Source: https://www.bibliotheque-charavines.fr/formulaire-10-q-us-auto-parts-network-usa-au-28-mars/
Timestamp: 2020-06-02 08:46:39+00:00

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Formulaire 10-Q US Auto Parts Network USA, au: 28 mars Les Experts de la Bourse
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COMMISSION NATIONALE DU MARCHÉ DES ACTIONS
FORMULE 10-Q
☒ RAPPORT TRIMESTRIEL SELON L'ARTICLE 13 OU 15 (d) DE LA SECURITIES CHANGE ACT OF 1934
Pour la période trimestrielle terminée le 28 mars 2020
☐ RAPPORT DE TRANSITION CONFORMÉMENT À L'ARTICLE 13 OU 15 d) DE LA LOI DE 1934 SUR LES ÉCHANGES DE TITRES
Pour la période de transition de à
Numéro de dossier de la Commission: 001‑33264
RÉSEAU USA AUTO PARTS USA, INC.
(Nom exact du déclarant tel que spécifié dans sa charte)
(État ou autre juridiction de
2050 W. 190e Street, Suite 400, Torrance, CA 90504
(Adresse du bureau exécutif principal) (Code postal)
(Numéro de téléphone du registraire, y compris l'indicatif régional)
Indiquez avec une coche si l'inscrit: (1) a soumis tous les rapports requis par l'article 13 ou 15 (d) du Securities Exchange Act de 1934 au cours des 12 mois précédents (ou pour une période plus court que le déclarant n'était tenu de déposer de tels rapports) et (2) a été soumis à ces exigences de dépôt au cours des 90 derniers jours. oui ☒ Non ☐
Indiquez par une coche si le déclarant a soumis électroniquement tous les fichiers de données interactifs à soumettre conformément à la règle 405 du règlement ST (§232.405 du présent chapitre) au cours des 12 mois précédents (ou pour une période supplémentaire) bref, le demandeur devait soumettre de tels dossiers). oui ☒ Non ☐
Indiquez avec une coche si le déclarant est un grand classeur accéléré, un classeur accéléré, un classeur non accéléré, une petite société déclarante ou une société en croissance émergente. Voir les définitions de «grand classeur accéléré», «classeur accéléré», «plus petite société déclarante» et «société en croissance émergente» dans la règle 12b-2 de la Loi sur l'échange.
Grand filer accéléré
Armoire de classement non accélérée
Si vous êtes une société émergente en croissance, indiquez par une coche si le déclarant a choisi de ne pas utiliser la période de transition prolongée pour se conformer aux normes comptables financières nouvelles ou révisées fournies conformément à l'article 13 (a) de la loi sur les échanges. ☐
Indiquez avec une coche si la personne inscrite est une société écran (au sens de la règle 12b-2 de la loi sur l'échange). Oui ☐ non ☒
Valeurs enregistrées conformément à l'article 12 (b) de la loi:
Symbole (s) commercial (s)
Nom de chaque bourse dans laquelle vous vous êtes inscrit
Actions ordinaires, 0,001 $ de valeur nominale par action
(Marché mondial NASDAQ)
Au 4 mai 2020, l'entité enregistrée avait 38 891 673 actions ordinaires en circulation, d'une valeur nominale de 0,001 $.
RAPPORT TRIMESTRIEL SUR LE FORMULAIRE 10-Q
POUR LES TREIZE SEMAINES TERMINÉES LE 28 MARS 2020
Sauf si le contexte l'exige autrement, comme utilisé dans ce rapport, les termes «US Auto Parts», «Company», «nous», «nous» et «notre» se réfèrent aux États-Unis. Auto Parts Network, Inc. et ses filiales. Sauf indication contraire, tous les montants sont en milliers.
Pièces détachées en provenance des USA USA®, USA Auto Parts Network ™ USA, Kool-Vue®JC Whitney®, Carparts.com®et Evan Fischer®, entre autres, sont nos marques déposées aux États-Unis. Toutes les autres marques et noms commerciaux apparaissant dans ce rapport sont la propriété de leurs propriétaires respectifs.
Les déclarations incluses dans ce rapport, autres que les déclarations ou caractérisations d'événements historiques ou actuels, sont des déclarations prospectives au sens de l'article 27A du Securities Act de 1933, tel que modifié (le «Securities Act») et de l'article 21E du Securities Exchange Act de 1934, tel que modifié (le "Exchange Act"), et nous avons l'intention que ces déclarations prospectives soient soumises aux ports sécurisés ainsi créés. Tous les énoncés prospectifs inclus dans ce document sont basés sur les croyances et hypothèses de la direction et sur les informations dont elle dispose actuellement. Nous avons tenté d'identifier les déclarations prospectives en utilisant des termes tels que «anticiper», «croire», «pourrait», «estimer», «attendre», «avoir l'intention», «peut», «plans», «potentiel», «prédire», «projets "," devrait "," sera "," serait "," continuera probablement "," résultera probablement "et des variations de ces mots ou expressions similaires. Ces déclarations prospectives comprennent, sans s'y limiter, des déclarations sur des événements futurs, nos résultats d'exploitation et financiers futurs, les attentes financières, la croissance et les stratégies attendues, les indicateurs commerciaux actuels, les besoins en capital, les plans de financement, le déploiement du capital, la liquidité, les contrats, les litiges, les offres de produits, les clients, les acquisitions, la concurrence et l'état de nos installations. Les déclarations prospectives, quel que soit leur emplacement dans le présent document ou dans d'autres déclarations attribuables à la Société, impliquent des risques, des incertitudes et d'autres facteurs connus et inconnus qui peuvent faire en sorte que nos résultats, performances ou réalisations réels soient sensiblement différents de tout résultat, action future. ou les réalisations exprimées ou implicites dans les déclarations prospectives. Nous discutons plus en détail de plusieurs de ces risques sous la rubrique «Facteurs de risque» de la partie II, point 1A du présent rapport. Compte tenu de ces incertitudes, vous ne devez pas vous fier indûment à ces déclarations prospectives. Vous devriez lire ce rapport et les documents auxquels nous faisons référence dans ce rapport et que nous avons présentés comme preuve documentaire du rapport dans son intégralité et étant entendu que nos résultats futurs réels peuvent être sensiblement différents de ce que nous attendons. De plus, les déclarations prospectives ne représentent les convictions et hypothèses de notre direction qu'à la date du présent rapport. Sauf si la loi l'exige, nous ne nous engageons pas à mettre à jour publiquement ces déclarations prospectives, ni à mettre à jour les raisons pour lesquelles les résultats réels peuvent différer sensiblement de ceux anticipés dans ces déclarations prospectives, même si de nouvelles informations sont disponibles à l'avenir.
PARTIE I. INFORMATIONS FINANCIÈRES
OBJET 1.FÉtats financiers
RÉSEAU USA AUTO PARTS USA, INC. ET FILIALES
SOLDE CONSOLIDÉ
(Non audité, en milliers, sauf valeur nominale et valeur de liquidation par action)
Droit d'utilisation – actifs – contrats de location simple, nets
Droit d'utilisation – actifs – contrats de location-financement, nets
Dépenses accumulées
Droit d'utilisation – obligation – opérationnel, actuel
Droit d'utilisation – obligation – financement, en cours
Paiements, non courants
Droit d'utilisation – obligation – opérationnel, non courant
Droit d'utilisation – obligation – financement, non courant
Capital comptable:
Actions privilégiées convertibles de série A, valeur nominale de 0,001 $; 1,45 $ pour la valeur de liquidation des actions ou un total de 6 017 $; 4 150 actions autorisées; 2621 et 2771 actions émises et en circulation au 28 mars 2020 et au 28 décembre 2019
Actions ordinaires, valeur nominale de 0,001 $; 100 000 actions autorisées; 38672 et 36167 actions émises et en circulation au 28 mars 2020 et au 28 décembre 2019 (dont 2525 actions propres)
Paiement supplémentaire en capital
Capitaux propres du total des actionnaires
Voir les notes jointes aux états financiers consolidés (non audités).
DÉCLARATIONS D'OPÉRATIONS CONSOLIDÉES ET D'OPÉRATIONS GLOBALES
(Non audité, en milliers, sauf les données par action)
Treize semaines terminées
Provision pour impôt sur le revenu (bénéfice)
Une autre perte globale:
Ajustements de conversion de devises étrangères
Perte non réalisée sur les actifs des fiducies à rémunération différée
Total des autres pertes globales
Actions utilisées dans le calcul de la perte nette de base et diluée par action
Exclut les charges d'amortissement qui sont incluses dans les charges d'exploitation.
ÉTATS DES CAPITAUX PROPRES CONSOLIDÉS
(Non audité, en milliers)
Payé en-
Solde tel que déclaré initialement au 29 décembre 2018
Effet de la nouvelle adoption comptable
Solde tel que présenté actuellement au 29 décembre 2018
Émission d'actions dans le cadre de l'acquisition d'unités d'actions restreintes
Émission d'actions en rapport avec les frais de DBO
Dividende en actions ordinaires
Effet des variations des devises étrangères
Solde, 30 mars 2019
(139 788)
Solde, 28 décembre 2019
Émission d'actions dans le cadre de l'exercice d'options sur actions
Dividende des actions ordinaires sur les actions privilégiées
Solde, 28 mars 2020
Attributions d'actions émises par le service des administrateurs non salariés
Amortissement des frais financiers reportés
Variations des actifs et passifs d'exploitation:
Obligation de droit d'utilisation – Contrats de location simple – Actuel
Obligation de droit d'utilisation – Contrats de location simple – Long terme
Dettes créditeurs renouvelables
Paiements effectués sur les prêts renouvelables à payer
Paiement des billets à ordre
Paiements pour contrats de location-acquisition
Retenue légale de la rémunération en actions
Produit de l'exercice des options d'achat d'actions
Dividendes d'actions privilégiées versés
Trésorerie nette utilisée dans les activités financières
Effets des variations du taux de change sur la trésorerie
Informations supplémentaires sur les activités d'investissement et de financement non monétaires:
Actif d'exploitation par droit d'usage acquis
Actif financé par le droit d'utilisation acquis
Achats d'actifs accumulés
Divulgation supplémentaire des informations sur les flux de trésorerie:
Paiement en espèces pendant la période d'imposition
Paiement en espèces pendant la période d'intérêt
NOTES AFFÉRENTES AUX ÉTATS FINANCIERS CONSOLIDÉS (NON AUDITÉS)
Note 1 – Base de présentation et description de la société
US Auto Parts Network, Inc. (y compris ses filiales) est un important fournisseur en ligne de pièces et accessoires automobiles de rechange et a été créé en 1995. La Société est entrée dans le secteur du commerce électronique en lançant son premier site Web en 2000 et actuellement Vous tirez l'essentiel de vos revenus des canaux de vente en ligne. La Société vend ses produits à des consommateurs individuels via un réseau de sites Web et de marchés en ligne et hors ligne à des distributeurs en gros. Nos sites Web emblématiques sont situés à www.carparts.com y www.jcwhitney.com, et notre site Web d'entreprise est à www.usautoparts.com. Les références à «société», «nous», «nous» ou «notre» font référence aux États-Unis. Auto Parts Network, Inc. et ses filiales consolidées.
Les produits de la société se composent de pièces de carrosserie destinées au marché de la réparation de carrosseries automobiles, de pièces de moteur pour le marché secondaire et de pièces et accessoires haute performance. La catégorie des pièces de collision se compose principalement de pièces de carrosserie pour l'extérieur d'une voiture. Nos pièces de cette catégorie sont généralement des pièces de rechange pour les pièces de carrosserie d'origine qui ont été endommagées à la suite d'une collision ou d'une usure générale. La plupart de ces produits sont vendus sur nos sites Web. De plus, nous vendons une vaste gamme de produits miroir, y compris notre propre marque privée appelée Kool-Vue.®, qui sont commercialisés et vendus en tant que pièces de rechange du marché secondaire et en tant que mises à niveau des pièces existantes. La catégorie des pièces de moteur est composée de composants de moteur et d'autres pièces mécaniques et électriques, y compris notre marque privée de convertisseurs catalytiques appelée Evan Fischer®. Ces pièces servent de pièces de rechange pour les pièces de moteur existantes et sont généralement utilisées par les professionnels et les amateurs pour l'entretien et la réparation mécanique et du moteur. Nous proposons également des versions performantes de nombreuses pièces vendues dans chacune des catégories ci-dessus. Les pièces et accessoires de performance sont généralement constitués de pièces qui améliorent les performances de la voiture, améliorent la fonctionnalité existante d'une pièce spécifique ou améliorent l'apparence physique ou le confort de la voiture.
La société est une société du Delaware C et est basée à Torrance, en Californie. L'entreprise compte des employés aux États-Unis et aux Philippines.
Les états financiers consolidés de la Société ont été préparés conformément aux principes comptables généralement reconnus aux États-Unis («US GAAP») pour les informations financières intermédiaires et aux instructions pour le formulaire 10-Q de la Securities and Exchange Commission. des États-Unis ("SEC") et l'article 10 du règlement SEC SX. De l'avis de la direction, les états financiers consolidés ci-joints contiennent tous les ajustements, consistant en des ajustements récurrents normaux, nécessaires pour présenter fidèlement la situation financière consolidée de la Société au 28 mars 2020 et les résultats d'exploitation consolidés et les flux de trésorerie pour les treize semaines se terminant le 28 mars 2020 et le 30 mars 2019. Les résultats de la Société pour les périodes intermédiaires ne sont pas nécessairement représentatifs des résultats attendus pour toute autre période intermédiaire ou pour toute l'année. Ces états financiers consolidés non audités doivent être lus conjointement avec les états financiers consolidés audités et les notes annexes inclus dans notre rapport annuel sur formulaire 10-K pour l'exercice clos le 28 décembre 2019, qui a été déposé auprès de la SEC le Le 10 mars 2020 et tous nos autres dépôts périodiques, y compris les rapports actuels sur le formulaire 8-K, déposés auprès de la SEC après la fin de notre exercice 2019 et pendant la date de ce rapport.
Au cours des treize semaines se terminant le 28 mars 2020, la Société a subi une perte nette de 978 $ comparativement à une perte nette de 3 581 $ au cours des treize semaines se terminant le 30 mars 2019. En vertu de notre plan d'exploitation actuel Nous estimons que notre trésorerie, nos équivalents de trésorerie, nos investissements, nos flux de trésorerie d'exploitation et notre financement par emprunt disponibles seront suffisants pour financer nos besoins de trésorerie d'exploitation pour au moins les douze prochains mois.
Les montants des charges d'exploitation de la période précédente ont été classés pour s'adapter à la présentation de la période actuelle des charges d'exploitation dans les résultats d'exploitation consolidés.
Déclarations comptables récemment adoptées
En février 2016, le Financial Accounting Standards Board ("FASB") a publié la mise à jour des normes comptables ("ASU") n ° 2018-15, "Intangibles – Fonds de commerce et autres – Logiciels à usage interne (sous-matière 350-40)" ("ASU 2018-
15 "). L'objectif de cette mise à jour est d'aligner les exigences de capitalisation des coûts de mise en œuvre engagés dans un contrat d'hébergement qui est un contrat de service avec les exigences de capitalisation des coûts de mise en œuvre engagés pour développer ou obtenir un logiciel à usage interne. La Société a adopté la norme le 29 décembre 2019 et l'adoption n'a eu aucune incidence importante sur les états financiers consolidés.
Dans Juin 2016, le FASB a publié l'ASU 2016-13, Instruments financiers – Pertes de crédit (sujet 326): évaluation des pertes de crédit sur instruments financiers et autres modifications ultérieures, y compris les améliorations de codage de l'ASU 2019-04 au sujet 326, Instruments financiers – Pertes de crédit, sujet 815, Produits dérivés et couverture, et thème 825, Instruments financiers, collectivement appelé («ASC 326»), qui fournit un nouveau modèle de dépréciation qui nécessite l'évaluation et la comptabilisation des pertes de crédit attendues pour la plupart des actifs financiers et de certains autres instruments, y compris, mais sans s'y limiter, les débiteurs, actifs contractuels, titres disponibles à la vente et certaines garanties financières. La Société a adopté la norme le 29 décembre 2019 et l'adoption n'a eu aucune incidence importante sur les états financiers consolidés.
En décembre 2019, le FASB a publié l'ASU 2019-12, Impôts sur les bénéfices (Thème 740): simplification de la comptabilité des impôts sur les bénéfices. Cette mise à jour vise à simplifier les règles actuelles concernant la comptabilité de l'impôt sur le revenu et répond à divers problèmes techniques, notamment la comptabilité fiscale de franchise, la répartition de l'impôt sur le revenu entre une perte sur les activités poursuivies et dans d'autres catégories, telles que les activités abandonnées, la déclaration de revenus des personnes morales non soumises à l'impôt sur les bénéfices et la comptabilisation provisoire des modifications promulguées dans les lois fiscales. La nouvelle norme est en vigueur pour les exercices ouverts à compter du 15 décembre 2020; cependant, l'adoption anticipée est autorisée. La société a adopté très tôt la norme Le 29 décembre 2019 et l'adoption n'ont pas eu d'impact significatif sur les comptes consolidés.
Note 2 – Prêts
La Société maintient une ligne de crédit renouvelable fondée sur l'actif («ligne de crédit») qui établit, entre autres, un engagement renouvelable d'un capital total pouvant atteindre 30 000 $, lequel est assujetti à une base de prêt provenant de certains les comptes débiteurs, les stocks et les immobilisations corporelles. Au 28 mars 2020, notre solde impayé de prêts renouvelables était de 0 $. Le solde impayé des lettres de crédit au 28 mars 2020 était de 21 768 $, dont 18 856 $ ont été utilisés et inclus dans les créditeurs. dans notre bilan consolidé.
Les prêts émis au titre de la ligne de crédit portent intérêt, au gré de la Société, à un taux annuel égal à (a) LIBOR majoré d'une marge applicable de 1,75%, ou (b) à un "taux de base préférentiel alternatif" sous réserve d'une augmentation ou réduction jusqu'à 0,25% par an selon le taux de couverture des frais fixes de la Société. Au 28 mars 2020, le taux d'intérêt basé sur le LIBOR de la société était de 2,75% (avec un principal de 0 $) et le taux d'intérêt principal de la société était de 3,50% (avec un principal de $ 0). Des frais d'engagement, basés sur la disponibilité inutilisée de la ligne de crédit et portant intérêt au taux de 0,25% par an, sont payés mensuellement. Aux termes de la convention de crédit avec JPMorgan Chase Bank (la «convention de crédit»), les rentrées de fonds sont déposées dans un coffre-fort, ce qui est à la discrétion de la Société à moins que la «période de détention de trésorerie» est en vigueur, au cours de laquelle les rentrées de fonds seront utilisées pour réduire les montants dus en vertu de la convention de crédit. La période de retenue en espèces est déclenchée en cas de défaut ou si la disponibilité excédentaire est inférieure à 3 600 $ pendant trois jours ouvrables consécutifs et se poursuivra jusqu'à ce que, pour les 45 jours consécutifs précédents, il n'y ait aucun cas de défaut et de dépassement. la disponibilité a été supérieure à 3 600 $ en tout temps (ledit déclencheur étant sujet à des ajustements en fonction de l'engagement rotatif de la société). De plus, dans l'éventualité où la «disponibilité excédentaire», telle que définie dans la convention de crédit, est inférieure à 3 000 $, la Société doit maintenir un ratio de couverture des frais fixes minimum de 1,0 à 1,0 (avec l'objet déclenchant ajustements en fonction de l'engagement renouvelable de la Société). La disponibilité excédentaire de la Société était de 4 676 $ au 28 mars 2020. À la date des présentes, la période de domination de trésorerie n'était pas en vigueur; par conséquent, aucun paiement de principal n'est dû. La convention de crédit nous oblige à obtenir le consentement écrit préalable de JPMorgan Chase Bank lorsque nous décidons de verser des dividendes ou d'effectuer des distributions concernant nos actions ordinaires. La ligne de crédit expire le 16 décembre 2022.
Note 3 – Capitaux propres et rémunération en actions
Options et unités d'actions restreintes
Au cours des treize semaines se terminant le 28 mars 2020, la société a exercé les options d'achat d'actions ordinaires suivantes:
Options accordées pour acheter 1 973 actions ordinaires.
Exercice de 523 options d'achat d'actions ordinaires.
Perte de 15 options d'achat d'actions ordinaires.
Expiration de 700 options d'achat d'actions ordinaires.
Le tableau suivant résume l'activité des unités d'actions restreintes de la Société pour les treize semaines terminées le 28 mars 2020 et les détails concernant les attributions en cours et exerçables au 28 mars 2020 (en milliers):
Prix ​​de l'exercice
Acquis et devraient être acquis au 28 décembre 2019
Prix ​​exceptionnels, 28 mars 2020
Acquis et devraient être acquis au 28 mars 2020
Au cours des treize semaines terminées le 28 mars 2020, 27 UAR acquises étaient fondées sur le temps et 1 762 étaient fondées sur le rendement. En outre, 56 actions ont été remises à un employé sortant et 3 actions ont été émises en paiement partiel des jetons de présence élus par un membre actuel du Conseil. Pour les UANR attribuées, le nombre d'actions émises à la date d'acquisition est net des retenues obligatoires minimales que nous payons en espèces aux autorités fiscales compétentes au nom de nos employés. Pour les employés qui choisissent de ne pas recevoir d'actions net des retenues obligatoires minimales, les impôts appropriés sont payés directement par l'employé. Au cours des treize semaines terminées le 28 mars 2020, nous avons retenu 36 actions pour satisfaire 84 $ aux obligations fiscales des employés. Bien que les actions retenues ne soient pas émises, elles sont traitées comme un rachat d'actions ordinaires dans nos états financiers consolidés, car elles réduisent le nombre d'actions qui auraient été émises lors de l'acquisition.
Pour les treize semaines terminées le 28 mars 2020, nous avons enregistré des coûts de rémunération liés aux options d'achat d'actions et aux UANR de $2,819. Pour les treize semaines terminées le 30 mars 2019, nous avons enregistré des coûts de rémunération liés aux options d'achat d'actions et aux UAR de 554 $. Au 28 mars 2020, des charges de rémunération non reconnues liées aux options d'achat d'actions et aux UAR de 9 871 $ seront passées en charges jusqu'en mars 2024.
Note 4 – Perte nette par action
Le tableau suivant présente le calcul de la perte nette de base et diluée par action (en milliers, sauf les données par action):
Perte nette par action:
Dividendes sur les actions privilégiées convertibles de série A
Perte nette attribuable aux actions ordinaires
Actions ordinaires moyennes pondérées en circulation (de base et diluées)
Les Company accounts for income taxes in accordance with ASC Topic 740 – Income Taxes (“ASC 740”). Under the provisions of ASC 740, management is required to evaluate whether a valuation allowance should be established against its deferred tax assets. We currently have a full valuation allowance against our deferred tax assets. As of each reporting date, the Company’s management considers new evidence, both positive and negative, that could impact management’s view with regard to future realization of deferred tax assets. For the thirteen weeks ended March 28, 2020, there was no material change from fiscal year ended 2019 in the amount of the Company&#39;s deferred tax assets that are more likely than not to be realized in future years.
We are a leading online provider of aftermarket auto parts, including collision parts, engine parts, and performance parts and accessories. Our user-friendly websites provide customers with a broad selection of SKUs, with detailed product descriptions and photographs. Our proprietary product database maps our SKUs to product applications based on vehicle makes, models and years. We principally sell our products to individual consumers through our network of websites and online marketplaces. Our flagship consumer websites are located at www.carparts.com y www.jcwhitney.com, and our corporate website is located at www.usautoparts.com. The inclusion of our website addresses in this report does not include or incorporate by reference into this report any information on our websites.
Number of SKUs required to serve the market. Les number of automotive SKUs has grown dramatically over the last several years. In today’s market, unless the consumer is driving a high volume produced vehicle and needs a simple maintenance item, the part they need is not typically on the shelf at a brick-and-mortar store. We believe our user-friendly websites provide customers with a favorable alternative to the brick-and-mortar shopping experience by offering a comprehensive selection of approximately 800,000 SKUs with detailed product descriptions, attributes and photographs combined with the flexibility of fulfilling orders using both drop-ship and stock-and-ship methods.
U.S. vehicle fleet expanding and aging. The average age of U.S. light vehicles, an indicator of auto parts demand, remained near record-highs at 11.8 years during 2019, according to the U.S. Auto Care Association. In addition, IHS, a market analytics firm, found that the total number of light vehicles in operation in the U.S. has increased to record levels, and should continue to rise through 2020. We believe an increasing vehicle base and rising average age of vehicles will have a positive impact on overall aftermarket parts demand because older vehicles generally require more repairs. In many cases we believe these older vehicles are driven by do-it-yourself ("DIY") car owners who are more likely to handle any necessary repairs themselves rather than taking their car to the professional repair shop.
Growth of online sales. Les U.S. Auto Care Association estimated that overall revenue from online sales of auto parts and accessories would reach almost $20 billion by 2022. Improved product availability, lower prices and consumers’ growing comfort with digital platforms are driving the shift to online sales. We believe that
Total expenses, which primarily consisted of cost of sales and operating expense, increased in the first quarter of 2020 compared to the same period in 2019. The changes in both cost of sales and operating expense are described in further detail under — “Résultats d'exploitation” below.
Net cash provided by operating activities for the thirteen weeks ended March 28, 2020 and March 30, 2019 was $14,299 and $4,875, respectively. The increase was primarily due to the higher balance of accounts payable because of timing of payments and temporary, favorable payment terms granted by our top vendors, as well as a lower net loss adjusted for non-cash charges.
For the thirteen weeks ended March 28, 2020 and March 30, 2019, net cash used in investing activities was the result of additions to property and equipment ($2,050 and $1,587, respectively), which are mainly related to capitalized website and software development costs.
Net cash used in financing activities was $368 and $477, respectively, for the thirteen weeks ended March 28, 2020 and March 30, 2019. The increase was primarily due to payments of our notes payable associated with the development of the Las Vegas, Nevada distribution center.
Total debt was $9,219 as of March 28, 2020 compared to $11,056 as of December 28, 2019 and primarily consists of right-of-use obligations – finance. During the first quarter of 2020, the Company paid off the notes payable associated with the development of the Las Vegas, Nevada distribution center. Therefore, the notes payable balance was $0 as of March 28, 2020.
The Company maintains an asset-based revolving credit facility ("Credit Facility") that provides for, among other things, a revolving commitment in an aggregate principal amount of up to $30,000, which is subject to a borrowing base derived from certain receivables, inventory and property and equipment. Our Credit Facility also provides for an option to increase the aggregate principal amount from $30,000 to $40,000 subject to lender approval. As of March 28, 2020, our outstanding revolving loan balance was $0. The outstanding letters of credit balance as of March 28, 2020 was $21,768, of which $18,856 was utilized and included in accounts payable in our consolidated balance sheet. We use letters of credit in the ordinary course of business to satisfy certain vendor obligations.
Loans drawn under the Credit Facility bear interest at a per annum rate equal to either (a) LIBOR plus an applicable margin of 1.75%, or (b) an “alternate prime base rate” subject to an increase or reduction by up to 0.25% per annum based on the Company’s fixed charge coverage ratio. As of March 28, 2020, the Company’s LIBOR based interest rate was 2.75% (on $0 principal) and the Company’s prime based rate was 3.50% (on $0 principal). A commitment fee, based upon undrawn availability under the Credit Facility bearing interest at a rate of 0.25% per annum, is payable monthly. Under the terms of the Credit Agreement, cash receipts are deposited into a lock-box, which are at the Company’s discretion unless the “cash dominion period” is in effect, during which cash receipts will be used to reduce amounts owing under the Credit Agreement. The cash dominion period is triggered in an event of default or if excess availability is less than the $3,600 for three consecutive business days, and will continue until, during the preceding 45 consecutive days, no event of default existed and excess availability has been greater than $3,600 at all times (with the trigger subject to adjustment based on the Company’s revolving commitment). In addition, in the event that “excess availability,” as defined under the Credit Agreement, is less than $3,000 the Company shall be required to maintain a minimum fixed charge coverage ratio of 1.0 to 1.0. The Company’s excess availability was $4,676 as of March 28, 2020. The Credit Facility matures on December 16, 2022.
Based on our current operating plan, we believe that our existing cash, cash equivalents, investments, cash flows from operations and available debt financing will be sufficient to finance our operational cash needs through at least the next twelve months. Our future capital requirements may, however, vary materially from those now planned or anticipated. Changes in our operating plans, lower than anticipated net sales or gross margins, increased expenses, continued or worsened economic conditions, worsening operating performance by us, or other events, including those described in “Risk Factors” included in Part II, Item 1A may force us to sell assets or seek additional debt or equity financings in the future, including the issuance of additional common stock under a registration statement. As such, there can be no assurance that we would be able to raise such additional financing or engage in asset sales on acceptable terms, or at all. If we are not able to raise adequate additional financing or proceeds from asset sales, we will need to defer, reduce or eliminate significant planned expenditures, restructure or significantly curtail our operations.
We believe our business is subject to seasonal fluctuations. We have historically experienced higher sales of body parts in winter months when inclement weather and hazardous road conditions typically result in more automobile collisions. Engine parts and performance parts and accessories have historically experienced higher sales in the summer months when consumers have more time to undertake elective projects to maintain and enhance the performance of their automobiles and the warmer weather during that time is conducive for such projects. We expect the historical seasonality trends to continue, and such trends may have a material impact on our financial condition and results of operations in subsequent periods.
There were no significant changes to our critical accounting policies during the thirteen weeks ended March 28, 2020. We believe our critical accounting policies affect the more significant judgments and estimates used in the preparation of our consolidated financial statements. Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our historical consolidated financial condition and results of operations (for further detail refer to our Annual Report on Form 10‑K that we filed with the SEC on March 10, 2020):
See “Note 1 – Summary of Significant Accounting Policies and Nature of Operations” of the Notes to Consolidated Financial Statements (Unaudited), included above in Part I, Item 1 of this report.
As a smaller reporting company as defined by Rule 12b-2 of the Exchange Act, we are not required to provide the information under this item.
We carried out an evaluation required by Rule 13a – 15(b) of the Securities Exchange Act of 1934, as amended (the “1934 Act”), under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a‑15(e) of the 1934 Act, as of the end of the period covered by this report.
The information set forth under the caption “Legal Matters” dans “Note 6 – Commitments and Contingencies” of the Notes to Consolidated Financial Statements (Unaudited), included in Part I, Item 1 of this report, is incorporated herein by reference. For an additional discussion of certain risks associated with legal proceedings, see the section below entitled “Risk Factors” included in Part II, Item 1A of this report.
Our business is subject to a number of risks which are discussed below. Other risks are presented elsewhere in this report and in our other filings with the SEC. We have marked with an asterisk (*) those risk factors that reflect substantive changes from the risk factors included in the Annual Report on Form 10‑K that we filed with the SEC on March 10, 2020. You should consider carefully the following risks in addition to the other information contained in this report and our other filings with the SEC, including our subsequent reports on Forms 10‑Q and 8‑K, and any amendments thereto, before deciding to buy, sell or hold our common stock. If any of the following known or unknown risks or uncertainties actually occurs with material adverse effects on us, our business, financial condition, results of operations and/or liquidity could be seriously harmed. In that event, the market price for our common stock will likely decline and you may lose all or part of your investment.
increased shipping costs; y
Our success depends on our ability to attract customers in a cost-effective manner. Our investments in marketing may not effectively reach potential consumers or those consumers may not decide to buy from us or the volume of consumers that purchase from us may not yield the intended return on investment. With respect to our marketing channels, we rely on relationships with providers of online services, search engines, shopping comparison sites and e-
commerce businesses to provide content, advertising banners and other links that direct customers to our websites. We rely on these relationships as significant sources of traffic to our websites. In particular, we rely on Google as an important marketing channel, and if Google changes its algorithms or if competition increases for advertisements on Google or on our marketplace channels, we may be unable to cost-effectively attract customers to our products.
Shifting online consumer behavior of purchasers of aftermarket auto parts could adversely impact our financial results and the growth of our business.
In addition, recent trends indicate that customers may be more inclined to shop for aftermarket auto parts through marketplace websites such as Amazon and eBay as opposed to purchasing parts through e-commerce channels. For example, during the first quarter of 2020 our online marketplaces sales was 36.4% of total sales, compared to 39.7% in the same period of 2019. Any mix shift in sales to marketplace channels or increase in associated commissions and costs, could result in lower gross margins, and as a result, our business and financial results may suffer.
We derive a substantial portion of our revenues from third-party marketplaces.
Third-party marketplaces account for a significant portion of our revenues. Our sales on eBay and Amazon represented a combined 36.4% of total sales in the first quarter of 2020. We anticipate that sales of our products on third-party marketplace will continue to account for a significant portion of our revenues. In the future, the loss of access to these third-party marketplaces could significantly reduce our revenues, and the success of our business depends partly on continued access to these third-party marketplaces. Our relationships with our third-party marketplace providers could deteriorate as a result of a variety of factors, such as if they become concerned about our ability to deliver quality products on a timely basis or to protect a third-party’s intellectual property. In addition, third-party marketplace providers could prohibit our access to these marketplaces if we are not able to meet the applicable required terms of use. Loss of access to a marketplace channel could result in lower sales, and as a result, our business and financial results may suffer.
During the first quarter of fiscal 2020, we recorded a net loss, and our net losses may continue in fiscal year 2020.
During the first quarter of fiscal 2020, we incurred a net loss of $978, compared to a net loss of $3,581 for the first quarter of fiscal 2019. If our net losses continue in fiscal year 2020, they could severely impact our liquidity, as we may not be able to provide positive cash flows from operations in order to meet our working capital requirements. We may need to borrow additional funds from our credit facility, which under certain circumstances may not be available, sell additional assets or seek additional equity or additional debt financing in the future. In such case, there can be no assurance that we would be able to raise such additional financing or engage in such asset sales on acceptable terms, or at all. If our net losses were to continue, and if we are not able to raise adequate additional financing or proceeds from
asset sales to continue to fund our ongoing operations, we will need to defer, reduce or eliminate significant planned expenditures, restructure or significantly curtail our operations, file for bankruptcy or cease operations.
We maintain an asset-based revolving credit facility with JPMorgan Chase Bank, N.A. (the “Credit Agreement”) that provides for, among other things, a revolving commitment in an aggregate principal amount of up to $30,000 subject to a borrowing base derived from certain of our receivables, inventory and property and equipment. Our Credit Agreement also provides for an option to increase the aggregate principal amount from $30,000 to $40,000, subject to lender approval. Our Credit Agreement includes a number of restrictive covenants. These covenants could impair our financing and operational flexibility and make it difficult for us to react to market conditions and satisfy our ongoing capital needs and unanticipated cash requirements. Specifically, such covenants restrict our ability and, if applicable, the ability of our subsidiaries to, among other things:
pay or amend our subordinated debt; y
While we did not have any outstanding revolver debt under our Credit Agreement as of March 28, 2020, we may have outstanding revolver debt in the future. Any outstanding indebtedness would have important consequences, including the following:
certain levels of indebtedness may limit our flexibility to adjust to changing business and market conditions, and make us more vulnerable to downturns in general economic conditions as compared to competitors that may be less leveraged; y
Furthermore, our ability to satisfy our debt service obligations depends, among other things, upon fluctuations in interest rates, our future operating performance and ability to refinance indebtedness when and if necessary. These factors depend partly on economic, financial, competitive and other factors beyond our control. We may not be able to generate sufficient cash from operations to meet our debt service obligations as well as fund necessary capital expenditures and general operating expenses. In addition, if we need to refinance our debt, or obtain additional debt financing or sell assets or equity to satisfy our debt service obligations, we may not be able to do so on commercially reasonable terms, if at all. If this were to occur, we may need to defer, reduce or eliminate significant planned expenditures, restructure or significantly curtail our operations, file for bankruptcy or cease operations. The Company’s outstanding letters of credit balance as of March 28, 2020 was $21,768.
Our top ten suppliers represented approximately 59% of our total product purchases during the thirteen weeks ended March 28, 2020. Our ability to acquire products from our suppliers in amounts and on terms acceptable to us is dependent upon a number of factors that could affect our suppliers and which are beyond our control. For example, financial or operational difficulties that some of our suppliers may face could result in an increase in the cost of the products we purchase from them. If we do not maintain our relationships with our existing suppliers or develop
relationships with new suppliers on acceptable commercial terms, we may not be able to continue to offer a broad selection of merchandise at competitive prices and, as a result, we could lose customers and our sales could decline.
For a number of the products that we sell, we outsource the distribution and fulfillment operation and are dependent on certain drop-ship suppliers to manage inventory, process orders and distribute those products to our customers in a timely manner. For the thirteen weeks ended March 28, 2020, our product purchases from three drop-ship suppliers represented approximately 8% of our total product purchases. Because we outsource to suppliers a number of these traditional retail functions relating to those products, we have limited control over how and when orders are fulfilled. We also have limited control over the products that our suppliers purchase or keep in stock. Our suppliers may not accurately forecast the products that will be in high demand or they may allocate popular products to other resellers, resulting in the unavailability of certain products for delivery to our customers. Any inability to offer a broad array of products at competitive prices and any failure to deliver those products to our customers in a timely and accurate manner may damage our reputation and brand and could cause us to lose customers and our sales could decline.
We acquire a majority of our products from manufacturers and distributors located in Taiwan and China. We do not have any long-term contracts or exclusive agreements with our foreign suppliers that would ensure our ability to acquire the types and quantities of products we desire at acceptable prices and in a timely manner or that would allow us to rely on customary indemnification protection with respect to any third-party claims similar to some of our U.S. suppliers.
natural disasters and public health emergencies, such as the recent outbreak of a novel strain of coronavirus identified first in Wuhan, Hubei Province, China and having turned into a global pandemic that has impacted a number of countries from which we purchase product;
import shipping delays resulting from foreign or domestic labor shortages, slow-downs, or stoppage; y
the failure of local laws to provide a sufficient degree of protection against infringement of our intellectual property;
political or military conflict involving the U.S. or any country in which our suppliers are located, which could cause a delay in the transportation of our products, an increase in transportation costs and additional risk to product being damaged and delivered on time;
inability of our non-U.S. suppliers to obtain adequate credit or access liquidity to finance their operations; y
For example, during the first quarter of 2018, the United States Customs and Border Protection (“CBP”) imposed an enhanced bonding requirement on the company at a level equivalent to three times the commercial invoice value of each shipment. While the Company has been granted relief removing the bonding requirement, CBP may impose other requirements on the Company which would make it more difficult or more expensive for the Company to import products. If we were unable to import products from China and Taiwan or were unable to import products from China and Taiwan in a cost-effective manner, we could suffer irreparable harm to our business and be required to significantly curtail our operations, file for bankruptcy or cease operations.
COVID-19 was declared a pandemic by the World Health Organization in March 2020. To date, this pandemic has affected nearly all regions around the world. In the United States, businesses as well as federal, state and local governments implemented significant actions to mitigate this public health crisis. Our operations could be disrupted as a result of these actions. While we cannot predict the duration or scope of the COVID-19 pandemic, it may negatively impact our business and such impact could be material to our financial results, condition and outlook. The COVID-19 pandemic may also have the effect of worsening other areas such as, but not limited to, those related to:
reduction or volatility in demand for our products, which may be caused by, among other things: reduced online traffic and changes in consumer spending behaviors (e.g. consumer confidence in general macroeconomic conditions and a decrease in consumer spending);
disruption to our operations or the operations of our suppliers, through the effects of business and facilities closures, social, economic, political or labor instability in affected areas, transportation delays, travel restrictions and changes in operating procedures, including for additional cleaning and safety protocols;
impacts to our business partners&#39; ability to operate or manage increases in their operating costs and other supply chain effects that may have an adverse effect on our ability to meet consumer demand and achieve cost targets;
increased volatility or significant disruption of global financial markets due in part to the COVID-19 pandemic, which could have a negative impact on our ability to access capital markets and other funding sources, on acceptable terms or at all and impede our ability to comply with debt covenants; y
The further spread of COVID-19, and the requirements to take action to mitigate the spread of the pandemic, will impact our ability to carry out our business as usual and may materially adversely impact global economic conditions, our business, results of operations, cash flows and financial condition.
We rely on third parties for the shipment of our products and we cannot be sure that these relationships will continue on terms favorable to us, or at all. Shipping costs have increased from time to time, and may continue to increase, and we may not be able to pass these costs directly to our customers. Any increased shipping costs could harm our business, prospects, financial condition and results of operations by increasing our costs of doing business and reducing gross margins which could negatively affect our operating results. In addition, we utilize a variety of shipping methods for both inbound and outbound logistics. For inbound logistics, we rely on trucking and ocean carriers and any increases in fees that they charge could adversely affect our business and financial condition. For outbound logistics, we rely on ‘‘Less-than-Truckload’’ (‘‘LTL’’) and parcel freight based upon the product and quantities being shipped and customer delivery requirements. These outbound freight costs have increased on a year-over-year basis and may continue to increase in the future. We also ship a number of oversized auto parts which may trigger additional shipping costs by third-party delivery services. Any increases in fees or any increased use of LTL would increase our shipping costs which could negatively affect our operating results.
If commodity prices such as fuel, plastic and steel increase, our margins may be negatively impacted.
Our third-party delivery services have increased fuel surcharges from time to time, and such increases negatively impact our margins, as we are generally unable to pass all of these costs directly to consumers. Increasing prices in the component materials for the parts we sell may impact the availability, the quality and the price of our products, as suppliers search for alternatives to existing materials and increase the prices they charge. We cannot ensure that we can recover all the increased costs through price increases, and our suppliers may not continue to provide the consistent quality of product as they may substitute lower cost materials to maintain pricing levels, all of which may have a negative impact on our business and results of operations.
potentially adverse tax consequences; y
It is essential to our business strategy that our technology and network infrastructure remain secure and is perceived by our customers to be secure. Despite security measures, however, any network infrastructure may be vulnerable to cyber-attacks. Information security risks have significantly increased in recent years in part due to the proliferation of new technologies and the increased sophistication and activities of organized crime, hackers, terrorists
and other external parties, including foreign private parties and state actors. As a leading online source for automotive aftermarket parts, we may face cyber-attacks that attempt to penetrate our network security, including our data centers, to sabotage or otherwise disable our network of websites and online marketplaces, misappropriate our or our customers’ proprietary information, which may include personally identifiable information, or cause interruptions of our internal systems and services. If successful, any of these attacks could negatively affect our reputation, damage our network infrastructure and our ability to sell our products, harm our relationship with customers that are affected and expose us to financial liability.
Moreover, we are subject to the Payment Card Industry Data Security Standard ("PCI DSS"), issued by the PCI Council. PCI DSS contains compliance guidelines and standards with regard to our security surrounding the physical and electronic storage, processing and transmission of individual cardholder data. We cannot be certain that all of our information technology systems are able to prevent, contain or detect any cyber-attacks, cyber terrorism, or security breaches from known malware or malware that may be developed in the future. To the extent that any disruption results in the loss, damage or misappropriation of information, we may be materially adversely affected by claims from customers, financial institutions, regulatory authorities, payment card associations and others. In addition, the cost of complying with stricter privacy and information security laws and standards could be significant to us. For example, we were recently required to transition from PCI Data Security Standard 2.0 to PCI Data Security Standard 3.2. We are in the process of conforming to the new standards which we expect to be completed in 2020. There is no guarantee that we will be able to conform to these new standards, and if we fail to meet these standards, we could become subject to fines and other penalties and experience a significant increase in payment card transaction costs. In addition, such failure could damage our reputation, inhibit sales, and adversely affect our business.
Failure to comply with privacy laws and regulations and failure to adequately protect customer data could harm our business, damage our reputation and result in a loss of customers.
Federal and state and regulations may govern the collection, use, sharing and security of data that we receive from our customers. In addition, we have and post on our websites our own privacy policies and practices concerning the collection, use and disclosure of customer data. Any failure, or perceived failure, by us to comply with our posted privacy policies or with any data-related consent orders, U.S. Federal Trade Commission requirements or other federal, state or international privacy-related laws and regulations could result in proceedings or actions against us by governmental entities or others, which could potentially harm our business. Further, failure or perceived failure to comply with our policies or applicable requirements related to the collection, use or security of personal information or other privacy-related matters could damage our reputation and result in a loss of customers.
The regulatory framework is constantly evolving, and privacy concerns could adversely affect our operating results.
The regulatory framework for privacy issues is currently evolving and is likely to remain uncertain for the foreseeable future. The occurrence of unanticipated events often rapidly drives the adoption of legislation or regulation affecting the use of data and the way we conduct our business; in fact, there are active discussions among U.S. legislators around adoption of a new U.S. federal privacy law. Restrictions could be placed upon the collection, management, aggregation and use of information, which could result in a material increase in the cost of collecting and maintaining certain kinds of data. In June of 2018, California enacted the California Consumer Privacy Act (the “CCPA”), which took effect on January 1, 2020. The CCPA gives consumers the right to request disclosure of information collected about them, and whether that information has been sold or shared with others, the right to request deletion of personal information (subject to certain exceptions), the right to opt out of the sale of the consumer’s personal information, and the right not to be discriminated against for exercising these rights. We are required to comply with the CCPA. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. The CCPA may increase our compliance costs and potential
liability. Some observers have noted that the CCPA could mark the beginning of a trend toward more stringent privacy legislation in the U.S., which could increase our potential liability and adversely affect our business.
wholesale aftermarket auto parts distributors such as LKQ Corporation; y
In order to expand our business, we must successfully offer, on a continuous basis, a broad selection of auto parts that meet the needs of our customers, including by being the first to market with new SKUs. Our auto parts are used by consumers for a variety of purposes, including repair, performance, improved aesthetics and functionality. In addition, to be successful, our product offerings must be broad and deep in scope, competitively priced, well-made, innovative and attractive to a wide range of consumers. We cannot predict with certainty that we will be successful in offering products that meet all of these requirements. Moreover, even if we offer a broad selection of products at competitive prices, we must maintain sufficient in-stock inventory to meet consumer demand. If our product offerings fail to satisfy our
customers’ requirements or respond to changes in customer preferences or we otherwise fail to maintain sufficient in-stock inventory, our revenue could decline.
OEMs have attempted to use claims of intellectual property infringement against manufacturers and distributors of aftermarket products to restrict or eliminate the sale of aftermarket products that are the subject of the claims. The OEMs have brought such claims in federal court and with the United States International Trade Commission. We have received in the past, and we anticipate we may in the future receive, communications alleging that certain products we sell infringe the patents, copyrights, trademarks and trade names or other intellectual property rights of OEMs or other third parties. For instance, after approximately three and a half years of litigation and related costs and expenses, on April 16, 2009, we entered into a settlement agreement with Ford Motor Company and Ford Global Technologies, LLC that ended the two legal actions that were initiated by Ford against us related to claims of patent infringement. The United States Patent and Trademark Office records indicate that OEMs are seeking and obtaining more design patents and trademarks then they have in the past.
In 2018, for example, the CBP alleged that certain repair grilles imported by the Company were counterfeit and infringed on trademarks registered by OEMs. The Company subsequently settled with CBP, however, to the extent that the OEMs are successful in obtaining and enforcing other intellectual property rights, we could be restricted or prohibited from selling certain aftermarket products which could have an adverse effect on our business. Infringement claims could also result in increased costs of doing business arising from new importing requirements, increased port and carrier fees and legal expenses, adverse judgments or settlements or changes to our business practices required to settle such claims or satisfy any judgments. For example, during the first quarter of 2019, we incurred approximately $266 of port and carrier fees and legal expenses attributable to CBP’s wrongful seizures and the Company’s litigation with CBP. Litigation or regulatory enforcement could also result in interpretations of the law that require us to change our business practices or otherwise increase our costs and harm our business. We may not maintain sufficient, or any, insurance coverage to cover the types of claims that could be asserted. If a successful claim were brought against us, it could expose us to significant liability.
We regard our trademarks, trade secrets and similar intellectual property such as our proprietary back-end order processing and fulfillment code and process as important to our success. We rely on trademark and copyright law, and trade secret protection, and confidentiality and/or license agreements with employees, customers, partners and others to protect our proprietary rights. We cannot be certain that we have taken adequate steps to protect our proprietary rights, especially in countries where the laws may not protect our rights as fully as in the United States. In addition, our proprietary rights may be infringed or misappropriated, and we could be required to incur significant expenses to preserve them. In the past we have filed litigation to protect our intellectual property rights. The outcome of such litigation can be uncertain, and the cost of prosecuting such litigation may have an adverse impact on our earnings. We have common law trademarks, as well as pending federal trademark registrations for several marks and several registered marks. However, any registrations may not adequately cover our intellectual property or protect us against infringement by others. Effective trademark, service mark, copyright, patent and trade secret protection may not be available in every country in which our products and services may be made available online. We also currently own or control a number of Internet domain names, including www.carparts.com, www.jcwhitney.com, www.autopartswarehouse.com and www.usautoparts.com, and have invested time and money in the purchase of domain names and other intellectual property, which may be impaired if we cannot protect such intellectual property. We may be unable to protect these domain names or acquire or maintain relevant domain names in the United States and in other countries. If we are not able to protect our trademarks, domain names or other intellectual property, we may experience difficulties in achieving and maintaining brand recognition and customer loyalty.
Our business is largely dependent on the personal efforts and abilities of highly skilled executive, technical, managerial, merchandising, marketing, and call center personnel. Competition for such personnel is intense, and we
cannot assure that we will be successful in attracting and retaining such personnel. The loss of any key employee or our inability to attract or retain other qualified employees could harm our business and results of operations.
cause customer dissatisfaction; ou
Because we are involved in litigation from time to time and are subject to numerous laws and governmental regulations, we could incur substantial judgments, fines, legal fees and other costs as well as reputational harm.
We are sometimes the subject of complaints or litigation from customers, employees or other third parties for various reasons. The damages sought against us in some of these litigation proceedings could be substantial. Although we maintain liability insurance for some litigation claims, if one or more of the claims were to greatly exceed our insurance coverage limits or if our insurance policies do not cover a claim, this could have a material adverse effect on our business, financial condition, results of operations and cash flows. For more information on our ongoing litigation, see the information set forth under the caption “Legal Matters” in “Note 6 Commitments and Contingencies” of the Notes to Consolidated Financial Statements, included in Part I, Item 1 of this report.
We are engaged in a multi-year implementation of a new global enterprise resource planning system (ERP). The ERP is designed to accurately maintain the company&#39;s books and records and provide information to the company&#39;s management team important to the operation of the business. The company&#39;s ERP has required, and will continue to require, the investment of significant human and financial resources. We may not be able to successfully implement the ERP without experiencing delays, increased costs and other difficulties. If we are unable to successfully design and implement the new ERP system as planned, our financial positions, results of operations and cash flows could be negatively impacted.
Since the completion of our initial public offering in February 2007 through March 28, 2020, the trading price of our common stock has been volatile, ranging from a high of $12.61 per share to a low per share of $0.88. We have also experienced significant fluctuations in the trading volume of our common stock. General economic and political conditions unrelated to our performance may also adversely affect the price of our common stock. In the past, following periods of volatility in the market price of a public company’s securities, securities class action litigation has often been initiated. Due to the inherent uncertainties of litigation, we cannot predict the ultimate outcome of any such litigation if it were initiated. The initiation of any such litigation or an unfavorable result could have a material adverse effect on our financial condition and results of operations.
NASDAQ imposes, among other requirements, continued listing standards including minimum bid and public float requirements. The price of our common stock must trade at or above $1.00 to comply with NASDAQ’s minimum bid requirement for continued listing on NASDAQ. If our stock trades at bid prices of less than $1.00 for a period in excess of 30 consecutive business days, NASDAQ could send a deficiency notice to us for not remaining in compliance with the minimum bid listing standards. If the closing bid price of our common stock were to fail to meet NASDAQ’s minimum closing bid price requirement, or if we otherwise fail to meet any other applicable requirements of the NASDAQ and we are unable to regain compliance, NASDAQ may make a determination to delist our common stock.
In March 2013, our Board of Directors, under the authority granted by our Certificate of Incorporation, established a series of preferred stock, our Series A Convertible Preferred, which has various rights, preferences and privileges senior to the shares of our common stock. Dividends on the Series A Convertible Preferred are payable quarterly, subject to the satisfaction of certain conditions, at a rate of $0.058 per share per annum in cash, in shares of common stock or in any combination of cash and common stock as determined by our Board of Directors. While we may, at our election, subject to the satisfaction of certain conditions, pay any accrued but unpaid dividends on the Series A Convertible Preferred in either cash or in common stock, we may be unable to satisfy the requisite conditions for paying dividends in common stock and, under such circumstances, we will be required to pay such accrued but unpaid dividends in cash. In such circumstances, we will be required to use cash that would otherwise be used to fund our ongoing operations to pay such accrued but unpaid dividends. To the extent we do pay dividends in common stock as we have done in certain prior periods, the ownership percentage of our common stockholders who are not holders of the Series A Convertible Preferred will be diluted. Our Series A Convertible Preferred is initially convertible for 2,620,687 shares of common stock, and to the extent that the Series A Convertible Preferred is converted, the common stock ownership percentage of our common stockholders who are not converting holders of the Series A Convertible Preferred will be diluted.
We expect that our revenue and operating results will continue to fluctuate from quarter to quarter due to various factors, many of which are beyond our control. If our quarterly revenue or operating results fall below the expectations
of investors or securities analysts, the price of our common stock could significantly decline. The factors that could cause our operating results to continue to fluctuate include, but are not limited to:
the amount and timing of operating costs and capital expenditures relating to expansion of our business, operations and infrastructure; y
While management has concluded that our internal controls over financial reporting were effective as of March 28, 2020, we have in the past, and could in the future, have a significant deficiency or material weakness in internal control over financial reporting or fail to comply with Section 404 of the Sarbanes-Oxley Act of 2002. If we fail to properly maintain an effective system of internal control over financial reporting, it could impact our ability to prevent fraud or to issue our financial statements in a timely manner that presents fairly our financial condition and results of operations. The existence of any such deficiencies or weaknesses, even if remediated, may also lead to the loss of investor confidence in the reliability of our financial statements, could harm our business and negatively impact the trading price of our common stock. Such deficiencies or material weaknesses may also subject us to lawsuits, regulatory investigations and other penalties.
stockholders are not permitted to cumulate their votes for the election of directors; y
We sell aftermarket auto parts consisting of collision and engine parts used for repair and maintenance, performance parts used to enhance performance or improve aesthetics and accessories that increase functionality or enhance a vehicle’s features. Demand for our products has been and may continue to be adversely affected by general economic conditions. In declining economies, consumers often defer regular vehicle maintenance and may forego purchases of nonessential performance and accessories products, which can result in a decrease in demand for auto parts in general. Consumers also defer purchases of new vehicles, which immediately impacts performance parts and
accessories, which are generally purchased in the first six months of a vehicle’s lifespan. In addition, during economic downturns some competitors may become more aggressive in their pricing practices, which would adversely impact our gross margin and could cause large fluctuations in our stock price. Certain suppliers may exit the industry which may impact our ability to procure parts and may adversely impact gross margin as the remaining suppliers increase prices to take advantage of limited competition.
We have historically collected sales or other similar taxes only on the shipment of goods to customers in the states of California, Virginia, Illinois, and Ohio. However, following the Supreme Court decision in South Dakota v. Wayfair, the Company is now required to collect sales tax in any state which passes legislation requiring out of state retailers to collect sales tax even where they have no physical nexus. We have historically enjoyed a competitive advantage to the extent our competitors are already subject to those tax obligations. By collecting sales tax in additional states, we will lose this competitive advantage as total costs to our customers will increase, which could adversely affect our sales.
New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, which could adversely affect our business operations and financial performance. Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us. For example, legislation enacted in 2017, informally titled the Tax Cuts and Jobs Act (the “Tax Act”) enacted many significant changes to the U.S. tax laws. Future guidance from the Internal Revenue Service and other tax authorities with respect to the Tax Act may affect us, and certain aspects of the Tax Act could be repealed or modified in future legislation. In addition, it is uncertain if and to what extent various states will conform to the Tax Act or any newly enacted federal tax legislation. Changes in corporate tax rates, the realization of net deferred tax assets relating to our operations, the taxation of foreign earnings, and the deductibility of expenses under the Tax Act or future reform legislation could have
a material impact on the value of our deferred tax assets, could result in significant one-time charges, and could increase our future U.S. tax expense.
Our ability to use net operating loss carryforwards too offset future income may be limited.
Under the Tax Act, federal net operating losses (“NOL”s) incurred in taxable years ending after December 31, 2017, may be carried forward indefinitely, but the deductibility of federal NOLs generated in tax years beginning after December 31, 2017, is limited. It is uncertain if and to what extent various states will conform to the Tax Act. In addition, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the “Code”), and corresponding provisions of state law, a corporation that undergoes an “ownership change” (generally defined as a greater than 50% change, by value, in its equity ownership over a three-year period) is subject to limitations on its ability to utilize its pre-ownership change NOL carryforwards to offset post-ownership change income. We may in the future experience ownership changes, and thus, our ability to utilize pre-ownership change NOL carryforwards to offset post-ownership change income may be limited. Such limitations may cause a portion of our NOL carryforwards to expire before we are able to utilize them. In addition, at the state level, there may be periods during which the use of NOL carryforwards is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.
We are subject to federal and state consumer protection laws and regulations, including laws protecting the privacy of customer non-public information and regulations prohibiting unfair and deceptive trade practices, as well as laws and regulations governing businesses in general and the Internet and e-commerce and certain environmental laws. Additional laws and regulations may be adopted with respect to the Internet, the effect of which on e-commerce is uncertain. These laws may cover issues such as user privacy, spyware and the tracking of consumer activities, marketing e-mails and communications, other advertising and promotional practices, money transfers, pricing, content and quality of products and services, taxation, electronic contracts and other communications, intellectual property rights, and information security. Furthermore, it is not clear how existing laws such as those governing issues such as property ownership, sales and other taxes, trespass, data mining and collection, and personal privacy apply to the Internet and e-commerce. To the extent we expand into international markets, we will be faced

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