Lulus Fashion Lounge Holdings Inc

Previous wording

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, as well as our audited consolidated financial statements and related notes as disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the Securities and Exchange Commission (“SEC”) on March 6, 2024 (the “2023 10-K”). This discussion contains forward-looking statements based upon current plans, expectations and beliefs involving risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in Item I, Part 1A, “Risk Factors” of the 2023 10-K and other factors set forth in other parts of this Quarterly Report on Form 10-Q. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained in this Quarterly Report on Form 10-Q, whether as a result of any new information, future events or otherwise*.*

Current wording

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, as well as our audited consolidated financial statements and related notes as disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the Securities and Exchange Commission (“SEC”) on March 6, 2024 (the “2023 10-K”). This discussion contains forward-looking statements based upon current plans, expectations and beliefs involving risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in Item I, Part 1A, “Risk Factors” in the 2023 10-K, Part II, Item 1A, “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, and Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q for the quarter ended September 29, 2024. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained in this Quarterly Report on Form 10-Q, whether as a result of any new information, future events or otherwise*.*

Previous wording

Lulus is a customer-driven, primarily online, digitally-native, attainable luxury fashion brand for women, offering modern, unapologetically feminine designs at attainable prices for all of life’s fashionable moments. Our aim is to make every woman feel beautiful, celebrated and as if she’s the most special version of herself for every occasion – from work desk to dream date or cozied up on the couch to the spotlight of her wedding day. Lulus primarily serves a large, diverse community of Millennial and Gen Z women, who typically meet us in their 20s and stay with us through their 30s and beyond. We focus relentlessly on giving our customers what they want by using direct consumer feedback and insights to refine product offerings and elevate the customer experience. Lulus’ world class personal stylists, bridal concierge, and customer care team share an unwavering commitment to elevating style and quality and bring exceptional customer service and personalized shopping to customers around the world.

Current wording

Lulu’s Fashion Lounge Holdings, Inc., a Delaware Corporation (“Lulus”, “we”, “our”, or the “Company”) is a customer-driven, primarily online, digitally-native, attainable luxury fashion brand for women, offering modern, unapologetically feminine designs at attainable prices for all of life’s fashionable moments. Our aim is to make every woman feel beautiful, celebrated and as if she’s the most special version of herself for every occasion – from work desk to dream date or cozied up on the couch to the spotlight of her wedding day. Lulus primarily serves a large, diverse community of Millennial and Gen Z women, who typically meet us in their 20s and stay with us through their 30s and beyond. We focus relentlessly on giving our customers what they want by using direct consumer feedback and insights to refine product offerings and elevate the customer experience. Lulus’ world class personal stylists, bridal concierge, and customer care team share an unwavering commitment to elevating style and quality and bring exceptional customer service and personalized shopping to customers around the world.

Previous wording

Changing macroeconomic factors, including inflation, interest rates, and overall consumer confidence with respect to current and future economic conditions, have directly impacted our sales in the first six months of 2024 as discretionary consumer spending levels and shopping behavior fluctuate with these factors. During the first six months of 2024, we have responded to these factors by taking appropriate pricing, promotional and other actions to stimulate customer demand. These factors are expected to continue to have an impact on our business, results of operations, our growth and financial condition.

Current wording

Changing macroeconomic factors, including inflation, interest rates, student loan repayment resumption, world events, wars and domestic and international conflicts and overall consumer confidence with respect to current and future economic conditions, have directly impacted our sales through the first nine months of 2024 as discretionary consumer spending levels and shopping behavior fluctuate with these factors. We have responded to these factors by taking appropriate pricing, promotional and other actions to stimulate customer demand. These factors are expected to continue to have an impact on our business, results of operations, our growth and financial condition.

Previous wording

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. During the thirteen and twenty-six weeks ended June 30, 2024, we incurred net losses of $10.8 million and $16.5 million, respectively.

Current wording

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. During the thirteen and thirty-nine weeks ended September 29, 2024, we incurred net losses of $6.9 million and $23.4 million, respectively.

Previous wording

In November 2021, we entered into a Credit Agreement (the “2021 Credit Agreement”) with Bank of America to provide a Revolving Facility (the “2021 Revolving Facility”) that provided for borrowings up to $50.0 million. The 2021 Credit Agreement contained various financial covenants and had a maturity date of November 15, 2024 as described in Note 5,Debt. As of June 30, 2024, we had total cash and cash equivalents of $1.8 million and no amounts due under the 2021 Revolving Facility. On July 22, 2024, we entered into an amendment to the 2021 Credit Agreement (the “2024 Amended Credit Agreement”) as described in Note 13, Subsequent Events.

Current wording

In November 2021, we entered into a Credit Agreement (the “2021 Credit Agreement”) with Bank of America (the “lender”) to provide a Revolving Facility (the “2021 Revolving Facility”) that provided for borrowings up to $50.0 million. On July 22, 2024, we entered into the First Amendment to the Credit Agreement (the “2024 Amended Credit Agreement”) which reduced the Revolving Commitment (as defined in the 2021 Credit Agreement) to $15.0 million, and further reduces the 2021 Revolving Facility to $10.0 million on March 31, 2025 and extended the maturity date to August 15, 2025, as further described in Note 5, Debt. As of September 29, 2024, we had total cash and cash equivalents of $6.3 million and $11.5 million due under the 2024 Amended Credit Agreement classified within total current liabilities. We borrowed an additional $1.6 million under the terms of the 2024 Amended Credit Agreement subsequent to September 29, 2024.

Previous wording

financing as needed. As the ability to raise additional debt financing is outside of our control, we cannot conclude that our plans will be effectively implemented within twelve months from the date the condensed consolidated financial statements are issued. Accordingly, we have concluded that these plans do not alleviate substantial doubt about our ability to continue as a going concern. The condensed consolidated financial statements do not reflect any adjustments relating to the outcome of this uncertainty.

Current wording

We are actively seeking alternative debt financing and continue to take certain cash conservation measures, including adjustments to marketing and other fixed and variable costs and capital spend to meet our obligations as needed. As the ability to raise additional debt financing is outside of management’s control, we cannot conclude that management’s plans will be effectively implemented within twelve months from the date the condensed consolidated financial statements are issued. Accordingly, we have concluded that these plans do not alleviate substantial doubt about our ability to continue as a going concern. The condensed consolidated financial statements do not reflect any adjustments relating to the outcome of this uncertainty.

Previous wording

primarily on our GAAP results and using these non-GAAP measures only supplementally. As noted in the table below, Adjusted EBITDA includes adjustments to exclude the impact of depreciation and amortization, interest expense, income taxes, equity-based compensation expense and other non-routine expenses. It is reasonable to expect that some of these items will occur in future periods. However, we believe these adjustments are appropriate because the amounts recognized can vary significantly from period to period, do not directly relate to the ongoing operations of our business and may complicate comparisons of our internal results of operations and results of operations of other companies over time. In addition, Adjusted EBITDA includes adjustments for other items that we do not expect to regularly record. Each of the normal recurring adjustments and other adjustments described in this paragraph and in the following reconciliation table help management with a measure of our core operating performance over time by removing items that are not related to day-to-day operations. Adjusted EBITDA Margin is a non-GAAP financial measure that we calculate as Adjusted EBITDA (as defined above) as a percentage of our net revenue.

Current wording

Due to these limitations, Adjusted EBITDA and Adjusted EBITDA Margin should not be considered as measures of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using these non-GAAP measures only supplementally. As noted in the table below, Adjusted EBITDA includes adjustments to exclude the impact of depreciation and amortization, interest expense, income taxes, equity-based compensation expense and other non-routine expenses. It is reasonable to expect that some of these items will occur in future periods. However, we believe these adjustments are appropriate because the amounts recognized can vary significantly from period to period, do not directly relate to the ongoing operations of our business and may complicate comparisons of our internal results of operations and results of operations of other companies over time. In addition, Adjusted EBITDA includes adjustments for other items that we do not expect to regularly record. Each of the normal recurring adjustments and other adjustments described in this paragraph and in the following reconciliation table help management with a measure of our core operating performance over time by removing items that are not related to day-to-day operations. Adjusted EBITDA Margin is a non-GAAP financial measure that we calculate as Adjusted EBITDA (as defined above) as a percentage of our net revenue.

Previous wording

A reconciliation to non-GAAP Free Cash Flow from net cash provided by operating activities for the thirteen and twenty-six weeks ended June 30, 2024 and July 2, 2023 is as follows:

Current wording

A reconciliation to non-GAAP Free Cash Flow from net cash provided by operating activities for the thirteen and thirty-nine weeks ended September 29, 2024 and October 1, 2023 is as follows:

Previous wording

Our financial condition and results of operations have been, and will continue to be, affected by a number of factors that present significant opportunities for us but also pose risks and challenges, including what is discussed below. See Part I, “Item 1A. Risk Factors” in our 2023 10-K.

Current wording

Our financial condition and results of operations have been, and will continue to be, affected by a number of factors that present significant opportunities for us but also pose risks and challenges, including what is discussed below. See Part I, “Item 1A. Risk Factors” in our 2023 10-K and* *Part II, Item 1A of our Quarterly Reports on Form 10-Q for the quarters ended June 30, 2024 and September 29, 2024.

Previous wording

Our continued success depends in part on our ability to retain and drive repeat purchases from our existing customers. We monitor retention across our entire customer base. Our goal is to attract and convert visitors into Active Customers and foster relationships that drive repeat purchases. During the trailing 12 months ended June 30, 2024, we served 2.7 million Active Customers compared to 3.1 million for the trailing 12 months ended July 2, 2023.

Current wording

Our continued success depends in part on our ability to retain and drive repeat purchases from our existing customers. We monitor retention across our entire customer base. Our goal is to attract and convert visitors into Active Customers and foster relationships that drive repeat purchases. During the trailing 12 months ended September 29, 2024, we served 2.7 million Active Customers compared to 3.0 million for the trailing 12 months ended October 1, 2023.

Previous wording

We utilize a data-driven strategy that leverages our proprietary reorder algorithm to manage inventory as efficiently as possible. Our “test, learn, and reorder” approach consists of limited inventory purchases followed by the analysis of proprietary data including real-time transaction data and customer feedback, which then informs our selection and customization of popular merchandise prior to reordering in larger quantities. While our initial orders are limited in size and financial risk and our supplier partners are highly responsive, we nonetheless purchase inventory in anticipation of future demand and therefore are exposed to potential shifts in customer preferences and price sensitivity over time. As we continue to grow, we will adjust our inventory purchases to align with the current needs of the business.

Current wording

We utilize a data-driven strategy that leverages our proprietary reorder algorithm to manage inventory as efficiently as possible. Our “test, learn, and reorder” approach consists of limited inventory purchases followed by the analysis of proprietary data including real-time transaction data and customer feedback, which then informs our selection and customization of popular merchandise prior to reordering in larger quantities. While our initial orders are limited in size

Previous wording

We regularly assess the realizability of deferred tax assets and record a valuation allowance to reduce the deferred tax assets to the amount that is more likely than not to be realized. In assessing the realizability of our deferred tax assets, we weigh all available positive and negative evidence. This evidence includes, but is not limited to, historical earnings, scheduled reversal of taxable temporary differences, tax planning strategies and projected future taxable income. Due to the weight of objectively verifiable negative evidence, we established a valuation allowance of $5.4 million against certain federal and state deferred tax assets during the thirteen weeks ended June 30, 2024. This was comprised of a valuation allowance of $5.7 million for the net deferred tax assets as of December 31, 2023 and an adjustment of $0.3 million for the twenty-six week period through June 30, 2024. The significant piece of objectively verifiable negative evidence evaluated was the recent cumulative losses. Our ability to use our deferred tax assets depends on the amount of taxable income in future periods.

Current wording

We regularly assess the realizability of deferred tax assets and record a valuation allowance to reduce the deferred tax assets to the amount that is more likely than not to be realized. In assessing the realizability of our deferred tax assets, we weigh all available positive and negative evidence. This evidence includes, but is not limited to, historical earnings, scheduled reversal of taxable temporary differences, tax planning strategies and projected future taxable income. Due to the weight of objectively verifiable negative evidence, we established a valuation allowance of $5.4million during the thirteen weeks ended June 30, 2024 and maintained such valuation allowance for the thirty-nine weeks ended September 29, 2024. This was comprised of a valuation allowance of $5.7 million for the net deferred tax assets as of December 31, 2023 and an adjustment of $0.3 million for the thirty-nine week period through September 29, 2024. The significant piece of objectively verifiable negative evidence evaluated was the recent cumulative losses. Our ability to use our deferred tax assets depends on the amount of taxable income in future periods.

Previous wording

Cost of revenue decreased in the thirteen weeks ended June 30, 2024 by $8.6 million, or 15% compared to the same period of the prior year, which was primarily driven by the impact of lower net revenue.

Current wording

Cost of revenue increased in the thirteen weeks ended September 29, 2024 by $0.3 million, or 1% compared to the same period of the prior year. The increase in cost of revenue as a percentage of net revenue was primarily due to a higher mix of markdown sales compared to the same period of the prior year.

Previous wording

Gross profit decreased in the thirteen weeks ended June 30, 2024 by $5.5 million, or 12% compared to the same period of the prior year which was primarily driven by the impact of the lower volume of sales.

Current wording

Gross profit decreased in the thirteen weeks ended September 29, 2024 by $2.9 million, or 9% compared to the same period of the prior year which was primarily driven by higher markdowns and discounts.

Previous wording

Selling and marketing expenses increased in the thirteen weeks ended June 30, 2024 by $0.2 million, or 1%, compared to the thirteen weeks ended July 2, 2023, primarily due to higher brand marketing spend as we invested more in brand awareness.

Current wording

Selling and marketing expenses increased in the thirteen weeks ended September 29, 2024 by $0.8 million, or 5%, compared to the thirteen weeks ended October 1, 2023, primarily due to higher online marketing costs.

Previous wording

General and administrative expenses decreased by $6.2 million in the twenty-six weeks ended June 30, 2024, or 13%, compared to the twenty-six weeks ended July 2, 2023. The decrease was primarily due to a $4.9 million decrease in equity based compensation expense, a $2.1 million decrease in variable labor and benefits costs primarily associated with lower sales volume and operational efficiencies, and a $0.6 million decrease in D&O insurance costs, partially offset by $0.5 million higher fixed labor costs, a $0.4 million increase in non-routine items accruals, a $0.3 million increase in depreciation and amortization and a $0.2 million increase in software expenses.

Current wording

General and administrative expenses decreased by $1.7 million in the thirteen weeks ended September 29, 2024, or 8%, compared to the thirteen weeks ended October 1, 2023. The decrease was primarily due to a $2.2 million decrease in stock based compensation expense, a $0.4 million decrease in non-routine items accruals, a $0.3 million decrease in D&O liability insurance and legal and professional fees, a $0.2 million decrease in variable labor and benefits associated with lower sales volume and operational efficiencies, and a $0.1 million decrease in board-related fees due to the reduction of our board size and temporary suspension of director cash compensation. This was partially offset by a $1.5 million increase in software, fixed labor, and depreciation and amortization.

Previous wording

Interest expense decreased in the thirteen weeks ended June 30, 2024 by $0.2 million, or 37%, compared to the thirteen weeks ended July 2, 2023. The decrease is attributable to lower average borrowings, offset by higher interest rates driving increased interest expense and unused fees related to the 2021 Revolving Facility.

Current wording

Interest expense decreased in the thirteen weeks ended September 29, 2024 by $0.1 million, or 31%, compared to the thirteen weeks ended October 1, 2023. The decrease is attributable to lower average borrowings and lower unused

Previous wording

Our income tax provision in the thirteen weeks ended June 30, 2024 increased by $5.4 million, to $6.3 million compared to a provision of $0.9 million in the thirteen weeks ended July 2, 2023. The increase was primarily due to the valuation allowance tax expense that was recorded against federal and state deferred tax assets.

Current wording

Our income tax provision in the thirteen weeks ended September 29, 2024 was immaterial, which was an increase of $1.2 million compared to a benefit of $1.2 million in the thirteen weeks ended October 1, 2023. The increase was primarily due to the valuation allowance tax expense that was recorded against federal and state deferred tax assets.

Previous wording

Net revenue decreased in the thirteen weeks ended June 30, 2024 by $14.2 million, or 13%, compared to the thirteen weeks ended July 2, 2023. The decrease is primarily the result of a 14% decrease in Total Orders Placed, as well as higher return rates, partially offset by higher AOV compared to the thirteen weeks ended July 2, 2023.

Current wording

Net revenue decreased in the thirty-nine weeks ended September 29, 2024 by $30.5 million, or 11%, compared to the thirty-nine weeks ended October 1, 2023. The decrease is primarily the result of a 12% decrease in Total Orders Placed, with the impact of higher AOV partially offset by higher return rates compared to thethirty-nine weeks ended October 1, 2023.

Previous wording

Cost of revenue decreased in the twenty-six weeks ended June 30, 2024 by $17.0 million, or 15%, compared to the twenty-six weeks ended July 2, 2023, which was primarily driven by the impact of lower net revenue.

Current wording

Cost of revenue decreased in the thirty-nine weeks ended September 29, 2024 by $16.8 million, or 10%, compared to the thirty-nine weeks ended October 1, 2023, which was primarily driven by the impact of lower net revenue.

Previous wording

Gross profit decreased in thetwenty-sixweeks ended June 30, 2024 by $10.8 million, or 13% compared to thetwenty-six weeks ended July 2, 2023, which was primarily driven by the impact of the lower volume of sales.

Current wording

Gross profit decreased in thethirty-nine weeks ended September 29, 2024 by $13.7 million, or 12% compared to thethirty-nine weeks ended October 1, 2023, which was primarily driven by the impact of the lower volume of sales along with higher markdowns and discounts.

Previous wording

Selling and marketing expenses decreased in the twenty-six weeks ended June 30, 2024 by $1.6 million, or 4%, compared to the twenty-six weeks ended July 2, 2023 due to lower performance marketing spend and favorability in merchant processing fees due to the lower sales volume, partially offset by higher brand marketing spend as we invested more in brand awareness.

Current wording

Selling and marketing expenses decreased in the thirty-nine weeks ended September 29, 2024 by $0.8 million, or 1%, compared to the thirty-nine weeks ended October 1, 2023 due to lower performance marketing spend and lower merchant fees due to lower sales volume, partially offset by higher brand marketing spend.

Previous wording

General and administrative expenses decreased by $3.0 million in the thirteen weeks ended June 30, 2024, or 12%, compared to the thirteen weeks ended July 2, 2023. The decrease was primarily due to a $1.3 million decrease in variable labor and benefits associated with lower sales volume and operational efficiencies, and a $2.1 million decrease related to equity-based awards, along with a $0.6 million decrease in D&O liability insurance and legal and professional fees. This was partially offset by a $0.4 million increase in non-routine items accruals, a $0.5 million increase in software, travel fixed labor, depreciation and amortization, and a $0.1 million increase in rent expense predominately due to our Melrose store.

Current wording

General and administrative expenses decreased by $7.9 million in the thirteen weeks ended September 29, 2024, or 11%, compared to the thirteen weeks ended October 1, 2023. The decrease was primarily due to a $7.3 million decrease related to equity-based awards, a $2.3 million decrease in variable labor and benefits associated with lower sales volume and operational efficiencies, and a $1.1 million decrease in D&O liability insurance and legal and professional fees. This was partially offset by a $1.6 million increase in fixed labor and $1.3 million in software, occupancy, depreciation and amortization.

Previous wording

Interest expense decreased in the twenty-six weeks ended June 30, 2024 by $0.3 million, or 31%, compared to the twenty-six weeks ended July 2, 2023. The decrease is attributable to lower average borrowings, partially offset by higher interest rates driving increased interest expense and unused fees related to the 2021 Revolving Facility.

Current wording

Interest expense decreased in the thirty-nine weeks ended September 29, 2024 by $0.4 million, or 31%, compared to the thirty-nine weeks ended October 1, 2023. The decrease is attributable to lower average borrowings and lower unused revolving facility fees, partially offset by higher interest rates.

Previous wording

Our income tax provision in the twenty-six weeks ended June 30, 2024 increased by $5.6 million to $5.8 million, compared to a provision of $0.2 million in the twenty-six weeks ended July 2, 2023. The increase was primarily due to the valuation allowance tax expense that was recorded against federal and state deferred tax assets.

Current wording

Our income tax provision in the thirty-nine weeks ended September 29, 2024 increased by $6.8 million to $5.8 million, compared to a benefit of $1.0 million in the thirty-nine weeks ended October 1, 2023. The increase was primarily due to the valuation allowance tax expense that was recorded against federal and state deferred tax assets.

Previous wording

Our primary sources of liquidity and capital resources are cash generated from operating activities and borrowings under our 2021 Revolving Facility, as amended by the 2024 Amended Credit Agreement**.** Our primary requirements for liquidity and capital are inventory purchases, payroll and general operating expenses, capital expenditures associated with distribution, network expansion and capitalized software and debt service requirements.

Current wording

Our primary sources of liquidity and capital resources are cash generated from operating activities as we have no further access to borrowings under our 2021 Revolving Facility, as amended by the 2024 Amended Credit Agreement. Our primary requirements for liquidity and capital are inventory purchases, payroll and general operating expenses, capital expenditures associated with our distribution facilities, capitalized software and debt service requirements.

Previous wording

The 2021 Revolving Facility had a maturity date of November 15, 2024, and borrowings thereunder accrued interest at a rate equal to, at our option, either (x) the term SOFR rate, plus the applicable SOFR adjustment plus a margin of 1.75% per annum or (y) the base rate plus a margin of 0.75% (with the base rate being the highest of the federal funds rate plus 0.50%, the prime rate and term SOFR for a period of one month plus 1.00%). The 2021 Revolving Facility contained a financial maintenance covenant requiring a maximum total leverage ratio of no more than 2.50:1.00, stepping down to 2.00:1.00 after 18 months. A commitment fee of 37.5 basis points was assessed on unused commitments under the 2021 Revolving Facility.

Current wording

On November 15, 2021, we entered into the 2021 Credit Agreement with the lender to provide the 2021 Revolving Facility that provided for borrowings up to $50.0 million with a maturity date of November 15, 2024. All borrowings under the 2021 Credit Agreement accrued interest at a rate equal to, at our option, either (x) the term daily SOFR plus the applicable SOFR adjustment plus a margin of 1.75% per annum or (y) the base rate plus a margin of 0.75% (with the base rate being the highest of the federal funds rate plus 0.50%, the prime rate and term SOFR for a period of one month plus 1.00%).

Previous wording

On July 22, 2024, we entered into the 2024 Amended Credit Agreement as described in Note 13, Subsequent Events. The 2024 Amended Credit Agreement reduced the 2021 Revolving Facility to $15.0 million and further reduces the 2021 Revolving Facility to $10.0 million on March 31, 2025. During the term of the 2024 Amended Credit Agreement, we may increase the aggregate amount of the facility up to an additional $10.0 million, subject to the satisfaction of certain conditions under the 2024 Amended Credit Agreement, including obtaining the consent of the administrative agent and an increased commitment from existing or new lenders. In addition, the 2024 Amended Credit Agreement may be used to issue letters of credit up to $5.0 million.

Current wording

On July 22, 2024, we entered into the 2024 Amended Credit Agreement which extended the maturity date from November 15, 2024 to August 15, 2025 and reduced the 2021 Revolving Facility from $50.0 million to $15.0 million, with a further reduction to $10.0 million on March 31, 2025. Under the 2024 Amended Credit Agreement, we can increase the aggregate amount of the facility by $10.0 million, subject to the satisfaction of certain conditions, including an asset coverage ratio of at least 1.50:1.00, recalculated as of the last day of the most recently ended month for which financial statements are internally available. The 2024 Amended Credit Agreement also reduced the previous letters of credit sublimit from $7.5 million to $5.0 million.

Previous wording

For the next twelve months, we will continue to take certain cost reduction and cash conservation measures, including adjustments to marketing and other variable and capital spend to meet our obligations and work to secure additional debt

Current wording

We are actively seeking alternative debt financing and continuing to take certain cash conservation measures, including adjustments to marketing and other fixed and variable costs and capital spend to meet our obligations as needed.

Previous wording

As of June 30, 2024, we had cash and cash equivalents of $1.8 million. We will continue to take certain cost reduction and cash conservation measures, including adjustments to marketing and other variable and capital spend to meet our obligations as needed. As the ability to raise additional debt financing is outside of our control, we cannot conclude that our plans will be effectively implemented within twelve months from the date the condensed consolidated financial statements are issued. Accordingly, we have concluded that these plans do not alleviate substantial doubt about our ability to continue as a going concern. The condensed consolidated financial statements do not reflect any adjustments relating to the outcome of this uncertainty. Actual results of operations will depend on numerous factors, many of which are beyond our control, as further discussed in Part I, Item 1A, “Risk Factors” included in our 2023 10-K and risk factors set forth in Part II of this Quarterly Report on Form 10-Q.

Current wording

As of September 29, 2024, we had cash and cash equivalents of $6.3 million. During the thirteen weeks ended September 29, 2024, we took certain cost reduction and cash conservation measures, including adjustments to marketing spend, and other fixed, variable, and capital spend. We will continue to take certain cost reduction and cash conservation measures to meet our obligations as needed. As the ability to raise additional debt financing is outside of our control, we cannot conclude that our plans will be effectively implemented within twelve months from the date the condensed consolidated financial statements are issued. Accordingly, we have concluded that these plans do not alleviate substantial doubt about our ability to continue as a going concern. The condensed consolidated financial statements do not reflect any adjustments relating to the outcome of this uncertainty. Actual results of operations will depend on numerous factors, many of which are beyond our control, as further discussed in Part I, Item 1A, “Risk Factors” included in our 2023 10-K and risk factors set forth in Part II, Item 1A of our Quarterly Reports on Form 10-Q for the quarters ended June 30, 2024 and September 29, 2024.

Previous wording

On May 3, 2024, the Company's Board of Directors authorized a stock repurchase program to repurchase up to $2.5 million of our common stock (the “2024 Repurchase Program”). The actual timing, number, and value of shares repurchased in the future will be determined by the Company in its discretion and will depend on a number of factors, including market conditions, applicable legal requirements, our capital needs, and whether there is a better alternative use of capital. Repurchases will be funded from the Company’s existing cash and cash equivalents, or future cash flow. The 2024 Repurchase Program may be modified, suspended, or terminated at any time. During the thirteen and twenty-six weeks ended June 30, 2024, the Company repurchased 47,850 shares of common stock in open market transactions pursuant to a 10b5-1 purchase plan entered into by the Company. As of June 30, 2024, the Company had $2.4 million available under the 2024 Repurchase Program authorization. For further information on the 2024 Repurchase Program, see Note 2, Significant Accounting Policies.

Current wording

On May 3, 2024, our Board of Directors authorized a stock repurchase program to repurchase up to $2.5 million of our common stock (the “2024 Repurchase Program”). The actual timing, number, and value of shares repurchased in the future will be determined at our discretion and will depend on a number of factors, including market conditions, applicable legal requirements, our capital needs, and whether there is a better alternative use of capital. Repurchases will be funded from our existing cash and cash equivalents, or future cash flow. The 2024 Repurchase Program may be modified, suspended, or terminated at any time. During the thirteen and thirty-nine weeks ended September 29, 2024, we repurchased 130,293 shares and 178,143 shares of common stock, respectively, in open market transactions pursuant to a 10b5-1 purchase plan. As of September 29, 2024, there was $2.2 million available under the 2024 Repurchase Program authorization. For further information on the 2024 Repurchase Program, see Note 2, Significant Accounting Policies.

Previous wording

During the twenty-six weeks ended June 30, 2024, net cash provided by operating activities increased by $2.2 million, as compared to the same period in 2023. The increase was largely due to a $10.5 million increase related to accrued expenses and other current liabilities mainly due to timing-related increases in accrued inventory of $5.2 million and accrued marketing of $2.4 million, a $1.7 million increase due to a non-routine legal reserve accrual, and a $1.4 million increase in miscellaneous accruals. There was also a $1.7 million increase related to other current liabilities, $0.8 million reduction in inventory purchases and a $0.4 million decrease related to assets for recovery, both of which were attributed to lower sales, as well as a $0.1 million timing-related decrease in prepaids and other current assets. This was partially offset by an increase of $7.2 million in our net loss after adjusting for non-cash items, an increase of $1.8 million in income taxes refund receivable, an increase of $1.0 million in accounts receivable, a decrease of $1.0 million in accounts payable primarily related to the timing of payments related to our credit card payables and a $0.3 million decrease related to operating lease liabilities.

Current wording

During the thirty-nine weeks ended September 29, 2024, net cash provided by operating activities decreased by $16.0 million, as compared to the same period in 2023. The decrease was largely due to an increase of $11.5 million in our net loss after adjusting for non-cash items, a $4.7 million increase in inventory purchases, a $3.8 million increase in prepaids and other current assets mainly due to an insurance receivable of $4.7 million partially offset by the write-off of our debt issuance costs pertaining to the 2021 Revolving Facility, prepaid marketing and prepaid software subscriptions, an increase of $2.3 million in income tax refund receivable, an increase of $1.4 million in accounts receivable pertaining to credit card and wholesale receivables, a decrease of $1.2 million in accounts payable primarily related to the timing of payments related to our credit card payables and a $0.4 million decrease related to operating lease liabilities. This was partially offset by a $7.5 million increase related to accrued expenses and other current liabilities mainly due to an increase in our non-routine legal reserve accrual of $4.6 million, an increase in stored value liabilities of $3.3 million due to lower redemption rates, a timing related increase in accrued inventory of $1.3 million, and an increase in miscellaneous accruals of $0.3 million offset by a decrease in accrued compensation and benefits of $0.7 million, a decrease in accrued freight of $0.4 million, a decrease in the return reserve of $0.4 million as a result of lower sales and a slight decrease in return rates, as well as a decrease in accrued marketing of $0.2 million. In addition, there was a $1.6 million increase related to other noncurrent liabilities and a $0.2 million increase related to assets for recovery.

Previous wording

During the twenty-six weeks ended June 30, 2024, as compared to the same period in 2023, net cash used in investing activities decreased by $0.2 million. This was attributable to $0.3 million less invested in capitalized software development costs and $0.1 million higher capital expenditures for furniture, leasehold improvements, equipment, and construction in progress for our general operations.

Current wording

During the thirty-nine weeks ended September 29, 2024, as compared to the same period in 2023, net cash used in investing activities decreased by $0.6 million. This was attributable to $0.5 million less invested in capitalized software development costs and $0.1 million lower capital expenditures for furniture, leasehold improvements, equipment, and construction in progress for our general operations.

Previous wording

Financing activities consist primarily of borrowings and repayments related to our 2021 Revolving Facility.

Current wording

Financing activities consist primarily of borrowings and repayments related to our revolving line of credit.

Previous wording

During the twenty-six weeks ended June 30, 2024, net cash used in financing activities decreased by $1.2 million compared to the same period in 2023. The decrease was primarily due to higher net borrowings of $2.0 million on our 2021 Revolving Facility, $0.4 million increase in finance lease payments primarily attributed to leased equipment for our distribution facilities, $0.2 million increase in withheld tax payments related to vesting of RSUs, $0.1 million decrease in proceeds received from issuance of common stock under our ESPP and $0.1 million increase related to the 2024 Repurchase Program.

Current wording

on ourrevolving line of credit anda $0.2 million decrease in withheld tax payments related to vesting of RSUs, partially offset by $4.0 million of higher repayments on our revolving line of credit, $0.7 million increase in finance lease payments, $0.3 million decrease in proceeds received from issuance of common stock under our ESPP and $0.2 million increase related to the 2024 Repurchase Program.

Previous wording

Other than the 2024 Amended Credit Agreement discussed in Note 13,Subsequent Events, there have been no other material changes to our contractual obligations and commitments as disclosed in our 2023 10-K.

Current wording

Other than the November 2024 Amended Credit Agreement discussed in Note 5,Debt and Note 13,Subsequent Events, there have been no other material changes to our contractual obligations and commitments as disclosed in our 2023 10-K.