BranchOut Food Inc. 10-K

ITEM 1A. RISK FACTORS Investing in our securities involves a high degree of risk. You should carefully consider the risks described below, together with the other information contained in this Annual Report on Form 10-K, including our consolidated financial statements and related notes. If any of the risks described below occur, our business, financial condition, results of operations, cash flows, and prospects could be materially and adversely affected. The trading price of our common stock could decline, and you could lose all or part of your investment. Risks Related to Our Operating History, Financial Position, and Capital Structure We have incurred losses and negative cash flows since inception, and we may not achieve or sustain profitability. We have incurred losses since inception. During the years ended December 31, 2025 and 2024, we incurred net losses of $6,124,672 and $4,751,516, respectively. There can be no assurance that we will not continue to incur net losses in the future. Our ability to achieve profitability depends on our ability to scale production, expand distribution, manage customer concentration, control input, labor, and logistics costs, improve manufacturing utilization and yields, and grow gross profit at a rate sufficient to cover operating expenses and public company costs. If we are unable to execute successfully on these objectives, we may continue to incur losses and negative cash flows, which could materially adversely affect our business, financial condition, and results of operations. Our financial statements include an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. Our audited consolidated financial statements include an explanatory paragraph from our independent registered public accounting firm expressing substantial doubt about our ability to continue as a going concern. This condition may adversely affect our ability to raise capital, negotiate favorable terms with customers and suppliers, retain employees, and execute our growth strategy. If our operating performance does not improve or we are unable to obtain additional liquidity when needed, we may be required to delay or reduce investments, scale back operations, or pursue financing or strategic alternatives on unfavorable terms, which could materially adversely affect our business. We may require additional capital to fund operations and growth, and financing may not be available on acceptable terms or at all. Our operating model requires significant working capital to support raw material sourcing, inventory, international transit times, and customer program requirements. We may need to raise additional capital through equity, debt, or other financings to fund operations, expand manufacturing capacity, or support growth initiatives. Financing may not be available when needed, or may be available only on unfavorable terms, including dilution to existing stockholders, restrictive covenants, increased leverage, or security interests in our assets. Any inability to obtain sufficient financing could materially adversely affect our liquidity, operations, and growth prospects. Our current growth may not be indicative of our future growth, and our limited operating history may make it difficult to assess our future viability. We expect that as our revenue increases, our revenue growth rate will decline. We also believe that growth of our revenue depends on several factors, including our ability to: ● expand our existing channels of distribution; ● develop additional channels of distribution; ● grow our customer base; ● effectively introduce new products; ● increase awareness of our brand; ● manufacture at a scale that satisfies future demand; and ● effectively source key raw materials. We may not successfully accomplish any of these objectives. We have not yet demonstrated the ability to manage rapid growth over a long period of time or achieve profitability at scale. Consequently, any predictions regarding our future success or viability may not be as accurate as they could be if we had a longer operating history or had previously achieved profitability. Our indebtedness may adversely affect our financial condition and limit our operational and financial flexibility. Our indebtedness and related security interests may limit our ability to incur additional debt, fund working capital needs, or pursue strategic opportunities. If we are unable to generate sufficient cash flow to service our obligations, we may be required to refinance, raise additional capital, or pursue other alternatives, which may not be available on favorable terms or at all. Failure to maintain compliance with Nasdaq listing requirements could adversely affect the liquidity and market price of our common stock. We have previously been subject to Nasdaq compliance matters, including monitoring related to stockholders’ equity and other continued listing requirements. If we fail to maintain compliance with applicable listing standards, we could be subject to delisting, which could reduce liquidity, limit access to capital markets, increase stock price volatility, and materially adversely affect the market price of our common stock. 6 The market price of our common stock may be volatile and subject to significant fluctuations, which could result in losses for investors. The trading price of our common stock may fluctuate significantly due to factors including operating results, customer concentration, liquidity constraints, financing activities, market conditions, and investor perceptions of growth-stage companies. These fluctuations may be unrelated to our actual operating performance and could result in losses for investors. Our ability to access the capital markets and the issuance of additional securities could dilute existing stockholders and adversely affect the market price of our common stock. We may continue to rely on the capital markets to fund operations, support growth initiatives, and strengthen our balance sheet. To raise capital, we may issue additional shares of common stock, preferred stock, warrants, options, convertible securities, or other equity-linked instruments. The issuance of additional securities, or the potential for such issuances, could result in substantial dilution to existing stockholders and could adversely affect the market price of our common stock. Our capital structure includes outstanding warrants, stock options, and convertible notes. The exercise or conversion of these securities could further dilute stockholders and increase the supply of shares available for sale in the public market, which could put downward pressure on our stock price. In addition, the perception that we may issue additional equity securities in the future could adversely affect the trading price of our common stock. Access to capital markets may be limited by market conditions, our operating performance, liquidity, stock price volatility, and compliance with applicable listing requirements. If we are unable to raise capital on acceptable terms when needed, we may be required to delay or reduce investments, curtail operations, or pursue alternative financing arrangements that may be more costly or restrictive. Because our common stock may have limited trading volume and analyst coverage, issuances of additional securities or significant sales of shares by existing stockholders could result in increased price volatility and adversely affect investor confidence. If we are unable to effectively manage our capital structure or access the capital markets on favorable terms, our business, financial condition, and growth prospects could be materially adversely affected. Risks Related to Our Emerging Growth Company and Smaller Reporting Company Status Because we are an emerging growth company and a smaller reporting company, our disclosures may be less comprehensive than those of other public companies. We are an emerging growth company (“EGC”) and a smaller reporting company (“SRC”) and take advantage of certain reduced reporting, disclosure, and governance requirements, including exemptions from auditor attestation of internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act, reduced executive compensation disclosure, and extended transition periods for new accounting standards. As a result, investors may find our common stock less attractive, which could result in reduced trading activity and increased stock price volatility. Risks Related to Internal Controls and Financial Reporting If we fail to maintain effective internal control over financial reporting, our ability to produce accurate financial statements could be impaired. As a public company, we are required to maintain effective internal control over financial reporting. Our operations involve complex manufacturing, inventory, cost accounting, and cross-border transactions. As we scale our business, our systems, processes, and personnel may not keep pace with growth. We may identify control deficiencies or material weaknesses, which could result in errors in our financial statements, restatements, delayed reporting, or loss of investor confidence, any of which could materially adversely affect our business and stock price. Risks Related to Customers, Distribution, and Market Demand A substantial portion of our net sales is derived from a limited number of customers. A significant portion of our net sales and accounts receivable is derived from a limited number of large retail customers. As a result, our operating results, cash flows, and working capital depend on the purchasing decisions, financial condition, and payment practices of these customers. Reductions in purchase volumes, changes in pricing or promotional terms, increased chargebacks, payment delays, or the loss of a significant customer could materially adversely affect our net sales, margins, liquidity, and manufacturing utilization. We generally do not have long-term purchase commitments from customers, and demand forecasting is difficult. Customer purchases are typically made through purchase orders and program-based arrangements rather than long-term volume commitments. Customers may reduce, delay, or cancel orders with limited notice, contributing to revenue volatility and increasing the difficulty of forecasting demand, planning production, and managing inventory. 7 The consumer-packaged foods industry is highly competitive, and we may be unable to compete effectively. We compete with large, branded food companies, emerging snack brands, and private-label manufacturers that have significantly greater financial, marketing, and distribution resources. Competitive pricing, promotional activity, and shifts in retailer category strategies could pressure our margins and limit our ability to grow. Changes in consumer preferences or retailer category strategies could reduce demand for our products. Consumer tastes and retailer merchandising priorities can shift rapidly. If demand for clean-label, fruit- and vegetable-based snacks declines, if retailers reduce shelf space, or if competing products gain preference, our net sales and operating results could be adversely affected. Risks Related to Manufacturing, Supply Chain, Agricultural Inputs, and Seasonality Our manufacturing operations are concentrated in a single facility in Peru, and any disruption could materially adversely affect our business, results of operations, and financial condition. All of our production is conducted at our manufacturing facility in Pisco, Peru, which commenced operations in December 2024. As a result, our ability to meet customer demand, maintain service levels, and generate revenue depends substantially on the continued operation of this facility. Any disruption—including equipment failure, utilities interruptions, labor disruptions, facility damage, supply interruptions, natural disasters, public health events, or regulatory or governmental actions—could impair production, delay shipments, increase costs, and harm customer relationships. Because we do not currently have redundant manufacturing capacity, any prolonged disruption could require us to reduce or suspend production. Replacing, repairing, or relocating production on a timely or cost-effective basis may not be feasible and could require significant capital investment, management attention, and time. In addition, disruptions could result in inventory shortages, lost sales, penalties or chargebacks, increased logistics costs, and reduced manufacturing utilization, which could materially adversely affect margins, cash flows, and working capital. We are exposed to risks associated with operating in Peru. Operating in Peru exposes us to risks related to political, economic, regulatory, labor, tax, infrastructure, and currency conditions. Changes in laws or regulations, labor disruptions, tax enforcement actions, currency controls, inflation, or political instability could increase costs, disrupt operations, or impair our ability to repatriate cash, any of which could materially adversely affect our business. Foreign currency fluctuations could adversely affect our results of operations. A significant portion of our costs are denominated in Peruvian soles, while substantially all of our revenues are denominated in U.S. dollars. Fluctuations in exchange rates could increase our costs, reduce margins, and adversely affect our financial results. We do not currently hedge foreign currency risk. If we are unable to effectively manage growth and scale our systems and controls, our business and reporting could be adversely affected. Scaling a manufacturing-led, cross-border operating model places significant demands on our organizational, operational, and financial infrastructure. If our systems, personnel, processes, and internal controls do not keep pace with growth—particularly in areas such as inventory, cost accounting, logistics, and revenue processes—we could experience operational disruptions, increased costs, delays in reporting, or reduced investor confidence. Achieving efficient manufacturing utilization and throughput is important to our margins, and failure to do so could adversely affect profitability. Our cost structure includes fixed and semi-fixed costs. If demand, uptime, yields, or production efficiency do not meet expectations, we may experience margin pressure, excess inventory, inventory write-downs, or increased per-unit costs. Agricultural supply, environmental conditions, and commodity volatility could adversely affect our costs, production, and margins. Our operating scale and sourcing flexibility are more limited than those of larger competitors, which may increase our exposure to agricultural and environmental risks. Our production depends on the availability, quality, and cost of agricultural raw materials, which are subject to volatility driven by weather conditions, climate variability, temperature extremes, drought, flooding, crop disease, and other environmental factors. Adverse growing conditions could reduce crop yields, affect raw material quality, disrupt harvest cycles, and increase input costs, which could negatively affect production volumes, gross margins, and operating results. Water availability is also a critical factor in agricultural production and food processing. Changes in water access, drought conditions, water use restrictions, or increased competition for water resources in regions where our raw materials are sourced or where our manufacturing facility operates could disrupt supply, increase costs, or require operational adjustments. 8 In addition, evolving environmental; sustainability; and environmental, social and governance related expectations from regulators, customers, and investors may increase our reporting obligations, compliance costs, and operational complexity. We may be required to provide additional disclosures regarding environmental impact, sourcing practices, emissions, or sustainability metrics, which may require investments in systems, processes, and data collection. Failure to meet evolving expectations could adversely affect our reputation, customer relationships, and access to capital. Our products and marketing may also be subject to scrutiny related to sustainability, environmental, or product claims. Regulatory agencies, competitors, consumer groups, or plaintiffs may challenge the accuracy or substantiation of claims related to sourcing, environmental impact, or sustainability practices. Such challenges could result in litigation, regulatory actions, increased compliance costs, reputational harm, or changes to our labeling or marketing practices. If agricultural supply conditions deteriorate, commodity price volatility persists, environmental factors worsen, or sustainability-related requirements increase, and we are unable to effectively manage these risks, our production, margins, financial condition, and results of operations could be materially adversely affected. Seasonality in harvest cycles and consumer demand may cause quarterly results to fluctuate and increase working capital requirements. Our operating model is influenced by harvest timing for certain raw materials and seasonal shifts in consumer demand and retailer purchasing patterns. If we are unable to align production and inventory planning with harvest availability and customer ordering cycles—particularly when building shelf-stable inventory for later demand—our service levels, working capital needs, and margins could be adversely affected. Inventory management challenges, product shelf-life limitations, and potential obsolescence could adversely affect our margins, cash flows, and operating results. Our business requires us to maintain significant levels of inventory, including raw materials, work-in-process, and finished goods, to support customer programs, international transit times, and production planning. Although our products are shelf-stable, they have finite shelf lives and are subject to quality, freshness, and specification requirements imposed by customers and regulators. Inaccurate demand forecasting, changes in customer purchasing patterns, program delays, order cancellations, or shifts in retailer promotional strategies could result in excess, slow-moving, or obsolete inventory. Inventory levels may also increase as a result of operational disruptions, manufacturing inefficiencies, changes in production yields, or efforts to build inventory in advance of anticipated demand or harvest availability. Excess inventory may require markdowns, write-downs, or disposal, which could adversely affect gross margins, operating results, and cash flows. In addition, inventory that approaches the end of its usable shelf life may be subject to customer rejection, reduced pricing, or increased handling and logistics costs. Our cross-border manufacturing and distribution model further increases inventory risk due to extended production lead times, international shipping durations, customs clearance processes, and limited ability to rapidly redeploy or rework finished goods. Once inventory is produced and shipped, our ability to adjust volumes in response to demand changes is constrained, increasing the risk of excess or obsolete inventory. If we are unable to accurately forecast demand, align production with customer requirements, or effectively manage inventory levels and shelf life, we may experience increased inventory write-downs, reduced manufacturing utilization, margin compression, and higher working capital requirements, any of which could materially adversely affect our business, financial condition, and results of operations. Our insurance coverage may be insufficient to cover all potential losses, which could materially adversely affect our business and financial condition. We maintain insurance coverage for certain risks associated with our business, including property damage, business interruption, product liability, general liability, workers’ compensation, and other customary coverages. However, our insurance policies are subject to deductibles, coverage limits, exclusions, and other terms that may not fully cover all potential losses. In addition, certain risks, including some types of natural disasters, cyber incidents, supply chain disruptions, regulatory actions, or catastrophic events, may be uninsurable or economically impractical to insure. Our manufacturing operations are concentrated in a single facility in Peru, which increases our exposure to property damage, business interruption, and operational disruption risks. If a significant event were to damage our facility, disrupt operations, or result in product liability or other claims, our insurance coverage may not be sufficient to fully compensate us for the associated losses, lost revenue, remediation costs, or liabilities. Furthermore, insurance coverage may not continue to be available on commercially reasonable terms, and premiums may increase over time. If we incur losses that are not adequately covered by insurance, or if insurance becomes unavailable or prohibitively expensive, our business, financial condition, results of operations, and cash flows could be materially adversely affected. Tariffs imposed on the importation of our products into the United States would increase the cost of our products and could result in decreased demand for our products. Our operations and financial results may be adversely impacted by changes in trade policies, including the imposition of tariffs, import/export restrictions, or other trade barriers. We are subject to tariffs, customs duties, and other trade-related costs. If the U.S. or other governments impose new or increased tariffs on goods imported from Peru or other countries where we manufacture our products, it could increase our production costs, reduce our profit margins, and lead to higher prices for consumers, potentially affecting demand for our products. Although tariffs imposed by the Trump administration were recently struck down by U.S. Supreme Court, there can be no assurance that other tariffs may be legally imposed in the future that will have a material adverse effect on our operations. 9 International logistics and customs processes could increase costs and disrupt service levels. We export products from Peru to the United States. Freight availability, fuel costs, port congestion, transit delays, and customs clearance requirements may increase costs or delay deliveries, which could adversely affect operating results and customer relationships. Our reliance on a limited number of key suppliers and service providers exposes us to supply chain concentration risk that could disrupt operations and adversely affect our business. Our operations rely on a limited number of key suppliers, manufacturers of specialized equipment, packaging providers, agricultural input suppliers, logistics partners, and other service providers. In certain cases, we may depend on single-source or limited-source vendors for critical inputs, components, or services, including materials necessary for production and distribution. If any of these suppliers or service providers experience financial distress, operational disruptions, capacity constraints, quality failures, labor shortages, cybersecurity incidents, transportation delays, or other adverse events, we may be unable to obtain sufficient materials or services on a timely or cost-effective basis. Because we may have limited bargaining power, alternative sources may not be readily available, may require significant time and cost to qualify, or may be available only on less favorable terms, which could increase costs and disrupt production or fulfillment. Our relatively limited scale may also make us more vulnerable to supplier concentration risks, including reduced leverage in pricing negotiations, longer lead times, and greater sensitivity to vendor disruptions. If we are unable to maintain reliable supply chain relationships, manage vendor risks, or secure alternative sources when needed, our production, margins, customer relationships, and operating results could be materially adversely affected. We rely on third-party service providers for key operational functions, and disruptions or failures by these providers could materially adversely affect our business and results of operations. Our operations depend on third-party logistics, transportation, information technology, and service providers, and disruptions or failures by these providers could adversely affect our operations and financial results. Inflation and cost pressures could increase operating expenses and adversely affect our margins and profitability. Our operating results are sensitive to inflationary pressures affecting labor, transportation, raw materials, utilities, packaging, and other operating inputs. Inflation in Peru, where our manufacturing operations are located, could increase wages, benefits, and other labor-related costs, particularly in a competitive labor market. Labor cost increases, including wage inflation, workforce shortages, or changes in labor regulations, could raise our cost structure and reduce operating efficiency. We are also exposed to fluctuations in freight and logistics costs, including ocean freight, inland transportation, fuel, and port-related expenses. Freight inflation, shipping delays, capacity constraints, or changes in global trade dynamics could increase distribution costs and reduce margins. In addition, the cost and availability of agricultural raw materials and other commodities are subject to volatility driven by weather patterns, climate variability, supply disruptions, energy prices, and global market conditions. Increases in input costs may not be fully recoverable through pricing actions, particularly in a competitive retail environment, which could result in margin compression. If inflationary pressures persist or intensify, and we are unable to effectively manage costs, improve operating efficiencies, or adjust pricing, our gross margins, operating results, cash flows, and financial condition could be materially adversely affected. Political, economic, and social conditions in Peru could adversely affect our operations, costs, and financial results. Our manufacturing operations are located in Peru, and a significant portion of our assets, employees, and operating activities are concentrated in that country. As a result, our business is subject to political, economic, and social risks specific to Peru that are beyond our control. These risks include changes in government leadership or policy, political instability, civil unrest, labor strikes, changes in labor laws or enforcement practices, tax or customs policy changes, currency controls, inflationary pressures, and disruptions to local infrastructure or public services. Peru has experienced periods of political uncertainty and social unrest, which have, at times, disrupted transportation networks, ports, utilities, and supply chains. Such events could interfere with our ability to operate our manufacturing facility, source raw materials, transport finished goods, or export products to the United States, resulting in production delays, increased costs, or lost sales. 10 Economic conditions in Peru, including inflation, changes in interest rates, fluctuations in foreign exchange rates, or restrictions on the movement of capital, could increase operating costs or limit our ability to repatriate cash. In addition, changes in tax laws, customs duties, regulatory interpretations, or enforcement practices by Peruvian authorities could increase our compliance obligations, result in disputes, or adversely affect our financial results. If political, economic, or social conditions in Peru deteriorate, or if we are unable to effectively manage the risks associated with operating in a foreign jurisdiction, our business, financial condition, results of operations, and cash flows could be materially adversely affected. Changes in tax laws, cross-border tax matters, or adverse tax determinations in the United States or Peru could materially adversely affect our financial condition and results of operations. We are subject to taxation in the United States and Peru, and our tax obligations are affected by the application and interpretation of complex and evolving tax laws and regulations in both jurisdictions. Changes in tax laws, tax rates, regulations, or administrative practices in either country could increase our tax liabilities, reduce our after-tax earnings, or require changes to our business structure or operations. Our cross-border operations involve intercompany transactions, transfer pricing arrangements, and the allocation of income and expenses between jurisdictions. Tax authorities in the United States or Peru may challenge our transfer pricing positions, intercompany pricing methodologies, or the characterization of transactions, which could result in additional taxes, interest, penalties, or disputes. Such determinations could increase our effective tax rate and adversely affect our financial results. We are also subject to indirect taxes, including value-added taxes, customs duties, and other transaction-based taxes in Peru, as well as United States federal and state income taxes. Changes in the administration, enforcement, or interpretation of these taxes, including customs valuation or import/export rules, could increase compliance costs or tax liabilities. In addition, we may be subject to tax examinations or audits by United States or Peruvian tax authorities. The outcomes of such audits are uncertain and could result in assessments of additional taxes, interest, and penalties. Our ability to utilize net operating losses or other tax attributes may also be limited by future changes in tax law, ownership changes, or our operating performance. If tax authorities successfully challenge our tax positions, or if tax laws or enforcement practices change in ways that increase our tax burden, our financial condition, results of operations, and cash flows could be materially adversely affected. Risks Related to Food Safety, Product Liability, and Regulation We are subject to extensive food safety, labeling, and product regulations, and noncompliance or quality failures could result in recalls, import holds, enforcement actions, or reputational harm. Our products are subject to United States and foreign food safety and labeling requirements, including regulation by the U.S. Food and Drug Administration and the Food Safety Modernization Act as it applies to imported foods. Failure to comply with applicable requirements, actual or alleged contamination, labeling errors, or other product quality issues could result in product recalls, market withdrawals, import holds, fines, litigation, increased costs, and reputational harm, any of which could adversely affect our business and operating results. In addition, regulatory requirements governing ingredient disclosures, product claims, certifications, and labeling—including evolving interpretations of terms such as “natural,” “organic,” or similar claims—may change or be subject to increased enforcement or litigation. Adverse publicity or legal challenges related to labeling or marketing claims could reduce consumer confidence, increase compliance costs, and negatively impact demand for our products. We may be subject to product liability claims and recall. Product contamination, spoilage, or consumer injury claims could expose us to product liability litigation, even if the claims are unfounded. Our insurance coverage may be insufficient to cover all potential liabilities, and product liability claims could materially adversely affect our business, financial condition, and reputation. Our operations are subject to regulation in multiple jurisdictions, and regulatory changes or increased enforcement could increase costs or disrupt operations. Our business is subject to regulation by governmental authorities in the United States and Peru, including laws related to food safety, labor, environmental practices, tax, and customs. Changes in regulatory requirements, interpretations, or enforcement practices—particularly those affecting imported foods or foreign manufacturing—could require operational changes, delay shipments, increase compliance costs, or result in enforcement actions that could materially adversely affect our business and results of operations. 11 Evolving environmental, labor, and sustainability regulations may increase compliance costs and operational complexity. We are subject to environmental, labor, food safety, and employment laws and regulations in the jurisdictions in which we operate. These requirements may become more stringent over time, including increased reporting, compliance, or operational obligations related to sustainability, environmental impact, and workforce practices. Compliance with current or future regulations could increase costs, require changes to operations, or limit our ability to source materials or operate facilities as currently structured. Risks Related to Licensed Technology and Intellectual Property Our business depends on licensed dehydration technology, and limitations, disputes, or loss of exclusivity could materially harm our business. Our business depends on licensed technology from EnWave Corporation, (“Enwave”), and changes to, loss of, or limitations under this license could materially adversely affect our operations and competitive position. Our production relies on proprietary vacuum-microwave dehydration technology licensed from EnWave. Because we do not own the underlying patents or core technology, our ability to manufacture certain products depends on our continued rights under the license and our compliance with its terms. Under the license, we are required to pay ongoing royalties and satisfy contractual obligations, including certain commercial and operational requirements, to maintain our rights and, in some cases, product or territorial exclusivity. Royalty obligations and minimum or exclusivity-related payments may increase over time or become more burdensome under changing operating conditions. The license contains termination and default provisions, including for non-payment, insolvency, or breach of contractual obligations. If the license were terminated or our exclusivity rights were reduced, we could lose the ability to manufacture certain products using EnWave technology, which could materially adversely affect our business and growth strategy. EnWave retains ownership and control of the underlying technology and certain rights related to the equipment and its operation, and our dependence on a third party for core production technology exposes us to risks related to technology availability, support, and continued cooperation. In addition, EnWave may grant licenses to other companies, including competitors, which could reduce our technological differentiation and increase competitive pressure. Technological advancements or the development of alternative processing technologies could reduce the competitiveness or commercial value of the licensed technology over time. If royalty obligations increase, exclusivity is reduced, competing licenses are granted, the technology becomes less competitive, or the license is terminated, our business, financial condition, and results of operations could be materially adversely affected. We may be unable to adequately protect our intellectual property and proprietary know-how. Our competitive position depends on a combination of licensed rights, patents, trademarks, and trade secrets. Third parties may challenge patent validity, develop alternative technologies, or misappropriate proprietary know-how. Enforcement efforts may be costly and could divert management attention. Risks Related to Information Systems and Cybersecurity Disruptions to our information technology systems or cybersecurity incidents could harm operations, financial reporting, and our business. We rely on information technology systems and third-party service providers to support key business functions, including production planning, inventory management, logistics coordination, order processing, financial reporting, and communications. Cybersecurity incidents—including ransomware attacks, malware infections, phishing, unauthorized access, denial-of-service attacks, and other cyber intrusions—could compromise our systems or data, disrupt operations, and adversely affect our business. A successful ransomware or similar attack could result in the encryption or loss of critical data, operational downtime, supply chain disruptions, delays in order fulfillment, and increased costs associated with remediation, system restoration, cybersecurity enhancements, and potential ransom payments. Because our manufacturing, logistics, and reporting processes depend on system availability and data integrity, a cybersecurity incident could result in partial or complete operational shutdown, delays in production or shipments, and inability to process transactions or prepare financial information on a timely basis. We also depend on third-party service providers, including cloud-based platforms, logistics and supply chain partners, and other vendors that process, store, or transmit sensitive operational and financial data. A cybersecurity breach affecting our suppliers, service providers, or other participants in our supply chain could expose us to data loss, operational disruption, contractual liabilities, or reputational harm, even if our own systems are not directly compromised. Cybersecurity incidents could also result in theft, loss, or unauthorized disclosure of confidential business information, financial data, or personal information, which could expose us to litigation, regulatory investigations, penalties, and remediation costs. In addition, a significant cybersecurity incident could impair our ability to maintain effective internal control over financial reporting, delay required filings with the Securities and Exchange Commission, require public disclosure of material incidents, and harm investor confidence. While we maintain cybersecurity controls and business continuity measures, these protections may not be sufficient to prevent or fully mitigate cybersecurity risks. The occurrence of a cybersecurity incident could materially adversely affect our operations, financial condition, results of operations, and reputation. 12 Risks Related to Personnel and Business Continuity Our success depends on a limited number of key personnel, and we may have difficulty attracting and retaining qualified employees. Our business depends on executive leadership and skilled operational, technical, and commercial personnel to scale manufacturing, manage customer relationships, maintain compliance, and satisfy public company reporting requirements. The loss of key personnel or inability to recruit and retain qualified employees could disrupt execution and adversely affect operating results. Our Chief Financial Officer is not a full-time employee. John Dalfonsi, our Chief Financial Officer, is not a full-time employee of the Company and is simultaneously serving other interests. There can be no assurance that we will be able to successfully manage our finance and accounting matters without a full-time Chief Financial Officer. Labor availability, wage inflation, or workplace safety incidents could increase costs and disrupt operations. Our manufacturing operations depend on a stable workforce and safe working conditions. Labor shortages, turnover, wage inflation, or safety incidents could reduce productivity, increase costs, and disrupt production. Changes in labor laws or enforcement practices could increase compliance burdens and operating costs. Risks Related to Corporate Governance Our governing documents designate Nevada courts as the exclusive forum for certain stockholder actions. Our governing documents designate Nevada courts as the exclusive forum for certain stockholder actions, which may limit stockholders’ ability to obtain a favorable judicial forum and could discourage litigation, potentially adversely affecting stockholders’ rights. Risks Related to Legal Proceedings and Compliance We may be subject to litigation, regulatory proceedings, and other legal matters that could materially adversely affect our business, financial condition, and results of operations. From time to time, we may become involved in legal proceedings, claims, and regulatory matters arising in the ordinary course of business. These may include, among others, commercial disputes, contract claims, intellectual property matters, employment and labor claims, product liability claims, consumer protection actions, regulatory or governmental investigations, and other proceedings. Litigation and regulatory matters can be costly, time-consuming, and disruptive to our operations and may divert the attention of management and other personnel. Even when claims lack merit, the costs associated with defending or resolving such matters can be significant. Adverse outcomes, including judgments, settlements, fines, penalties, or injunctions, could materially adversely affect our financial condition, results of operations, cash flows, and reputation. In addition, legal proceedings may result in substantial damages, increased insurance premiums, loss of intellectual property rights, changes to our business practices, or other unfavorable outcomes. We may also be subject to claims arising from customer disputes, supplier relationships, technology licensing arrangements, or cross-border operations, including matters subject to foreign jurisdictions, which may increase the complexity, cost, and uncertainty of such proceedings. Our insurance coverage may not be sufficient to cover all potential losses associated with legal claims, and some types of claims may not be covered by insurance at all. If we are required to record significant legal expenses, damages, or settlement costs, our business, financial condition, and results of operations could be materially adversely affected. 13