{"url_path":"/sec/bark/10-k/2026/item-7","section_key":"item-7","section_title":"Item 7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-06-10","source_url":"https://www.sec.gov/Archives/edgar/data/1819574/0001628280-26-042242-index.html","accession_number":"0001628280-26-042242","cik":"0001819574","ticker":"BARK","issuer_name":"Bark, Inc.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1819574/0001628280-26-042242-index.html","primary_entity_key":"0001819574","primary_entity_name":"Bark, Inc."},"word_count":8083,"has_tables":true,"body_markdown":"ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS\n\nThe following discussion and analysis provides information which management believes is relevant to an assessment and understanding of our consolidated results of operations and financial condition. The discussion should be read in conjunction with the audited consolidated financial statements and notes thereto contained in this Annual Report on Form 10-K. This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described in the “Risk Factors” sections of this Annual Report on Form 10-K. Actual results may differ materially from those contained in any forward-looking statements. Unless the context otherwise requires, references to “we”, “us”, “our”, “the Company” and “BARK” are intended to mean the business and operations of BARK, Inc. and its consolidated subsidiaries. The audited consolidated financial statements as of March 31, 2026 and 2025 and for the fiscal years ended March 31, 2026, 2025 and 2024, respectively, present the financial position and results of operations and cash flows of BARK, Inc. and its wholly-owned subsidiaries.\n\nOverview\n\nWe believe that dogs and humans are better together and we aspire to be the world’s favorite dog brand. We are a team of dog-obsessed people committed to delivering personalization at scale by satisfying each dog’s distinct personality, preferences, and needs with the best products and services. Since our founding in 2011, we have happily served millions of dogs and their people.\n\nWe are an omnichannel brand serving dogs across two key brands: BarkBox and Super Chewer. All of our products are designed, developed, and branded by BARK. We leverage an ever-growing collection of first-party data, customer insights, and artificial intelligence (“AI”) to deliver personalized products and experiences tailored to the needs of each and every dog we serve. We sell our products in two segments: Direct To Consumer (“DTC”) and Commerce through our network of retail partners, which currently spans over 50,000 doors nationwide and online marketplaces including Amazon, Chewy and TikTok.\n\nFactors Affecting Our Performance\n\nWe believe that our performance and future success depend on several factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and in the section of this Annual Report on Form 10-K titled “Risk Factors.”\n\nInvestments in growth\n\nOur ability to increase the number of customers. total orders, and cross-category purchasing is a key factor in our future DTC growth and will be driven by our marketing efforts and ability to continue to expand our product offerings. As a result, we expect to continue to focus on long-term growth through investments in product offerings and the dog and dog parent experience. We are working to enhance our offerings and expand the breadth of the products. We will remain flexible, adjusting our marketing spend up or down, based on the returns.\n\nExpansion of new offerings\n\nAnother key factor in our future performance is our ability to increase our average order value (“AOV”), which involves introducing new products into our portfolio. We expect to continue to invest in the expansion of our product offerings, as we seek to attract new customers as well as growing sales with our existing customers. This expansion may require additional financial investments in headcount, marketing, customer acquisition expenses, operational capabilities and inventory. If we are unable to generate sufficient demand for these new offerings, we may not recover the financial investments and revenue may not increase as desired.\n\nExpansion within new and existing retail channels\n\nOur commerce segment continues to be an important growth driver for the business and our ability to expand our product assortment within both new and existing retail partners remains a focus area. This expansion may also require increased investments in trade marketing, merchandising support, and logistics capabilities. If we are unable\n\n28\n\n[Table of Contents](#ic9ec87c3a71f4bd29cf1b282e6078c92_7)\n\nto successfully grow our retail presence or maintain strong partnerships, our ability to reach new customers and drive incremental revenue may be limited.\n\nCertain macroeconomic and global events and conditions create a challenging environment\n\nMarket factors and international events, such as continued changes to trade policy, including the imposition of tariffs or changes in tariff rates, inflation, in particular as driven by the conflict with Iran, market effects of other global conflicts, and rising tensions with China, create business uncertainty and could further exacerbate rising interest rates, higher fuel and energy costs and commodity prices, reductions in net worth based on market declines, increases in housing costs, decreases in credit availability and rising consumer debt levels, which could impact our costs of doing business and the levels of discretionary consumer spending on our products and services and our financial results.\n\nIEEPA tariffs\n\nOn February 20, 2026, the U.S. Supreme Court held that tariffs imposed under the International Emergency Economic Powers Act (\"IEEPA\") were unconstitutional. On April 20, 2026, CBP launched its Consolidated Administration and Processing of Entries (\"CAPE\") portal to process refund claims.\n\nThe Company paid a total of $15.4 million in IEEPA tariffs on imported goods between February 4, 2025 and February 24, 2026. Our recovery of IEEPA tariffs represents a loss recovery. To date, the Company submitted claims that were accepted by the CAPE portal in the amount of $3.3 million and a corresponding refund receivable was recorded within accounts receivable, net in the Company's consolidated balance sheet as of March 31, 2026. Of the $3.3 million, $2.7 million, and $0.6 million were recorded as reductions of cost of revenue, and inventory, respectively. An additional $7.1 million and $5.0 million of the IEEPA tariffs paid by the Company allocable to cost of revenue and inventory, respectively, for the fiscal year ended March 31, 2026 were not recorded. These amounts are not currently eligible for submission under the CAPE portal and therefore the Company was unable to recognize any receivable or loss recovery with respect to these amounts.\n\nNone of the IEEPA tariffs paid by the Company were passed through to our customers or are owed to our vendors or suppliers. The Company will pursue all actions necessary to recover the remaining amounts of IEEPA tariffs paid by the Company.\n\nWe cannot predict the duration or magnitude of the risks and challenges discussed above. Please refer to the “Cautionary Note Regarding Forward-Looking Statements” and those factors described under “Risk Factors” in this Annual Report on Form 10-K.\n\nReverse Stock Split\n\nOn April 1, 2026, we effected a 1-for-20 reverse stock split of our common stock (the “Reverse Stock Split”), and our common stock began trading on a split-adjusted basis on April 1, 2026. Accordingly, all share and per share amounts presented in these consolidated financial statements and the accompanying notes have been retroactively adjusted, where applicable, to reflect the Reverse Stock Split.\n\nAs a result of the Reverse Stock Split, the number of shares of common stock outstanding and the number of shares underlying outstanding equity awards were proportionately reduced, and the corresponding exercise prices and per share amounts, as applicable, were proportionately increased. No fractional shares were issued in connection with the Reverse Stock Split.\n\nKey Performance Indicators\n\nWe use the following key financial and operating metrics to evaluate our business and operations, measure our performance, identify trends affecting our business, project our future performance, and make strategic decisions. These key financial and operating metrics should be read in conjunction with the following discussion of our results of operations and financial condition together with our consolidated financial statements and the related notes and\n\n29\n\n[Table of Contents](#ic9ec87c3a71f4bd29cf1b282e6078c92_7)\n\nother financial information included elsewhere in this Annual Report on Form 10-K may not be comparable to similarly titled performance indicators used by other companies.\n\nFiscal Year Ended\n\nMarch 31,\n\n20262025\n\nTotal Orders (in thousands)10,06013,210\n\nAverage Order Value$31.06$31.04\n\nDirect to Consumer Gross Profit (in thousands)(1)\n$213,620$271,012\n\nDirect to Consumer Gross Margin (1)\n68.4%66.1%\n\n(1) Direct to Consumer Gross Profit and Direct to Consumer Gross Margin does not include the revenue or cost of goods sold from BARK Air.\n\nTotal Orders\n\nWe define Total Orders as the total number of Direct to Consumer orders shipped in a given period. These include all orders across all of our product categories, regardless of whether they are purchased on a subscription, auto-ship, or one-off basis. Total Orders excludes orders from BARK Air. We use Total Orders as an indicator of customer interest and demand.\n\nAverage Order Value\n\nAverage Order Value (“AOV”) is Direct to Consumer revenue for the period divided by Total Orders for the same period. AOV excludes Direct to Consumer revenue from BARK Air. We use AOV to provide insight into customer spending patterns.\n\nComponents of Our Results of Operations\n\nWe operate with two reportable segments: Direct to Consumer and Commerce, to reflect the way our Chief Executive Officer, who is our Chief Operating Decision Maker (“CODM”), reviews and assesses the performance of the business.\n\nRevenue\n\nThe Company generates revenue through its DTC and Commerce segments, through the sale of BarkBox and Super Chewer branded toys and BARK branded treats and chews.\n\nWhile BarkBox and Super Chewer toys remain the primary driver of our DTC and commerce segments and fundamental to our brand identity, we are also focused on maximizing the profitability of our complementary treats and chews categories. This includes a strategic rationalization—specifically the discontinuation of kibble and topper offerings—to concentrate resources and narrow our focus. We believe this streamlined approach allows us to better support our core toy and treat business while improving our overall profitability profile.\n\nDTC\n\nThe majority of our revenue is derived from our subscription products that feature monthly themes of premium quality BarkBox and/or Super Chewer toys and BARK-branded treats and chews that are delivered directly to a dog’s home. Customers have the option to subscribe to these products on a one-month, three-month, six-month, or twelve-month basis. During the life of their subscription, we offer our customers incremental products via Add-To-Box (“ATB”), which allows us to cross-sell customers across our full portfolio of products.\n\nCommerce\n\nWe also sell our BarkBox and Super Chewer toys and BARK-branded treats and chews in retail stores and other e-tailers, significantly broadening our customer reach and raising awareness of the BARK brand. BARK products are currently sold in over 50,000 retail doors, including Target, Walmart, TJ Maxx, Costco and PetSmart. Additionally, we sell our products on other online platforms including Amazon, Chewy and TikTok.\n\n30\n\n[Table of Contents](#ic9ec87c3a71f4bd29cf1b282e6078c92_7)\n\nBARK Air\n\nAnnounced in April 2024, BARK Air is a first-of-its kind air travel experience tailored to dogs. The Company is partnered with several charter companies offering premium flights for customers and their dogs. Interested parties can book flights at dogsflyfirst.com. Our charter partners are responsible for all aircraft, pilots, maintenance, and insurance, allowing BARK to focus on creating a great travel experience for dogs and their people worldwide. We believe this initiative exemplifies the Company’s dog-first approach to curating the best products and services.\n\nAs our flagship entry into the services category, BARK Air is part of a broader strategy to expand into premium, differentiated dog services. With new routes, expanded partnerships, and high early engagement, we believe BARK Air and future services represent a meaningful long-term growth opportunity. Revenue generated by BARK Air is currently reflected in our DTC segment.\n\nCost of Revenue\n\nCost of revenue primarily consists of the purchase price of inventory sold, duties, inbound freight costs associated with inventory, shipping supply costs, and inventory shrinkage costs.\n\nOperating Expenses\n\nOperating expenses consist of general and administrative and advertising and marketing expenses.\n\nGeneral and Administrative\n\nGeneral and administrative expenses consist primarily of compensation and benefit expenses, including stock-based compensation, fulfillment and shipping costs, which represent costs incurred in operating and staffing fulfillment and customer service centers, including costs attributable to receiving, inspecting, picking, packaging and preparing customer orders for shipment, outbound freight costs associated with shipping orders to customers, and responding to inquiries from customers. General and administrative expenses also include fees charged by third parties that provide payment processing services, office expense, including rent, insurance and professional service fees.\n\nAdvertising and Marketing\n\nAdvertising and marketing expense consists primarily of internet advertising, promotional items, agency fees, other marketing costs and compensation and benefits expenses, including stock-based compensation expense, for employees engaged in advertising and marketing.\n\nInterest Income\n\nInterest income primarily consists of income earned on our interest-bearing deposit accounts.\n\nInterest Expense\n\nInterest expense primarily consists of interest incurred under our 2025 Convertible Notes, and amortization of debt issuance costs.\n\nOther Income, Net\n\nOther income, net, primarily consists of changes in the fair value of our warrant liabilities and loss on extinguishment of debt.\n\n31\n\n[Table of Contents](#ic9ec87c3a71f4bd29cf1b282e6078c92_7)\n\nResults of Operations\n\nWe operate in two reportable segments to reflect the way our CODM reviews and assesses the performance of the business. See Note 2, “Summary of Significant Accounting Policies,” in our audited consolidated financial statements for the fiscal years ended March 31, 2026, 2025, and 2024 included elsewhere in this Annual Report on Form 10-K.\n\nFiscal Year Ended\n March 31,\n\n2026202520242026 vs 20252025 vs 2024\n\n(in thousands)\n\nConsolidated Statement of Operation Data:\n\nRevenue\n\nDirect to Consumer$324,927 $415,837 $436,446 (21.9)%(4.7)%\n\nCommerce69,916 68,345 53,738 2.3 %27.2 %\n\nTotal revenue394,843 484,182 490,184 (18.5)%(1.2)%\n\nCost of revenue\n\nDirect to Consumer111,186 145,011 157,578 (23.3)%(8.0)%\n\nCommerce41,772 37,183 30,454 12.3 %22.1 %\n\nTotal cost of revenue152,958 182,194 188,032 (16.0)%(3.1)%\n\nGross profit241,885 301,988 302,152 (19.9)%(0.1)%\n\nOperating expenses:\n\nAdvertising and marketing 59,213 83,756 79,282 (29.3)%5.6 %\n\nGeneral and administrative222,850 253,380 268,390 (12.0)%(5.6)%\n\nTotal operating expenses282,063 337,136 347,672 (16.3)%(3.0)%\n\nLoss from operations(40,178)(35,148)(45,520)14.3 %(22.8)%\n\nInterest income1,880 4,926 7,533 (61.8)%N/M\n\nInterest expense(1,856)(2,788)(4,351)(33.4)%(35.9)%\n\nOther income, net\n1,146 132 5,328 768.2 %(97.5)%\n\nNet loss before income taxes(39,008)(32,878)(37,010)18.6 %(11.2)%\n\nProvision for income taxes— — — 0.0 %0.0 %\n\nNet loss $(39,008)$(32,878)$(37,010)18.6 %(11.2)%\n\nN/M means not meaningful.\n\n32\n\n[Table of Contents](#ic9ec87c3a71f4bd29cf1b282e6078c92_7)\n\nComparison of the Fiscal Years Ended March 31, 2026 and March 31, 2025\n\nRevenue\n\nFiscal Year Ended\nMarch 31,\n\n2026\n2025\n$ Change% Change\n\n( in thousands)\n\nRevenue\n\nDirect to Consumer324,927 415,837 (90,910)(21.9)%\n\nCommerce69,916 68,345 1,571 2.3 %\n\nTotal revenue$394,843 $484,182 $(89,339)(18.5)%\n\nPercentage of Revenue\n\nDirect to Consumer82.3 %85.9 %\n\nCommerce17.7 %14.1 %\n\nDirect to Consumer revenue decreased by $90.9 million, or 21.9%, for the fiscal year ended March 31, 2026 compared to the fiscal year ended March 31, 2025. This decrease was primarily driven by a 23.8%, or 3.2 million decrease in Total Orders. The decrease was partially offset by an increase in revenue from BARK Air of $6.5 million. Total BARK Air revenue was $12.4 million or 3.8% of Direct to Consumer revenue.\n\nCommerce revenue increased by $1.6 million, or 2.3%, for the fiscal year ended March 31, 2026 compared to the fiscal year ended March 31, 2025. This increase was primarily driven by sales volume from existing and new customers.\n\nGross Profit\n\nFiscal Year Ended\nMarch 31,\n\n2026\n2025\n$ Change% Change\n\n( in thousands)\n\nGross Profit\n\nDirect to Consumer$213,741 $270,826 $(57,085)(21.1)%\n\nCommerce28,144 31,162 (3,018)(9.7)%\n\nTotal gross profit$241,885 $301,988 $(60,103)(19.9)%\n\nPercentage of revenue61.3 %62.4 %\n\nDirect to Consumer gross profit decreased by $57.1 million, and Commerce gross profit decreased by $3.0 million, for the fiscal year ended March 31, 2026 compared to the fiscal year ended March 31, 2025. The decrease in Direct to Consumer gross profit is primarily attributable to a decrease in revenue and the decrease in Commerce gross profit was primarily due to a decrease in revenue due to the opportunistic sell-through of surplus inventory and customer mix.\n\nGross profit as a percentage of revenue decreased 110 basis points for the fiscal year ended March 31, 2026 compared to the fiscal year ended March 31, 2025.\n\nDirect to Consumer gross margin was 65.8%, 66 basis points higher than the same period last year. Excluding the impact of BARK Air, Direct to Consumer gross margin increased 230 basis points compared to the same period last year. The increase in Direct to Consumer gross margin is primarily attributable to product cost improvements and plan mix changes.\n\n33\n\n[Table of Contents](#ic9ec87c3a71f4bd29cf1b282e6078c92_7)\n\nCommerce gross margin was 40.3%, 540 basis points lower than the same period last year. The decrease in Commerce gross margin is primarily attributable to opportunistic sell-through of surplus inventory, and changes in customer mix.\n\nOperating Expenses\n\nGeneral and Administrative Expense\n\nFiscal Year Ended\nMarch 31,\n\n2026\n2025\n$ Change% Change\n\n( in thousands)\n\nOther general and administrative\n103,408 114,257 (10,849)(9.5)%\n\nShipping and fulfillment\n119,442 139,123 (19,681)(14.1)%\n\nTotal General and administrative\n$222,850 $253,380 $(30,530)(12.0)%\n\nPercentage of revenue56.4 %52.3 %\n\nGeneral and administrative expense decreased by $30.5 million, or 12.0%, for the fiscal year ended March 31, 2026 compared to the fiscal year ended March 31, 2025. This decrease during the period was primarily due to: decreased shipping and fulfillment costs of $19.7 million attributable to lower DTC volumes, decreased compensation expense of $6.5 million due to a decrease in headcount and decreased consulting expense of $1.0 million, as the business continued to manage its cost base. The remaining decrease in general and administrative costs is due to a reduction in rent, office expenses.\n\nAdvertising and Marketing\n\nFiscal Year Ended\nMarch 31,\n\n2026\n2025\n$ Change% Change\n\n( in thousands)\n\nAdvertising and marketing $59,213 $83,756 $(24,543)(29.3)%\n\nPercentage of revenue15.0 %17.3 %\n\nAdvertising and marketing expense decreased by $24.5 million, or 29.3%, for the fiscal year ended March 31, 2026 compared to the fiscal year ended March 31, 2025. The decrease is attributable to a strategic decrease in DTC marketing spend.\n\nInterest Income\n\nFiscal Year Ended\nMarch 31,\n\n2026\n2025\n$ Change% Change\n\n( in thousands)\n\nInterest income\n$1,880 $4,926 $(3,046)(61.8)%\n\nPercentage of revenue0.5 %1.0 %\n\nInterest income decreased by $3.0 million for the fiscal year ended March 31, 2026 compared to the fiscal year ended March 31, 2025. The decrease in interest income is due to an overall decrease in cash in interest-bearing deposit accounts.\n\n34\n\n[Table of Contents](#ic9ec87c3a71f4bd29cf1b282e6078c92_7)\n\nInterest Expense\n\nFiscal Year Ended\nMarch 31,\n\n2026\n2025\n$ Change% Change\n\n( in thousands)\n\nInterest expense\n$(1,856)$(2,788)$932 (33.4)%\n\nPercentage of revenue(0.5)%(0.6)%\n\nInterest expense decreased by $0.9 million, or 33.4%, for the fiscal year ended March 31, 2026 compared to the fiscal year ended March 31, 2025. The decrease is attributable to the timing of the 2025 Convertible Note repurchase which occurred on November 6, 2025.\n\nOther Income, net\n\nFiscal Year Ended\nMarch 31,\n\n2026\n2025\n$ Change% Change\n\n( in thousands)\n\nOther income, net\n1,146 132 $1,014 768.2 %\n\nPercentage of revenue0.3 %— %\n\nOther income, net increased by $1.0 million for the fiscal year ended March 31, 2026 compared to the fiscal year ended March 31, 2025. The increase in other income, net, was primarily due to the decrease in the fair value of our warrant liabilities of $0.9 million, and increased sublease income of $0.6 million.\n\n35\n\n[Table of Contents](#ic9ec87c3a71f4bd29cf1b282e6078c92_7)\n\nComparison of the Fiscal Years Ended March 31, 2025 and March 31, 2024\n\nRevenue\n\nFiscal Year Ended\nMarch 31,\n\n20252024$ Change% Change\n\n( in thousands)\n\nRevenue\n\nDirect to Consumer415,837 436,446 (20,609)(4.7)%\n\nCommerce68,345 53,738 14,607 27.2 %\n\nTotal revenue$484,182 $490,184 $(6,002)(1.2)%\n\nPercentage of Revenue\n\nDirect to Consumer85.9 %89.0 %\n\nCommerce14.1 %11.0 %\n\nDirect to Consumer revenue decreased by $20.6 million, or 4.7%, for the fiscal year ended March 31, 2025 compared to the fiscal year ended March 31, 2024. This decrease was primarily driven by a 5.1%, or 0.7 million decrease in Total Orders, in addition to a $0.30 or 1.0% decrease in AOV. Fiscal year 2025 Direct to Consumer revenue included $5.8 million of BARK Air revenue.\n\nCommerce revenue increased by $14.6 million, or 27.2%, for the fiscal year ended March 31, 2025 compared to the fiscal year ended March 31, 2024. This increase was primarily driven by sales volume from existing and new customers.\n\nGross Profit\n\nFiscal Year Ended\nMarch 31,\n\n20252024$ Change% Change\n\n( in thousands)\n\nGross Profit\n\nDirect to Consumer$270,826 $278,868 $(8,042)(2.9)%\n\nCommerce31,162 23,284 7,878 33.8 %\n\nTotal gross profit$301,988 $302,152 $(164)(0.1)%\n\nPercentage of revenue62.4 %61.6 %\n\nDirect to Consumer gross profit decreased by $8.0 million, and Commerce gross profit increased by $7.9 million, for the fiscal year ended March 31, 2025 compared to the fiscal year ended March 31, 2024. The decrease in Direct to Consumer gross profit is primarily attributable to a decrease in revenue. The increase in Commerce gross profit is primarily attributable to an increase in revenue.\n\nGross profit as a percentage of revenue increased 70 basis points for the fiscal year ended March 31, 2025 compared to the fiscal year ended March 31, 2024. Direct to Consumer gross margin was 65.1%, 120 basis points and Commerce gross margin was 45.6%, 230 basis points higher than the same period last year, respectively. The increase in gross margin is primarily attributable to lower inbound freight and product cost improvements.\n\n36\n\n[Table of Contents](#ic9ec87c3a71f4bd29cf1b282e6078c92_7)\n\nOperating Expenses\n\nGeneral and Administrative Expense\n\nFiscal Year Ended\nMarch 31,\n\n20252024$ Change% Change\n\n( in thousands)\n\nOther general and administrative\n114,257 128,576 (14,319)(11.1)%\n\nShipping and fulfillment\n139,123 139,814 (691)(0.5)%\n\nTotal General and administrative\n$253,380 $268,390 $(15,010)(5.6)%\n\nPercentage of revenue52.3 %54.8 %\n\nGeneral and administrative expense decreased by $15.0 million, or 5.6%, for the fiscal year ended March 31, 2025 compared to the fiscal year ended March 31, 2024. This decrease during the period was primarily due to: decreased shipping and fulfillment costs of $0.7 million attributable to lower direct to consumer volumes, decreased compensation expense of $6.7 million due to a decrease in headcount and decreased consulting expense of $2.2 million, as the business continued to manage its cost base. In addition, there was a $2.4 million benefit from the release of sales tax reserves relating to tax years for which the liability has been settled or the statute of limitations has expired. The remaining decrease in general and administrative costs is due to a reduction in rent, office expenses, and other expenses.\n\nAdvertising and Marketing\n\nFiscal Year Ended\nMarch 31,\n\n20252024$ Change% Change\n\n( in thousands)\n\nAdvertising and marketing $83,756 $79,282 $4,474 5.6 %\n\nPercentage of revenue17.3 %16.2 %\n\nAdvertising and marketing expense increased by $4.5 million, or 5.6%, for the fiscal year ended March 31, 2025 compared to the fiscal year ended March 31, 2024. The increase is attributable to increased marketing spend to acquire a higher volume of new subscribers.\n\nInterest Income\n\nFiscal Year Ended\nMarch 31,\n\n20252024$ Change% Change\n\n( in thousands)\n\nInterest income\n$4,926 $7,533 $(2,607)(34.6)%\n\nPercentage of revenue1.0 %1.5 %\n\nInterest income decreased by $2.6 million for the fiscal year ended March 31, 2025 compared to the fiscal year ended March 31, 2024. The decrease in interest income is due to an overall decrease in cash in interest-bearing deposit accounts in line with the deployment of cash for the partial debt repayment of $44.4 million during the fiscal third quarter ended December 31, 2023 and share repurchases of $24.7 million as part of the share repurchase program which began during the fiscal second quarter ended September 30, 2023.\n\n37\n\n[Table of Contents](#ic9ec87c3a71f4bd29cf1b282e6078c92_7)\n\nInterest Expense\n\nFiscal Year Ended\nMarch 31,\n\n20252024$ Change% Change\n\n( in thousands)\n\nInterest expense\n$(2,788)$(4,351)$1,563 (35.9)%\n\nPercentage of revenue(0.6)%(0.9)%\n\nInterest expense decreased by $1.6 million, or 35.9%, for the fiscal year ended March 31, 2025 compared to the fiscal year ended March 31, 2024. Interest expense for each period is derived from the Company’s 2025 Convertible Notes. The decrease is attributable to the partial debt repayment of $44.4 million during the fiscal third quarter ended December 31, 2023.\n\nOther Income, net\n\nFiscal Year Ended\nMarch 31,\n\n20252024$ Change% Change\n\n( in thousands)\n\nOther income, net\n132 5,328 $(5,196)(97.5)%\n\nPercentage of revenue— %1.1 %\n\nOther income, net decreased by $5.2 million for the fiscal year ended March 31, 2025 compared to the fiscal year ended March 31, 2024. The decrease in other income, net was primarily due to the gain on extinguishment of debt in prior year of $1.8 million, as well as a decrease in the change of the fair value of our warrant liabilities of $3.2 million.\n\nNon-GAAP Financial Measures\n\nWe report our financial results in accordance with U.S. GAAP. However, management believes that Adjusted Net Loss, Adjusted Net Income (Loss) Margin, Adjusted Net Income (Loss) Per Common Share, Adjusted EBITDA, Adjusted EBITDA Margin, and Free Cash Flow, all non-GAAP financial measures (together the “Non-GAAP Measures”), provide investors with additional useful information in evaluating our performance.\n\nWe calculate Adjusted Net Income (Loss) as net loss, adjusted to exclude: (1) stock-based compensation expense, (2) change in fair value of warrants and derivatives, (3) sales and use tax income, (4) restructuring charges related to reduction in force payments, (5) gain on extinguishment of debt, (6) litigation expenses (consisting of legal and related fees for a specific proceeding that is outside of our ordinary course of business), (7) warehouse restructuring costs, (8) non-cash impairment of previously capitalized software and cloud computing implementation costs, (9) technology modernization costs, (10) product line exit costs, (11) strategic transaction costs, (12) headquarters transition costs and (13) other items (as defined below).\n\nWe calculate Adjusted Net Income (Loss) Margin by dividing Adjusted Net Income (Loss) for the period by Revenue for the period.\n\nWe calculate Adjusted Net Income (Loss) Per Common Share by dividing Adjusted Net Income (Loss) for the period by weighted average common shares used to compute net loss per share attributable to common stockholders for the period.\n\nWe calculate Adjusted EBITDA as net loss, adjusted to exclude: (1) interest income, (2) interest expense, (3) depreciation and amortization expense, (4) stock-based compensation expense, (5) change in fair value of warrants and derivatives, (6) capitalized cloud computing amortization, (7) sales and use tax income, (8) restructuring charges related to reduction in force payments, (9) gain on extinguishment of debt, (10) litigation expenses (consisting of\n\n38\n\n[Table of Contents](#ic9ec87c3a71f4bd29cf1b282e6078c92_7)\n\nlegal and related fees for a specific proceeding that is outside of our ordinary course of business), (11) warehouse restructuring costs, (12) non-cash impairment of previously capitalized software and cloud computing implementation costs, (13) technology modernization costs, (14) product line exit costs, (15) strategic transaction costs, (16) headquarters transition costs and (17) other items (as defined below).\n\nWe calculate Adjusted EBITDA Margin by dividing Adjusted EBITDA for the period by revenue for the period.\n\nWe calculate Free Cash Flow as net cash provided by (used in) operating activities less capital expenditures.\n\nThe Non-GAAP Measures are financial measures that are not required by, or presented in accordance with U.S. GAAP. We believe that the Non-GAAP Measures, when taken together with our financial results presented in accordance with U.S. GAAP, provide meaningful supplemental information regarding our operating performance and facilitate internal comparisons of our historical operating performance on a more consistent basis by excluding certain items that may not be indicative of our business, results of operations or outlook. In particular, we believe that the use of the Non-GAAP Measures is helpful to our investors as they are measures used by management in assessing the health of our business, determining incentive compensation and evaluating our operating performance, as well as for internal planning and forecasting purposes.\n\nThe Non-GAAP Measures are presented for supplemental informational purposes only, have limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with U.S. GAAP. Some of the limitations of the Non-GAAP Measures include that (1) the measures do not properly reflect capital commitments to be paid in the future, (2) although depreciation and amortization are non-cash charges, the underlying assets may need to be replaced and Adjusted EBITDA and Adjusted EBITDA Margin do not reflect these capital expenditures, (3) Adjusted EBITDA and Adjusted EBITDA Margin do not consider the impact of stock-based compensation expense, which is an ongoing expense for the Company, (4) Adjusted EBITDA and Adjusted EBITDA Margin do not reflect other non-operating expenses, including interest expense, and (5) Free cash flow does not represent the total residual cash flow available for discretionary purposes and does not reflect our future contractual commitments. In addition, our use of the Non-GAAP Measures may not be comparable to similarly titled measures of other companies because they may not calculate the Non-GAAP Measures in the same manner, limiting their usefulness as a comparative measure. Because of these limitations, when evaluating our performance, you should consider the Non-GAAP Measures alongside other financial measures, including our net loss and other results stated in accordance with U.S. GAAP.\n\n39\n\n[Table of Contents](#ic9ec87c3a71f4bd29cf1b282e6078c92_7)\n\nThe following table presents a reconciliation of Adjusted net loss to net loss, the most directly comparable financial measure stated in accordance with U.S. GAAP, and the calculation of net loss margin, Adjusted net loss margin and Adjusted net loss per common share for the periods presented:\n\nAdjusted Net Loss\n\nFiscal Year Ended\nMarch 31,\n\n202620252024\n\nNet loss$(39,008)$(32,878)$(37,010)\n\nStock-based compensation expense14,351 12,735 12,931 \n\nChange in fair value of warrants and derivatives(913)521 (2,738)\n\nSales and use tax income (1)(950)(2,417)(487)\n\nRestructuring3,835 3,829 1,660 \n\nGain on extinguishment of debt— — (1,828)\n\nLitigation expenses (2)1,168 1,839 175 \n\nWarehouse restructuring costs2,522 4,738 814 \n\nImpairment of assets1,079 3,599 3,079 \n\nTechnology modernization (3)1,521 2,400 684 \n\nProduct line exit costs (4)\n2,774 — — \n\nStrategic transaction costs (5)\n1,666 — — \n\nHeadquarters Transition (6)\n534 — — \n\nOther items (7)\n317 1,316 2,698 \n\nAdjusted net loss$(11,104)$(4,318)$(20,022)\n\nNet loss margin(9.88)%(6.79)%(7.55)%\n\nAdjusted net loss margin(2.81)%(0.89)%(4.08)%\n\nAdjusted net loss per common share - basic and diluted$(1.30)$(0.50)$(2.26)\n\nWeighted average common shares used to compute adjusted net loss per share attributable to common stockholders - basic and diluted8,542,5028,719,9788,863,029\n\n40\n\n[Table of Contents](#ic9ec87c3a71f4bd29cf1b282e6078c92_7)\n\nThe following table presents a reconciliation of Adjusted EBITDA to net loss, the most directly comparable financial measure stated in accordance with U.S. GAAP, and the calculation of net loss margin and Adjusted EBITDA margin for the periods presented:\n\nAdjusted EBITDA\n\nFiscal Year Ended March 31\n\n202620252024\n\n(in thousands)\n\nNet loss$(39,008)$(32,878)$(37,010)\n\nInterest income\n(1,880)(4,926)(7,533)\n\nInterest expense1,856 2,788 4,351 \n\nDepreciation and amortization expense9,102 11,222 12,602 \n\nStock-based compensation expense14,351 12,735 12,931 \n\nChange in fair value of warrants and derivatives(913)521 (2,738)\n\nCloud computing amortization2,237 594 — \n\nSales and use tax income (1)(950)(2,417)(487)\n\nRestructuring3,835 3,829 1,660 \n\nGain on extinguishment of debt— — (1,828)\n\nLitigation expenses (2)1,168 1,839 175 \n\nWarehouse restructuring costs2,522 4,738 814 \n\nImpairment of assets1,079 3,599 3,079 \n\nTechnology modernization (3)1,521 2,400 684 \n\nProduct line exit costs (4)\n2,774 — — \n\nStrategic transaction costs (5)\n1,666 — — \n\nHeadquarters transition (6)\n534 — — \n\nOther items (7)\n317 1,316 2,698 \n\nAdjusted EBITDA$211 $5,360 $(10,602)\n\nNet loss margin(9.88)%(6.79)%(7.55)%\n\nAdjusted EBITDA margin0.05 %1.11 %(2.16)%\n\n(1)Sales and use tax income relates to recording a liability for sales and use tax we did not collect from our customers. Historically, we had collected state or local sales, use, or other similar taxes in certain jurisdictions in which we only had physical presence. On June 21, 2018, the U.S. Supreme Court decided, in South Dakota v. Wayfair, Inc. that state and local jurisdictions may, at least in certain circumstances, enforce a sales and use tax collection obligation on remote vendors that have no physical presence in such jurisdiction. A number of states have positioned themselves to require sales and use tax collection by remote vendors and/or by online marketplaces. The details and effective dates of these collection requirements vary from state to state and accordingly, we recorded a liability in those periods in which we created economic nexus based on each state’s requirements. Accordingly, we now collect, remit, and report sales tax in all states that impose a sales tax. Subsequently, as certain of these liabilities are waived by tax authorities or the applicable statute of limitations expires, the related accrued liability is reversed.\n\n(2)Litigation expenses related to a stockholder class action complaint, see Item 3. Legal Proceedings.\n\n(3)Includes consulting fees related to technology transformation activities, and payroll costs for employees that dedicate significant time to this project. We believe that these costs are discrete and non-recurring in nature, as they relate to a one-time unification of our product offerings on our new commerce platform. As such, they are not normal, recurring operating expenses and are not reflective of ongoing trends in the cost of doing business.\n\n(4)In January of 2026, we made the decision to discontinue all kibble products as well as dental and certain lines of treat products. The decision was made to streamline focus to prioritize our core toy identity while improving operational efficiency and our profitability profile. Accordingly, we believe that these costs are discrete and non-recurring in nature. Exit costs of $2.8 million were recorded in cost of revenues in the consolidated statement of operations.\n\n41\n\n[Table of Contents](#ic9ec87c3a71f4bd29cf1b282e6078c92_7)\n\n(5)Represents strategic transaction costs, which include investment banking fees, legal due diligence and related documentation costs, finance and accounting diligence and documentation.\n\n(6)In February of 2026, we relocated our corporate headquarters. As part of the relocation, we recorded a $0.5 million loss on the disposal of furniture and fixtures, and other equipment. We believe this loss is discrete and non-recurring in nature, and not reflective of ongoing trends in the cost of doing business.\n\n(7)For the fiscal year ended March 31, 2026, other items is comprised of executive transition costs of $0.3 million, and costs associated with the share repurchase program of less than $0.1 million. For the fiscal year ended March 31, 2025, other items is comprised of executive transition costs of $0.8 million, costs associated with the share repurchase program of $0.4 million, and duplicate headquarters rent of less than $0.1 million. For the fiscal year ended March 31, 2024, other items is comprised of non-recurring retention payments to management of $1.4 million, executive transition costs of $1.3 million, tax penalties of less than $0.1 million, and duplicate headquarters rent of less than $0.1 million.\n\nThe following table presents a reconciliation of Free Cash Flow to Net cash provided by (used in) operating activities, the most directly comparable financial measure prepared in accordance with U.S. GAAP, for each of the periods indicated:\n\nFree Cash Flow\n\nFiscal Year Ended March 31\n\n2026\n\n2025\n\n2024\n\nFree cash flow reconciliation:\n\nNet cash (used in) provided by operating activities\n$(23,158)$(7,079)$6,060 \n\nCapital expenditures(3,416)(6,157)(8,831)\n\nFree cash flow$(26,574)$(13,236)$(2,771)\n\nLiquidity and Capital Resources\n\nAs of March 31, 2026, we had cash and cash equivalents of approximately $19.3 million. We expect that our cash and cash equivalents, together with cash provided by our operating activities and available proceeds from borrowings (as described below), will be sufficient to fund our operations for at least the next 12 months. We are required to comply with certain financial and non-financial covenants related to our borrowing agreements, which we are in compliance with as of March 31, 2026 and expect to be in compliance with during the next 12 months.\n\nOur material cash requirements include our lease arrangements for corporate offices, warehouses and certain equipment. As of March 31, 2026, we had fixed lease payment obligations of $37.7 million, with $5.2 million payable within 12 months.\n\n2025 Convertible Notes\n\nOn November 27, 2020, the Company issued $75.0 million aggregate principal amount of 2025 Convertible Notes (the “2025 Convertible Notes”) to Magnetar Capital, LLC (“Magnetar”) under an indenture, dated as of November 27, 2020, between Legacy BARK and U.S. Bank National Association, as trustee and collateral agent (the “Indenture”). The Company received net proceeds of approximately $74.7 million from the sale of the 2025 Convertible Notes, after deducting fees and expenses of approximately $0.3 million. The Company recorded the expenses associated with the issuance of the 2025 Convertible Notes as a discount to the note and amortized the expenses over the term of the note.\n\nOn November 2, 2023, the Company repurchased $45.0 million of the $83.5 million of outstanding aggregate principal amount of 5.50% Convertible Secured Notes due 2025 from entities affiliated with Magnetar Financial, LLC (collectively, the “Holders”), pursuant to the terms and conditions of a negotiated notes purchase agreement (the “2023 Agreement”) among the Company and the Holders.\n\n42\n\n[Table of Contents](#ic9ec87c3a71f4bd29cf1b282e6078c92_7)\n\nPursuant to the 2023 Agreement, the Company repurchased $45.0 million in aggregate principal amount of the 2025 Convertible Notes plus $2.2 million of accrued and unpaid interest thereon to, but excluding the repurchase date, from the Holders for a total cash purchase price of $44.4 million. In addition, $1.0 million of unamortized deferred financing fees were derecognized from the Company’s balance sheet on the date of extinguishment. The accelerated deferred financing fees were recognized as a component of gain on extinguishment of debt. The Company recognized a gain on debt extinguishment of $1.8 million in connection with the repurchase.\n\nOn November 6, 2025, the Company repurchased the remaining $42.9 million of outstanding aggregate principal amount of 5.50% Convertible Secured Notes due 2025 (the “2025 Convertible Notes”) from entities affiliated with Magnetar Financial, LLC (collectively, the “Holders”), pursuant to the terms and conditions of a negotiated notes purchase agreement (the “2025 Agreement”) among the Company and the Holders (the “Final Repurchase”).\n\nPursuant to the 2025 Agreement, on November 6, 2025, the Company repurchased all $42.9 million of the remaining outstanding aggregate principal amount of the 2025 Convertible Notes from the Holders for a total cash purchase price of $45.1 million (which included $2.2 million of accrued and unpaid interest, through but excluding, the repurchase date). There was no gain or loss in connection with the Final Repurchase.\n\nWestern Alliance Revolving Line of Credit\n\nIn October 2017, the Company entered into a loan and security agreement with and issued a warrant to purchase preferred stock (“Initial Western Alliance Warrant”) to Western Alliance Bank (“Western Alliance”), which provide for a revolving line of credit (as amended, the “Credit Facility”) in an aggregate principal amount of up to $35.0 million, including a $10.0 million sublimit for letters of credit of which $9.2 million has been issued. The Credit Facility is subject to borrowing base limitations derived from advance rates derived from the Company’s eligible subscription revenues and eligible accounts receivable. The Credit Facility has been amended several times, most recently in March 2026. After giving effect to this most recent amendment, the maturity date of the Credit Facility is August 29, 2026. Certain of the Company’s obligations to Western Alliance and under the Credit Facility are guaranteed by certain of its subsidiaries and secured by substantially all of their assets. The Company is evaluating alternative options or further renewal of the Credit Facility.\n\nThe interest rate for borrowings under the Credit Facility is equal to (a) the greater (i) of the prime rate that is published in the Money Rates section of The Wall Street Journal from time to time and (ii) 5.25% per annum, plus (b) 0.50%, per annum.\n\nThe Credit Facility has a borrowing base subject to an amount equal to 80.00% of the Company’s trailing three months of subscription revenue and an amount equal to 80.00% of certain of the Company’s customer accounts receivable when a collateral audit is performed and 60.00% when no such collateral audit is performed. Western Alliance has first perfected security in substantially all of the Company’s assets, including its rights to its intellectual property.\n\nThe Credit Facility requires the Company to comply with certain financial and performance covenants, including, among other things, minimum cash deposits with Western Alliance. The Credit Facility also contains affirmative and negative covenants customary for financings of this type, including, among other things, limitations or prohibitions on repurchasing common shares, declaring and paying dividends and other distributions, incurring indebtedness, making loans and investments, incurring liens, or entering into mergers, asset sales and transactions with affiliates.\n\nAs of March 31, 2026 and March 31, 2025, there were no outstanding borrowings under the Credit Facility. As of March 31, 2026 and March 31, 2025, the Company was compliant with its financial covenants.\n\nCash Flows\n\nComparison of the Fiscal Years Ended March 31, 2026, 2025 and 2024.\n\nThe following table summarizes our cash flows for the fiscal years ended March 31, 2026, 2025 and 2024:\n\n43\n\n[Table of Contents](#ic9ec87c3a71f4bd29cf1b282e6078c92_7)\n\nFiscal Year Ended March 31\n\n202620252024\n\n(in thousands)\n\nNet cash (used in) provided by operating activities\n$(23,158)$(7,079)$6,060 \n\nNet cash used in investing activities(3,416)(6,157)(8,831)\n\nNet cash used in financing activities\n(45,710)(19,870)(49,615)\n\nEffect of exchange rate changes on cash(81)(69)24 \n\nNet increase (decrease) in cash and restricted cash $(72,365)$(33,174)$(52,362)\n\nCash flows (used in) provided by Operating Activities\n\nNet cash flows in operating activities represent the cash receipts and disbursements related to our activities other than investing and financing activities.\n\nNet cash flows used in operating activities is derived by adjusting our net loss for:\n\n•non-cash operating items such as depreciation and amortization, stock-based compensation and other non-cash income or expenses; and\n\n•changes in operating assets and liabilities reflect timing differences between the receipt and payment of cash associated with transactions.\n\nFor the fiscal year ended March 31, 2026, net cash used in operating activities was $23.2 million. This consisted of a net loss of $39.0 million, adjusted for non-cash charges totaling $29.5 million and a net unfavorable change of $13.7 million in operating assets and liabilities.\n\nThe non-cash charges primarily consisted of $14.4 million of stock-based compensation, $9.1 million of depreciation and amortization, $4.3 million of non-cash lease expense, and $1.1 million of asset impairment charges.\n\nThe unfavorable change in operating assets and liabilities was primarily driven by a decrease in inventory of $11.1 million and an increase in deferred revenue of $1.0 million, more than offset by an increase in accounts receivable of $2.9 million, a decrease in accounts payable and accrued expenses of $13.4 million, a $5.7 million reduction in operating lease liabilities, and a $2.3 million reduction in other liabilities.\n\nFor the fiscal year ended March 31, 2025, net cash used in operating activities was $7.1 million. This consisted of a net loss of $32.9 million, adjusted for non-cash charges totaling $36.9 million and a net favorable change of $11.1 million in operating assets and liabilities. The non-cash charges primarily consisted of $12.7 million of stock-based compensation, $11.2 million of depreciation and amortization, and $4.5 million of non-cash lease expense.\n\nFor the fiscal year ended March 31, 2024, net cash provided by operating activities was $6.1 million. This consisted of a net loss of $37.0 million, adjusted for non-cash charges totaling $30.5 million and a net favorable change of $12.5 million in operating assets and liabilities. The non-cash charges primarily consisted of $12.9 million of stock-based compensation, $12.6 million of depreciation and amortization, and $4.1 million of non-cash lease expense.\n\nCash flows used in Investing Activities\n\nFor the fiscal year ended March 31, 2026, net cash used in investing activities was $3.4 million, primarily due to capital expenditures for warehouse equipment and software implementation.\n\nFor the fiscal year ended March 31, 2025, net cash used in investing activities was $6.2 million, primarily due to capital expenditures.\n\nFor the fiscal year ended March 31, 2024, net cash used in investing activities was $8.8 million, primarily due to capital expenditures for warehouse machinery, leasehold improvements, equipment, and software implementations.\n\n44\n\n[Table of Contents](#ic9ec87c3a71f4bd29cf1b282e6078c92_7)\n\nCash flows used in Financing Activities\n\nFor the fiscal year ended March 31, 2026, net cash used in financing activities was $45.7 million, primarily due to the November 6, 2025 cash repurchase of the remaining $42.9 million aggregate principal amount of our 2025 Convertible Notes (see Note 6 — Debt), $1.8 million of common stock repurchases under our Board-authorized share repurchase program, and $1.5 million of payments for restricted stock units held for taxes.\n\nFor the fiscal year ended March 31, 2025, net cash used in financing activities was $19.9 million, primarily due to payments to repurchase common stock of $18.5 million.\n\nFor the fiscal year ended March 31, 2024, net cash used in financing activities was $49.6 million, primarily due to the partial payment of long-term debt of $42.3 million and payments to repurchase common stock of $6.2 million.\n\nOff-Balance Sheet Arrangements\n\nWe did not have during the periods presented, and we do not currently have, any off-balance sheet financing arrangements or any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.\n\nCritical Accounting Policies and Estimates\n\nThis discussion and analysis of financial condition and results of operations is based upon our audited consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities. We also make estimates and assumptions on revenue generated and reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. Our critical accounting policies are described in greater detail in Note 2 — Summary of Significant Accounting Policies to our consolidated financial statements included in this Annual Report on Form 10-K.\n\nCritical accounting estimates are defined as those reflective of significant judgments, estimates and uncertainties, which may result in materially different results under different assumptions and conditions. We have listed below our critical accounting estimates that we believe to have the greatest potential impact on our audited consolidated financial statements. Historically, our assumptions, judgments and estimates relative to our critical accounting estimates have not differed materially from actual results.\n\nRevenue Recognition\n\nOur primary sources of revenue are from sales of toys & accessories and consumables through our Direct to Consumer and Commerce segments. We recognize revenue upon delivery of products and services to our customer, as applicable. The recognition of revenue is determined through application of the following five-step model:\n\n•Identification of the contract(s) with customers, as applicable;\n\n•Identification of the performance obligation(s) in the contract;\n\n•Determination of the transaction price;\n\n•Allocation of the transaction price to the performance obligation(s) in the contract; and\n\n•Recognition of revenue when or as the performance obligation(s) is satisfied.\n\n45\n\n[Table of Contents](#ic9ec87c3a71f4bd29cf1b282e6078c92_7)\n\nDiscounts are considered fixed consideration and represent a fixed reduction to revenue for each performance obligation. The sales returns and chargebacks allowance is considered to be contingent and represents a component of variable consideration. The estimated consideration reflects potential sales returns and chargebacks as a reduction in the transaction price. We have determined that the expected value method will provide the best predictor for a refund liability associated with sales returns and chargebacks. The expected value method estimates variable consideration based on the range of possible outcomes and the probabilities of each outcome and is most appropriate when an entity has a large number of contracts that have similar characteristics. The estimate is recorded in total for sales transactions recorded in the current period and, in effect, represents a reduction in the transaction price at the time of sale.\n\nOur contract liability represents cash collections from our customers prior to delivery of subscription products, which is recorded as deferred revenue on the consolidated balance sheets. Deferred revenue is recognized as revenue upon the delivery of the box or product.\n\nInventories\n\nInventories consist principally of finished goods, and represent products available for sale and are accounted for using the first-in, first-out (“FIFO”) method and valued at the lower of cost or net realizable value. Inventory costs consist of product, duties and inbound shipping and handling costs. We assess the valuation of inventory and periodically write down the value for estimated excess and obsolete inventory based upon estimates of future demand and market conditions. Inventory valuation requires us to make judgments, based on information available at each reporting period. Inventory valuation losses are recorded as cost of revenues.\n\nWe review current business trends and forecasts, and inventory aging to determine adjustments which we estimate will be needed to liquidate existing excess inventories and record inventories at either the lower of cost or net realizable value or the lower of cost or market, as applicable. We believe that all inventory write-downs required at March 31, 2026, have been recorded. Our historical estimates of inventory reserves have not differed materially from actual results. If market conditions were to change, including as a result of the current geopolitical conflicts and wars, supply chain and global logistics disruptions, and/or potential changes to trade policy, including the imposition of new or increased tariffs, it is possible that the required level of inventory reserves may need to be adjusted.\n\nRecent Accounting Pronouncements\n\nA description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 — Summary of Significant Accounting Policies in our audited consolidated financial statements contained in this Annual Report on Form 10-K.\n\n46\n\n[Table of Contents](#ic9ec87c3a71f4bd29cf1b282e6078c92_7)"}