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In December 2019, a novel strain of coronavirus (“COVID-19”) was reported to have surfaced in Wuhan, China. In January 2020, the World Health Organization declared the COVID-19 outbreak a “Public Health Emergency of International Concern.” This worldwide outbreak has resulted in the implementation of significant governmental measures, including lockdowns, closures, quarantines, and travel bans intended to control the spread of the virus. Companies are also taking precautions, such as requiring employees to work remotely, imposing travel restrictions and temporarily closing businesses and facilities. These restrictions, and future prevention and mitigation measures, have had an adverse impact on global economic conditions and are likely to have an adverse impact on consumer confidence and spending, which could materially adversely affect the supply of, as well as the demand for, our products. Uncertainties regarding the economic impact of COVID-19 are likely to result in sustained market turmoil, which could also negatively impact our business, financial condition, and cash flows.

 

We source our products from suppliers and manufacturers located in the United States. The impact of COVID-19 on these suppliers, or any of our other suppliers, co-manufacturers, distributors or transportation or logistics providers, may negatively affect the price and availability of our ingredients and/or packaging materials and impact our supply chain. In an effort to avoid running out of saleable merchandise inventory and losing revenue, we have had to, when available, acquire larger quantities of our traditional inventory and broaden our product offering to adopt to customer needs ahead of time. However, our suppliers have at times indicated that they would not be able to accommodate our order volume. If the disruptions caused by COVID-19 continue for an extended period, our ability to meet the demands of our customers may be materially impacted. To date, we have not experienced any material reduction in the available supply of our products and our outlook and business goals have not been materially affected by the supply chain disruptions.

 

If we are forced to scale back hours of operation or close our facility in Lakewood, New Jersey in response to the pandemic, we expect our business, financial condition and results of operations would be materially adversely affected. Additionally, many of our employees, including members of our management team, have been working remotely because of the closure of our offices in Lakewood, New Jersey in response to the COVID-19 pandemic. If our operations or productivity continue to be impacted throughout the duration of the COVID-19 outbreak and government-mandated closures, our business, financial condition, and cash flows may negatively be impacted. The extent to which the COVID-19 pandemic will further impact our business will depend on future developments and, given the uncertainty around the extent and timing of the potential future spread or mitigation and around the imposition or relaxation of protective measures, we cannot reasonably estimate the impact to our business at this time.

 

The extent of COVID-19’s effect on our operational and financial performance will depend on future developments, including the duration, spread and intensity of the outbreak, all of which are uncertain and difficult to predict considering the rapidly evolving landscape. As a result, it is not currently possible to ascertain the overall impact of COVID-19 on our business. However, if the pandemic continues for a prolonged period, it could have a material adverse effect on our business, results of operations, financial condition and cash flows and adversely impact the trading price of our Common Stock.

 

 

As of December 31, 2022, we had an accumulated deficit of approximately $6.6 million. We recorded a net loss of $5,141,249 and $1,179,163 for the years ended December 31, 2022 and 2021, respectively. We cannot anticipate when, if ever, our operations will become profitable. We expect to incur significant net losses as we develop our business and pursue our business strategy. We intend to invest significantly in our business before we expect cash flow from operations to be adequate to cover our operating expenses. If we are unable to execute our business strategy and grow our business, for any reason, our business, prospects, financial condition, and results of operations will be adversely affected.

 

 

The Company is attempting to further implement its business plan and generate sufficient revenue; however, the Company’s cash position may not be sufficient to support its operations. While the Company believes in the viability of its strategy to further implement its business plan and generate sufficient revenue and in its ability to raise additional funds by the sale of its equity, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon its ability to further implement its business plan and generate sufficient revenue and its ability to raise additional funds. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

 

We operate in a rapidly evolving industry that may not develop as expected, if at all. Although we have experienced significant growth in net sales and the number of our active customers, itmay bedifficult to assess our future prospects. You should consider our business and prospects in light of the risks and difficulties we may encounter. These risks and difficulties include our ability to, among other things: acquire new customers who purchase products from us at the same rate and of the same type as existing customers; retain our existing customers and have them continue to purchase products from us at rates and methods consistent with their prior purchasing behavior; encourage customers to expand the categories of products they purchase from us; attract new vendors to supply quality products that we can offer to our customers at attractive prices; retain our existing vendors and have them supply additional quality products that we can offer to our customers at attractive prices; increase brand awareness; provide our customers with a superior customer support; fulfill and deliver orders in a timely way and in accordance with customer expectations, which may change over time; respond to changes in consumer access to and use of the Internet and mobile devices; react to challenges from existing and new competitors; avoid interruptions or disruptions in our business; develop and maintain a scalable, high-performance technology and fulfilment infrastructure that can efficiently and reliably handle increased usage, as well as the deployment of new features and the sale of new products and services; respond to macroeconomic trends; and hire, integrate and retain qualified personnel.

 

To effectively manage our growth, we must continue to implement our operational plans and strategies, improve, and expand our infrastructure of people and information systems and expand, train, and manage our employee and contractor base. We have increased employee and contractor headcount since our inception to support the growth in our business, and we intend for this growth to continue for the foreseeable future. To support continued growth, we must effectively integrate, develop, and motivate new employees, while maintaining our corporate culture. We face competition for qualified personnel. Additionally, we may not be able to hire new employees quickly enough to meet our needs. If we fail to effectively manage our hiring needs or successfully integrate our new hires, our efficiency and ability to meet our forecasts and our employee morale, productivity and retention could suffer, which may have a material adverse effect on our business, financial condition, and operating results.

 

Additionally, the growth and expansion of our business and our product offerings in the future will place significant demands on our management. The growth of our business may require significant additional resources, which may not scale in a cost-effective manner or may negatively affect the quality of our customer experience. We are also required to manage multiple relationships with various vendors, customers and other third parties. Further growth of our operations, our vendor base, our fulfilment process, information technology systems or our internal controls and procedures may not be adequate to support our operations. If we are unable to manage the growth of our organization effectively, our business, financial condition and operating results may be materially and adversely affected.

 

We anticipate that our operating expenses will increase substantially in the foreseeable future as we continue to invest to increase our customer base, increase the number and variety of products we offer, expand our marketing channels, expand our operations, hire additional employees, incur the costs of being a public company and develop our technology platform and fulfilment process. These efforts may prove more expensive than we currently anticipate. Some of our efforts to generate net sales from our business are new and unproven, and any failure to increase our net sales or improve our gross margins could prevent us from attaining or increasing profitability. In addition, we expect to invest to fund longer term initiatives, which will likely impact profitability or other operating results. We cannot be certain that we will be able to attain or increase profitability on a quarterly or annual basis. If we are unable to effectively manage these risks and difficulties as we encounter them, our business, financial condition, and operating results may be materially and adversely affected.

We will require additional funds to implement our business strategy. We may issue additional equity securities to raise needed capital. We may be unable to secure such funding when needed in adequate amounts or on acceptable terms, if at all. Any additional equity financing may involve substantial dilution to our then existing stockholders. The inability to raise the additional capital will restrict our ability to develop and conduct business operations.

We may base our current and future expense levels on our operating forecasts and estimates of future net sales and gross margins. Net sales and operating results are difficult to forecast because they generally depend on the volume, timing, and type of the orders we receive, all of which are uncertain. Additionally, our business is affected by general economic and business conditions in the United States. A significant portion of our expenses is fixed, and as a result, we may be unable to adjust our spending in a timely manner to compensate for any unexpected shortfall in net sales. Any failure to accurately predict net sales or gross margins could cause our operating results in any given quarter, or a series of quarters, to be lower than expected, which could cause the price of our Common Stock to decline substantially.

 

We expect competition in e-commerce generally to continue to increase because there are no significant barriers to entry. We currently compete with and expect to increasingly compete with e-commerce businesses, such as Diapers.com, Buy Buy Baby, Albee Baby, Giggle, and Amazon.com, Inc., and e-commerce platforms of traditional retailers, such as online marketplaces such as eBay Inc. We also compete with the traditional offline retail industry, including discount and mass merchandisers, such as Target, Toys “R” Us and Walmart.

 

We believe that our ability to compete depends upon many factors both within and beyond our control, including: the size and composition of our customer base; the number of vendors and products we feature on our site; selling and marketing efforts; the quality, price and reliability of products offered either by us or our competitors; the convenience of the shopping experience that we provide; our ability to cost-effectively source, market and distribute our products and manage our operations; and our reputation and brand strength relative to our competitors.

 

These factors may allow our competitors to derive greater net sales and profits from their existing customer base, acquire customers at lower costs or respond more quickly than we can to new or emerging technologies and changes in consumer habits. These competitors may engage in more extensive research and development efforts, undertake more far-reaching marketing campaigns, and adopt more aggressive pricing policies, which may allow them to build larger customer bases or generate net sales from their customer bases more effectively than we do.

In addition, our competitors may have longer relationships with customers and suppliers. Increased competition may result in price reductions, reduced gross margins, and loss of market share, any of which could materially and adversely affect our business, operating results, and financial condition.

 

The business of selling products over the Internet is dynamic and relatively new. If customers cease to find our website experience easy to use and offer good value, or otherwise lose interest in shopping in this manner, we may not acquire new customers at rates consistent with historical or projected periods, and existing customers’ buying patterns and levels may be less than historical or projected rates and our business, financial condition and operating results may suffer.

We have invested in marketing and branding related to customer acquisition and expect to continue to do so. We must continue to acquire customers in order to increase net sales and achieve profitability. In order to expand our customer base, we must appeal to and acquire customers who have historically used other means of commerce to purchase products and may prefer alternatives to our offerings, the retailer’s own website or the websites of our competitors. We cannot assure you that the net sales from new customers we acquire will ultimately exceed the cost of acquiring those customers. If consumers do not perceive the products we offer to be of high value and quality, we may not be able to acquire new customers. If we are unable to acquire new customers who purchase products in numbers sufficient to grow our business, the net sales we generate may decrease, and our business, financial condition and operating results may be materially and adversely affected.

 

 

We use social networking sites, such as Facebook, Pinterest, Instagram, Twitter and Tumblr, online services, search engines, affiliate marketing websites, directories and other social media websites and e-commerce businesses to advertise, market and direct potential customers to our site. As e-commerce and social networking continue to rapidly evolve, we must continue to use e-commerce and social media channels that are used by our current and prospective customers and cost-effectively drive traffic to our website. We believe that failure to utilize these channels as sources of traffic to our site to generate new customers would adversely affect our financial condition.

 

 

If we experience significantly increased sales and since we do not have supply agreements to ensure our requirements, there can be no assurance that additional products will be available when required or on terms that are favorable to us, or that a supplier would allocate sufficient products to us in order to meet our requirements or fill our orders in a timely manner which could lead to delays to our customers, which could hurt our relationships with our customers, resulting in negative publicity, damage our brand and adversely affect our business, prospects and operating results.

 

Our financial performance depends on our ability to identify, originate, and define retail product trends, as well as to anticipate, gauge and react to changing consumer preferences in a timely manner. Our products must appeal to a broad range of moms whose preferences cannot be predicted with certainty and are subject to change. Our business fluctuates according to changes in consumer preferences dictated in part by fashion trends, perceived product value and seasonal variations.

 

We have historically earned the largest portion of our net sales from the sale of strollers and stroller accessories and car seats. We may broaden our product offerings in the future. We continue to explore additional categories which may be accepted by our target customers. If we offer new products or categories that are not accepted by our customers, our sales may fall short of expectations, our brand and reputation could be adversely affected, and we may incur expenses that are not offset by sales. If we expand into new categories, consumer demands may be different, and there is no assurance that we will be successful in these new categories. We may make substantial investments in such new categories in anticipation of future net sales. If the launch of a new category requires investments greater than we expect, if we are unable to attract vendors that produce sufficient high quality, value-oriented products or if the sales generated from a new category grow more slowly or produce lower gross margins than we expect, our results of operations could be adversely impacted. Expansion of our product lines may also strain our management and operational resources, specifically the need to hire and manage additional merchandise buyers to source these new products. We may also face greater competition in specific categories from Internet sites or retailers that are more focused on such categories. It may be difficult to differentiate our offering from other competitors as we offer additional product categories, and our customers may have additional considerations in deciding whether to purchase these additional product categories. In addition, the relative profitability, if any, of new product lines may be lower than what we have experienced historically, and we may not generate sufficient net sales from new product initiatives to recoup our investments in them. If any of these were to occur, it could damage our reputation, limit our growth, and have a material adverse effect on our business, financial condition, and operating results.

 

We believe that maintaining and enhancing our brand is critical to expanding our base of customers and vendors. Maintaining and enhancing our brand may require us to make substantial investments, and these investments may not be successful. If we fail to promote and maintain our brand or if we incur excessive expenses in this effort, our business, operating results, and financial condition may be materially and adversely affected. We anticipate that, as our market becomes increasingly competitive, maintaining and enhancing our brand may become increasingly difficult and expensive. Maintaining and enhancing our brand will depend largely on our ability to continue to provide reliable, trustworthy, and high-quality products to our customers. Our brand depends on superior customer support, which requires significant personnel expense. If not managed properly, this expense could impact our profitability. Failure to manage or train our customer support and team of sales representatives, or “Mom reps”, properly could compromise our ability to establish customer relationships and handle customer complaints effectively. Customer complaints or negative publicity about our website, products, delivery times, customer data handling and security practices or customer support could diminish consumer use of our website and consumer and vendor confidence in us and cause our reputation to suffer.

 

 

 

Our performance is subject to economic conditions and their impact on levels of consumer spending. Our business could be negatively impacted by reduced demand for our products related to one or more significant local, regional or global economic or social disruptions. Some of the factors adversely that have affected and may in the future affect consumer spending include levels of unemployment, consumer debt levels, changes in net worth based on market changes and uncertainty, home foreclosures and changes in home values, recession or inflationary pressures in the general economy, fluctuating interest rates, credit availability, government actions, fluctuating fuel and other energy costs, fluctuating commodity prices and general uncertainty regarding the overall future economic environment. Consumer purchases of discretionary items, including our merchandise, generally decline during periods when disposable income is adversely affected or there is economic uncertainty. Adverse economic changes in any of the regions in which we sell our products could reduce consumer confidence and could negatively affect net sales and have a material adverse effect on our operating results.

 

Additionally, these and other economic conditions may cause our suppliers, distributors, contractors or other third-party partners to suffer financial or operational difficulties that they cannot overcome, resulting in their inability to provide us with the materials and services we need, in which case our business and results of operations could be adversely affected.

 

 

Inflation and increases in interest rates could reduce the demand for our products which could limit our growth or reduce our net sales. Furthermore, current uncertainty in the economy due to the lingering effects of the COVID-19 pandemic, inflation, increases in interest rates and Russia’s invasion of Ukraine may detrimentally influence the potential customers willingness to spend funds on our products.

 

During 2022, the U.S. Federal Reserve raised interest rates by an aggregate of 300 basis points. The consensus is that rates will be increased again during 2022. Additionally, the current geopolitical environment in Europe provides yet another layer of uncertainty around the actions that the Federal Reserve might take. Market interest rates are affected by many factors outside of our control, including governmental monetary policies, domestic and international economic conditions, inflation, deflation, recession, changes in unemployment, the money supply, international disorder and instability in domestic and foreign financial markets. Rising interest rates tend to slow the economy as households and businesses have less money to spend on goods and services. As such, further increases in interest rates could adversely affect consumer purchases of our products which would have a material adverse effect on our operating results. Additionally, increasing interest rates may affect the Company’s financing activities, which could make it more difficult for the Company to secure inventory on a timely basis and adversely impact the Company’s ability to manage its accounts payable with suppliers. The recent increases in interest rates have increased the interest we have incurred on our merchant advances and credit transactions. While the impact of such increased interest has not yet been material to our operations or financial performance, continued increases in interest rates could have a material adverse effect on our operations or financial performance.

 

Our net sales depend, in part, on our ability to continue to source merchandise in sufficient quantities at competitive prices from vendors. Offering a variety of brands, styles, categories, and products at affordable price points is important to our ability to acquire new customers and to keep our existing customers engaged and purchasing products. Growth in the number of our customers, as well as increased competition, may make it difficult to source additional brands and styles in sufficient quantities and on acceptable terms to meet the demand of our customers.

 

We have no contractual assurances of continued supply, pricing or access to new products, and vendors could change the terms upon which they sell to us or discontinue selling to us for future sales at any time. If we are not able to identify and effectively promote new brands, we may lose customers to our competitors. Even if we identify new vendors, we may not be able to purchase desired merchandise in sufficient quantities on terms acceptable to us in the future, and products from alternative sources, if any, may be of a lesser quality or more expensive than those from existing vendors. An inability to purchase suitable merchandise on acceptable terms or to source new vendors could have a material adverse effect on our business, financial condition, and operating results.

 

 

 

We depend on our vendors to supply high quality merchandise in a timely manner. The failure of these vendors to supply merchandise which meets our quality standards, or the quality standards of our customers could damage our reputation and harm our business, financial condition, and operating results.

 

Our vendors are subject to various risks, including raw material costs, inflation, labor disputes, union organizing activities, boycotts, financial liquidity, product merchantability, safety issues, inclement weather, natural disasters, disruptions in exports, trade restrictions, trade disruptions, currency fluctuations and general economic and political conditions that could limit the ability of our vendors to provide us with high quality merchandise on a timely basis and at prices and payment terms that are commercially acceptable. For these or other reasons, one or more of our vendors might not adhere to our vendor terms and conditions or their applicable contract or might stop providing us with high quality merchandise. If there are any deficiencies in the products our vendors have provided to us, we might not identify such deficiencies before products ship to our customers.

 

In addition, our vendors may have difficulty adjusting to our changing demands and growing business. Failure of our vendors to provide us with quality merchandise that complies with all applicable laws, including product safety regulations and legislation in a timely and effective manner could damage our reputation and brand. Further, any merchandise could become subject to a recall, regulatory action, or legal claim, which could result in increased legal expenses as well as damage to our reputation and brand and harm to our business. We cannot predict whether any of the countries in which our merchandise currently is manufactured or may be manufactured in the future will be subject to additional trade restrictions imposed by the United States and other foreign governments, including the likelihood, type or effect of any such restrictions. Such developments could have a material adverse effect on our business, financial condition, and operating results.

 

We purchase our merchandise from numerous domestic and international manufacturers. Failure of our vendors to comply with applicable laws and regulations and contractual requirements could lead to litigation against us, resulting in increased legal expenses and costs.

Many of the products we sell are for children, and these products are often subject to enhanced safety concerns and additional scrutiny and regulation. Product safety concerns may require us to voluntarily remove selected products from our inventory. Such recalls and voluntary removal of products can result in, among other things, lost sales, diverted resources, potential harm to our reputation and increased customer service costs and legal expenses, which could have a material adverse effect on our business, financial condition and operating results.

 

Some of the products we sell may expose us to product liability claims and litigation or regulatory action relating to personal injury, death or environmental or property damage. Although we maintain liability insurance, we cannot be certain that our coverage will be adequate for liabilities actually incurred or that insurance will continue to be available to us on economically reasonable terms, or at all.

 

If we do not optimize and manage our fulfilment processes successfully and efficiently, it could result in excess or insufficient fulfilment, an increase in costs or impairment charges or harm our business in other ways. If we do not have sufficient fulfilment capacity or experience a problem fulfilling orders in a timely manner, our customers may experience delays in receiving their purchases, which could harm our reputation and our relationship with our customers.

If we add new products or categories with different fulfilment requirements or change the mix in products that we sell, our fulfilment will become increasingly complex. Failure to successfully address such challenges in a cost-effective and timely manner could impair our ability to timely deliver our customers’ purchases and could harm our reputation and ultimately, our business, financial condition and operating results.

 

If we grow faster than we anticipate, we may exceed our fulfilment center’s capacity, we may experience problems fulfilling orders in a timely manner or our customers may experience delays in receiving their purchases, which could harm our reputation and our relationship withour customers, and we would need to increase our capital expenditures more than anticipated.

 

We do not have our own fulfilment operations. We outsource our order fulfilment operations to a 35,000 square foot warehouse fulfilment center in Farmingdale, New Jersey. The fulfilment facility stores, selects, packs, ships, and handle returns. We have worked and continue to work with the same fulfilment facility for over the last five years on a good faith relationship, pursuant to which we are billed monthly in accordance with the fulfilment facility’s standard rates. Since we do not have a contractual agreement with this facility, the facility could decide not to provide us with such warehouse space for our inventory and its fulfilment services which would, if we were not able to find an adequate replacement for our fulfilment needs, result in a disruption in our ability to fill customer orders which could adversely affect our financial condition and reputation.

We accept payments using a variety of methods, including credit card, debit card, PayPal, and gift cards. For certain payment methods, including credit and debit cards, we pay interchange and other fees, which may increase over time and raise our operating costs and lower profitability. We are also subject to payment card association operating rules and certification requirements, including the Payment Card Industry Data Security Standard and rules governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for us to comply. If we fail to comply with the rules or requirements of any provider of a payment method we accept, among other things, we may be subject to fines or higher transaction fees and may lose, or face restrictions placed upon, our ability to accept credit and debit card payments from consumers or facilitate other types of online payments. If any of these events were to occur, our business, financial condition and operating results could be materially and adversely affected.

We also may incur significant losses from fraud. We may incur losses from claims that the consumer did not authorize the purchase, from merchant fraud, from erroneous transmissions and from consumers who have closed bank accounts or have insufficient funds in them to satisfy payments. In addition to the direct costs of such losses, if they are related to credit card transactions and become excessive, they could potentially result in our losing the right to accept credit cards for payment. In addition, under current credit card practices, we are liable for fraudulent credit card transactions because we do not obtain a cardholder’s signature. We use a third-party fraud specialist to monitor our credit transactions. Our failure to adequately control fraudulent transactions could damage our reputation and brand and result in litigation or regulatory action, causing an increase in legal expenses and fees and substantially harm our business, financial condition, and operating results.

 

We are subject to general business regulations and laws as well as regulations and laws specifically governing the Internet and e-commerce. Existing and future regulations and laws could impede the growth of the Internet, e-commerce, or mobile commerce. These regulations and laws may involve taxes, tariffs, privacy and data security, anti-spam, content protection, electronic contracts and communications, consumer protection and gift cards.We cannot guarantee that our practices have complied, comply, or will comply fully with all such laws and regulations. Any failure, or perceived failure, by us to comply with any of these laws or regulations could result in damage to our reputation, a loss in business and proceedings or actions against us by governmental entities or others. Any such proceeding or action could hurt our reputation, force us to spend significant amounts in defense of these proceedings, distract our management, increase our costs of doing business, decrease the use of our site by consumers and vendors and may result in the imposition of monetary liability. We may also be contractually liable to indemnify and hold harmless third parties from the costs or consequences of non-compliance with any such laws or regulations.

 

A variety of laws and regulations govern the collection, use, retention, sharing and security of consumer data. Laws and regulations relating to privacy, data protection and consumer protection are evolving and subject to potentially differing interpretations. We strive to comply with all applicable laws, regulations and other legal obligations relating to privacy, data protection and consumer protection, including those relating to the use of data for marketing purposes. It is possible, however, that these requirements may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another or may conflict with other rules or our practices. We cannot guarantee that our practices have complied or will comply fully with all such laws, regulations, requirements, and obligations. Any failure, or perceived failure, by us to comply with any privacyor consumer protection-related laws, regulations, industry self-regulatory principles, industry standards or codescould adversely affect our reputations, brand, and business, and may result in claims, proceedings, or actions against us by governmental entities or others or other liabilities. Any such claim, proceeding or action could hurt our reputation, brand, and business, force us to incur significant expenses in defense of such proceedings, distract our management, increase our costs of doing business, result in a loss of customers and vendors and may result in the imposition of monetary liability. We may also be contractually liable to indemnify and hold harmless third parties from the costs or consequences of non-compliance with any laws, regulations or other legal obligations relating to privacy or consumer protection or any inadvertent or unauthorized use or disclosure of data that we store or handle as part of operating our business.

We collect, maintain, transmit and store data about our customers, vendors, and others, including credit card information and personally identifiable information, as well as other confidential and proprietary information. We also employ third-party service providers that store, process and transmit proprietary, personal, and confidential information on our behalf. We rely on encryption and authentication technology licensed from third parties in an effort to securely transmit confidential and sensitive information, including credit card numbers.Advances in computer capabilities, new technological discoveries or other developments may result in the whole or partial failure of this technology to protect transaction data or other confidential and sensitive information from being breached or compromised. More generally, we take steps to protect the security, integrity, and confidentiality of the information we collect, store or transmit, but there is no guarantee that inadvertent or unauthorized use or disclosure will not occur or that third parties will not gain unauthorized access to this information despite our efforts. Our security measures, and those of our third-party service providers, may not detect or prevent all attempts to hack our systems, denial-of-service attacks, viruses, malicious software, break-ins, phishing attacks, social engineering, security breaches or other attacks and similar disruptions that may jeopardize the security of information.We and our service providers may not have the resources or technical sophistication to anticipate or prevent all types of attacks, and techniques used to obtain unauthorized access to, or sabotage systems change frequently and may not be known until launched against us or our third-party service providers. In addition, security breaches can also occur because of non-technical issues, including intentional or inadvertent breaches by our employees or by persons with whom we have commercial relationships.

Any compromise or breach of our security measures, or those of our third-party service providers, could violate applicable privacy, data security and other laws, and cause significant legal and financial exposure, adverse publicity, and a loss of confidence in our security measures, which could have an adverse and material effect on our business, financial condition, and operating results.Although we maintain privacy, data breach and network security liability insurance, we cannot be certain that our coverage will be adequate for liabilities actually incurred or that insurance will continue to be available to us on economically reasonable terms, or at all. We may need to devote significant resources to protect against security breaches or to address problems caused by breaches, diverting resources from the growth and expansion of our business.

 

 

Our future success depends in large part upon the leadership and performance of our management and consultants. The Company’s operations and business strategy are dependent upon the knowledge and business experience of our executive officers and our consultants. We have employment agreements with Chaim (Charlie) Birnbaum, our Chief Executive Officer, and Jesse Sutton, our Chairman. Although, we hope to retain the services of all our officers, if an officer should choose to leave us for any reason before we have hired additional personnel, our operations may suffer. If we should lose their services before we are able to engage and retain qualified employees and consultants to execute our business plan, we may not be able to continue to develop our business as quickly or efficiently. 

 

In addition, we must be able to attract, train, motivate and retain highly skilled and experienced employees in order to successfully develop our business. Qualified employees often are in great demand and may be unavailable in the time frame required to satisfy our business requirements.

Competition for qualified employees or inflationary pressures on employee compensation could require us to pay higher wages to attract and retain a sufficient number of qualified employees. We cannot be certain that we will be able to attract and retain qualified employees to meet current or future operational needs at a reasonable cost, or at all.

The loss of personnel or our inability to hire or retain sufficient personnel at competitive rates of compensation could impair our ability to successfully grow our business. If we lose the services of any of our consultants, we may not be able to replace them with similarly qualified personnel, which could harm our business.

 

Our Chief Executive Officer, Chaim (Charlie) Birnbaum, is not subject to a non-competition or non-solicitation agreement. If he should choose to leave us for any reason, or start a competitive business while employed by us, he is not contractually prohibited from doing so or from soliciting and hiring our employees and consultants from such competitive endeavors any of which would have a material adverse effect on our business operations.

 

 

The individuals who now constitute our management team, other than our Chief Executive Officer, have no experience managing a publicly traded company and complying with the increasingly complex laws pertaining to public companies. Our management team may not successfully or efficiently manage our transition to being a public company subject to significant regulatory oversight and incremental reporting obligations under the federal securities laws. In particular, these new obligations will require substantial attention from our senior management and could divert their attention away from the day-to-day management of our business, which could materially and adversely affect our business, financial condition and operating results.

 

 

 

 

We face an inherent business risk of exposure to product liability in the event that products that we sell fail to perform as expected or failure results in bodily injury or property damage which could cause us to lose revenues, incur increased costs associated with customer support, experience delays increased returns or discounts, and damage our reputation, all of which could negatively affect our financial condition and results of operations. If any of the products we sell are or are alleged to be defective, we may be required to participate in a recall involving such products.

 

 

In the future, we could be required to raise capital through public or private financing or other arrangements. Such financing may not be available on acceptable terms, or at all, and our failure to raise capital when needed could harm our business. If we sell any such securities in subsequent transactions, investors may be materially diluted. Debt financing, if available, may involve restrictive covenants and could reduce our operational flexibility or profitability, such as covenants that could limit our ability to, among other things, incur additional indebtedness, liens, or other encumbrances, make dividends or other distributions to holders of our capital stock, and sell or transfer assets, as well as certain financial covenants. If we cannot raise funds on acceptable terms, we may not be able to grow our business or respond to competitive pressures.

 

 

Our operations could be disrupted by geopolitical conditions, trade disputes, international boycotts and sanctions, political and social instability, acts of war, terrorist activity or other similar events. From time to time, we could have a large number of customers located in a particular geographic region. Decreased demand from a discrete event impacting a region in which we have a concentrated exposure could negatively impact our results of operations.

 

In February 2022, Russia initiated significant military action against Ukraine. In response, the U.S. and certain other countries imposed significant sanctions and export controls against Russia, Belarus and certain individuals and entities connected to Russian or Belarusian political, business, and financial organizations, and the U.S. and certain other countries could impose further sanctions, trade restrictions, and other retaliatory actions should the conflict continue or worsen. It is not possible to predict the broader consequences of the conflict, including related geopolitical tensions, and the measures and retaliatory actions taken by the U.S. and other countries in respect thereof as well as any counter measures or retaliatory actions by Russia or Belarus in response, including, for example, potential cyberattacks or the disruption of energy exports, is likely to cause regional instability, geopolitical shifts, and could materially adversely affect global trade, currency exchange rates, regional economies and the global economy. We have not experienced any significant direct impacts from the conflict between Russia and Ukraine. However, we have experienced an increase in the cost of products from suppliers as well as an increase in shipping costs due to the increase in gas prices. While product cost increases have been passed through to our customers through product price increases, the increase in shipping costs has been absorbed by the Company, resulting in nominal impact to our profit margins.

 

The situation in Ukraine remains uncertain, and while it is difficult to predict the impact of the conflict between Russia and Ukraine, the conflict and actions taken in response to the conflict could further increase our costs, disrupt our supply chain, reduce our sales and earnings, impair our ability to raise additional capital when needed on acceptable terms, if at all, or otherwise adversely affect our business, financial condition, and results of operations. 

 

 

 

 

As of March 28, 2023, there were 1,752.37 shares of our Series A Preferred Stock convertible into an aggregate of 1,752,370 shares of Common Stock and warrants to purchase an aggregate of 3,279,508 shares of Common Stock outstanding. The issuance of shares upon conversion of preferred shares and exercise of warrants will result in substantial dilution to the interests of other stockholders since the selling security holders may ultimately convert and sell the full amount issuable on conversion, subject to any limitations on beneficial ownership that may result from such conversion.

 

 

We intend to retain any future earnings to finance the development and expansion of our business. We do not anticipate paying any cash dividends on our Common Stock in the foreseeable future. Unless we pay dividends, our stockholders will not be able to receive a return on their shares unless they sell them at a price higher than that which they initially paid for such shares.

 

An active trading market for our Common Stock may never develop following completion of our initial public offering or, if developed, may not be sustained. The lack of an active trading market may impair the value of your shares and your ability to sell your shares at the time you wish to sell them. An inactive trading market may also impair our ability to raise capital by selling our Common Stock and entering into strategic partnerships or acquiring other complementary products, technologies or businesses by using our Common Stock as consideration. In addition, if we fail to satisfy exchange listing standards, we could be delisted, which would have a negative effect on the price of our securities.

 

In recent years, the stock markets generally have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry factors may significantly affect the market price of our Common Stock, regardless of our actual operating performance. These fluctuations may be even more pronounced in the trading market for our Common Stock shortly following our initial public offering and the sales of our Common Stock by certain selling stockholders.

 

In addition, in the past, class action litigation has often been instituted against companies whose securities have experienced periods of volatility in market price. Securities litigation brought against us following volatility in our stock price, regardless of the merit or ultimate results of such litigation, could result in substantial costs, which would hurt our financial condition and operating results and divert management’s attention and resources from our business.

 

The market price of our Common Stock may fluctuate significantly in response to numerous factors, many of which are beyond our control, including: actual or anticipated fluctuations in our results of operations; the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections; failure of securities analysts to initiate or maintain coverage of our Company, changes in financial estimates or ratings by any securities analysts who follow our Company or our failure to meet these estimates or the expectations of investors; announcements by us or our competitors of significant innovations, acquisitions, strategic partnerships, joint ventures, operating results or capital commitments; changes in operating performance and stock market valuations of other companies in our industry; price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole; changes in our Board or management; sales of large blocks of our Common Stock, including sales by our executive officers, directors and significant stockholders; lawsuits threatened or filed against us; changes in laws or regulations applicable to our business; the expiration of lock-up agreements; changes in our capital structure, such as future issuances of debt or equity securities; short sales, hedging and other derivative transactions involving our capital stock; general economic and geopolitical conditions, including the current or anticipated impact of military conflict and related sanctions imposed on Russia by the United States and other countries due to Russia’s recent invasion of Ukraine; and the other factors described in this section of the report captioned, “.”

 

 

 

In addition to the risks addressed above under “,” our Common Stock may be subject to rapid and substantial price volatility. We may experience extreme stock price volatility unrelated to our actual or expected operating performance, financial condition or prospects, making it difficult for prospective investors to assess the rapidly changing value of our ordinary shares. Recently, there have been instances of extreme stock price run-ups followed by rapid price declines and strong stock price volatility with a number of recent initial public offerings, especially among companies with relatively smaller public floats. As a relatively small-capitalization company with relatively small public float, we may experience greater stock price volatility, extreme price run-ups, lower trading volume and less liquidity than large-capitalization companies. In particular, our Common Stock may be subject to rapid and substantial price volatility, low volumes of trades and large spreads in bid and ask prices. Such volatility, including any stock-run up, may be unrelated to our actual or expected operating performance, financial condition or prospects, making it difficult for prospective investors to assess the rapidly changing value of our Common Stock.

 

 

In addition, if the trading volumes of our shares of Common Stock are low, persons buying or selling in relatively small quantities may easily influence prices of our shares of Common Stock. This low volume of trades could also cause the price of our Common Stock to fluctuate greatly, with large percentage changes in price occurring in any trading day session. Holders of our Common Stock may also not be able to readily liquidate their investment or may be forced to sell at depressed prices due to low volume trading. Broad market fluctuations and general economic and political conditions may also adversely affect the market price of our Common Stock. As a result of this volatility, investors may experience losses on their investment in our Common Stock. A decline in the market price of our Common Stock also could adversely affect our ability to issue additional shares of Common Stock or other securities and our ability to obtain additional financing in the future. No assurance can be given that an active market in our Common Stock will develop or be sustained. If an active market does not develop, holders of our Common Stock may be unable to readily sell the shares they hold or may not be able to sell their shares at all.

 

As a public company, we will be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and other applicable securities rules and regulations. Compliance with these rules and regulations will increase our legal and financial compliance costs, make some activities more difficult, time-consuming, or costly and increase demand on our systems and resources. The Exchange Act requires, among other things, that we file annual, quarterly, and current reports with respect to our business and results of operations. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. In order to maintain and, if required, improve our disclosure controls and procedures and internal control over financial reporting to meet this standard, significant resources and management oversight may be required. As a result, management’s attention may be diverted from other business concerns, which could adversely affect our business and results of operations. We will need to hire additional employees or engage outside consultants to comply with these requirements, which will increase our costs and expenses.

 

 

We will be required, pursuant to Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting for the first fiscal year beginning after the effective date of our initial public offering. This assessment will need to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting, as well as a statement that our independent registered public accounting firm has issued an opinion on our internal control over financial reporting, provided that our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting until our first annual report required to be filed with the SEC following the date we are deemed to be an “accelerated filer” or a “large accelerated filer,” each as defined in the Exchange Act. We will be required to disclose changes made in our internal control and procedures on a quarterly basis. To comply with the requirements of being a public company, we may need to undertake various actions, such as implementing new internal controls and procedures and hiring accounting or internal audit staff.

 

In future periods, if during the evaluation and testing process, we identify any other material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal control over financial reporting is effective. If we are unable to assert that our internal control over financial reporting is effective, we could lose investor confidence in the accuracy and completeness of our financial reports, which would cause the price of our Common Stock to decline, and we may be subject to investigation or sanctions by the SEC.

 

 

Our Board has the authority to fix and determine the relative rights and preferences of preferred stock. Our Board also has the authority to issue preferred stock without further stockholder approval. As a result, our Board could authorize the issuance of a series of preferred stock that would grant to such holders (i) the preferred right to our assets upon liquidation, (ii) the right to receive dividend payments before dividends are distributed to the holders of Common Stock and (iii) the right to the redemption of the shares, together with a premium, prior to the redemption of our Common Stock. In addition, our Board could authorize the issuance of a series of preferred stock that has greater voting power than our Common Stock or that is convertible into our Common Stock, which could decrease the relative voting power of our Common Stock or result in dilution to our existing holders of Common Stock.

 

 

Any of the actions described in the preceding paragraph could significantly adversely affect the investment made by holders of our Common Stock. Holders of Common Stock could potentially not receive dividends that they might otherwise have received. In addition, holders of our Common Stock could receive less proceeds in connection with any future sale of the Company, whether in liquidation or on any other basis.

 

 

Our executive officers and directors will control approximately 16.65% of our outstanding Common Stock after our initial public offering. These stockholders, if they act together, may be able to exercise substantial influence over the outcome of all corporate actions requiring approval of our stockholders, including the election of directors and approval of significant corporate transactions, which may result in corporate action with which other stockholders do not agree. This concentration of ownership may also have the effect of delaying or preventing a change in control which might be in other stockholders’ best interest, but which might negatively affect the market price of our Common Stock.

 

Our Certificate of Incorporation provides that, unless the Company consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware, or if such court does not have subject matter jurisdiction, any other court located in the State of Delaware with subject matter jurisdiction, will be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, other employee or stockholder of the Company to the Company or the Company’s stockholders, (iii) any action asserting a claim against the Company or its officers or directors arising pursuant to any provision of the DGCL or the Amended and Restated Certificate of Incorporation or Bylaws or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware, or (iv) any action asserting a claim against the Company or any director or officer of the Company governed by the internal affairs doctrine of the law of the State of Delaware; provided, that, if and only if the Court of Chancery of the State of Delaware dismisses any such action for lack of subject matter jurisdiction, such action may be brought in another state court sitting in the State of Delaware. Additionally, the Certificate of Incorporation provides that, unless the Company consents to the selection of an alternative forum, the federal district courts of the United States of America shall, to the fullest extent permitted by law, be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act; provided, however, that such provision does not apply to suits brought to enforce any liability or duty created by the Exchange Act, or any other claim for which the federal courts have exclusive jurisdiction. However, there is uncertainty as to whether a court would enforce this provision and investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. Section 22 of the Securities Act creates concurrent jurisdiction for state and federal courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder.

 

Any person or entity purchasing or otherwise acquiring any interest in any of the securities of the Company will be deemed to have notice of and consented to these provisions. These exclusive-forum provisions may limit or make more costly a stockholder’s ability to bring a claim in a judicial forum of its choosing for disputes with the Company or its directors, officers, or other employees, which may discourage lawsuits against the Company and its directors, officers, and other employees. If a court were to find these exclusive-forum provisions to be inapplicable or unenforceable in an action, the Company may incur additional costs associated with resolving the dispute in other jurisdictions, which could harm its results of operations.

 

 

 

We are an “emerging growth company” and a “smaller reporting company” as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” and “smaller reporting companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

 

In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We are choosing to take advantage of the extended transition period for complying with new or revised accounting standards.

 

We will remain an “emerging growth company” until the last day of the fiscal year following the fifth anniversary of the date of the first sale of our Common Stock pursuant to an effective registration statement under the Securities Act, although we will lose that status sooner if our revenues exceed $1.235 billion, if we issue more than $1 billion in non-convertible debt in a three year period, or if the market value of our Common Stock that is held by non-affiliates exceeds $700 million as of the last day of our most recently completed second fiscal quarter.

 

We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as (i) the market value of our Common Stock held by non-affiliates is equal to or less than $250 million as of the last business day of the most recently completed second fiscal quarter, and (ii) our annual revenues is equal to or less than $100 million during the most recently completed fiscal year and the market value of our Common Stock held by non-affiliates is equal to or less than $700 million as of the last business day of the most recently completed second fiscal quarter.

 

We cannot predict if investors will find our Common Stock less attractive because we may rely on these exemptions. If some investors find our Common Stock less attractive as a result, there may be a less active trading market for our Common Stock and our stock price may be more volatile. In addition, taking advantage of reduced disclosure obligations may make comparison of our financial statements with other public companies difficult or impossible. If investors are unable to compare our business with other companies in our industry, we may not be able to raise additional capital as and when we need it, which may materially and adversely affect our financial condition and results of operations.

 

 

None.

 

Our principal place of business is located at 1915 Swarthmore Avenue, Lakewood, New Jersey 08701, which consists of approximately 6,770 square feet of space which the Company leases. The relevant lease is scheduled to expire on October 31, 2024.

 

We do not own any properties or land.

 

We believe our facilities are adequate and suitable for our current needs and that, should it be needed, suitable additional or alternative space will be available.

 

From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition, or operating results.

 

From time to time, we are subject to litigation and other proceedings that arise in the ordinary course of our business. Subject to the inherent uncertainties of litigation and although no assurances are possible, we believe that there are no pending lawsuits or claims that, individually or in the aggregate, will have a material adverse effect on our business, financial condition or our yearly results of operations.

 

Not applicable.

 

 

 

Prior to our initial public offering, our Common Stock has not been listed on any stock exchange or quoted on any over-the-counter market or quotation system and there has been no public market for our Common Stock. We have applied to have our Common Stock listed on the Nasdaq Capital Market under the symbol “BABY,” which listing is a condition to our initial public offering and the sale of securities registered for resale by certain selling stockholders under our Resale Prospectus.

 

 

As of March 28, 2023, we have 4,939,345 shares of Common Stock issued and outstanding held by 39 stockholders of record.

 

We do not currently anticipate declaring or paying cash dividends on our Common Stock in the foreseeable future. We currently intend to retain our future earnings, if any, to finance the development and expansion of our business and to pursue selective merger and acquisition opportunities. Any future determination to pay dividends will be at the discretion of our Board and will depend upon then-existing conditions, including our results of operations and financial condition, capital requirements, business prospects, statutory and contractual restrictions on our ability to pay cash dividends, including restrictions contained in our senior credit facility, and other factors our board of directors may deem relevant. Accordingly, you may need to sell your shares of our Common Stock to realize a return on your investment, and you may not be able to sell your shares at or above the price you paid for them. Our Series A Preferred Stock ranks on parity with our Common Stock with respect to dividend rights.

 

Our Board and stockholders adopted the 2022 Equity Incentive Plan (the “2022 Equity Incentive Plan”) on September 1, 2022 and October 19, 2022, respectively. The 2022 Equity Incentive Plan governs equity awards to our employees, directors, officers, consultants, and other eligible participants. Under the 2022 Equity Incentive Plan there are 350,000 shares of Common Stock reserved for issuance.

 

The types of awards permitted under the 2022 Equity Incentive Plan include nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, and other awards. Each option shall be exercisable at such times and subject to such terms and conditions as the Board may specify.

 

The Board has the power to amend, suspend or terminate the 2022 Equity Incentive Plan without stockholder approval or ratification at any time or from time to time. No change may be made that increases the total number of shares of our Common Stock reserved for issuance pursuant to incentive awards or reduces the minimum exercise price for options or exchange of options for other incentive awards, unless such change is authorized by our stockholders within twelve (12) months prior to such an event.

 

As of December 31, 2022, the Company has not granted any awards under the 2022 Equity Incentive Plan.

 

In February 2022, the Company issued 150 shares of Series A preferred stock and 1,291,922 shares of common stock to management and advisors pursuant to services performed. 

 

In March 2022, the Company received proceeds of $1,689,980 pursuant to the Subsequent Closing.  Simultaneously with the proceeds from the Subsequent Closing, the 2021 Notes and $250,000 in related party accounts payable converted into shares of common stock and preferred stock on a one-for-one basis (based on the as-converted calculation of preferred stock). Altogether, the Company issued 2,270 shares of preferred stock and 731,690 shares of common stock pursuant to an aggregate value of $3,001,667, consisting of the March 2022 Subsequent Closing and the note and payable conversions.

 

On September 13, 2022, the Company conducted the first closing of a private placement offering of its common stock to accredited investors (the “Pre-IPO Offering”).  Pursuant to the Pre-IPO Offering, the Company sold an aggregate of 538,338 shares of common stock at a price of $1.08 per share for net proceeds of $429,711, after deducting costs paid to the placement agent. In connection with the Pre-IPO Offering, the Company issued warrants to purchase 37,683 shares of common stock to the placement agreement as additional offering costs.

 

 

In October 2022, the Company issued 150,000 shares of common stock pursuant to professional fees incurred for the Company’s anticipated public offering.

 

On October 19, 2022, the majority of all of the holders of (i) the issued and outstanding shares of common stock (the “Common Holders”) and (ii) the issued and outstanding shares of Series A Preferred Stock (the “Preferred Holders”), and all of the Purchasers under the Securities Purchase Agreement (together with the Common Holders and the Preferred Holders, the “Holders”) entered into an Omnibus Waiver, Consent and Exchange Agreement, pursuant to which the Holders agreed to, (1) amend and restate the Company’s Certificate of Incorporation and the Certificate of Designation of its Series A Preferred Stock to, among other things, increase the number of authorized shares of Preferred Stock designated as Series A Preferred Stock and to increase the Beneficial Ownership Limitation from 4.99% to 9.99%, (2) terminate all prior lock-up agreements to which the Preferred Holders were a party pertaining to the Company’s equity securities and replace and supersede all prior lock-up agreements to which the Common Holders were a party pertaining to the Company’s equity securities with a new lock-up agreement to be entered into in connection with the IPO underwriting agreement, (3) permit the Preferred Holders to exchange an aggregate of 543,456 shares of Common Stock held by the Preferred Holders for shares of the Company’s Series A Preferred Stock (the “Exchanged Series A Preferred Stock”), and (4) forever waive all registration rights granted to the Holders under the Securities Purchase Agreement.

 

Following the exchange of the Preferred Holders’ shares of Common Stock into Exchanged Series A Preferred Stock, the Preferred Holders converted 1,291.085 shares of Series A Preferred Stock back into 1,291,085 shares of Common Stock.

 

On January 25, 2023, the Company issued three unsecured original issue discount promissory notes in the aggregate principal amount of $577,500, respectively (the “OID Notes”). The Company received proceeds in the aggregate amount of $550,000 in connection with the issuance of the OID Notes. No interest shall accrue on the OID Note prior to an event of default and after event of default, interest shall accrue at the rate of 24% per annum. The principal and all unpaid interest owed under each OID Note shall be due and payable on the earlier of (i) April 30, 2023, or (ii) three business days after the closing or abandonment of Company’s anticipated initial public offering.

The Company is presently conducting a private offering (the “March 2023 Private Offering”) of up to $1,000,000 of its unsecured promissory notes (“New Notes”) and warrants to purchase up to 1,000,000 shares of the Company’s common stock.  The New Notes will bear interest at a rate of 6% per annum and will mature (the “New Notes Maturity Date”) on the earlier of two years from the date of the initial closing of such private placement or a liquidity event, as defined in the New Notes, which includes a firm commitment underwritten initial public offering of the Common Stock.  Each of the New Notes will be coupled with an equal number of warrants (the “New Warrants”) to purchase common stock (up to $1,000,000 warrants) at an exercise price of $1.00 per share.  On the New Notes Maturity Date, the New Notes will be automatically repaid, and the proceeds payable shall be automatically applied to the exercise of the New Warrants.    As of March 28, 2023, the Company has issued $650,000 of New Notes and have issued New Warrants to purchase 650,000 shares of common stock.  The Company received net proceeds of $590,00

 

The Company’s registration statement on Form S-1 (Registration Number 333-267982) relating to its initial public offering was declared effective by the Securities and Exchange Commission on February 14, 2023.  As of March 28, 2023, the Company has not consummated its initial public offering and has not received any proceeds therefrom.

 

 

 

 

We are primarily a baby gear distributor based in Lakewood, New Jersey. We showcase and sell our products through our showroom and our website, 

, third party marketplaces like Amazon.com and our boutique (on site). We also showcase and sell our baby gear products directly to consumers in our retail showroom in Lakewood, New Jersey. We focus on providing our consumers with high value content and education on brands of baby gear we believe to be of high quality. We have a team of Mom reps to assist consumers in our showroom, online and over the telephone. Our Mom reps are educated consumer advocates who we believe offer real value by helping guide customers, especially new moms to be, who may be very overwhelmed by the pregnancy experience, in a non-judgmental, friendly, and professional manner.

 

Although approximately 85% of our current sales are from strollers, stroller accessories and car seats, we also offer a variety of products including baby carriers, diaper bags, feeding and safety accessories and bouncers. We do not have our own fulfilment operations. We outsource our order fulfilment operations to a 35,000 square foot warehouse fulfilment center which we believe improves customer service and shortens the delivery time compared with those e-commerce retailers that do not hold any inventory. Outsourcing also lowers shipping costs as compared to drop shipping. We offer next day delivery via FedEx, UPS & USPS in the New York Tri-State area and free shipping on orders over $75. We currently maintain approximately $4.5 million of inventory, consisting of strollers, car seats and highchairs, with a 60 – 90-day turnover. With respect to items of which we sell less, we take customer orders before we purchase inventory from our vendors and then drop ship to the customer directly from the manufacturer thereby reducing our inventory risk on such items.

 

According to Market Watch, new mothers represent $16 billion in combined consumer purchasing power. We focus on offering baby gear for the mid to higher income demographics, specifically those with annual income of $75,000 and more. Currently, our average order is $200 – $300. However, since we believe that the average spending by expectant parents is around $4,000, we hope to be able to generate additional sales by offering additional products.

 

 

Our strategy is built upon:

 

 

 

 

 

 

With additional investment to allow further scaling, the combination of its unique customer base, vendor relationships, efficient fulfilment infrastructure, and the ability to leverage its own brand for new products will result in significant competitive advantages and sustainably higher gross sales and net margins.

 

Our challenge is to ensure that potential customers do not use our content, education, and advice and purchase elsewhere. We currently intend to purchase, from time to time, end of season inventory to offer lower prices to help with customer acquisition. We also intend to widen our product line to furniture and nursery (products such as bedding and linen) in an effort to reach a broader range of consumers and to have a larger order value and better lifetime value per consumer. We intend to increase our Mom reps to include a wider range of persons in order to communicate with and relate to varied demographics. We believe that our Mom reps not only help increase our customer base but also help us compete with the Big Box stores and other online retailers. The salespeople in the Big Box stores do not necessarily consist of educated parents as our Mom reps. Online e-commerce retailers cannot provide the personal expertise that our Mom reps offer our potential customers.

 

Another major challenge of ours is that we are subject to the terms and conditions imposed on us by our vendors. We do not have any contracts or binding agreements to purchase inventory. Management works diligently to maintain good relationships with our vendors.

 

As a result of a number of factors, our historical results of operations may not be comparable to our results of operations in future periods, and our results of operations may not be directly comparable from period to period. Set forth below is a brief discussion of the key factors impacting our results of operations.

 

 

 

Prices of certain commodity products, including raw materials, are historically volatile and are subject to fluctuations arising from changes in domestic and international supply and demand, labor costs, competition, market speculation, government regulations, trade restrictions and tariffs. Increasing prices in the component materials for the goods we sell may impact the availability and the price of the products, as vendors search for alternatives to existing materials and increase the prices they charge for the goods. Also, cost base reflects significant elements for freight, including fuel, which has significantly increased due to the effects of the coronavirus (COVID-19) pandemic and Russia’s initiation of military action against Ukraine. Rapid and significant changes in commodity prices such as fuel and plastic may increase the price at which we purchase goods that we sell from our vendors, and as a result, if we are unable to pass the increased costs of raw materials on to our customers, such increased costs may negatively affect our profit margins. We have experienced an increase in the cost of products from suppliers as well as an increase in shipping costs due to the increase in gas prices. While product cost increases have been passed through to our customers through product price increases, the increase in shipping costs has been absorbed by the Company, resulting in nominal impact to our profit margins. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs by increasing prices for our products.

 

 

Fluctuations in interest rates impact on the value of investments and financing activities, giving rise to interest rate risk. The debt of the Company is comprised of different instruments, which bear interest at either fixed or floating interest rates. The ratio of fixed and floating rate instruments in the loan portfolio is monitored and managed. All of our notes payable and capital lease obligations are fixed rate instruments and are not subject to fluctuations in interest rates. A majority of the interest rates on our borrowings compare favorably with those rates available in the market.

 

 

The Company policy with regards to financial assets, is to invest cash at floating rates of interest and to maintain cash reserves in short-term investments in order to maintain liquidity, while also achieving a satisfactory return for shareholders.

 

The impact of recent interest rate increases has increased interest incurred on our merchant advances and credit transactions, however the impact has not been material to our operations or financial performance.

Increasing interest rates may affect the Company’s financing activities, which could make it more difficult for the Company to secure inventory on a timely basis and adversely impact the Company’s ability to manage its accounts payable with suppliers.

 

 

Our operations could be disrupted by geopolitical conditions, trade disputes, international boycotts and sanctions, political and social instability, acts of war, terrorist activity or other similar events. From time to time, we could have a large number of customers located in a particular geographic region. Decreased demand from a discrete event impacting a region in which we have a concentrated exposure could negatively impact our results of operations.

 

Recently, Russia initiated significant military action against Ukraine. In response, the U.S. and certain other countries imposed significant sanctions and export controls against Russia, Belarus and certain individuals and entities connected to Russian or Belarusian political, business, and financial organizations, and the U.S. and certain other countries could impose further sanctions, trade restrictions, and other retaliatory actions should the conflict continue or worsen. It is not possible to predict the broader consequences of the conflict, including related geopolitical tensions, and the measures and retaliatory actions taken by the U.S. and other countries in respect thereof as well as any counter measures or retaliatory actions by Russia or Belarus in response, including, for example, potential cyberattacks or the disruption of energy exports, is likely to cause regional instability, geopolitical shifts, and could materially adversely affect global trade, currency exchange rates, regional economies and the global economy. The situation remains uncertain, and while it is difficult to predict the impact of any of the foregoing, the conflict and actions taken in response to the conflict could increase our costs, disrupt our supply chain, reduce our sales and earnings, impair our ability to raise additional capital when needed on acceptable terms, if at all, or otherwise adversely affect our business, financial condition, and results of operations.

 

The recent and ongoing COVID-19 pandemic could materially affect our operations, as well as the business or operations of third parties with whom we conduct business.

 

The future impact that COVID-19 may have on our results of operations is uncertain. We experienced a decrease in our net revenues of approximately 8% from the year ended December 31, 2021, compared to the year ended December 31, 2020. This decrease was primarily due to supply chain constraints resulting from the COVID-19 pandemic. In an effort to avoid running out of saleable merchandise inventory and losing revenue, we have had to, when available, acquire larger quantities of our traditional inventory and broaden our product offering to adopt to customer needs ahead of time. However, our suppliers have at times indicated that they would not be able to accommodate our order volume. If the disruptions caused by COVID-19 continue for an extended period, our ability to meet the demands of our customers may be materially impacted. To date, we have not experienced any material reduction in the available supply of products and our outlook and business goals have not been materially affected by the supply chain disruptions. We will continue to evaluate the nature and extent of COVID-19’s impact to our business, results of operations, financial condition and liquidity. Our results presented herein are not necessarily indicative of the results to be expected for future periods in 2022 or the full fiscal year.

 

Management cannot predict the full impact of the COVID-19 pandemic on our sourcing, manufacturing and distribution of our products or to economic conditions generally, including the effects on consumer spending. The ultimate extent of the effects of the COVID-19 pandemic on us is highly uncertain and will depend on future developments, and such effects could exist for an extended period of time even after the pandemic might end.

 

Our business could be adversely affected by the effects of other future health epidemics or pandemics in regions where we or third parties on which we rely have significant business operations.

 

Since the demand for the category of products that we sell is not related to any particular season, and no seasonal pattern exists with respect to pregnancies, our business rarely suffers a seasonal impact.

 

 

 

 

We sell our products through our showroom and our website, as well as third party marketplaces like Amazon.com and our boutique (on site). We also showcase and sell our baby gear products directly to consumers in our retail showroom in Lakewood, New Jersey.

 

 

Our cost of net revenue includes the direct cost of purchased merchandise, inventory shrinkage, inventory adjustments due to obsolescence including excess and slow-moving inventory and lower of cost and net realizable reserves. Cost of net revenues also includes duties and inbound freight.

 

Our gross profit and margin is primarily driven by fluctuations in our product costs for purchased inventory.

 

 

General and administrative expenses consist primarily of all payroll and payroll-related expenses, professional fees, insurance, software costs, merchant processing fees and expenses related to our operations at our headquarters, including warehouse costs, including utilities, depreciation and amortization, and other costs related to the administration of our business.

 

Following the completion of our initial public offering, we expect to incur additional expenses as a result of operating as a public company, including costs to comply with the rules and regulations applicable to companies listed on a national securities exchange, costs related to compliance and reporting obligations pursuant to the rules and regulations of the SEC and higher expenses for insurance, investor relations and professional services. We expect these costs will increase our operating costs.

 

 

Sales and marketing expenses include advertising and marketing costs, including print, email marketing, digital and social media costs, public relations costs, as well as fulfilment charges, outbound shipping to customers, and Amazon commissions.

 

 

Interest expense is incurred on the Company’s various loans and merchant advances.

 

The following table presents our results of operations for the years ended December 31, 2022 and 2021:

 

 

 

  

Net revenue was $22.0 million for the year ended December 31, 2022, as compared to $13.3 million for the comparable year ended December 31, 2021 an increase of $8.7 million.  The increase was primarily due to a larger assortment and more variety of inventory available in 2022, as well as continued marketing efforts to support e-commerce activities.

 

 

Cost of net revenues was $14.7 million for the year ended December 31, 2022, as compared to $8.9 million for the comparable year ended December 31, 2021, an increase of $5.8 million.  The increase was primarily attributable to higher revenues in 2022.

 

Our gross profit for the year ended December 31, 2022 was $7.3 million and $4.4 million for the year ended December 31, 2021, and our gross margin was 33.0% and 33.3% for the years ended December 31, 2022 and 2021, respectively, as our product and shipping costs as a percentage of revenue were consistent.

 

 

General and administrative expenses were $5.8 million for the year ended December 31, 2022, as compared to $2.1 million for the comparable year ended December 31, 2021, an increase of $3.7 million. The increase was primarily due to stock-based compensation and other non-cash expenses as well as increased headcount in 2022.

 

General and administrative expenses as a percentage of revenues were 26.5% and 15.7% for the years ended December 31, 2022 and 2021, respectively.

 

 

Research and development expenses were $146,022 in the year ended December 31, 2022, which related to product testing.

 

 

Sales and marketing expenses were $6.4 million for the year ended December 31, 2022, as compared to $3.4 million for the comparable year ended December 31, 2021, an increase of $3.0 million. The increase was primarily due to continued advertising and increased digital marketing efforts, as well as public relations costs in 2022.

 

Sales and marketing expenses as a percentage of revenues were 29.0% and 25.5% for the years ended December 31, 2022 and 2021, respectively.

 

 

Interest expense was $209,224 for the year ended December 31, 2022, as compared to $132,157 or the comparable year ended December 31, 2021. The increase was due to new loans and merchant advances entered into during the year. Other income was $159,159 in 2022, primarily due to the PPP forgiveness.

 

 

Net loss was $5.1 million for the year ended December 31, 2022, as compared to $1.2 million for the comparable year ended December 31, 2021, an increase of $3.9 million. The increase in net loss was primarily due to higher operating expenses driven by stock and non-cash compensation in 2022, partially offset by higher gross profit and other income.

 

Our principal liquidity requirements are for working capital to fund our inventory and marketing expenditures. We fund our liquidity requirements primarily through cash on hand, cash flows from operations, and debt financing. As of December 31, 2022 and December 31, 2021, we had $218,605 and $773,880 of cash, respectively.

 

 

During 2022 and 2021, we entered into several short-term merchant loans with Amazon.   The loans mature in six to nine months and bear interest ranging from 8% to 12%.  The loans require monthly principal and interest payments.  During the years ended December 31, 2022 and 2021, we received merchant advances totaling $7,202,000 and $797,010, respectively, and made repayments totaling $5,570,794 and $987,843, respectively. As of December 31, 2022 and 2021, we had $1,843,025 and $209,168, respectively in outstanding principal pertaining to these merchant loans.  Interest expense for the loans totaled $157,322 and $40,852 for the years ended December 31, 2022 and 2021, respectively. As of December 31, 2022 and 2021, there was $17,376 and $0, respectively, in interest payable pertaining to these loans.

 

 

During 2021, we received loan proceeds of $651,873 from a related party.  The loan was unsecured, non-interest bearing and due on demand.  During 2021, we fully repaid this loan.

 

In May 2021, we entered into a loan with a lender in an aggregate principal amount of $142,597 pursuant to the Paycheck Protection Program (“PPP”) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The PPP Loan is evidenced by a promissory note (“PPP Note”). Subject to the terms of the PPP Note, the PPP Loan bears interest at a fixed rate of one percent (1%) per annum, with the first six months of interest deferred, has an initial term of five years, and is unsecured and guaranteed by the Small Business Administration. We may apply to the lender for forgiveness of the PPP Loan, with the amount which may be forgiven equal to the sum of payroll costs, covered rent, and covered utility payments incurred by the Company during the applicable forgiveness period, calculated in accordance with the terms of the CARES Act. The PPP Note provides for customary events of default including, among other things, cross-defaults on any other loan with the lender. The PPP Loans may be accelerated upon the occurrence of an event of default. The loan proceeds were used for payroll and other covered payments including general operating costs and were fully forgiven in February 2022. As such, the Company recorded a gain of $142,597 included in other income in the statements of comprehensive loss.

 

As of December 31, 2022 and 2021, we had $1,025,000 outstanding pertaining to a promissory note received in 2021.  In December 2022, the Company extended the maturity date to March 31, 2024.  Interest expense for the years ended December 31, 2022 and 2021 were $0 and $25,000, respectively, all of which was accrued and unpaid as of December 31, 2022.

 

In November 2021, in connection with the Note Closing, we entered into the Notes for an aggregate principal amount of $1,061,687. The Notes bear interest at 8% per annum and matured on February 28, 2022. The Notes are convertible into shares of Common Stock and/or Series A Preferred Stock and warrants to purchase Common Stock of the Company. In March 2022, upon the Subsequent Closing, $1,061,687 of the Notes automatically converted into shares of Common Stock at a conversion price of $1.00 per share and/or, subject to the Beneficial Ownership Limitation (as defined below), Series A Preferred Stock and Mergeco Warrants.

 

During the year ended December 31, 2021, we incurred $16,562 in interest pertaining to the Notes, all of which was accrued and unpaid as of December 31, 2021. Upon the Subsequent Closing and conversion of the Notes at their principal amount, the interest was deemed forgiven and we recorded a gain in other income in the statements of comprehensive loss.

 

In connection with the Subsequent Closing, as part of the Placement Agent Consideration (as defined below), we issued a convertible promissory note to Palladium Capital Group, LLC (formerly Palladium Capital Advisors, LLC) in the principal amount of $240,135, dated March 1, 2022, which was subsequently assigned to Palladium Holdings LLC on April 6, 2022 (the “”). The Palladium Note bears interest at a rate of 8% per annum and matures on September 1, 2023; provided, that no interest will be payable in the event such Palladium Note is converted into shares of common and/or Series A Preferred Stock and warrants of PishPosh, Inc. The value of the Palladium Note was recognized as offering costs and charged to additional paid-in capital.

 

On August 23, 2022, we issued a Convertible Promissory Note to Dov Kurlander pursuant to services performed in the principal amount of $950,000 (the “Kurlander Note”). The Kurlander Note bears interest at 5% per annum, with principal and interest payments payable monthly, and matures on May 15, 2023.

The terms of the Kurlander Note provide that Mr. Kurlander shall be entitled, at his election, to convert all or any portion of the outstanding principal amount and accrued but unpaid interest under the Kurlander Note into validly issued, fully paid and non-assessable shares of Common Stock at a price equal to an amount that is 110% of the price at which the Company consummates its initial public offering of its Common Stock on the effective date of this registration statement. However, pursuant to the terms of the Kurlander Note, Mr. Kurlander shall not have the right to exercise any portion of the Kurlander Note as his current beneficial ownership exceeds the Beneficial Ownership Limitation.

 

 

The following table summarizes our cash flows from operating, investing, and financing activities:

 

 

 

Cash flows used in operating activities were $4.3 million for the year ended December 31, 2022, as compared to cash provided of $1.2 for the comparable year ended December 31, 2021. Cash used during the year ended December 31, 2022 was primarily driven by our net loss of $5.1 million, decreases in operating assets and liabilities of $1.8 million, partially offset by non-cash charges of $2.7 million.  Changes in operating assets and liabilities included an increase of $1.6 million in inventory and deferred offering costs of $0.8 million, partially offset by an increase of $0.8 million in accounts payable and accounts payable, related party.

 

Cash flows used in operating activities for the year ended December 31, 2021 were primarily driven by our net loss of $1.2 million and cash used in operating assets and liabilities of $0.2 million, partially offset by non-cash charges of $0.2 million. Changes in operating assets and liabilities included an increase of $1.1 million in inventory, partially offset by an increase of $0.8 million in accounts payable.

 

Cash used in investing activities was $33,762 and $0.1 million for the years ended December 31, 2022 and 2021, respectively primarily driven by capitalized website development costs.

 

 

We received loan proceeds of $7.2 million for the year ended December 31, 2022 and made repayments totaling $5.6 million. We also received $1.7 million in the issuance of preferred and common stock pursuant to the Subsequent Closing. We also received $0.4 million in the issuance of common stock from the pre-IPO offering.

 

In the year ended December 31, 2021, we received an aggregate of $4.2 million in proceeds from loans, merchant advances, related party advances and convertible notes. We made loan repayments of $1.5 million and repaid related party loans totaling $0.7 million.

 

 

The Company has evaluated whether there are certain conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued.

 

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has often not generated profits since inception, has sustained net losses of $5,141,249 and $1,179,163 for the years ended December 31, 2022 and 2021 respectively, and has negative cash flows from operations for the years then ended.  These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern for the next 12 months from the date the financial statements were available to be issued is dependent upon its ability to generate sufficient cash flows from operations to meet its obligations, which it has not been able to accomplish to date, and/or to obtain additional capital financing.  Through the date the financial statements were available to be issued, the Company has been primarily financed through the issuance of loans and proceeds from the sale of preferred and common stock.  In the event that the Company cannot generate sufficient revenue to sustain its operations, the Company will need to reduce expenses or obtain financing through the sale of debt and/or equity securities. The issuance of additional equity would result in dilution to existing shareholders. If the Company is unable to obtain additional funds when they are needed or if such funds cannot be obtained on terms acceptable to the Company, the Company would be unable to execute upon the business plan or pay costs and expenses as they are incurred, which would have a material, adverse effect on the business, financial condition and results of operations. No assurance can be given that the Company will be successful in these efforts.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 

The Company is seeking to raise capital via an equity offering. In the event the Company does not complete an offering, the Company expects to seek additional funding through private equity or debt financings. The Company may not be able to obtain financing on acceptable terms, or at all.

We do not have any off-balance sheet arrangements, as defined by applicable regulations of the SEC, that are reasonably likely to have a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources. 

 

We are an emerging growth company, as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, these financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates. We are using the extended transition period for any other new or revised accounting standards during the period in which we remain an emerging growth company.

 

We will remain an emerging growth company until the earliest of (i) the last day of our first fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual gross revenues of at least $1.235 billion or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Common Stock that is held by non-affiliates exceeds $700.0 million as of the prior June 30th and (ii) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

 

We are also a “smaller reporting company,” meaning that the market value of our stock held by non-affiliates plus the proposed aggregate amount of gross proceeds to us as a result of this offering is less than $700.0 million and our annual revenue is less than $100.0 million during the most recently completed fiscal year. We may continue to be a smaller reporting company after this offering if either (i) the market value of our stock held by non-affiliates is less than $250.0 million or (ii) our annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700.0 million. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Reports on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.

 

 

The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America (“GAAP”). The Company’s fiscal year end is December 31.

 

 

The preparation of our financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions reflected in these financial statements include, but are not limited to, inventory, revenue recognition, and e-commerce accounting considerations. We base our estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates when there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ from those estimates.

 

 

Certain assets and liabilities of the Company are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) 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. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

 

 

 

 

 

The carrying values of our accounts receivable, prepaid expenses, accounts payable and accrued expenses approximate their fair values due to the short maturity of these instruments. We believe the carrying amount of our convertible notes payable and loan payable approximate fair value based on rates and other terms currently available to us for similar debt instruments.

 

 

Accounts receivable are derived from products delivered to customers and are stated at their net realizable value. Each month, the Company reviews its receivables on a customer-by-customer basis and evaluates whether an allowance for doubtful accounts is necessary based on any known or perceived collection issues. Any balances that are eventually deemed uncollectible are written off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. 

 

 

Inventories consist of finished goods and products in transit from the Company’s suppliers.  Finished goods inventory includes amounts primarily held at the Company’s warehouse location and at Amazon.  Costs of finished goods inventories include all costs incurred to bring inventory to its current condition, including inbound freight and duties. Inventory is recorded at the lower of cost or net realizable value using the first-in-first-out (FIFO) method. If the Company determines that the estimated net realizable value of its inventory is less than the carrying value of such inventory, it records a charge to cost of goods sold to reflect the lower of cost or net realizable value. If actual market conditions are less favorable than those projected by the Company, further adjustments may be required that would increase the cost of goods sold in the period in which such a determination was made.

 

 

Intangible assets consist of capitalized website development costs less accumulated amortization. Website development costs are capitalized during the application and infrastructure development stage in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 350-50. We amortize these costs using the straight-line method over an estimated useful life of three years.

 

 

We review our long-lived assets (property and equipment and amortizable intangible assets) for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. If the sum of the expected cash flows, undiscounted, is less than the carrying amount of the asset, an impairment loss is recognized as the amount by which the carrying amount of the asset exceeds its fair value.

 

 

In accordance with FASB ASC 606, ¸ the Company determines revenue recognition through the following steps:

 

 

 

 

 

 

 

Revenue is recognized when performance obligations are satisfied through the transfer of control of promised goods to the Company's customers in an amount that reflects the consideration expected to be received in exchange for transferring goods or services to customers. Control transfers once a customer has the ability to direct the use of, and obtain substantially all of the benefits from, the product. This includes the transfer of legal title, physical possession, the risks and rewards of ownership, and customer acceptance.

 

The Company derives its revenue primarily from e-commerce transactions. For e-commerce transactions, revenue is recognized at the time the product is shipped to the customer, which is the point in time when control is transferred. The Company generates a small percentage of sales in its showroom, which revenue is recognized at the time the product is sold in store to the customer.

 

The Company deducts discounts, sales tax, and estimated refunds to arrive at net revenue. Sales tax collected from clients is not considered revenue and is included in accrued expenses until remitted to the taxing authorities. Shipping and handling fees charged to customers are included in net revenues.  All shipping and handling costs are accounted for as fulfillment costs in sales and marketing expense, and are therefore not evaluated as a separate performance obligation.

 

 

Cost of revenue consists of the costs of inventory sold, packaging materials costs, inbound freight and customs and duties.  The Company includes outbound freight associated with shipping goods to customers as a component of sales and marketing expenses as noted below.

 

 

Sales and marketing expenses includes fulfillment center operations, third-party logistics costs, e-commerce selling commissions, marketing and advertising costs as well as public relations.

 

The Company also includes outbound freight associated with shipping goods to customers as a component of sales and marketing expenses. 

 

General and administrative expenses consist primarily of compensation and benefits costs, professional services and information technology.  General and administrative expenses also include payment processing fees, website costs and warehousing fees.

 

The Company complies with the requirements of FASB ASC 340-10-S99-1 with regards to offering costs. Prior to the completion of an offering, offering costs are capitalized. The deferred offering costs are charged to additional paid-in capital or as a discount to debt, as applicable, upon the completion of an offering or to expense if the offering is not completed. 

 

 

Stock warrant valuation models require the input of highly subjective assumptions. The fair value of stock-based payment awards was estimated using the Black-Scholes option model with a volatility figure derived from an index of historical stock prices for comparable entities. The Company accounts for the expected life based on the contractual life of the warrants. The risk-free interest rate was determined from the implied yields of U.S. Treasury zero-coupon bonds with a remaining life consistent with the expected term of the warrants.

 

 

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842, as modified by other subsequently issued related ASUs. The amendments in these Updates specify the accounting for leases. The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. The Company adopted the new standard, including ASU No. 2021-09, Leases (Topic 842), Discount Rate for Lessees That are Not Public Business Entities, which provides nonpublic business entities with a practical expedient that allows them to elect, as an accounting policy, to use a risk-free rate as the discount rate for all leases, and all other related ASUs, effective January 1, 2022 using a modified retrospective approach. The Company also elected the package of practical expedients permitted under the transition guidance within the new standard (see below). 

 

As of January 1, 2022, the Company changed its accounting method for leases as a result of implementing the requirements of FASB ASC 842, Leases, using the modified retrospective transition method. There was no cumulative effect adjustment to the Company’s balance sheet as of January 1, 2022. Adoption of the new guidance did not have a significant impact to the statements of operations or cash flows for the year ended December 31, 2022. Comparative information has not been restated and continues to be reported under the accounting standards in effect for the prior period.

 

The new lease guidance requires the recognition of a right-of-use asset and a lease liability for operating leases. The Company elected the package of practical expedients, including 1) relief from reassessing whether any expired or existing contracts are or contain leases, 2) relief from reassessing the classification for any expired or existing leases, 3) relief from reassessing initial direct costs for any existing leases, 4) using hindsight to determine the lease term and assess impairment of right-of-use assets, 5) election not to apply the recognition requirements to short-term leases, and 6) election not to separate lease components from non-lease components.

 

In August 2020, the FASB issued ASU 2020-06, which simplifies the guidance on the issuer’s accounting for convertible debt instruments by removing the separation models for convertible debt with a cash conversion feature and convertible instruments with a beneficial conversion feature. As a result, entities will not separately present in equity an embedded conversion feature in such debt and will account for a convertible debt instrument wholly as debt, unless certain other conditions are met. The elimination of these models will reduce reported interest expense and increase reported net income for entities that have issued a convertible instrument that is within the scope of ASU 2020-06. ASU 2020-06 is applicable for fiscal years beginning after December 15, 2021, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. The Company adopted ASU 2020-06 on January 1, 2022 and the adoption of this ASU did not have a material impact on the Company’s financial statements and related disclosures.

 

 

The Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information under this Item.

 

 

The financial statements required to be filed pursuant to this Item 8 are appended to this report and are incorporated herein by reference. An index of those financial statements is found in Item 15 of Part IV of this Annual Report.

 

 

 

None.

 

Disclosure controls and procedures as defined in Rules 13a-15I and 15d-15(e) under the Exchange Act are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

 

Our management, with the participation of our chief executive officer (our principal executive officer) and our chief financial officer (our principal financial officer) evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K. Based upon that evaluation, and as a result of the remediation of previously identified material weaknesses, as described below, our principal executive officer and principal financial officer concluded that, as of December 31, 2022, our disclosure controls and procedures were effective.

 

Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projection of any evaluation of effectiveness to future periods is subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework (2013 Framework). Based on this assessment, management concluded that, as of December 31, 2022, the Company’s internal control over financial reporting was effective.

 

 

 

During the preparation of our financial statements for the fiscal years ended December 31, 2022 and 2021, we identified certain material weaknesses:

 

 

We are in the process of implementing measures designed to improve our internal control over financial reporting to remediate these material weaknesses. The Company’s plan to remediate the material weaknesses in its internal control over financial reporting includes utilizing a portion of the working capital from its initial public offering to increase staffing within its finance department sufficient to facilitate proper segregation of accounting functions and to enable appropriate review of its internally prepared financial statements. In addition, the Company plans to retain outside consultants, experts in, and specializing in SEC reporting for public company registrants.

 

This Annual Report on Form 10-K does not include an attestation report of the Company’s registered public accounting firm, as non-accelerated filers are exempt from the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act.

 

None.

 

 

Not applicable.

 

 

The following table sets forth as of March 28, 2023, the names and positions of our executive officers and directors serving as of such date. Directors will be elected at our annual meeting of stockholders and serve for one year or until their successors are elected and qualify. Officers are elected by the Board and their terms of office are, except to the extent governed by employment contract, at the discretion of the Board.

 

. Charlie Birnbaum was appointed as Chief Executive Officer of the Company on January 18, 2023 and was appointed a director of the Company in May 2022. Prior to being appointed as Chief Executive Officer, Charlie served as Chief Operating Officer of Pish Posh Baby and became Chief Operating Officer of the Company concurrent with the Merger of Pish Posh Baby with and into the Company in February 2022. A decade-long veteran in online business-to-consumer (“B2C”) sales, Mr. Birnbaum has spent the last five years leveraging his deep knowledge of e-commerce operations and strategy to reposition PishPosh Baby as a rapidly expanding, profitable online player. Mr. Birnbaum is qualified to serve as a director of the Company due to his extensive experience and knowledge of online B2C sales.

 

. Eric Sherb was appointed as Chief Financial Officer of the Company on August 29, 2022. Mr. Sherb acted as the Company’s Chief Financial Officer on an outsourced basis since July 2022. He is a CPA with 13 years of experience in accounting advisory, auditing and mergers and acquisitions. He began his career at PricewaterhouseCoopers, where he worked as a senior associate from June 2011 to January 2013. Mr. Sherb has several years’ experience in mid-size audit and consulting firms with clients in a variety of industries. Since October 2018, Eric has been a founder and owner of EMS Consulting Services, LLC. He has extensive experience in financial reporting for pre-revenue startups to large public entities, including bookkeeping, consolidation, financial statement preparation and analysis, management and investor reporting, financial modeling and audit and IPO readiness. Mr. Sherb has provided technical advisory on complex transactions, including debt/equity financings, business combinations, revenue recognition, lease arrangements, etc. Mr. Sherb has helped clients establish and improve financial operations, including system implementation, compensation structures and the creation of accounting policies and processes. Mr. Sherb graduated with a Bachelor of Business Administration from Emory University in Accounting and Finance.

 

 Mr. Benishai is our Chief Merchandising Officer (a non-executive position). Since 2005, he has and continues to serve as the Chief Executive Officer of Art and Cook, a wholesale consumer goods specializing in home products. He was responsible for importing over $150M of goods in the past five years. Some of his daily duties include:

 

 

 

 

 

 

 

 

Mr. Benishai brings more than 20 years’ experience working in product development, sourcing, and consulting and has served as a product, packaging, and branding advisor for companies such as Polaroid (2015-2016), Sharper Image (2016-2017), Brookstone (2019-2020) and Southern Telecom (2007-2022).

 Jesse Sutton was appointed Chairman of the Company on January 18, 2023 and was appointed as a director of the Company in May 2022. In addition, Mr. Sutton also previously served as Chief Executive Officer of Pish Posh Baby and became Chief Executive Officer of the Company concurrent with the Merger of Pish Posh Baby with and into the Company in February 2022 and continued to serve as the Chief Executive Officer of the Company until January 18, 2023. Mr. Sutton has over 25 years’ experience in the video game industry and has overseen the publishing of hundreds of games across all platforms and all genres. From 2007 through 2017, Mr. Sutton was CEO of Majesco Entertainment, a NASDAQ-traded video game publisher he co-founded in 2003 where he was responsible for the development and publishing of popular interactive entertainment titles such as Zumba and Cooking Mama. While with Majesco, he was responsible for all aspects of the company including funding, product development, SEC reporting, marketing, licensing, sales and operations. After Majesco Entertainment went private in 2017, he continued to serve as CEO through 2021, and from 2019 through 2020, he also served as President of Global Bit, a software development firm. Since 2019, Mr. Sutton also serves as Chief Executive Officer and a director of Ultimax Digital Inc. Since 2005, Mr. Sutton has served as Chairman of the Reach For The Stars School for Autistic Children. Mr. Sutton holds a Bachelor’s Degree from Yeshiva University. Mr. Sutton is qualified to serve as a director of the Company due to the valuable expertise and perspective he brings in his capacity as the Company’s Chief Executive Officer and because of his extensive experience and knowledge of the consumer products industry.

. Patrick White joined the Company as a director in May 2022. Mr. White has served as a director of VerifyMe, Inc. (NASDAQ: VRME) since July 12, 2017. Mr. White founded Document Security Systems, Inc. (NYSE: DSS), a technology company, and served as its Chief Executive Officer and Director from August 2002 until December 2012 and as its business consultant from 2012 to March 2015. Mr. White has been a director of BoxScore Brands Inc. (OTCQB: BOXES) (formerly, U-Vend, Inc.) since 2009. Mr. White was a Financial Advisor for Monroe County, NY Government from April 2016 until May 2017. Mr. White was a consultant to VerifyMe, Inc. from June 1, 2017 through August 14, 2017, when he was appointed Chief Executive Officer and President. Mr. White was appointed to the Company’s Board for his experience with previously serving as the Chief Executive Officer of a public company. Mr. White is qualified to serve as a director of the Company due to his substantial board and consulting experience.

 

 

Mark Kahn joined the Company as a director in May 2022. Since 2022, Mr. Kahn works as a financial analyst at Israel David LLC a boutique securities litigation firm. Mr. Kahn was previously employed at Palladium Capital Group, LLC in a non-licensed analyst capacity. Prior to joining Palladium, Mr. Kahn co-founded Siyata Capital Partners Family fund, a hedge fund focusing on technology startups and growth companies, where he served as Technology Analyst from June 2020 to September 2021. At Siyata, Mr. Kahn assumed responsibility for the P&L of the fund and its clients. Mr. Kahn also has extensive experience in advising successful e-commerce companies and startup companies. From December 2018 through December 2019, he ran the development and design of SkuNexus, now a leading e-commerce software with partnerships with Shopify and BigCommerce, and other public companies. Mr. Kahn’s experience and strength in e-commerce, finance, and technology serve as a great asset for Pish Posh Baby’s Board. Mr. Kahn holds degrees in software architecture and design from General Assembly NYC which was awarded in December 2018. Mr. Kahn brings a wealth of experience to Pish Posh Baby, including knowledge of the finance, e-commerce, and technology spaces. His expertise in business development, software architecture and design, and P&L management is expected to contribute to Pish Posh Baby's continued success. His experience in advising successful e-commerce companies, combined with his understanding of the venture capital and startup space, make him an ideal addition to the Board. Mr. Kahn is highly respected in the industry and his appointment to the Board is an exciting development for Pish Posh Baby.

 

. Victor Setton joined the Company as a director in September 2022. Since January 2005, Mr. Setton has served as President and Chief Executive Office of Just Mobile Direct Inc., a manufacturer and distributor of consumer electronics & accessories, selling primary to national retail accounts. In addition, since December 2020, Mr. Setton has also served as a founder of Current Digital Influence Group, a brand license developer of consumer products for digital media influencers. From May 2020 through February 2020, Mr. Setton acted as Chief Executive Officer of Mobile City Online, a direct-to-consumer commerce of mobile electronics and related accessories. Mr. Setton is qualified to serve as a director of the Company due to his experience and knowledge of the e-commerce and consumer products industry.

 

 

The number of members of our Board will be determined from time to time by resolution of the Board. Currently, our Board consists of five (5) persons. Our directors hold office until the earlier of their death, resignation, retirement, disqualification, or removal or until their successors have been duly elected and qualified.

 

 

Prior to the closing of this initial public offering, our Board will be composed of a majority of “independent directors” as defined under the rules of The Nasdaq Stock Market LLC (“Nasdaq”). We use the definition of “” applied by Nasdaq to make this determination. Nasdaq Listing Rule 5605(a)(2) provides that an “” is a person other than an officer or employee of the company or any other individual having a relationship which, in the opinion of the company’s board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Nasdaq listing rules provide that a director cannot be considered independent if:

 

 

 

 

 

 

Under such definitions, our Board has undertaken a review of the independence of each director. Based on the information provided by each director concerning his or her background, employment, and affiliations, our Board has determined that Patrick White, Menachem (Mark) Kahn and Victor Setton are all independent directors of the Company. However, our Common Stock is not currently quoted or listed on any national exchange or interdealer quotation system with a requirement that a majority of our Board be independent and, therefore, the Company is not subject to any director independence requirements.

 

 

We have established an audit committee (the “Audit Committee”), a compensation committee (the “Compensation Committee”) and a nominating and corporate governance committee (the “Nominating and Governance Committee”). Each such committee of the Board has or will have the composition and responsibilities described below.

 

 

The Audit Committee assists the Board in overseeing our accounting and financial reporting processes and the audits of our financial statements. The Audit Committee’s responsibilities include, among other matters: appointing, approving the compensation of, and assessing the independence of our registered public accounting firm; overseeing the work of our registered public accounting firm, including through the receipt and consideration of reports from such firm; reviewing and discussing with management and the registered public accounting firm our annual and quarterly financial statements and related disclosures; coordinating our Board’s oversight of our internal control over financial reporting, disclosure controls and procedures; discussing our risk management policies; meeting independently with our internal auditing staff, if any, registered public accounting firm and management; reviewing and approving or ratifying any related person transactions; and preparing the Audit Committee report required by the SEC.

 

The members of our Audit Committee are Menachem (Mark) Kahn, Victor Setton, and Patrick White who serves as chairperson of this committee.

The Compensation Committee’s responsibilities include, among other matters: reviewing and approving, or recommending for approval by the Board, the compensation of our Chief Executive Officer and our other executive officers; overseeing and administering our cash and equity incentive plans; reviewing and making recommendations to our Board with respect to director compensation; reviewing and discussing annually with management our “,” to the extent required; reviewing and discussing the voting recommendations of our stockholders on matters involving executive compensation, to the extent required; and preparing the annual Compensation Committee report required by SEC rules, to the extent required.

 

The members of our Compensation Committee are Patrick White and Menachem (Mark) Kahn, who serves as chairperson of this committee.