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Item 1A. Risk Factors

2024-02-27 compared with 2023-03-01 · 215 added, 214 removed, 403 unchanged (52% of the section changed)

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Risks Related to Our Business and Operations

The COVID-19 pandemic and related impacts, have had, and may in the future continue to have, a material adverse impact on our business.

The COVID-19 pandemic and the related actions taken by governments and the private sector to contain and combat the outbreak and spread of COVID-19 have adversely affected global economies, financial markets and the overall environment for our business, and the extent to which these may continue to impact our future results of operations and overall financial performance remains uncertain.

The global macroeconomic effects of the pandemic, including weakened economic conditions, consumer spending and supply chain disruptions, and financial market volatility have continued, and may continue for an indefinite period of time.

As a result of the pandemic, we have experienced temporary and occasional disruptions and closures of our facilities, including the temporary closure of our retail stores beginning on March 19, 2020 until June 2020, which had a material adverse impact on our sales and profitability, and other temporary closures or reduced hours due to surges in COVID-19 variants.

We have also seen shifts in consumer behaviors and preferences, as well as impacts in the demand for our products.

The COVID-19 pandemic and its effects has impacted and may continue to impact us in the following ways:

• a disruption to our growth strategy, supply chain, delivery of merchandise, professional recruitment, ability to staff stores, typical seasonality and customer demand;

• newly enacted state, local and federal healthcare laws in response to COVID-19, and exposure to potential lawsuits, workforce attrition and difficulty in maintaining professional recruitment;

• an inability to maintain sufficient levels of cash flow from our operations to fund our business and growth strategy and difficulty in obtaining additional financing on terms that are favorable to us.

A number of factors, including future resurgences, the pace at which government restrictions are lifted or re-instated to contain the virus, the impact on our ability to maintain sufficient personnel and recruit employees, including related labor costs, the impact on our customers and suppliers, inflationary pressures, any impairment in the fair value of our assets, the impact on our ability to access capital markets on favorable terms, the speed and extent to which markets fully recover from the disruptions caused by the pandemic, and the impact of these factors on our business, will depend on future developments that are highly uncertain and cannot be predicted with confidence.

In addition, to the extent COVID-19 adversely affects our operations and global economic conditions more generally, it may also have the effect of heightening many of the other risks described herein.

We refer you to “Management’s Discussion and Analysis of Financial Position and Results of Operations” for a more detailed discussion of the actual operational and financial impacts that we have experienced to date.

Market volatility, an overall decline in the health of the economy and other factors impacting consumer spending, including inflation, recessionary conditions, the timing and issuance of tax refunds, governmental instability and natural disasters, may affect consumer purchases, which could reduce demand for our products and materially harm our sales, profitability and financial condition.

The termination of our partnership with Walmart, including the transition period and other wind down activities, will have an impact on our business, revenues, profitability and cash flows, which impact could be material.

Following receipt of notice of non-renewal by Walmart on July 20, 2023, our partnership with Walmart, which includes supplying and operating Vision Centers in select Walmart stores and arranging for the provision of optometric services at certain Walmart locations in California, ended effective as of February 23, 2024.

Additionally, the agreements governing our provision of contact lens distribution and related services to Walmart and Sam’s Club will terminate effective as of June 30, 2024 and the Company will also wind down its remaining AC Lens operations, including the closure of its Ohio distribution center, which largely supported the whole distribution and e-commerce contact lens services that we provided to Walmart and Sam’s Club.

The termination of the Walmart partnership and the wind down of AC Lens operations will result in a reduction of our revenues, profitability and cash flows, and therefore, will adversely affect our business, financial condition and results of operations, which could be material.

In addition, in connection with the termination of these agreements, we recorded impairment charges of $79.7 million for the year ended December 30, 2023, including $60.1 million related to goodwill, $9.1 million related to contracts and relationships, and $10.5 million related to property & equipment, which adversely impacted our profitability during this period.

Additional asset impairment charges may be possible as we further evaluate the effect of the termination on our business.

Certain of these agreements include pre-termination transition and post-termination obligations of the parties, including a solicitation period for Walmart to offer employment or similar arrangements to certain associates and optometrists from specified Vision Centers.

The transition period presents numerous risks and may cause disruption to these businesses including, without limitation, a potential reduction in sales, productivity and focus, and may make it harder to retain associates and optometrists, which in turn could adversely affect our financial condition and results of operations.

The termination of the Walmart partnership and related wind down of AC Lens operations could negatively impact other parts of our business, including, without limitation, impairing our ability to attract and retain management, associates and optometrists, to compete for managed vision care contracts, to obtain favorable terms from vendors, or to generate cash to fund our business.

While we are seeking to reduce costs and replace any lost business with new America’s Best or Eyeglass World stores and by other means, including outsourcing certain services, we may not be successful in our efforts.

In addition, the termination of the Walmart partnership has adversely affected, and may continue to adversely affect, the market price of our common stock, regardless of our actual operating performance during the transition period and thereafter.

Market volatility, an overall decline in the health of the economy and other factors impacting consumer spending, including inflation, uncertainty in financial markets, recessionary conditions, escalated interest rates, the timing and issuance of tax refunds, governmental instability, war and natural disasters, may affect consumer purchases, which could reduce demand for our products and materially harm our sales, profitability and financial condition.

Our business depends on consumer demand for our products and, consequently, is sensitive to a number of factors that influence consumer confidence and spending, such as general economic conditions, consumer disposable income, energy and fuel prices, recession and fears of recession, unemployment, minimum wages, availability of consumer credit, consumer debt levels, conditions in the housing market, interest rates, tax rates and policies, inflation, consumer confidence in future economic conditions and political conditions, developments related to the U.S.

federal debt ceiling, war and fears of war (including the Russian invasion of Ukraine), impacts of climate change, inclement weather, natural disasters, terrorism, cybersecurity incidents, outbreak of viruses or widespread illness and consumer perceptions of personal well-being and security.

Over the past few years, global markets and economic conditions have been challenging, particularly in light of rising interest rates and historic inflation throughout 2022 which has created continued economic uncertainty.

Reduced customer confidence and spending cutbacks may result in reduced demand for our merchandise and may force us to take inventory markdowns, increased selling and promotional expenses or, if part of a prolonged or pervasive economic downturn, may slow the pace of new store openings or cause current stores to close.

Additionally, our business is seasonal in nature, with the first and second quarters typically representing a higher portion of net sales to us than other quarters, especially with the issuance of tax refunds that consumers utilize for eyewear and eyecare in the first half of the year.

federal debt ceiling, global conflict (including the Russia-Ukraine war and the Israel-Hamas conflict), impacts of climate change, inclement weather, natural disasters, terrorism, cybersecurity incidents, outbreak of viruses or widespread illness and consumer perceptions of personal well-being and security.

Over the past few years, global markets and economic conditions have been challenging, particularly in light of rising interest rates and historic inflation throughout 2023 and global conflict, which has created continued economic uncertainty.

These conditions have impacted customer demand and may continue to have similar impacts in the future.

Reduced customer confidence and spending cutbacks may result in reduced demand for our merchandise and may force us to mark down inventory, increase selling and promotional expenses or, if part of a prolonged or pervasive economic downturn, may slow the pace of new store openings or cause current stores to close.

Additionally, our business is seasonal in nature, with the first and second quarters typically representing a higher portion of net sales to us than other quarters, due in part to the issuance of tax refunds that many consumers have historically utilized for eyewear and eye care spending in the first half of the year.

As such, a significant downward trend in the first half of the year could have a substantial negative impact on our annual financial results.

From time to time we have also temporarily closed certain stores due to hurricanes, natural disasters or civil unrest.

From time to time, we have also temporarily closed certain stores due to widespread health concerns like the COVID-19 pandemic, hurricanes and other severe weather, natural disasters or civil unrest.

Such store closures due to factors that are outside of our control could materially adversely affect our sales and profitability.

Furthermore, our target market, which consists of value seeking and lower income consumers, is sensitive to a number of these and other factors outside of our control.

A continuation of these and similar circumstances could have a material negative impact on our financial performance.

Failure to recruit and retain vision care professionals could adversely affect our business, financial condition and results of operations.

Our ability to hire and/or contract with vision care professionals for our stores and remote offerings is critical to our operations as well as our growth strategy.

Our operations, like those of many of our competitors, depend on our ability to offer both eyewear and eye exams, which require the availability of optometrists in or near our stores.

Furthermore, our target market of value-seeking and lower income consumers, is sensitive to a number of these and other factors outside of our control.

A continuation of these or other similar circumstances could have a material negative impact on our financial performance.

Failure to recruit and retain vision care professionals for in-store roles or to provide remote care offerings could adversely affect our business, financial condition and results of operations.

Our ability to hire and/or contract with vision care professionals for in-store roles and remote care offerings is critical to our operations as well as our growth strategy.

Our operations, like those of many of our competitors, depend on our ability to offer both eyewear and eye exams, which requires the availability of optometrists in or near our stores.

Many states require that opticians be licensed to dispense and fit eyeglasses and contact lenses.

The failure to have vision care professionals available in or near our stores could adversely affect our ability to win managed vision care contracts.

Additionally, as we enable remote medicine at an increased number of our stores, the ability to hire and retain vision care professionals for such remote offerings and the continued successful implementation and operation of our remote medicine technology platform is essential to the expansion of our remote medicine strategy.

Failure to have vision care professionals available in or near our stores could adversely affect our ability to win managed vision care contracts.

Additionally, as we enable remote medicine solutions at an increased number of our stores, the ability to hire and retain vision care professionals for such remote care offerings and the continued successful installation, implementation and operation of the applicable equipment and remote medicine technology platform is essential to the expansion of our remote medicine strategy.

The inability to attract and retain vision care professionals or enable and maintain remote medicine at applicable locations, could have a material adverse effect on our business, financial condition and results of operations.

Competition for vision care professionals has increased, especially with the increased demand for optometrists in the current constrained labor market.

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There can be no assurance that flexibility initiatives provided to vision care professionals, including with respect to scheduling, will be successful in attracting or retaining vision care professionals or addressing constraints in exam capacity.

As previously disclosed, due to the pandemic and related effects, we experienced an unexpected degree of vision care professional shortages and related exam capacity constraints over the course of 2022 despite increased recruitment and retention efforts, which included wage investments and other enhanced compensation efforts.

Such efforts have, and may continue to, increase our operating costs and adversely impact our results, and ultimately may be unsuccessful.

Due to the COVID-19 pandemic and related effects, we experienced an unexpected degree of vision care professional shortages and related exam capacity constraints, which continued over the course of 2023, and may continue into 2024 and beyond, despite increased recruitment and retention efforts including wage investments and other enhanced compensation efforts.

Such efforts have increased, and may continue to increase, our operating costs which could adversely impact our results, and ultimately may be unsuccessful.

In addition, due to these same factors, we experienced wage pressure for our vision care professionals and associates in 2023, which we expect to continue in 2024, and which may continue thereafter.

Additionally, our ability to recruit, hire and/or contract with vision care professionals is closely regulated.

For example, there is a risk that state authorities in some jurisdictions may find that our contractual relationships with optometrists or professional corporations or similar entities that employ optometrists violate laws prohibiting the corporate practice of medicine/optometry, in which case we may be required to restructure these arrangements, which may make it more difficult for us to attract and retain their services.

For example, there is a risk that state authorities in some jurisdictions may find that our contractual relationships with optometrists or professional corporations or similar entities that employ optometrists, violate laws prohibiting the corporate practice of medicine/optometry, in which case we could be required to restructure these arrangements, which may make it more difficult for us to attract and retain vision care professionals.

“Business-Government Regulation.”

A material change in our relationship with vision care professionals, whether resulting from constraints in exam capacity, a dispute with an eye care practitioner or a group of eye care practitioners controlling multiple practice locations, a government or regulatory authority challenging our operating structure or our relationship with vision care professionals, or other changes to applicable laws or regulations (or interpretations of the same), or the loss of these relationships, could impair our ability to provide services to our customers, cause our customers to go elsewhere for their optical needs, or result in legal sanctions against us.

In addition, some professional corporations or similar entities provide for the vision care services at a number of our retail locations, exposing us to some concentration risk.

In addition, a limited number of professional corporations or similar entities provide for the vision care services at a number of our retail locations, exposing us to some concentration risk.

A material change to any of the foregoing relationships could have a material adverse effect on our business, financial condition and results of operations.

Any difficulties or delays in securing the services of these professionals could also adversely affect our relationships with our Host and Legacy partners.

Any difficulties or delays in securing the services of these professionals could also adversely affect our relationships with our Host partners.

The optical retail industry is highly competitive, and if we do not compete successfully, our business may be adversely impacted.

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Some of our competitors are larger or vertically integrated and engaged in the manufacture and distribution of eyewear as well as managed care.

Larger competitors who have greater financial and operational resources, greater brand recognition and broader geographic presence than we do, may be able to offer more competitive prices, and have larger marketing and advertising spends.

Vertically integrated competitors may advantageously leverage their structure and make it more difficult for others in the industry, including us, to compete.

Larger competitors who have greater financial and operational resources, greater brand recognition or broader geographic presence than we do, have large marketing and advertising spends and may be able to offer more competitive prices.

Vertically integrated competitors may advantageously leverage their structure, making it more difficult for others in the industry, including us, to compete.

We purchase many of our products from suppliers who are affiliates of our competitors.

We also compete for managed vision care contracts with certain of our competitors who are affiliates of managed care payors.

The termination of one or more relationships we have with these larger vertically integrated competitors could have a material adverse effect on our business, financial condition and results of operations.

In addition, if any of our competitors were to consolidate operations, such consolidation would exacerbate the aforementioned risks.

While we strive to evolve in line with changing consumers’ shopping habits and new technologies, our business and results of operations may be adversely affected if we are not able to effectively respond to changes in the retail markets.

While we strive to evolve in line with changing consumer shopping habits and new technologies, our business and results of operations may be adversely affected if we are not able to effectively respond to changes in the retail markets at the same rate as our competitors.

If we fail to open and operate new stores in a timely and cost-effective manner or fail to successfully enter new markets, our financial performance could be materially and adversely affected.

Achieving our growth strategy depends, in large part, on growing our store base and expanding our operations, both in existing and new markets, and operating our new stores successfully.

Achieving our growth strategy depends, in large part, on growing our store base and expanding our operations, both in new and existing markets, and operating our new stores successfully.

The success of our contemplated expansion depends on many factors, including, among others, our ability to:

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• achieve and maintain brand awareness in new and existing markets;

• identify and satisfy the merchandise and other preferences of our customers.

Accordingly, we cannot assure you that we will achieve our planned growth or, even if we are able to grow our store base as planned, that our new stores will perform as expected or achieve net sales or profitability levels comparable to those of our existing stores in the time periods estimated by us or at all.

• identify and satisfy the merchandise, lifestyle and other preferences of our customers.

Accordingly, we cannot assure you that we will achieve our planned growth or that our new stores will perform as expected or achieve net sales or profitability levels comparable to those of our existing stores in the time periods estimated by us or at all.

Our failure to implement our growth strategy and to successfully open and operate new stores in the time frames and at the costs estimated by us could have a material adverse effect on our business, financial condition and results of operations.

If the performance of our Host and Legacy brands declines or we are unable to maintain or extend our operating relationships with our Host and Legacy partners, our business, profitability and cash flows may be adversely affected and we may be required to incur impairment charges.

We derive revenues and operating cash flows from our relationships with our Legacy and Host partners through our operations of 230 Vision Centers in select Walmart stores, 29 Vista Optical locations within select Fred Meyer stores and 54 Vista Optical locations on select military bases.

Termination or expiration of our Host and Legacy agreements would result in a reduction of our revenues and operating cash flows, which could be material and which could adversely affect our business, financial condition and results of operations including an impairment of the intangible assets.

The loss of our Vision Centers or Vista Optical locations could impair our ability to attract and retain management and retail associates, compete for managed vision care contracts, obtain favorable terms, such as discounts and rebates, from optical vendors and generate cash to fund our business and service our debt obligations.

If the performance of our Host and Legacy brands declines or we are unable to maintain or extend our operating relationships with our Host partners, our business, profitability and cash flows may be adversely affected and we may be required to incur impairment charges.

Historically, we derived revenues and operating cash flows from our relationships with our Host and Legacy partners through our operations of 225 Vision Centers in select Walmart stores until February 2024, and as of December 30, 2023, 29 Vista Optical locations within select Fred Meyer stores and 54 Vista Optical locations on select military bases.

With respect to the loss of business related to our Vision Centers, see “The termination of our partnership with Walmart, including the transition period, will have a significant impact on our business, revenues, profitability and cash flows, which impact could be material” above.

Termination or expiration of our Host agreements would result in a reduction of our revenues and operating cash flows, which could be material and which could adversely affect our business, financial condition and results of operations including an impairment of the intangible assets.

Additionally, the loss of our Vista Optical locations could impair our ability to attract and retain management and retail associates, compete for managed vision care contracts, obtain favorable terms, such as discounts and rebates, from optical vendors and generate cash to fund our business and service our debt obligations.

We may seek to replace any lost Host or Legacy locations with new America’s Best or Eyeglass World stores but we may not be able to support the carrying value of the intangible assets at these brands or replace the lost revenues and cash flows.

For example, our current management & services agreement with Walmart presents a variety of risks.

The current term of the management & services agreement ends on February 23, 2024 and will automatically renew for a three-year period unless, no later than July 2023, either party gives written notice of non-renewal.

Sales associated with this arrangement with Walmart represented 7.6% of consolidated net revenue in fiscal year 2022, which exposes us to concentration of customer risk.

In addition, the agreement permits Walmart to control many aspects of the retail operations at the Vision Centers we manage on behalf of Walmart, including pricing, merchandising and similar matters.

If Walmart exercises its rights under this agreement in a way that adversely affects us, our sole remedy would be to terminate the agreement after participating in an informal resolution and, if necessary, a mediation process.

There are no assurances that Walmart will not seek to exercise these rights in a manner that is materially adverse to our interests.

In addition, under our current management & services agreement, we earn fees based on a percentage of the revenues from the Vision Centers we manage.

The agreement also allows Walmart to collect penalties from us if the Vision Centers do not generate a requisite amount of revenues, which penalties equal a percentage of the shortfall.

We may not be able to maintain the performance levels required and, as a result, may be forced to pay penalties to Walmart or default under this agreement at a point in time when our fees from the arrangement will already be lower than anticipated.

Further, a breach by us of the terms and conditions of this agreement could cause us to lose all management fees derived under this agreement, which could adversely affect our financial position and results of operations.

At December 31, 2022, the carrying value of goodwill and intangible assets at our Host and Legacy brands was $21.6 million and $73.0 million, respectively.

At December 30, 2023, the carrying value of intangible assets at our Host and Legacy brands was $20.1 million and $0.1 million, respectively.

We review the carrying value of our goodwill and intangibles for impairment annually, or more frequently when impairment indicators exist.

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If a significant write down were required, the charge could have a material adverse effect on our operating results and stockholders’ equity, and could impact the trading price of our common stock.

We require significant capital to fund our expanding business.

If we are unable to maintain sufficient levels of cash flow from our operations, we may not be able to execute or sustain our growth strategy or we may require additional financing, which may not be available to us on satisfactory terms or at all.

To support our expanding business and execute our growth strategy, we need significant amounts of capital, including funds to pay our lease obligations, build out new store spaces, laboratories and distribution centers, implement and operate remote medicine technology and EHR platforms, purchase inventory, pay personnel and further invest in our infrastructure and facilities including investments in transitioning and updating our enterprise resource planning and other technological systems and capabilities.

Further, our plans to grow our store base may create cash flow pressure if new locations do not perform as projected.

We have and expect to continue to primarily depend on cash flow from operations to fund our business and growth plans.

If we do not generate sufficient cash flow from operations, we may need to obtain additional equity or debt financing.

Tightening in the credit markets, low liquidity, volatility in the capital markets and a downturn in the economy could result in diminished availability of credit, higher cost of borrowing and lack of confidence in the equity markets, making it more difficult to obtain additional financing on terms that are favorable to us.

If such financing is not available to us, or is not available on satisfactory terms, our ability to operate and expand our business could be curtailed and we may need to delay, limit or eliminate planned store openings or operations or other elements of our growth strategy.

We are a low-cost provider and our business model relies on the low cost of inputs.

Factors such as wage rate increases, inflation, cost increases, increases in raw material prices and energy prices could have a material adverse effect on our business, financial condition and results of operations.

Factors such as wage rate increases, inflation, cost increases, increases in the price of raw materials and energy prices could have a material adverse effect on our business, financial condition and results of operations.

Increases in compensation, wage pressure and other expenses for vision care professionals, as well as our other associates, have adversely affected, and may continue to adversely affect, our profitability.

Increases in minimum wages and other wage and hour regulations and labor shortages can exacerbate this risk.

As a result of the impacts of the COVID-19 pandemic, we have experienced an increasingly competitive labor market for vision care professionals and increased preferences for adjusted work schedules, resulting in the demand for optometrists exceeding supply in certain areas during fiscal year 2022 and causing constraints in exam capacity.

Due to these factors, we experienced wage pressure for our vision care professionals and associates in 2022.

Since the beginning of the COVID-19 pandemic, we have experienced an increasingly competitive labor market for vision care professionals and increased preferences for adjusted work schedules, resulting in the demand for optometrists exceeding supply in certain areas during fiscal year 2023 and causing constraints in exam capacity.

Due to these factors, we experienced wage pressure for our vision care professionals and associates in 2023, which we expect to continue in 2024 and may continue thereafter.

Targeted wage investments, including increases in compensation and other expenses for our optometrists and associates, along with other initiatives, were implemented in response to these factors that have and will continue to impact our costs applicable to revenue and selling, general and administrative expenses.

The costs to employ or retain optometrists may increase further, potentially materially.

The costs associated with employment or retention of vision care professionals may increase further, potentially materially.

See “Failure to recruit and retain vision care professionals could adversely affect our business, financial condition and results of operations” above.

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Increases in other operating costs, including changes in energy prices and lease and utility costs, may increase our cost of products sold or selling, general and administrative expenses.

Our low price model and competitive pressures in the optical retail industry may inhibit our ability to reflect these increased costs in the prices of our products, in which case such increased costs could have a material adverse effect on our business, financial condition and results of operations.

Our low-price model and competitive pressures in the optical retail industry may inhibit our ability to reflect these increased costs in the price of our products, in which case such increased costs could have a material adverse effect on our business, financial condition and results of operations.

We require significant capital to fund our expanding business.

To support our expanding business and execute our growth strategy, we need significant amounts of capital, including funds to pay our lease obligations, build out new store spaces, laboratories and distribution centers, implement and operate remote medicine technology and EHR platforms, purchase inventory, pay personnel and further invest in our infrastructure and facilities, including investments in transitioning and updating our enterprise resource planning (“ERP”) and other technological systems and capabilities.

In 2024, we intend to continue to progress our ERP initiatives and to expand the installation of the EHR platform to the remaining America’s Best locations.

We cannot guarantee that these projects will be completed on time or within established budgets.

Any delay or increased costs could have a material adverse effect on our business, financial condition and results of operations.

Further, our plans to grow our store base may create cash flow pressure if new locations do not perform as projected.

We have primarily depended, and expect to continue to primarily depend, on cash flow from operations to fund our business and growth plans.

If we do not generate sufficient cash flow from operations, we may need to obtain additional equity or debt financing.

Tightening in the credit markets, low liquidity, volatility in the capital markets or a downturn in the economy could result in diminished availability of credit, higher cost of borrowing or lack of confidence in the equity markets, any of which may make it more difficult to obtain additional financing on terms that are favorable to us.

Our growth strategy could strain our existing resources and cause the performance of our existing stores to suffer.

Our planned expansion has and continues to place increased demands on our existing operational, managerial, supply-chain and administrative resources.

Our planned expansion has placed, and continues to place, increased demands on our existing operational, managerial, supply-chain and administrative resources.

These increased demands could strain our resources and cause us to operate our business less effectively, which in turn could cause the performance of our new and existing stores to suffer.

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Should we open additional laboratories or distribution centers, any related construction or expansion projects entail risks which could cause delays and cost overruns, such as unavailability of suitable space, shortages of materials, shortages of skilled labor or work stoppages, unforeseen construction, scheduling, engineering, environmental or geological problems, weather interference, fires or other casualty losses, and unanticipated cost increases.

We cannot guarantee that any project will be completed on time or within established

We cannot guarantee that any project will be completed on time or within established budgets.

Any delay or increased costs associated with any project could adversely affect the financial and overall performance of our existing and planned new stores.

We cannot anticipate all of the demands that our expanding operations will impose on our business, personnel and systems and our failure to address such demands and to profitably manage our growth could have a material adverse effect on our business, financial condition and results of operations.

We cannot anticipate all of the demands that our expanding operations will impose on our business, personnel and systems and our failure to address such demands or to profitably manage our growth could have a material adverse effect on our business, financial condition and results of operations.

In addition, opening new stores in our established markets may result in inadvertent oversaturation, temporarily or permanently divert customers and sales from our existing stores to new stores and reduce comparable store sales, thus adversely affecting our overall financial performance.

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In addition, oversaturation, or the risk of oversaturation, may reduce or adversely affect the number or location of stores we plan to open, and could thereby materially and adversely affect our growth plans overall or in particular markets.

From time to time, we update the whitespace analysis prepared for us through an established partnership with a third-party real estate data analytics firm.

There are many variables that impact this analysis and there can be no guarantee that updates will lead to the same or greater whitespace opportunity, which could impact our ability to execute our growth strategy.

The COVID-19 pandemic and related impacts, have had, and may in the future continue to have, a material adverse impact on our business.

The COVID-19 pandemic and the related actions taken by governments and the private sector to contain and combat the outbreak and spread of COVID-19 adversely affected global economies, financial markets and the overall environment for our business.

As a result of the pandemic, we have seen shifts in consumer behaviors and preferences, as well as impacts in the demand for our products.

In the event of a resurgence or another pandemic, the extent to which these may impact our future results of operations and overall financial performance remains uncertain.

The global macroeconomic effects of pandemics, including weakened economic conditions, consumer spending and supply chain disruptions, and financial market volatility have continued, and may continue for an indefinite period of time.

Our success depends upon our marketing, advertising and promotional efforts.

If we are unable to implement them successfully or efficiently, or if our competitors are more effective than we are, it could have a material adverse effect on our business, financial condition and results of operations.

If we are unable to implement them successfully or efficiently, or if our competitors are more effective than we are, we may experience a material adverse effect on our business, financial condition and results of operations.

We use marketing and promotional programs to attract customers to our stores and to encourage purchases by our customers.

If we fail to successfully or efficiently develop and implement marketing, advertising and promotional strategies, we may be unable to achieve and maintain brand awareness, and customer traffic to our stores and/or websites may be reduced.

If we fail to successfully or efficiently develop and implement marketing, advertising and promotional strategies or to incorporate innovative approaches in such endeavors, we may be unable to achieve and maintain brand awareness, and customer traffic to our stores and/or websites may be reduced.

We may not be able to advertise cost-effectively in new or smaller markets in which we have lower store density, which could slow growth at such stores.

Changes in the amount and degree of promotional intensity or merchandising strategy by our competitors could cause us to have difficulties in retaining existing customers and attracting new customers.

If the efficacy of our marketing or promotional activities declines or if such activities of our competitors are more effective than ours, or if for any other reason we lose the loyalty of our customers, it could have a material adverse effect on our business, financial condition and results of operations.

Further, since our expansion in California, we have a national advertising campaign for America’s Best as opposed to only utilizing local advertising campaigns.

We cannot provide assurances that a national advertising campaign will be cost-effective or successful or that we will continue such campaigns.

If the efficacy of our marketing or promotional activities declines or if such activities of our competitors are more effective than ours, or if for any other reason we lose the loyalty of our customers, we may experience a material adverse effect on our business, financial condition and results of operations.

We are subject to risks associated with leasing substantial amounts of space, including future increases in occupancy costs.

We lease our America’s Best and Eyeglass World store locations, our corporate office, the AC Lens corporate office, the FirstSight corporate office, our laboratories in Georgia, Texas and Utah and our distribution centers.

We lease our America’s Best and Eyeglass World store locations, our corporate office, the FirstSight corporate office, our laboratories in Georgia, Texas and Utah, and our distribution centers.

We leased space for the AC Lens corporate office through February 2024, and the lease related to our Ohio distribution center expires in March 2028.

We also lease our Vista Optical locations inside Fred Meyer stores.

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In addition, the potential default or bankruptcy of landlords in existing or pending leasehold locations may affect our ability to maintain or renew our existing leases.

All of these factors could have a material adverse impact on our operations.

Most leases for our stores provide for a minimum rent and typically include escalating rent increases over time.

Any of these factors could have a material adverse impact on our operations.

Most of our store leases provide for a minimum rent and typically include escalating rent increases over time.

In certain circumstances we pay a percentage rent based upon sales after certain minimum thresholds are achieved.

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Our inability to enter into new leases or renew existing leases on terms acceptable to us, or be released from our obligations under leases for stores that we close, could materially and adversely affect our business, financial condition and results of operations.

Certain technological advances, greater availability of, or increased consumer preferences for, vision correction alternatives to prescription eyeglasses or contact lenses, and future drug development for the correction of vision-related problems may reduce the demand for our products and adversely impact our business and profitability.

Technological advances in vision care, including the development of remote medicine and other new or improved products, as well as future drug development for the correction of vision-related problems, could significantly change how eye exams may be conducted and make our existing products less attractive or even obsolete.

Although, we have enabled remote medicine technologies in a number of locations to enable the provision of eye examinations by remote doctors to patients in-store, several companies have developed technologies for, and some companies are incorporating the remote delivery of eye examinations and eye refractions more broadly.

If consumers accept the use of these technologies, consumers could become less likely to obtain an in-person eye examination and therefore less likely to shop at our retail locations.

Certain technological advances, greater availability of, or increased consumer preferences for, vision correction alternatives to prescription eyeglasses or contact lenses, or future drug development for the correction of vision-related problems may reduce the demand for our products and adversely impact our business and profitability.

Technological advances in vision care, including the development of artificial intelligence, remote medicine and other new or improved products, as well as future drug development for the correction of vision-related problems, could significantly change how eye exams may be conducted and make our existing products less attractive or even obsolete.

Although we have enabled remote medicine technologies in a number of locations to enable the provision of eye examinations by remote doctors to patients in our stores, several companies have developed technologies for, and some companies are incorporating the remote delivery of, eye examinations and eye refractions more broadly.

If consumers accept the use of these technologies, they could become less likely to obtain an in-person eye examination and therefore less likely to shop at our retail locations.

Additionally, the greater availability and acceptance, or reductions in the cost, of vision correction alternatives to prescription eyeglasses and contact lenses, such as corneal refractive surgery procedures, photo-refractive keratotomy, or PRK and LASIK, may reduce the demand for our products, lower our sales and thereby adversely impact our business and profitability.

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Our business is partly dependent on our ability to strategically source a sufficient volume and variety of brand name merchandise at opportunistic pricing.

Some of our products are sourced from suppliers or with significantly reduced prices.

Some of our products are sourced from suppliers or at significantly reduced prices.

We are not always able to purchase specific merchandise on a recurring basis and we may not have control over the supply, design, cost or availability of some products we offer for sale in our stores.

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Our business is subject to seasonal fluctuation.

We typically realize a higher portion of net sales during the first half of the fiscal year, due, among other things, to the timing of tax refunds and the impact of healthcare plan resets after the close of the prior year.

We typically realize a higher portion of net sales during the first half of the fiscal year, due to, among other things, the timing of tax refunds and the impact of healthcare plan resets after the close of the prior year.

Adverse events, such as higher unemployment, lapses in or the lack of insurance coverage, delays in the issuance of tax refunds, deteriorating economic conditions, public transportation disruptions, or unanticipated adverse weather or travel conditions, can deter consumers from shopping.

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In addition, in order to prepare for our peak shopping quarters, we must increase the staffing at our stores and order and keep in stock more merchandise than we carry during other parts of the year.

This staffing increase and inventory build-up may require us to expend cash faster than is generated by our operations during this period.

This staffing increase and inventory build-up may require us to expend cash faster than it is generated by our operations during this period.

Any unanticipated decrease in demand for our products during such period could require us to sell excess inventory at a substantial markdown, which could have a material adverse effect on our business, financial condition and results of operations.

Our e-commerce and omni-channel business faces distinct risks, and our failure to successfully manage it could have a negative impact on our profitability.

Our e-commerce and omni-channel business faces distinct risks, and our failure to successfully manage those risks could have a negative impact on our profitability.

As an e-commerce and omni-channel retailer, we encounter risks and difficulties frequently experienced by Internet-based businesses.

The successful operation of our business as well as our ability to provide a positive shopping experience that will generate orders and drive subsequent visits depends on efficient and uninterrupted operation of our order-taking and fulfillment operations.

The successful operation of our business and our ability to provide a positive shopping experience that will generate orders and drive subsequent visits depends on efficient and uninterrupted operation of our order-taking and fulfillment operations.

Risks associated with our e-commerce and omni-channel business include:

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• disruptions in telephone service or power outages;

• reliance on third parties for computer hardware and software, web-hosting, as well as delivery of merchandise to our customers;

• reliance on third parties for computer hardware and software, web-hosting, and delivery of merchandise to our customers;

• rapid technology changes;

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• liability for online content;

• cybersecurity and consumer and HIPAA privacy concerns and regulation;

• cybersecurity and consumer and HIPAA privacy concerns and regulations;

• natural disasters or adverse weather conditions.

In addition, we have contractual relationships with several third parties, including Walmart and Sam’s Club, whereby we host websites for the online sale of contact lenses and other optical products and perform related back office functions for these parties.

In addition, we have contractual relationships with certain third parties whereby we host websites for the online sale of contact lenses and other optical products and perform related back office functions for these parties.

We could be exposed to contractual liability to these third parties in the event of a failure, security breach or disruption to these websites or our failure to properly provide the services called for by these agreements.

Our online sales also expose us to broader applicability of regulations, as well as additional regulations, such as the prescription verification and other requirements under the FCLCA, rules relating to registration of internet sellers, certain requirements under the Treasury Department’s OFAC, FCPA, anti-money laundering and trade sanction laws, and similar anti-corruption, anti-bribery and international trade laws.

Problems in any of these areas could result in a reduction in sales, increased costs, sanctions or penalties and damage to our reputation and brands.

Problems in any of these areas could result in a reduction in sales, increased costs, sanctions or penalties, or damage to our reputation and brands.

In addition, we must keep up to date with competitive technology trends, including the use of new or improved technology, creative user interfaces and other e-commerce marketing tools such as paid search and mobile applications, among others, which may increase our costs and which may not increase sales or attract customers.

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Substantially all of our inventory is shipped directly from suppliers to our two distribution centers in Lawrenceville, Georgia and Columbus, Ohio.

Inventory is then processed, sorted and shipped using third-party carriers to our stores, to our laboratories for further processing, to our online customers or to Walmart stores and Sam’s Club locations.

Inventory is then processed, sorted and shipped using third-party carriers to our stores, to our laboratories for further processing or to our online customers.

We operate laboratory facilities in Lawrenceville, Georgia;

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and Salt Lake City, Utah.

We also have outsourcing relationships with third-party laboratories in Mexico and China.

These laboratories process most of the lenses ordered by our customers in our stores, as well as on our websites.

We also have outsourcing relationships with third-party laboratories in Mexico.

These laboratories process most of the lenses ordered by customers in our stores, as well as on our websites.

Once processed at the laboratories, the finished products are returned to our distribution centers for shipment to stores, our customers or our business partners.

In connection with the MSA Termination, and as part of an ongoing effort to reduce exposure to China, we recently terminated our outsourced laboratory relationship in China.

We depend in large part on the orderly operation of this receiving and distribution process, which depends, in turn, on adherence to shipping schedules and effective management of our distribution centers.

Increase in transportation costs (including increases in fuel costs), increased shipping costs, issues with overseas shipments, supplier-side delays, reductions in the transportation capacity of carriers, labor strikes or shortages in the transportation industry, disruptions to the national and international transportation infrastructure and unexpected delivery interruptions or delays also have the potential to derail our distribution process.

We face additional risks related to the laboratories in China and Mexico, including port of entry risks such as longshoremen strikes, import restrictions, foreign government regulations, trade restrictions, customs and duties.

If we change the transportation companies we use, we could face logistical difficulties that could adversely affect deliveries and we could incur costs and expend resources in connection with such change.

Increases in transportation costs (including increases in fuel costs), increased shipping costs, issues with overseas shipments, supplier-side delays, reductions in the transportation capacity of carriers, labor strikes or shortages in the transportation industry, disruptions to the national and international transportation infrastructure, and unexpected delivery interruptions or delays also have the potential to derail our distribution process.

We face additional risks related to our international outsourcing laboratory relationships, including port of entry risks such as longshoremen strikes, import restrictions, foreign government regulations, trade restrictions, customs and duties.

If we change the transportation companies we use, we may face logistical difficulties that could adversely affect deliveries and we could incur costs and expend resources in connection with such change.

We also may not be able to obtain terms as favorable as those received from the third-party transportation providers we currently use, which could increase our costs.

We also may not anticipate changing demands on our distribution system, including the effect of any expansion we may need to implement in our distribution centers.

Events beyond our control, including, but not limited to, disruptions in operations due to natural or man-made disasters, inclement weather conditions, accidents, system failures, or public health emergencies could also result in delays in our receipt of inventory and the delivery of merchandise between our stores, our optical laboratories and our distribution centers, significantly higher costs and longer lead times or an adverse effect on our ability to fulfill customer orders in a timely manner.

Any disruption to the laboratories’ operations may reduce or impair the quality of assembled eyeglasses.

Events beyond our control, including, but not limited to, disruptions in operations due to natural or man-made disasters, inclement weather conditions, accidents, system failures, or public health emergencies could also result in delays in our receipt of inventory or the delivery of merchandise between our stores, our optical laboratories and our distribution centers, significantly higher costs and longer lead times, or an adverse effect on our ability to fulfill customer orders in a timely manner.

Any disruption to our laboratories’ operations may reduce or impair the quality of assembled eyeglasses.

The inability to fulfill, or any delays in processing, customer orders through our laboratory network or any quality issues could result in the loss of customers, issuances of refunds or credits and may also adversely affect our reputation.

The insurance we maintain for business interruption may not cover all risk, or be sufficient to cover all of our potential losses, may not continue to be available to us on acceptable terms, if at all, and any insurance proceeds may not be paid to us in a timely manner.

We may incur losses arising from our investments in technological innovators in the optical retail industry, which would negatively affect our financial results.

We are regularly presented with opportunities to invest and have invested in certain venture-backed emerging companies and technological innovators across the optical retail industry.

The insurance we maintain for business interruption may not cover all risk or be sufficient to cover all of our potential losses or may not continue to be available to us on acceptable terms, if at all, and any insurance proceeds may not be paid to us in a timely manner.

We may incur losses arising from our investments in technological innovators in the optical retail industry, including artificial intelligence, which would negatively affect our financial results.

We are regularly presented with opportunities to invest.

We have recently invested in an entity specializing in applying artificial intelligence-powered screening and diagnostic tools to retinal imaging and historically have invested in certain venture-backed emerging companies and technological innovators across the optical retail industry.

Such investments could include equity or debt instruments in companies that may be non-marketable.

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Investors, customers, employees and other stakeholders have increasingly focused on the ESG practices of companies in recent years.

As we published our second Corporate Responsibility Report in 2022 and continue to develop our corporate responsibility strategy, our ESG practices will be evaluated against stakeholders’ evolving expectations and standards for responsible corporate citizenship.

If our practices in the areas of social impact, employee empowerment, environmental stewardship and corporate governance fail to meet such expectations and standards, our reputation and employee and customer retention may be negatively impacted.

As we published our third Corporate Responsibility Report in 2023 and continue to develop our corporate responsibility strategy, our ESG practices will be evaluated against stakeholders’ evolving expectations and standards for responsible corporate citizenship.

If our practices in the areas of social impact, employee empowerment, environmental stewardship and corporate governance fail to meet such expectations and standards, our reputation or employee and customer retention may be negatively impacted.

Additionally, increased regulatory requirements regarding climate and ESG disclosures, as well as environmental stewardship, could also lead to increased operational costs.

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Risks Related to Our Dependence on Third Parties

Our future operational success depends on our ability to develop, maintain and extend relationships with managed vision care companies, vision insurance providers and other third-party payors.

An increasing percentage of our customers receive vision insurance coverage through managed care payors.

These payors represent an increasingly significant portion of our overall revenues and our revenue growth and represented approximately 35% of our overall revenues in fiscal year 2023.

While we have relationships with almost all vision care insurers in the U.S.

and with all of the major carriers, a relatively small number of payors currently comprise the majority of our managed care revenues, subjecting us to concentration risk.

Our future operational success could depend on our ability to negotiate contracts with managed vision care companies, vision insurance providers and other third-party payors, several of whom have significant market share.

As our managed care business continues to expand, we have incurred, and expect to incur, additional costs related to this area of our business.

In addition, as our managed care business continues to grow closer to overall industry penetration levels, we expect our associated revenue growth rate to slow over time.

We may be unable to establish or maintain satisfactory relationships with managed care and other third-party payors.

In addition, many managed care payors have existing provider structures in place that they may be unable or unwilling to change.

Some vertically-integrated payors also have their own networks, and these payors may take actions to maintain or protect these networks in ways that negatively affect us, including by increasing costs or not allowing our new or existing stores to participate in their networks.

Increasing consolidation in the optical retail industry may give such payors greater market power which may adversely affect our ability to negotiate reimbursement rates under managed care arrangements.

Our inability to enter into arrangements with managed care payors in the future or to maintain existing relationships with managed care payors on commercially reasonable terms could have a material adverse effect on our business, financial condition and results of operations.

In addition, delays in receiving or the failure to receive reimbursements under our managed care arrangements, significant changes to the economics of a managed care contract or relationship, or the loss of a significant managed care contract or relationship could have a significant negative impact on our business, financial condition and results of operations.

We face risks associated with vendors from whom our products are sourced and are dependent on a limited number of suppliers.

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Our ability to obtain a sufficient selection or volume of merchandise on a timely basis at competitive prices could suffer as a result of any deterioration or change in our vendor relationships or events that adversely affect our vendors.

Other than our contracts for the supply of spectacle lenses and our private label contact lenses, we typically do not enter into long-term contracts with our vendors and, as such, we operate without significant contractual assurances of continued supply, pricing or access to new products.

Other than our contracts for the supply of eyeglass lenses and our private label contact lenses, we typically do not enter into long-term contracts with our vendors and, as such, we operate without significant contractual assurances of continued supply, pricing or access to new products.

Any of our vendors could discontinue supplying us with desired products in sufficient quantities or offer us less favorable terms on future transactions for a variety of reasons.

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The occurrence of one or more of these events could impact our ability to get products to our customers, result in disruptions to our operations, increase our costs and decrease our profitability.

We also source merchandise directly from suppliers outside of the United States.

We also source merchandise directly from suppliers outside of the U.S.

Additionally, a significant amount of our domestically-purchased merchandise is manufactured abroad.

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Moreover, negative press or reports about internationally manufactured products may sway public opinion, and thus customer confidence, away from the products sold in our stores.

These and other issues affecting our international vendors or internationally manufactured merchandise could have a material adverse effect on our business, financial condition and results of operations.

were to withdraw from or materially modify any other international trade agreements to which it is a party or if the U.S.

imposes significant additional tariffs or other restrictions on imports from China and Mexico, where our outsourced optical laboratories are located and where the majority of our frames are sourced and manufactured, it could have an adverse impact on our business.

Any such tariffs, restrictions or other changes could lead to additional costs, delays in shipments, embargoes and other uncertainties that could negatively impact our relationships with our international vendors and labs and materially adversely affect our business, including by requiring us to increase our prices and identify alternative sources for merchandise and labs.

For example, we source merchandise from suppliers located in China, a significant amount of domestically-purchased merchandise is manufactured in China, and one of our outsourced third-party laboratories is located in China.

These and other issues affecting our international vendors or internationally

manufactured merchandise could have a material adverse effect on our business, financial condition and results of operations.

were to withdraw from or materially modify any other international trade agreement to which it is a party or if the U.S.

imposes significant additional tariffs or other restrictions on imports from Mexico, where our outsourced optical laboratories are located, or China, where the majority of our frames are sourced and manufactured, it could have an adverse impact on our business.

Any such tariffs, restrictions or other changes could lead to additional costs, delays in shipments, embargoes or other uncertainties that could negatively impact our relationships with our international vendors and labs and materially adversely affect our business, including by requiring us to increase our prices and identify alternative sources for merchandise and labs.

For example, we source merchandise from suppliers located in China and a significant amount of domestically-purchased merchandise is manufactured in China.

Historically, tariffs have not materially affected our financial results, and we believe that less than 10% of costs applicable to revenue are subject to tariffs on Chinese imports;

however, tariff rates are subject to change and have varied over the past few years.

Effective September 1, 2019, the U.S.

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Given the current U.S.

presidential administration, there is uncertainty whether there will be, and the resulting impacts of, any changes to U.S.

government trade policy.

presidential administration, there is uncertainty as to whether there will be any changes to U.S.

government trade policy and what the resulting impacts of those changes may be.

While we have implemented mitigation plans and continue to focus on additional mitigation strategies to offset the impact of tariffs, costs with respect to products subject to these tariffs have increased.

If we are unable to mitigate the full impact of the enacted tariffs or if there is a further escalation of tariffs, costs on a significant portion of our products may increase further and our financial results may be negatively affected.

In connection with the MSA Termination, and as part of an ongoing effort to reduce exposure to China, we recently terminated our outsourced laboratory relationship in China.

Material changes in the pricing practices of our suppliers could negatively impact our profitability.

For example, we have in the past been subject to the unilateral pricing policies implemented by certain contact lens manufacturers, which policies mandated the minimum prices at which certain contact lenses could be sold to consumers.

Such manufacturers could refuse to supply us with their products if they deemed us in breach of such policies.

For example, we have in the past been subject to the unilateral pricing policies implemented by certain contact lens manufacturers, which mandated the minimum prices at which certain contact lenses could be sold to consumers.

Such manufacturers could refuse to supply us with their products if they deem us in breach of such policies.

Our vendors may also increase their pricing if their raw materials became more expensive.

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Our vendors may pass the increase in sourcing costs to us through price increases, thereby impacting our margins.

We have faced such price

increases previously and could face material changes in the future, impacting our ability to continue to provide our products at competitive prices to customers.

We have faced such price increases previously and could face material changes in the future, impacting our ability to continue to provide our products to customers at competitive prices.

In addition, some of our vendors may not have the capacity to supply us with sufficient merchandise to keep pace with our growth plans, especially if we need significantly greater amounts of inventory.

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We rely on a limited number of vendors to supply the majority of our eyeglass lenses and contact lenses and are thus exposed to concentration of supplier risk.

In particular, we have agreed to exclusively purchase almost all of our spectacle lenses from one supplier.

In particular, we have agreed to exclusively purchase almost all of our eyeglass lenses from one supplier.

During fiscal year 2023, 89% of lens expenditures were from this vendor and 92% of contact lens expenditures were with three vendors.

We are less exposed to a supplier risk for our eyeglass frames as only 60% of frame expenditures were with two vendors.

If we were to lose any significant supplier, we may be unable to establish additional or replacement sources for our products that meet our quality controls and standards in a timely manner or on commercially reasonable terms, if at all.

As a few major suppliers dominate the optical retail industry, the risks associated with finding alternative sources may be exacerbated.

For example, effective October 1, 2018, Essilor and Luxottica completed their merger to become EssilorLuxottica, which exacerbates our concentration of supplier risk.

Future operational success depends on our ability to develop, maintain and extend relationships with managed vision care companies, vision insurance providers and other third-party payors.

An increasing percentage of our customers receive vision insurance coverage through managed care payors.

These payors represent an increasingly significant portion of our overall revenues and our revenue growth and represented approximately one third of our overall revenues in fiscal year 2022.

While we have relationships with almost all vision care insurers in the United States and with all of the major carriers, currently, a relatively small number of payors comprise the majority of our managed care revenues, subjecting us to concentration risk.

As our managed care business continues to expand, we have incurred and expect to incur additional costs related to this area of our business.

In addition, as our managed care business continues to grow closer to overall industry penetration levels, we expect our associated revenue growth rate to slow over time.

We may be unable to establish or maintain satisfactory relationships with managed care and other third-party payors.

In addition, many managed care payors have existing provider structures in place that they may be unable or unwilling to change.

In addition, delays in receiving or the failure to receive reimbursements under our managed care arrangements, significant changes to the economics of a managed care contract or relationship or the loss of a significant managed care contract or relationship could have a significant negative impact on our business, financial condition and results of operations.

We rely heavily on our information technology systems, as well as those of our vendors, for our business to effectively operate and to safeguard confidential information;

any significant failure, inadequacy, interruption or security breach could adversely affect our business, financial condition and operations.

We rely heavily on our information technology systems for many functions across our operations, including managing our supply chain and inventory, processing customer transactions in our stores, allocating lens processing jobs to the appropriate laboratories, providing and maintaining our remote medicine and EHR platform, our financial accounting and reporting systems, operating our websites, and human resources administration.

Our ability to effectively manage our business and coordinate the sourcing, distribution and sale of our products depends significantly on the reliability and capacity of these systems.

We also collect, process and store sensitive and confidential information, including our proprietary business information and that of our customers, associates,

suppliers and business partners, including Walmart and Sam’s Club.

We rely heavily on our information technology systems for many functions across our operations, including ERP, managing our supply chain and inventory, processing customer transactions in our stores, allocating lens processing jobs to the appropriate laboratories, providing and maintaining our remote medicine and EHR platforms, our financial accounting and reporting systems, maintenance of certain of our cybersecurity programs, CRM and customer engagement efforts, operating our websites, growing our omni-channel and e-commerce business, and human resources administration.

Our ability to effectively manage our business and coordinate the sourcing,

distribution and sale of our products depends significantly on the reliability and capacity of these systems.

We also collect, process and store sensitive and confidential information, including our proprietary business information and that of our customers, associates, suppliers and business partners.

The secure processing, maintenance and transmission of this information is critical to our operations.

Our systems may be subject to damage or interruption from power outages or damages, telecommunications problems, data corruption, software errors, network failures, acts of war or terrorist attacks, fire, flood, ransomware and natural disasters.

Our existing safety systems, data backup, access protection, user management and information technology emergency planning may not be sufficient to prevent data loss or long-term network outages.

In addition, we may have to upgrade our existing information technology systems or choose to incorporate new technology systems from time to time in order for such systems to support the increasing needs of our expanding business.

Costs and potential problems and interruptions associated with the implementation of new or upgraded systems and technology or with maintenance or adequate support of existing systems could disrupt or reduce the efficiency of our operations.

Our systems and those of our third-party service providers and business partners may be vulnerable to security breaches, attacks by hackers, acts of vandalism, computer viruses, misplaced or lost data, human errors or other similar events and are from time to time subject to such attacks.

Security breaches, computer malware and computer hacking have become more prevalent across industries and are increasing in their frequency, levels of persistence, sophistication and intensity, and are being conducted by sophisticated organized groups and individuals.

In addition, we may need to upgrade our existing information technology systems or choose to incorporate new technology systems from time to time in order for such systems to support the increasing needs of our expanding business.

Costs and potential problems or interruptions associated with the implementation of new or upgraded systems and technology or with maintenance or adequate support of existing systems could disrupt or reduce the efficiency of our operations.

In particular, we are in the process of implementing a new ERP system.

This system will replace many of our existing operating and financial systems.

The implementation is a major undertaking, both financially and from a management and personnel perspective.

Any material disruptions, delays or deficiencies in the design and implementation of our new ERP system could adversely affect our ability to process orders, ship products, provide services and customer support, send invoices and track payments, fulfill contractual obligations or otherwise operate our business.

Our systems and those of our third-party service providers and business partners may be vulnerable to security breaches, attacks by hackers, acts of vandalism, computer viruses, misplaced or lost data, human errors, or other similar events and are from time to time subject to such incidents.

Security breaches, computer malware and computer hacking have become more prevalent across industries and are increasing in their frequency, level of persistence, sophistication and intensity, and are being conducted by sophisticated, organized groups and individuals.

We may face increased cybersecurity risks due to our reliance on Internet technology and the increased number of employees working remotely following the pandemic.

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In addition, associates may intentionally or inadvertently cause data or security breaches that result in unauthorized release of sensitive or confidential information.

Because the techniques used to circumvent security systems can be highly sophisticated, change frequently, are often not recognized until launched against a target and may originate from less regulated and remote areas around the world, we may be unable to proactively address all possible techniques or implement adequate preventive measures for all situations.

Like most corporations, the Company’s systems are a target of attacks.

Because the techniques used to circumvent security systems can be highly sophisticated, change frequently, are often not recognized until launched against a target and may originate from less regulated and remote areas around the world, we may be unable to proactively address all possible vulnerabilities or implement adequate preventive measures for all situations.

Like most corporations, our systems are a target of attacks.

Although the incidents that we have experienced to date have not had a material effect on our business, there can be no assurance that such incidents will not have a material adverse effect on us in the future.

Any such breach, attack, virus or other event could result in costly investigations and litigation exceeding applicable insurance coverage or contractual rights available to us, civil or criminal penalties, operational changes or other response measures, loss of consumer confidence in our security measures, and negative publicity that could adversely affect our financial condition, results of operations and reputation.

Any such breach, attack, virus or other event could result in costly investigations and litigation exceeding applicable insurance coverage or contractual rights available to us, civil or criminal penalties, operational changes or other response measures, loss of consumer confidence in our security measures, or negative publicity that could adversely affect our financial condition, results of operations and reputation.

Any material disruption or slowdown of our systems or those of our third-party service providers and business partners, could have a material adverse effect on our business, financial condition and results of operations.

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Such changes may require us to update our processes and could impact our ability to submit claims or to timely receive reimbursements from our managed care partners.

If claims for payment are disputed by managed care payors or if we fail to timely or accurately submit claims, we may not receive payment for such claims in a timely manner or at all, which could negatively impact our relationship with managed care organizations and could require us to take write-offs or otherwise have a significant negative impact on our business, financial condition and results of operations.

If claims for payment are disputed by managed care payors or if we fail to timely or accurately submit claims, we may not receive payment for such claims in a

timely manner or at all, which could negatively impact our relationship with managed care organizations and could require us to take write-offs or otherwise have a significant negative impact on our business, financial condition and results of operations.

Furthermore, any changes to or repeal of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or any other significant changes to the healthcare regulatory landscape may reduce or eliminate coverage or reimbursement rates of insurance-funded eye exams or eyewear.

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“Business-Government Regulation.”

State legislators and regulators may also be reluctant to accept telehealth and remote medicine as an additional way to provide access to quality patient care.

Recently, there has been an increase in legislative and rulemaking activity that creates disparity across jurisdictions on how telehealth is regulated and how we are able to implement our remote medicine solution.

Recently, there has been an increase in legislative and rulemaking activity that creates disparity across jurisdictions with respect to how telehealth is regulated and how we are able to implement our remote medicine solution.

Our ability to launch our remote medicine solution in certain jurisdictions or in the most cost-efficient manner is highly dependent on the evolution of these state-by-state requirements and restrictions.

We have already seen some states take positions on telehealth that significantly limit our ability to deploy our current remote medicine solution, or that prohibit the use of telehealth by optometrists to conduct eye examinations.

The ever-changing regulatory landscape may cause disruption as we launch our remote medicine solution in various states, causing us to significantly reconfigure the solution or potentially decide to not deploy in that particular state.

Some states have taken positions on telehealth that significantly limit our ability to deploy our current remote medicine solution, or that prohibit the use of telehealth by optometrists to conduct eye examinations.

This may have an abrupt and material effect on our business operations or financial status.

If a legal challenge to our chosen remote medicine solution were successful, and we are unable to modify the model to comply with the requirements but still meet the needs of patients and optometrists, this may have a material effect on our business operations or financial status in that jurisdiction.

If a legal challenge to our chosen remote medicine solution were successful, and we are unable to modify the model to comply with the requirements and still meet the needs of patients and optometrists, this may have a material effect on our business operations or financial status in that jurisdiction.

We cannot provide any assurances that we will not be subject to reprimands, sanctions, probation, fines, suspension or revocation of operating or business permits, or that our ability to offer remote medicine services in that jurisdiction will not be challenged.

We also may be the subject of administrative complaints or actions in the future.

Our ability to recruit optometrists who are willing and able to provide telehealth services where permitted may be affected by their respective licensing authorities or state optometry boards or associations view on telehealth practice.

We must continuously monitor legislative and rulemaking activities for changes in the telehealth requirements and work with various stakeholders to educate lawmakers on how remote optometry services may be provided safely and effectively.

We cannot guarantee that our interpretation of existing or future requirements is aligned with how regulators may interpret such requirements, and we cannot assure that, if challenged, our current telehealth solution will be found to be in compliance with the law.

We must continuously monitor legislative and rulemaking activities for changes in telehealth requirements and work with various stakeholders to educate lawmakers on how remote optometry services may be provided safely and effectively.

We cannot guarantee that our interpretation of existing or future requirements is aligned with how regulators may interpret such requirements, and we cannot assure that, if challenged, our current remote medicine solution will be found to be in compliance with the law.

We must comply with the FCLCA and its implementing regulations with respect to verifying contact lens prescriptions in connection with our online sales of contact lenses.

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It is possible that regulators in certain states could determine that our warranty plans should be subject to these laws and mandate that we comply with various registration, disclosure and financial requirements.

In such event, we could be required to incur enhanced compliance costs, as well as the risk of cease and desist orders and monetary penalties.

In such event, we could be required to incur enhanced compliance costs, or be at risk of cease and desist orders and monetary penalties.

Our participation in federal healthcare programs, such as Medicare and Medicaid, requires us to comply with laws regarding the way in which we conduct business and submit claims.

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the provision of free items and services to patients covered by commercial payors may implicate applicable state laws related to, among other things, unlawful schemes to defraud, excessive fees for services, tortious interference with patient contracts, and statutory or common law fraud.

In addition, state regulators or boards of optometry may also challenge our promotional practices, including America’s Best’s bundled offers, as, among other things, violating applicable state laws regarding unfair competition, false advertising to consumers, or corporation practice of optometry prohibitions.

To the extent our promotional programs are found to be inconsistent with applicable laws, we may be required to restructure or discontinue such programs, or be subject to other significant penalties.

Eyeglasses and contact lenses are regulated as medical devices in the United States by the FDA, and under the FDC Act, such medical devices must meet a number of regulatory requirements.

Eyeglasses and contact lenses are regulated as medical devices in the U.S.

by the FDA, and under the FDC Act, such medical devices must meet a number of regulatory requirements.

We do not hold any marketing authorizations for the eyeglasses and contact lenses that we sell as we serve as the retailer for third-party manufacturers’ devices.

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Department of Justice, on behalf of the FDA and/or various forms of FDA enforcement and compliance actions, which include recalls, fines, penalties, injunctions, seizures, prosecutions, adverse publicity (such as FDA press releases) or other adverse actions.

Our failure to comply with the applicable regulations could have severe consequences, including the closure of our stores, possible breaches of the agreements relating to certain of our brands, changes to our way of doing business and the imposition of fines and penalties.

Our failure to comply with applicable regulations could have severe consequences, including the closure of our stores, possible breaches of the agreements relating to certain of our brands, changes to our way of doing business and the imposition of fines and penalties.

We are subject to managed vision care laws and regulations.

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This approval process can be complex and can cause delays in the projected opening of our stores.

The sale of managed care products by FirstSight is essential to our expansion of America’s Best in California, and the suspension or loss of our license or our failure to otherwise comply with applicable regulatory requirements could have a material adverse impact on our expansion plans in California.

The sale of managed care products by FirstSight is essential to our America’s Best operations in California, and the suspension or loss of our license or our failure to otherwise comply with applicable regulatory requirements could have a material adverse impact on such business in California.

In addition, our Eyecare Club programs may be subject to regulation under managed care and related state laws, including those of California, where these programs are offered by FirstSight.

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The regulatory environment surrounding information security and privacy is increasingly demanding, with the frequent imposition of new and changing requirements across our business.

For instance, as an entity that collects and maintains personally identifiable information and protected health information, we could be forced, in the event of a data breach, to report the breach not only to affected customers, but also to various public agencies and media outlets, potentially harming our reputation and our business.

For instance, as an entity that collects and maintains PII and PHI, we could be forced, in the event of a data breach, to report the breach not only to affected customers, but also to various public agencies and media outlets, potentially harming our reputation and our business.

Our business partners may have contractual rights of indemnification against us or seek to terminate our contracts with them in the event that their customer or proprietary business information is released as a result of a breach of our information technology.

Additionally, business partners may also face a data breach, allowing for our customer or proprietary business information to be released, could result in a loss of consumer confidence in our security measures, harm our business and also lead to costly investigations and litigation.

Such a data breach of a business partner also may not be adequately covered under contractual rights of indemnification or cyber insurance.

Further, if we are unable to comply with the security standards established by banks and the payment card industry, we may be subject to fines, restrictions and expulsion from card acceptance programs, which could adversely affect our retail operations.

Additionally, business partners may also face a data breach, allowing for our customer or proprietary business information to be released, which could result in a loss of consumer confidence in our security measures, harm our business and also lead to costly investigations and litigation.

Such a breach also may not be adequately covered under contractual rights of indemnification or by cyber insurance.

Further, if we are unable to comply with the security standards established by banks and the payment card industry, we may be subject to fines, restrictions or expulsion from card acceptance programs, which could adversely affect our retail operations.

As privacy and information security laws and regulations change and vary from state to state, we may incur additional compliance costs.

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If the products that we manufacture, repackage or relabel are defective or otherwise result in product liability or personal injury claims against us, our business could be adversely affected and we could be subject to adverse regulatory action.

If our merchandise or services do not meet applicable governmental safety standards or our customers’ expectations regarding quality or safety, we could experience lost sales and increased costs, be exposed to legal and reputational risk and face fines or penalties which could materially adversely affect our financial results.

If our merchandise or services do not meet applicable governmental safety standards or our customers’ expectations regarding quality or safety, we could experience lost sales and increased costs, be exposed to legal and reputational risk, or face fines or penalties which could materially adversely affect our financial results.

Failure to comply with laws, regulations and enforcement activities or changes in statutory, regulatory, accounting and other legal requirements could potentially impact our operating and financial results.

In addition to the vision care and healthcare laws and regulations discussed above, we are subject to numerous federal, state, local and foreign laws and governmental regulations including those relating to environmental protection, building, land use and zoning requirements, workplace regulations, wage and hour, privacy and information security, consumer protection laws, immigration and employment law matters.

If we fail to comply with existing or future laws or regulations, or if these laws or regulations are violated by importers, manufacturers or distributors, we may be subject to governmental or judicial fines or sanctions, while incurring substantial legal fees and costs.

In addition, our capital expenditures could increase due to remediation measures that may be required if we are found to be noncompliant with any existing or future laws or regulations.

Further, the FTC has authority to investigate and prosecute practices that constitute “unfair trade practices,” “deceptive trade practices” or “unfair methods of competition.” State attorneys generals typically have comparable authority, and many states also permit private plaintiffs to bring actions on the basis of these laws.

Further, the FTC has authority to investigate and prosecute practices that constitute “unfair trade practices,” “deceptive trade practices” or “unfair methods of competition.” State attorneys general typically have comparable authority and many states also permit private plaintiffs to bring actions on the basis of these laws.

Federal and state consumer protection laws and regulations may apply to our operations and retail offers.

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laboratories we contract with may subject us to the FCPA and trade sanction laws, and similar anti-corruption, anti-bribery and international trade laws, any violation of which could create substantial liability for us and also harm our reputation.

Our four laboratories in the United States and our in-store laboratories at our Eyeglass World locations subject us to various federal, state and local laws, regulations and other requirements pertaining to protection of the environment, public health and associate safety, including regulations governing the management of hazardous substances and the maintenance of safe working conditions, such as the Occupational Safety and Health Act of 1970, as amended.

These laws also apply generally to all our properties.

Our four laboratories in the U.S.

and our in-store laboratories at Eyeglass World locations subject us to various federal, state and local laws, regulations and other requirements pertaining to protection of the environment, public health and associate safety, including regulations governing the management of hazardous substances and the maintenance of safe working conditions, such as the Occupational Safety and Health Act of 1970, as amended.

These laws also apply generally to all of our properties.

Our failure to comply with these laws can subject us to criminal and civil liabilities.

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Any material interruptions or failures in our payment-related systems could have a material adverse effect on our business, financial condition and results of operations.

If there are amendments to the PCI Standard, the cost of re-compliance could also be substantial and we may suffer loss of critical data and interruptions or delays in our operations as a result.

Adverse litigation judgments or settlements resulting from legal proceedings relating to our business operations could materially adversely affect our business, financial condition and results of operations.

If there are amendments to the PCI Standard, the cost of compliance with new requirements could also be substantial and we may suffer loss of critical data and interruptions or delays in our operations as a result.

Adverse judgments or settlements resulting from legal proceedings relating to our business operations could materially adversely affect our business, financial condition and results of operations.

From time to time, we are subject to allegations, and may be party to legal claims and regulatory proceedings, relating to our business operations.

“Legal Proceedings.” Such allegations, claims and proceedings may be brought by third parties, including our shareholders, customers, associates, governmental or regulatory bodies, or competitors and may include class actions.

Defending against such claims and proceedings is costly and time consuming and may divert management’s attention and personnel resources from our normal business operations, and the outcome of many of these claims and proceedings cannot be predicted.

If any of these claims or proceedings were to be determined adversely to us, a judgment, a fine or a settlement involving a payment of a material sum of money were to occur, or injunctive relief were issued against us, our business, financial condition and results of operations could be materially adversely affected.

Defending against such claims and proceedings is costly and time consuming and may divert management’s attention and resources from our normal business operations, and the outcome of many of these claims and proceedings cannot be predicted.

If any of these claims or proceedings were to be determined adversely to us, if a judgment, a fine or a settlement involving a payment of a material sum of money were to occur, or if injunctive relief were issued against us, our business, financial condition and results of operations could be materially adversely affected.

We are and may in the future be the target of securities-related litigation.

Litigation can divert our management’s attention and resources, result in substantial costs, and have an adverse effect on our business, results of operations, financial condition and stock price.

We maintain director and officer insurance to mitigate the risks associated with potential claims;

however, we are responsible for meeting certain deductibles under such policies, and there can be no assurance that our insurance coverage will adequately protect us from all claims made against us.

Further, as a result of the litigation, the costs of insurance may increase, and the availability of coverage may decrease.

As a result, we may not be able to maintain our current levels of insurance at a reasonable cost, or at all, which might make it more difficult to attract qualified candidates to serve as executive officers or directors.

There also may be adverse publicity associated with litigation that could negatively affect customer perception of our business and materially damage our reputation.

We may not be able to adequately protect our intellectual property, which could harm the value of our brand and adversely affect our business.

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While it is our policy to protect and defend vigorously our rights to our intellectual property, we cannot predict whether steps taken by us to protect our intellectual property rights will be adequate to prevent infringement or misappropriation of these rights.

It may be difficult for us to prevent others from copying elements of our products and any litigation to enforce our rights could be costly, divert attention of management, and may not be successful.

It may be difficult for us to prevent others from copying elements of our products and any litigation to enforce our rights could be costly, divert attention of management and may not ultimately be successful.

Although we believe that we have sufficient rights to all of our trademarks, service marks and other intellectual property rights, we may face claims of infringement that could interfere with our ability to market and promote our brands.

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Risks Related to Our Indebtedness

We have a significant amount of indebtedness which could adversely affect our business and financial position, including limiting our business flexibility and preventing us from meeting our debt obligations.

We have a significant amount of indebtedness which could adversely affect our business and financial position, including by limiting our business flexibility and preventing us from meeting our debt obligations.

We have a significant amount of indebtedness.

As of December 31, 2022, we had approximately $552.5 million of aggregate principal amount of indebtedness associated with our first lien term loan in the aggregate principal amount of $150.0 million (the “term loan”) and $402.5 million of 2.50% convertible senior notes due on May 15, 2025 (the “2025 Notes”) outstanding (excluding finance lease obligations).

Our leverage could have important consequences for us, including:

As of December 30, 2023, we had approximately $448.7 million of aggregate principal amount of indebtedness associated with our first lien term loan in the aggregate principal amount of $146.3 million (the “Term Loan A”) due in 2028, subject to springing maturity, and $302.5 million of 2.50% convertible senior notes due on May 15, 2025 (the “2025 Notes”) outstanding (excluding finance lease obligations).

Our leverage could have a number of consequences for us, including:

• requiring us to utilize a substantial portion of our cash flows from operations to make payments on our indebtedness, reducing the availability of our cash flows to fund working capital, capital expenditures, general corporate and other purposes;

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• restricting us from capitalizing on business opportunities;

• limiting our ability to obtain additional financing for working capital, capital expenditures, execution of our business strategy, debt service requirements, acquisitions and other general corporate purposes;

• limiting our flexibility in planning for, or reacting to, changes in our business or market conditions and placing us at a competitive disadvantage compared to our competitors who are less highly leveraged and who, therefore, may be able to take advantage of opportunities that our leverage prevents us from exploiting.

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If we cannot generate sufficient cash flow from operations to make scheduled principal and interest payments in the future, we may need to refinance all or a portion of our indebtedness on or before maturity, sell assets, delay capital expenditures or seek additional equity.

The terms of our existing or future debt agreements may also restrict us from affecting any of these alternatives.

The terms of our existing or future debt agreements may also restrict us from effecting any of these alternatives.

Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations.

In addition to refinancing, we may elect to deploy capital to reduce outstanding debt and such capital deployment would reduce our ability to use funds for other purposes.

For example, we repurchased $100.0 million aggregate principal amount of our 2025 Notes in November 2023, and the Company is continuing to evaluate its alternatives in light of the impending maturity date of the 2025 Notes on May 15, 2025, including, repayment, refinancing and further repurchase prior to maturity.

The Company may also elect to pay all or a portion of the conversion price relating to the 2025 Notes in cash to the extent a holder elects to convert.

Further, changes in the credit and capital markets, including market disruptions and interest rate fluctuations, may increase the cost of financing, make it more difficult to obtain favorable terms, or restrict our access to these sources of future liquidity.

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Our inability to generate sufficient cash flow to satisfy our debt service obligations, or to refinance or restructure our obligations on commercially reasonable terms or at all, could have a material adverse effect on our business, financial condition and results of operations, as well as on our ability to satisfy our obligations in respect of our indebtedness.

A change in interest rates or replacement of LIBOR and other benchmark rates, or uncertainty related to the potential for any of the foregoing, may adversely affect our business.

As of December 31, 2022, $150.0 million of term loan borrowings were subject to variable interest rates, with a weighted average borrowing rate of 3.1%.

In fiscal year 2021, following the maturity of the interest rate swaps, the interest rate collar hedged some of the variability in Company’s interest rates.

A decrease in LIBOR, or any alternative rate, below a certain threshold could require payments to the counterparty of our interest rate collar derivative and could materially reduce our profitability and cash flows.

An increase in interest rates, whether because of an increase in market interest rates or a decrease in our creditworthiness, could also increase the cost of servicing our debt and could materially reduce our profitability and cash flows.

On January 1, 2022, the publication of the one-week and two-months U.S.

A change in interest rates may adversely affect our business.

As of December 30, 2023, $146.3 million of term loan borrowings were subject to variable interest rates and we had total borrowings of $448.7 million with a weighted average borrowing rate of 3.4%, inclusive of the effects of our interest rate collar.

In fiscal year 2021, following the maturity of the interest rate swaps, the interest rate collar hedged some of the variability in our interest rates.

A decrease in the applicable rate below a certain threshold could require payments to the counterparty of our interest rate collar derivative and could materially reduce our profitability and cash flows.

An increase in interest rates, whether because of an increase in market interest rates or a decrease in our creditworthiness, could increase the cost of servicing our debt and could materially reduce our profitability and cash flows.

Moreover, on January 1, 2022, the publication of the one-week and two-months U.S.

Dollar LIBOR maturities and all non-U.S.

Dollar LIBOR maturities ceased and the remaining U.S.

Dollar LIBOR maturities will cease immediately after June 30, 2023.

Accordingly, many existing LIBOR obligations will transition to another benchmark after June 30, 2023 or, in some cases, have already transitioned.

In 2021, we amended our credit agreement to, among other things, add customary LIBOR replacement provisions which will come into effect upon discontinuation of LIBOR.

It is not possible to know what the effect of any such changes in views or alternatives may have on the financial markets for LIBOR-linked financial instruments.

Uncertainty regarding LIBOR could result in pricing volatility, adverse tax or accounting impacts, compliance, legal and operational costs.

Dollar LIBOR maturities ceased immediately after June 30, 2023.

Accordingly, many of our existing LIBOR obligations that were not already replaced by a different rate, transitioned to another benchmark after June 30, 2023.

At this time, it is not possible to predict the full effect that the discontinuance of LIBOR, or the establishment of alternative reference rates such as SOFR, will have on us or our borrowing costs and such changes may result in an increase in the cost of our variable rate indebtedness.

SOFR is a relatively new reference rate and its composition and characteristics are not the same as LIBOR.

Given the limited history of this rate and potential volatility as compared to other benchmark or market rates, the future performance of this rate cannot be predicted based on historical performance.

Our credit agreement contains restrictions that limit our flexibility in operating our business.

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Conversion of the 2025 Notes could dilute the ownership interest of existing stockholders or may otherwise depress the price of our common stock.

On May 12, 2020, we completed the issuance of the 2025 Notes.

As of December 30, 2023, $302.5 million aggregate principal amount of our 2025 Notes were outstanding.

The 2025 Notes are convertible into cash, shares of common stock or a combination of cash and shares of common stock at our election, based on the applicable conversion rate at such time.

Prior to February 15, 2025, the 2025 Notes are convertible at the option of the holders of such notes under certain circumstances as provided in the governing indenture and, as of December 31, 2022, those circumstances were in effect.

Based on the initial conversion rate of the 2025 Notes, which is subject to adjustment, the 2025 Notes are convertible into 12.9 million shares of our common stock with a maximum possible issuance of 16.5 million shares.

As of December 30, 2023, based on the initial conversion rate of the 2025 Notes, which is subject to adjustment, the 2025 Notes are convertible into 9.7 million shares of our common stock with a maximum possible issuance of 12.4 million shares.

The conversion of some or all of the 2025 Notes could dilute the ownership interests of existing stockholders to the extent we elect to deliver shares of our common stock upon conversion of any of the 2025 Notes.

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In addition, price volatility may be greater if the public float and trading volume of our common stock is low.

We are and may in the future be the target of securities-related litigation.

Litigation can divert our management’s attention and resources, result in substantial costs, and have an adverse effect on our business, results of operations, financial condition and stock price.

We maintain director and officer insurance to mitigate the risks associated with potential claims;

however, we are responsible for meeting certain deductibles under such policies, and there can be no assurance that our insurance coverage will adequately protect us from all claims made against us.

Further, as a result of the litigation, the costs of insurance may increase, and the availability of coverage may decrease.

As a result, we may not be able to maintain our current levels of insurance at a reasonable cost, or at all, which might make it more difficult to attract qualified

candidates to serve as executive officers or directors.

There also may be adverse publicity associated with litigation that could negatively affect customer perception of our business and materially damage our reputation.

Because we have no current plans to pay cash dividends on our common stock, investors may not receive any return on investment unless they sell their common stock for a price greater than that which they paid for it.

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Our amended and restated certificate of incorporation authorizes our Board of Directors, without the approval of our stockholders, to issue 50,000,000 shares of our preferred stock, subject to limitations prescribed by applicable law, rules and regulations and the provisions of our amended and restated certificate of incorporation, as shares of preferred stock in series, to establish from time to time the number of shares to be included in each such series and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof.

The powers, preferences and rights of these additional series of preferred stock may be senior to or on parity with our common stock, which may reduce its value.

Our amended and restated certificate of incorporation provides, subject to limited exceptions, 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, associates or stockholders.

The powers, preferences and rights of these additional series of preferred stock may be senior to or in parity with our common stock, which may reduce its value.

Our certificate of incorporation provides, subject to limited exceptions, 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, associates or stockholders.

Our amended and restated certificate of incorporation provides, subject to limited exceptions, that unless we consent to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for any (i) derivative action or proceeding brought on behalf of our company, (ii) action asserting a claim of breach of a fiduciary duty owed by any director, officer, or other associate or stockholder of our company to the Company or our stockholders, creditors or other constituents, (iii) action asserting a claim against the Company or any director or officer of the Company arising pursuant to any provision of the Delaware General Corporation Law, or the DGCL, or our amended and restated certificate of incorporation or our amended and restated bylaws or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware, or (iv) action asserting a claim against the Company or any director or officer of the Company governed by the internal affairs doctrine.

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Alternatively, if a court were to find the choice of forum provision contained in our 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, which could harm our business, operating results and financial condition.

Maintaining the requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members.

As a public company, we incur significant legal, accounting, insurance and other expenses that we did not incur as a private company, including costs associated with public company governance and reporting requirements.

We also have incurred and will continue to incur costs associated with our compliance with the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, and the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, as well as rules and regulations implemented by the SEC, and costs in connection with continued listing on Nasdaq.

Our efforts to comply with these rules and regulations have significantly increased our legal and financial compliance costs, including costs associated with the hiring of additional personnel, and have made some activities more difficult, time-consuming or costly.

Our management devotes a substantial amount of time to ensure that we comply with all of these requirements, diverting the attention of management away from revenue-producing activities.

The expenses incurred by public companies generally for reporting and corporate governance purposes have been increasing.

These laws and regulations also could make it more difficult or costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage.

These laws and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our Board of Directors, our board committees or as our executive officers.

Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of our common stock, fines, sanctions and other regulatory action and potentially civil litigation.

Ineffective internal controls could have a material adverse effect on our business and stock price, and could result in our financial statements becoming unreliable.

Our internal control over financial reporting may not prevent or detect misstatements because of its inherent limitations, including the possibility of human error, the circumvention or overriding of controls, or fraud.

Even effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements.

If we fail to maintain the adequacy of our internal controls, including any failure to

implement required new or improved controls, or if we experience difficulties in their implementation, our business and financial results could be harmed and we could fail to meet our financial reporting obligations.

If securities or industry analysts do not publish research or reports about our business or if they downgrade our stock or our sector, our stock price and trading volume could decline.

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If one or more of these analysts stop covering us or fail to publish reports on us regularly, we could lose visibility in the market, which in turn could cause our stock price or trading volume to decline.

Unresolved Staff Comments

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