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What changed in Bark, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Bark, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+326 added−321 removedSource: 10-K (2023-06-01) vs 10-K (2022-05-31)

Top changes in Bark, Inc.'s 2023 10-K

326 paragraphs added · 321 removed · 222 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeAccording to a 2020 Euromonitor International (“Euromonitor International”) report, pet care—relative to other industries—remained recession-resistant and even in the midst of the COVID-19 pandemic, many pet owners have been willing to cut back spending on themselves in favor of spending on their pets. 4 Table of Contents Dog ownership is growing quickly: According to the 2021-22 APPA Survey, dogs are the most popular pet in the U.S., with more than 69 million households having a dog as a member of their family.
Biggest changeDog ownership is growing quickly: According to the 2021-22 APPA Survey, dogs are the most popular pet in the U.S., with more than 69 million households having a dog as a member of their family. This reflects an increase of roughly 6 million, compared to 2020.
By employing an in-house team of world-class designers to design our products and having them made exclusively for us, rather than selling third-party products, we have created a collection of high-quality and unique, and cleverly-themed products, with strong brand association and higher potential for profitability.
By employing an in-house team of world-class designers to design our products and having them made exclusively for us, rather than selling third-party products, we have created a collection of high-quality, unique, and cleverly-themed products, with strong brand association and higher potential for profitability.
We believe that this business also serves to introduce first-time customers to BARK who later become loyal subscribers of our DTC business. Growth Opportunities We strive to be a dog parent’s partner from those first days with a puppy throughout their dog’s entire adult life.
We believe that this business also serves to introduce first-time customers to BARK who later could become loyal subscribers of our DTC business. Growth Opportunities We strive to be a dog parent’s partner from those first days with a puppy throughout their dog’s entire adult life.
We also enter into, and rely on, confidentiality and proprietary rights agreements with our employees, consultants, contractors and business partners to protect our trade secrets, proprietary technology and other confidential information. We further control the use of our proprietary technology and intellectual property through provisions in both customer terms of use on our website and in agreements with our vendors.
We also enter into, and rely on, confidentiality and proprietary rights agreements with our employees, consultants, contractors and business partners to protect our trade secrets, proprietary technology and other confidential information. We further control the use of our proprietary technology and intellectual property through provisions in both customer terms of use on our websites and in agreements with our vendors.
The Company has executed agreements that will bring BARK products to over 40,000 retail doors, including Target, Costco, Walmart, Petco, and Petsmart. We believe that these partnerships significantly broaden our customer reach and raise awareness for the BARK brand.
The Company has executed agreements that will bring BARK products to over 40,000 retail doors, including Target, Walmart, Kroger, Petco, and PetSmart. We believe that these partnerships significantly broaden our customer reach and raise awareness for the BARK brand.
We began our journey in the play category with BarkBox – a monthly-themed subscription of toys and treats, tailored to the needs of each customer based on their dog’s size, play style, allergies, and more.
We began our journey with BarkBox – a monthly-themed subscription of toys and treats, tailored to the needs of each customer based on their dog’s size, play style, allergies, and more.
We advocate for and celebrate a culture of inclusiveness for all people regardless of race, gender, sexual orientation, family status, religion, ethnicity, national origin, physical ability, 7 Table of Contents veteran status, age, or love of cats as we work toward one common goal: to make every single dog as happy as they make us.
We advocate for and celebrate a culture of inclusiveness for all people regardless of race, gender, sexual orientation, family status, religion, ethnicity, national origin, physical ability, veteran status, age, or love of cats as we work toward one common goal: to make every single dog as happy as they make us.
We require that all of our manufacturers comply with applicable laws and BARK generally has the right to audit the suppliers’ facilities. Distribution and Inventory Management BARK currently utilizes global third-party logistics providers to warehouse and distribute finished products from its distribution facilities to support its domestic operations.
We require that all of our manufacturers comply with applicable laws and BARK generally has the right to audit the suppliers’ facilities. Distribution and Inventory Management BARK currently utilizes global third-party logistics providers to warehouse and distribute finished products from their distribution facilities to support BARK’s domestic operations.
We engage with employees through monthly pulse surveys to measure employee engagement, receive feedback, and respond to employee concerns effectively. We leverage these data points to continuously evolve our policies and practices to meet employee needs and align with BARK team values.
We engage with employees through periodic surveys to measure employee engagement, receive feedback, and respond to employee concerns effectively. We leverage these data points to continuously evolve our policies and practices to meet employee needs and align with BARK team values.
All of our exclusive products are required to be produced according to BARK’s specifications, and our manufacturers warrant that such products will perform in accordance with BARK’s specifications. Our manufacturing and supplier contracts are generally on year-to-year terms and provide BARK with the additional right to terminate the agreement for uncured material breaches within thirty days.
All of our exclusive products are required to be produced according to BARK’s specifications, and our manufacturers warrant that such products will perform in accordance with BARK’s specifications. Our manufacturing and supplier contracts are generally on multi-year terms and provide BARK with the additional right to terminate the agreement for uncured material breaches.
We do this by focusing on four key areas: • Diversity Sourcing & Recruitment: Promote an inclusive approach to hiring diverse talent by focusing on the equity of recruiting processes in addition to sourcing pools. • Continuous Learning & Communication: Make diversity and inclusion everyone’s responsibility by providing training and educational opportunities. • Employee Resource Groups: Provide employees with opportunities and resources to build a shared, supportive community while also advancing the team’s Diversity Equity and Inclusion mission. • Accountability: Ensure accountability while committing to focus on retention, advancement, and equity.
We do this by focusing on four key areas: 7 Table of Contents • Diversity Sourcing & Recruitment: Promote an inclusive approach to hiring diverse talent through our recruiting processes and sourcing pools. • Continuous Learning & Communication: Make diversity and inclusion everyone’s responsibility by providing training and educational opportunities. • Employee Resource Groups: Provide employees with opportunities and resources to build a shared, supportive community while also advancing the team’s Diversity Equity and Inclusion mission. • Accountability: Ensure accountability while committing to focus on retention, advancement, and equity.
We expect to pursue additional trademark registrations to the extent we believe such registrations would be beneficial and cost-effective. In addition to trademark protection, we own numerous domain names, including www.barkbox.com, www.bark.co, and www.barkshop.com.
We expect to pursue additional trademark registrations to the extent we believe such registrations would be beneficial and cost-effective. 8 Table of Contents In addition to trademark protection, we own numerous domain names, including www.bark.co, www.barkbox.com, and www.barkshop.com.
By designing our own products, we have the opportunity to achieve higher price points, therefore expanding our gross margins. Omnichannel: While the majority of our revenues are driven by our DTC business, we derived $59 million, or 11.7% of our revenues from the sale of BARK products in retail stores and other e-tailers in fiscal 2022.
By designing our own products, we have the opportunity to achieve higher price points, therefore expanding our gross margins. Omnichannel: While the majority of our revenues are driven by our DTC business, we derived $63 million, or 11.8% of our revenues from the sale of BARK products in retail stores and other e-tailers in fiscal 2023.
Vertically Integrated: All of our products are designed, developed, and branded BARK, which drives higher margins. We believe that our data and insights have enabled us to design and make superior products for dogs as well as to create new products that dogs and their dog parents love.
Vertically Integrated: All of our products are designed, developed, and branded BARK, which drives higher margins, compared to companies that primarily sell third-party products. We believe that our data and insights have enabled us to design and make superior products for dogs as well as to create new products that dogs and their dog parents love.
ITEM 1. BUSINESS Overview Our mission is to make all dogs happy. We believe that dogs and humans are better together and we aspire to be the world’s favorite dog brand. We are a team of dog-obsessed people committed to delivering personalization at scale by satisfying each dog’s distinct personality, preferences, and needs.
Overview Our mission is to make all dogs happy We believe that dogs and humans are better together and we aspire to be the world’s favorite dog brand. We are a team of dog-obsessed people committed to delivering personalization at scale by satisfying each dog’s distinct personality, preferences, and needs with the best products and services.
As of March 31, 2022, 65% of our employees, 36% of our management team, and 33% of our Board of Directors identified as female or nonbinary. Employee Engagement Team communication is frequent and direct, allowing for a high level of transparency and feedback.
As of March 31, 2023, 67% of our employees, 31% of our management team, and 33% of our Board of Directors identified as female or nonbinary. Employee Engagement Team communication is frequent and direct, allowing for a high level of transparency and feedback.
On a quarterly basis, we review all grants of equity for parity across gender and race to ensure that we are taking a consistent approach to compensation for all team members based on market data, role, and level. Manufacturing BARK purchases substantially all of its merchandise directly from third-party manufacturers, who typically manufacture the products exclusively for BARK.
On a regular basis, we review all grants of equity for parity across gender and race to ensure that we are taking a consistent approach to compensation for all team members based on market data, role, and level. Manufacturing BARK purchases substantially all of its merchandise directly from third-party manufacturers.
Our customer service team–the Happy Team–proactively engages over 250,000 customers each month. We get to know their dog’s preferences based on breed, size, age, play style, allergies, and more. This allows us to personalize our products and experiences for each customer, which we believe drives stronger retention and lifetime value.
Our Happy Team proactively engages hundreds of thousands of customers each month. We get to know their dog’s preferences based on breed, size, age, play style, allergies, and more. This allows us to personalize our products and experiences for each customer, which we believe drives stronger retention and lifetime value.
By viewing each dog as an individual, and by creating magical experiences for our customers, we have been able to build lasting relationships with millions of dogs and their parents. Our customer service–Happy Team–proactively engages over 250,000 customers each month.
By viewing each dog as an individual, and by creating magical experiences for our customers, we have been able to build lasting relationships with millions of dogs and their parents. Our customer service (“Happy Team”) proactively engages around 200,000 customers each month.
These registered or pending trademarks include, among others, “Bark,” “BARKBox,” “BARK Bright,” “BARK Food,” “BARK Essentials,” “BARK Super Chewer,” “Super Chewer,” “BARKPOST,” “Destroyers,” “Destroyers Club,” and “Dog People Get It.” The current registrations of these trademarks are effective for varying periods of time and may be renewed periodically, provided that we, as the 8 Table of Contents registered owner, or our licensees where applicable, comply with all applicable renewal requirements including, where necessary, the continued use of the trademarks in connection with similar goods.
These registered or pending trademarks, standardized and stylized, include, among others, “BARK,” “BARKBOX,” “BARK BRIGHT,” “BARKEATS,” “BARK SUPER CHEWER,” “SUPER CHEWER,” and “BARKPOST.” The current registrations of these trademarks are effective for varying periods of time and may be renewed periodically, provided that we, as the registered owner, or our licensees where applicable, comply with all applicable renewal requirements including, where necessary, the continued use of the trademarks in connection with similar goods.
We use the valuable data from these customer interactions to inform the design and development of future products, and we leverage it along with machine learning technology to recommend additional products to our customers through cross-selling and Add-to-Box (“ATB”). This data helps drive Average Order Value (“AOV”) and improves customer retention.
We use the valuable data from these customer interactions to inform the design and development of future products, and we leverage it along with machine learning technology to recommend additional products to our customers through cross-selling and Add-to-Box (“ATB”).
We are able to tailor our products to each customer by collecting proprietary product and customer data with each interaction. We also leverage our machine learning technology and first-party data set to compare dogs’ attributes against our available inventory when recommending products for purchase via cross-selling or ATB. In addition, we believe that personalization requires more than curation.
We also leverage our machine learning technology and first-party data set to compare dogs’ attributes against our available inventory when recommending products for purchase via cross-selling or ATB. In addition, we believe that personalization requires more than curation.
Our employee population includes approximately 227 Bark Happy Ambassadors and their leadership, 96 engineers, data scientists, and technology staff, 93 designers and creative team members, 102 operations and fulfillment center employees, and 125 marketing, general, and administrative employees.
Our employee population includes approximately 488 BARK Happy Ambassadors and their leadership, 95 engineers, data scientists, and technology staff, 66 designers and creative team members, 101 operations and fulfillment center employees, and 149 marketing, general, and administrative employees.
Some of these vendors operate their own manufacturing facilities and others subcontract the manufacturing to other parties. BARK’s manufacturers generally agree to terms that are substantially similar to its standard manufacturer terms, which govern its business relationships.
Some of these suppliers operate their own manufacturing facilities and others subcontract the manufacturing to other parties. BARK’s manufacturers generally agree to terms that are substantially similar to its standard manufacturer terms, which govern its business relationships. BARK has long-standing relationships with a diverse base of vendors that BARK believes to be mutually satisfactory.
Since our founding in 2011, we have happily served over six million dogs and their people. We are a vertically integrated, omnichannel brand serving dogs across four key categories: play, food, health, and home. All of our products are designed, developed, and branded BARK.
Since our founding in 2011, we have happily served millions of dogs and their people. We are a vertically integrated, omnichannel brand serving dogs across two key categories: toys & accessories and consumables. All of our products are designed, developed, and branded BARK.
We believe that BARK differentiates itself from our competitors by the strength of our brand, customer relationships and engagement, proprietary branded products, data-driven design and marketing, and achieving a high level of performance with regard to these competitive factors. Dog food, in particular, is a highly competitive industry.
We believe that BARK differentiates itself from our competitors by the strength of our brand, customer relationships and engagement, proprietary branded products, data-driven design and marketing, and achieving a high level of performance with regard to these competitive factors. Government Regulation Our business is subject to foreign and domestic laws and regulations applicable to companies conducting business on the Internet.
BARK seeks to be there every step of the way serving dogs’ needs in Play, Food, Health, and Home. Our ambition is to grow BARK to be the world’s favorite dog brand.
BARK seeks to be there every step of the way serving dogs with the best products and services. Our ambition is to grow BARK to be the world’s favorite dog brand.
This segment represented 11.7% of our total revenue in fiscal 2022. Our Key Products: Barkbox and Super Chewer (Play Category) —These subscription products feature monthly themed boxes of premium-quality BARK toys and treats that are delivered directly to a dog’s home.
Our Key Products: Toys & Accessories (“toys”)— The majority of our revenue in the toys category is derived from BarkBox and Super Chewer, which are subscription products that feature monthly themed boxes of premium-quality BARK toys and treats that are delivered directly to a dog’s home.
These achievements helped drive a 34% year-over-year increase in fiscal 2022 revenue to $507 million. Our Industry Large, growing, and resilient market for pet products: According to the American Pet Products Association (“APPA”), annual spend on pets in the U.S. was $123.6 billion in 2021, an increase of $20 billion, or over 19%, compared to 2020.
Our Industry Large, growing, and resilient market for pet products: According to the American Pet Products Association (“APPA”), annual spend on pets in the U.S. was approximately $137 billion in 2022, an increase of over $13 billion, or nearly 11%, compared to 2021.
Our commerce business, which reflects the sale of BARK products in retail stores and other e-tailers, significantly broadens our customer reach and raises awareness for the BARK brand. The Company has executed agreements that will bring BARK products to over 40,000 retail doors, including Target, Costco, Walmart, Petco, and Petsmart.
Our commerce business, which reflects the sale of BARK products in retail stores and other e-tailers, significantly broadens our customer reach and raises awareness for the BARK brand. Today, BARK products are sold in over 40,000 retail doors, including Target, Walmart, Kroger, Petco, and PetSmart. This segment represented 11.8% of our total revenue in fiscal 2023.
An accelerating shift to digital and e-commerce: E-commerce sales continue to grow faster than the overall retail sales market and are increasingly taking significant share from brick-and-mortar retail. Sales of dog-related products have mirrored this trend as dog owners, increasingly shift a greater share of their dog-related purchasing to online options and subscription-based offerings across all categories.
Sales of dog-related products have mirrored this trend as dog owners increasingly shift a greater share of their dog-related purchasing to online options and subscription-based offerings across all categories. According to the market research firm Packaged Facts, an estimated 36% of all pet product sales occurred online in 2022.
We leverage an ever-growing collection of proprietary data, customer insights, and machine learning to deliver personalized products and experiences tailored to the needs of each and every dog we serve. Our products are primarily sold direct-to-consumer (“DTC”), and on a subscription basis, which we believe provides us with strong visibility into future revenue.
We leverage an ever-growing collection of first-party data, customer insights, and machine learning to deliver personalized products and experiences tailored to the needs of each and every dog we serve. Our products are sold direct-to-consumer (“DTC”) and through our network of retail partners, which currently spans over 40,000 doors across the U.S.
We believe that this data and our strong customer relationships afford us a unique opportunity to win market share in categories like food and health.
We believe that our growing first-party dataset, strong brand, and loyal customer base afford us a meaningful advantage and opportunity to win market share in these newer categories.
Our People and Culture The Team As dog people, BARK employees join the company because they are aligned with our mission to make all dogs happy. The work we are doing is inherently joyful, optimistic, and humorous because our primary customers, dogs, possess all of those characteristics.
The work we are doing is inherently joyful, optimistic, and humorous because our primary customers, dogs, possess those same characteristics. To that end, our company culture is centered around service, creativity, and a high level of ambition to serve all dogs and their humans.
Our Strengths Ever-Growing Data Drives Personalization at Scale: We know the names, age, breed, birthdays, play style, allergies, and more for over 6 million dogs. We believe that this is a key competitive advantage as it enables us to deliver highly personalized products and experiences for each and every dog that we serve.
We believe that this is a key competitive advantage as it enables us to deliver highly personalized products and experiences for each and every dog that we serve. We are able to tailor our products to each customer by collecting proprietary product and customer data with each interaction.
BARK Bright eliminates the arduous task of brushing a dog’s teeth while still effectively fighting germs and bad breath.
Dental—Also known as BARK Bright, this category includes a variety of chews and toothpastes aimed at improving your dog’s dental health. BARK Bright eliminates the arduous task of brushing a dog’s teeth while still effectively fighting germs and bad breath. Our BARK Bright dental kit provides an innovative regimen for dog dental care.
We believe our DTC approach, coupled with our valuable data and strong customer relationships will enable us to win a share in these categories. Unified Customer Experience Expected to Enhance Cross-Selling and Awareness: Historically, BARK operated five siloed businesses and customer experiences – BarkBox, SuperChewer, BarkBright, BarkFood, and BarkShop. Each of these businesses had distinct websites, dashboards, and logins.
These product lines are relatively small for BARK today, however, with millions of customers, strong brand awareness, and a healthy balance sheet, we see significant opportunity to grow these products, long-term. Unified Customer Experience Expected to Enhance Cross-Selling and Awareness: Historically, BARK operated five siloed businesses and customer experiences – BarkBox, SuperChewer, BarkBright, BarkFood, and BarkShop.
Our Segments and Products We operate two business segments across the play, food, health, and home categories: direct to consumer and commerce. Our direct-to-consumer business, which is primarily comprised of subscription-based products delivered on a monthly basis, drives the majority of our revenues and represented 88.3% of total revenue in fiscal 2022.
By 2026, Packaged Facts estimates roughly 45% of all U.S. pet sales will occur online. Our Segments and Products 4 Table of Contents We operate two business segments: direct to consumer and commerce. Our DTC business drives the majority of our revenues and represented 88.2% of total revenue in fiscal 2023.
We are focused on several key areas that we believe will be significant drivers to our business, long-term. 6 Table of Contents New Product Categories Expected to Grow Customer Base and Lifetime Value: We believe the food and health categories afford us a significant opportunity to expand our customer base, increase AOV, and improve customer retention, long-term.
We are focused on several key areas that we believe will be significant drivers to our business, long-term. 6 Table of Contents Growth across our consumables products: While we are one of the largest treat companies in the U.S. by revenue today, we have only just begun to tap into the broader consumables opportunity.
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We also sell many of our products through our network of retail partners. The Company signed 23 new retail partners in FY 2022 which will increase BARK’s presence to over 40,000 doors in fiscal year 2023.
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ITEM 1. BUSINESS Unless otherwise expressly stated or the context otherwise requires, when we refer to “we,” “our,” “us,” or “BARK” in this annual report on Form 10-K, we mean BARK, Inc. and its consolidated subsidiaries.
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In 2017 we launched Super Chewer, our second product in the play category, which expanded our addressable market and enabled us to scale our customer base more quickly. We believe that we have created a category-defining brand that has captured a healthy share of the roughly $3 billion dog toy market.
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More recently, we have entered exciting, and much larger categories in the consumables space, which include kibble, treats, toppers, supplements, and dental products. This expansion has significantly increased our total addressable market and the number of customers we can serve.
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On March 31, 2022, we served approximately 2.3 million active subscriptions, over 9 million social media followers, and more than ten million email contacts, which affords us meaningful insights and reach with a significant portion of the U.S. dog population.
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We believe we have an opportunity to significantly expand our customer base, both in the U.S. and globally. An accelerating shift to digital and e-commerce: E-commerce sales continue to grow faster than the overall retail sales market and are increasingly taking significant share from brick-and-mortar retail.
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Over the past 24 months, we have entered exciting new categories like food and health that have expanded our total addressable market to over $40 billion. We are approaching food and health with the same playbook that made BarkBox and SuperChewer so successful. By viewing each dog as an individual, and by personalizing their experience.
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We see a significant opportunity to grow our presence in retail. Today, virtually all of our commerce revenue consists of selling our toys in retail. The Company is currently in the process of pitching its retail partners on new treat designs, which could meaningfully increase its revenue in this segment, long-term.
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Historically, personalization at scale has not been feasible in areas like food, because there simply isn’t enough retail shelf space, plus they lack the information on millions of dogs that’s necessary to serve them as individuals.
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Customers have the option to subscribe to these products on a one month, six month, or twelve month basis. During the life of their subscription, we offer our customers incremental products via ATB, which allows us to cross-sell customers our full portfolio of products including kibble, treats, toppers, dental, and more.
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We believe that our detailed information on over six million dogs and our proven ability to customize products at scale gives us a big advantage and opportunity to win in this category. Over the past year, we have grown our customer base, enhanced our cross-selling capabilities, and launched new and innovative products that significantly expanded our total addressable market.
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Over the years, we have become increasingly more effective at cross-selling to customers. For example, in fiscal 2023, cross-selling revenue was $41 million, up 35% compared to the prior year. We also sell toys through our network of retail partners. Today, the commerce segment accounts for roughly 11.8% of total revenue.
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This reflects an increase of roughly 6 million, compared to 2020. Out of those 69 million U.S. dog households, we are serving approximately 2.3 million dog households as of March 31, 2022. We believe we have an opportunity to significantly expand our customer base, both in the U.S. and globally.
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This distribution channel allows us to reach new customers and introduce them to the BARK brand. Our toys category also includes revenue derived from the sale of other products such as beds, leashes, apparel, and other miscellaneous products. This category generated approximately $307.0 million of revenue in fiscal 2023, up 4.3% compared to fiscal 2022.
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The pet food category has been a major driver of this channel shift. According to Packaged Facts, an estimated 37% of all pet food sales occurred online in 2021, as compared to 32% in 2020. By 2025, Packaged Facts estimate roughly 55% of all U.S. pet sales will occur online.
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The allocation between Toys & Accessories and Consumables includes estimates and was determined utilizing data on stand-alone selling prices that the Company charges for similar offerings, and also reflects historical pricing practices. Consumables— The majority of our consumables revenue today is derived from the treats and chews that are included in our BarkBox and Super Chewer boxes.
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Subscribers have the option to increase the number of toys and treats or add incremental products each month through our monthly Add-to-Box (“ATB”) offering. We also offer the toys and treats included in subscription boxes as individual SKUs through our website BarkShop.com (“BarkShop”) as well as through BARK’s retail partners.
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Over the past two years, the Company has expanded into new and larger consumables markets such as kibble, toppers, supplements and dental products. To sell these products, the Company recently launched a new consumables website, food.BARK.co, which contains the majority of our consumables portfolio, all of which can be purchased on a recurring, auto-ship, or one-off basis.
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As of March 31, 2022, BARK serves 2.3 million Active Subscribers, representing hundreds of thousands of customer-tailored boxes each month. BARK Food (Food Category)—BARK Food is our personalized monthly meal plan serving the $35 billion-plus dog food segment.
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Treats — Includes treats and chews included in our BarkBox and Super Chewer boxes, as well as the sale of treats on our consumables website. Many of our treats feature monthly themes, similar to our toys. Today, BARK is one of the largest treat brands in the U.S. by revenue, even without any current sales of treats in retail.
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By leveraging our strong customer relationships, growing data set, and in-house vet nutritionists, BARK is able to create personalized meal plans through a blend of base kibbles, toppers, and supplements.
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The Company is currently in discussions with its retail partners to begin selling treats through its retail network. Toppers —Includes meal-enhancing sprinkles, broths, and bites that are added to a dog’s food to enhance the flavor of their food. These toppers are often single ingredient proteins that can be easily added to a dog’s existing meal plan.
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Our in-house vet nutritionists help curate meal plans based on breed, age, weight, and other dietary needs to ensure we serve each dog as an individual; the same approach that made BarkBox and Super Chewer a success. We believe that innovation in the dog food market has been scarce and is ripe for disruption.
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Toppers are particularly beneficial for picky eaters. Supplements —Includes a variety of dog supplements such as hip and joint support, and skin and coat support. These products are often targeted at specific breeds that are prone to certain ailments. Kibble —We sell a variety of kibble, priced to compete with the mass premium category.
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Historically, personalization at scale has not been feasible; there is not enough retail shelf space to serve each dog as an individual. We believe we are the first digitally-native, direct-to-consumer brand that offers a personalized, adjustable, and customizable monthly dog food service at a mass-market price point.
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While our kibble can be purchased on an individual basis, we entered this market with a breed-based approach that recommends meal plans consisting of a mix of kibble, toppers, and supplements based on the characteristics and personalities of various dog breeds.
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Further, we believe that the value proposition of BARK Food will appeal broadly to dog parents. BARK Bright (Health Category)—BARK Bright is the first product in our health category. BARK Bright is a unique dental product that combines a proprietary triple-enzymatic gel, developed in partnership with Novozymes Bio Ag, with a delicious treat-like dental stick.
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For example, because German Shepherds are prone to hip issues, we recommend hip and joint 5 Table of Contents support supplements with the purchase of their kibble. If that dog is also a picky eater, we will recommend adding one of our toppers. This increases our Average Order Value and margin profile.
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Our BARK Bright dental kit provides an innovative regimen for dog dental care, and is available through monthly subscriptions, ATB, individually on Barkshop, and through certain retail partnerships. 5 Table of Contents BARK Home (Home Category)—BARK Home offers dog parents a variety of products for daily life, including dog beds, bowls, collars, harnesses, and leashes.
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Overall, we see significant runway in our consumables category long-term, and anticipate the majority of our future growth may be driven by these product categories. Our Strengths Ever-Growing Data Drives Personalization at Scale: We know the names, age, breed, birthdays, play style, allergies, and more for over 6 million dogs.
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We sell BARK Home products through our website BarkShop.com and through certain retail partners. We also sell a combination of our toys and treats, BARK Bright, and BARK Home products through our network of retail partners. We also collaborate with, and make products for other brands such as Disney, Warner Bros, Universal Studios, the NBA, and more.
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With the introduction of innovative new products across kibble, toppers, supplements, and dental products, we have significantly increased our addressable market and the number of customers we can serve. In the near-term, one of our biggest opportunities is to begin selling treats across our approximately 40,000 retail doors.
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We are approaching food and health with a similar playbook that made BarkBox and Super Chewer so successful—by treating each dog as an individual and creating personalized experiences for each of them. With roughly 6 million current and former customers, we know the names, ages, breeds, play-style, allergies, and more for more than 6 million dogs.
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We are currently in the process of pitching retail partners on a new treat design, and we we believe we will ability to introduce treats in some of our retail network by the end of fiscal 2024 and continue expanding this in fiscal 2025. We are also seeing healthy growth in our newer categories like kibble and dental.
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We believe that innovation and personalization in these categories have historically been scarce, as there isn’t enough retail shelf space to serve each dog individually, and, most dog food companies don’t get to know your dog at checkout.
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Each of these businesses had distinct websites, dashboards, and logins. We are currently in the process of unifying our brand under the bark.co domain so all of our products are sold under one roof. This will improve the customer experience, raise awareness of our full suite of products, and enhance our cross-selling capabilities.
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Becoming BARK is focused on unifying our brand and the customer experience. This initiative will ensure that all of our current and prospective customers are made aware of our full suite of products. We also expect it to materially improve our cross-selling capabilities and ultimately enhance the overall experience that customers have with BARK.
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We have made notable progress on this initiative by bringing our consumables under the food.bark.co domain, and we will continue to introduce additional products to the bark.co domain. Our People and Culture The Team As dog people, BARK employees join the company because they are aligned with our mission to make all dogs happy.
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We also anticipate it will grow our average order value at an even faster pace. For example, BarkBox.com sees over 2 million unique visitors every month and, in the past, we offered them only toys & treats for their dogs. This is a huge opportunity.
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At the end of fiscal 2023, BARK employed approximately 900 full-time and part-time employees, with 511 employees based in the U.S. and 384 employees based in the Philippines.
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By simply offering dental, food, and other products to these visitors, along with an incentive to try something new, we leverage the brand equity and exposure of BarkBox in a meaningful way. This is one simple way of cross-selling our products in these new product lines to accelerate our growth in these new categories.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeNatural disasters, power outages, connectivity issues, or other events that impact our employees’ ability to work remotely, could disrupt business for a substantial period of time. The increase in remote working may also result in consumer privacy, IT security and fraud concerns as well as increase our exposure to potential wage and hour issues.
Biggest changeMany of our personnel continue to work remotely, which could have a negative impact on the execution of our business plans and operations. Natural disasters, power outages, connectivity issues, or other events that impact our employees’ ability to work remotely, could disrupt business for a substantial period of time.
If we fail meet the challenges or navigate the uncertainties described above, as well as those described elsewhere in this “Risk Factors” section, our business, financial condition and results of operations will be materially adversely affected. We may fail to acquire new customers in a cost-effective manner.
If we fail to meet the challenges or navigate the uncertainties described above, as well as those described elsewhere in this “Risk Factors” section, our business, financial condition and results of operations will be materially adversely affected. We may fail to acquire new customers in a cost-effective manner.
If we fail to effectively meet the challenges described above our business and future operating results will be materially adversely affected. Risks Related to the COVID-19 Pandemic and the Macro-Economic Environment We rely on consumer discretionary spending, which may be adversely affected by economic downturns and other macroeconomic conditions or trends. Our business depends on consumer discretionary spending.
If we fail to effectively meet the challenges described above our business and future operating results will be materially adversely affected. Risks Related to the Macro-Economic Environment and the COVID-19 Pandemic We rely on consumer discretionary spending, which may be adversely affected by economic downturns and other macroeconomic conditions or trends. Our business depends on consumer discretionary spending.
It could take a significant amount of time to identify a manufacturer or supplier that has the capability and resources to manufacture our products to our specifications in sufficient volume, and with acceptable quality control, technical capabilities, responsiveness and service, financial stability, regulatory compliance, and labor and other ethical practices; • Our current product purchases are centralized among a few manufacturers and suppliers to realize substantial cost savings, which exposes us to credit and other risks, including insolvency, financial difficulties, supply chain delays or other factors may result in our manufacturers or suppliers not being able to fulfill the terms of their agreements with us; and • We have signed a number of contracts whose performance depends upon third party suppliers delivering products on schedule to meet our contractual commitments.
It could take a significant amount of time to identify a manufacturer or supplier that has the capability and resources to manufacture our products to our specifications in sufficient volume, and with acceptable quality control, technical capabilities, responsiveness and service, financial stability, regulatory compliance, and labor and other ethical practices; • our current product purchases are centralized among a few manufacturers and suppliers to realize substantial cost savings, which exposes us to credit and other risks, including insolvency, financial difficulties, supply chain delays or other factors which may result in our manufacturers or suppliers not being able to fulfill the terms of their agreements with us; and • we have signed a number of contracts whose performance depends upon third party suppliers delivering products on schedule to meet our contractual commitments.
Any harm to our reputation or brand, being subject of regulatory action and incurring related fees, distraction of our management and loss of customers or suppliers could have a material adverse effect on our business, financial condition and results of operations. We are subject to product safety, labor, or other laws.
Any harm to our reputation or brand, being subject to regulatory action and incurring related fees, distraction of our management and loss of customers or suppliers could have a material adverse effect on our business, financial condition and results of operations. We are subject to product safety, labor, or other laws.
These provisions include: a classified board; removal of directors only for cause or a super majority vote; super majority vote required to amend of certain provisions of our certificate of incorporation and any provisions of our bylaws; issuance of “blank check” preferred stock authorized; stockholders may not call special stockholder meetings; stockholder action by written consent prohibited; indemnification of our director and officers; Board is expressly authorized to make, alter, or repeal our bylaws; and advance notice requirements for nominations for election to our Board or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.
These provisions include: a classified board; removal of directors only for cause or a super majority vote; super majority vote required to amend of certain provisions of our certificate of incorporation and any provisions of our bylaws; issuance of “blank check” preferred stock authorized; stockholders may not call special stockholder meetings; stockholder action by written consent prohibited; indemnification of our director and officers; Board of Directors is expressly authorized to make, alter, or repeal our bylaws; and advance notice requirements for nominations for election to our Board of Directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.
Acquisitions, investments and other strategic alliances involve numerous risks, including: problems integrating the acquired business, facilities, technologies, subscribers, customers, partners or products, issues maintaining uniform standards, procedures, controls and policies; unanticipated costs; diversion of management’s attention from our existing business; adverse effects on existing business relationships with suppliers, manufacturing partners, and retail partners; challenges with entering new markets in which we may have limited or no experience; potential loss of key employees of acquired businesses; and increased legal, accounting and compliance costs.
Acquisitions, investments and other strategic alliances involve numerous risks, including: problems integrating the acquired business, facilities, technologies, customers, partners or products, issues maintaining uniform standards, procedures, controls and policies; unanticipated costs; diversion of management’s attention from our existing business; adverse effects on existing business relationships with suppliers, manufacturing partners, and retail partners; challenges with entering new markets in which we may have limited or no experience; potential loss of key employees of acquired businesses; and increased legal, accounting and compliance costs.
Any failure, or perceived failure, to comply with our posted privacy policies or with any federal or state privacy or consumer protection-related laws, regulations, industry self-regulatory principles, industry standards or codes of conduct, regulatory guidance, orders to which we may be subject or other legal obligations relating to privacy or consumer protection could adversely affect our reputation, brand and business, and may result in claims, liabilities, proceedings or actions against us by governmental entities, subscribers, customers, suppliers or others, or may require us to change our operations and/or cease using certain data.
Any failure, or perceived failure, to comply with our posted privacy policies or with any federal or state privacy or consumer protection-related laws, regulations, industry self-regulatory principles, industry standards or codes of conduct, regulatory guidance, orders to which we may be subject or other legal obligations relating to privacy or consumer protection could adversely affect our reputation, brand and business, and may result in claims, liabilities, proceedings or actions against us by governmental entities,customers, suppliers or others, or may require us to change our operations and/or cease using certain data.
Our revolving credit facility and the indenture governing our 2025 Convertible Notes (the “Notes”) both limit our ability to, among other things: incur or guarantee additional debt; make certain investments and acquisitions; incur certain liens or permit them to exist; enter into certain types of transactions with affiliates; merge or consolidate with another company; and transfer, sell or otherwise dispose of assets, including our cash.
Our revolving credit facility and the indenture governing our 2025 Convertible Notes both limit our ability to, among other things: incur or guarantee additional debt; make certain investments and acquisitions; incur certain liens or permit them to exist; enter into certain types of transactions with affiliates; merge or consolidate with another company; and transfer, sell or otherwise dispose of assets, including our cash.
To be successful, we must accurately predict and respond to evolving consumer trends, demands and preferences, including predicting monthly themes for our BarkBox and Super Chewer subscriptions that will resonate with subscribers and customers as timely and clever. The development and introduction of new products and expansion into new offerings also involves considerable costs.
To be successful, we must accurately predict and respond to evolving consumer trends, demands and preferences, including predicting monthly themes for our BarkBox and Super Chewer subscriptions that will resonate with customers as timely and clever. The development and introduction of new products and expansion into new offerings also involves considerable costs.
If our assumptions change or if actual circumstances differ from those in our assumptions, our operating results to fall below the expectations of industry or financial analysts and investors, resulting in a decline in the trading price of our common stock. We may be unable to accurately forecast our revenue and appropriately plan for our expenses in the future.
If our assumptions change or if actual circumstances differ from those in our assumptions, our operating results could fall below the expectations of industry or financial analysts and investors, resulting in a decline in the trading price of our common stock. We may be unable to accurately forecast our revenue and appropriately plan for our expenses in the future.
Any such claims, proceedings or actions could further harm our reputation and brand, force us to incur significant expenses in defense of such proceedings or actions, distract our management, increase our costs of doing business, result in a loss of subscribers, customers and suppliers and result in the imposition of monetary penalties.
Any such claims, proceedings or actions could further harm our reputation and brand, force us to incur significant expenses in defense of such proceedings or actions, distract our management, increase our costs of doing business, result in a loss of customers and suppliers and result in the imposition of monetary penalties.
We are also subject to risks of damage or loss during delivery by our shipping vendors. If the products ordered by our subscribers or customers are not delivered in a timely fashion or are damaged or lost during the delivery process, our subscribers or customers could become dissatisfied and cease buying products.
We are also subject to risks of damage or loss during delivery by our shipping vendors. If the products ordered by our customers are not delivered in a timely fashion or are damaged or lost during the delivery process, our customers could become dissatisfied and cease buying our products.
We periodically update our operations and financial systems, procedures and controls; however; our current procedures that may not scale proportionately with our business growth or with becoming a public company. Our systems will continue to require automation, modifications and improvements to respond to current and future changes in our business.
We periodically update our operations and financial systems, procedures and controls; however, our current procedures may not scale proportionately with our business growth or with becoming a public company. Our systems will continue to require automation, modifications and improvements to respond to current and future changes in our business.
Our omnichannel operations, such as offering our products through our website, on third party websites and in traditional brick and mortar stores, create additional complexities in our ability to manage inventory levels, as well as certain operational issues, including timely shipping and refunds.
Our omnichannel operations, such as offering our products through our websites, on third party websites and in traditional brick and mortar stores, create additional complexities in our ability to manage inventory levels, as well as certain operational issues, including timely shipping and refunds.
The liquidity of any trading market and the trading price of the 2025 Convertible Notes may be adversely affected by changes in our financial performance or prospects and by changes in the financial performance of or prospects for companies in our industry generally. ITEM 1B. UNRESOLVED COMMENTS None.
The liquidity of any trading market and the trading price of the 2025 Convertible Notes may be adversely affected by changes in our financial performance or prospects and by changes in the financial performance of or prospects for companies in our industry generally. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
Some of the factors that may negatively influence consumer spending include high levels of unemployment; higher consumer debt levels; reductions in net worth, declines in asset values, and related market uncertainty; home foreclosures and reductions in home values; fluctuating interest rates and credit availability; global pandemics, including the COVID-19 pandemic and the loosening of restrictions as the pandemic conditions improve; fluctuating fuel and other energy costs; fluctuating commodity prices; the high rate of inflation and general uncertainty regarding the overall future political and economic environment.
Some of the factors that may negatively influence consumer spending include high levels of unemployment; higher consumer debt levels; reductions in net worth, declines in asset values, and related market uncertainty; home foreclosures and reductions in home values; fluctuating interest rates and credit availability; bank failures; global pandemics, including the COVID-19 pandemic and the loosening of restrictions as the pandemic conditions improve; fluctuating fuel and other energy costs; fluctuating commodity prices; and the high rate of inflation and general uncertainty regarding the overall future political and economic environment.
The occurrence of a natural disaster, power loss, telecommunications failure, data loss, computer virus, an act of terrorism, cyberattack, vandalism or sabotage, act of war or any similar event, or a decision to close the third-party data centers on which we normally operate or the facilities of any other third-party provider without adequate notice or other unanticipated problems at these facilities could result in lengthy interruptions in the availability of our website and mobile application.
The occurrence of a natural disaster, power loss, telecommunications failure, data loss, computer virus, an act of terrorism, cyberattack, vandalism or sabotage, act of war or any similar event, or a decision to close the third-party data centers on which we normally operate or the facilities of any other third-party provider without adequate notice or other unanticipated problems at these facilities could result in lengthy interruptions in the availability of our websites and mobile application.
The market price of our common stock may fluctuate significantly or decline in response to numerous factors, many of which are beyond our control, including: actual or anticipated fluctuations in our revenue and results of operations; 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 maintain coverage of BARK, changes in financial estimates or ratings by any securities analysts who follow BARK or our failure to meet the estimates or the expectations of investors; announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures, or capital commitments; changes in operating performance and stock market valuations of other retail or technology companies generally, or those in our industry in particular; price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole; trading volume of our common stock; the inclusion, exclusion or removal of our common stock from any indices; changes in members of our Board or management; transactions in our common stock by directors, officers, affiliates and other major investors; lawsuits threatened or filed against us; changes in laws or regulations applicable to our business; 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 conditions in the U.S. or global markets; other events or factors, including those resulting from the COVID-19 pandemic war, such as in the Ukraine, incidents of terrorism or responses to these events; and the other factors described in this “Risk Factors” section.
The market price of our common stock may fluctuate significantly or decline in response to numerous factors, many of which are beyond our control, including: actual or anticipated fluctuations in our revenue and results of operations; 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 maintain coverage of BARK, changes in financial estimates or ratings by any securities analysts who follow BARK or our failure to meet the estimates or the expectations of investors; announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures, or capital commitments; changes in operating performance and stock market valuations of other retail or technology companies generally, or those in our industry in particular; price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole; trading volume of our common stock; the inclusion, exclusion or removal of our common stock from any indices; changes in members of our Board of Directors or management; transactions in our common stock by directors, officers, affiliates and other major investors; lawsuits threatened or filed against us; changes in laws or regulations applicable to our business; 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 conditions in the U.S. or global markets; other events or factors, such as the COVID-19 pandemic, the war in the Ukraine, increased inflation, bank failures, incidents of terrorism or responses to these events; and the other events or factors described in this “Risk Factors” section.
Ownership of our stock is concentrated among our current officers, directors and their respective affiliates. Our existing executive officers, directors and their respective affiliates, together as a group, beneficially own a significant amount of the outstanding of our common stock.
Ownership of our stock is concentrated among our current officers, directors and their respective affiliates. Our existing executive officers, directors and their respective affiliates, together as a group, beneficially own a significant amount of the outstanding shares of our common stock.
Current and future competitors may also make strategic acquisitions or establish cooperative relationships among themselves or with others. If we fail to compete effectively, or are required to offer promotions and other incentives or adopt more aggressive pricing strategies, our operating margins could decrease, which could materially adversely affect our business, financial condition and operating results.
Current and future competitors may also make strategic acquisitions or establish cooperative relationships among themselves or with others. If we fail to compete effectively, or are required to offer promotions and other incentives or adopt more aggressive pricing strategies, our operating margins could decrease, which could materially adversely affect our business, financial condition and results of operations.
We have limited control over our suppliers, contract manufacturers, and logistics partners, which subjects us to the following risks, many of which have materialized due to the COVID-19 pandemic, including: failure to satisfy demand for our products; reduced control over delivery timing, product reliability, the manufacturing process and components used in our products; limited ability to develop comprehensive manufacturing specifications that take into account any materials shortages or substitutions; variance in the manufacturing capability of our third-party manufacturers; price increases; failure of a significant supplier, manufacturer, or logistics partner to perform its obligations for technical, market, or other reasons; misappropriation of our intellectual property; changes in local economic conditions in the jurisdictions where our suppliers, manufacturers, and logistics partners are located; the imposition of new laws and regulations, including those relating to labor conditions, quality and safety standards, imports, duties, tariffs, taxes, and other charges on imports, as well as trade restrictions and restrictions on currency exchange or the transfer of funds; and insufficient warranties and indemnities on components supplied to our manufacturers or performance by our partners.
We have limited control over our suppliers, contract manufacturers, and logistics partners, which subjects us to the following risks, many of which have materialized during the COVID-19 pandemic, including: failure to satisfy demand for our products; reduced control over delivery timing, product reliability, the manufacturing process and components used in our products; limited ability to develop comprehensive manufacturing specifications that take into account any materials shortages or substitutions; variance in the manufacturing capability of our third-party 13 Table of Contents manufacturers; price increases; failure of a significant supplier, manufacturer, or logistics partner to perform its obligations for technical, market, or other reasons; misappropriation of our intellectual property; changes in local economic conditions in the jurisdictions where our suppliers, manufacturers, and logistics partners are located; the imposition of new laws and regulations, including those relating to labor conditions, quality and safety standards, imports, duties, tariffs, taxes, and other charges on imports, as well as trade restrictions and restrictions on currency exchange or the transfer of funds; and insufficient warranties and indemnities on components supplied to our manufacturers or performance by our partners.
Our competitive strengths include: our proprietary product and customer data; strong customer relationships; vertically integrated design, development and manufacturing of our products; and omnichannel approach including both direct to consumer and retail sales. Our strategy is to expand into new product categories, in particular the food category; create a unified customer experience; and focus on the path to profitability.
Our competitive strengths include: our proprietary product and customer data; strong customer relationships; vertically integrated design, development and manufacturing of our products; and omnichannel approach including both direct to consumer and retail sales. Our strategy is to expand into new product categories, in particular the consumables category; create a unified customer experience; and focus on the path to profitability.
For example, the State of California enacted the California Consumer Privacy Act of 2018 (the “CCPA”), which requires companies that process information on California residents make new disclosures to customers about the collection of their data, use and sharing practices, and allow customers to opt out of certain data sharing with third parties and provide a new cause of action for data breaches.
For example, the State of California enacted the California Consumer Privacy Act of 2018 (the “CCPA”), which requires companies that process information on California residents make new disclosures to customers about the collection of their data, use and sharing practices, and allow customers to opt out of certain data sharing with third parties and provides a new cause of action for data breaches.
Any web or mobile platform interruption or inadequacy that causes performance issues or interruptions in the availability of our website or mobile application could reduce consumer satisfaction and result in a reduction in the number of customers using our products and services, which could have a material adverse effect on our business, financial condition and results of operations.
Any web or mobile platform interruption or inadequacy that causes performance issues or interruptions in the availability of our websites or mobile application could reduce consumer satisfaction and result in a reduction in the number of customers using our products and services, which could have a material adverse effect on our business, financial condition and results of operations.
Any of the above risks could delay delivery of our products to customers in a timely and cost effective manner, which could have a material adverse effect on our business, financial condition and operating results. We face challenges due to limited control over our suppliers, contract manufacturers, and logistics partners.
Any of the above risks could delay delivery of our products to customers in a timely and cost effective manner, which could have a material adverse effect on our business, financial condition and results of operations. We face challenges due to limited control over our suppliers, contract manufacturers, and logistics partners.
Many of these current competitors have, and potential competitors may have, longer operating histories, greater brand recognition, larger fulfillment infrastructures, greater technical capabilities, significantly greater financial, marketing and other resources and larger customer bases than we do, allowing our competitors to derive greater net 15 Table of Contents 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 preferences or habits.
Many of these current competitors have, and potential competitors may have, longer operating histories, greater brand recognition, larger fulfillment infrastructures, greater technical capabilities, significantly greater financial, marketing and other resources and larger customer bases than we do, allowing 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 preferences or habits.
If sustained or repeated, these performance issues could reduce the attractiveness of our products and services. In addition, the costs and complexities involved in expanding and upgrading our systems may prevent us from doing so in a timely manner and may prevent us from adequately meeting the demand placed on our systems.
If sustained or repeated, these performance issues could reduce the attractiveness of our products and services. In addition, the costs and complexities involved in consolidating our websites or expanding and upgrading our systems may prevent us from doing so in a timely manner and may prevent us from adequately meeting the demand placed on our systems.
The security of our partners’ computer networks and databases containing personal information may be compromised. In the ordinary course of our business, we and our vendors collect, process, and store certain personal information and other data relating to individuals, such as our subscribers, customers and employees, including subscriber and customer payment card information.
The security of our and our partners’ computer networks and databases containing personal information may be compromised. In the ordinary course of business, we and our vendors collect, process, and store certain personal information and other data relating to individuals, such as our customers and employees, including customer payment card information.
Our issuance of additional shares of common stock or other equity securities of equal or senior rank would dilute our existing shareholders and may cause the market price of our common stock to decline. 24 Table of Contents Risks Related to the 2025 Convertible Notes Our obligation to redeem the 2025 Convertible Notes may not protect holders.
Our issuance of additional shares of common stock or other 23 Table of Contents equity securities of equal or senior rank would dilute our existing shareholders and may cause the market price of our common stock to decline. Risks Related to the 2025 Convertible Notes Our obligation to redeem the 2025 Convertible Notes may not protect holders.
Our ability to successfully offer our products, grow our business and account for transactions in an appropriate and timely manner requires an effective planning and management process and certain other automated management and accounting systems. We currently do not have an integrated enterprise resource planning system and certain other automated management and accounting systems.
Our ability to successfully offer our products, grow our business and account for transactions in an appropriate and timely manner requires an effective planning and management process and certain other automated management and accounting systems. We currently do not have a fully integrated enterprise resource planning system and certain other automated management and accounting systems.
We expect our operating expenses to increase over the next several years as we increase our advertising, expand into new markets, expand our offerings, hire additional personnel, incur additional expenses related to being a public company and continue to develop features on our website and mobile applications.
We expect our operating expenses to increase over the next several years as we increase our advertising, expand into new markets, expand our offerings, hire additional personnel, incur additional expenses related to being a public company and continue to develop features on our websites and mobile applications.
In addition, if our stock price does not meet the conversion price of the Notes, then we will have to repay the principal of the Notes in cash, which we may not have available. Our revolving credit facility also contains covenants requiring us to satisfy certain financial covenants.
In addition, if our stock price does not meet the conversion price of the 2025 Convertible Notes, then we will have to repay the principal of the 2025 Convertible Notes in cash, which we may not have available. Our revolving credit facility also contains covenants requiring us to satisfy certain financial covenants.
We face a number of risks relating to these providers, including: 13 Table of Contents • Our suppliers, manufacturers or logistics partners could be impacted by a natural disaster, an epidemic such as the ongoing COVID-19 pandemic, or other interruptions at a particular location; • Our manufacturers and suppliers are primarily located in Asia, which introduces risks related to geopolitical developments and differences in regulatory standards and legal systems; • Our existing supply channels may not be able to satisfy a significant increase in demand for our products, or we may need to replace an existing manufacturer or supplier.
We face a number of risks relating to these providers, including: • our suppliers, manufacturers or logistics partners could be impacted by a natural disaster, an epidemic such as the COVID-19 pandemic, or other interruptions at a particular location; • our manufacturers and suppliers are primarily located in Asia, which introduces risks related to geopolitical developments and differences in regulatory standards and legal systems; • our existing supply channels may not be able to satisfy a significant increase in demand for our products, or we may need to replace an existing manufacturer or supplier.
If we do not optimize and operate our fulfillment centers and shipping services successfully and efficiently, it could result in excess or insufficient fulfillment capacity, an increase in costs or impairment charges or harm to our business in other ways.
If we do not optimize and operate our fulfillment centers and shipping services successfully and efficiently, it could result in excess or insufficient fulfillment capacity, an increase in costs and/or inventory shrinkage or impairment charges or harm to our business in other ways.
While we have some limited disaster recovery arrangements in place, our preparations may not be adequate to account for disasters or similar events that may occur in the future and may not effectively permit us to continue operating in the event of any problems with respect to our systems or those of our third-party data centers or any other third-party facilities.
While we have some limited disaster recovery arrangements in place, our preparations may not be adequate to account for disasters or similar events that may occur in the future and may not 16 Table of Contents effectively permit us to continue operating in the event of any problems with respect to our systems or those of our third-party data centers or any other third-party facilities.
We must be able to appropriately, effectively and efficiently allocate our marketing for multiple products, including: accurately identifying, targeting and reaching our audience of current and potential customers with our marketing messages; selecting the right marketplace, media and specific media vehicle in which to advertise; adapting quickly to changes in the algorithmic logic, privacy policies, and other procedures used by search engines, social media platforms and other third party platforms; identifying the most effective and efficient level of spending in each marketplace, media and specific media vehicle; determining the appropriate creative message and media mix for advertising, marketing and promotional expenditures; managing marketing costs, including creative and media expenses, in order to maintain acceptable subscriber and customer acquisition costs; differentiating our products as compared to other products; creating greater brand awareness; driving traffic to our website, and websites of our retail partners and adapting our marketing tactics as e-commerce, search, and social networking evolve.
We must be able to appropriately, effectively and efficiently allocate our marketing spend for multiple products, including: accurately identifying, targeting and reaching our audience of current and potential customers with our marketing messages; selecting the right marketplace, media and specific media vehicle in which to advertise; 10 Table of Contents adapting quickly to changes in the algorithmic logic, privacy policies, and other procedures used by search engines, social media platforms and other third party platforms; identifying the most effective and efficient level of spending in each marketplace, media and specific media vehicle; determining the appropriate creative message and media mix for advertising, marketing and promotional expenditures; managing marketing costs, including creative and media expenses, in order to maintain acceptable customer acquisition costs; differentiating our products as compared to other products; creating greater brand awareness; driving traffic to our websites, and websites of our retail partners and adapting our marketing tactics as e-commerce, search, and social networking evolve.
Also, search engines, social media platforms frequently update and change the logic that determines the placement and display of results of a user’s search, such that the purchased or algorithmic placement of links to our website can be negatively affected.
Also, search engines, social media platforms frequently update and change the logic that determines the placement and display of results of a user’s search, such that the purchased or algorithmic placement of links to our websites can be negatively affected.
In addition, our future success depends on our continuing ability to attract, develop, motivate and retain highly qualified and skilled employees. The market for such positions is competitive, in particular, due to the labor market effects from the COVID-19 pandemic. Qualified individuals are in high demand and we may incur significant costs to attract them.
In addition, our future success depends on our continuing ability to attract, develop, motivate and retain highly qualified and skilled employees. The market for such positions is competitive, in particular, due to the ongoing labor market effects or distortions from the COVID-19 pandemic. Qualified individuals are in high demand and we may incur significant costs to attract and retain them.
If our key performance indicators are not accurate representations of our business, or if investors do not perceive our key performance indicators to be accurate, or if we discover material inaccuracies with respect to these numbers, our 21 Table of Contents reputation may be significantly harmed, which could have a material adverse effect on our business, financial condition and results of operations.
If our key performance indicators are not accurate representations of our business, or if investors do not perceive our key performance indicators to be accurate, or if we discover material inaccuracies with respect to these numbers, our reputation may be significantly harmed, which could have a material adverse effect on our business, financial condition and results of operations.
Compromise of our data security by third parties with whom we do business, failure to prevent or mitigate the loss of personal or business information, and delays in detecting or providing prompt notice of any such compromise or loss may 17 Table of Contents disrupt our operations, damage our reputation, and subject us to litigation, government action, or other additional costs and liabilities that could materially adversely affect our business, financial condition, and operating results.
Compromise of our data security by third parties with whom we do business, failure to prevent or mitigate the loss of personal or business information, and delays in detecting or providing prompt notice of any such compromise or loss may disrupt our operations, damage our reputation, and subject us to litigation, government action, or other additional costs and liabilities that could materially adversely affect our business, financial condition, and results of operations.
Interruptions or delays in these systems, whether due to system failures, computer viruses, physical or electronic break-ins, undetected errors, design faults or other unexpected events or causes, could affect the security or availability of our website and mobile application and prevent our customers from accessing our website and mobile application.
Interruptions or delays in these systems, or in the consolidation of our websites, whether due to system failures, computer viruses, physical or electronic break-ins, undetected errors, design faults or other unexpected events or causes, could affect the security or availability of our websites and mobile application and prevent our customers from accessing our websites and mobile application.
Our operations, including our manufacturing partners, are subject to regulation by the Occupational Safety and Health Administration (“OSHA”), the Food and Drug Administration (the “FDA”), the Department of Agriculture (the “USDA”) and by various other federal, state, local and foreign authorities regarding the processing, packaging, storage, distribution, advertising, labeling and export of our products, including food safety standards.
Our operations, including our manufacturing partners, are subject to regulation by the Occupational Safety and Health Administration, the Food and Drug Administration, the Department of Agriculture and by various other federal, state, local and foreign authorities regarding the processing, packaging, storage, distribution, advertising, labeling and export of our products, including food safety standards.
Environmental Protection Agency, state, local and foreign environmental, health and safety legislative and regulatory authorities and the National Labor Relations Board, covering such areas as discharges and emissions to air and water, the use, management, disposal and remediation of, and human exposure to, hazardous 19 Table of Contents materials and wastes, and public and worker health and safety.
Environmental Protection Agency, state, local and foreign environmental, health and safety legislative and regulatory authorities and the National Labor Relations Board, covering such areas as discharges and emissions to air and water, the use, management, disposal and remediation of, and human exposure to, hazardous materials and wastes, and public and worker health and safety.
If we are unable to anticipate, identify, develop or market products, or create new offerings, that respond to changes in requirements and preferences, or if our new product introductions, repositioned products, or new offerings fail to gain consumer acceptance, we may be unable to grow our business as anticipated, or our revenue, margins and profitability may decline or not improve, which could materially adversely effect on our business, financial condition and results of operations.
If we are unable to anticipate, identify, develop or market products, or create new offerings that respond to changes in customer requirements and preferences, or if our new product introductions, repositioned products, or new offerings fail to gain consumer acceptance, we may be unable to grow our business as anticipated, or our revenue, margins and profitability may decline or not improve, which could materially adversely affect our business, financial condition and results of operations.
Our internal systems and tools have a number of limitations, and our methodologies for tracking these metrics may change over time, which could result in unexpected changes to our key performance indicators, including the metrics or estimates that we publicly disclose.
Our internal 20 Table of Contents systems and tools have a number of limitations, and our methodologies for tracking these metrics may change over time, which could result in unexpected changes to our key performance indicators, including the metrics or estimates that we publicly disclose.
Moreover, a search engine or social media platform could, for competitive or other purposes, alter its search algorithms or results, causing our website to place lower in search query results.
Moreover, a search engine or social media platform could, for competitive or other purposes, alter its search algorithms or results, causing our websites to place lower in search query results.
Our ability to leverage our competitive strengths and execute on our strategy is subject to numerous challenges and uncertainties including, but not limited to the following: • costs or other issues with acquiring new customers and retaining existing customers; • adverse impacts on shipping and fulfillment services and costs; • changes in trends and consumer preferences; • interruptions in our business due to technology failures, cybersecurity breaches or labor shortages; • our ability to retain existing suppliers and attract new suppliers and scale our supply chain; 10 Table of Contents • our ability to develop a unified, scalable, high-performance technology and fulfillment infrastructure; • our ability to hire and retain talented, experienced people at all levels of our organization; • impacts related to the COVID-19 pandemic; and • changes in the macro-economic environment, such as inflation, instability in the financial markets, changes in the labor markets, and political, economic and social instability, such as war in the Ukraine, in particular as such changes impact consumer discretionary spending.
Our ability to leverage our competitive strengths and execute on our strategy is subject to numerous challenges and uncertainties including, but not limited to, the following: • costs or other issues with acquiring new customers and retaining existing customers; • adverse impacts on shipping and fulfillment services and costs; • changes in trends and consumer preferences; • interruptions in our business due to technology failures, cybersecurity breaches or labor shortages; • our ability to retain existing suppliers and attract new suppliers and scale our supply chain; • our ability to develop a unified, scalable, high-performance technology and fulfillment infrastructure; • our ability to hire and retain talented, experienced people at all levels of our organization; • impacts related to the COVID-19 pandemic; and • changes in the macro-economic environment, such as inflation, increasing interest rates, instability in the banking system or financial markets, changes in the labor markets, and political, economic and social instability, such as war in the Ukraine, in particular as such changes impact consumer discretionary spending.
In addition, we may be unable to obtain or utilize on terms that are favorable to us, or at all, licenses or other rights with respect to intellectual property we do not own. These risks have been amplified by the increase in third parties whose sole or primary business is to assert such claims.
In addition, we may be unable to obtain or utilize on terms that are favorable to us, or at all, licenses or other 17 Table of Contents rights with respect to intellectual property we do not own. These risks have been amplified by the increase in third parties whose sole or primary business is to assert such claims.
If we fail to comply with the rules or requirements of any provider of a payment method we accept, if the volume of fraud in our transactions limits or terminates our rights to use payment methods we currently accept, or if a data breach occurs relating to our payment systems, we may, among other things, be subject to fines or higher transaction fees and may lose, or face restrictions placed upon, our ability to accept credit card payments from subscribers or facilitate other types of online payments.
If we fail to comply with the rules or requirements of any provider of a payment method we accept, if the volume of fraud in our transactions limits or terminates our rights to use payment methods we currently accept, or if a data breach occurs relating to our payment systems, we may, among other things, be subject to fines or higher transaction fees and may lose, or face restrictions placed upon, our ability to accept credit card payments 15 Table of Contents from customers or facilitate other types of online payments.
In the dog food category, there are numerous brands and products that compete for shelf space and sales, with competition based primarily upon brand recognition and loyalty, product packaging, quality and innovation, taste, nutrition, breadth of product line, price and convenience.
In the consumables category, there are numerous brands and products that compete for shelf space and sales, with competition based primarily upon brand recognition and loyalty, product packaging, quality and innovation, taste, nutrition, breadth of product line, price and convenience.
Any litigation or other administrative, regulatory, or legal proceedings against us could result in substantial costs, and divert management’s attention and resources. Although we generally maintain insurance to mitigate certain costs, there can be no assurance that costs associated with lawsuits or other legal proceedings will not exceed the limits of insurance policies.
Any litigation or other administrative, regulatory, or legal proceedings against us could result in substantial costs, and divert management’s attention and resources. Although 19 Table of Contents we generally maintain insurance to mitigate certain costs, there can be no assurance that costs associated with lawsuits or other legal proceedings will not exceed the limits of our insurance policies.
We also have the ability to issue equity awards that are convertible into shares of our common stock under our 2021 Equity Incentive Plan and under our Employee Stock Purchase Plan, see footnote 7 — Debt, and footnote 9 — Stock-Based Compensation Plans, to our consolidated financial statements set forth in this annual report on Form 10-K.
We also have the ability to issue equity awards that are convertible into shares of our common stock under our 2021 Equity Incentive Plan and under our Employee Stock Purchase Plan, see Note 7 — Debt, and Note 8 — Stock-Based Compensation Plans, to our consolidated financial statements set forth in this annual report on Form 10-K.
We also anticipate the need to add additional fulfillment center and shipping capacity as our business continues to grow. We may not be able to locate suitable facilities or services on commercially acceptable terms in accordance with our expansion plans, or recruit qualified managerial and operational supply personnel to support our expansion plans.
We also anticipate the need to add additional fulfillment center and shipping capacity as our business continues to grow. We may not be able to locate suitable facilities or services on commercially acceptable terms in 14 Table of Contents accordance with our expansion plans, or recruit qualified managerial and operational supply personnel to support our expansion plans.
These claims, whether meritorious or not, could be time-consuming, result in considerable litigation costs, result in injunctions against us or the payment of damages or royalties by us, require significant amounts of management time or result in the diversion of significant operational resources and expensive changes to our business model.
These claims, whether meritorious or not, could be time-consuming, result in considerable litigation costs, injunctions against us or the payment of damages or royalties by us, require significant amounts of management time or divert significant operational resources or cause expensive changes to our business model.
This regulation of the use of these cookies and other current online tracking and advertising practices or the loss of our ability to make effective use of services that employ such 16 Table of Contents technologies could increase limit our ability to acquire new customers on cost-effective terms, which could materially adversely affect our business, financial condition, and results of operations.
This regulation of the use of cookies and other current online tracking and advertising practices or the loss of our ability to make effective use of services that employ such technologies could limit our ability to acquire new customers on cost-effective terms, which could materially adversely affect our business, financial condition, and results of operations.
We depend on these indirect sales channel partners to distribute and sell our products to dog parents, which subjects us to a number of challenges, including: • The sales and business practices, reputation or failure to comply with laws and regulations, of or by our sales channel partners, of which we may or may not be aware, may affect our business and reputation; • Adverse changes in our relationships with our sales channel partners could impact sales of our products; • Economic conditions, labor issues, natural disasters, regional or global pandemics, evolving consumer preferences, and purchasing patterns of our distribution partners, or competition between our sales channels, could result in sales channel disruption; • Our sales channel partners also sell products offered by our competitors and, in the case of retailer house brands, may also be our competitors; • Certain of our sales channel partners could decide to de-emphasize the product categories that we offer, and certain of our third-party e-commerce partners could change their algorithmic logic, policies or procedures making our products harder for customers to find or remove them from e-commerce sites altogether; and • We must build relationships with new channel partners and adapt to new distribution and marketing models as we expand new product categories and markets, which may require significant management attention 12 Table of Contents and operational resources and may affect our accounting, including revenue recognition, gross margins, and the ability to make comparisons from period to period.
We depend on these indirect sales channel partners to distribute and sell our products to dog parents, which subjects us to a number of challenges, including: • the sales and business practices, reputation or failure to comply with laws and regulations, of or by our sales channel partners, of which we may or may not be aware, may affect our business and reputation; • adverse changes in our relationships with our sales channel partners could impact sales of our products; • economic conditions, labor issues, natural disasters, regional or global pandemics, evolving consumer preferences, and purchasing patterns of our distribution partners, or competition between our sales channels, could result in sales channel disruption; • our sales channel partners, who also sell products offered by our competitors, and in the case of retailer house brands, may also be our competitors, which sales may compete with our own products; • certain of our sales channel partners could decide to de-emphasize the product categories that we offer, change their algorithmic logic, policies or procedures making our products harder for customers to find, or remove them from e-commerce sites altogether; and • building relationships with new channel partners or adapting to new distribution and marketing models in order to expand into new product categories and markets may require significant management attention and operational resources, and affect our accounting, including revenue recognition, gross margins, and the ability to make comparisons from period to period.
We sell some of our products through a network of retailers and e-tailers (together with our direct sales channel). Our products are available through Amazon.com as well as in retail locations including Target, Petco, PetSmart, Costco, Walmart and CVS, and many others.
We sell some of our products through a network of retailers and e-tailers (in addition to our direct sales channel). Our products are available through Amazon.com as well as in retail locations including Target, Petco, PetSmart, Costco, Walmart, Kroger and CVS, and many others.
We may not have the resources or technical sophistication to anticipate or prevent rapidly evolving types of cyber-attacks. As our business partners move to remote work due to the COVID-19 pandemic, they may be more vulnerable to cyber-attacks.
We may not have the resources or technical sophistication to anticipate or prevent rapidly evolving types of cyber-attacks. As our business partners have moved to remote work in response to the COVID-19 pandemic, they may be more vulnerable to cyber-attacks.
Changes to the terms of our shipping arrangements and delays or failures in delivery of our products may have a material adverse affect on our margins and profitability, which could adversely affect our business, financial condition and results of operations. 14 Table of Contents We may be unable to manage the complexities created by our omni channel operations.
Changes to the terms of our shipping arrangements and delays or failures in delivery of our products may have a material adverse effect on our margins and profitability, which could adversely affect our business, financial condition and results of operations. We may be unable to manage the complexities created by our omnichannel operations.
Our success depends on the continuing efforts of our key employees and our ability to attract and retain highly skilled personnel and senior management. Our ability to maintain our competitive position is largely dependent on the services of our senior management and other key personnel.
Our success depends on the continuing efforts of our key employees and our ability to attract and retain highly skilled personnel and senior management. 11 Table of Contents Our ability to maintain our competitive position is largely dependent on the contributions of our senior management and other key personnel.
Our certificate of incorporation and amended and restated bylaws contain provisions that could depress the trading price of our common stock by impeding a change in control of BARK or changes in our management that our stockholders may deem advantageous.
Delaware law, our certificate of incorporation and bylaws may impede a merger, tender offer, or proxy contest. Our certificate of incorporation and amended and restated bylaws contain provisions that could depress the trading price of our common stock by impeding a change in control of BARK or changes in our management that our stockholders may deem advantageous.
While it is difficult at this time to predict how this provision may adversely impact our stockholders, it is possible that we could not be offered the opportunity to participate in a future transaction that might have resulted in a financial benefit to us, which could, in turn, result in a material adverse effect on our business, financial condition, results of operations, or prospects. 23 Table of Contents Delaware law, our certificate of incorporation and bylaws may impede a merger, tender offer, or proxy contest.
While it is difficult at this time to predict how this 22 Table of Contents provision may adversely impact our stockholders, it is possible that we could not be offered the opportunity to participate in a future transaction that might have resulted in a financial benefit to us, which could, in turn, result in a material adverse effect on our business, financial condition, results of operations, or prospects.
The U.S. or foreign countries could enact legislation or impose regulations, including unfavorable labor regulations, tax policies or economic sanctions that could have an adverse impact on our ability to conduct our business in the countries in which we have relationships.
Foreign labor laws, standards and customs may vary greatly from those in the U.S. The U.S. or foreign countries could enact legislation or impose regulations, including unfavorable labor regulations, tax policies or economic sanctions that could have an adverse impact on our ability to conduct our business in the countries in which we have relationships.
Future litigation could have a material adverse effect on our business. Lawsuits and other administrative, regulatory, or legal proceedings that may arise in the course of our operations can involve substantial costs, including the costs associated with investigation, litigation and possible settlement, judgment, penalty or fine.
Lawsuits and other administrative, regulatory, or legal proceedings that may arise in the course of our operations can involve substantial costs, including the costs associated with investigation, litigation and possible settlement, judgment, penalty or fine.
Any decline in consumer discretionary spending could negatively impact our revenue, which could have a material adverse effect on our business, financial condition and results of operations. We may be impacted by the COVID-19 global pandemic and related government, private sector and individual consumer responses.
Any decline in consumer 12 Table of Contents discretionary spending could negatively impact our revenue, which could have a material adverse effect on our business, financial condition and results of operations. We may continue to be impacted by the COVID-19 global pandemic.
If we cannot raise funds on acceptable terms, we may be forced to raise funds on undesirable terms, or our business may contract or we may be unable to grow our business or respond to competitive pressures, any of which could have a material adverse effect on our business, financial condition, and results of operations. 22 Table of Contents Risks Relating to Ownership of Our Common Stock Our stock price may be volatile or decline regardless of our operating performance.
If we cannot raise funds on acceptable terms, we may be forced to raise funds on undesirable terms, or 21 Table of Contents our business may contract or we may be unable to grow our business or respond to competitive pressures, any of which could have a material adverse effect on our business, financial condition, and results of operations.
Further, due to the continuing spread of COVID-19 and related governmental work and travel restrictions, there may be disruptions and delays in national, regional and local shipping, which may negatively impact our subscribers’ and customers’ experience.
Further, due to the effects of the COVID-19 pandemic, there may continue to be disruptions and delays in national, regional and local shipping, which may negatively impact our customers’ experience.
Our business, financial condition and results of operations could be materially adversely affected if fees associated with lawsuits or other legal proceedings or a judgment, penalty or fine is not fully or partially covered by insurance. General Risk Related to Our Business We have identified material weaknesses in our internal controls over financial reporting.
Our business, financial condition and results of operations could be materially adversely affected if fees associated with lawsuits or other legal proceedings or a judgment, penalty or fine is not fully or is only partially covered by insurance. General Risk Related to Our Business Our estimates or judgments relating to our critical accounting policies could prove to be incorrect.
A significant portion of our revenue is recurring revenue from subscription customers, especially those customers who are highly engaged and purchase our add-to-box offerings or our other offerings, such as BARK Food and BARK Bright.
A significant portion of our revenue is recurring revenue from subscription customers, especially those customers who are highly engaged and purchase our add-to-box offerings which include toys, treats, toppers, dental and other products.
Significant assumptions and estimates used in preparing our consolidated financial statements include those related to determination of fair value of our inventory reserves, common stock and warrants, stock-based compensation and the valuation of embedded derivatives.
Significant assumptions and estimates used in preparing our consolidated financial statements include those related to determination of fair value of the Company’s allowance for uncollectible accounts receivable, excess and obsolete inventory reserve, stock-based compensation, fair value of right-of-use assets and the valuation of embedded derivatives.
Our growth depends, in part, on our ability to successfully introduce new products to our existing BarkBox and Super Chewer subscriptions and to introduce new product lines, including BARK Home (everyday products), BARK Bright (dental, health and wellness), and BARK Food (personalized food blend), and to improve and reposition our existing products to meet the requirements of our customers and the needs of their dogs.
Our growth depends, in part, on our ability to successfully introduce new products to our existing BarkBox and Super Chewer subscriptions and Toys & accessories and Consumables categories, and to improve and reposition our existing products to meet the requirements of our customers and the needs of their dogs.
Risks Related to Information Technology and Cybersecurity We are subject to risks related to online payment methods. We currently accept payments using a variety of methods, including credit card, debit card, PayPal and gift cards. As we offer new payment options to subscribers, we may be subject to additional regulations, compliance requirements, fraud and other risks.
Risks Related to Information Technology and Cybersecurity We are subject to risks related to online payment methods. We currently accept payments using a variety of methods, including credit card, debit card, PayPal, Venmo, Apple Pay, Shop Pay and gift cards.
In the future, as we offer new payment options to subscribers, including by way of integrating emerging mobile and other payment methods, we may be subject to additional regulations, compliance requirements and fraud.
In the future, as we offer new payment options to customers, including by way of integrating emerging mobile and other payment methods, we may be subject to additional regulations, compliance requirements and fraud, if our customers re-use their login and password information across multiple websites, exposing us to breaches on other sites.
For certain payment methods, we pay interchange and other fees, which may increase over time and raise our operating costs and lower profitability.
As we offer new payment options to customers, we may be subject to additional regulations, compliance requirements, fraud and other risks. For certain payment methods, we pay interchange and other fees, which may increase over time and raise our operating costs and lower profitability.
For example, we rely on third-party marketing analytics systems to identify marketing spend by channel, which we then reconcile across a number of systems. In addition, we rely on third-party warehouse and fulfillment providers to communicate the receiving and shipping information that drives active customer count and related data.
In addition, we rely on third-party warehouse and fulfillment providers to communicate the receiving and shipping information that drives active customer count and related data.
Failure to maintain our high level of engagement and protect our brand and reputation with our customers would cause our revenue to decrease, which could have a material adverse effect on our business, financial condition and results of operations. 11 Table of Contents We may not be able to accurately predict consumer trends, successfully introduce new products, improve existing products, or expand into new offerings.
Failure to maintain our high level of engagement and protect our brand and reputation with our customers would cause our revenue to decrease, which could have a material adverse effect on our business, financial condition and results of operations.
We may be unable to maintain and scale our technology. Our reputation and ability to acquire, retain and serve our customers depends on the reliable performance of our website and mobile application and our underlying network infrastructure.
We may be unable to maintain and scale our technology. Our reputation and ability to acquire, retain and serve our customers depends on the reliable performance of our websites and mobile application and our cloud-based solutions. The operation of these systems, and the consolidation of our websites, is complex and could result in operational failures.
In addition, 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. Furthermore, the failure of any vendors to provide safe and humane factory conditions at their facilities could damage our reputation with our customers and result in legal claims against us.
In addition, failure of our vendors to comply with 18 Table of Contents applicable laws and regulations and contractual requirements could lead to litigation against us, resulting in increased legal expenses.
It also creates a new California data protection agency specifically tasked to enforce the law, which could result in increased regulatory scrutiny of businesses in the areas of data protection and security.
It also creates a new California Privacy Protection Agency specifically tasked to enforce the law, which could result in increased regulatory scrutiny of businesses in the areas of data protection and security. Similar laws have been proposed in other states and at the federal level, and if passed, such laws may have potentially conflicting requirements that could make compliance challenging.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe following table sets forth the location, use and size of certain of our properties as of March 31, 2022: Location Use Ownership Status Approximate Area in Square Feet New York, New York Office Space Leased 26,300 New York, New York Photo Studio Leased 1,850 Columbus, Ohio Warehouse and distribution Center Leased 97,934 Columbus, Ohio Office Space Leased 12,978 Columbus, Ohio Office Space Leased 34,238 Hebron, Kentucky Warehouse and distribution Center Leased 201,600 Las Vegas, Nevada Warehouse and distribution Center Leased 400,593
Biggest changeThe following table sets forth the location, use and size of certain of our properties as of March 31, 2023: Location Use Ownership Status Approximate Area in Square Feet New York, New York Office Space Leased 26,300 New York, New York Office Space Leased 51,220 New York, New York Photo Studio Leased 1,850 Columbus, Ohio Warehouse and distribution Center Leased 97,934 Columbus, Ohio Office Space Leased 12,978 Columbus, Ohio Office Space Leased 34,238 Hebron, Kentucky Warehouse and distribution Center Leased 201,600 Las Vegas, Nevada Warehouse and distribution Center Leased 400,593
ITEM 2. PROPERTIES We currently maintain our executive offices at 221 Canal Street, New York, New York, In addition, we lease and operate fulfillment centers in seven locations, at which we receive products from vendors, ship products to customers, and receive and process returns from customers. We also lease and operate a customer service center in Columbus, Ohio.
ITEM 2. PROPERTIES We currently maintain our executive offices at 120 Broadway, Floor 12, New York, NY. In addition, we lease and operate fulfillment centers in three locations, at which we receive products from vendors, ship products to customers, and receive and process returns from customers. We also lease and operate a customer service center in Columbus, Ohio.
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We believe these properties are suitable and adequate for our current business operations.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS We are subject to, and are presently involved in, litigation and other legal proceedings in the ordinary course of our business. We believe that there are no pending lawsuits or claims that, individually or in the aggregate, may have a material adverse effect on our business, financial condition or operating results.
Biggest changeWhile it is not possible to determine the outcome of any legal proceedings brought against us, we believe that, except for the matter described above, there are no pending lawsuits or claims that, individually or in the aggregate, may have a material effect on our business, financial condition or operating results.
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However, no assurance can be given that the final outcome of such proceedings will not materially impact our consolidated financial condition or results of operations. 25 Table of Contents ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 26 Table of Contents PART II.
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ITEM 3. LEGAL PROCEEDINGS 24 Table of Contents On September 1, 2022, plaintiff Amber Farmer filed a complaint against BarkBox, Inc., in the U.S. District Court for the Central District of California. Farmer v. BarkBox, Inc., No. 2:22-cv-06242 (C.D. Cal.).
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The plaintiff alleges that BarkBox violates California’s Automatic Renewal Law, Unfair Competition Law, and Consumers Legal Remedies Act by failing to adequately disclose the automatic renewal of BarkBox’s subscription plans. The plaintiff seeks to represent a class containing all consumers who purchased a subscription from BarkBox in California.
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We filed a Motion to Dismiss and Motion to Compel Arbitration on November 4, 2022. While we intend to vigorously defend against this litigation, this case is at a very early stage and there can be no assurance that we will be successful in our defense.
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For this same reason, we cannot currently estimate the loss or the range of possible losses we may experience in connection with this litigation. In addition, we are from time to time subject to, and are presently involved in, litigation and other legal proceedings in the ordinary course of business.
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Our view and estimate related to these matters may change in the future, as new events and circumstances arise and as the matters continue to develop. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 25 Table of Contents PART II.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 26 Part II. 27 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 27 Item 6. [Reserved] 28 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 29 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 49 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 25 Part II. 26 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 26 Item 6. [Reserved] 27 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 28 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 50 Item 8.
Financial Statements and Supplementary Data 49 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 54 Item 9A. Controls and Procedures 55
Financial Statements and Supplementary Data 50 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 35 Item 9A. Controls and Procedures 36

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe stock price performance of the graph above is not necessarily indicative of future stock price performance.
Biggest changeData for the S&P 500 and the S&P Retail Internet Select Industry index assume reinvestment of dividends. Total return equals stock price appreciation plus reinvestment of dividends. The stock price performance of the graph above is not necessarily indicative of future stock price performance.
Payment of cash dividends, if any, in the future will be at the discretion of our Board of Directors and will depend on then-existing conditions, including our financial condition, results of operation, contractual restrictions and other factors our board of directors may deem relevant. In addition our ability to pay dividends is limited by covenants of its existing outstanding indebtedness.
Payment of cash dividends, if any, in the future will be at the discretion of our Board of Directors and will depend on then-existing conditions, including our financial condition, results of operation, contractual restrictions and other factors our Board of Directors may deem relevant. In addition our ability to pay dividends is limited by covenants in our existing outstanding indebtedness.
Dividend Policy We have never declared or paid any cash dividends on our common stock to date. We may retain future earnings, if any, for future operations, expansion and debt repayment and we do not anticipate paying any cash dividends in the foreseeable future.
Dividend Policy We have never declared or paid any cash dividends on our common stock to date. We may retain future earnings, if any, for future operations, expansion and debt repayment and we do not anticipate declaring or paying any cash dividends in the foreseeable future.
ITEM 5. MARKET FOR REGISTRANTS’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Market Information Our common stock and warrants to purchase common stock are traded on the NYSE under the symbols “BARK” and “BARK WS,” respectively. Holders As of May 27, 2022 there were approximately 147 stockholders of record.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Market Information Our common stock and warrants to purchase common stock are traded on the NYSE under the symbols “BARK” and “BARK WS,” respectively. Holders As of May 29, 2023 there were approximately 107 stockholders of record.
Recent Sales of Unregistered Securities None. 27 Table of Contents Performance Graph The graph below compares the cumulative total stockholder return on our common stock with the cumulative total return on the Standard & Poor’s (“S&P”) 500 index and the Nasdaq Composite index.
Recent Sales of Unregistered Securities None. 26 Table of Contents Performance Graph The graph below compares the cumulative total stockholder return on our common stock with the cumulative total return on the Standard & Poor’s (“S&P”) 500 index and the S&P Retail Internet Select Industry index.
The graph assumes an initial investment of $100 in our common stock at the market close on December 18, 2020, which was the first day on which our common stock commenced trading on its own. Data for the S&P 500 and the Nasdaq Composite assume reinvestment of dividends. Total return equals stock price appreciation plus reinvestment of dividends.
The graph assumes an initial investment of $100 in our common stock at the market close on December 18, 2020, which was the first day on which our common stock commenced trading on its own through March 31, 2023 the last business day of our fiscal year.
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We do not anticipate declaring any cash dividends to holders of our common stock in the foreseeable future. Securities Authorized for Issuance under Equity Compensation Plans The information required by Item 5 of Form 10-K regarding equity compensation plans is incorporated herein by reference to Item 12 of Part III of this Annual Report.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeBecause of these limitations, when evaluating our performance, you should consider the Non-GAAP Measures alongside other financial measures, including our net income (loss) and other results stated in accordance with GAAP. 40 Table of Contents The following table presents a reconciliation of Adjusted Net Loss to net loss, the most directly comparable financial measure stated in accordance with GAAP, and the calculation of net loss margin, Adjusted Net Loss Margin and Adjusted Net Loss Per Common Share for the periods presented: Adjusted Net Loss Fiscal Year Ended March 31, 2022 2021 2020 Net loss $ (68,299) $ (31,391) $ (31,368) Stock-based compensation expense 17,861 6,522 1,817 Change in fair value of warrants and derivatives (33,196) 931 (96) Sales and use tax expense (1) 648 1,211 5,023 Transaction costs (2) 6,053 1,545 — Demurrage fees (3) 2,610 — — Other one-time items (4) 6,653 — — Adjusted net loss $ (67,669) $ (21,182) $ (24,624) Net loss margin (13.46) % (8.29) % (13.98) % Adjusted net loss margin (13.34) % (5.59) % (10.98) % Adjusted net loss per common share - basic and diluted $ (0.43) $ (0.46) $ (0.55) Weighted average common shares used to compute adjusted net loss per share attributable to common stockholders - basic and diluted 156,201,601 46,297,847 45,110,365 41 Table of Contents The following table presents a reconciliation of Adjusted EBITDA to net loss, the most directly comparable financial measure stated in accordance with GAAP, and the calculation of net loss margin and Adjusted EBITDA margin for the periods presented: Adjusted EBITDA Fiscal Year Ended March 31 2022 2021 2020 (in thousands) Net loss $ (68,299) $ (31,391) $ (31,368) Interest expense 5,464 10,923 5,421 Depreciation and amortization expense 4,403 2,405 1,397 Stock-based compensation expense 17,861 6,522 1,817 Change in fair value of warrants and derivatives (33,196) 931 (96) Sales and use tax expense (1) 648 1,211 5,023 Transaction costs (2) 6,053 1,545 — Demurrage fees (3) 2,610 — — Other one-time items (4) 6,653 — — Adjusted EBITDA $ (57,802) $ (7,854) $ (17,806) Net loss margin (13.46) % (8.29) % (13.98) % Adjusted EBITDA margin (11.39) % (2.07) % (7.94) % (1) Sales and use tax expense relates to recording a liability for sales and use tax we did not collect from our customers.
Biggest changeGAAP, and the calculation of net loss margin, Adjusted net loss margin and Adjusted net loss per common share for the periods presented: Adjusted Net Loss Fiscal Year Ended March 31, 2023 2022 2021 Net loss $ (61,519) $ (68,299) $ (31,391) Stock-based compensation expense 14,811 17,861 6,522 Change in fair value of warrants and derivatives (5,350) (33,196) 931 Sales and use tax expense (income) (1) (365) 648 1,211 Restructuring 1,763 86 — Executive transition costs 1,680 1,930 — Duplicate headquarters rent 1,747 — — Impairment of assets 2,065 — — Transaction costs (2) — 6,053 1,545 Demurrage fees (3) — 2,610 — Other items (4) 104 4,638 Adjusted net loss $ (45,064) $ (67,669) $ (21,182) Net loss margin (11.49) % (13.46) % (8.29) % Adjusted net loss margin (8.42) % (13.34) % (5.59) % Adjusted net loss per common share - basic and diluted $ (0.26) $ (0.43) $ (0.45) Weighted average common shares used to compute adjusted net loss per share attributable to common stockholders - basic and diluted 176,717,509 156,201,601 46,297,847 42 Table of Contents The following table presents a reconciliation of Adjusted EBITDA to net loss, the most directly comparable financial measure stated in accordance with U.S.
This increase during the period was primarily due to increased fulfillment and shipping costs of $60.9 million attributable to the 28.3% increase in Subscription Shipments and increased third-party shipping rates; increased compensation expense of $32.5 million attributable to an increase in employee headcount, including stock-based compensation expense of $10.8 million; increased audit, professional, and legal fees of $13.4 million primarily related to growth of operations and requirements as a new publicly traded company; and increase in other general and administrative expenses of $6.1 million.
This increase during the period was primarily due to increased fulfillment and shipping costs of $60.9 million attributable to the 28.3% increase in Subscription Shipments and increased third-party shipping rates; increased compensation expense of $32.5 million attributable to an increase in employee headcount, including stock-based compensation expense of $10.8 million; increased audit, professional, and legal fees of $13.4 million primarily related to growth of operations and requirements as a new publicly traded company; and an increase in other general and administrative expenses of $6.1 million.
Net cash flows used in operating activities is derived by adjusting our net loss for: • non-cash operating items such as depreciation and amortization, stock-based compensation and other non-cash income or expenses; • changes in operating assets and liabilities reflect timing differences between the receipt and payment of cash associated with transactions.
Net cash flows used in operating activities is derived by adjusting our net loss for: • non-cash operating items such as depreciation and amortization, stock-based compensation and other non-cash income or expenses; and • changes in operating assets and liabilities reflect timing differences between the receipt and payment of cash associated with transactions.
Our critical accounting policies are described in greater details in Note 2 to our consolidated financial statements included in this Annual Report on Form 10-K. Critical accounting estimates are defined as those reflective of significant judgments, estimates and uncertainties, which may result in materially different results under different assumptions and conditions.
Our critical accounting policies are described in greater details in Note 2 — Summary of Significant Accounting Policies to our consolidated financial statements included in this Annual Report on Form 10-K. Critical accounting estimates are defined as those reflective of significant judgments, estimates and uncertainties, which may result in materially different results under different assumptions and conditions.
The estimate is recorded in total for sales transactions recorded in the current period and, in effect, represents a reduction in the transaction price at the time of sale. Our contract liability represents cash collections from its customers prior to delivery of subscription products, which is recorded as deferred revenue on the consolidated balance sheets.
The estimate is recorded in total for sales transactions recorded in the current period and, in effect, represents a reduction in the transaction price at the time of sale. Our contract liability represents cash collections from our customers prior to delivery of subscription products, which is recorded as deferred revenue on the consolidated balance sheets.
Cash flows provided by Financing Activities For the fiscal year ended March 31, 2022, net cash provided by financing activities was $355.5 million, primarily due to proceeds of $227.1 million p roceeds from the Merger and proceeds from the PIPE of $200.0 million.
For the fiscal year ended March 31, 2022, net cash provided by financing activities was $355.5 million, primarily due to proceeds of $227.1 million p roceeds from the Merger and proceeds from the PIPE of $200.0 million.
We calculate Adjusted Net Income (Loss) Margin by dividing Adjusted Net Income (Loss) for the period by Revenue for the period. We calculate Adjusted Net Income (Loss) Per Common Share by dividing Adjusted Net Income (Loss) for the period by weighted average common shares used to compute net loss per share attributable to common stockholders for the period.
We calculate Adjusted Net Loss Margin by dividing Adjusted Net Loss for the period by Revenue for the period. We calculate Adjusted Net Loss Per Common Share by dividing Adjusted Net Loss for the period by weighted average common shares used to compute net loss per share attributable to common stockholders for the period.
As a result, we were required to adopt new or revised accounting standards as required by public companies, including those standards which we had previously deferred pursuant to the JOBS Act. Additionally, we are no longer able to take advantage of the reduced regulatory and reporting requirements of emerging growth companies. 48 Table of Contents
As a result, we were required to adopt new or revised accounting standards as required by public companies, including those standards which we had previously deferred pursuant to the JOBS Act. Additionally, we are no longer able to take advantage of the reduced regulatory and reporting requirements of emerging growth companies. 49 Table of Contents
Other Income (Expense), Net Other income (expense), net, primarily consists of changes in the fair value of our warrant liabilities and loss on extinguishment of debt. 33 Table of Contents Results of Operations We operate in two reportable segments to reflect the way our CODM reviews and assesses the performance of the business.
Other Income (Expense), Net Other income (expense), net, primarily consists of changes in the fair value of our warrant liabilities and loss on extinguishment of debt. 34 Table of Contents Results of Operations We operate in two reportable segments to reflect the way our CODM reviews and assesses the performance of the business.
Interest Expense Fiscal Year Ended March 31, 2022 2021 $ Change % Change ( in thousands) Interest expense $ (5,464) $ (10,923) $ 5,459 (50.0) % Percentage of revenue (1.1) % (2.9) % 36 Table of Contents Interest expense decreased by $5.5 million, or 50.0% , for the fiscal year ended March 31, 2022 compared to the fiscal year ended March 31, 2021.
Interest Expense Fiscal Year Ended March 31, 2022 2021 $ Change % Change ( in thousands) Interest expense $ (5,464) $ (10,923) $ 5,459 (50.0) % Percentage of revenue (1.1) % (2.9) % 40 Table of Contents Interest expense decreased by $5.5 million, or 50.0% , for the fiscal year ended March 31, 2022 compared to the fiscal year ended March 31, 2021.
See Note 2, “Summary of Significant Accounting Policies,” in our audited consolidated financial statements for the fiscal years ended March 31, 2022, 2021, and 2020 included elsewhere in this Annual Report on Form 10-K.
See Note 2, “Summary of Significant Accounting Policies,” in our audited consolidated financial statements for the fiscal years ended March 31, 2023, 2022, and 2021 included elsewhere in this Annual Report on Form 10-K.
Other income (expense), net increased by $31.2 million for the fiscal year ended March 31, 2022 compared to the fiscal year ended March 31, 2021. This increase in other income (expense), net, was primarily due to the $33.2 million of income related to the changes in fair value of our warrant liabilities during the period.
Other income increased by $31.2 million for the fiscal year ended March 31, 2022 compared to the fiscal year ended March 31, 2021. This increase in other income was primarily due to the $33.2 million of income related to the changes in fair value of our warrant liabilities during the period.
The Non-GAAP Measures are presented for supplemental informational purposes only, have limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP.
The Non-GAAP Measures are presented for supplemental informational purposes only, have limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with U.S. GAAP.
The recognition of revenue is determined through application of the following five-step model: • Identification of the contract(s) with subscribers or customers, as applicable; • Identification of the performance obligation(s) in the contract; • Determination of the transaction price; • Allocation of the transaction price to the performance obligation(s) in the contract; and • Recognition of revenue when or as the performance obligation(s) are satisfied.
The recognition of revenue is determined through application of the following five-step model: • Identification of the contract(s) with customers, as applicable; • Identification of the performance obligation(s) in the contract; • Determination of the transaction price; • Allocation of the transaction price to the performance obligation(s) in the contract; and • Recognition of revenue when or as the performance obligation(s) is satisfied.
Off-Balance Sheet Arrangements We did not have during the periods presented, and we do not currently have, any off-balance sheet financing arrangements or any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
Off-Balance Sheet Arrangements 47 Table of Contents We did not have during the periods presented, and we do not currently have, any off-balance sheet financing arrangements or any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
The decrease is primarily due to charges to make certain adjustments to inventory for shrinkage and slow moving items and, an inventory write-down we made related to a strategic narrowing of focus on products we intend to sell, as well as an increase in costs for inbound freight. 35 Table of Contents Operating Expenses General and Administrative Expense Fiscal Year Ended March 31, 2022 2021 $ Change % Change ( in thousands) General and administrative $ 301,870 $ 179,510 $ 122,360 68.2 % Percentage of revenue 59.5 % 47.4 % General and administrative expense increased by $122.4 million, or 68.2%, f or the fiscal year ended March 31, 2022 compared to the fiscal year ended March 31, 2021.
The decrease is primarily due to charges to make certain adjustments to inventory for shrinkage and slow moving items, an inventory write-down made related to a strategic narrowing of focus on products intended to sell, as well as an increase in costs for inbound freight. 39 Table of Contents Operating Expenses General and Administrative Expense Fiscal Year Ended March 31, 2022 2021 $ Change % Change ( in thousands) General and administrative $ 301,870 $ 179,510 $ 122,360 68.2 % Percentage of revenue 59.5 % 47.4 % General and administrative expense increased by $122.4 million, or 68.2%, f or the fiscal year ended March 31, 2022 compared to the fiscal year ended March 31, 2021.
The audited consolidated financial statements as of March 31, 2022 and 2021 and for the fiscal years ended March 31, 2022, 2021 and 2020, respectively, present the financial position and results of operations and cash flows of BARK, Inc. and its wholly-owned subsidiaries.
The audited consolidated financial statements as of March 31, 2023 and 2022 and for the fiscal years ended March 31, 2023, 2022 and 2021, respectively, present the financial position and results of operations and cash flows of BARK, Inc. and its wholly-owned subsidiaries.
In addition, our use of the Non-GAAP Measures may not be comparable to similarly titled measures of other companies because they may not calculate the Non-GAAP Measures in the same manner, limiting its usefulness as a comparative measure.
In addition, our use of the Non-GAAP Measures may not be comparable to similarly titled measures of other companies because they may not calculate the Non-GAAP Measures in the same manner, limiting their usefulness as a comparative measure.
We are required to comply with certain financial and non-financial covenants related to our borrowing agreements, which we are in compliance with as of March 31, 2022 and expect to be in compliance with during the next 12 months.
We are required to comply with certain financial and non-financial covenants related to our borrowing agreements, which we are in compliance with as of March 31, 2023 and expect to be in compliance with during the next 12 months.
The increase in our net operating assets and liabilities was driven by the changes in accounts payable and accrued expenses of $16.5 million related to increased expenditures 45 Table of Contents to support general business growth, as well as the timing of payments, and other liabilities of $13.3 million, and deferred revenue of $13.9 million, due to growth in our prepaid subscription sales.
The increase in our net operating assets and liabilities was driven by the changes in accounts payable and accrued expenses of $16.5 million related to increased expenditures to support general business growth, as well as the timing of payments, and other liabilities of $13.3 million, and deferred revenue of $13.9 million, due to growth in our prepaid subscription sales.
These key financial and operating metrics should be read in conjunction with the following discussion of our results 30 Table of Contents of operations and financial condition together with our audited consolidated financial statements and the related notes and other financial information included elsewhere in this Annual Report on Form 10-K.
These key financial and operating metrics should be read in conjunction with the following discussion of our results of operations and financial condition together with our audited consolidated financial statements and the related notes and other financial information included elsewhere in this Annual Report on Form 10-K.
In particular, we believe that the use of the Non-GAAP Measures are helpful to our investors as they are measures used by management in assessing the health of our business, determining incentive compensation and evaluating our operating performance, as well as for internal planning and forecasting purposes.
In particular, we believe that the use of the Non-GAAP Measures are helpful to our investors as they are measures used by management in 41 Table of Contents assessing the health of our business, determining incentive compensation and evaluating our operating performance, as well as for internal planning and forecasting purposes.
Average Order Value Average Order Value (“AOV”) is Direct to Consumer revenue for the period divided by Subscription Shipments for the same period. 31 Table of Contents Components of Our Results of Operations We operate with two reportable segments: Direct to Consumer and Commerce, to reflect the way our Chief Executive Officer, who is our chief operating decision maker (“CODM”), reviews and assesses the performance of the business.
Average Order Value (Subscription Shipments) Historically, we calculated Average Order Value (Subscription Shipments) as Direct to Consumer revenue for the period divided by Subscription Shipments for the same period. 31 Table of Contents Components of Our Results of Operations We operate with two reportable segments: Direct to Consumer and Commerce, to reflect the way our Chief Executive Officer, who is our Chief Operating Decision Maker (“CODM”), reviews and assesses the performance of the business.
We believe that the Non-GAAP Measures, when taken together with our financial results presented in accordance with GAAP, provides meaningful supplemental information regarding our operating performance and facilitates internal comparisons of our historical operating performance on a more consistent basis by excluding certain items that may not be indicative of our business, results of operations or outlook.
We believe that the Non-GAAP Measures, when taken together with our financial results presented in accordance with U.S. GAAP, provide meaningful supplemental information regarding our operating performance and facilitates internal comparisons of our historical operating performance on a more consistent basis by excluding certain items that may not be indicative of our business, results of operations or outlook.
The increase in cash provided by financing activities was partially offset by the repayments of outstanding borrowings on our line of credit of $34.3 million, payments of transaction costs of $25.2 million, p ayment of deferred underwriting fees $8.9 million, and rep ayment of the outstanding PPP loan of $5.2 million .
The increase in cash provided by financing activities was partially offset by the repayments of outstanding borrowings on our line of credit of $34.3 million, payments of transaction costs of $25.2 million, p ayment of deferred underwriting fees $8.9 million, and rep ayment of the outstanding Paycheck Protection Program loan of $5.2 million .
The results of these estimates form the basis for making judgments about the carrying value of assets and liabilities that are not 46 Table of Contents readily apparent from other sources. Actual results may differ from these estimates.
The results of these estimates form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
Some of the limitations of the Non-GAAP Measures include that (1) the measures do not properly reflect capital commitments to be paid in the future, (2) although depreciation and amortization are non-cash charges, the underlying assets may need to be replaced and Adjusted EBITDA and Adjusted EBITDA Margin do not reflect these capital expenditures, (3) Adjusted EBITDA and Adjusted EBITDA Margin do not consider the impact of stock-based compensation expense, which is an ongoing expense for our company and (4) Adjusted EBITDA and Adjusted EBITDA Margin do not reflect other non-operating expenses, including interest expense.
Some of the limitations of the Non-GAAP Measures include that (1) the measures do not properly reflect capital commitments to be paid in the future, (2) although depreciation and amortization are non-cash charges, the underlying assets may need to be replaced and Adjusted EBITDA and Adjusted EBITDA Margin do not reflect these capital expenditures, (3) Adjusted EBITDA and Adjusted EBITDA Margin do not consider the impact of stock-based compensation expense, which is an ongoing expense for our company, (4) Adjusted EBITDA, (5) Free cash flow does not represent the total residual cash flow available for discretionary purposes and does not reflect our future contractual commitments. and Adjusted EBITDA Margin do not reflect other non-operating expenses, including interest expense.
Deferred revenue is recognized as revenue upon the delivery of the box or product. Inventories Inventories consist principally of finished goods, and represent products available for sale and are accounted for using the first-in, first-out (“FIFO”) method and valued at the lower of cost or net realizable value. Inventory costs consist of product and inbound shipping and handling costs.
Deferred revenue is recognized as revenue upon the delivery of the box or product. Inventories 48 Table of Contents Inventories consist principally of finished goods, and represent products available for sale and are accounted for using the first-in, first-out (“FIFO”) method and valued at the lower of cost or net realizable value.
For the fiscal year ended March 31, 2022, net cash used in operating activities was $172.3 million. The $172.3 million of net cash used in operating activities consisted of net loss of $68.3 million adjusted for non-cash charges totaling $7.6 million and a net decrease of $111.6 million in our net operating assets and liabilities.
The $172.3 million of net cash used in operating activities consisted of net loss of $68.3 million adjusted for non-cash charges totaling $7.6 million and a net decrease of $111.6 million in our net operating assets and liabilities.
The interest rate for borrowings under the Credit Facility, as amended, is equal to (i) the greater of the prime rate that is published in the Money Rates section of The Wall Street Journal from time to time (the “Prime Rate”) and 5.25%, plus (ii) half of one percent (0.50%), per annum.
As of March 31, 2023, there were no borrowings under the Credit Facility. 45 Table of Contents The interest rate for borrowings under the Credit Facility, as amended, is equal to (i) the greater of the prime rate that is published in the Money Rates section of The Wall Street Journal from time to time (the “Prime Rate”) and five and one quarter percent (5.25%), plus (ii) half of one percent (0.50%), per annum.
We have restricted cash of $2.3 million as of March 31, 2022 to secure a letter of credit for two of our leases, which is expected to be maintained as a security deposit for the duration of the lease. 42 Table of Contents Our material cash requirements include our facility lease arrangements for corporate offices, warehouses and certain equipment .
We have restricted cash of $5.2 million as of March 31, 2023 to secure a letter of credit for four of our leases, which is expected to be maintained as a security deposit for the duration of the lease. Our material cash requirements include our lease arrangements for corporate offices, warehouses and certain equipment.
We define Active Subscriptions as the total number of unique product subscriptions with at least one shipment during the last 12 months. Active Subscriptions does not include gift subscriptions or one-time subscription purchases. New Subscriptions We define New Subscriptions as the number of unique subscriptions with their first shipment occurring in a period.
Subscription Shipments does not include gift subscriptions or one-time subscription shipments. Active Subscriptions We define Active Subscriptions as the total number of unique product subscriptions with at least one shipment during the last 12 months. Active Subscriptions does not include gift subscriptions or one-time subscription purchases.
Customer Acquisition Cost Customer Acquisition Cost (“CAC”) is a measure of the cost to acquire New Subscriptions in our Direct to Consumer business segment. This unit economic metric indicates how effective we are at acquiring each New Subscription.
New Subscriptions We define New Subscriptions as the number of unique subscriptions with their first shipment occurring in a period. Customer Acquisition Cost Customer Acquisition Cost (“CAC”) is a measure of the cost to acquire New Subscriptions in our Direct to Consumer business segment. This unit economic metric indicates how effective we are at acquiring each New Subscription.
However, management believes that Adjusted Net Income (Loss), Adjusted Net Income (Loss) Margin, Adjusted Net Income (Loss) Per Common Share, Adjusted EBITDA and Adjusted EBITDA Margin, all non-GAAP financial measures (together the “Non-GAAP Measures”), provide investors with additional useful information in evaluating our performance.
Non-GAAP Financial Measures We report our financial results in accordance with U.S. GAAP. However, management believes that Adjusted Net Loss, Adjusted Net Loss Margin, Adjusted Net Loss Per Common Share, Adjusted EBITDA, Adjusted EBITDA Margin, and Free Cash Flow, all non-GAAP financial measures (together the “Non-GAAP Measures”), provide investors with additional useful information in evaluating our performance.
If we are unable to generate sufficient demand for these new offerings, we may not recover the financial investments we make into new categories and revenue may not increase in the future.
If we are unable to generate sufficient demand for these new offerings, we may not recover the financial investments and revenue may not increase as desired.
We continued to experience increases in inbound freight costs due to the challenges in the current import market, as transpacific ships and trade lanes continue to be overburdened with volume and experience a significant shortage of equipment and capacity due to the COVID-19 pandemic.
In the past, we have experienced increases in inbound freight costs due to the challenges in the import market, as transpacific ships and trade lanes continue to be overburdened with volume and experience a significant shortage of equipment and capacity due to the COVID-19 pandemic and other macroeconomic challenges affecting the global supply chain.
We assess the valuation of inventory and periodically write down the value for estimated excess and obsolete inventory based upon estimates of future demand and market conditions. Inventory valuation requires us to make judgments, based on information available at each reporting period. Inventory valuation losses are recorded as cost of revenues.
Inventory costs consist of product and inbound shipping and handling costs. We assess the valuation of inventory and periodically write down the value for estimated excess and obsolete inventory based upon estimates of future demand and market conditions. Inventory valuation requires us to make judgments, based on information available at each reporting period.
Liquidity and Capital Resources As of March 31, 2022, we had cash and cash equivalents of approximately $199.4 million. We expect that our cash and cash equivalents, together with cash provided by our operating activities and proceeds from borrowings (as defined below), will be sufficient to fund our operations for at least the next 12 months.
We expect that our cash and cash equivalents, together with cash provided by our operating activities and proceeds from borrowings (as defined below), will be sufficient to fund our operations for at least the next 12 months.
The following table summarizes our cash flows for the fiscal years ended March 31, 2022, 2021 and 2020: Fiscal Year Ended March 31 2022 2021 2020 (in thousands) Net cash used in operating activities $ (172,338) $ (19,618) $ (19,666) Net cash used in investing activities (21,172) (4,825) (4,677) Net cash provided by financing activities 355,458 54,498 22,678 Net increase (decrease) in cash and restricted cash $ 161,948 $ 30,055 $ (1,665) Cash flows used in Operating Activities Net cash flows in operating activities represent the cash receipts and disbursements related to our activities other than investing and financing activities.
The following table summarizes our cash flows for the fiscal years ended March 31, 2023, 2022 and 2021: Fiscal Year Ended March 31 2023 2022 2021 (in thousands) Net cash provided by (used in) operating activities $ 4,694 $ (172,338) $ (19,618) Net cash used in investing activities (21,145) (21,172) (4,825) Net cash provided by (used in) financing activities (2,099) 355,458 54,498 Effect of exchange rate changes on cash (62) — — Net increase (decrease) in cash and restricted cash $ (18,612) $ 161,948 $ 30,055 Cash flows provided by (used in) Operating Activities Net cash flows in operating activities represent the cash receipts and disbursements related to our activities other than investing and financing activities.
We review current business trends and forecasts, and inventory aging to determine adjustments which we estimate will be needed to liquidate existing excess inventories and record inventories at either the lower of cost or net realizable value or the lower of cost or market, as applicable. We believe that all inventory write-downs required at March 31, 2022, have been recorded.
Inventory valuation losses are recorded as cost of revenues. We review current business trends and forecasts, and inventory aging to determine adjustments which we estimate will be needed to liquidate existing excess inventories and record inventories at either the lower of cost or net realizable value or the lower of cost or market, as applicable.
Investments in growth We expect to continue to focus on long-term growth through investments in product offerings and the dog and dog parent experience. We are working to enhance our offerings and expand the breadth of the products and 29 Table of Contents offerings, including BARK Food and BARK Bright.
As a result, we expect to continue to focus on long-term growth through investments in product offerings and the dog and dog parent experience. We are working to enhance our offerings and expand the breadth of the products and offerings especially in consumables.
Fiscal Year Ended March 31 2022 2021 2020 Subscription Shipments (in thousands) 14,906 11,619 7,618 Average Monthly Subscription Shipment Churn 7.0% 5.9% 7.5% Active Subscriptions (in thousands) 2,265 1,826 1,207 New Subscriptions (in thousands) 1,164 1,200 627 CAC $ 53.43 $ 47.55 $ 55.44 LTV:CAC 4.7x 6.3x 3.9x Average Order Value $ 30.06 $ 28.74 $ 26.80 Subscription Shipments We define Subscription Shipments as the total number of subscription product shipments shipped in a given period.
Fiscal Year Ended March 31 2023 2022 2021 Subscription Shipments (in thousands) 14,638 14,906 11,619 Active Subscriptions (in thousands) 2,159 2,265 1,826 New Subscriptions (in thousands) 941 1,164 1,200 CAC $ 58.20 $ 53.43 $ 47.55 LTV:CAC 4.7x 4.7x 6.3x Average Order Value (Subscription Shipments) $ 32.24 $ 30.06 $ 28.74 Subscription Shipments We define Subscription Shipments as the total number of subscription product shipments shipped in a given period.
Factors Affecting Our Performance We believe that our performance and future success depend on several factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and in the section of this Annual Report on Form 10-K titled “ Risk Factors .” Acquisition of new subscriptions Our ability to attract new subscriptions is a key factor for our future growth.
Factors Affecting Our Performance We believe that our performance and future success depend on several factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and in the section of this Annual Report on Form 10-K titled “ Risk Factors .” Investments in growth Our ability to increase the number of total orders and cross category purchasing is a key factor in our future growth and will be driven by our marketing and from the development of new products, primarily in the consumables space.
Interest Expense Interest expense primarily consists of interest incurred under our line of credit, term loan and convertible promissory notes agreements, and amortization of debt issuance costs.
Interest Income (Expense), Net Interest income (expense), net, primarily consists of interest incurred under our line of credit, term loan and convertible promissory notes agreements, and amortization of debt issuance costs, net of income earned on our money market funds and interest-bearing checking accounts.
Fiscal Year Ended March 31, 2022 2021 2020 2022 vs 2021 2021 vs 2020 (in thousands) Consolidated Statement of Operation Data: Revenue Direct to Consumer $ 448,074 $ 333,970 $ 204,151 34.2 % 63.6 % Commerce 59,332 44,634 20,184 32.9 % 121.1 % Total revenue 507,406 378,604 224,335 34.0 % 68.8 % Cost of revenue Direct to Consumer 187,991 128,044 79,191 46.8 % 61.7 % Commerce 37,309 24,620 9,730 51.5 % 153.0 % Total cost of revenue 225,300 152,664 88,921 47.6 % 71.7 % Gross profit 282,106 225,940 135,414 24.9 % 66.9 % Operating expenses: General and administrative 301,870 179,510 115,893 68.2 % 54.9 % Advertising and marketing 74,417 67,029 46,147 11.0 % 45.3 % Total operating expenses 376,287 246,539 162,040 52.6 % 52.1 % Loss from operations (94,181) (20,599) (26,626) 357.2 % -22.6 % Interest expense (5,464) (10,923) (5,421) -50.0 % 101.5 % Other income (expense), net 31,346 131 679 N/M -80.7 % Net loss before income taxes (68,299) (31,391) (31,368) 117.6 % 0.1 % Provision for income taxes — — — 0.0 % 0.0 % Net loss $ (68,299) $ (31,391) $ (31,368) 117.6 % 0.1 % N/M means not meaningful. 34 Table of Contents Comparison of the Fiscal Years Ended March 31, 2022 and March 31, 2021 Revenue Fiscal Year Ended March 31, 2022 2021 $ Change % Change ( in thousands) Revenue Direct to Consumer $ 448,074 $ 333,970 $ 114,104 34.2 % Commerce 59,332 44,634 14,698 32.9 % Total revenue $ 507,406 $ 378,604 $ 128,802 34.0 % Percentage of Revenue Direct to Consumer 88.3 % 88.2 % Commerce 11.7 % 11.8 % Direct to Consumer revenue increased by $114.1 million, or 34.2% , for the fiscal year ended March 31, 2022 compared to the fiscal year ended March 31, 2021.
Fiscal Year Ended March 31, 2023 2022 2021 2023 vs 2022 2022 vs 2021 (in thousands) Consolidated Statement of Operation Data: Revenue Direct to Consumer $ 471,994 $ 448,074 $ 333,970 5.3 % 34.2 % Commerce 63,321 59,332 44,634 6.7 % 32.9 % Total revenue 535,315 507,406 378,604 5.5 % 34.0 % Cost of revenue Direct to Consumer 186,666 187,991 128,044 (0.7) % 46.8 % Commerce 40,534 37,309 24,620 8.6 % 51.5 % Total cost of revenue 227,200 225,300 152,664 0.8 % 47.6 % Gross profit 308,115 282,106 225,940 9.2 % 24.9 % Operating expenses: Advertising and marketing 68,807 74,417 67,029 (7.5) % 11.0 % General and administrative 303,139 301,870 179,510 0.4 % 68.2 % Total operating expenses 371,946 376,287 246,539 (1.2) % 52.6 % Loss from operations (63,831) (94,181) (20,599) (32.2) % 357.2 % Interest expense (4,372) (5,464) (10,923) (20.0) % -50.0 % Other income (expense), net 6,684 31,346 131 N/M N/M Net loss before income taxes (61,519) (68,299) (31,391) (9.9) % 117.6 % Provision for income taxes — — — 0.0 % 0.0 % Net loss $ (61,519) $ (68,299) $ (31,391) (9.9) % 117.6 % N/M means not meaningful. 35 Table of Contents Comparison of the Fiscal Years Ended March 31, 2023 and March 31, 2022 Revenue Fiscal Year Ended March 31, 2023 2022 $ Change % Change ( in thousands) Revenue Direct to Consumer 471,994 448,074 23,920 5.3 % Commerce 63,321 59,332 3,989 6.7 % Total revenue $ 535,315 $ 507,406 $ 27,909 5.5 % Percentage of Revenue Direct to Consumer 88.2 % 88.3 % Commerce 11.8 % 11.7 % Direct to Consumer revenue increased by $23.9 million, or 5.3% , for the fiscal year ended March 31, 2023 compared to the fiscal year ended March 31, 2022.
On May 27, 2022, the Company and Western Alliance entered into the twelfth loan and security modification agreement, which extended the Credit Facility maturity date to June 30, 2022. As of March 31, 2022, there were no borrowings under the Credit Facility.
On May 27, 2022, the Company and Western Alliance entered into the twelfth loan and security modification agreement, which extended the Credit Facility maturity date to June 30, 2022. On June 30, 2022, the Company and Western Alliance entered into the thirteenth loan and security modification agreement, which extended the Credit Facility maturity date to July 15, 2022.
Online marketplaces revenue is recognized upon delivery of goods to the end customer. 32 Table of Contents Cost of Revenue Cost of revenue primarily consists of the purchase price of inventory sold, inbound freight costs associated with inventory, shipping supply costs, and inventory shrinkage costs. Operating Expenses Operating expenses consist of general and administrative and advertising and marketing expenses.
Cost of Revenue Cost of revenue primarily consists of the purchase price of inventory sold, inbound freight costs associated with inventory, shipping supply costs, and inventory shrinkage costs. Operating Expenses Operating expenses consist of general and administrative and advertising and marketing expenses.
Cash flows used in Investing Activities For the fiscal years ended March 31, 2022, 2021, and 2020, net cash used in investing activities was $21.2 million, $4.8 million, and $4.7 million respectively , primarily due to capital expenditures for warehouse machinery, leasehold improvements and equipment.
For the fiscal year ended March 31, 2022, and 2021, net cash used in investing activities was $21.2 million and $4.8 million, respectively , primarily due to capital expenditures for warehouse machinery, leasehold improvements, equipment, and the capitalization of labor and license costs associated with software development for internal use.
We received net proceeds of approximately $74.7 million from the sale of the 2025 Convertible Notes, after deducting fees and expenses of approximately $0.3 million. 44 Table of Contents We used approximately $27.6 million of the net proceeds from the sale of the 2025 Convertible Notes to repay the outstanding term loans with Western Alliance Bank and Pinnacle Ventures, LLC (“Pinnacle”), which included $2.0 million of early repayment fees related to the Pinnacle loan.
On November 27, 2020, the Company used approximately $27.6 million of the net proceeds from the sale of the 2025 Convertible Notes to repay the previously outstanding term loans with Western Alliance Bank and Pinnacle Ventures, LLC (“Pinnacle”), which included $2.0 million of early repayment fees related to the Pinnacle loan. The 2025 Convertible Notes are governed by the Indenture.
For the fiscal year ended March 31, 2020, $19.7 million of net cash used in operating activities consisted of a net loss of $31.4 million adjusted for non-cash charges of $4.7 million and a net increase of $7.0 million in our net operating assets and liabilities.
For the fiscal year ended March 31, 2023, net cash provided by operating activities was $4.7 million. The $4.7 million of net cash provided by operating activities consisted of net loss of $61.5 million adjusted for non-cash charges totaling $26.3 million and a net increase of $39.9 million in our net operating assets and liabilities.
We calculate Adjusted EBITDA Margin by dividing Adjusted EBITDA for the period by revenue for the period. The Non-GAAP Measures are financial measures that are not required by, or presented in accordance with GAAP.
We calculate Adjusted EBITDA Margin by dividing Adjusted EBITDA for the period by revenue for the period. We calculate Free Cash Flow as net cash provided by (used in) operating activities less capital expenditures. The Non-GAAP Measures are financial measures that are not required by, or presented in accordance with U.S. GAAP.
Commerce gross profit increased by $9.6 million for the fiscal year ended March 31, 2021 compared to the fiscal year ended March 31, 2020. Gross profit as a percentage of revenue decreased for the fiscal year ended March 31, 2021 compared to the fiscal year ended March 31, 2020.
Gross profit as a percentage of revenue increased to 57.6% for the fiscal year ended March 31, 2023 compared to 55.6% for the fiscal year ended March 31, 2022.
We calculate Adjusted EBITDA as net income (loss), adjusted to exclude: (1) interest expense, (2) depreciation and amortization, (3) stock-based compensation expense, (4) change in fair value of warrants and derivatives, (5) sales and use tax expense, (6) one-time transaction costs associated with the financing and merger, (7) demurrage fees related to freight and (8) other one-time items.
We calculate Adjusted EBITDA as net loss, adjusted to exclude: (1) interest expense (2) depreciation and amortization expense, (3) stock-based compensation expense, (4) change in fair value of warrants and derivatives, (5) sales and use tax expense (income), (6) restructuring charges related to reduction in force payment, (7) executive transition costs (8) duplicate rent expense incurred during the relocation of our corporate headquarters, (9) impairment of assets (10) transaction costs (11) demurrage fees related to freight and (11) other items (as defined below).
We calculate Adjusted Net Income (Loss) as net income (loss), adjusted to exclude: (1) stock-based compensation expense, (2) change in fair value of warrants and derivatives, (3) sales and use tax expense, (4) one-time transaction costs associated with the financing and merger, (5) demurrage fees related to freight and (6) other one-time items.
We calculate Adjusted Net Loss as net loss, adjusted to exclude: (1) stock-based compensation expense, (2) change in fair value of warrants and derivatives, (3) sales and use tax expense (income), (4) restructuring charges related to reduction in force payments, (5) executive transition costs, (6) duplicate rent expense incurred as a result of relocating our corporate headquarters, (7) asset impairment charges, (8) transaction costs associated with the Merger, (9) demurrage fees related to freight, and (10) other items (as defined below).
The non-cash charges primarily consisted of $1.8 million for stock-based compensation, $1.4 million for depreciation and amortization and $1.3 million for amortization of deferred financing fees and debt discount.
The non-cash charges primarily consisted of $14.8 million for stock based compensation, $9.4 million for depreciation and amortization, and $4.9 million of right-of-use asset amortization .
In addition, the COVID-19 pandemic has had, and continues to have, an unprecedented and unexpected effect on the global economy, civil society, labor markets, and certain industries. As a result, it is difficult to predict the magnitude or scope of the impact these effects will or may have directly, or indirectly, on our business, operating results and financial condition.
As a result, it is difficult to predict the magnitude or scope of the impact that these effects may have directly, or indirectly, on our business, operating results and financial condition in the future.
If market conditions were to change, including as a result of the current conflict in Ukraine and its broader macroeconomic implications or the COVID-19 pandemic and the supply chain and logistics disruptions globally, it is possible that the required level of inventory reserves may need to be adjusted. 47 Table of Contents Recent Accounting Pronouncements A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 in our audited consolidated financial statements contained in this Annual Report on Form 10-K.
If market conditions were to change, including as a result of the current war in the Ukraine and its broader macroeconomic implications or the COVID-19 pandemic and the supply chain and logistics disruptions globally, it is possible that the required level of inventory reserves may need to be adjusted.
Other Income (Expense), Net Fiscal Year Ended March 31, 2021 2020 $ Change % Change ( in thousands) Other income (expense), net $ 131 $ 679 $ (548) -80.7 % Percentage of revenue — % 0.3 % Other income decreased by $0.5 million, or 80.7%, for the fiscal year ended March 31, 2021 compared to the fiscal year ended March 31, 2020.
Interest Income (Expense), Net Fiscal Year Ended March 31, 2023 2022 $ Change % Change ( in thousands) Interest income (expense), net $ (4,372) $ (5,464) $ 1,092 (20.0) % Percentage of revenue (0.8) % (1.1) % Interest income (expense), net decreased by $1.1 million, or 20.0% , for the fiscal year ended March 31, 2023 compared to the fiscal year ended March 31, 2022.
The 2025 Convertible Notes will mature on December 1, 2025, unless earlier converted, redeemed or repurchased. Cash Flows Comparison of the Fiscal Years Ended March 31, 2022, 2021 and 2020.
The 2025 Convertible Notes will mature on December 1, 2025, unless earlier converted, redeemed or repurchased.
Advertising and Marketing Advertising and marketing expense consists primarily of internet advertising, promotional items, agency fees, other marketing costs and compensation and benefits expenses, including stock-based compensation expense, for employees engaged in advertising and marketing.
General and administrative expenses also includes fees charged by third parties that provide payment processing services, office expense, including rent, insurance and professional service fees. 33 Table of Contents Advertising and Marketing Advertising and marketing expense consists primarily of internet advertising, promotional items, agency fees, other marketing costs and compensation and benefits expenses, including stock-based compensation expense, for employees engaged in advertising and marketing.
Advertising and Marketing Fiscal Year Ended March 31, 2021 2020 $ Change % Change ( in thousands) Advertising and marketing $ 67,029 $ 46,147 $ 20,882 45.3 % Percentage of revenue 17.7 % 20.6 % Advertising and marketing expense increased by $20.9 million, or 45.3%, for the fiscal year ended March 31, 2021 compared to the fiscal year ended March 31, 2020.
Advertising and Marketing Fiscal Year Ended March 31, 2023 2022 $ Change % Change ( in thousands) Advertising and marketing $ 68,807 $ 74,417 $ (5,610) (7.5) % Percentage of revenue 12.9 % 14.7 % Advertising and marketing expense decreased by $5.6 million, or 7.5%, for the fiscal year ended March 31, 2023 compared to the fiscal year ended March 31, 2022.
Revenue Recognition Our primary source of revenue is from of our toys and treats subscriptions and sales of good through retailers, third parties or our website. We recognize revenue upon delivery of products and services to our subscriber or customer, as applicable.
Revenue Recognition Our primary sources of revenue are from sales of toys and accessories and consumables through our Direct to Consumer and Commerce segments. We recognize revenue upon delivery of products and services to our customer, as applicable.
Our historical estimates of inventory reserves have not differed materially from actual results.
We believe that all inventory write-downs required at March 31, 2023, have been recorded. Our historical estimates of inventory reserves have not differed materially from actual results.
(4) For fiscal year ended March 31, 2022, other one-time items is comprised of loss on extinguishment of debt of $2.0 million, executive transition costs, including recruiting, bonus and relocation related expenses of $1.9 million, costs related to unrealized business ventures of $1.8 million, SOX implementation fees of $0.7 million, loss on exercise of warrants of $0.1 million and restructuring related expenses of $0.1 million.
For fiscal year ended March 31, 2022, one-time items is comprised of loss on extinguishment of debt of $2.0 million, costs related to unrealized business ventures of $1.8 million, SOX implementation fees of $0.7 million, and loss on exercise of warrants of $0.1 million. 43 Table of Contents The following table presents a reconciliation of Free Cash Flow to Net cash provided by (used in) operating activities, the most directly comparable financial measure prepared in accordance with U.S.
Commerce revenue increased by $24.5 million for the fiscal year ended March 31, 2021 compared to the fiscal year ended March 31, 2020.
Other income (expense), net decreased by $24.7 million for the fiscal year ended March 31, 2023 compared to the fiscal year ended March 31, 2022.
Please refer to the “Special Note Regarding Forward-Looking Statements” and the “Risk Factors” in this Annual Report on Form 10-K. Key Performance Indicators We use the following key financial and operating metrics to evaluate our business and operations, measure our performance, identify trends affecting our business, project our future performance, and make strategic decisions.
Please refer to the “Cautionary Note Regarding Forward-Looking Statements” and those factors described under “Risk Factors” in this Annual Report on Form 10-K. 29 Table of Contents Key Performance Indicators We are introducing the following key performance indicators ("KPIs") to more accurately align with the Company's current business operations and strategic focus.
Subscription revenue is recognized at a point in time as control is transferred to the subscriber upon delivery of each monthly box. On a monthly basis, toys and treats subscription customers have the option to purchase additional toys, treats, or essential products to add to their respective subscription boxes, through our add to box (“ATB”) offering.
Subscription revenue is recognized at a point in time as control is transferred to the subscriber upon delivery of each monthly box. During the life of their subscription, we offer customers incremental products via ATB, which enables us to cross-sell customers into our full portfolio of products, including kibble, treats, toppers, dental and more.
(2) Transactions costs represent non-recurring consulting and advisory costs with respect to the merger agreement entered into with Northern Star Acquisition Corp. on December 16, 2020. (3) Demurrage fees are raised when the full container is not moved out of the port/terminal for unpacking within the allowed free days offered by the shipping line.
Subsequently, as certain of these liabilities are waived by tax authorities or the applicable statute of limitations expires, the related accrued liability is reversed. (2) Transactions costs represent non-recurring consulting and advisory costs with respect to the merger agreement entered into with Northern Star Acquisition Corp. on December 16, 2020.
Western Alliance has a first lien perfected security interest in substantially all of our assets, including our rights to our intellectual property.
Western Alliance has first perfected security in substantially all of the Company’s assets, including its rights to its intellectual property. As of March 31, 2023 and March 31, 2022, there were no outstanding borrowings under the Credit Facility.
Expansion of new offerings We expect to continue to invest in the expansion of our new offerings, including BARK Food, BARK Bright and potential new offerings. By expanding our product lines we seek to attract new customers as well as increase sales to our existing customers.
We expect to continue to invest in the expansion of our product offerings, particularly in the consumables space, as we seek to attract new customers as well as growing sales with our existing customers. This expansion may require additional financial investments in headcount, marketing, customer acquisition expenses, operational capabilities and inventory.
This increase was primarily due to volume increases amongst existing retail partners, as well as the addition of new retail partners since March 31, 2020. 37 Table of Contents Gross Profit Fiscal Year Ended March 31, 2021 2020 $ Change % Change ( in thousands) Gross Profit Direct to Consumer $ 205,926 $ 124,960 $ 80,966 64.8 % Commerce $ 20,014 $ 10,454 $ 9,560 91.4 % Total gross profit $ 225,940 $ 135,414 $ 90,526 66.9 % Percentage of revenue 59.7 % 60.4 % Direct to Consumer gross profit increased by $81.0 million for the fiscal year ended March 31, 2021 compared to the fiscal year ended March 31, 2020.
Commerce revenue increased by $4.0 million, or 6.7%, for the fiscal year ended March 31, 2023 compared to the fiscal year ended March 31, 2022. This increase was primarily driven by the addition of new retail partners since March 31, 2022, as well as volume increases amongst existing retail partners during the period.
Impact of COVID-19 The extent to which the COVID-19 pandemic will continue to impact our business will depend on future developments related to the geographic spread of the disease, the duration and severity of the outbreak, travel restrictions, required social distancing, governmental mandates, business closures or governmental or business disruptions, and the effectiveness of actions taken in the United States and other countries to prevent, contain and treat the virus and any additional government stimulus programs.
In the past, the COVID-19 pandemic resulted in travel restrictions, required social distancing, business closures, governmental and business disruptions, and other actions taken by the United States government and the governments of other countries.
Comparison of the Fiscal Years Ended March 31, 2021 and March 31, 2020 Revenue Fiscal Year Ended March 31, 2021 2020 $ Change % Change ( in thousands) Revenue Direct to Consumer $ 333,970 $ 204,151 $ 129,819 63.6 % Commerce 44,634 20,184 24,450 121.1 % Total revenue $ 378,604 $ 224,335 $ 154,269 68.8 % Percentage of Revenue Direct to Consumer 88.2 % 91.0 % Commerce 11.8 % 9.0 % Direct to Consumer revenue increased by $129.8 million, or 63.6% , for the fiscal year ended March 31, 2021 compared to the fiscal year ended March 31, 2020.
Additionally, in fiscal 2022 the Company incurred $2.0 million of expense related to the loss on extinguishment of debt incurred from conversion of the convertible promissory notes issued in 2019 and 2020 in connection with the Merger during the prior period. 38 Table of Contents Comparison of the Fiscal Years Ended March 31, 2022 and March 31, 2021 Revenue Fiscal Year Ended March 31, 2022 2021 $ Change % Change ( in thousands) Revenue Direct to Consumer $ 448,074 $ 333,970 $ 114,104 34.2 % Commerce 59,332 44,634 14,698 32.9 % Total revenue $ 507,406 $ 378,604 $ 128,802 34.0 % Percentage of Revenue Direct to Consumer 88.3 % 88.2 % Commerce 11.7 % 11.8 % Direct to Consumer revenue increased by $114.1 million, or 34.2% , for the fiscal year ended March 31, 2022 compared to the fiscal year ended March 31, 2021.
BARK Food —BARK Food revenue consists of sales of personalized and nutritious meals for dogs sold at a meal per day price. Revenue is recognized at a point in time, as control is transferred to the customer upon delivery of goods. BarkShop —BarkShop revenue consists of sales of individual toys, treats and other products through our website, BarkShop.
Revenue related to food.BARK.co is recognized at a point in time, as control is transferred to the customer upon each delivery. Treats — Includes treats and chews included in our BarkBox and Super Chewer boxes, as well as the sale of treats on our consumables website. Many of our treats feature monthly themes, similar to our toys.
As of March 31, 2021 and 2020 the weighted-average interest rate for the Western Alliance Credit Facility and term loans was 5.75% and 6.09%, respectively. The Credit Facility has a borrowing base subject to an amount equal to eighty percent (80%) of our trailing three months of subscription revenue.
The Credit Facility has a borrowing base subject to an amount equal to eighty percent (80.00%) of the Company’s trailing three months of subscription revenue and an amount equal to (80.00%) of certain of the Company’s customer accounts receivable when a collateral audit is performed and sixty percent (60.00%) when no such collateral audit is performed.
This increase was primarily due to the 52.5% or 4.0 million increase in Subscription Shipments. Additionally, ATB revenue increased by $15.1 million during the period, from $2.4 million to $17.5 million for the fiscal years ended March 31, 2020 and 2021, respectively.
This increase was primarily driven by a $2.18 or 7.3% increase in A verage Order Value, due to increased shipping fees and cross selling offset by a 1.8% or 0.3 million decrease in Subscription Shipments during the period.
This decrease in Other income was due to increased expense of $1.0 million related changes in fair value of our derivative liabilities and decreased rental income from our subleases of $0.3 million, offset by $0.8 million of other income related to a settlement agreement payment received during the period. 39 Table of Contents Non-GAAP Financial Measures We report our financial results in accordance with GAAP.
The decrease in other income (expense), net was primarily due to the $27.8 million decrease of income related to the changes in fair value of our warrant liabilities, offset by an increase in other income of $1.1 million.
For the fiscal year ended March 31, 2020, net cash provided by financing activities was $22.7 million, primarily due to proceeds from the Western Alliance term loan of $10.0 million, Pinnacle term loan of $7.6 million, and convertible notes issuances of $5.4 million.
Cash flows provided by (used in) Financing Activities For the fiscal year ended March 31, 2023, net cash used in financing activities was $2.1 million, primarily due to payments for finance lease obligations.
On June 11, 2021, we voluntarily repaid the outstanding principal and interest amounts outstanding of the PPP loan. 2025 Convertible Notes On November 27, 2020, we issued $75.0 million aggregate principal amount of 2025 Convertible Notes to Magnetar Capital, LLC (“Magnetar”).
As of March 31, 2023, we had fixed lease payment obligations of $53.2 million, with $5.6 million payable within 12 months. 2025 Convertible Notes On November 27, 2020, the Company issued $75.0 million aggregate principal amount of 2025 Convertible Notes (the “2025 Convertible Notes”) to Magnetar Capital, LLC (“Magnetar”) under an indenture, dated as of November 27, 2020, between Legacy BARK and U.S.
Under the terms of this Credit Facility, we are required to comply with certain financial and nonfinancial covenants, including covenants to maintain certain liquidity amounts, as defined in the Western Alliance Agreement, as amended. 43 Table of Contents Convertible Promissory Notes On December 19, 2019, we entered into a note purchase agreement and issued individual convertible promissory notes thereunder, with an option for subsequent closings through May 1, 2020 for up to $10.0 million in aggregate principal.
Under the terms of this Credit Facility, the Company is required to comply with certain financial and non-financial covenants, including covenants to maintain certain liquidity amounts, as defined in the amended Western Alliance Agreement. As of March 31, 2023 and March 31, 2022, the Company was compliant with its financial covenants.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeA hypothetical 10% increase in interest rates during any of the periods presented would not have had a material impact on our consolidated financial statements. We are primarily exposed to changes in short-term interest rates with respect to our cost of borrowing under our Western Alliance Agreement.
Biggest changeDue to the short-term duration of our cash equivalents, we have not been exposed, nor do we anticipate being exposed, to material risks due to changes in interest rates. A hypothetical 10% increase in interest rates during any of the periods presented would not have had a material impact on our consolidated financial statements.
As of March 31, 2022 there are no outstanding borrowings under the Credit Facility. We monitor our cost of borrowing under our facility, taking into account our funding requirements, and our expectations for short-term rates in the future.
We are primarily exposed to changes in short-term interest rates with respect to our cost of borrowing under our Western Alliance Agreement. As of March 31, 2023 there are no outstanding borrowings under the Credit Facility. We monitor our cost of borrowing under our facility, taking into account our funding requirements, and our expectations for short-term rates in the future.
Foreign Exchange Risk We operate our business primarily within the United States and currently execute the majority of our transactions in U.S. dollars. We have not utilized hedging strategies with respect to such foreign exchange exposure. This limited foreign currency translation risk is not expected to have a material impact on our consolidated financial statements. 49 Table of Contents
As a result, we have only limited foreign translation or exchange risk, which we do not expect to have a material impact on our consolidated financial statements. We have not utilized hedging strategies with respect to such limited foreign translation or exchange risk. 50 Table of Contents
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Risk We had cash and cash equivalents of approximately $199.4 million as of March 31, 2022. We do not participate in any investment activities. We have not been exposed, nor do we anticipate being exposed, to material risks due to changes in interest rates.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Risk As of March 31, 2023, we had cash and cash equivalents of approximately $177.9 million consisting of bank deposits and money market accounts.
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Please refer to the Part I, Item 1A: “Risk Factors” in this Annual Report on Form 10-K for further information. Foreign Exchange Risk We operate our business primarily within the United States and currently execute the majority of our transactions in U.S. dollars.

Other BARK 10-K year-over-year comparisons