FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, which we
refer to in this quarterly report as the Securities Act, and Section 21E of the
Securities Exchange Act of 1934, as amended, which we refer to in this quarterly
report as the Exchange Act. Forward-looking statements are not statements of
historical fact but rather reflect our current expectations, estimates and
predictions about future results and events. These statements may use words such
as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “predict,” “project”
and similar expressions as they relate to us or our management. When we make
forward-looking statements, we are basing them on our management’s beliefs and
assumptions, using information currently available to us. These forward-looking
statements are subject to risks, uncertainties and assumptions, including but
not limited to, risks, uncertainties and assumptions discussed in this quarterly
report. Factors that can cause or contribute to these differences include those
described under the headings “Risk Factors” and “Management Discussion and
Analysis and Plan of Operation.”
If one or more of these or other risks or uncertainties materialize, or if our
underlying assumptions prove to be incorrect, actual results may vary materially
from what we projected. Any forward-looking statement you read in this quarterly
report reflects our current views with respect to future events and is subject
to these and other risks, uncertainties and assumptions relating to our
operations, results of operations, growth strategy and liquidity. All subsequent
written and oral forward-looking statements attributable to us or individuals
acting on our behalf are expressly qualified in their entirety by this
paragraph. You are cautioned not to place undue reliance on forward-looking
statements, which speak only as of the date of this quarterly report. The
Company expressly disclaims any obligation to release publicly any updates or
revisions to these forward-looking statements to reflect any change in its views
or expectations. The Company can give no assurances that such forward-looking
statements will prove to be correct.
Company
The
Company described herein, was incorporated under the laws of the
on
89030. Our phone number is (702) 267-7100.
Nature of Business –
Group
incorporated under the laws of the
On
Exchange”), pursuant to which the Company acquired 100% of the issued and
outstanding equity securities of The 4Less Corp. (“4LESS”), in exchange for the
issuance of (i) nineteen thousand (19,000) shares of Series B Preferred Stock,
(ii) six thousand seven hundred fifty (6,750) shares of Series C Preferred
Stock, and (iii) 870 shares of Series D Preferred Stock. The Series C Preferred
Shares have a right to convert into common stock of the Company by multiplying
the number of issued and outstanding shares of common stock by 2.63 on the
conversion date. The Share Exchange closed on
the Share Exchange, the former shareholders of 4LESS became the controlling
shareholders of the Company. The Share Exchange was accounted for as a reverse
takeover/recapitalization effected by a share exchange, wherein 4LESS is
considered the acquirer for accounting and financial reporting purposes. The
capital, share price, and earnings per share amount in these consolidated
financial statements for the period prior to the reverse merger were restated to
reflect the recapitalization in accordance with the shares issued as a result of
the reverse merger except otherwise noted.
On
changed the name of their wholly owned subsidiary from the 4Less Corp. to
Parts 4Less
Group, Inc.
Our Business
Like many small businesses,
4Less
those items out of his garage in 2013. What started out as a hobby, quickly
grew into a fully functioning ecommerce aftermarket auto parts company that
required a significant technical staff and facilities to support their growth.
In June of 2015, they leased their first office.
Originally the company listed their auto parts in the different marketplaces
such as Amazon, eBay, Walmart and Jet.
Starting in 2016 the company began investing to become their own ecommerce
platform thereby allowing their auto parts to be direct listed across
marketplace and social media sites. Technical achievements including CRM system,
warehouse integration API, warehouse inventory software to name a few.
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In 2019, shortly after the share exchange with
technology upgrades in place, 4Less began successfully moving majority of sales
from third party marketplaces direct to their proprietary ecommerce web site
Liftkits4Less.com. By doing so the company saves 8%-10% in fees charged by the
major marketplace’s such as e-Bay and Amazon as well as further building the
4less brand as a leading ecommerce site for auto parts.
On
the name of their wholly owned subsidiary from the 4Less Corp. to
4Less
began focusing all of their efforts and resources on building out a flagship
automotive marketplace with the potential to offer buyers a wide range of
automotive parts for cars, trucks, boats, motorcycles and RV’s on a single
platform.
In
In a short period of time after the beta launch the company realized that with
the amount of interest received from numerous types of larges sellers, which
included not only ecommerce sites presently selling parts online, but also
interest from other large parts sellers such as warehouse distributors, new car
dealers with large inventories of parts as well as brick and mortar parts
retailers looking to move sales online, the platform originally created would
soon be inadequate. As such, the Company made the decision to upgrade to a
larger and more advanced platform solution so they immediately began
implementation of the AWS Fargate serverless platform solution.
The platform upgrade was completed in the 1st quarter FYE 2023, with marketplace
sales expected to begin in 3rd quarter 2023.
On
is believed to be the industry’s first pure-play automotive parts-only
marketplace, AutoParts4Less.com, with approximately 2 million parts listed from
over 25 parts sellers. Additionally, with the slowdown of the economy including
purchases of auto parts accessories such as lift kits, exclusively designed for
trucks and SUV’s, the company decided to discontinue operations of their
ecommerce website Liftkits4less.com in mid-November to focus entirely on growing
their parts marketplace, AutoParts4Less.com. By doing so they also expect to
reduce monthly operating costs to under 300k a month for the foreseeable future.
On
Competition
We believe that our automotive parts marketplace AutoParts4less.com, with no
known large challengers presently in the space outside of “all things to all
people” online marketplaces Amazon and eBay, has the opportunity to quickly be
branded when launched as the auto part’s industry premier marketplace just as
sites like Etsy, Wayfair, Uber and Chewey’s have been able to successfully do in
their industries.
Results of Operations For the Nine Months Ended
Nine Months Ended
The following table shows our results of operations for the nine months endedOctober 31, 2022 , and 2021. The historical results presented below are not necessarily indicative of the results that may be expected for any future period. Change 2022 2021 $ % Total Revenues$ 4,089,037 $ 9,429,519 $ (5,340,482 ) (57% ) Gross Profit 792,491 2,454,393 (1,661,902 ) (68% ) Total Operating Expenses 5,378,156 7,146,485 (1,768,329 ) (25% )
Total Other Income (Expense) (7,643,110 ) (194,288 ) (7,448,822 ) (3,834% )
Net Income (Loss)
$ (12,228,775 ) $ (4,886,380 ) $ (7,342,395 ) (150% ) Revenue
The following table shows revenue split between proprietary and third-party
website revenue for the nine months ended
Change
2022 2021 $ %
Proprietary website revenue
Third party website revenue 1,338,401 3,090,041 (1,751,640 ) (57% )
Total Revenue
$ 4,089,037 $ 9,429,519 $ (5,340,482 ) (57% ) - 29 -
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We had total revenue of
compared to
decreased by
consumer demand as well as supply chain issues. In the prior year’s quarter,
sales were driven by high consumer demand as a result of economic stimulus
packages provided during the pandemic and an aggressive marketing push by the
Company. In current Q3 the Company began winding its website Liftkits4less in
anticipation of the
AutoParts4Less.com. The Company also recorded
will be recognized as revenue next quarter and recognized
revenue recorded
by customers this period but delivered in the following period due to back
orders and processing and delivery times. The Company also recorded
customer deposits and recognized
customer deposits are orders paid by customers and canceled in the following
period due to back orders or other reasons. For the prior year period, the
Company recorded
the next quarter and recognized
recorded
31, 2021
Both proprietary website revenues and third party website revenues fell by 57%
as the Company transitions from a seller of accessories to a pure-play
automotive parts-only marketplace.
Gross Profit
We had gross profit of
compared to gross profit of
2021
explained above and also due to an increase in cost because the Company had to
purchase goods at higher product costs from distributers rather than the usual
manufacturers for many of the new available products or some of the products
that were not available from the usual manufacturers due to still existing
supply chain issues. The 2022 gross profit was further reduced by a
provision on inventory which will be sold off in the coming quarter on
transitioning to the new AutoParts4Less.com website.
Operating Expenses The following table shows our operating expenses for the nine months endedOctober 31, 2022 , and 2021: Change Operating Expenses 2022 2021 $ % Depreciation$ 38,587 $ 35,930 2,657 7% Postage, Shipping and Freight 146,962 430,105 (283,143 ) (66% ) Marketing and Advertising 671,348 1,876,576 (1,205,228 ) (64% ) E Commerce Services, Commissions and ) ) Fees 1,076,787 1,160,569 (83,782 (7% Operating lease cost 90,177 91,437 (1,260 ) (1% ) Personnel Costs 505,253 1,078,449 (573,196 ) (53% ) PPP Loan Forgiveness - (209,447 ) 209,447 - General and Administrative 2,849,042 2,682,866 166,176 6% Total Operating Expenses$ 5,378,156 $ 7,146,485 (1,768,329 ) (25% )
• Depreciation increased by
2022, thus a higher asset value is being depreciated.
• Postage shipping and freight decreased by$283,143 due to lower sales.
• Marketing and advertising decreased by
promotional efforts in the prior period to drive sales to our proprietary
websites and build our brands. For the nine months ended
spending has resumed to usual levels and in Q32022 we reduced advertising in
anticipation on new website launch in November.
• E Commerce Services, Commissions and Fees decreased by
sales.
• Operating lease cost decreased by$1,260 . • PPP loan forgiveness in 2021 was a non-recurring item.
• Personnel Costs decreased by
lower demand.
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• General and Administrative increased by
compensation of
reduced by reductions of 1,831,823 across all other general and administrative
accounts as the Company focused on reducing its costs in a declining market.
Investor relations were lower as a result of the REG A subscription offering in
the prior year and there was also a reduction in professional fees due to
associated reporting and business requirements of the afore-mentioned REG A
subscription from the prior year’s quarter.
Other Income (Expense)
The following table shows our other income and expenses for the nine months
ended
Change
Other Income (Expense) 2022 2022 $ %
Gain (Loss) on Sale of Property and $ $
Equipment - 20,345 (20,345 ) -
Gain (Loss) on Derivatives (841,772 ) (88,551 ) (753,221 ) 851%
Gain on Settlement of Debt 19,539 1,004,615 (985,076 ) (98% )
Amortization of Debt Discount (4,309,329 ) (442,075 ) (3,867,254 ) (875% )
Interest Expense (2,511,548 ) (688,622 ) (1,822,926 ) (265% )
Total Other Income (Expense) $ (7,643,110 ) $ (194,288 ) (7,448,822 ) (3,834% )
The changes above can be explained by the increase in convertible debt that
started at the end of last fiscal year and continued for the nine months ended
to
amortization of debt discount and interest expense increased significantly. The
higher loss on derivatives in 2022 is a function of the market factors in the
valuation of the derivative liability described in Note 9 of the included
financial statements as well as the derivative discounts acquired with the new
debt.
We had net loss of
compared to net income of
The increase in net loss was mainly due to the large increase in other expenses,
the lower sales and the increase in stock-based compensation as explained in the
discussion above.
Results of Operations for the Three Months Ended
the Three Months Ended
The following table shows our results of operations for the three months endedOctober 31, 2022 , and 2021. The historical results presented below are not necessarily indicative of the results that may be expected for any future period. Change 2022 2021 $ % Total Revenues$ 1,017,986 $ 3,114,062 $ (2,096,074 ) (67% ) Gross Profit 171,088 839,498 (668,410 ) (80% )
Total Operating Expenses 1,009,907 2,860,927 (1,851,020 ) (65% )
Total Other Income (Expense) (3,292,872 ) (545,145 ) (2,747,727 ) (504% )
Net Income (Loss)
$ (4,131,691 ) $ (2,566,574 ) $ (1,565,117 ) (61% ) Revenue
The following table shows revenue split between proprietary and third-party
website revenue for the three months ended
Change
2022 2021 $ %
Proprietary website revenue $ 611,799 $ 2,392,668 $ (1,780,869 ) (74% )
Third party website revenue 406,187 721,394 (315,207 ) (44% )
Total Revenue $ 1,017,986 $ 3,114,062 $ (2,096,076 ) (67% )
We had total revenue of
compared to
decreased by
consumer demand as well as supply chain issues. In the prior year’s quarter,
sales were driven by high consumer demand as a result of economic stimulus
packages provided during the pandemic and an aggressive marketing push by the
Company. In current Q3 the Company began winding its website Liftkits4less in
anticipation of the
AutoParts4Less.com.
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Table of Contents Gross Profit
We had gross profit of
compared to gross profit of
2022
explained above. The 2022 gross profit was further reduced by a
provision on inventory which will be sold off in the coming quarter on
transitioning to the new AutoParts4Less.com website.
Operating Expenses The following table shows our operating expenses for the three months endedOctober 31, 2022 and 2021: Change Operating Expenses 2022 2021 $ % Depreciation$ 12,743 $ 12,479 264 2% Postage, Shipping and Freight 32,013 94,356 (62,343 ) (66% ) Marketing and Advertising 156,522 609,252 (452,730 ) (74% ) E Commerce Services, Commissions and ) ) Fees 396,065 434,832 (38,767 (9% Operating lease cost 29,219 30,478 (1,259 ) (4% ) Personnel Costs 131,937 319,256 (187,319 ) (59% ) PPP Loan Forgiveness - (209,447 ) 209,447 (100% ) General and Administrative 251,408 1,569,721 (1,318,313 ) (84% ) Total Operating Expenses$ 1,009,907 $ 2,860,927 (1,851,020 ) (65% ) • Depreciation increased by$264 . • Postage shipping and freight decreased by$62,343 due to lower sales.
• Marketing and advertising decreased by
efforts in 2021 to drive sales to our proprietary websites and build our brands.
For the quarter ended
anticipation on new website launch in November.
• E Commerce Services, Commissions and Fees decreased by
sales.
• Operating lease cost decreased by$1,259 .
• Personnel Costs decreased by
lower demand.
• PPP loan forgiveness in Q3 2021 was a non-recurring item.
• General and Administrative decreased by
reducing its expenses in a declining market. Investor relations were lower as a
result of the REG A subscription offering in the prior year and there was also a
reduction in professional fees due to associated reporting and business
requirements of the afore-mentioned REG A subscription from the prior year’s
quarter.
Other Income (Expense)
The following table shows our other income and expenses for the three months
ended
Change
Other Income (Expense) 2022 2022 $ %
Gain (Loss) on Derivatives $ (184,146 ) $ (76,444 ) (107,702 ) (141% )
Gain on Settlement of Debt 10,128 41,249 (31,121 ) (75% )
Amortization of Debt Discount (1,932,722 ) (130,139 ) (1,802,583 ) (1,385% )
Interest Expense (1,186,132 ) (379,811 ) (806,321 ) (212% )
Total Other Income (Expense) $ (3,292,872 ) $ (545,145 ) (2,747,727 ) (504% )
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The changes above can be explained by the increase in convertible debt this
quarter ended
large increases in amortization expense and interest expense. The higher loss on
derivatives is a function of the market factors in the valuation of the
derivative liability described in Note 9 as well as the increase in derivative
discount resulting from the new debt issuances.
We had a net loss of
compared to a net loss of
The decrease in net income was mainly due to the large increase in other
expenses and the lower sales as explained in the discussion above.
Liquidity and Capital Resources
Management believes that we will continue to incur losses for the immediate
future. Therefore, we will need additional equity or debt financing until we can
achieve profitability and positive cash flows from operating activities, if
ever. These conditions raise substantial doubt about our ability to continue as
a going concern. Our unaudited consolidated financial statements do not include
any adjustments relating to the recovery of assets or the classification of
liabilities that may be necessary should we be unable to continue as a going
concern.
As of
rate, we will need to consider additional funding sources going forward. We are
taking proactive measures to reduce operating expenses and drive growth in
revenue.
The successful outcome of future activities cannot be determined at this time
and there is no assurance that, if achieved, we will have sufficient funds to
execute our intended business plan or generate positive operating results.
Capital Resources
The following table summarizes total current assets, liabilities and working
capital (deficit) for the periods indicated:
October 31, 2022 January 31, 2022
Current assets $ 252,543 $ 564,615
Current liabilities 15,532,213 8,890,462
Working capital (deficits)
Net cash used in operations for the nine months ended
months ended
nine months ended
investing activities of
by financing activities for the nine months ended
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