Kaspien Holdings Inc., formerly Trans World Entertainment Corporation, which, together with its consolidated subsidiaries, is referred to herein as “the Company”, “we”, “us” and subsidiaries“our”, was incorporated in New York in 1972. We own 100% of the outstanding common stock of Kaspien Inc., formerly etailz, Inc (“Kaspien”), through which our principal operations are conducted. Kaspien provides a platform of software and services to empower brands to grow their online distribution channels on digital marketplaces such as Amazon, Walmart, eBay, among others. The Company helps brands achieve their online retail goals through its innovative and proprietary technology, tailored strategies, and mutually beneficial partnerships.

Previously, the Company”) operates in two reportable segments:Company also operated fye, and etailz. The fye segment operates a chain of retail entertainment stores and e-commerce sites,www.fye.comandwww.secondspin.com.  AsOn February 20, 2020, the Company consummated the sale of November 2, 2019, the fye segment operated 206 stores totaling approximately 1.1 million square feet in the United States, the District of Columbia and the U.S. Virgin Islands. The etailz segment is a digital marketplace retailer and generates substantially all of its revenue through Amazon Marketplace. The Company’s business is seasonal in nature for both segments, with the peak selling period beingassets and certain of the holiday season which falls inliabilities relating to fye to a subsidiary of 2428391 Ontario Inc. o/a Sunrise Records (“Sunrise Records”) pursuant to an Asset Purchase Agreement (as amended, the Company’s fourth fiscal quarter.

“Asset Purchase Agreement”) dated January 23, 2020, by and among the Company, Record Town, Inc., Record Town USA LLC, Record Town Utah LLC, Trans World FL LLC, Trans World New York, LLC, 2428392 Inc., and Sunrise Records. (the “FYE Transaction”).

The Company’s primary sources of liquidity are its borrowing capacity under its revolving credit facility, available cash and cash equivalents, and to a lesser extent, cash generated from operations. Our cash requirements relate primarily to working capital needed to operate and grow our business, including funding operating expenses and the purchase of inventory and capital expenditures.inventory. Our ability to achieve profitability and meet future liquidity needs and capital requirements will depend upon numerous factors, including the timing and amount of our net revenue; the timing and amount of our operating expenses; the timing and costs of working capital needs; and in thesuccessful implementation of our strategy and planned activities.

activities; and our ability to overcome the impact of the COVID-19 pandemic.

In addition to the aforementionedbelow current sources of existing working capital, the Company ismay explore certain other strategic alternatives that may become available to the Company, as well as continuing itsour efforts to generate additional sales and increase margins.  ThereHowever, at this time the Company has no commitments to obtain any additional funds, and there can be no assurance that any of the initiatives or strategic alternatives described abovesuch funds will be implemented, successfulavailable on acceptable terms or consummated.

Reverse Stock Split:

On August 15, 2019,at all, should we require such additional funds.  If the Company effected a reverse stock split ofis unable to improve its outstanding shares of common stock at a ratio of one-for-twenty pursuantoperations, it may be required to a Certificate of Amendment toobtain additional funding, and the Company’s Certificatefinancial condition and results of Incorporation filed withoperations may be materially adversely affected.  Furthermore, broad market and industry factors may seriously harm the Secretarymarket price of Stateour Common Stock, regardless of the State of New York. The reverse stock split was reflected onour operating performance, and may adversely impact our ability to raise additional funds, should we require such additional funds. Similarly, if our Common Stock is delisted from the Nasdaq Capital Market, (“Nasdaq”) beginning withit may also limit our ability to raise additional funds.

The unaudited condensed consolidated financial statements for the openingthirteen weeks ended October 31, 2020 were prepared on the basis of trading on August 15, 2019.a going concern which contemplates that the Company will be able to realize assets and discharge liabilities in the normal course of business. The primary purposeability of the reverse stock split, which was approvedCompany to meet its liabilities and to continue as a going concern is dependent on continued improved profitability and the other factors set forth in the preceding paragraphs. For the next 12 months, management believes that the Company’s existing liquidity will be adequate to fund its working capital needs. Management anticipates any cash requirements due to a shortfall in cash from operations will be funded by the Company’s stockholders at the Company’s Annual Stockholders Meeting on June 27, 2019, was to enable the Company to regain compliance with the $1.00 minimum bid price requirement for continued listing on Nasdaq. Pursuant to the reverse stock split, every twenty shares of the Company’s issued and outstanding shares of common stock were automatically combined into one issued and outstanding share of common stock, without any changerevolving credit facility, as discussed in note 9 in the par value per share of the common stock. Unless otherwise indicated, all share and per share amounts of the common stock included in the accompanying interim condensed consolidated financial statementsstatements.

The fye business is reported as discontinued operations in our Consolidated Statements of Income, and the related assets and liabilities have been retrospectively adjustedpresented as held-for-sale in the Consolidated Balance Sheets, through their dates of disposal. These changes have been applied to give effectall periods presented. Unless otherwise noted, discussion within these notes to the reverse stock splitconsolidated financial statements relates to continuing operations. Refer to Note 3 for all periods presented,additional information on discontinued operations.

To date, as a direct result of COVID-19, most of our employees are working remotely. The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition, including reclassifying an amount equal to the reduction in par value to additional paid-in capital. Amountsexpenses, reserves and allowances, and employee-related amounts, will depend on future developments that are highly uncertain, including as a result of common stock resulting from the reverse stock split were rounded up to the nearest whole share. The reverse stock split affected all issued and outstanding shares of the Company’s common stock,new information that may emerge concerning COVID-19 and the respective numbers of shares of common stock underlying outstanding stock options, and the Company’s equity incentive plans were proportionately adjusted.

Asset Impairment Charges:

During the thirty nine weeks ended November 2, 2019, the Company concluded, based on continued operating losses within the fye segment driven by lower than expected third quarter sales that triggering events had occurred, and an evaluation of the fye long-lived assets for impairment was required. Fixed assets and operating lease right-of-use assets, primarily at the Company’s retail store locations,actions taken to contain or treat it, as well as certain fixed assetsthe economic impact on local, regional, national and international customers and markets, which are highly uncertain and cannot be predicted at this time. Management is actively monitoring this situation and the corporate location, consistingpossible effects on its financial condition, liquidity, operations, industry, and workforce. Given the daily evolution of the home officeCOVID-19 outbreak and the Albany distribution center, where impairment was determinedresponse to exist were written downcurb its spread, currently we are not able to their estimated fair values asestimate the effects of the endCOVID-19 outbreak to our results of November 2,operations, financial condition, or liquidity.

Note 2. Basis of Presentation

The accompanying interim condensed consolidated financial statements consist of Trans World Entertainment Corporation,Kaspien Holdings Inc., Record Town, Inc. (“Record Town”), Record Town’s subsidiaries and etailz,Kaspien, Inc., all of which are wholly-owned.wholly owned.  All intercompany accounts and transactions have been eliminated.

The interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. The information furnished in these unaudited interim condensed consolidated financial statements reflects all normal, recurring adjustments which, in the opinion of management, are necessary for the fair

presentation of such financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenuesnet revenue and expenses during the reporting period. Actual results could differ from those estimates. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to rules and regulations applicable to interim financial statements.

The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations as of and for the year ended February 2, 20191, 2020 contained in the Company’sCompany's Annual Report on Form 10-K filed May 14, 2019.

June 15, 2020.  The results of operations for the thirteen and thirty-nine weeks ended November 2, 2019October 31, 2020 are not necessarily indicative of the results to be expected for the entire fiscal year ending February 1, 2020. 

As goodwill was fully impaired during fiscal 2018, the Company no longer considers goodwill to be a significant accounting policy. With the exception of goodwill, the3, 2021.

The Company’s significant accounting policies are the same as those described in Note 1 to the Company’s Consolidated Financial Statements on Form 10-K for the fiscal year ended February 2, 2019.

1, 2020.

Note 3.5. Recently Adopted Accounting Pronouncements

In March 2017, the FASB issued ASU 2017-07, “Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” which is intended to improve the presentation of net periodic pension cost and net periodic post-retirement benefit cost in an entity’s financial statements by requiring the service cost component be disaggregated from other components of net benefit costs and presented in the same line item or items as other compensation costs for the employees. Additionally, only the service cost component of net benefit cost is eligible for capitalization when applicable. ASU 2017-07 was effective for the Company’s fiscal year beginning February 3, 2019.  This standard did not have a material effect on the Company’s consolidated financial statements.

In June 2016, the Financial Accounting Standards Board (the “FASB”)FASB issued ASU 2016-02, LeasesNo. 2016-13, “Financial Instruments – Credit Losses (Topic 842). Lessees326): Measurement of Credit Losses on Financial Instruments,” which introduced an expected credit loss model for the impairment of financial assets measured at amortized cost. The model replaces the probable, incurred loss model for those assets and instead, broadens the information an entity must consider in developing its expected credit loss estimate for assets measured at amortized cost. This standard will be effective for smaller reporting companies for fiscal years beginning after December 15, 2022, however early adoption is permitted. We are required to recognize a right-of-use asset and a lease liability for virtually allcurrently evaluating the impact of their leases (other than leases that meetthis new standard on the definition of a short-term lease). The liability is equalconsolidated financial statements.

In August 2018, the FASB issued ASU 2018-14, “Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework— Changes to the present valueDisclosure Requirements for Defined Benefit Plans”, which removes certain disclosures that are no longer cost beneficial and also includes additional disclosures to improve the overall usefulness of lease payments. The assetthe disclosure requirements to financial statement users. This standard will be effective for public entities for fiscal years beginning after December 15, 2020, however early adoption is basedpermitted. We are currently evaluating the impact of this new standard on the liability, subjectconsolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes” (Topic 740), which simplifies the accounting for income taxes by eliminating certain exceptions to certain adjustments, such asthe guidance in ASC 740 related to the approach for initial direct costs. Forintraperiod tax allocation, the methodology for calculating income statement purposes, a dual model was retained, requiring leasestaxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The standard also simplifies aspects of the enacted changes in tax laws or rates. This standard will be effective for public entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, however early adoption is permitted. We are currently evaluating the impact of this new standard on the consolidated financial statements.

In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”). ASU 2020-04 provides optional expedients and exceptions for applying U.S. GAAP to contract modifications and hedging relationships that reference LIBOR or another reference rate expected to be classified as either operating or finance leases. Operating leases result in straight-line expense (similar to operating leases under the prior accounting standard) while finance leases result in a frontloaded expense pattern (similar to capital leases under the prior accounting standard).

The Company adopted this new accounting standard on February 3, 2019 on a modified retrospective basis and applied the new standard to all leases greater than one year. As a result, comparative financial information has not been restated and continues to be reported under the accounting standards in effect for those periods. The Company elected the packagediscontinued because of practical expedients permitted under the transition guidance within the new standard, which includes,reference rate reform. ASU 2020-04 provides, among other things, guidance that modifications of contracts within the ability to carry forwardscope of Topic 470, Debt, should be accounted for by prospectively adjusting the effective interest rate; modifications of contracts within the scope of Topic 840, Leases, should be accounted for as a continuation of the existing lease classification.contract; and, changes in the critical terms of hedging relationships, caused by reference rate reform, should not result in the de-designation of the instrument, provided certain criteria are met. The Company’s exposure to LIBOR rates includes its credit facility. The amendments are effective as of March 12, 2020 through December 31, 2022. Adoption is permitted at any time. The Company doesis currently evaluating the impact this update will have on its Condensed Consolidated Financial Statements.

Recent accounting pronouncements pending adoption not engage in any Lessor transactions, and as a Lessee, the Company doesdiscussed above are either not applicable or are not expected to have any finance leases. As a result, the new standard had a material impact on the unaudited condensedour consolidated balance sheet, but did not materially impact the Company’s consolidated operatingfinancial condition, results and did not materially impact the Company’sof operations, or cash flows.

The following is a discussion of the Company’s lease policy under the new lease accounting standard:

The Company determines if an arrangement contains a lease at the inception of a contract. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at the commencement date based on the present value of the remaining future minimum lease payments. As the interest rate implicit in the Company’s leases is not readily determinable, the Company utilizes its incremental borrowing rate to discount the lease payments. The operating lease right-of-use assets also include lease payments made before commencement and reduced by lease incentives. Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheet and lease expense is recognized on a straight-line basis over the term of the short-term lease.

For real estate leases, the Company accounts for lease components and non-lease components as a single lease component. Certain real estate leases require additional payments based on reimbursement for real estate taxes, common area maintenance and insurance, which are expensed as incurred as variable lease costs. Other real estate leases contain one fixed lease payment that includes real estate taxes, common area maintenance and insurance. These fixed payments are considered part of the lease payment and included in the right-of-use assets and lease liabilities.

We elected the following package of practical expedients permitted under the lease standard: We do not record leases with an initial term of 12 months or less on the balance sheet but continue to expense them on a straight-line basis over the lease term. As of November 2, 2019, 153 leases were short-term in nature and were exempt from being recorded on the balance sheet.

The Company leases its 181,300 square foot distribution center/office facility in Albany, New York from an entity controlled by the estate of Robert J. Higgins, its former Chairman and largest shareholder. The distribution center/office lease commenced on January 1, 2016, and expires on December 31, 2020. Under the lease, accounted for as an operating lease, the Company is responsible for monthly payments in the amount of $103 thousand per month. Under the terms of the lease agreement, the Company is also responsible for property taxes and other operating costs with respect to the premises.

During the thirty nine weeks ended November 2, 2019, the Company concluded, based on continued operating losses within the fye segment driven by lower than expected third quarter sales that triggering events had occurred, and an evaluation of the fye operating lease right-of-use asset for impairment was required. Operating lease right-of-use assets, primarily at the Company’s retail store locations, where impairment was determined to exist were written down to their estimated fair values as of the end of November 2, 2019, resulting in the recording of asset impairment charges of $13.7 million. Estimated fair values at these locations were determined based on a measure of discounted future cash flows over the remaining lease terms at the respective locations. Future cash flows were estimated based on individual store and corporate level plans and were discounted at a rate approximating the Company’s cost of capital. Management believes its assumptions were reasonable and consistently applied.

Impact of New Lease Standard on Balance Sheet Line Items

As a result of applying the new lease standard using a modified retrospective method, the following adjustments were made to accounts on the condensed consolidated balance sheet as of February 3, 2019:

		Impact of Change in Accounting Policy
		As Reported February 2, 2019				Adjustments				Adjusted February 3, 2019
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	4,355			$	—			$	4,355
Restricted cash			4,126				—				4,126
Accounts receivable			5,383				—				5,383
Merchandise inventory			94,842				—				94,842
Prepaid expenses and other current assets			6,657				(748	)			5,909
Total current assets			115,363				(748	)			114,615
Restricted cash			5,745				—				5,745
Fixed assets, net			7,529				—				7,529
Operating lease right-of-use assets			—				28,044				28,044
Intangible assets, net			3,668				—				3,668
Other assets			5,708				—				5,708
TOTAL ASSETS		$	138,013			$	27,296			$	165,309
LIABILITIES
CURRENT LIABILITIES
Accounts payable		$	34,329			$	—			$	34,329
Accrued expenses and other current liabilities			8,132				(1,319	)			6,813
Deferred revenue			6,955				—				6,955
Current portion of operating lease liabilites			—				9,064				9,064
Total current liabilities			49,416				7,745				57,161
Operating lease liabilities			—				22,728				22,728
Other long-term liabilities			24,867				(3,177	)			21,690
TOTAL LIABILITIES			74,283				27,296				101,579
SHAREHOLDERS’ EQUITY
Preferred stock ($0.01 par value; 5,000,000 shares authorized; none issued)			—				—				—
Common stock ($0.01 par value; 200,000,000 shares authorized; 3,221,834 shares issued)			32				—				32
Additional paid-in capital			344,826				—				344,826
Treasury stock at cost (1,408,892 shares)			(230,166	)			—				(230,166	)
Accumulated other comprehensive loss			(735	)			—				(735	)
Accumulated deficit			(50,227	)			—				(50,227	)
TOTAL SHAREHOLDERS’ EQUITY			63,730				—				63,730
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	138,013			$	27,296			$	165,309

The following table is a summary of the Company’s components of net lease cost for the thirteen and thirty-nine week periods ended November 2, 2019:

Lease Cost

				Thirteen Weeks Ended				Thirty-nine Weeks Ended
(amounts in thousands)		Classification		November 2, 2019				November 2, 2019
Short-term operating lease cost		SG&A		$	4,838			$	10,043
Operating lease cost		SG&A			1,753				7,013
Variable lease cost		SG&A			127				369
Net lease cost				$	6,718			$	17,425

During the thirteen and thirty-nine weeks ended November 3, 2018, the Company recorded minimum rentals of $7.2 million and $21.9 million, respectively, and did not record any contingent rentals.

As of November 2, 2019, the maturity of lease liabilities is as follows:

(amounts in thousands)		Operating Leases
2019		$	2,656
2020			10,502
2021			7,312
2022			3,181
2023			2,278
Thereafter			2,116
Total lease payments			28,045
Less: amounts representing interest			(2,378	)
Present value of lease liabilities		$	25,667

Lease term and discount rate are as follows:

		November 2, 2019
Weighted-average remaining lease term (years) Operating leases			1.06
Weighted-average discount rate Operating leases			5	%
Other information:
		Thirty-nine Weeks Ended
(amounts in thousands)		November 2, 2019
Cash paid for amounts included in the measurement of operating lease liabilities
Operating cash flows from operating leases		$	6,582

As determined prior to the adoption of the new lease standard, the future minimum lease payments under operating leases in effect as of February 2, 2019 were as follows:

(amounts in thousands)

2019		$	24,426
2020			8,393
2021			5,239
2022			1,881
2023			1,137
Thereafter			1,060
Total minimum lease payments		$	42,136

	October 31, 2020
	Weighted Average Amortization Period (in months)				Original Gross Carrying Amount				Accumulated Impairment				Accumulated Amortization				Net Carrying Amount
Vendor relationships			120			$	19,100			$	14,587			$	4,513			$	-
Technology			60				6,700				2,587				3,757				356
Trade names and trademarks			60				3,200				-				2,567				633
						$	29,000			$	17,174			$	10,837			$	989

(amounts in thousands)	February 1, 2020				Impairment Expense				Amortization Expense				October 31, 2020
Amortized intangible assets:
Technology		$	647			$	-			$	291			$	356
Trade names and trademarks			1,113				-				480				633
Net amortized intangible assets		$	1,760			$	-			$	771			$	989