Management's Discussion and Analysis of Financial Condition and Results of
Operations provide information that the Company's management believes necessary
to achieve an understanding of its financial condition and results of
operations. To the extent that such analysis contains statements which are not
of a historical nature, such statements are forward-looking statements, which
involve risks and uncertainties. These risks include, but are not limited to,
changes in the competitive environment for the Company's products and services;
general economic factors in markets where the Company's products and services
are sold; and other factors including, but not limited to: cost of goods,
consumer disposable income, consumer debt levels and buying patterns, consumer
credit availability, interest rates, customer preferences, unemployment, labor
costs, inflation, fuel and energy prices, weather patterns, climate change,
catastrophic events, competitive pressures and insurance costs discussed in the
Company's filings with the Securities and Exchange Commission.

AF transactions

Previously, the Company also operated fye, a chain of retail entertainment
stores and e-commerce sites, www.fye.com and www.secondspin.com. On February 20,
2020, the Company consummated the sale of substantially all of the assets and
certain of the liabilities relating to fye to a subsidiary of 2428391 Ontario
Inc. o/a Sunrise Records ("Sunrise Records") pursuant to an Asset Purchase
Agreement dated January 23, 2020, by and among the Company, Record Town, Inc.,
Record Town USA LLC, Record Town Utah LLC, Trans World FL LLC, Trans World New
York, LLC, 2428392 Inc., and Sunrise Records (the "FYE Transaction").

Following the FYE transaction, Kaspian is the sole operating segment of the Company.

Impact of COVID-19

To date, as a direct result of COVID-19, most of our employees are working
remotely. The full extent to which the COVID-19 pandemic will directly or
indirectly impact our business, results of operations and financial condition,
including expenses, reserves and allowances, and employee-related amounts, will
depend on future developments that are highly uncertain, including as a result
of new information that may emerge concerning COVID-19 and the actions taken to
contain or treat it, as well as the economic impact on local, regional, national
and international customers and markets, which are highly uncertain and cannot
be predicted at this time. Management is actively monitoring this situation and
the possible effects on its financial condition, liquidity, operations,
industry, and workforce. Given the daily evolution of the COVID-19 outbreak and
the response to curb its spread, currently we are not able to estimate the
effects of the COVID-19 outbreak to our results of operations, financial
condition, or liquidity.

In response to the rapidly evolving COVID-19 pandemic, we activated our business
continuity program, led by our Executive Team in conjunction with Human
Resources, to help us manage the situation. In mid-March of 2020, we
transitioned our corporate office staff to work 100% remotely. This process was
aided through the implementation of a flexible work from home policy rolled out
to the organization in fiscal 2019, having a companywide communication platform
for instant messaging and video conferencing, and cloud-based critical business
applications. However, while our business is not dependent on physical office
locations nor travel, having a 100% remote workforce does present increased
operational risk. Our leadership team believes we have the necessary controls in
place to mitigate these impacts and allow the team to continue to operate
effectively remotely as long as required by State guidelines.

While e-commerce has largely benefited from the closure of brick-and-mortar
locations as consumer spending has been pushed online to marketplaces such as
Amazon and Walmart, the industry nor our organization has been immune to the
impact to our supply chains. During 2021, we have been impacted by COVID-19
pandemic and related global shipping disruption. Together these have led to
substantial increases in supply chain costs and has reduced the reliability and
timely delivery of such shipping containers. Further, this global shipping
disruption is forcing us to increase our inventory on-hand including advance
ordering and taking possession of inventory earlier than expected impacting its
working capital.

COVID-19 continues to bring uncertainty to consumer demand as price increases
related to raw materials, the importing of goods, including tariffs, and the
cost of delivering goods to consumers has led to inflation across the U.S.
Coupled with continued changes in governmental restrictions and requirements,
which continued to vary across the majority of the country, the Company has
noticed changes to consumer buying habits, which may have reduced demand for its
products. Further, we have increased the sale prices for our products to offset
the increased supply chain costs, which has also led to reduced demand for our
goods. Reduced demand for our products and increased prices affecting consumer
demand generally have also made forecasting more difficult.

The risk of another wave or increased numbers of positive COVID-19 cases also
presents further risk to supply chains. Leadership is actively monitoring the
situation and potential impacts on its financial condition, liquidity,
operations and workforce but the full extent of the impact is still highly

Key performance indicators

Management monitors a number of key performance indicators to assess its performance, including:

Net Revenue: The Company measures total year over year sales growth. Net sales
performance is measured through several key performance indicators including
number of partners and active product listings and sales per listing.

Cost of Sales and Gross Profit:  Gross profit is calculated based on the cost of
product in relation to its retail selling value. Changes in gross profit are
impacted primarily by net sales levels, mix of products sold, obsolescence and
distribution costs. Distribution expenses include those costs associated with
receiving, inspecting & warehousing merchandise, Amazon fulfillment fees, and
costs associated with product returns to vendors.

Selling, general and administrative (“SG&A”) expenses: Selling, general and administrative expenses include salaries and related costs, general operating expenses and depreciation and amortization expenses. SG&A expenses also include various non-interest income and expense items.

Balance sheet and ratios: The Company considers cash, merchandise inventories, accounts payable leverage and working capital as key indicators of its financial condition. See “Liquidity and Capital Resources” for a more in-depth discussion of these items.

Gross Merchandise Value (“GMV”): The total value of merchandise sold over a period of time through a customer-to-customer exchange site. This is the measure of the value of goods sold across all channels and partners on our platform.

               Fiscal Year Ended January 29, 2022 ("fiscal 2021")
         Compared to Fiscal Year Ended January 30, 2021 ("fiscal 2020")

The Company's fiscal year is a 52 or 53-week period ending the Saturday nearest
to January 31. Fiscal 2021 and fiscal 2020 ended January 29, 2022 and January
30, 2021, respectively. Both fiscal 2021 and fiscal 2020 had 52 weeks.

Net Revenue. Net revenue decreased 9.2% to $143.7 million compared to $158.3
million in fiscal 2020. The primary source of revenue is the Retail as a Service
("RaaS") model, which represented 99% of net revenue. Net revenue from Walmart,
Target and Other Marketplaces increased to 1.5% in fiscal 2021 from 0.6% in
fiscal 2020. Subscriptions and Other share of net revenue increased to 1.3% of
net revenue from 0.8% of net revenue in the comparable period from the prior
year. The increase was attributable an increase in the number of partners and
higher gross merchandise value ("GMV") of partner revenue flowing through the
platform Amazon Marketplace. The following table sets forth net revenue by
marketplace as a percentage of total net revenue:

                                        January 31,       % to        January 30,       % to
                                           2022           Total          2021           Total       Change
Amazon US                              $     134,125        93.3 %   $     148,526        93.8 %   $ (14,401 )
Amazon International                           5,576         3.9 %           7,646         4.8 %      (2,070 )
Walmart, Target & Other Marketplaces           2,172         1.5 %             884         0.6 %       1,288
Subtotal Retail                              141,873        98.7 %         157,056        99.2 %     (15,183 )
Subscriptions & Other                          1,840         1.3 %           1,289         0.8 %         551
Total                                  $     143,713       100.0 %   $     158,345       100.0 %   $ (14,632 )

The Company generates revenue across a broad array of product lines primarily
through the Amazon Marketplace. Categories include apparel, baby, beauty,
electronics, health & personal care, home/kitchen/grocery, pets, sporting goods,
toys & art.

The platform’s annual GMV for fiscal year 2021 was $271 million compared to $248
for fiscal 2020. Subscription GMV increased 45% to $120 million i.e. 44.3% of total GMV, compared to $83 million i.e. 33.5% of total GMV for fiscal year 2020.

Gross Profit.  Gross profit as a percentage of revenue was 22.8% in fiscal 2021
as compared to 24.9% in fiscal 2020. The decrease in the gross profit rate was
primarily due to a decrease in merchandise margin to 44.8% in fiscal 2021 as
compared to 46.4% in fiscal 2020 and a $2.0 million increase in warehousing and
freight expenses. The following table sets forth a year-over-year comparison of
the Company's gross profit:

(amounts in thousands)    January 29, 2022      January 30, 2021          $            %

Merchandise margin        $          64,410     $          73,448     $ (9,038 )      (12.3 )%
% of net revenue                       44.8 %                46.4 %       (1.6 )%

Fulfillment fees                    (21,655 )             (26,046 )      4,391         16.9 %
Warehousing and freight              (9,982 )              (7,986 )     (1,996 )      (24.9 )%
Gross profit              $          32,773     $          39,416       (6,643 )      (16.9 )%

% of net revenue                       22.8 %                24.9 %


————————————————– ——————————

Selling, general and administrative expenses. The following table provides a year-over-year comparison of the Company’s SG&A expenses:

                                         January 29,      January 30,
(amounts in thousands)                      2022             2021              $             %

Selling expenses                         $    20,794     $      23,112     $  (2,318 )       (10.0 )%
General and administrative expenses           19,501            19,890          (389 )        (2.0 )%
Depreciation and amortization expenses         2,096             2,139           (43 )        (2.0 )%
Total SG&A expenses                      $    42,391     $      45,141     $  (2,750 )        (6.1 )%

As a % of total revenue                         29.5 %            28.5 %

SG&A expenses decreased $2.8 million, or 6.1%, mainly due to a 10.0% reduction in selling expenses. The decrease in selling expenses is attributable to the decrease in net income. General and administrative expenses decreased $0.4 million.

SG&A expenses as a percentage of net revenue increased to 29.5% as compared to
28.5% in fiscal 2020. The increase in the rate as a percentage of net revenue
was primarily due to lost leverage on the general and administrative expenses.

Depreciation and amortization. The consolidated amortization expense for the 2021 financial year was $2.1 millionat the same level as the 2020 financial year.

Interest charges. The interest expense for the 2021 financial year was $1.9 millioncompared to the interest charges of $1.7 million during fiscal year 2020.

Income tax expense (benefits). The following table provides a year-over-year comparison of the Company’s income tax expense:

(amounts in thousands)                                              Change
                                January 29,       January 30,
                                   2022              2021              $

Income tax (benefit) expense   $          27     $      (3,542 )    $ 3,569

Effective tax rate                       0.3 %           (47.6 )%      47.9 %

Income tax expense for fiscal year 2021 includes state taxes.

During fiscal 2020, based on the Company's evaluation of new information that
occurred in the current financial reporting period, the Company recorded an
income tax benefit of $3.5 million related to the recognition of previously
unrecognized income tax benefits pursuant to ASC 740-10-25, Accounting for
Income Taxes - Recognition. Prior to the current financial reporting period, the
Company had accrued the liabilities for unrecognized income tax benefits,
including accrued interest and penalties related to tax positions created by the
fye business. As a result of the FYE Transaction and a reorganization of the
Company's corporate structure, the Company will not utilize the tax attributes
attributable to the tax positions and the corporate entities associated with the
tax positions have been liquidated.


————————————————– ——————————

Net Loss. The following table sets forth a year-over-year comparison of the
Company's net loss:

(amounts in thousands)                                                           Change
                                           January 29,        January 31,
                                              2022               2020              $

Net loss                                  $      (8,031 )    $      (3,892 )    $ (4,139 )

Net loss as a percentage of Net revenue            (5.6 )%            (2.5 

)% (3.1 )%

The net loss was $8.0 million for the 2021 financial year, compared to $3.9 million for fiscal year 2020. The increase in net loss is mainly due to lower net revenues and lower gross margin rate.


Liquidity and Cash Flows:
The consolidated financial statements for the year ended January 29, 2022 were
prepared on the basis of a going concern which contemplates that the Company
will be able to realize assets and satisfy liabilities and commitments in the
normal course of business. The ability of the Company to meet its liabilities
and to continue as a going concern is dependent on improved profitability, the
continued implementation of the strategic initiative to reposition the Company
as a platform of software and services, the availability of future funding and
overcoming the impact of the COVID-19 pandemic.

The audited consolidated financial statements do not include any adjustments that may result from the outcome of these uncertainties.

The Company incurred net losses of $8.0 million and $3.9 million for the fiscal
2021 and fiscal 2020, respectively, and has an accumulated deficit of $120.9
million as of January 29, 2022. In addition, net cash used in operating
activities during fiscal 2021 was $14.5 million. Net cash used in operating
activities during fiscal 2020 was $13.4 million.

There can be no assurance that we will be successful in further implementing our
business strategy or that the strategy, including the completed initiatives,
will be successful in sustaining acceptable levels of sales growth and
profitability. Based on recurring losses from operations, negative cash flows
from operations, the expectation of continuing operating losses for the
foreseeable future, negative cash flows from operations and uncertainty with
respect to any available future funding, the Company has concluded that there is
substantial doubt about the Company's ability to continue as a going concern.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.

The Company's primary sources of liquidity are its borrowing capacity under its
Credit Facility, available cash and cash equivalents, and to a lesser extent,
cash generated from operations. Our cash requirements relate primarily to
working capital needed to operate Kaspien, including funding operating expenses,
the purchase of inventory and capital expenditures. Our ability to achieve
profitability and meet future liquidity needs and capital requirements will
depend upon numerous factors, including the timing and amount of our revenue;
the timing and amount of our operating expenses; the timing and costs of working
capital needs; successful implementation of our strategy and planned activities;
and our ability to overcome the impact of the COVID-19 pandemic.

On March 18, 2021, the Company closed an underwritten offering of 416,600 shares
of common stock of the Company, at a price to the public of $32.50 per share.
The gross proceeds of the offering were approximately $13.5 million, prior to
deducting underwriting discounts and commissions and estimated offering
expenses. The Company intends to use the net proceeds from the offering for
general corporate purposes, including working capital to implement its strategic
plans focused on brand acquisition, investments in technology to enhance its
scalable platform and its core retail business.

On March 2, 2022, the Company amended its subordinated loan pursuant to which
the lenders made an additional $5.0 million secured term loan with a scheduled
maturity date of March 31, 2024, which is the same maturity date as the existing
loans under the Subordinated Loan Agreement.

In addition to the aforementioned current sources of existing working capital,
the Company is continuing its efforts to generate additional sales and increase
margins. There can be no assurance that any of the initiatives or strategic
alternatives will be implemented, successful or consummated.

The following table sets forth a two-year summary of key components of cash flow
and working capital:

                                                                              2021 vs.
                     (amounts in thousands)         2021          2020          2020
                       Operating Cash Flows       $ (14,534 )   $ (13,391 )   $  (1,143 )
                       Investing Cash Flows          (1,431 )      10,589       (12,018 )
                       Financing Cash Flows          14,233           505        13,728

                       Capital Expenditures          (1,431 )      (1,190 )        (241 )

                    End of Period Balances:

Cash, cash equivalents and restricted cash (1) 4,823 6,555

     (1,732 )
                      Merchandise Inventory          30,222        24,515         5,707
                            Working Capital          16,334        10,762         5,572

     Cash and cash equivalents per
(1)  Consolidated Balance Sheets                 $   1,218     $   1,809          (591 )
     Add: Restricted cash                            3,605         4,746        (1,141 )
     Cash, cash equivalents, and restricted
     cash                                        $   4,823     $   6,555        (1,732 )

During fiscal 2021, cash used in operations was $14.5 million compared to $13.4
million in fiscal 2020. During 2021, cash used in operations consisted primarily
of a net loss of $8.0 million, an increase of $4.8 million in inventory and the
payment of $2.6 million in accounts payable. During 2020, cash used in
operations consisted primarily of a net loss of $3.9 million, an increase of
$6.7 million in inventory and the payment of $5.5 million in accounts payable
partially offset by a decrease in prepaid expenses and accounts receivables. See
the Consolidated Statement of Cash Flows for further detail.

The Company monitors various statistics to measure its management of inventory,
including inventory turnover (annual cost of sales divided by average
merchandise inventory balances), and accounts payable leverage (accounts payable
divided by merchandise inventory). Inventory turnover measures the Company's
ability to sell merchandise and how many times it is replaced in a year. This
ratio is important in determining the need for markdowns and planning future
inventory levels and assessing customer response to our merchandise. Inventory
turnover in fiscal 2021 and in fiscal 2020 was 4.0 and 5.6, respectively.
Accounts payable leverage measures the percentage of inventory being funded by
the Company's product vendors. The percentage is important in determining the
Company's ability to fund its business. Accounts payable leverage on inventory
for Kaspien was 20.7% as of January 29, 2022, compared with 36.3% as of January
30, 2021.

Cash used in investing activities was $1.4 million in fiscal 2021, compared to
cash provided by investing activities of $10.6 million in fiscal 2020. During
fiscal 2021, cash used in investing activities consisted of $1.4 million in
capital expenditures. During fiscal 2020, cash provided by investing activities
consisted of proceeds from the sale of the fye business of $11.8 million,
partially offset by capital expenditures of $1.2 million.

The Company has historically financed its capital expenditures through
borrowings under its revolving credit facility and cash flow from operations.
The Company anticipates capital spending of approximately $1.5 million in fiscal

Cash provided by financing activities was $14.2 million in fiscal 2021, compared
to $505,000 in fiscal 2020. In fiscal 2021, the primary source of cash was an
underwritten offering of 416,600 shares of common stock of the Company, at a
price to the public of $32.50 per share. The net proceeds of the offering were
approximately $12.2 million. Additional sources of cash included the $10.0
million in proceeds from short term borrowings. The Company used $6.3 million of
the proceeds to pay down its Credit Facility. In fiscal 2020, cash provided by
financing activities consisted of $6.3 million in proceeds from short term
borrowings, $5.1 million in proceeds from long term borrowings, $2.0 million in
proceeds from a PPP loan, partially offset by $13.1 million in payment of
short-term borrowings

Related Party Transactions.
Directors Jonathan Marcus, Thomas Simpson, and Michael Reickert are the chief
executive officer of Alimco Re Ltd. ("Alimco"), the managing member of
Kick-Start III, LLC and Kick-Start IV, LLC ("Kick-Start"), and a trustee of the
Robert J. Higgins TWMC Trust (the "Trust"), an affiliate of RJHDC, LLC ("RJHDC"
and together with Alimco and Kick-Start, "Related Party Entities"),
respectively.  The Related Party Entities are parties to the following
agreements with the Company entered into on March 30, 2020:

• Subordinated Loan and Guarantee Agreement (as amended), under which the

The related party entities made a $5.2 million guaranteed term loan ($2.7 million from

Alimco, $0.5 million of Kick-Start, and $2.0 million of the RJHDC) to Kaspian

with an expected maturity of March 31, 2024accrued interest at the rate

of twelve percent (12%) per annum and compounded on the last day of each

calendar quarter by becoming part of the principal amount, and secured by a

second-ranking lien on substantially all of the assets of the

   Company and Kaspien;

• Warrants to purchase common shares (“Warrants”), pursuant to which the Company

issued warrants to purchase up to 244,532 common shares from the related company

Participating Entities (127,208 shares for Alimco23,401 actions for Kick-Start, and

93,923 shares for RJHDC), subject to adjustment according to the terms of

the Warrants, at an exercise price of $0.01 per share. From April 15, 2022,

   238,763 warrants were exercised by the Related Party Entities and 5,769
   remained outstanding;

• Contingent Value Rights Agreement (the “CVR Agreement”), under which the

The related party entities received contingent value rights (“CVR”) representing

the contractual right to receive cash payments from the Company in the amount

equal, in total, to 19.9% ​​of the proceeds (10.35% for Alimco1.90% for

Kick-Start, and 7.64% for RJHDC) received by the Company for certain

the intercompany debts owed to it by Kaspian and/or its participation in

   Kaspien; and

• Voting Agreement (the “Voting Agreement”), under which the Related party

Entities, the Trust, Mr Simpson and their respective related entities have agreed

the manner in which their respective shares of the capital stock of the Company held by the

parties will be voted on with respect to the nomination, election, removal and

replacement of board members. In accordance with the voting agreement, MM.

Marcus and Simpson were appointed directors of the Company, and Mr.

Reickert, trustee of the Trust, remained a director of the Company. Mr.

Subin was also granted observer rights on the board.

On March 2, 2022the Company has entered into the following agreements with certain related parties:

• An amendment to the Subordinated Loan and Security Agreement, under which

Alimco make a supplement $5,000,000.00 secured term loan (the “additional loan

Subordinated Loan”) with an expected maturity of March 31, 2024interest

accumulating at the rate of fifteen percent (15.0%) per annum, capitalized on the last

day of each calendar quarter by becoming part of the principal amount of the

Additional subordinated loan, secured by a second ranking security

interest in substantially all of the assets of the Company and Kaspian;

• Common Share Purchase Warrant (“Alimco Warrant”), pursuant to which the Company

issued warrants to purchase up to 320,000 common shares at Alimco,

subject to adjustment in accordance with the terms of the Alimco Warrant, at a

strike price of $0.01 per share;

• Registration Rights Agreement, under which Alimco has been granted

customary registration and superimposition fees with respect to the mandate

   Shares issued upon exercise of the Alimco Warrant; and


————————————————– ——————————

• Contingent Value Rights Agreement (the “Second CVR Agreement”) pursuant to

who Alimco received additional Contingent Value Rights (“Additional CVRs”)

representing the contractual right to receive cash payments from the Company

an amount equal, in the aggregate, to 9.0% of the proceeds received by the

Company in respect of certain distributions by the Company or Kaspian;

recapitalizations or financing of the Company or Kaspian (with some

exclude trade finance in the ordinary course); reimbursement of

intercompany debts due to the Company by Kaspian; or sale or transfer

of any share of the Company or Kaspian.


The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States requires that
management apply accounting policies and make estimates and assumptions that
affect results of operations and the reported amounts of assets and liabilities
in the financial statements. Management bases its estimates and judgments on
historical experience and other factors that are believed to be reasonable under
the circumstances. Actual results may differ from these estimates under
different assumptions or conditions. Note 1 of the Notes to the Consolidated
Financial Statements in this report includes a summary of the significant
accounting policies and methods used by the Company in the preparation of its
consolidated financial statements. Management believes that of the Company's
significant accounting policies and estimates, the following involve a higher
degree of judgment or complexity:

Merchandise Inventory and Return Costs. Merchandise inventory is stated at the
lower of cost or net realizable value under the average cost method. Inventory
valuation requires significant judgment and estimates, including obsolescence
and any adjustments to net realizable value, if net realizable value is lower
than cost. For all merchandise categories, the Company records obsolescence and
any adjustments to net realizable value (if lower than cost) based on current
and anticipated demand, customer preferences, and market conditions.

Long-Lived Assets other than Goodwill: Long-lived assets are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to undiscounted future net cash flows expected to be generated by the asset over
its remaining useful life. If the carrying amount of an asset exceeds its
estimated future cash flows, an impairment charge is recognized by the amount by
which the carrying amount of the assets exceeds the fair value of the assets.
Fair value is generally measured based on discounted estimated future cash
flows. Assets to be disposed of would be separately presented in the
Consolidated Balance Sheets and reported at the lower of the carrying amount or
fair value less disposition costs. As of January 29, 2022, for the purposes of
the asset impairment test, the Company has one asset grouping.

Recently published accounting pronouncements.

The information presented above can be found in the notes to the consolidated statements, note 2.

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