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Item 1A. Risk Factors

2026-04-15 compared with 2025-04-09 · 241 added, 235 removed, 666 unchanged (42% of the section changed)

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is a summary of material risks, uncertainties and other factors that could have a material effect on the Company and its operations:

have incurred significant net losses since our inception and cannot assure you that we will achieve or maintain profitable operations.

If we do not obtain adequate capital funding or improve our financial performance,

we may not be able to continue as a going concern.

outbreak of an illness or any other public health crisis could materially and adversely affect, and has materially and adversely

affected, our business, financial condition and results of operations.

our efforts to locate desirable targets are unsuccessful or if we are unable to acquire desirable companies on commercially reasonable

terms, we may not be able to grow the business, and our revenues and operating results will be adversely affected.

may not be able to successfully integrate future acquisitions or generate sufficient revenues from future acquisitions, which could

cause our business to suffer.

may be subject to claims arising from the operations of our various businesses for periods prior to the dates we acquired them.

ability to acquire additional businesses may require issuances of our common stock and/or debt financing that we may be unable to

obtain on acceptable terms.

have an amount of debt which may be considered significant for a company of our size, which could adversely affect our financial

condition and our ability to react to changes in our business.

may not be able to generate sufficient cash to service all our debt or refinance our obligations and may be forced to take other

actions to satisfy our obligations under such indebtedness, which may not be successful.

results of operations have been and could be in the future adversely affected as a result of asset impairments.

we fail to effectively manage our growth, our business, financial condition and operating results could be harmed.

we are unable to anticipate and respond to changing customer preferences and shifts in fashion and industry trends in a timely manner,

our business, financial condition and operating results could be harmed.

business depends on our ability to maintain a strong portfolio of brands and engaged customers.

We may not be able to maintain and

enhance our existing brand portfolio if we receive customer complaints, negative publicity or otherwise fail to live up to consumers’

expectations, which could materially adversely affect our business, operating results and growth prospects.

economic downturn or economic uncertainty in the United States may adversely affect consumer discretionary spending and demand for

our products.

Adverse macroeconomic and geopolitical conditions, including trade policies and tariffs, may have a material adverse

effect on the Company’s business, results of operations and financial condition.

operate in highly competitive markets and the size and resources of some of our competitors may allow them to compete more effectively

than we can, resulting in a loss of our market share and a decrease in our net revenue.

of social media and influencers may materially and adversely affect our reputation or subject us to fines or other penalties.

we fail to retain existing customers, or fail to maintain average order value levels, we may not be able to maintain our revenue

base and margins, which would have a material adverse effect on our business and operating results.

purchase inventory in anticipation of sales, and if we are unable to manage our inventory effectively, our operating results could

be adversely affected.

returns could harm our business.

rely on third-party suppliers and manufacturers to provide raw materials for and to produce our products, and we have limited control

over these suppliers and manufacturers and may not be able to obtain quality products on a timely basis or in sufficient quantity.

sales and gross margins may decline as a result of increasing product costs and decreasing selling prices.

operations are currently dependent on a single warehouse and distribution center, and the loss of, or disruption in, the warehouse

and distribution center and other factors affecting the distribution of merchandise could have a material adverse effect on our business

and operations.

sales and gross margins may decline because of increasing freight costs.

in labor costs, including wages, could adversely affect our business, financial condition and results of operations.

breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation

future success depends on our key executive officers and our ability to attract, retain, and motivate qualified personnel.

we cannot successfully protect our intellectual property, our business could suffer.

the technology-based systems that give our customers the ability to shop with us online do not function effectively, our operating

results could be materially adversely affected.

Organizations

face growing regulatory and compliance requirements.

failure to comply with trade and other regulations could lead to investigations or actions by government regulators and negative

business is affected by seasonality.

price of our common stock has in the past and may in the future fluctuate substantially.

we are unable to implement and maintain effective internal control over financial reporting, investors may lose confidence in the

accuracy and completeness of our financial reports, which could adversely affect the market price of our common stock.

are an emerging growth company and a smaller reporting company within the meaning of the Securities Act, and as a result of the reduced

disclosure and governance requirements applicable to emerging growth companies and smaller reporting companies, our common stock

may be less attractive to investors and may make it more difficult to compare our performance with other public companies.

sales of our common stock, or the perception in the public markets that these sales may occur, may depress our stock price.

in our sixth amended and restated certificate of incorporation and bylaws and under Delaware law could discourage a takeover that

stockholders may consider favorable.

sixth amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the

sole and exclusive forum for certain stockholder litigation matters, which could limit our stockholders’ ability to obtain

a favorable judicial forum for disputes with us or our directors, officers, employees or stockholders.

may be required to issue additional shares of our common stock further to agreements whereby we acquired Bailey.

Any such additional

issuances would result in additional dilution to our stockholders.

do not expect to pay any dividends in the foreseeable future.

securities analysts do not publish favorable reports about us or if we, or our industry, are the subject of unfavorable commentary,

the price of our common stock could decline.

We have incurred significant

net losses since our inception and cannot assure you that we will achieve or maintain profitable operations.

If we do not obtain adequate

capital funding or improve our financial performance, we may not be able to continue as a going concern.

Widespread outbreak of

an illness or any other public health crisis could materially and adversely affect, and has materially and adversely affected, our

business, financial condition and results of operations.

If our efforts to locate

desirable targets are unsuccessful or if we are unable to acquire desirable companies on commercially reasonable terms, we may not

be able to grow the business, and our revenues and operating results will be adversely affected.

We may not be able to successfully

integrate future acquisitions or generate sufficient revenues from future acquisitions, which could cause our business to suffer.

We may be subject to claims

arising from the operations of our various businesses for periods prior to the dates we acquired them.

Our ability to acquire

additional businesses may require issuances of our common stock and/or debt financing that we may be unable to obtain on acceptable

We have an amount of debt

which may be considered significant for a company of our size, which could adversely affect our financial condition and our ability

to react to changes in our business.

We may not be able to generate

sufficient cash to service all our debt or refinance our obligations and may be forced to take other actions to satisfy our obligations

under such indebtedness, which may not be successful.

Our results of operations

have been and could be in the future adversely affected as a result of asset impairments.

If we fail to effectively

manage our growth, our business, financial condition and operating results could be harmed.

If we are unable to anticipate

and respond to changing customer preferences and shifts in fashion and industry trends in a timely manner, our business, financial

condition and operating results could be harmed.

Our business depends on

our ability to maintain a strong portfolio of brands and engaged customers.

We may not be able to maintain and enhance our existing

brand portfolio if we receive customer complaints, negative publicity or otherwise fail to live up to consumers’ expectations,

which could materially adversely affect our business, operating results and growth prospects.

An economic downturn or

economic uncertainty in the United States may adversely affect consumer discretionary spending and demand for our products.

We operate in highly competitive

markets and the size and resources of some of our competitors may allow them to compete more effectively than we can, resulting in

a loss of our market share and a decrease in our net revenue.

Use of social media and

influencers may materially and adversely affect our reputation or subject us to fines or other penalties.

If we fail to retain existing

customers, or fail to maintain average order value levels, we may not be able to maintain our revenue base and margins, which would

have a material adverse effect on our business and operating results.

We purchase inventory in

anticipation of sales, and if we are unable to manage our inventory effectively, our operating results could be adversely affected.

Merchandise returns could

harm our business.

We rely on third-party

suppliers and manufacturers to provide raw materials for and to produce our products, and we have limited control over these suppliers

and manufacturers and may not be able to obtain quality products on a timely basis or in sufficient quantity.

Our sales and gross margins

may decline as a result of increasing product costs and decreasing selling prices.

Our operations are currently

dependent on a single warehouse and distribution center, and the loss of, or disruption in, the warehouse and distribution center

and other factors affecting the distribution of merchandise could have a material adverse effect on our business and operations.

Our sales and gross margins

may decline because of increasing freight costs.

Increases in labor costs,

including wages, could adversely affect our business, financial condition and results of operations.

Security breaches and other

disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.

Our future success depends

on our key executive officers and our ability to attract, retain, and motivate qualified personnel.

If we cannot successfully

protect our intellectual property, our business could suffer.

If the technology-based

systems that give our customers the ability to shop with us online do not function effectively, our operating results could be materially

adversely affected.

Organizations face growing

regulatory and compliance requirements.

Our failure to comply with

trade and other regulations could lead to investigations or actions by government regulators and negative publicity.

Our business is affected

by seasonality.

The price of our common

stock has in the past and may in the future fluctuate substantially.

If we are not able to comply

with the applicable continued listing requirements or standards of the NasdaqCM, Nasdaq could delist our common stock.

If we are unable to implement

and maintain effective internal control over financial reporting, investors may lose confidence in the accuracy and completeness

of our financial reports, which could adversely affect the market price of our common stock.

We are an emerging growth

company and a smaller reporting company within the meaning of the Securities Act, and as a result of the reduced disclosure and governance

requirements applicable to emerging growth companies and smaller reporting companies, our common stock may be less attractive to

investors and may make it more difficult to compare our performance with other public companies.

Future sales of our common

stock, or the perception in the public markets that these sales may occur, may depress our stock price.

Provisions in our articles of incorporation and bylaws and under Nevada law could discourage a takeover that stockholders

may consider favorable.

We may be required to issue

additional shares of our common stock further to agreements whereby we acquired Bailey.

Any such additional issuances would result

in additional dilution to our stockholders.

We do not expect to pay

any dividends in the foreseeable future.

If securities analysts

do not publish favorable reports about us or if we, or our industry, are the subject of unfavorable commentary, the price of our

common stock could decline.

related to our financial condition and business.

have incurred significant net losses since our inception and cannot assure you that we will achieve or maintain profitable operations.

have incurred significant net losses since inception.

Our net loss was approximately $13.2 and $10.3 million for the years ended December

31, 2024 and 2023, respectively.

As of December 31, 2024, we had an accumulated deficit of $127.2 million.

We may continue to incur significant

losses in the future for a number of reasons, including unforeseen expenses, difficulties, complications, delays, and other unknown events,

as well as the inflationary and potentially recessive economic environment.

We have incurred significant net losses since inception.

Our net loss was

approximately $28.3 and $13.1 million for the years ended December 31, 2025 and 2024, respectively.

As of December 31, 2025, we had an

accumulated deficit of $155.35 million.

We may continue to incur significant losses in the future for a number of reasons, including unforeseen

expenses, difficulties, complications, delays, and other unknown events, as well as the inflationary and potentially recessive economic

anticipate that our operating expenses will increase substantially in the foreseeable future as we undertake the acquisition and integration

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would have a materially adverse effect on our ability to implement our business plan, our results and operations, and our financial condition.

We have historically incurred

net losses and experienced negative cash flows from operations.

have received capital funding to continue the business operations

Company has historically incurred net losses and experienced negative cash flows from operations.

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capital deficit of $5.45 million.

However, the Company has successfully obtained substantial capital funding, which, we believe, provides the necessary

liquidity to support our ongoing operations.

this funding, we believe we are positioned to execute our business strategy, invest in growth initiatives, and enhance our financial

performance, although additional funding may be required in the future to support expansion.

However, the Company has successfully obtained substantial capital funding, which provides the necessary

liquidity to support its ongoing operations and allows it to continue as a going concern.

this funding, we are positioned to execute our business strategy, invest in growth initiatives, and enhance our financial performance.

While additional funding may be required in the future to support expansion, we are confident in our ability to secure capital on acceptable

terms as needed.

amount and timing of our future funding requirements will depend on various factors, including:

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associated with the build-out and opening of showrooms for certain brands, as needed.

will continue to monitor our financial position and capital needs going forward.

Additionally, we remain mindful of any debt financing covenants

that may restrict our ability to incur additional debt, pay dividends, or engage in certain transactions.

we continue to monitor our financial position and capital needs, our recent funding strengthens our ability to operate effectively, respond

to competitive pressures, and achieve long-term profitability.

Additionally, we remain mindful of any debt financing covenants that may

restrict our ability to incur additional debt, pay dividends, or engage in certain transactions.

our efforts to locate desirable targets are unsuccessful or if we are unable to acquire desirable companies on commercially reasonable

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Additionally:

key personnel of the acquired business may decide not to work for us;

in management at an acquired business may impair its relationships with employees and customers;

may be unable to maintain uniform standards, controls, procedures and policies among acquired businesses;

may be unable to successfully implement infrastructure, logistics and systems integration;

may be held liable for legal claims (including environmental claims) arising out of activities of the acquired businesses prior to

our acquisitions, some of which we may not have discovered during our due diligence, and we may not have indemnification claims available

to us or we may not be able to realize on any indemnification claims with respect to those legal claims;

will assume risks associated with deficiencies in the internal controls of acquired businesses;

may not be able to realize the cost savings or other financial benefits we anticipated;

may be unable to successfully scale an acquired business;

ongoing business may be disrupted or receive insufficient management attention.

the key personnel of the

acquired business may decide not to work for us;

changes in management at

an acquired business may impair its relationships with employees and customers;

we may be unable to maintain

uniform standards, controls, procedures and policies among acquired businesses;

we may be unable to successfully

implement infrastructure, logistics and systems integration;

we may be held liable for

legal claims (including environmental claims) arising out of activities of the acquired businesses prior to our acquisitions, some

of which we may not have discovered during our due diligence, and we may not have indemnification claims available to us or we may

not be able to realize on any indemnification claims with respect to those legal claims;

we will assume risks associated

with deficiencies in the internal controls of acquired businesses;

we may not be able to realize

the cost savings or other financial benefits we anticipated;

we may be unable to successfully

scale an acquired business;

our ongoing business may

be disrupted or receive insufficient management attention.

or all of these factors could have a material adverse effect on our business, financial condition and results of operations.

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For example, it could:

it more difficult for us to satisfy our obligations to the holders of our outstanding debt, resulting in possible defaults on and

acceleration of such indebtedness;

us to dedicate a substantial portion of our cash flows from operations to make payments on our debt, which would reduce the availability

of our cash flows from operations to fund working capital, capital expenditures or other general corporate purposes;

our vulnerability to general adverse economic and industry conditions, including interest rate fluctuations;

us at a competitive disadvantage to our competitors with proportionately less debt for their size;

our ability to refinance our existing indebtedness or borrow additional funds in the future;

our flexibility in planning for, or reacting to, changing conditions in our business;

our ability to react to competitive pressures or make it difficult for us to carry out capital spending that is necessary or important

to our growth strategy.

make it more difficult

for us to satisfy our obligations to the holders of our outstanding debt, resulting in possible defaults on and acceleration of such

indebtedness;

require us to dedicate

a substantial portion of our cash flows from operations to make payments on our debt, which would reduce the availability of our

cash flows from operations to fund working capital, capital expenditures or other general corporate purposes;

increase our vulnerability

to general adverse economic and industry conditions, including interest rate fluctuations;

place us at a competitive

disadvantage to our competitors with proportionately less debt for their size;

limit our ability to refinance

our existing indebtedness or borrow additional funds in the future;

limit our flexibility in

planning for, or reacting to, changing conditions in our business;

limit our ability to react

to competitive pressures or make it difficult for us to carry out capital spending that is necessary or important to our growth strategy.

of the foregoing impacts of our substantial indebtedness could have a material adverse effect on our business, financial condition and

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could make it more difficult for us to refinance our indebtedness on favorable terms, or at all.

the absence of such operating results and resources, we may be required to dispose of material assets to meet our debt service obligations.

We may not be able to consummate those sales, or, if we do, we will not control the timing of the sales or whether the proceeds that

we realize will be adequate to meet debt service obligations when due.

In the absence of such operating results

and resources, we may be required to dispose of material assets to meet our debt service obligations.

We may not be able to consummate

those sales, or, if we do, we will not control the timing of the sales or whether the proceeds that we realize will be adequate to meet

debt service obligations when due.

results of operations have been and could be in the future adversely affected as a result of asset impairments.

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forecast future product demand trends, which could cause us to carry too much or too little merchandise in various product categories.

Adverse macroeconomic and

geopolitical conditions, including trade policies and tariffs, may have a material adverse effect on the Company’s business, results

of operations and financial condition.

Challenging macroeconomic conditions,

including as a result of geopolitical events, changes to international trade policies, public health crises, disruptions in global supply

chains, and changes in inflation and interest rates, may negatively impact our costs from our suppliers and consumer demand for our products,

as well as sales cycles, and in turn may materially affect the Company’s business, results of operations and financial condition.

Such economic factors and uncertainties are beyond the Company’s control and the Company has no comparative advantage in forecasting

their effects.

has established free

trade laws and regulations that set certain duties and tariffs for qualifying imports and exports, subject to compliance with the applicable

classification and other requirements.

Changes in laws or policies governing the terms of foreign trade, and in particular increased trade

restrictions, tariffs or taxes on imports from countries where our supplies may be sourced could have a material adverse effect on our

business and financial results.

In recent years, the U.S.

and Chinese governments have imposed a series of significant incremental retaliatory

tariffs to certain imported products.

Further, the U.S.

administration recently has begun to enact additional or enhanced tariffs in various

jurisdictions relevant to our business.

Implementation of tariffs or other restrictive trade measures by the United States and potentially

reciprocally by other countries subject to such to tariffs remains highly uncertain.

If the actual and potential tariffs and reciprocal

tariffs are implemented as currently proposed, our results of operations could be materially negatively impacted, both directly and indirectly

through negative effects to our supply chain, as a result of increased costs, decreased demand and other adverse economic impacts, and

we may not be able to successfully mitigate or offset such impacts.

Depending upon their implementation and duration, as well as our ability

to mitigate their impact, these tariffs and any other future regulatory actions implemented on a broader range of products or raw materials

could materially affect our business, including in the form of increased cost of goods sold, decreased margins, increased pricing for

customers, reduced sales and disruption in our supply chain.

Furthermore, additional trade restrictions could be adopted with little to

no advance notice, and we may not be able to effectively mitigate the adverse impacts from such measures, which could further increase

the cost of our products, disrupt our supply chain and impair our ability to effectively operate and compete in the countries where we

The Company is closely monitoring this evolving situation but there can be no assurance that the Company will be able to

mitigate the impacts of any trade measures, which could be material to the Company’s business operations or harm the Company’s

competitive position.

operate in highly competitive markets and the size and resources of some of our competitors may allow them to compete more effectively

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a result, these competitors may be better equipped than we are to influence consumer preferences or otherwise increase their market share

adapting to changes in customer requirements or consumer preferences;

excess inventory that has been written down or written off;

resources to the marketing and sale of their products, including significant advertising campaigns, media placement, partnerships

and product endorsement;

in lengthy and costly intellectual property and other disputes.

quickly adapting to changes

in customer requirements or consumer preferences;

discounting excess inventory

that has been written down or written off;

devoting resources to the

marketing and sale of their products, including significant advertising campaigns, media placement, partnerships and product endorsement;

engaging in lengthy and

costly intellectual property and other disputes.

inability to compete successfully against our competitors and maintain our gross margin could have a material adverse effect on our business,

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chain issues have specifically impacted the following for our brands:

costs in raw materials from fabric prices, which have increased 10% to 100% depending on the fabric, the time of year, and the origin

of the fabric, as well as where the fabric is being shipped;

cost per kilo to ship via sea or air, which has increased from 25% to 300% depending on the time of year and from the country we

are shipping from;

transit time via sea or air, which have increased by two weeks to two months;

labor costs for producing the finished goods, which have increased 5% to 25% depending on the country and the labor skill required

to produce the goods.

Increased costs in raw

materials from fabric prices, which have increased 10% to 100% depending on the fabric, the time of year, and the origin of the fabric,

as well as where the fabric is being shipped;

Increased cost per kilo

to ship via sea or air, which has increased from 25% to 300% depending on the time of year and from the country we are shipping from;

Increased transit time

via sea or air, which have increased by two weeks to two months;

Increased labor costs for

producing the finished goods, which have increased 5% to 25% depending on the country and the labor skill required to produce the

operations of our suppliers can be subject to additional risks beyond our control, including shipping delays, labor disputes, trade restrictions,

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meet our requirements.

In addition, even if we are able to find new third-party suppliers or manufacturers, we may encounter delays in

production and added costs as a result of the time it takes to train our manufacturers on our methods, products and quality control standards.

Moreover, it is possible that we will experience defects, errors, or other problems with their work that will materially affect our operations

and we may have little or no recourse to recover damages for these losses.

Any delays, interruption or increased costs in the supply

of fabric or manufacture of our products could have an adverse effect on our ability to meet retail customer and consumer demand for

our products and result in lower net revenues and net income both in the short and long term.

addition, even if we are able to find new third-party suppliers or manufacturers, we may encounter delays in production and added costs

as a result of the time it takes to train our manufacturers on our methods, products and quality control standards.

Moreover, it is possible

that we will experience defects, errors, or other problems with their work that will materially affect our operations and we may have

little or no recourse to recover damages for these losses.

Any delays, interruption or increased costs in the supply of fabric or manufacture

of our products could have an adverse effect on our ability to meet retail customer and consumer demand for our products and result in

lower net revenues and net income both in the short and long term.

addition to the foregoing, one of our subsidiary’s depends on two primary suppliers located in China and Turkey for the substantial

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market price of our common stock has in the past and could in the future be extremely volatile.

From May 2021 to March 31, 2025, the

high and low prices of our common stock as quoted on the Nasdaq Capital Market (through December 17, 2024) and the OTC Pink

(beginning on December 18, 2024) was $746,250 and $1.03, respectively (as appropriately adjusted for Reverse Stock Splits).

From May 2021 to December 31, 2025, the

high and low prices of our common stock as quoted on the NasdaqCM was $746,250 and $1.12, respectively (as appropriately adjusted for

the 1-for-100 , 1-for-25 and 1-for-50 reverse stock splits effectuated by the Company in November 2022, August 2023 December 2024, respectively).

The future market price of our common stock may be significantly affected by factors, such as:

conditions affecting the apparel industries;

variations in our results of operations;

in government regulations;

announcement of acquisitions by us or our competitors;

in general economic and political conditions;

in the financial markets;

of our operations and the operations of others in our industry;

in interest rates;

or actual litigation and government investigations;

addition or departure of key personnel;

taken by our stockholders, including the sale or disposition of their shares of our common stock;

between our actual financial and operating results and those expected by investors and analysts and changes in analysts’ recommendations

market conditions affecting

the apparel industries;

quarterly variations in

our results of operations;

changes in government regulations;

the announcement of acquisitions

by us or our competitors;

changes in general economic

and political conditions;

volatility in the financial

results of our operations

and the operations of others in our industry;

changes in interest rates;

threatened or actual litigation

and government investigations;

the addition or departure

of key personnel;

actions taken by our stockholders,

including the sale or disposition of their shares of our common stock;

differences between our

actual financial and operating results and those expected by investors and analysts and changes in analysts’ recommendations

or projections.

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attention and resources.

we are not able to comply with the applicable continued listing requirements or standards of the NasdaqCM, Nasdaq could delist our common

January 17, 2023, Digital Brands Group, Inc.

(the “Company”) was notified by the Nasdaq Hearings Panel (the “Panel”)

that the Company has evidenced compliance with all applicable requirements for continued listing on The NasdaqCM, including the $2.5

million stockholders’ equity requirement set forth in Nasdaq Listing Rule 5550(b).

The Company remained subject to a “Panel

Monitor,” as that term is defined by Nasdaq Listing Rule 5815(d)(4)(A), through January 17, 2024.

can be no assurance that we will successfully regain our Nasdaq listing.

As our Common Stock and warrants are currently traded on the

OTC marketplace, and as of the date of filing these financial statements, the company has not yet returned to NasdaqCM, our stockholders

may experience reduced liquidity and increased difficulty in obtaining accurate price quotations.

Additionally, the ability to issue

additional securities for financing or other purposes, or to secure necessary funding in the future, may be materially and adversely

affected due to the absence of a national securities exchange listing.

we are unable to implement and maintain effective internal control over financial reporting, investors may lose confidence in the accuracy

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results to be materially misstated and result in the loss of investor confidence or delisting and cause our stock price to decline.

a result of such failures, we could also become subject to investigations by the SEC, or other regulatory authorities, and become

a result of such failures, we could also become subject to investigations by Nasdaq, the SEC, or other regulatory authorities, and become

subject to litigation from investors and stockholders, any of which could harm our reputation and financial condition and divert financial

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stock or make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.

in our sixth amended and restated certificate of incorporation and bylaws and under Delaware law could discourage a takeover that stockholders

in articles of incorporation and bylaws and under Nevada law could discourage a takeover that stockholders

may consider favorable.

sixth amended and restated certificate of incorporation and amended and restated bylaws may discourage, delay or prevent a merger or

articles of incorporation and bylaws may discourage, delay or prevent a merger or

acquisition that a stockholder may consider favorable because they, among other things:

a supermajority voting requirement of at least 66 2∕3% of the outstanding voting stock in order to amend certain provisions

in our sixth amended and restated certificate of incorporation, which makes it more difficult for stockholders to eliminate anti-

takeover provisions;

stockholder-initiated action by written consent in lieu of a meeting, which hampers the ability of stockholders to take action during

the interim periods between annual meetings of stockholders;

the written request of stockholders holding an aggregate of 25% of shares of our common stock in order for stockholders to call a

special meeting, which together with the elimination of stockholder action by written consent described above, makes it very difficult

for stockholders to take action during the interim periods between annual meetings of stockholders.

a Delaware corporation, we are also subject to the Delaware anti-takeover provisions contained in Section 203 of the Delaware General

Corporation Law.

Under Delaware law, a corporation may not engage in a business acquisition with any holder of 15% or more of its capital

stock unless the holder has held the stock for three years or, among other things, the board of directors has approved the transaction.

Our board of directors could rely on this provision to prevent or delay an acquisition of us.

sixth amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the sole

and exclusive forum for certain stockholder litigation matters, which could limit our stockholders’ ability to obtain a favorable

judicial forum for disputes with us or our directors, officers, employees or stockholders.

sixth amended and restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative

forum, the Court of Chancery of the State of Delaware (or, if and only if the Court of Chancery of the State of Delaware lacks subject

matter jurisdiction, any state court located within the State of Delaware or, if and only if all such state courts lack subject matter

jurisdiction, the federal district court for the District of Delaware) shall be the sole and exclusive forum for the following types

of actions or proceedings under Delaware statutory or common law:

derivative action or proceeding brought on our behalf;

action asserting a breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders;

action asserting a claim against us or our directors, officers or other employees arising under the Delaware General Corporation

Law, our sixth amended and restated certificate of incorporation or our bylaws;

action or proceeding to interpret, apply, enforce or determine the validity of our sixth amended and restated certificate of incorporation

or our bylaws;

action or proceeding as to which the Delaware General Corporation Law confers jurisdiction to the Court of Chancery of the State

action asserting a claim against us or our directors, officers or other employees that is governed by the “internal affairs

doctrine” as that term is defined in Section 115 of the Delaware General Corporation Law.

sixth amended and restated certificate of incorporation further provides that unless the Company consents in writing to the selection

of an alternative forum, the U.S.

federal district courts have exclusive jurisdiction of the resolution of any complaint asserting a

cause of action arising under the Securities Act.

The enforceability of similar exclusive federal forum provisions in other companies’

organizational documents has been challenged in legal proceedings, and while the Delaware Supreme Court has ruled that this type of exclusive

federal forum provision is facially valid under Delaware law, there is uncertainty as to whether other courts would enforce such provisions

and that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder.

exclusive forum provision does not apply to suits brought to enforce a duty or liability created by the Exchange Act or any other claim

for which the federal courts have exclusive jurisdiction.

person or entity purchasing or otherwise acquiring any interest in shares of our capital stock will be deemed to have notice of and to

have consented to this exclusive forum provision of our sixth amended and restated certificate of incorporation.

This choice of forum

provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or

any of our directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims.

Alternatively,

if a court were to find this choice of forum provision in our sixth amended and restated certificate of incorporation to be inapplicable

or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions.

costs associated with resolving an action in other jurisdictions could materially adversely affect our business, financial condition

and results of operations.

Nevada Revised Statutes, or NRS, “acquisition of controlling interest” statutes (NRS 78.378 through 78.3793, inclusive)

contain provisions governing the acquisition of a controlling interest in certain Nevada corporations, and these “control

share” laws provide generally that any person that acquires a “controlling interest” in certain Nevada

corporations may be denied voting rights, unless a majority of the disinterested stockholders of the corporation elects to restore

such voting rights;

require the written request

of stockholders holding an aggregate of 25% of shares of our common stock in order for stockholders to call a special meeting, which

together with the elimination of stockholder action by written consent described above, makes it very difficult for stockholders

to take action during the interim periods between annual meetings of stockholders.

a Nevada corporation, we are also subject to the “acquisition of controlling interest” statutes contained in Sections

78.378 through 78.3793 of the NRS.

Under Nevada law, an acquiring person who acquires a controlling interest in an “issuing

corporation” may not exercise voting rights on any control shares unless such voting rights are conferred by a majority vote

of the disinterested stockholders at a special or annual meeting.

Additionally, Nevada’s business combination statutes

prohibit an “interested stockholder” from entering into a “combination” with a Nevada corporation for three

years after becoming an interested stockholder unless certain conditions are met, including board approval of the transaction.

board of directors and disinterested stockholders could rely on these provisions to prevent or delay an acquisition of

do not expect to pay any dividends in the foreseeable future.

16 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors