operating loss carryforwards (“NOLs”) of approximately $112.3 million, of which $60.5 million begin to expire in 2031 and $51.9million can be carried forward indefinitely. The Company also had state NOLs of approximately $41.1 million which begin to expire in 2031.
Net operating loss and tax credit carry-forwards are subject to review and possible adjustment by the IRS and may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant stockholders over a three-year period in excess of 50% as defined under Sections 382 and 383 in the Internal Revenue Code, which could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. The amount of the annual limitation is determined based on the Company’s value immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. The Company has completed a formal study through March 31, 2022 to determine if any ownership changes within the meaning of IRC Section 382 and 383 have occurred. As a result of the study, it was determined that BarkBox, Inc. experienced an ownership change on July 8, 2014; however, the limitation from the ownership change will not result in any of the NOLs or tax credits expiring unutilized. The Company has not completed a formal study related to Northern Star Acquisition Corp. and its separate NOLs from periods prior to the Merger. However, any potential ownership change is not expected to result in any of the NOLs expiring unutilized.
The Company has recorded a valuation allowance against its deferred tax assets in each of the years ended March 31, 2022 and 2021, because the Company’s management believes that it is more likely than not that these assets will not be realized. As a result of generating additional net operating losses, the valuation allowance increased by approximately $29.3 million, from $36.6 million as of March 31, 2021 to $65.9 million as of March 31, 2022.
The Company had no unrecognized tax benefits or related interest and penalties accrued for the years ended March 31, 2022, 2021 and 2020 . The Company will recognize interest and penalties related to uncertain tax positions in income tax expense.
The Company is subject to U.S. federal income tax and state income tax. The statute of limitations for assessment by the IRS and state tax authorities is open for the tax years since 2017; currently, no federal or state income tax returns are under examination by the respective taxing authorities. To the extent the Company has tax attributes carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the IRS and the state tax authorities to the extent utilized in a future period.
On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security (CARES) Act to provide relief as a result of the COVID-19 outbreak. The Company has examined the impact of the CARES Act on the business and none of the provisions have a significant impact on the Company.
13. OTHER INCOME (LOSS)—NET
Other income—net consisted of the following:
| | | | | | | | | | | | | | | | | | | | |
| | Fiscal Year Ended March 31 |
| | 2022 | | 2021 | | 2020 |
Other income—net: | | | | | | |
Other income | | $ | 275 | | | $ | 267 | | | $ | 583 | |
Change in fair value of warrants | | 33,196 | | | (6) | | | 3 | |
Change in fair value of derivative liability | | — | | | (925) | | | 93 | |
Loss on extinguishment of debt | | (2,024) | | | — | | | — | |
Loss on warrant exercise | | (101) | | | — | | | — | |
Settlement claim | | — | | | 795 | | | 0 |
| | $ | 31,346 | | | $ | 131 | | | $ | 679 | |
14. NET LOSS PER SHARE
Basic and diluted net income (loss) per share attributable to common stockholders was calculated as follows:
| | | | | | | | | | | | | | | | | | | | |
| Fiscal Year Ended March 31 |
| | 2022 | | 2021 | | 2020 |
Numerator: | | | | | | |
Net loss | | $ | (68,299) | | | $ | (31,391) | | | $ | (31,368) | |
Less: Earnings attributable to participating securities | | $ | — | | | $ | — | | | $ | — | |
Net loss attributable to common stockholders—basic and diluted | | $ | (68,299) | | | $ | (31,391) | | | $ | (31,368) | |
Denominator: | | | | | | |
Weighted average common shares outstanding—basic and diluted | | 156,201,601 | | | 46,297,847 | | | 45,110,365 | |
| | | | | | |
Net loss per share attributable to common stockholders - basic and diluted | | $ | (0.44) | | | $ | (0.68) | | | $ | (0.70) | |
For the fiscal year ended March 31, 2022, the Company’s potential dilutive securities, which include stock options, RSUs, warrants and convertible notes have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted-average number of shares of
common stock outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same for the three months and fiscal year ended March 31, 2022.
For the fiscal year ended March 31, 2021, the Company’s potential dilutive securities, which include redeemable convertible preferred stock, stock options and warrants, have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted-average number of shares of common stock outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same for the three months and fiscal year ended March 31, 2021.
The Company excluded the following potential shares of common stock, presented based on amounts outstanding at March 31, 2022, 2021 and 2020 from the computation of diluted net loss per share attributable to common shareholders for the fiscal years ended March 31, 2022, 2021 and 2020 because including them would have had an anti-dilutive effect.
| | | | | | | | | | | | | | | | | | | | |
| As of | |
| March 31, | |
| 2022 | | 2021 | | 2020 | |
Redeemable convertible preferred stock as converted to common stock | — | | | 29,139,810 | | 29,139,810 | | |
Stock options to purchase common stock | 19,331,636 | | | 29,454,960 | | 21,178,016 | | |
Restricted stock units | 4,134,053 | | | — | | | — | | |
Warrants to purchase common stock | 13,036,333 | | | 2,044,719 | | 2,044,719 | | |
Warrants to purchase preferred stock | — | | | 4,572 | | 4,572 | | |
2025 convertible notes as converted to common stock | 8,062,230 | | — | | | — | | |
The Company also had convertible notes outstanding for the fiscal year ended March 31, 2022, which could have obligated the Company and/or its stockholders to issue shares of common stock upon the occurrence of various future events at prices and in amounts that are not determinable until the occurrence of those future events. Because the necessary conditions for the conversion of these instruments had not been satisfied during the fiscal year ended March 31, 2022, the Company excluded these instruments from the table above and the calculation of diluted net loss per share for the period. See Note 7, “Debt,” for additional details.
15. SEGMENTS
The Company applies ASC 280, Segment Reporting, in determining reportable segments for its financial statement disclosure. The Company has two reportable segments: Direct to Consumer and Commerce. The Direct to Consumer segment derives revenue from the sale of BarkBox, Super Chewer, BARK Bright and BARK Food subscriptions, as well as product line sales through the Company’s website, BarkShop. The Commerce segment derives revenue from the sale of toys, treats and BARK Home products through major retailers and online marketplaces. Reporting in this format provides management with the financial information necessary to evaluate the success of the segments and the overall business. There are no internal revenue transactions between the Company’s segments.
The CODM reviews revenue and gross profit for both of the reportable segments. Gross profit is defined as revenue less cost of revenue incurred by the segment. The Company does not allocate assets at the reportable segment level as these are managed on an entity wide group basis and, accordingly, the Company does not report asset information by segments.
Key financial performance measures of the segments including revenue, cost of revenue, and gross profit are as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | |
| | Fiscal Year Ended March 31 |
| | 2022 | | 2021 | | 2020 |
Direct to Consumer: | | | | | | |
Revenue | | $ | 448,074 | | | $ | 333,970 | | | $ | 204,151 | |
Cost of revenue | | 187,991 | | | 128,044 | | | 79,191 | |
Gross profit | | 260,083 | | | 205,926 | | | 124,960 | |
Commerce: | | | | | | |
Revenue | | 59,332 | | | 44,634 | | | 20,184 | |
Cost of revenue | | 37,309 | | | 24,620 | | | 9,730 | |
Gross profit | | 22,023 | | | 20,014 | | | 10,454 | |
Consolidated: | | | | | | |
Revenue | | 507,406 | | | 378,604 | | | 224,335 | |
Cost of revenue | | 225,300 | | | 152,664 | | | 88,921 | |
Gross profit | | $ | 282,106 | | | $ | 225,940 | | | $ | 135,414 | |
16. 401(k)
The Company sponsors a 401(k) defined contribution plan covering all eligible U.S. employees. Subject to certain Internal Revenue Service (“IRS”) limits, eligible employees may elect to contribute from 1% to 100% of their compensation. Company contributions to the plan are at the sole discretion of the Company’s Board. Currently, the Company does not provide a 401(k) match.
17. SUBSEQUENT EVENTS
On May 27, 2022, the company amended the Western Alliance Agreement to extend the Credit Facility maturity date to June 30, 2022.