Item 1A. Risk Factors
ITEM 1A. Risk
Factors
The
following important factors, and the important factors described elsewhere in this report or in our other filings with the SEC, could
affect (and in some cases have affected) our results and could cause our results to be materially different from estimates or expectations.
Other risks and uncertainties may also affect our results or operations adversely. The following and these other risks could materially
and adversely affect our business, operations, results or financial condition.
Risks
Related to Our Operating History, Financial Position and Capital Needs
We
are an early-stage company and have incurred significant losses since our inception. We expect to incur losses for the foreseeable future
and may never achieve or maintain profitability.
We
are an early-stage company. We were formed and commenced operations in November 2017. We face all the risks faced by newer companies,
including significant competition from existing and emerging competitors, many of which are established and have better access to capital.
In addition, as a new business, we may encounter unforeseen expenses, difficulties, complications, delays, and other known and unknown
factors. We will need to transition from an early-stage company to a company capable of supporting larger scale commercial activities.
If we are not successful in such a transition, our business, results, and financial condition will be harmed.
We
have not been profitable to date, and we expect operating losses for the near future. During the years ended December 31, 2024 and 2023,
we had net revenue of approximately $6,516,337 and $2,825,855, respectively, and incurred net losses of approximately $4,751,516 and
$3,925,710, respectively. There can be no assurance that we will not continue to incur net losses in the future. We may not succeed in
expanding our customer base and product offerings and even if we do, may never generate revenue that is significant enough to achieve
profitability. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual
basis. Furthermore, we may not be able to control overhead expenses even where our operations successfully expand. Our failure to become
and remain profitable would depress our value and could impair our ability to raise capital, expand our business, diversify our product
offerings, or even continue our operations.
Our
audited financial statements for the years ended December 31, 2024 and 2023 included a statement from our independent registered public
accounting firm that there is substantial doubt about our ability to continue as a going concern, and a continuation of negative financial
trends could result in our inability to continue as a going concern.
There
is substantial doubt about our ability to continue as a going concern over the next twelve months and our independent registered public
accounting firm has included a “going concern” explanatory paragraph in their report in our financial statements as of and
for the years ended December 31, 2024 and 2023. If our operating results fail to improve, our financial condition will deteriorate which
could render us unable to continue as a going concern.
Our
failure to meet the continued listing requirements of Nasdaq could result in a delisting of our securities.
On
April 11, 2024, we received a letter from Nasdaq stating that we were not in compliance with Nasdaq Listing Rule 5550(b)(1) (the “Rule”)
because our stockholders’ equity of $2,210,476 as of December 31, 2023 was below the minimum requirement of $2,500,000. Pursuant
to Nasdaq’s Listing Rules, on May 28, 2024, we submitted to Nasdaq a plan to regain compliance with the Rule, which was accepted
by Nasdaq and provided us with an extension of 180 calendar days from April 11, 2024 (until October 8, 2024) to regain compliance with
the Rule. On October 10, 2024, Nasdaq notified us that we did not meet the terms of the extension to regain compliance with the Rule,
and as a result, unless we requested an appeal, trading of our common stock would be suspended. On October 11, 2024, we submitted a request
for a hearing with Nasdaq’s Hearings Panel to appeal Nasdaq’s delisting determination, which stayed the suspension of trading
of our common stock.
As
of November 14, 2024, as a result of the sale of 928,602 Shares under the ATM Agreement for aggregate gross offering proceeds
of approximately $1,795,000, we regained compliance with the Rule, and the hearing before the Hearing Panel was cancelled. However, Nasdaq
informed us that it will continue to monitor the Company’s ongoing compliance with the stockholders’ equity requirement and,
if we fail to evidence compliance with the Rule upon the filing of its Annual Report on Form 10-K for the year ended December 31, 2024,
we may be subject to delisting.
As
of December 31, 2024, we were again not in compliance with the Rule, with stockholders’ equity of $2,341,583 as reported in this
Annual Report on Form 10-K. However, as a result of the sale of 1,303,115 additional shares of
our common stock under the ATM Agreement following December 31, 2024 for net proceeds of approximately $2.4 million, as of the date of
filing this Annual Report on Form 10-K, the Company believes it has regained compliance with the Rule. However, Nasdaq will continue
to monitor the Company’s ongoing compliance with the stockholders’ equity requirement and, if at the time of its next periodic
report the Company does not evidence compliance, it may be subject to delisting. A delisting would likely have a negative effect on the
price of our common stock and may impair the ability of our stockholders to sell our stock.
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We
may need to raise additional capital to fund our existing commercial operations and develop and commercialize new products and expand
our operations.
If
our available cash balances, net proceeds from financing activities, and anticipated cash flow from operations are insufficient to satisfy
our liquidity requirements, we may seek to sell common stock or other securities, and/or seek additional debt financing.
We
may consider raising additional capital in the future to expand our business, to pursue strategic investments, to take advantage of financing
opportunities or for other reasons, including to:
●
increase our sales and marketing efforts
and address competitive developments;
●
provide for supply and inventory costs;
●
maintain compliance with Nasdaq listing
requirements;
●
fund development and marketing efforts of
any future products or additional features to then-current products;
●
acquire, license or invest in new technologies;
and
●
acquire or invest in complementary businesses
or assets.
Our
present and future funding requirements will depend on many factors, including:
●
our ability to achieve revenue growth and improve gross margins;
●
the cost of expanding our operations and offerings, including our sales
and marketing efforts;
●
the effect of competing market developments; and
●
costs related to international expansion.
The
various ways we could raise additional capital carry potential risks. If we raise funds by issuing equity securities, dilution to our
stockholders could result. Any equity securities issued also could provide for rights, preferences, or privileges senior to those of
holders of shares of our common stock. If we raise funds by issuing debt securities, those debt securities would have rights, preferences,
and privileges senior to those of holders of shares of our common stock. The terms of any debt securities issued or borrowings made pursuant
to a credit agreement could impose significant restrictions on our operations. If we raise additional funds through collaborations and
licensing arrangements, we might be required to relinquish significant rights or grant licenses on terms that are not favorable to us.
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, in the future, 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;
●
cost-effectively increase online sales on
our website and third-party marketplaces;
●
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.
We
may be unable to manage our future growth effectively, which could make it difficult to execute our business strategy.
Our
growth has placed, and may continue to place, significant demands on our organizational, administrative, and operational infrastructure,
including manufacturing operations, quality control, technical support and customer service, sales force management and general and financial
administration. As we continue to grow, we will need to make significant investments in multiple divisions of our company, including
in sales, marketing, product development, information technology, equipment, facilities, and human resources. We will also need to improve
our operational, financial and management controls as well as our reporting systems and procedures.
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If
we are unable to manage our growth effectively, we may be unable to execute our business plan, which could have a material adverse effect
on our business and our results of operations. Managing our planned growth effectively will require us to:
●
maintain a low cost of customer acquisition
relative to customer lifetime value;
●
identify products that will be viewed favorably
by customers;
●
expand operations with our contract manufacturers;
and
●
successfully hire, train, and motivate additional
employees, including additional personnel for our technology, sales and marketing efforts.
The
expansion of our products and customer base may result in increases in our overhead and selling expenses. Any increase in expenditures
in anticipation of future sales that do not materialize would adversely affect our profitability. In addition, if we are unable to effectively
manage the growth of our business, the quality of our products may suffer and we may be unable to address competitive challenges, which
would adversely affect our overall business, operations, and financial condition.
Our
disclosure controls and procedures may not prevent or detect all errors or acts of fraud.
Upon
the completion of the IPO, we became subject to the periodic reporting requirements of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), and implemented disclosure controls and procedures to reasonably assure that information we must disclose
in reports we file or submit under the Exchange Act is accumulated and communicated to management, and recorded, processed, summarized
and reported within the time periods specified in the rules and forms of the SEC. However, we believe that any disclosure controls and
procedures or internal controls and procedures, no matter how well-conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met. These inherent limitations include the realities that judgments in decision-making
can be faulty, and that breakdowns can occur because of simple error or mistake. For example, our directors or executive officers could
inadvertently fail to disclose a new relationship or arrangement causing us to fail to make a required related party transaction disclosure.
Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized
override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud
may occur and not be detected.
Risks
Related to Our Business
We
are dependent on our management team, and the loss of any key member of this team may prevent us from implementing our business plan
in a timely manner, or at all.
Our
success depends largely upon the continued services of our executive officers and other key personnel, particularly our Chief Executive
Officer, Eric Healy. Our executive officers or key personnel could terminate their employment with us at any time without penalty. In
addition, we do not maintain key person life insurance policies on any of our employees. The loss of one or more of our executive officers
or key personnel could seriously harm our business and may prevent us from implementing our business plan in a timely manner, or at all.
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.
Our
business is reliant on the license we have been granted to utilize certain dry processing technology we use to manufacture our products
in the agreed upon exclusive region.
Our
ability to continue our business of growth and distribution of our products is dependent on the licensing agreement (the “Licensing
Agreement”) we entered into with EnWave to utilize its dehydration technology in the manufacturing of our products. Our license
is exclusive to North America, Central America, and South America (excluding our contract manufacturer in Chile) as it specifically relates
to our avocado products and Peru, and the Licensing Agreement grants non-exclusive rights for a variety of additional products. Any failure
to comply with the terms of the Licensing Agreement could convert the exclusive portion of the license to a non-exclusive license, thereby
permitting potential competitors to produce comparable avocado-based products using EnWave’s dehydration technology in the same
geographic areas. Thus, any material failure to comply with the terms of the license or any failure to renew the license after it expires
could have a material adverse impact on our financial condition and the operation of our business as it relates to our avocado-based
products. Furthermore, we are reliant on EnWave to enforce its intellectual property rights in preventing would be competitors from using
the technology exclusively licensed to us and there can be no assurance that EnWave will be successful in enforcing such rights in the
relevant areas. Furthermore, future product development efforts may lead to additional products that we desire to commercialize. In this
case, we will request expanding the exclusive and/or non-exclusive products defined by the Licensing Agreement, but there can be no assurance
that EnWave will grant such requests.
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We
rely on a small number of suppliers to provide our raw materials, and our supply chain may be interrupted and prevent us from obtaining
the necessary materials we need to operate.
We
rely on limited number of suppliers and partners to meet our high-quality standards and supply products in a timely and efficient manner.
There is, however, no assurance that quality natural and organic products will continue to be available to meet our specific and growing
needs. This may be due to, among other reasons, problems with our suppliers’ and vendors’ businesses, finances, labor relations,
ability to export materials, product quality issues, costs, production, insurance and reputation, as well as disease pandemics, epidemics
or outbreaks such as COVID-19, acts of war, terrorism, natural disasters, fires, earthquakes, flooding or other catastrophic occurrences.
If, for any reason, our suppliers or vendors became unable or unwilling to continue to provide services to us, this would likely lead
to an interruption in our ability to import our products until we find another source that could provide these services. Failure to find
a suitable replacement, even on a temporary basis, would have a material adverse effect on our ability to meet our current production
targets, make it difficult to grow and would have an adverse effect on our results of operations.
Competition
in the food retail industry is intense and presents an ongoing threat to the success of our business.
The
food retail industry is very competitive. In our online and wholesale business, we compete with food retail stores, supermarkets, warehouse
clubs and other mass and general retail and online merchandisers, many of which are larger than us and have significantly greater capital
resources than we do, selling both competitive products and retailing our own products, and competing against our direct online business.
We also compete with a number of Natural, Organic and Functional Food and Beverage producers.
We
face significant competition from these and other retailers and producers. Any changes in their merchandising and operational strategies
could negatively affect our sales and profitability. In particular, competitors seek to gain or retain market share by reducing prices,
we would likely be forced to reduce our prices on similar product offerings in order to remain competitive, which may result in a decrease
in our market share, net sales and profitability and may require a change in our operating strategies.
We
have been able to compete successfully by differentiating ourselves from our competitors by providing an expanding selection of natural,
organic, and functional food and beverage products, competitive pricing, convenience and exceptional customer service. If changes in
consumer preferences decrease the competitive advantage attributable to these factors, or if we fail to otherwise positively differentiate
our product offering or customer experience from our competitors, our business, financial condition, and results of operations could
be materially and adversely affected.
Many
of our current competitors have, and potential competitors may have, longer operating histories, greater brand recognition, larger fulfillment
infrastructures, greater technical capabilities, significantly greater financial, marketing, and other resources and larger customer
bases than we do. These factors may allow our competitors to derive greater net sales and profits from their existing customer bases,
acquire customers at lower costs or respond more quickly than we can to new or emerging technologies and changes in consumer preferences
or habits. These competitors may engage in more extensive research and development efforts, undertake more far-reaching marketing campaigns,
and adopt more aggressive pricing policies (including but not limited to predatory pricing policies and the provision of substantial
discounts), which may allow them to build larger customer bases or generate net sales from those customer bases more effectively than
we are able to execute upon. There can be no assurance that we will be able to successfully compete against these competitors.
We
expect competition in the Natural, Organic and Functional Food and Beverage industry generally to continue to increase. We believe that
our ability to compete successfully in this market depends upon many factors both within and beyond our control, including:
●
the size and composition of our customer
base;
●
the number of products that we feature on
our website;
●
the quality and responsiveness of our customer
service;
●
our selling and marketing efforts;
●
the quality and price of the products that
we offer;
●
the convenience of the shopping experience
that we provide;
●
our ability to distribute our products and
manage our operations; and
●
our reputation and brand strength.
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Given
the rapid changes affecting the global, national, and regional economies generally and the Natural, Organic and Functional Food and Beverage
industry, we may not be able to create and maintain a competitive advantage in the marketplace. Our success will depend on our ability
to respond to, among other things, changes in consumer preferences, laws and regulations, market conditions, and competitive pressures.
Any failure by us to anticipate or respond adequately to such changes could have a material adverse effect on our financial condition,
operating results, liquidity, cash flow and our operational performance.
If
we fail to compete successfully in this market, our business, financial condition, and results of operations would be materially and
adversely affected.
Our
products are new, and our industry is rapidly evolving.
To
be successful we must, among other things:
●
develop, manufacture, and introduce new
attractive and successful consumer products in our BranchOut brand;
●
attract and maintain a large customer base
and develop and grow that customer base;
●
increase awareness of our BranchOut brand
and develop effective marketing strategies to ensure consumer loyalty;
●
establish and maintain strategic relationships
with key sales, marketing, manufacturing, and distribution providers;
●
respond to competitive and technological
developments; and
●
attract, retain, and motivate qualified
personnel.
We
cannot guarantee that we will succeed in achieving our goals, and our failure to do so would have a material adverse effect on our business,
prospects, financial condition, and operating results.
Some
of our products are new and are in the early stages of commercialization, and some products that are important to our growth strategy
are in various stages of research and development and have not yet been commercialized. Products in development that have not yet been
commercialized include Broccoli Bites, Asparagus Sticks, Mango Chips and Mandarin Crisps and others. We are not certain that these, or
any other future products, will be developed to commercialization, sell as anticipated, or be desirable to their intended markets. Also,
some of our products may have limited uses and benefits, which may limit their appeal to consumers and put us at a competitive disadvantage.
Developing new products and placing them into wholesale channels and into conventional and natural grocery environments is an expensive
and time-consuming process, and if a product fails to sustain market acceptance, the investment made in the product may be lost.
As
is typical in a rapidly evolving industry, the development process and demand and market acceptance for recently introduced products
are subject to a high level of uncertainty and risk. Because the market for our products is new, evolving and therefore uncertain, it
is difficult to predict with any certainty the size of this market and its growth rate, if any. We cannot guarantee that we will be successful
in developing new products, or that a market for our products will develop or that demand for our products will be sustainable. If we
fail to develop new products, or the market for new products fails to develop, develops more slowly than expected or becomes saturated
with competitors, our business, financial condition and operating results would be materially adversely affected.
Our
future results of operations may be adversely affected by volatile commodity costs.
Many
aspects of our business could be directly affected by volatile commodity costs. Agricultural commodities and raw materials, including
avocados, bananas, pineapples, blueberries and other fresh produce, plastic film, cardboard, and other packaging materials, are the principal
inputs used in our products. These items are subject to price volatility which can be caused by commodity market fluctuations, inflation,
crop yields, seasonal cycles, weather conditions (including the potential effects of climate change), temperature extremes and natural
disasters (including floods, droughts, water scarcity, frosts, earthquakes and hurricanes), pest and disease problems, changes in currency
exchange rates, imbalances between supply and demand, natural disasters and government programs and policies, among other factors. Volatile
fuel costs translate into unpredictable costs for the products and services we receive from our third-party providers including, but
not limited to, distribution costs for our products and packaging costs. The volatility of such costs could have a material adverse effect
on our results of operations.
We
are subject to the risks associated with sourcing and manufacturing products from, and conducting business operations outside of the
United States, which could adversely affect our business.
We
purchase our products from a variety of suppliers, including international suppliers. Our direct purchases from non-US suppliers represented
most of our raw material purchases in 2024 and 2023, and we expect our international purchases to grow. We may in the future also enter
into agreements with distributors in foreign countries to sell our products. All of these activities are subject to the uncertainties
associated with international business operations, including:
●
difficulties with foreign and geographically
dispersed operations;
●
having to comply with various U.S. and international
laws;
11
●
changes and uncertainties relating to foreign
rules and regulations;
●
tariffs, export or import restrictions,
restrictions on remittances abroad, imposition of duties or taxes that limit our ability to import necessary materials;
●
limitations on our ability to enter into
cost-effective arrangements with distributors, or at all;
●
fluctuations in foreign currency exchange
rates;
●
imposition of limitations on production,
sale, or export in foreign countries, including due to COVID-19 or other epidemics, pandemics, outbreaks and quarantines;
●
imposition of limitations on or increase
of withholding and other taxes on remittances and other payments by foreign processors or joint ventures;
●
imposition of differing labor laws and standards;
●
economic, political, environmental, health-related
or social instability in foreign countries and regions;
●
an inability, or reduced ability, to protect
our intellectual property;
●
availability of government subsidies or
other incentives that benefit competitors in their local markets that are not available to us;
●
difficulties in recruiting and retaining
personnel, and managing international operations;
●
difficulties in enforcing contracts and legal decisions; and
●
less developed infrastructure.
In
particular, there has been significant recent political instability in Peru and Chile, where our contract manufacturers are located.
There can be no assurance that political instability in those countries will not materially and adversely affect our contract manufacturers
and, in turn, our ability to source our products.
If
we expand into other target markets, we cannot assure you that our expansion plans will be realized, or if realized, be successful. We
expect each market to have particular regulatory and funding hurdles to overcome, and future developments in these markets, including
the uncertainty relating to governmental policies and regulations, could harm our business. If we expend significant time and resources
on expansion plans that fail or are delayed, our reputation, business and financial condition may be adversely affected.
In
addition, we could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act, as amended, and similar worldwide anti-bribery
laws, which generally prohibit companies and their intermediaries from making improper payments to officials or other third parties for
the purpose of obtaining or retaining business. While our policies mandate compliance with these anti-bribery laws, our internal control
policies and procedures may not protect us from reckless or criminal acts committed by our employees or agents. Violations of these laws,
or allegations of such violations, could disrupt our business and result in a material adverse effect on our results of operations, cash
flows and financial condition.
Our
results may be negatively affected by changes in foreign currency exchange rates.
Currently,
substantially all of our international purchase and sales contracts are denominated in U.S. dollars. As a result, a decrease in the value
of the U.S. dollar relative to foreign currencies could increase our costs in dollars for the food products and ingredients that we import
from other countries. In addition, if and when we expand into international markets, an increase in the value of the U.S. dollar relative
to foreign currencies could require us to reduce our selling price or risk making our products less competitive in international markets.
A
larger portion of our revenues may be denominated in other foreign currencies if we expand into international markets. Conducting business
in currencies other than U.S. dollars could subject us to fluctuations in currency exchange rates that could negatively affect our revenues,
cost of revenues and operating margins and result in foreign currency translation gains and losses.
We
may be unable to adequately protect our brand and our other intellectual property rights.
We
regard our brand, customer lists, trademarks, domain names, trade secrets and similar intellectual property as critical to our success.
We may rely on U.S. and international trademark, copyright and patent law, trade secret protection, agreements and other methods with
our employees and others to protect our proprietary rights. We might not be able to obtain broad protection in the United States for
all our intellectual property. The protection of our intellectual property rights may require the expenditure of significant financial,
managerial and operational resources. Moreover, the steps we take to protect our intellectual property may not adequately protect our
rights or prevent third parties from infringing or misappropriating our proprietary rights, and we may be unable to broadly enforce all
our trademarks. Any of our trademarks or other intellectual property rights or future patents (if any) may be challenged by others or
invalidated through administrative process or litigation. Any of our future patent and trademark applications may never be granted. To
date, we have applied for patent protection with the United States Patent and Trademark Office with respect to certain of the manufacturing
processes that we use (in addition to our licensed technology). Even if we are granted one or more patents with respect to our manufacturing
process, there is no guarantee that others will not independently develop or otherwise acquire equivalent or superior technology or intellectual
property rights. Furthermore, our confidentiality agreements may not effectively prevent disclosure of our proprietary information, technologies
and processes and may not provide an adequate remedy in the event of unauthorized disclosure of such information.
12
We
might be required to spend significant resources to monitor and protect our intellectual property rights. For example, we may initiate
claims or litigation against others for infringement, misappropriation or violation of our intellectual property rights or other proprietary
rights or to establish the validity of such rights. However, we may be unable to discover or determine the extent of any infringement,
misappropriation or other violation of our intellectual property rights and other proprietary rights. Despite our efforts, we may be
unable to prevent third parties from infringing upon, misappropriating or otherwise violating our intellectual property rights and other
proprietary rights. Any litigation, whether or not it is resolved in our favor, could result in significant expense to us and divert
the efforts of our technical and management personnel, which may materially and adversely affect our business, financial condition, and
results of operations.
In
addition, our licensed technology platform may use open-source software. The use of such open-source software may subject us to certain
conditions, including the obligation to offer, distribute, or disclose our licensed technology platform for no or reduced cost, make
the proprietary source code subject to open-source software licenses available to the public, license our software and systems that use
open-source software for the purpose of making derivative works, or allow reverse assembly, disassembly, or reverse engineering.
We
may not be able to enforce our intellectual property rights throughout the world.
The
laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the United States. Many
companies have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions.
This could make it difficult for us to stop the infringement or the misappropriation of our intellectual property rights. The loss of
the BranchOut brand or logo or other registered or common law trade names or a diminution in the perceived quality of products or services
associated with the Company would harm our business. Our efforts to protect our intellectual property rights in such countries may be
inadequate. In addition, changes in the law and legal decisions by courts in the United States and foreign countries may affect our ability
to obtain adequate protection for our technology and the enforcement of intellectual property.
Third
parties may assert that our employees or consultants have wrongfully used or disclosed confidential information or misappropriated trade
secrets.
Although
we try to ensure that our employees and consultants do not use the proprietary information or know-how of others in their work for us,
we may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise used or
disclosed intellectual property, including trade secrets or other proprietary information, of a former employer or other third parties.
Litigation may be necessary to defend these claims. If we fail in defending any such claims, in addition to paying monetary damages,
we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation
could result in substantial costs to the Company and be a distraction to management and other employees.
A
food safety or quality issue that results in a product disruption such as a recall, health issue, or death of a consumer could harm our
business.
The
sale of products for human use and consumption involves the risk of injury or illness to consumers. Such injuries may result from inadvertent
mislabeling, tampering by unauthorized third parties or product contamination or spoilage. Under certain circumstances, we may be required
to recall or withdraw products, suspend production of our products, or cease operations, which may lead to a material adverse effect
on our business. In addition, customers may stop placing or cancel orders for such products as a result of such events.
Even
if a situation does not necessitate a recall or market withdrawal, product liability claims might be asserted against us. While we are
subject to governmental inspection and regulations and believe our facilities and those of our co-packers and suppliers comply in all
material respects with all applicable laws and regulations, if the consumption of any of our products causes, or is alleged to have caused,
a health-related illness or death to a consumer, we may become subject to claims or lawsuits relating to such matters. Even if a product
liability claim is unsuccessful or is not fully pursued, the negative publicity surrounding any assertion that our products caused illness
or physical harm could cause consumers to lose confidence in the safety and quality of our products. Moreover, claims or liabilities
of this type might not be covered by our insurance or by any rights of indemnity or contribution that we may have against others. Although
we maintain product liability and product recall insurance in an amount that we believe to be consistent with market practice, we cannot
be sure that we will not incur claims or liabilities for which we are not insured or that exceed the amount of our insurance coverage.
A product liability judgment against us or a product recall could have a material adverse effect on our business, financial condition,
results of operations or liquidity.
13
We
may be subject to significant liability that is not covered by insurance.
Although
we believe that our insurance coverage is consistent with industry practice, any claim under our insurance policies may be subject to
certain exceptions, may not be honored fully, in a timely manner, or at all, and we may not have purchased sufficient insurance to cover
all losses incurred. If we were to incur liabilities not covered by insurance or if our business operations were interrupted for a substantial
period, we could incur costs and suffer losses. Additionally, insurance coverage may not be available to us at commercially acceptable
premiums in the future, or at all.
We
rely on independent certification for a number of our products.
We
rely on independent third-party certification, such as certifications of our products as “Organic”, “KETO”, “Gluten
Free”, “Vegan” or “Non-GMO” (non-genetically modified organisms), to differentiate our products from others.
We must comply with the requirements of independent organizations or certification authorities in order to label our products as certified.
The loss of any independent certifications could adversely affect our market position as a natural products company and harm our business.
Our
future results of operations may be adversely affected by the availability of certifiable ingredients.
Our
ability to ensure a continuing supply of certifiable ingredients at competitive prices depends on many factors beyond our control, such
as the number and size of farms that grow organic crops, climate conditions, changes in national and world economic conditions, currency
fluctuations and forecasting adequate need of seasonal ingredients.
The
ingredients that we use in the production of our products (including, among others, avocados, bananas, pineapples and blueberries) are
vulnerable to adverse weather conditions and natural disasters, such as floods, droughts, water scarcity, temperature extremes, frosts,
earthquakes and pestilence. Natural disasters and adverse weather conditions (including the effects of climate change) can lower crop
yields and reduce crop size and crop quality, which in turn could reduce our supplies of certifiable ingredients or increase the prices
of such ingredients. If our supplies of certifiable ingredients are reduced, we may not be able to find enough supplemental supply sources
on favorable terms, if at all, which could impact our ability to supply product to our customers and adversely affect our business, financial
condition and results of operations.
We
also compete with other manufacturers in the procurement of certifiable product ingredients, which may be less plentiful in the open
market than conventional product ingredients. This competition may increase in the future if consumer demand for certifiable products
increases. This could cause our expenses to increase or could limit the amount of product that we can manufacture and sell.
Adverse
weather conditions, natural disasters, crop disease, pests and other natural conditions can impose significant costs and losses on our
business.
Agricultural
products are vulnerable to adverse weather conditions, including severe rains, drought and temperature extremes, floods and windstorms,
which are quite common but difficult to predict. Agricultural products also are vulnerable to crop disease and to pests, which may vary
in severity and effect, depending on the stage of production at the time of infection or infestation, the type of treatment applied and
climatic conditions. Unfavorable growing conditions caused by these factors can reduce both crop size and crop quality and, in extreme
cases, entire harvests may be lost. Additionally, adverse weather or natural disasters, including earthquakes, winter storms, droughts,
volcanic events or fires, could impact the manufacturing and business facilities of our suppliers in South America, which could result
in significant costs and meaningfully reduce our capacity to fulfill orders and maintain normal business operations. These factors may
result in lower sales volume and increased costs due increased costs of products. Incremental costs, including transportation, may also
be incurred if we need to find alternate short-term supplies of products from alternative areas. These factors can increase costs, decrease
revenues and lead to additional charges to earnings, which may have a material adverse effect on our business, results of operations
and financial condition.
Climate
change may negatively affect our business and operations.
There
is concern that carbon dioxide and other greenhouse gases in the atmosphere may have an adverse impact on global temperatures, weather
patterns and the frequency and severity of extreme weather and natural disasters. In the event that climate change has a negative effect
on agricultural productivity, we may be subject to decreased availability or less favorable pricing for certain commodities that are
necessary for our products, such as avocados, bananas, pineapples, blueberries and other fresh produce. As a result of climate change,
we may also be subjected to decreased availability of water, deteriorated quality of water or less favorable pricing for water, which
could adversely impact our manufacturing and distribution operations, as well as the agricultural businesses of our suppliers, which
rely on the availability and quality of water.
14
Our
production equipment may be damaged, adversely affecting our ability to meet consumer and wholesale demand.
A
significant proportion of our products are produced at our contract manufacturers’ facilities in South America. A significant disruption
at those facilities or to any of our key production equipment, even on a short-term basis, could impair our ability to timely produce
and ship products, which could have a material adverse effect on our business, financial position and results of operations. In the past,
we have had manufacturing delays due to damaged and malfunctioning equipment, shipping delays, U.S. port congestion and delays, and cannot
fully insure against the effects of such delays on our business. The manufacturing operations of our suppliers are vulnerable to interruption
and damage from natural and other types of disasters, including earthquake, fire, floods, volcanic events, draughts, environmental accidents,
winter storms, power loss, disease outbreaks, epidemics or pandemics such as the COVID-19 pandemic, communications failures and similar
events. If any disaster were to occur at one of these facilities, our ability to operate our business would be seriously impaired.
Damage
to our brand’s reputation could have a material impact on our results of operations.
Our
financial success is directly dependent on the consumer perception of our brand. The success of our brand may suffer if our marketing
plans or product initiatives do not have the desired impact on our brand’s image or its ability to attract consumers. Further,
our results could be negatively affected if our brand suffers substantial damage to its reputation due to real or perceived quality issues
or other actions by the Company or any of its executives.
We
rely on big box retailers for a substantial portion of our sales, and our failure to maintain and further develop our sales channels
could harm our business.
We
sell a substantial portion of our products through big box retailers such as Costco, Walmart and Sam’s Club Stores. The top two
retailers of our products for the years ended December 31, 2024 and 2023, accounted for 99% and 90% of our net sales,
respectively. The loss of, or business disruption at, one or more of these retailers or distributors or a negative change in our relationship
with these retailers could have a material adverse effect on our business. If we do not maintain our relationship with these retailers
or develop relationships with new retailers and distributors, the growth of our business may be adversely affected, and our business
may be harmed.
We
do not have long-term purchase agreements with our customers.
Many
of our customers buy from us under purchase orders, and we generally do not have long-term agreements with or commitments from these
customers for the purchase of products. We cannot provide assurance that our customers, including customers that participate in our subscription
programs, will maintain, or increase their sales volumes or orders for our products or that we will be able to maintain or add to our
existing customer base. As a result, our past sales experience is not indicative of future sales or anticipated sales trends. Further,
decreases in our customers’ sales volumes or orders for products supplied by us may have a material adverse effect on our business,
financial condition, or results of operations and may occur without warning thus making future planning and forecasting difficult.
We
may not be able to successfully implement our growth strategy for our brand on a timely basis or at all.
We
believe that our future success depends, in part, on our ability to implement our growth strategy of leveraging our existing brand and
products to drive increased sales. Our ability to implement this strategy depends, among other things, on our ability to:
●
enter distribution and other strategic arrangements
with third-party retailers and other potential distributors of our products;
●
successfully compete in the product categories
in which we operate;
●
introduce new and appealing products and
successfully innovate on our existing products;
●
develop and maintain consumer interest in
our brand; and
●
increase our brand recognition and loyalty.
We
may not be able to implement this growth strategy successfully. Our planned marketing expenditures may not result in increased sales
or generate sufficient levels of consumer interest or brand awareness, and our high rates of sales and income growth may not be sustainable
over time.
15
If
we face labor shortages or increased labor costs, our results of operations and our growth could be adversely affected.
Labor
is a significant component of the cost of operating our business. Our ability to meet labor needs while controlling labor costs are subject
to external factors, such as employment levels, prevailing wage rates, minimum wage legislation, changing demographics, health and other
insurance costs and governmental labor and employment requirements. In the event of increasing wage rates, if we or any of our contract
manufacturers fail to increase our wages competitively, the quality of our workforce and products could decline, while increasing our
wages could cause our earnings to decrease. If we face labor shortages or increased labor costs, our operating expenses could increase
and our business, financial condition and results of operations could be materially and adversely affected.
Consumer
preferences for natural and organic food products are difficult to predict and may change.
Our
business is primarily focused on sales of non-GMO, organic and natural products, and our success depends, in part, on our ability to
offer products that anticipate the tastes and dietary habits of consumers and appeal to their preferences on a timely and affordable
basis. Consumer eating habits may impact our business because of changes in attitudes regarding diet and health or new information regarding
the health effects of consuming products we distribute. If consumer eating habits change significantly, we may be required to modify
or discontinue sales of certain items in our product portfolio, and we may experience higher costs associated with implementing those
changes. We cannot ensure that we will be able to effectively respond to changes in consumer health perceptions or to adapt our product
offerings to trends in eating habits.
A
significant shift in consumer demand away from our products, could reduce our sales and harm our business. Consumer trends change based
on a number of possible factors, including nutritional values, a change in consumer preferences or general economic conditions. Additionally,
there is a growing focus among some consumers to buy local food products in an attempt to reduce the carbon footprint associated with
transporting food products from longer distances, which could result in a decrease in the demand for food products and ingredients that
we import from other countries or transport from remote processing locations or growing regions. Further, failures by us or our competitors
to deliver quality products could erode consumer trust in the organic certification of foods. A significant shift in consumer demand
away from our products would reduce our market share, harming our business.
Technology
failures or security breaches could disrupt our operations and negatively impact our business.
In
the normal course of business, we rely on information technology systems to process, transmit, and store electronic information. For
example, our production and distribution facilities and inventory management utilize information technology to increase efficiencies
and limit costs. Information technology systems are also integral to the reporting of our results of operations. Furthermore, a significant
portion of the communications between, and storage of personal data of, our personnel, customers, and suppliers depend on information
technology, including social media platforms.
Our
information technology systems may be vulnerable to a variety of interruptions, as a result of updating our enterprise platform or due
to events beyond our control, including, but not limited to, natural disasters, terrorist attacks, telecommunications failures, computer
viruses, hackers, and other security issues. These events could compromise our confidential information, impede, or interrupt our business
operations, and may result in other negative consequences, including remediation costs, loss of revenue, litigation and reputational
damage. Furthermore, if a breach or other breakdown results in disclosure of confidential or personal information, we may suffer reputational,
competitive and/or business harm.
While
we have implemented administrative and technical controls and taken other preventive actions to reduce the risk of cyber incidents and
protect our information technology, they may be insufficient to prevent physical and electronic break-ins, cyber-attacks, or other security
breaches to our computer systems, which could have a material adverse effect on our business, financial condition or results of operations.
Economic
downturns could limit consumer demand for our products and negatively affect our sales and profitability.
The
premium organic and natural food industry is sensitive to national and regional economic conditions and the demand for the products that
we distribute may be adversely affected from time to time by economic downturns that impact consumer spending, including discretionary
spending. Future economic conditions such as employment levels, business conditions, housing starts, interest rates, inflation rates,
energy and fuel costs and tax rates could reduce consumer spending or change consumer purchasing habits. Among these changes could be
a reduction in the number of natural and organic products that consumers purchase where there are non-organic alternatives, given that
many premium natural and organic products, and particularly premium natural and organic foods, often have higher retail prices than do
their non-organic counterparts.
16
Regulatory
Risks
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. A significant portion of our products is manufactured in foreign countries, and as a result, we
are subject to tariffs, customs duties, and other trade-related costs. While the recent tariffs imposed by President Trump don’t
apply to imports from Peru and Chile, 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.
Our
products and operations are subject to government regulation and oversight both in the United States and abroad, and our failure to comply
with applicable requirements could adversely affect our business and results of operations.
We
are affected by a wide range of governmental laws and regulations. Examples of regulatory agencies influencing our operations include
the United States Department of Agriculture (the “USDA”), the Food and Drug Administration (the “FDA”), the Federal
Trade Commission (the “FTC”), and the Environmental Protection Agency (the “EPA”), among others. These agencies
regulate, among other things, with respect to our products and operations:
●
design, development, and manufacturing;
●
testing, labeling, content, and language
of instructions for use and storage;
●
product safety;
●
marketing, sales, and distribution;
●
record keeping procedures;
●
advertising and promotion;
●
recalls and corrective actions; and
●
product import and export.
These
laws and regulations affect various aspects of our business. For example, certain food ingredient products manufactured by us are regulated
under the United States Federal Food, Drug, and Cosmetic Act (“FDCA”), as administered by the FDA. Under the FDCA, pre-marketing
approval by the FDA is required for the sale of a food ingredient which is a food additive unless the substance is generally recognized
as safe, under the conditions of its intended use by qualified experts in food safety. We believe that most food ingredients in our products
are generally recognized as safe. However, this status cannot be determined until actual formulations and uses are finalized. As a result,
we may be adversely affected if the FDA determines that our food ingredient products do not meet the criteria for generally recognized
as safe.
The
regulations to which we are subject are complex and have tended to become more stringent over time. Regulatory changes could result in
restrictions on our ability to carry on or expand our operations, higher than anticipated costs or lower than anticipated sales. The
failure to comply with applicable regulations could jeopardize our ability to sell our products and result in enforcement actions and
third-party lawsuits such as:
●
warning letters;
●
fines;
●
injunctions;
●
civil penalties and civil lawsuits;
●
termination of distribution;
●
recalls or seizures of products;
●
termination of distribution;
●
delays in the introduction of products into
the market; and
●
total or partial suspension of production.
Any
of these sanctions could result in higher than anticipated costs or lower than anticipated sales and harm our reputation, business, financial
condition, and results of operations. We may also be required to take corrective actions, such as installing additional equipment or
taking other actions, each of which could require us to make substantial capital expenditures. In addition, we could be required to indemnify
our employees in connection with any expenses or liabilities that they may incur individually in connection with regulatory action against
them. As a result, our future business prospects could deteriorate due to regulatory constraints, and our profitability could be impaired
by our obligation to provide such indemnification to our employees.
17
Our
reputation could suffer from real or perceived issues involving the labeling or marketing of our products.
Products
that we sell carry claims as to their origin, ingredients, or health benefits, including, by way of example, the use of the term “natural”,
“functional”, or “healthy”, or similar synonyms or implied statements relating to such benefits. Although the
FDA and the USDA each has issued statements regarding the appropriate use of the word “natural,” there is no single, U.S.
government regulated definition of the term “natural” for use in the food industry, which is true for many other adjectives
common in our industry. The resulting uncertainty has led to consumer confusion, distrust, and legal challenges. Plaintiffs have commenced
legal actions against several food companies that market “natural” products, asserting false, misleading, and deceptive advertising
and labeling claims, including claims related to genetically modified ingredients. In limited circumstances, the FDA has taken regulatory
action against products labeled “natural” but that nonetheless contain synthetic ingredients or components. Should we become
subject to similar claims, consumers may avoid purchasing products from us or seek alternatives, even if the basis for the claim is unfounded.
Adverse publicity about these matters may discourage consumers from buying our products. The cost of defending against any such claims
could be significant. Any loss of confidence on the part of consumers in the truthfulness of our labeling or ingredient claims would
be difficult and costly to overcome and may significantly reduce our brand value. Any of these events could adversely affect our reputation
and brand and decrease our sales, which would have a material adverse effect on our business, financial condition, and results of operations.
Similarly,
certain USDA regulations set forth the minimum standards producers must meet in order to have their products labeled as “certified
organic.” While we believe our products and our supply chain are in compliance with these regulations, changes to food regulations
may increase our costs to remain in compliance. We could lose certifications if a facility becomes contaminated, if we do not use raw
materials that are certified, or if key ingredients used in our products are no longer allowed to be used in food certifications. The
loss of our certifications could materially and adversely affect our business, financial condition, or results of operations.
In
addition, the USDA has proposed a rule requiring disclosure of the use of genetic engineering in manufacturing a product or an ingredient
used in a product. The rule has not been finalized, and we are unable to predict with certainty what the final requirements will be.
If the USDA issues bioengineering disclosure regulations inconsistent with our practices, the resulting changes in labeling could adversely
affect customer acceptance of our product and materially and adversely affect our business.
Litigation
and regulatory enforcement concerning marketing and labeling of food products could adversely affect our business and reputation.
The
marketing and labeling of any food product in recent years has brought increased risk that consumers will bring class action lawsuits
and that the FTC and/or state attorneys general will bring legal action concerning the truth and accuracy of the marketing and labeling
of the product. Examples of causes of action that may be asserted in a consumer class action lawsuit include fraud, unfair trade practices
and breach of state consumer protection statutes. The FTC and/or state attorneys general may bring legal action that seeks removal of
a product from the marketplace and impose fines and penalties. Even when unmerited, class claims, action by the FTC or state attorneys’
general enforcement actions can be expensive to defend and adversely affect our reputation with existing and potential customers and
consumers and our corporate and brand image, which could have a material and adverse effect on our business, financial condition or results
of operations.
We
may face scrutiny from evolving state regulations concerning health, safety, our supply chain and marketing.
In
addition to the federal regulatory issues listed above, there are a growing number of state regulations that might impair our ability
to operate and avoid interruption. For example, California currently enforces legislation commonly referred to as “Proposition
65” that requires that “clear and reasonable” warnings be given to consumers who are exposed to chemicals known to
the State of California to cause cancer or reproductive toxicity. Although we seek to comply with the requirements of Proposition 65,
there can be no assurance that we will not be adversely affected by litigation or other actions relating to Proposition 65 or future
legislation that is similar or related thereto. Increased compliance costs associated with operating in California and other states could
adversely affect our business, financial condition and results of operations.
Risks
Related to Our Capital Structure
Our
indebtedness could adversely affect our ability to raise additional capital to fund operations, limit our ability to react to changes
in the economy or our industry and prevent us from meeting our financial obligations and our creditors have broad remedies in the event
of default.
As
of December 31, 2024 and 2023, we had total liabilities of $10,514,292 and $914,622, respectively. Certain portions of this indebtedness
are secured by a security interest in substantially all of our assets, and our security agreements include broad remedies in favor of
the lenders, including the right to foreclose on pledged assets in connection with an event of default.
18
If
we cannot generate sufficient cash flow from operations to service our debt, we may need to further refinance our debt, dispose of assets,
or issue equity to obtain necessary funds. We do not know whether we will be able to do any of this on a timely basis or on terms satisfactory
to us, or at all. Our substantial indebtedness could have important consequences, including:
●
our ability to obtain additional debt or
equity financing for working capital, capital expenditures, debt service requirements, acquisitions, and general corporate or other
purposes may be limited;
●
a portion of our cash flows from operations
will be dedicated to the payment of principal and interest on the indebtedness and will not be available for other purposes, including
operations, capital expenditures and future business opportunities; and
●
we may be vulnerable in a downturn in general
economic conditions or in business or may be unable to carry on capital spending that is important to our growth.
Our
Articles of Incorporation provide that the Nevada Eighth Judicial District Court of Clark County, Nevada shall be the exclusive forum
for certain litigation that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable
judicial forum for disputes with us or our directors, officers or employees.
Our
Articles of Incorporation provide that, subject to limited exceptions, the Nevada Eighth Judicial District Court of Clark County, Nevada
shall be, to the fullest extent permitted by law, the sole and exclusive forum for (i) any derivative action or proceeding brought in
the name or right of the Corporation or on its behalf, (ii) any action asserting a claim for breach of a fiduciary duty owed by any of
our directors, officers, employees or agents to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision
of Nevada Revised Statutes (“NRS”) Chapters 78 or 92A, our Articles of incorporation or our bylaws, (iv) any action to interpret,
apply, enforce or determine the validity of our Articles of Incorporation or bylaws, or (v) any action asserting a claim governed by
the internal affairs doctrine.
Notwithstanding
these provisions of our Articles of Incorporation, Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits
brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder, and Section 22 of
the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability
created by the Securities Act or the rules and regulations thereunder, and notwithstanding the provisions of our Articles of Incorporation,
compliance with the federal securities laws and the rules and regulations thereunder may not be waived by our investors. Accordingly,
the exclusive forum provision of our Articles of Incorporation would not apply to suits brought to enforce any liability or duty created
by the Securities Act, the Exchange Act the rules and regulations thereunder or any other claim for which the federal courts have exclusive
or concurrent jurisdiction, which may cause us to incur additional costs associated with resolving such actions in other jurisdictions.
These
choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for certain
disputes with us or our directors, officers, employees or agents, which may discourage such lawsuits against us and our directors, officers,
employees and agents. Stockholders who do bring a claim in the Nevada Eighth Judicial District Court of Clark County, Nevada could face
additional litigation costs in pursuing any such claim, particularly if they do not reside in or near the State of Nevada. The Nevada
Eighth Judicial District Court of Clark County Nevada may also reach different judgments or results than would other courts, including
courts where a stockholder considering an action may be located or would otherwise choose to bring the action, and such judgments or
results may be more favorable to us than to our stockholders. Alternatively, if a court were to find the choice of forum provision contained
in our Articles of Incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving
such action in other jurisdictions, which could adversely affect our business and financial condition.
19
We
are an emerging growth company and a smaller reporting company, and the reduced reporting requirements applicable to emerging growth
companies and smaller reporting companies may make our common stock less attractive to investors.
We
are an emerging growth company, as defined in the JOBS Act. For as long as we continue to be an emerging growth company, we may take
advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth
companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act,
reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the
requirements of holding nonbinding advisory votes on executive compensation and stockholder approval of any golden parachute payments
not previously approved. We could be an emerging growth company until the five-year anniversary of our IPO, although circumstances could
cause us to lose that status earlier, including if we become a “large accelerated filer” as defined in Rule 12b-2 under the
Securities Exchange Act of 1934, as amended, or the Exchange Act, or if we have total annual gross revenue of $1.07 billion or more during
any fiscal year before that time, in which cases we would no longer be an emerging growth company as of the following December 31 or,
if we issue more than $1.0 billion in non-convertible debt during any three year period before that time, in which case we would cease
to be an emerging growth company immediately. Even after we no longer qualify as an emerging growth company, we may still qualify as
a “smaller reporting company”, which would allow us to take advantage of many of the same exemptions from disclosure requirements,
including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and reduced
disclosure obligations regarding executive compensation in our periodic reports and proxy statements. Investors may find our common stock
less attractive because we may rely on these exemptions. We may take advantage of certain of the scaled disclosures available to smaller
reporting companies and will be able to take advantage of these scaled disclosures for so long as our voting and non-voting common stock
held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue
is less than $100.0 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates
is less than $700.0 million measured on the last business day of our second fiscal quarter. If some investors find our common stock less
attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.