What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2025-02-26 compared with 2024-03-08 · 228 added, 232 removed, 1046 unchanged (31% of the section changed)

12 unchanged sentences

• increase awareness of our brand and successfully compete with other companies;

• effectively market our products through Honest.com and retail partnerships to increase sales velocity;

• effectively market our products through retail partnerships to increase sales velocity;

• price our products effectively so that we are able to attract new consumers and expand sales to our existing consumers;

1 unchanged sentence

• continue to innovate and introduce new products;

• maintain and improve our technology platform supporting our Honest.com business;

• expand our supplier and fulfillment capacities;

11 unchanged sentences

In addition, to support continued growth, we must effectively integrate, develop and motivate a large number of new employees while maintaining our corporate culture.

For example, in January 2023, we hired a new Chief Executive Officer, in May 2023 we hired a Chief Growth Officer, a newly created role, and in September 2023, we hired a new Chief Financial Officer.

We face significant competition for personnel.

For example, on January 8, 2025, our Chief Financial Officer notified the Company of his intention to retire during the 2025 fiscal year, effective as of a mutually acceptable date.

While we have initiated a search to identify a successor for the Chief Financial Officer position, there is no assurance that we will be able to find an appropriate officer to fill the role quickly or at all or be able to effectively integrate a new Chief Financial Officer once such officer is appointed.

We continue to face significant competition for personnel.

To attract top talent, we have had to offer, and expect to continue to offer, competitive compensation and benefits packages before we can validate the productivity of new employees.

We may also need to increase our employee compensation levels to remain competitive in attracting and retaining talented employees.

In the past few years we have also seen heightened demand for labor and escalating labor prices in the market.

In the past few years we have also seen heightened demand for labor and escalating labor prices in the

The risks associated with a rapidly growing workforce will be particularly acute as we expand into new product categories.

6 unchanged sentences

Our quarterly operating results may fluctuate for a variety of reasons, many of which are beyond our control, including:

• fluctuations in revenue due to consumer and customer demand, including as a result of adverse economic and market conditions driven by the challenging macroeconomic environment, the seasonality of market transactions and fluctuations in sales through our Retail and Digital channels and inflationary pressures;

• inflation in key input costs, including transportation, labor and warehouse costs;

• inflation in key input costs, including the cost to import products, transportation, labor and warehouse costs;

• increased costs of the components and raw materials that go into making our products;

21 unchanged sentences

In addition, we have in the past and may in the future dispose of or discontinue select products or streamline operations and incur costs or restructuring and other charges in doing so.

For example, during the year ended December 31, 2023 we exited certain retail and online stores in unprofitable geographical locations, in Asia and Europe, and we incurred restructuring costs in connection with the Transformation Initiative of approximately $2.2 million.

We are currently working on updating our strategic focus, which could impact our business and results of operations.

Although we believe that our updated strategy will lead to long-term growth in sales and profitability, we may not realize the anticipated benefits.

Although we believe that our strategy will lead to long-term growth in sales and profitability, we may not realize the anticipated benefits.

The failure to realize benefits, which may be due to our inability to execute plans, global or local economic conditions, competition, changes in our industry and the other risks described herein, could have an adverse effect on our business, financial condition, results of operations and prospects.

2 unchanged sentences

This consolidation has produced larger, more sophisticated organizations with increased negotiating and buying power that are able to resist price increases, demand higher levels of marketing and promotional support, operate with lower inventories, decrease the number of brands that they carry and increase their emphasis on private label products, all of which has in the past and could in the future negatively impact our business.

In 2023, we generated 51% and 49% of our total revenue from retail customers (including their websites) and Digital channels, respectively.

In 2023, Target, Amazon and Walmart accounted for approximately 31%, 30% and 7% of our total revenue, respectively.

In 2024, our three largest retailers, Target, Amazon and Walmart accounted for approximately 30%, 34% and 9% of our total revenue, respectively.

We sell products to Target, Amazon and Walmart under each of their standard vendor agreements.

3 unchanged sentences

The loss of Target, Amazon and Walmart or any other large customer, the reduction of purchasing levels or the cancellation of any business from Target, Amazon or Walmart or any other large customer for an extended length of time could negatively impact our sales and ability to achieve or maintain profitability.

For example, in 2022, Amazon held fewer weeks of inventory supply on hand, which

impacted the consumer experience and ultimate consumption, and has and could in the future negatively impact our results of operations.

For example, during 2024, we experienced distribution losses with two of our largest retail customers on certain diaper SKUs mainly related to these retailers' footprint changes for certain product categories overall and a shift to more exclusive non-gendered prints, which has impacted our revenue and we expect will negatively impact our diaper revenue in the future.

Third-party ecommerce or retail customers may take actions that affect us for reasons that we cannot always anticipate or control, such as their financial condition, changes in their business strategy or operations, the introduction of competing products or the perceived quality of our products.

For example, a few of our retail customers filed for bankruptcy over the last year, which has impacted the timing of payment, the ability for us to collect amounts due to us and impacted our gross margin due to markdowns.

For example, a few of our retail customers filed for bankruptcy in 2023, which has impacted the timing of payment, the ability for us to collect amounts due to us and impacted our gross margin due to markdowns.

Our third-party ecommerce or retail customers may also change their purchasing levels.

For example, in 2022, Amazon held fewer weeks of inventory supply on hand, which impacted the consumer experience and ultimate consumption, and negatively impacted our results of operations.

In light of tariffs and macroeconomic conditions, we may see some of our third-party ecommerce or retail customers hold different inventory levels or change the frequency and/or levels of their orders in 2025, which may have a negative impact on our business and results of operations.

Despite operating in different channel categories, our third-party ecommerce and retail customers sometimes compete for the same consumers.

1 unchanged sentence

Consequently, our financial results may fluctuate significantly from period to period based on the actions of one or more significant third-party ecommerce or retail customers, such as a change in quantity or number of SKUs purchased, store placement of our products, or amount of shelf space.

For example, in 2025, we expect that there will be a change in size of diaper box assortment at a key retail customer, which may impact velocities.

We may be unable to accurately forecast revenue, gross margin or operating expenses and appropriately plan our expenses in the future.

Revenue and results of operations are difficult to forecast because they generally depend on the volume, timing and type of orders we receive across our various channels, all of which are uncertain.

Forecasts have been and may continue to be particularly challenging in the current macroeconomic environment, in particular as we implemented margin-enhancing and cost-cutting programs as part of our Transformation Initiative in 2023 and may in the future implement similar programs.

Forecasts have been and may continue to be particularly challenging in the current macroeconomic environment.

We base our expense levels and investment plans on our estimates of revenue and gross margin.

We cannot be sure prior growth rates and trends are meaningful predictors of future growth.

For example, in the third quarter of 2022, some of our digital and retail customers reduced inventory on hand and changed their fulfillment schedules, which negatively impacted our fulfillment operations in 2022.

For example, in the third quarter of 2022, some of our customers reduced inventory on hand and changed their fulfillment schedules, which negatively impacted our fulfillment operations in 2022.

Furthermore, during 2024, we experienced distribution losses with two of our largest retail customers on certain diaper SKUs mainly related to these retailers' footprint changes for certain product categories overall and a shift to more exclusive non-gendered prints, which has impacted our revenue and we expect will negatively impact our diaper revenue in the future.

If our assumptions prove to be wrong, we may generate lower revenue or gross margin than anticipated or may spend more than we anticipate acquiring and retaining consumers either of which could have an adverse effect on our business, financial condition, results of operations and prospects.

3 unchanged sentences

Numerous brands and products compete for limited shelf space in the retail channel, and for favorable positioning and promotion among ecommerce channels.

We compete based on various product attributes including clean formulation, sustainability, effectiveness and design, as well as our ability to establish direct relationships with our consumers through digital channels.

Select competitors in the Diapers and Wipes market include Kimberly-Clark Corporation (maker of Huggies), Procter & Gamble Company (maker of Pampers, Pampers Pure and Luvs), WaterWipes UC and private label brands.

Select competitors in the Skin and Personal Care market include Kenvue Inc.

(maker of Johnson’s Baby and Aveeno), The Clorox Company (parent company of Burt’s Bees, Inc.), Unilever PLC (maker of Shea Moisture), LVMH Moët Hennessy Louis Vuitton (maker of Benefit Cosmetics LLC), Estée Lauder Inc., L’Oréal S.A.

We compete based on various product attributes including clean formulation, sustainability, effectiveness and design.

Select competitors of diapers and wipes include Kimberly-Clark Corporation (maker of Huggies and Cottonelle), Procter & Gamble Company (maker of Pampers, Pampers Pure, Luvs and Charmin), WaterWipes UC and other private label brands.

Select competitors of our skin and personal care products include Kenvue Inc.

(maker of Johnson’s Baby and Aveeno), The Clorox Company (parent company of Burt’s Bees, Inc.), Unilever PLC (maker of Shea Moisture), Estée Lauder Inc., L’Oréal S.A.

and Pacifica Beauty LLC.

Select competitors in the Household and Wellness market include Carters, Inc., The Clorox Company, Reckitt Benckiser Group plc (maker of Lysol) and Unilever PLC (maker of Seventh Generation products).

Select competitors of our baby clothing include Carter's Inc.

Many of these competitors have substantially greater financial and other resources than us and some of whose products are well accepted in the marketplace today.

7 unchanged sentences

Retailers also market competitive products under their own private labels, which are generally sold at lower prices, and may change the merchandising of our products so they have less favorable placement.

each of which would adversely affect our margins and could result in a decrease in our operating results and ability to achieve or maintain profitability.

Competitive pressures or other factors could cause us to lose market share, which may require us to lower prices, increase marketing expenditures, or increase the use of discounting or promotional campaigns, each of which would adversely affect our margins and could result in a decrease in our operating results and ability to achieve or maintain profitability.

We expect competition in the CPG industry to continue to increase, especially as more companies introduce clean products and enter this market.

12 unchanged sentences

Further, competitors with substantially greater operations and resources than us may be less affected by the current macroeconomic conditions .

C urrent macroeconomic conditions, such as inflation, increasing interest rates,

the health of the U.S.

consumer (such as increasing debt and delinquency rates and resumption of student loan repayments), geopolitical events, disruptions in access to bank deposits and lending commitments due to bank failures, increase the risk of a potential recession and can negatively impact consumer discretionary spend for our products.

C urrent macroeconomic conditions, such as uncertainty around inflation and interest rates, the health of the U.S.

consumer (such as increasing debt and delinquency rates and resumption of student loan repayments), and geopolitical events, increase the risk of a potential recession and can negatively impact consumer discretionary spend for our products.

Although we are monitoring the situation, we cannot predict for how long, or the ultimate extent to which, the current macroeconomic conditions may disrupt our operations, or our suppliers’ operations, or if we will be required to implement other changes, such as further price increases or cost savings initiatives, in addition to the ones already implemented in 2023.

3 unchanged sentences

Our sales and profit are dependent upon our ability to expand our existing consumer relationships and acquire new consumers.

Our success, and our ability to increase revenue and achieve profitability, depend in part on our ability to cost-effectively acquire new consumers, retain existing consumers and keep existing consumers engaged so that they continue to purchase our products.

Our diaper business is also a strategic consumer acquisition tool that fuels growth for baby wipes, personal care, Honest baby clothing and other products.

While we intend to continue to invest significantly in sales and marketing to educate consumers about our brand, our values and our products, there is no assurance that these efforts will generate further demand for our products or expand our consumer base.

Our ability to attract new consumers and retain our existing consumers will depend on, among other items, the perceived value and quality of our products, consumer demand for clean, sustainable, thoughtfully designed and effective products at a premium price, competitive offerings, the elasticity of our price increases, our ability to offer new and relevant products and the effectiveness of our marketing efforts.

Our ability to attract new consumers and retain our existing consumers will depend on, among other items, the perceived value and quality of our products, consumer demand for cleanly-formulated, sustainably-designed and effective products at a premium price, competitive offerings, the elasticity of our price increases, our ability to offer new and relevant products and the effectiveness of our marketing efforts.

We may also lose loyal consumers to our competitors if we are unable to meet consumer demand in a timely manner.

4 unchanged sentences

Any growth within our existing distribution channels may also affect our existing consumer relationships and present additional challenges, including those related to pricing strategies.

For example throughout 2023, we rolled-out mid-single digit price increases across approximately two-thirds of our product portfolio, including in Diapers and Wipes and Skin and Personal Care categories which has in 2023 and may in the future negatively impact consumer demand.

For example throughout 2023, we rolled-out mid-single digit price increases across approximately two-thirds of our product portfolio, including in diapers, wipes, skin and personal care products which has in the past and may in the future negatively impact consumer demand.

To a lesser extent, in 2023, we rolled-out price increases on certain beauty and personal care products.

We plan to take additional price increases in the future as needed to offset input cost inflation.

Our direct connections to our consumers may become more limited as we expand our non-DTC channels.

Further in 2023, we exited distribution in low-margin channels which negatively impacted Skin and Personal Care revenue.

Additionally, we may need to increase or reallocate spending on marketing and promotional activities, such as temporary price reductions, off-invoice discounts, retailer advertisements, product coupons and other trade activities, and these expenditures are subject to risks, including risks

related to consumer acceptance of our efforts.

Further in 2023, we exited distribution in low-margin channels which negatively impacted our revenue.

Our failure to obtain new consumers, or expand our business with existing consumers, could have an adverse effect on our business, financial condition, results of operations and prospects.

1 unchanged sentence

Our paid advertising may include search engine marketing, display, paid social media and product placement and traditional advertising, such as direct mail, television, radio and magazine advertising.

Our paid advertising significantly increased the past few years due to industry-wide increases in advertising pricing, which impacted our ability to cost-effectively drive traffic to Honest.com and our digital customers.

Our paid advertising significantly increased in the past few years due to industry-wide increases in advertising pricing, which impacted our ability to cost-effectively drive traffic to Honest.com and our digital customers.

Our non-paid advertising efforts include search engine optimization, non-paid social media and e-mail marketing.

We drive a significant amount of traffic to our website via search engines and, therefore, rely heavily on search engines.

We drive and have driven a significant amount of traffic to our website via search engines and, therefore, rely heavily on search engines.

Search engines frequently update and change the logic that determines the placement and display of results of a user’s search, such that the purchased or algorithmic placement of links to our website can be negatively affected.

2 unchanged sentences

As social networking and ecommerce channels continue to rapidly evolve, we may be unable to develop or maintain a presence within these channels.

If we are unable to cost-effectively drive traffic to our website, or if the popularity of our founder, Jessica Warren’s social media, online or offline presence declines, our ability to acquire new consumers could be adversely affected.

We had also historically depended on Ms.

Warren’s social media reach and influence to connect with consumers and provide insight on current trends.

For example, the Honest Beauty social channels where Ms.

Warren was featured frequently in the past have lost significant viewership and engagement over the past two years.

If our online or offline presence declines, our ability to acquire new consumers could be adversely affected.

Additionally, if we fail to increase our revenue per active consumer, generate repeat purchases or maintain high levels of consumer engagement, our business, financial condition, results of operations and prospects could be adversely affected.

Pandemics or disease outbreaks and overall macroeconomic trends have had and may continue to have an adverse effect on our business, financial condition, results of operations and prospects.

Pandemics or disease outbreaks have impacted our business, financial condition, results of operations and prospects, in particular due to the negative impact from supply chain disruptions, i ncreasing commodity costs and shifting consumer demand.

Overall macroeconomic trends, including due to pandemics or disease outbreaks, have had and may continue to have an adverse effect on our business, financial condition, results of operations and prospects.

Recent macroeconomic trends, including those resulting from the pandemics have impacted our business, financial condition, results of operations and prospects, in particular due to the negative impact from supply chain disruptions, i ncreasing commodity costs and shifting consumer demand.

The impact of overall macroeconomic trends on any of our suppliers, manufacturers, retail or ecommerce customers or transportation or logistics providers has and may continue to negatively affect the price and availability of our raw materials and products and impact our supply chain.

If the disruptions caused by overall macroeconomic trends continue for an extended period of time, our ability to meet the demands of our consumers may be materially impacted.

The conditions caused by macroeconomic conditions may negatively impact collections of accounts receivable (including as a result of retail customer bankruptcies), result in reduced orders from retail or digital partners or cause some of our retail customers to go out of business, all of which could adversely affect our business, financial condition, results of operations and prospects.

The conditions caused by macroeconomic conditions may negatively impact collections of accounts receivable (including as a result of retail customer bankruptcies), result in reduced orders from retail or digital customers or cause some of our retail customers to go out of business, all of which could adversely affect our business, financial condition, results of operations and prospects.

In addition, any depression or recession resulting from macroeconomic factors could change customer and consumer behavior and demand, including with respect to our products, which could have an adverse effect on our business, financial condition, results of operations and prospects.

For example, economic conditions, including inflationary pressures such as price increases in commodity prices, labor costs, input costs and transportation costs have impacted our gross margin and could impact consumer spending decisions to choose lower priced products, particularly as a result of our price increases implemented in 2022 and 2023 intended to offset these input costs.

consumer spending decisions to choose lower priced products, particularly as a result of our price increases implemented in 2022 and 2023 intended to offset these input costs.

We may not be able to increase our prices or productivity sufficiently enough to offset these costs.

For example, as part of our Transformation Initiative, we e xited low-margin elements of the cleaning and sanitization business as the demand for sanitizing and disinfecting products declined significantly after the COVID-19 pandemic.

The current macroeconomic conditions, such as inflation, increasing interest rates, geopolitical events and recent and potential future disruption in access to bank deposits and lending commitments due to bank failures, increase the risk of a potential recession and these macroeconomic conditions can negatively impact consumer discretionary spend for our products.

For example, as part of our Transformation Initiative in 2023, we e xited low-margin elements of the cleaning and sanitization business as the demand for sanitizing and disinfecting products declined significantly after the COVID-19 pandemic.

The current macroeconomic conditions, including as a result of global pandemics, changing consumer attitudes or behavior or other macroeconomic conditions, such as inflation, tariffs or supply chain disruptions inflation, and these macroeconomic conditions can negatively impact consumer discretionary spend for our products.

Our strategic initiatives, including as part of the Transformation Initiative, to reduce our costs could have long-term adverse effects on our business, financial condition, results of operations and prospects, could result in total costs and expenses that are greater than expected, and we may not realize the operational or financial benefits from such actions.

In 2023, we executed a broad-based Transformation Initiative designed to build the Honest brand and drive growth in higher-margin areas of the portfolio, strengthen our cost structure, drive focus on the most productive areas of our business, deliver greater impact from brand-building investments, and improve executional excellence across the enterprise.

This Transformation Initiative and the timing and success of such efforts are subject to many risks and uncertainties, including, without limitation, our ability to reduce costs and achieve positive gross margins;

This Transformation Initiative and the success of such efforts are subject to many risks and uncertainties, including, without limitation, our ability to reduce costs and achieve positive gross margins;

meet certain revenue and operating expense targets;

7 unchanged sentences

These effects could have a material adverse effect on our ability to execute on our updated business model.

There can be no assurance that we will be successful in executing the Transformation Initiative.

There can be no assurance that our execution the Transformation Initiative in 2023 will lead to future success as a result of such effects.

The Transformation Initiative may also be disruptive to our operations.

2 unchanged sentences

Due to our limited resources, we may not be able to effectively manage our operations or recruit and retain qualified personnel, which may result in weaknesses in our infrastructure and operations, risks that we may not be able to comply with legal and regulatory requirements, and loss of employees and reduced productivity among remaining employees.

If we fail to manage our inventory effectively, our business, results of operations, financial condition and liquidity may be materially and adversely affected.

If we fail to manage our inventory effectively, our business, financial condition, results of operations and liquidity may be materially and adversely affected.

Our business requires us to manage a large volume of inventory effectively.

7 unchanged sentences

Inventory levels in excess of consumer or customer demand have resulted and may result in inventory write-downs or write-offs and the sale of excess inventory at discounted prices or in less preferred distribution channels, which could impair our brand image and harm our business.

For example, given the significant decline in consumer demand for sanitizing and disinfecting products following the height of the COVID-19 pandemic, we recorded an inventory write-down of $4.3 million and $5.6 million during the years ended December 31, 2022 and 2021, respectively, relating to certain sanitization and disinfecting products as the amount of inventory was significantly in excess of existing and projected demand, and we may record inventory write-downs in the future.

In addition, if we underestimate the demand for our products, our third-party manufacturers may not be able to produce products to meet our consumer or customer requirements, and this could result in delays in the shipment of our products and our ability to recognize revenue, lost sales, as well as damage to our reputation and retailer and distributor relationships.

For example, given the significant decline in consumer demand for sanitizing and disinfecting products following the height of the COVID-19 pandemic, we recorded an inventory write-down of $4.3 million during the year ended December 31, 2022, relating to certain sanitization and disinfecting products as the amount of inventory was significantly in excess of existing and projected demand, and we may record inventory write-downs in the future.

revenue, lost sales, as well as damage to our reputation and retailer and distributor relationships.

F uture out-of-stock disruptions may negatively impact our results of operations, reputation and distributor relationships.

1 unchanged sentence

A failure to accurately predict the level of demand for our products could adversely affect our business, financial condition, and results of operations.

Our inability to secure, maintain and increase our presence in retail stores could adversely impact our revenue, and in turn our business, financial condition, results of operations and prospects could be adversely affected.

Our operations include sales to retail stores and their related websites, which in 2024, accounted for approximately 87% of our revenue.

The success of our business is largely dependent on our continuing development of strong relationships with major retail chains.

Target and Walmart represented 30% and 9%, respectively, of our retail sales in 2024.

The loss of our relationship with Target, Walmart or any other large retail customer could have a significant impact on our revenue.

For example, in 2023 we exited distribution in low-margin channels and our rotational program with Costco was not renewed.

We have no assurance of future rotational programs or ongoing revenue with Costco.

Additionally, in 2024, we exited selling certain products with a drug store customer and we experienced distribution losses with two of our largest retail customers on certain diaper SKUs, which has impacted our revenue and we expect will negatively impact our diaper revenue in the future.

In addition, we may be unable to secure adequate shelf space in new markets, or any shelf space at all, until we develop relationships with the retailers that operate in such markets.

We also may not be successful in executing our launches with new retailers.

Consequently, growth opportunities may be limited and our revenue, business, financial condition, results of operations and prospects could be adversely affected if we are unable to successfully establish or maintain relationships with other retailers in new or current markets.

We also face significant competition to display our products on store shelves and obtain optimal presence on those shelves.

Due to the intense competition for limited shelf space, retailers are in a position to negotiate favorable terms of sale, including price discounts, allowances and product return policies.

To the extent we elect to increase discounts or allowances in an effort to secure shelf space, our operating results could be adversely affected.

We may not be able to increase or sustain our volume of retail shelf space or offer retailers price discounts sufficient to overcome competition and, as a result, our sales and results of operations could be adversely affected.

In addition, many of our competitors have significantly greater financial, manufacturing, marketing, management and other resources than we do and may have greater name recognition, a more established distribution network and a larger base of wholesale customers and distributors.

Many of our competitors also have well-established relationships with our current and potential consumers who purchase our products in retail stores, and have extensive knowledge of our target markets.

As a result, these competitors may be able to devote greater resources to the development, promotion and sale of their products and respond more quickly to evolving consumer preferences.

If our competitors’ sales surpass ours, retailers may give higher priority to our competitors’ products, causing such retailers to reduce their efforts to sell our products and resulting in the loss of advantageous shelf space.

Failure to introduce new products may adversely affect our ability to continue to grow.

12 unchanged sentences

Additionally, we may choose to change one of our marketing or advertising partners, which may prove to be unsuccessful.

Substantial advertising and promotional expenditures may be required to maintain or improve our brand’s market position or to introduce new products to the market, and we are increasingly engaging with non-traditional media, including consumer outreach through social media and web-based channels, which may not prove successful.

Substantial advertising and promotional expenditures have been required in the past and may be required in the future to maintain or improve our brand’s market position or to introduce new products to the market, and we are increasingly engaging with non-traditional media, including consumer outreach through social media and web-based channels, which may not prove successful.

An increase in our marketing and advertising efforts may not maintain our current reputation or lead to increased brand awareness.

In addition, in 2022 and 2023 the industry experienced an increased in paid advertising which impacted our ability to cost-effectively drive traffic to Honest.com.

In addition, since 2022 the industry experienced an increased in paid advertising which impacted our ability to cost-effectively drive traffic to Honest.com.

Further, social media platforms frequently change the algorithms that determine the ranking and display of results of a user’s search and may make other changes to the way results are displayed, which may negatively affect the placement of our links.

Moreover, social media platforms and other digital advertising platforms have increased the costs of digital advertising which has made such marketing less cost effective and partially led us to shift our advertising budget toward our Retail channel, and in turn reduced the number of visits to our website and social media channels.

For example, since the second half of 2022, we made a strategic choice to significantly reduce digital media spending in the face of higher advertising costs, which has and may continue to impact our revenue in the digital channel.

In addition, we had also historically depended on Ms.

Warren’s social media reach and influence to connect with consumers and provide insight on current trends.

For example, the Honest Beauty social channels where Ms.

Warren was featured frequently in the past have lost significant viewership and engagement over the past two years.

Moreover, social media platforms and other digital advertising platforms have increased the costs of digital advertising which has made such marketing less cost effective and partially led us to shift our advertising budget toward retail channels, and in turn reduced the number of visits to our website and social media channels.

In addition, social media platforms typically require compliance with their policies and procedures, which may be subject to change or new interpretation with limited ability to negotiate, which could negatively impact our marketing capabilities.

5 unchanged sentences

If the difference in perceived value between our brand and private label products narrows, or if there is a perception of such a narrowing, consumers may choose not to buy our products at prices that are profitable for us.

We believe that in periods of economic uncertainty, such as the current economic uncertainty surrounding the continuing effects of rising inflation, increasing interest rates, increasing prices of our products , and risk of a recession, consumers may purchase more lower-priced private label or other economy brands.

We believe that in periods of economic uncertainty, such as the current economic uncertainty surrounding the continuing effects of inflation, increased interest rates, increasing prices of our products , and risk of a recession, consumers may purchase more lower-priced private label or other economy brands.

To the extent this occurs, we could experience a reduction in the sales volume of our products or an unfavorable shift in our product mix, which could have an adverse effect on our business, financial condition, results of operations and prospects.

1 unchanged sentence

We have developed a strong and trusted brand that has contributed significantly to the success of our business, and we believe our continued success depends on our ability to maintain and grow the value of The Honest Company brand.

Maintaining, promoting and positioning our brand and reputation will depend on, among other factors, the success of our product offerings, product safety, quality assurance, marketing and merchandising efforts, our continued focus on delivering clean, sustainable, well-designed, and effective products to our consumers and our ability to provide a consistent, high-quality consumer experience.

Maintaining, promoting and positioning our brand and reputation will depend on, among other factors, the success of our product offerings, product safety, quality assurance, marketing and merchandising efforts, our continued focus on delivering cleanly-formulated, sustainably-designed, and effective products to our consumers and our ability to provide a consistent, high-quality consumer experience.

If our manufacturers or suppliers fail to comply with their contractual obligations, including our quality standards, our brand could be harmed.

2 unchanged sentences

Our brand and reputation may be diminished due to real or perceived quality, safety, efficacy or environmental impact issues with our products, which could have an adverse effect on our business, financial condition, results of operations and prospects.

We believe our consumers rely on us to provide them with clean, sustainable, well-designed, and effective products.

We believe our consumers rely on us to provide them with cleanly-formulated, sustainably-designed, and effective products.

Any loss of confidence on the part of consumers in our products or the ingredients used in our products, whether related to product contamination or product safety or quality failures, actual or perceived, environmental impacts, or inclusion of prohibited ingredients, or ingredients that are perceived to be “toxic”, could tarnish the image of our brand and could cause consumers to choose other products.

13 unchanged sentences

In addition, safety or other defects in our competitors’ products or products using the Honest name in other consumer categories, like beverages and pet food in which we do not own the Honest brand, could reduce consumer demand for our own products if consumers view them to be similar.

Any such adverse effect could be exacerbated by our market positioning as a purveyor of clean, sustainable, well-designed, and effective products and may significantly reduce our brand value.

Any such adverse effect could be exacerbated by our market positioning as a purveyor of cleanly-formulated, sustainably-designed, and effective products and may significantly reduce our brand value.

Issues regarding the safety, efficacy, quality, composition or environmental impact of any of our products, regardless of the cause, may have an adverse effect on our brand, reputation and operating results.

5 unchanged sentences

We have positioned our brand to capitalize on growing consumer interest in clean conscious products.

The clean conscious consumer product industry is sensitive to national and regional economic conditions and the demand for the products that we distribute may be adversely affected from time to time by economic downturns that impact consumer spending, including discretionary spending.

Current macroeconomic conditions, such as inflation, increasing interest rates, geopolitical events and potential future disruption in access to bank deposits and lending commitments due to bank failures, increase the risk of a potential recession and these macroeconomic conditions can negatively impact consumer discretionary spend for our products.

The clean consumer product industry is sensitive to national and regional economic conditions and the demand for the products that we distribute may be adversely affected from time to time by economic downturns that impact consumer spending, including discretionary spending.

Current macroeconomic conditions, including as a result of global pandemics, changing consumer attitudes or behavior or other macroeconomic conditions, such as inflation, tariffs or supply chain disruptions and these macroeconomic conditions can negatively impact consumer discretionary spend for our products.

These external economic conditions, including geopolitical uncertainty, have become more challenging and uncertain in recent years.

Current and any f uture economic conditions such as employment levels, business conditions, housing starts, market volatility, interest rates, inflation rates, energy and fuel costs and tax rates, or our actions in response to these conditions, such as price increases, including our price increase in 2022 and 2023, could reduce consumer spending or change consumer purchasing habits.

Among these changes could be a reduction in the number of clean conscious consumer products that consumers purchase where there are alternatives, given that many products in this category often have higher retail prices than do their conventional counterparts.

Further, the Diapers and Wipes, Skin and Personal Care and Household and Wellness categories in which we operate are subject to changes in consumer preference, perception and spending habits.

Current and any f uture economic conditions such as employment levels, business conditions, housing starts, market volatility, interest rates, inflation rates, potential changes in tariffs and trade barriers, energy and fuel costs and tax rates, or our actions in response to these conditions, such as price increases, including our price increases in 2022 and 2023, could reduce consumer spending or change consumer purchasing habits.

Among these changes could be a reduction in the number of clean consumer products that consumers purchase where there are alternatives, given that many products in this category often have higher retail prices than do their conventional counterparts.

Further, the product categories in which we operate are subject to changes in consumer preference, perception and spending habits.

Our performance depends significantly on factors that may affect the level and pattern of consumer spending in the markets in which we operate.

Such factors include consumer preference, consumer confidence, consumer income, consumer perception of the safety and quality of our products and shifts in the perceived value for our products relative to alternatives.

The Diapers and Wipes market is also subject to changes in birthrates,

which have been declining in developed countries like the United States.

In addition, media coverage regarding the safety, quality environmental suitability of, our products or the raw materials, ingredients or processes involved in their manufacturing may damage consumer confidence in our products.

The market for diapers and wipes is also subject to changes in birthrates, which have been declining in developed countries like the United States.

In addition, media coverage regarding the safety, quality, and environmental suitability of our products or the raw materials, ingredients or processes involved in their manufacturing may damage consumer confidence in our products.

A general decline in the consumption of our products could occur at any time as a result of change in consumer preference, perception, confidence and spending habits, including an unwillingness to pay a premium or an inability to purchase our products due to financial hardship or increased price sensitivity, inflationary pressures and economic uncertainty.

3 unchanged sentences

We also may not be able to effectively promote our products by our marketing and advertising campaigns and gain market acceptance.

If our products fail to gain market acceptance, are restricted by regulatory requirements or have quality problems, we may not be able to fully recover costs and expenses incurred in our operation, and our business, financial condition, results of operations and prospects could be adversely affected.

If our products fail to gain market acceptance, are restricted by regulatory requirements or have quality problems, we may not be able to fully recover costs and expenses incurred in our operations, and our business, financial condition, results of operations and prospects could be adversely affected.

If we cannot maintain our Company culture or focus on our purpose as we grow, our success and our business and competitive position may be harmed.

3 unchanged sentences

If we fail to maintain our Company culture or focus on our mission, our competitive position and business, financial condition, results of operations and prospects could be adversely affected.

Our ability to maintain our competitive position is largely dependent on the services of our senior management and other key personnel, including our founder and Chief Creative Officer, Jessica Warren, and our Chief Executive Officer, Carla Vernón.

The loss of the services of either of these persons could have an adverse effect on our business, financial condition and results of operations.

Our ability to maintain our competitive position is largely dependent on the services of our senior management and other key personnel.

Our ability to maintain our competitive position is largely dependent on the services of our senior management and other key personnel, and the loss of their services could have an adverse effect on our business, financial condition and results of operations.

Jessica Warren departed as our Chief Creative Officer on April 9, 2024.

Jessica Warren is a globally recognized Latina business leader, entrepreneur, advocate, actress, and New York Times bestselling author.

We believe that the success of our brand is based in part on our affiliation with Jessica Warren.

We have an agreement with Jessica Warren, or the Likeness Agreement, which, among other things, includes a license for her likeness and imposes various obligations on us.

Warren has the right to terminate the Likeness Agreement at any time upon prior written notice, and the Likeness Agreement will immediately terminate in the event we become insolvent.

Upon termination of the Likeness Agreement, we could, among other things, be required to pay damages to Ms.

Warren, lose our ability to associate the brand with Ms.

Warren, including the ability to sell existing inventory using the licensed intellectual property, and sustain reputational damage.

We are currently discussing the terms of the Likeness Agreement with Ms.

Warren and there is no assurance that we will reach agreement on such terms.

The termination of the Likeness Agreement could result in a reduction of our operating margins and cash flow from operations or otherwise adversely affect our business.

We believe that the success of our brand has historically been based in part on our affiliation with Jessica Warren.

We had an agreement with Jessica Warren, or the Likeness Agreement, which, among other things, included a license for her likeness and imposed various obligations on us.

The Likeness Agreement was terminated as part of Ms.

Warren's departure from her Chief Creative Officer position.

Resulting from the termination of the Likeness Agreement, we are required to remove certain licensed property from our website, digital assets, social media and Company-owned or -controlled assets, digital assets and sell existing inventory that use the licensed intellectual property on its packaging.

Our obligations from the termination of the Likeness Agreement could result in a reduction of our operating margins and cash flow from operations or otherwise adversely affect our business.

In connection with the termination of the Likeness Agreement we recorded an inventory write-down of $0.8 million during the year ended December 31, 2024, inclusive of overhead costs and tariffs.

Additionally, we earmarked donations of $0.4 million , inclusive of overhead costs and tariffs.

We anticipate future inventory write-offs as we are prohibited from selling existing inventory that uses certain specified licensed intellectual property on its packaging.

Additionally, the loss of our ability to use Ms.

Warren’s likeness could result in marketplace confusion, loss of goodwill and/or similar negative consequences.

We depend on Ms.

We have also historically depended on Ms.

Warren’s social media reach and influence to connect with consumers and provide insight on current trends.

Warren objects to a proposed use of the licensed property, we may be prevented from implementing our business plan in a timely manner, or at all, outside of previously approved usages or usages consistent with certain pre-approved product guidelines.

For example, the Honest Beauty social channels where Ms.

Warren was featured frequently in the past have lost significant viewership and engagement over the past two years.

The loss of the services of Ms.

Warren, or the loss of our ability to use Ms.

Warren and the loss of our ability to use Ms.

Warren’s likeness, could have an adverse effect on our business, financial condition and results of operations.

Our brand may also depend on the positive image and public popularity of Ms.

Warren to maintain and increase brand recognition.

Warren’s social media presence and approximately 57 million followers as of February 2024 across all of her social media channels combined represent a large social following and potential audience for our social media reach.

Consumers may be drawn to our products because of her involvement with us.

Warren’s image, reputation or popularity is materially and adversely affected, this could negatively affect the marketability and sales of our products and could have an adverse effect on our business, financial condition and results of operations.

In addition, our future success depends on our continued ability to attract, develop, motivate and retain highly qualified and skilled employees, including Carla Vernón, who became our Chief Executive Officer effective January 9, 2023.

The market for such positions is competitive.

2 unchanged sentences

In addition, the loss of any of our senior management or other key employees or our inability to recruit and develop mid-level managers could adversely affect our ability to execute our business plan and we may be unable to find adequate replacements.

All of our employees are at-will employees,

meaning that they may terminate their employment relationship with us at any time, and their knowledge of our business and industry would be extremely difficult to replace.

All of our employees are at-will employees, meaning that they may terminate their employment relationship with us at any time, and their knowledge of our business and industry would be

extremely difficult to replace.

For example, on January 8, 2025, our Chief Financial Officer notified the Company of his intention to retire during the 2025 fiscal year, effective as of a mutually acceptable date.

The loss of one or more of our executive officers could harm morale, cause additional personnel to depart, or introduce operational delays or risks as successor executives learn our business, each of which could harm our operating results.

If we fail to retain talented senior management and other key personnel, or if we do not succeed in attracting well-qualified employees or retaining and motivating existing employees, our business, financial condition and results of operations could be adversely affected.

4 unchanged sentences

As existing ecommerce and social media platforms continue to rapidly evolve and new platforms develop, we must continue to maintain a presence on these platforms and establish presences on new or emerging social media platforms.

If we are unable to cost-effectively use social media platforms as marketing tools or if the social media platforms we use change their policies or algorithms, we may not be able to fully optimize such platforms, and our ability to maintain and acquire consumers and our financial condition may suffer.

If we are unable to cost-effectively use social media platforms as marketing tools or if the social media platforms we use discontinue or reduce their operations or change their policies or algorithms, we may not be able to fully optimize such platforms, and our ability to maintain and acquire consumers and our financial condition may suffer.

Furthermore, as laws and regulations and public opinion rapidly evolve to govern the use of these platforms and devices, the failure by us, our employees, our network of social media influencers, our sponsors or third parties acting at our direction to abide by applicable laws and regulations in the use of these platforms and devices or otherwise could subject us to regulatory investigations, class action lawsuits, liability, fines or other penalties and have an adverse effect on our business, financial condition, results of operations and prospects.

16 unchanged sentences

We incurred net losses of $6.1 million, $39.2 million and $49.0 million in the years ended December 31, 2024, 2023 and 2022, respectively.

Even as we try to manage our expenses and execute the Transformation Initiative , these efforts may be more costly than we expect and may not result in increased revenue or growth or margin improvements in our business.

Even as we try to manage our expenses and despite executing the Transformation Initiative , these efforts may be more costly than we expect and may not result in increased revenue or growth or margin improvements in our business in the future.

Any failure to increase our revenue sufficiently to keep pace with our investments and other expenses could prevent us from achieving or maintaining profitability or positive cash flow on a consistent basis.

16 unchanged sentences

We rely on independent third-party certification, such as certifications of some of our products or ingredients as “organic” to differentiate them from others.

We must comply with the requirements of independent organizations or certification authorities in order to label our products as certified organic, such as the United States Department of Agriculture’s, or the USDA, National Organic Program, the Global Organic Textile Standard for organic cotton in our baby clothing and bedding, the USDA’s BioPreferred Program for certified biobased products, the National Eczema Association’s NEA Seal of Acceptance, and the NSF/ANSI 305 standards set by Quality Assurance International.

We must comply with the requirements of independent organizations or certification authorities in order to label our products with specific certification claims, such as the Global Organic Textile Standard for organic cotton in our baby clothing and bedding, the USDA’s BioPreferred Program for certified biobased products, the National Eczema Association’s NEA Seal of Acceptance, and the NSF/ANSI 305 standards set by Quality Assurance International.

For example, we can lose our certifications if we use unapproved raw materials or incorrectly use a certification on product labels or in marketing materials.

8 unchanged sentences

If we are not correct in predicting the performance of such promotions, or if we are not correct in estimating credits, our business, financial condition, results of operations and prospects could be adversely affected.

Our operations include sales to retail stores and their related websites, which in 2023, accounted for approximately 51% of our revenue.

The success of our business is largely dependent on our continuing development of strong relationships with major retail chains.

Target and Walmart represented 31% and 7%, respectively, of our retail sales in 2023.

The loss of our relationship with Target, Walmart or any other large retail customer could have a significant impact on our revenue.

For example, in 2023 our rotational program with Costco was not renewed.

We have no assurance of future rotational programs or ongoing revenue with Costco.

In addition, we may be unable to secure adequate shelf space in new markets, or any shelf space at all, until we develop relationships with the retailers that operate in such markets.

We also may not be successful in executing our launches

with new retailers.

Consequently, growth opportunities through our Retail channel may be limited and our revenue, business, financial condition, results of operations and prospects could be adversely affected if we are unable to successfully establish or maintain relationships with other retailers in new or current markets.

For example, in 2023 we exited distribution in low-margin channels.

We also face significant competition to display our products on store shelves and obtain optimal presence on those shelves.

Due to the intense competition for limited shelf space, retailers are in a position to negotiate favorable terms of sale, including price discounts, allowances and product return policies.

To the extent we elect to increase discounts or allowances in an effort to secure shelf space, our operating results could be adversely affected.

Many of our competitors also have well-established relationships with our current and potential consumers who purchase Diapers and Wipes, Skin and Personal Care or Household and Wellness products at retail stores, and have extensive knowledge of our target markets.

As a result, these competitors may be able to devote greater resources to the development, promotion and sale of their products and respond more quickly to evolving consumer preferences.

Significant product returns or refunds could harm our business.

10 unchanged sentences

Additionally, as new mobile devices and platforms are released, it is difficult to predict the problems we may encounter in developing applications for alternative devices and platforms and we may need to devote significant resources to the creation, support and maintenance of such applications.

If we or our retail or ecommerce partners are unable to attract consumers to our or their websites or mobile applications through these devices or are slow to develop a version of such websites or mobile applications that are more compatible with alternative devices, we may fail to capture a significant share of consumers in the Diapers and Wipes, Skin and Personal Care or Household and Wellness product categories and could also lose consumers, which could have an adverse effect on our business, financial condition, results of operations and prospects.

If we or our retail or ecommerce partners are unable to attract consumers to our or their websites or mobile applications through these devices or are slow to develop a version of such websites or mobile applications that are more compatible with alternative devices, we may fail to capture a significant share of consumers in our product categories and could also lose consumers, which could have an adverse effect on our business, financial condition, results of operations and prospects.

Further, we continually upgrade existing technologies and business applications and we may be required to implement new technologies or business applications in the future.

16 unchanged sentences

Further, we rely on parcel carriers for the delivery of products sold directly to consumers through Honest.com and one major carrier for our domestic freight.

Interruptions to or failures in these international and domestic transportation and delivery services has in the past prevented and could in the future prevent the timely or successful delivery of our products.

Interruptions to or failures in these international and domestic transportation and delivery services have in the past prevented and could in the future prevent the timely or successful delivery of

our products.

These interruptions or failures may also be due to unforeseen events that are beyond our control or the control of our third-party delivery and transportation service providers, such as truck shortages, labor unrest, political turmoil or natural disasters.

There is no assurance that these interruptions or failures will not happen again.

For example, a labor strike at a port could negatively impact the delivery of our imported wipes, and the escalating trade dispute between the United States and China and the increased demand for shipping containers have and may in the future restrict the flow of the goods, including our components and wipes, from China to the United States.

For example, a labor strike at a port could negatively impact the delivery of our imported wipes, and the escalating trade dispute between the United States and China, United States and Mexico, and United States and Canada, including any potential tariff or trade barriers, and the increased demand for shipping containers have and may in the future restrict the flow of the goods, including our components and wipes from China to the United States and our diapers from Mexico to the United States.

Any failure to provide high-quality delivery services to our consumers may negatively affect the shopping experience of our consumers, damage our reputation and cause us to lose consumers.

68 unchanged sentences

The imposition by state governments of sales tax collection obligations on out-of-state retailers in jurisdictions where we do not currently collect sales taxes, whether for prior years or prospectively, could also create additional administrative burdens for us, put us at a competitive disadvantage if they do not impose similar obligations on our competitors and decrease our future sales, which could have an adverse effect on our business, financial condition, results of operations and prospects.

We may seek to grow our business through acquisitions of, or investments in, new or complementary businesses, facilities, technologies or products, or through strategic alliances, and the failure to manage these acquisitions, investments or alliances, or to integrate them with our existing business, could have an adverse effect on us.

From time to time we may consider opportunities to acquire or make investments in new or complementary businesses, facilities, technologies, offerings or products, or enter into strategic alliances, that may enhance our capabilities, expand our outsourcing and supplier network, complement our current products or expand the breadth of our markets.

We may seek to grow our business through acquisitions of, or investments in, new or complementary businesses, facilities, technologies or products, or through strategic alliances, and the failure to successfully manage or execute these acquisitions, investments or alliances, or to integrate them with our existing business, could have an adverse effect on us.

From time to time we may consider opportunities to acquire or make investments in new or complementary businesses, facilities, technologies, offerings or products, or enter into strategic alliances, which may enhance our capabilities, expand our outsourcing and supplier network, complement our current products or expand the breadth of our markets.

Acquisitions, investments and other strategic alliances, including our supplier services agreement with Butterblu, involve numerous risks, including:

8 unchanged sentences

• increased legal and accounting compliance costs.

We are currently in discussions with Butterblu regarding our respective obligations under the supplier services agreement pursuant to which Butterblu provides certain design, manufacturing, sales and marketing services to us.

As part of the supplier services agreement, we have agreed to purchase and own inventory for the term of the supplier service agreement, which is until December 31, 2026, unless terminated sooner.

Butterblu continues to operate and maintain our baby apparel offerings independently through the honestbabyclothing.com website under our supplier services agreement and Honest baby clothing sales are reflected as revenue in our consolidated statements of comprehensive loss.

These discussions could result in termination of the supplier services agreement prior to its termination date, potential disputes over our respective obligations or the terms of termination, and costs to us related to the inventory we agreed to purchase and own for the term of the agreement.

In addition, any loss of the relationship with Butterblu may negatively impact sales of our baby apparel, which will adversely affect our results of operations.

Revenue generated from baby apparel was 12% and 8%, respectively, of our total revenue during the year ended December 31, 2024 and 2023.

Our ability to successfully grow through strategic transactions depends upon our ability to identify, negotiate, complete and integrate suitable target businesses, facilities, technologies and products and to obtain any necessary financing.

18 unchanged sentences

For example, some of our contracts with third-party manufacturers have clauses that trigger good faith renegotiation of purchase costs in the case of significant raw material cost escalation.

We renegotiated and agreed to higher purchase prices in 2022 with two of our third-party manufacturers which has negatively impacted our cost of revenue in our Diapers and Wipes product category and will continue to have a negative impact on our results of operations.

We implemented price increases that took effect throughout 2022 and 2023 and plan to implement additional price increases in the future as needed to offset input cost inflation.

We renegotiated and agreed to higher purchase prices in 2024 with one of our third-party manufacturers, which may negatively impact our cost of revenue and may have a negative impact on our results of operations in the future.

We implemented price increases that took effect in 2022 and 2023 and plan to implement additional price increases in the future as needed to offset input cost inflation.

The implementation of these price increases are dependent on acceptance from our customers and accurate input of these pricing changes into our systems and our customers' systems.

14 unchanged sentences

In December 2022, we amended our agreement with Ontex to increase pricing on certain items, among other terms, which applied for the balance of our agreement with Ontex through 2023 and increased our cost of revenue in 2023.

In January 2024, we amended and restated our agreement with Ontex, which included improved pricing on certain items, among

other terms, which will be reflected in our results of operations in future periods.

In January 2024, we amended and restated our agreement with Ontex, which included improved pricing on certain items, among other terms, which were reflected in our results of operations for the year ended December 31, 2024.

If we are not successful in negotiating future renewals or if we are subject to increased pricing terms, our business, financial condition, results of operations and prospects could be adversely affected.

6 unchanged sentences

Similarly, if one or more of our suppliers or customers were to offer these incentives, including preferential pricing, to our competitors, our competitive advantage would be reduced, which could have an adverse effect on our business, financial condition, results of operations and prospects.

In the fourth quarter of 2023, we entered into an agreement with National Distribution Centers, LLC ("NFI") that replaced GEODIS in providing services at our Las Vegas, Nevada fulfillment center.

In 2023, we entered into an agreement with National Distribution Centers, LLC (“NFI”) that replaced GEODIS in providing services at our Las Vegas, Nevada fulfillment center.

GEODIS Logistics LLC, or GEODIS still manages our warehouse fulfillment center located in Breinigsville, Pennsylvania.

3 unchanged sentences

If we are not successful negotiating such renewals, our business, financial condition, results of operations and prospects could be adversely affected as we may have to work with a new provider of warehousing, distribution and fulfillment services which could be disruptive to our operations and further increase our costs.

For example, as part of the negotiations in connection with the renewal of its contract, GEODIS passed on increased service and inflation related costs to us, which negatively impacted our cost of revenue for the year ended December 31, 2023 and may continue to negatively impact our cost of revenue going forward.

We rely on third-party suppliers, manufacturers, retail and ecommerce customers and other vendors, and they may not continue to produce products or provide services that are consistent with our standards or applicable regulatory requirements, which could harm our brand, cause consumer dissatisfaction, and require us to find alternative suppliers of our products or services.

5 unchanged sentences

For example, some of our contracts with third-party manufacturers have clauses that trigger good faith renegotiation of purchase costs in the case of significant raw material cost escalation.

In the fourth quarter of 2021, we were informed by two third-party manufacturers in our Diapers and Wipes and Skin and Personal Care categories, respectively, that those hurdles had been met.

In addition, in the third quarter of 2022, we received requests from the same two third-party manufacturers to renegotiate purchase costs due to continued increases in raw material costs.

In 2021, we were informed by two third-party manufacturers that those hurdles had been met.

In addition, in 2022, we received requests from the same two third-party manufacturers to renegotiate purchase costs due to continued increases in raw material costs.

As a result, we negotiated and agreed to higher purchase prices which negatively impacted our cost of revenue in 2022 and 2023.

3 unchanged sentences

In addition, quality control problems, such as the use of materials and delivery of products that do not meet our quality control standards and specifications or comply with applicable laws or regulations, could harm our brand and business or cause consumer dissatisfaction.

For example, as disinfecting and sanitization products have faced supply chain challenges, decelerating market demand and aging and slower turning inventory, we have received some product quality complaints from customers and

consumers that have resulted and may in the future result in additional refunds, returns, write-offs and remediation costs.

For example, as disinfecting and sanitization products faced supply chain challenges during the COVID-19 pandemic, decelerating market demand and aging and slower turning inventory, we had received some product quality complaints from customers and consumers that resulted in additional refunds, returns, write-offs and remediation costs.

Remediation costs would be significant, including the cost to rework a product to be in sellable condition or the cost to destroy a product that cannot be remediated, and while immaterial as of December 31, 2024, it could have an adverse effect on our business, financial condition and results of operations.

23 unchanged sentences

In addition, if we or any distribution partners do not have sufficient fulfillment capacity or experience a problem fulfilling orders in a timely manner, our consumers may experience delays in receiving their purchases, which could harm our reputation and our relationship with our consumers.

and our distribution partner may experience disruptions to the operations of our fulfillment centers, which may negatively impact our and our distribution partner’s ability to fulfill orders in a timely manner, which could harm our reputation, relationships with consumers and business, financial condition, results of operations and prospects.

We have designed and established our own fulfillment center infrastructure, including customizing inventory and package handling software systems, which is tailored to meet the specific needs of our business.

We and our distribution partner may experience disruptions to the operations of our fulfillment centers, which may negatively impact our and our distribution partner’s ability to fulfill orders in a timely manner, which could harm our reputation, relationships with consumers and business, financial condition, results of operations and prospects.

We have designed and established our own fulfillment center infrastructure, including customizing inventory and package handling software systems, which are tailored to meet the specific needs of our business.

If we continue to add fulfillment and warehouse capabilities, add new businesses or categories with different fulfillment requirements or change the mix in products that we sell, our fulfillment network will become increasingly complex and operating it will become more challenging.

10 unchanged sentences

Shipping is a critical part of our business and any changes in our shipping arrangements or any interruptions in shipping could adversely affect our operating results.

We primarily rely on one major vendor for our DTC shipping requirements and one major vendor for our inbound domestic freight.

We primarily rely on one major vendor for our DTC shipping requirements and two major vendors for our inbound domestic freight.

If we are not able to negotiate acceptable pricing and other terms with these vendors or they experience performance problems or other difficulties, this could negatively impact our operating results and our consumer experience.

1 unchanged sentence

In addition, our ability to receive inbound inventory efficiently and ship products to consumers and retailers may be negatively affected by inclement weather, fire, flood, power loss, earthquakes, labor disputes, acts of war or terrorism, trade embargoes, customs and tax requirements and similar factors.

For example, strikes at major international shipping ports have in the past impacted our supply of inventory from our third-party manufacturers, and the escalating trade dispute between the United States and China has and may in the future lead to increased tariffs, and the revocation of current tariff exclusions for certain of our products, which may restrict the flow of goods from China to the United States.

For example, strikes at major international shipping ports have in the past impacted our supply of inventory from our third-party manufacturers, and the escalating trade dispute between the United States and China, the United States and Mexico, and the United States and Canada has and may in the future lead to increased tariffs or trade barriers, and the revocation of current tariff exclusions for certain of our products, which may restrict the flow of goods from China, Mexico, and/or Canada to the United States.

We are also subject to risks of damage or loss during delivery by our shipping vendors.

8 unchanged sentences

As we offer new payment options to consumers, including by way of integrating emerging mobile and other payment methods, we may be subject to additional regulations, compliance requirements and fraud.

If we fail to comply with the rules or requirements of any provider of a payment method we

accept, if the volume of fraud in our transactions limits or terminates our rights to use payment methods we currently accept, or if a data breach occurs relating to our payment systems, we may, among other things, be subject to fines or higher transaction fees and may lose, or face restrictions placed upon, our ability to accept credit card payments from consumers or facilitate other types of online payments.

If we fail to comply with the rules or requirements of any provider of a payment method we accept, if the volume of fraud in our transactions limits or terminates our rights to use payment methods we currently accept, or if a data breach occurs relating to our payment systems, we may, among other things, be subject to fines or higher transaction fees and may lose, or face restrictions placed upon, our ability to accept credit card payments from consumers or facilitate other types of online payments.

We also occasionally receive orders placed with fraudulent data and we may ultimately be held liable for the unauthorized use of a cardholder’s card number in an illegal activity and be required by card issuers to pay charge-back fees.

6 unchanged sentences

Health and safety incidents or advertising inaccuracies or product mislabeling may have an adverse effect on our business by exposing us to lawsuits, product recalls or regulatory enforcement actions, increasing our operating costs and reducing demand for our product offerings.

Selling Diapers and Wipes, Skin and Personal Care and Household and Wellness products and baby clothing and nursery bedding products involves inherent legal and other risks, and there is increasing governmental scrutiny of and public awareness regarding product safety.

Selling our products and baby clothing and nursery bedding products involves inherent legal and other risks, and there is increasing governmental scrutiny of and public awareness regarding product safety.

Illness, injury or death related to allergens, illnesses, foreign material contamination or other product safety incidents caused by our products, or involving our suppliers, could result in the disruption or discontinuance of sales of these products or our relationships with such suppliers, or otherwise result in increased operating costs, regulatory enforcement actions or harm to our reputation.

For example, in 2015 multiple class action lawsuits were filed against us claiming that certain of our products, including our sunscreen, were ineffective and were not “natural,” which also resulted in an investigation by the Food and Drug Administration, or the FDA.

In 2016 multiple class action lawsuits were filed against us claiming that we misled buyers about ingredients in our laundry detergent, dish soap and multi-surface cleaner.

In 2016 multiple class action lawsuits were filed against us claiming that we misled buyers about ingredients in our laundry detergent, dish soap and multi-

surface cleaner.

In 2022, a class action lawsuit was filed against us alleging that our plant-based claim on certain wipes products was deceptive to purchasers.

11 unchanged sentences

The costs of a recall could be outside the scope of our existing or future insurance policy coverage or limits.

In addition, companies that sell Diapers and Wipes, Skin and Personal Care, Household and Wellness and other products have been subject to targeted, large-scale tampering as well as to opportunistic, individual product tampering, and we, like any such company, could be a target for product tampering.

In addition, companies that sell similar and other products have been subject to targeted, large-scale tampering as well as to opportunistic, individual product tampering, and we, like any such company, could be a target for product tampering.

Forms of tampering could include the introduction of foreign material, chemical contaminants and pathological organisms into products, as well as product substitution.

1 unchanged sentence

If we do not adequately address the possibility, or any actual instance, of product tampering, we could face possible seizure or recall of our products and the imposition of civil or criminal sanctions, which could have an adverse effect on our business, financial condition, results of operations and prospects.

Further, many products that we sell carry or are advertised with claims as to their origin, ingredients or health, wellness, environmental or other benefits or attributes, including, by way of example, the use of the terms “natural”, “organic”, “clean”, “clean conscious”, “sustainable”, “plant-based” or “naturally derived,” or similar synonyms or implied statements relating to such benefits or attributes.

Although the FDA, FTC, and the USDA each has issued statements regarding the appropriate use of the

word “natural,” there is no single, U.S.

Further, many products that we sell carry or are advertised with claims as to their origin, ingredients or health, wellness, environmental or other benefits or attributes, including, by way of example, the use of the terms “natural”, “organic”, “clean”, “clean conscious”, “sustainable”, “compostable”, “plant-based” or “naturally derived,” or similar synonyms or implied statements relating to such benefits or attributes.

Although the FDA, FTC, and the USDA each has issued statements regarding the appropriate use of the word “natural,” there is no single, U.S.

government regulated definition of the term “natural” or related concepts like “naturally derived” for use in the personal care industry, which is true for many other adjectives common in the clean conscious product industry.

4 unchanged sentences

For example, a class action lawsuit was filed against us in 2022 alleging that our plant-based claim on certain wipes products was deceptive to purchasers.

While we believe the claim is baseless, the cost of defending the lawsuit has been significant.

While the case was ultimately resolved, the cost of defending the lawsuit was significant.

Any loss of confidence on the part of consumers in the truthfulness of our labeling, advertising or ingredient claims would be difficult and costly to overcome and may significantly reduce our brand value.

6 unchanged sentences

Products that expressly or impliedly claim to control microorganisms that pose a threat to human health may be subject to additional regulatory scrutiny and need to be supported by additional efficacy data.

Should we advertise or market these EPA regulated products with claims that are not permitted by the terms of their registration or are otherwise false or misleading, the EPA may be authorized to take enforcement action to prevent the sale or distribution of disinfectant products.

disinfectant products.

False or misleading marketing claims concerning a product’s EPA registration or its efficacy may also create the risk for challenges under state law at the consumer level.

10 unchanged sentences

We have in the past been subject to lawsuits brought under Prop 65, and if we fail to comply with Prop 65 in the future, it may result in lawsuits and regulatory enforcement that could have a material adverse effect on our reputation, business, financial condition, results of operations and prospects.

Further, the inclusion of warnings on our products to comply with Prop 65 could also reduce overall

consumption of our products or leave consumers with the perception (whether or not valid) that our products do not meet their health and wellness needs, all of which could adversely affect our reputation, business, financial condition, results of operations and prospects.

Further, the inclusion of warnings on our products to comply with Prop 65 could also reduce overall consumption of our products or leave consumers with the perception (whether or not valid) that our products do not meet their health and wellness needs, all of which could adversely affect our reputation, business, financial condition, results of operations and prospects.

These developments, depending on the outcome, could have an adverse effect on our reputation, business, financial condition, results of operations and prospects.

Changes in existing laws or regulations or related official guidance, or the adoption of new laws or regulations or guidance, may increase our costs and otherwise adversely affect our business, financial condition, results of operations and prospects.

The manufacture and marketing of Diapers and Wipes, Skin and Personal Care and Household and Wellness products is highly regulated.

The manufacture and marketing of our products is highly regulated.

We and our suppliers and manufacturers are subject to a variety of laws and regulations.

6 unchanged sentences

The regulatory environment in which we operate has changed in the past could change significantly and adversely in the future.

For example, in December 2009, the FTC substantially revised its Guides Concerning the Use of Endorsements and Testimonials in Advertising, or “Endorsement Guides,” to eliminate a safe harbor principle that formerly recognized that advertisers could publish consumer testimonials that conveyed truthful but extraordinary results from using the advertiser’s product as long as the advertiser clearly and conspicuously disclosed that the endorser’s results were not typical.

advertisers could publish consumer testimonials that conveyed truthful but extraordinary results from using the advertiser’s product as long as the advertiser clearly and conspicuously disclosed that the endorser’s results were not typical.

Similarly, in 2012, the FTC announced revisions to its Guides For The Use Of Environmental Marketing Claims, or the “Green Guides,” that assist advertisers in avoiding the dissemination of false or deceptive environmental claims for their products.

8 unchanged sentences

In the event of actual or alleged non-compliance, we might be forced to find alternative retail or ecommerce partners, suppliers or manufacturers and we may be subject to lawsuits and/or regulatory enforcement actions related to such non-compliance by the suppliers and manufacturers.

As a result, our supply of Diapers and Wipes, Skin and Personal Care and Household and Wellness products could be disrupted or our costs could increase, which could adversely affect our business, financial condition, results of operations and prospects.

As a result, our supply of our products could be disrupted or our costs could increase, which could adversely affect our business, financial condition, results of operations and prospects.

The failure of any partner or manufacturer to produce products that conform to our standards could adversely affect our reputation in the marketplace and result in product recalls, product liability claims, government or third-party actions and economic loss.

For example, a manufacturer’s failure to meet cGMPs, could result in the delivery of product that is subject to a product recall, product liability litigation, or government investigations.

Additionally, actions we may take to mitigate the impact of any disruption or potential

disruption in our supply of materials or finished inventory, including increasing inventory in anticipation of a potential supply or production interruption, could have an adverse effect on our business, financial condition, results of operations and prospects.

Additionally, actions we may take to mitigate the impact of any disruption or potential disruption in our supply of materials or finished inventory, including increasing inventory in anticipation of a potential supply or production interruption, could have an adverse effect on our business, financial condition, results of operations and prospects.

Class action litigation, other legal claims and regulatory enforcement actions could subject us to liability for damages, civil and criminal penalties and other monetary and non-monetary liability and could otherwise adversely affect our reputation, business, financial condition, results of operations and prospects.

1 unchanged sentence

Consequently, we are subject to a heightened risk of consumer class action litigation, other legal claims, government investigations or other regulatory enforcement actions.

The product marketing and labeling practices of companies operating in the Diapers and Wipes, Skin and Personal Care, Household and Wellness and clean conscious products segments of the marketplace receive close scrutiny from the private plaintiff’s class action bar and from public consumer protection agencies.

The product marketing and labeling practices of companies operating in our product categories and clean conscious products segments of the marketplace receive close scrutiny from the private plaintiff’s class action bar and from public consumer protection agencies.

Accordingly, there is risk that consumers will bring class action lawsuits and that the FTC and/or state attorneys general or other consumer protection law enforcement authorities will bring legal actions concerning the truth and accuracy of our product marketing and labeling claims.

5 unchanged sentences

In 2022, a class action lawsuit was filed against us alleging that our plant-based claim on certain wipes products was deceptive to purchasers.

While we believe the claim is baseless, the cost of defending the lawsuit has been significant.

While the case was ultimately resolved, the cost of defending the lawsuit was significant.

We have also been the subject of litigation claiming our labels contain inaccurate or misleading information.

21 unchanged sentences

For a description of our material pending legal proceedings, please see Note 10 , Commitments and Contingencies , to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Even when not merited, the defense of these lawsuits may divert our management’s attention, and we may incur significant expenses in defending these lawsuits.

The defense of these lawsuits may divert our management’s attention, and we may incur significant expenses in defending these lawsuits.

The results of litigation and other legal proceedings are inherently uncertain, and adverse judgments or settlements in some of these legal disputes may result in adverse monetary damages, penalties or injunctive relief against us, which could have an adverse effect on our business, financial condition, results of operations and prospects.

3 unchanged sentences

Increasing scrutiny and evolving expectations from stakeholders with respect to our ESG practices, performance, commitments and disclosures may impact our reputation, increase our costs and impact our access to capital.

Stakeholder scrutiny related to our ESG practices, commitments, performance and disclosures continues to increase.

We have adopted certain policies and programs, including with respect to responsible ingredients and sustainability, safety and health, human capital management, social performance and community relations, diversity and inclusion and supply chain code of conduct.

Our stakeholders might not be satisfied with our ESG practices, commitments, performance and/or disclosures, or the speed of their adoption, implementation and measurable success.

Investor advocacy groups, certain institutional investors, investment funds, creditors and other influential investors are increasingly focused on our ESG practices and in recent years have placed increasing importance on the ESG implications of their investments and lending decisions.

If we do not meet our stakeholders’ evolving expectations, our reputation, access to and cost of capital, stock price, and ability to attract and retain customers, consumers and talent could be negatively impacted.

Organizations that provide information to investors and financial institutions on ESG performance and related matters have developed quantitative and qualitative data collection processes and ratings processes for evaluating companies on their approach to ESG matters.

Such ratings are used by some investors to inform their investment and voting decisions.

In addition, many investors have created their own proprietary ratings that inform their investment and voting decisions.

Unfavorable ratings or assessment of our ESG practices, including our compliance with certain disclosure standards and frameworks, may lead to negative investor sentiment toward us, which could have a negative impact on our stock price and our access to and cost of capital.

As we continue to focus on our ESG practices, commitments, performance and disclosures, and as ESG-related regulations and disclosure standards and frameworks continue to evolve, we have expanded our public disclosures in these areas.

For example, in 2022, we published our first ESG Investor Tear Sheet.

Such disclosures may reflect goals, aspirations, commitments, cost estimates and other expectations and assumptions, including over long timeframes, which are based on available data and estimates, necessarily uncertain, may be refined or expanded over time, and may not be realized.

Climate and other ESG disclosure regulations, as well as pressure from customers, investors, and other stakeholders to provide ESG-related data or adopt certain ESG policies, may impose additional financial and administrative burdens and increase liability risk.

In addition, our climate or other ESG claims or goals could result in additional regulatory disclosure obligations, or expose the Company to regulatory, customer, or other stakeholder scrutiny.

Further, the voluntary disclosure standards or frameworks we choose to align with are evolving and may change over time and our interpretation of such disclosure standards and frameworks may differ from those of others, either of which may result in a lack of consistent or meaningful comparative data from period to period and/or significant revisions to our goals and aspirations or reported progress in achieving such goals and aspirations.

We may be subject to stakeholder scrutiny related to our Environmental, Social, Governance ( “ESG” ) practices, commitments, performance and disclosures.

We have certain policies and/or programs, including with respect to responsible ingredients and sustainability, safety and health, human capital management, social performance and community relations, diversity and inclusion and/or supply chain code of conduct.

Our stakeholders might be dissatisfied with these practices, commitments, performance and/or disclosures, or their adoption, implementation and success or lack thereof.

Investor advocacy groups, certain institutional investors, investment funds, creditors and other investors have been focused, and may continue to focus on ESG , including diversity and inclusion, practices and in recent years have placed importance on the ESG implications on and of their investments.

If we do not meet our stakeholders’ evolving expectations on these topics, our reputation, access to and cost of capital, stock price, and ability to attract and retain customers, consumers and talent could be negatively impacted and we may face the risk of litigation.

Our ESG disclosures, including on our ingredients, ideals, and industries, may reflect goals, aspirations, commitments, cost estimates and other expectations and assumptions, including over long timeframes, which are based on available data and estimates, and may be refined or expanded over time, and may not be realized.

Our climate or other ESG claims or goals could result in additional regulatory disclosure obligations, or expose the Company to regulatory, customer, or other stakeholder scrutiny.

Ensuring that there are adequate systems and processes in place to comply with the various ESG tracking and disclosure obligations will require management’s time and expense.

If we do not adapt to or comply with government regulations, investor or stakeholder expectations, including with respect to evolving disclosure standards and frameworks, or if we are perceived to have not responded appropriately, regardless of whether there is a legal requirement to do so, we may suffer from reputational damage and our business, financial condition, cost of capital and/or stock price could be adversely affected.

Further, being associated with activities by suppliers, contractors or other affiliates that have or are perceived to have individual or cumulative adverse impacts on the environment, climate, biodiversity and land management, water access and management, human rights or cultural heritage could negatively affect our reputation and impose additional costs.

We (and our third parties) are subject to stringent and changing domestic and foreign laws, regulations, and rules, contractual data privacy and security obligations, industry standards, policies and other obligations related to data privacy and security.

The actual or perceived failure by us, our consumers, partners or vendors to comply with obligations could lead to regulatory investigations or actions;

Further, being associated with activities by suppliers, contractors or other affiliates that have or are perceived to have individual or cumulative impacts on the environment, climate, biodiversity and land management, or water access and management that do not meet our stakeholders' expectations could negatively affect our reputation and impose additional costs.

We and the third parties with whom we work are subject to stringent and changing domestic and foreign laws, regulations, and rules, contractual data privacy and security obligations, industry standards, policies and other obligations related to data privacy and security.

Our (or the third parties with whom we work) actual or perceived failure to comply with obligations could lead to regulatory investigations or actions;

litigation (including class claims) and mass arbitration demands;

fines and penalties;

have an adverse effect on our business, financial condition, results of operations and prospects disruptions of our business operations;

have an adverse effect on our business, financial condition, results of operations and prospects;

disruptions of our business operations;

reputational harm;

6 unchanged sentences

The legal and regulatory framework for privacy and security issues is rapidly evolving and is expected to increase our compliance costs and exposure to liability.

There are numerous federal, state, local, and foreign laws, orders, codes, regulations and regulatory guidance regarding privacy, information security and processing (which we collectively refer to as Data Protection Laws), the number and scope of which is changing, subject to differing applications and interpretations, and which may be inconsistent among jurisdictions, or in conflict with other rules, laws or Data Protection Obligations (defined below).

There are numerous federal, state, local, and foreign laws, orders, codes, regulations and regulatory guidance regarding privacy, information security and processing consumer protection laws, and other similar laws (which we collectively refer to as Data Protection Laws), the number and scope of which is changing, subject to differing applications and interpretations, and which may be inconsistent among jurisdictions, or in conflict with other rules, laws or Data Protection Obligations (defined below).

We expect that there will continue to be new Data Protection Laws and Data Protection Obligations, and we cannot yet determine the impact such future Data Protection Laws may have on our business.

Any significant change to Data Protection Laws and Data Protection Obligations, including without limitation, regarding the manner in which the express or implied consent of consumers for processing is obtained, could increase our costs and require us to modify our operations, possibly in a material manner, which we may be unable to complete and may limit our ability to store and process consumer information and operate our business.

We are also subject to the terms of our external and internal privacy and security policies, codes, representations, certifications, industry standards, publications and frameworks (which we collectively refer to as Privacy Policies) and contractual obligations to third parties related to privacy, information security and processing, including contractual obligations to indemnify and hold harmless third parties from the costs or consequences of non-compliance with Data Protection Laws or other obligations (which we collectively refer to as Data Protection Obligations).

We are also subject to the terms of our external and internal privacy and security policies, codes, marketing materials, whitepapers, and other statements and representations, certifications, industry standards, publications and frameworks (which we collectively refer to as Privacy Policies) and contractual obligations to third parties related to privacy, information security and processing, including contractual obligations to indemnify and hold harmless third parties from the costs or consequences of non-compliance with Data Protection Laws or other obligations (which we collectively refer to as Data Protection Obligations).

In the United States, these include rules and regulations promulgated under the authority of the Federal Trade Commission, the Electronic Communications Privacy Act, the Computer Fraud and Abuse Act, the California Consumer Privacy Act, or CCPA, the Telephone Consumer Protection Act, or TCPA, the Controlling the Assault of Non-Solicited Pornography And Marketing Act, or CAN-SPAM, other state and federal laws relating to privacy and data security, and other similar laws (e.g., wiretapping laws).

3 unchanged sentences

Many states have enacted telemarketing laws and regulations that are even more proscriptive than the TCPA and that pose additional litigation and regulatory enforcement risks.

In the past few years, numerous U.S.

states—including California, Virginia, Colorado, Connecticut, and Utah—have enacted comprehensive privacy laws that impose certain obligations on covered businesses, including providing specific disclosures in privacy notices and affording residents with certain rights concerning their personal data.

Numerous U.S.

states have enacted comprehensive privacy laws that impose certain obligations on covered businesses, including providing specific disclosures in privacy notices and affording residents with certain rights

concerning their personal data.

As applicable, such rights may include the right to access, correct, or delete certain personal data, and to opt-out of certain data processing activities, such as targeted advertising, profiling, and automated decision-making.

2 unchanged sentences

These state laws allow for statutory fines for noncompliance.

For example, the CCPA (as amended by the California Privacy Rights Act of 2020) applies to personal information of consumers, business representatives, and employees who are California residents, and requires businesses to make specific disclosures in privacy notices and honor requests of such individuals to exercise certain privacy rights, such as those noted below.

For example, the CCPA applies to personal information of consumers, business representatives, and employees who are California residents, and requires businesses to make specific disclosures in privacy notices and honor requests of such individuals to exercise certain privacy rights, such as those noted below.

The CCPA provides for administrative fines of up to $7,500 per intentional violation and allows private litigants affected by certain data breaches to recover significant statutory damages.

2 unchanged sentences

Additionally, under various Data Protection Laws and Data Protection Obligations, we may be required to obtain certain consents to process personal information.

For example, some of our data processing practices may be challenged under wiretapping laws, if we obtain

consumer information from third parties through various methods, including chatbot providers, or via third-party marketing pixels.

For example, some of our data processing practices may be challenged under wiretapping laws, if we obtain consumer information from third parties through various methods, including chatbot providers, or via third-party marketing pixels.

These practices may be subject to increased challenges by class action plaintiffs.

6 unchanged sentences

For example, in Canada, the Personal Information Protection and Electronic Documents Act (“PIPEDA”) and various related provincial laws, as well as Canada’s Anti-Spam Legislation (“CASL”), may apply to our operations and the European Union’s General Data Protection Regulation, or GDPR, and the United Kingdom’s GDPR, or UK GDPR, imposes strict requirements for processing the personal data of individuals.

For example, the GDPR introduced strict requirements for processing the personal data of European Union data subjects.

Companies that must comply with the GDPR face increased compliance obligations and risk, including more robust regulatory enforcement of data protection requirements, an order prohibiting processing of European data subject personal data and potential fines for noncompliance of up to €20 million or 4% of the annual global revenues of the noncompliant company, whichever is greater.

European data protection laws including the GDPR also generally prohibit the transfer of personal data from Europe, including the European Economic Area, or EEA, the United Kingdom, and Switzerland, to the United States and most other countries unless the parties to the transfer have established a legal basis for the transfer and implemented specific safeguards to protect the transferred personal data.

For example, under the GDPR, companies may face temporary or definitive bans on data processing and other corrective actions;

fines of up to 20 million Euros under the EU GDPR, 17.5 million pounds sterling under the UK GDPR or, in each case, 4% of annual global revenue, whichever is greater;

or private litigation related to processing of personal data brought by classes of data subjects or consumer protection organizations authorized at law to represent their interests.

Europe and other jurisdictions have enacted laws requiring data to be localized or limiting the transfer of personal data to other countries.

In particular, the European Economic Area (EEA) and the United Kingdom (UK) have significantly restricted the transfer of personal data to the United States and other countries whose privacy laws it generally believes are inadequate.

Also, following the expiry of the post-Brexit transitional arrangements, the United Kingdom Information Commissioner’s Office is not able to be our “lead supervisory authority” in respect of any “cross border processing” for the purposes of the GDPR.

2 unchanged sentences

Other countries have also passed or are considering passing laws requiring local data residency and/or restricting the international transfer of data.

The European Commission released a set of Standard Contractual Clauses (SCCs), that are designed to be a valid mechanism by which entities can transfer personal data out of the EEA to jurisdictions that the European Commission has not found to provide an adequate level of protection.

Currently, these Standard Contractual Clauses are a valid mechanism to transfer personal data outside of the EEA.

Although there are currently various mechanisms that may be used to transfer personal data from the EEA and UK to the United States in compliance with law, such as the EEA standard contractual clauses (SCCs), the UK’s International Data Transfer Agreement / Addendum, and the EU-U.S.

Data Privacy Framework and the UK extension thereto (which allows for transfers to relevant U.S.-based organizations who self-certify compliance and participate in the Framework), these mechanisms are subject to legal challenges, and there is no assurance that we can satisfy or rely on these measures to lawfully transfer personal data to the United States.

Additional regulatory guidance has been released that seeks to imposes additional obligations on companies seeking to rely on SCCs, such as conducting transfer impact assessments to determine whether additional security measures are necessary to protect the at-issue personal data.

9 unchanged sentences

Additionally, other countries outside of Europe have enacted or are considering enacting similar cross-border data transfer restrictions and laws requiring local data residency, which could increase the cost and complexity of delivering our products and operating our business.

Regulators in the United States such as the Department of Justice are also increasingly scrutinizing certain personal data transfers and have proposed and may enact certain data localization requirements.

Additionally, individuals are increasingly resistant to the collection, use, and sharing of personal data to deliver targeted advertising.

2 unchanged sentences

Major technology platforms on which we rely to gather information about consumers have adopted or proposed measures to provide consumers with additional control over the collection, use, and sharing of their personal data for targeted advertising purposes.

For example, in 2021, Apple began allowing users to more easily opt-out of activity tracking across

devices, which has impacted and may continue to impact our business.

For example, in 2021, Apple began allowing users to more easily opt-out of activity tracking across devices, which has impacted and may continue to impact our business.

In February 2022, Google announced similar plans to adopt additional privacy controls on its Android devices to allow users to limit sharing of their data with third parties and reduce cross-device tracking for advertising purposes.

11 unchanged sentences

For example, certain privacy laws, such as the GDPR and the CCPA, require our customers to impose specific contractual restrictions on their service providers.

We publish privacy policies, marketing materials and other statements, such as compliance with certain certifications or self-regulatory principles, regarding data privacy and security.

If these policies, materials or statements are found to be deficient, lacking in transparency, deceptive, unfair, or misrepresentative of our practices, we may be subject to investigation, enforcement actions by regulators or other adverse consequences.

Our obligations related to data privacy and security (and consumers’ data privacy expectations) are quickly changing, becoming increasingly stringent and creating regulatory uncertainty as to the effective future legal framework.

Additionally, these obligations may be subject to differing applications and interpretations, which may be inconsistent or in conflict among jurisdictions.

We publish privacy policies, marketing materials, whitepapers, and other statements, such as statements related to compliance with certain certifications or self-regulatory principles, regarding data privacy and security.

Regulators in the United States are increasingly scrutinizing these statements, and i f these policies, materials or statements are found to be deficient, lacking in transparency, deceptive, unfair, misleading or misrepresentative of our practices, we may be subject to investigation, enforcement actions by regulators or other adverse consequences.

Our obligations related to data privacy and security (and consumers’ data privacy expectations) are quickly changing, becoming increasingly stringent and creating uncertainty as to the effective future legal framework.

Additionally, these

obligations may be subject to differing applications and interpretations, which may be inconsistent or in conflict among jurisdictions.

Preparing for and complying with these obligations requires us to devote significant resources (including, without limitation, financial and time-related resources), which may necessitate changes to our information technologies, systems, and practices and to those of any third parties that process personal information on our behalf.

6 unchanged sentences

We strive to comply with applicable Data Protection Laws, Privacy Policies and Data Protection Obligations to the extent possible, but we may at times fail to do so, or may be perceived to have failed to do so.

If we fail, or are perceived to have failed, to address or comply with data privacy and security obligations, we could face significant consequences, including, but not limited to, government enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar);

If we or the third parties with whom we work fail, or are perceived to have failed, to address or comply with data privacy and security obligations, we could face significant consequences, including, but not limited to, government enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar);

litigation (including class-related claims) and mass arbitration demands;

12 unchanged sentences

adverse publicity;

or revision or restructuring of our operations.

Moreover, despite our efforts, we may not be successful in achieving compliance if our employees, partners or vendors do not comply with applicable Data Protection Laws, Privacy Policies and Data Protection Obligations.

If we or our vendors fail (or are perceived to have failed) to comply with applicable Data Protection Laws, Privacy Policies and Data Protection Obligations, or if our Privacy Policies are, in whole or part, found to be inaccurate, incomplete, deceptive, unfair, or misrepresentative of our actual practices, our business, financial condition, results of operations and prospects could be adversely affected.

or substantial revision or restructuring of our business model or operations.

Government regulation of the Internet and ecommerce is evolving, and unfavorable changes or failure by us to comply with these regulations could have an adverse effect on our business, financial condition, results of operations and prospects.

19 unchanged sentences

Federal and state wage and hour rules establish minimum salary requirements for employees to be exempt from overtime payments.

For example, among other requirements, California law requires employers to pay employees who are classified as exempt from overtime a minimum salary of at least twice the minimum wage, which is currently $58,240 per year for executive, administrative and professional employees with employers that have 26 or more employees.

For example, among other requirements, California law requires employers to pay employees who are classified as exempt from overtime a minimum salary of at least twice the minimum wage, which is $68,640 per year as of January 1, 2025 for executive, administrative and professional employees with employers that have 26 or more employees.

Minimum salary requirements impact the way we classify certain employees, increases our payment of overtime wages and provision of meal or rest breaks, and increases the overall salaries we are required to pay to currently exempt employees to maintain their exempt status.

1 unchanged sentence

Risks Related to Our Intellectual Property and Information Technology

We are increasingly dependent on information technology and our ability to process data in order to operate and sell products, and if we (or our third parties) are unable to protect against software and hardware vulnerabilities, service interruptions, data corruption, cyber-based attacks, ransomware or security breaches, or if we fail to comply with our commitments and assurances regarding the privacy and security of such data, we could experience adverse consequences, including but not limited to regulatory investigations or actions;

We are increasingly dependent on information technology and our ability to process data in order to operate and sell products, and if our information technology systems or those third parties with whom we work or our data, are or were compromised, we could experience adverse consequences, including but not limited to regulatory investigations or actions;

fines and penalties;

6 unchanged sentences

We rely on information technology networks and systems and data processing (some of which are managed by third-parties) to market, sell and deliver our products and services, to fulfill orders, to collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of and share (which we collectively refer to as Process or Processing) personal information, sensitive, confidential or proprietary information, financial information and other information (which we collectively refer to as sensitive information), to manage a variety of business processes and activities, for financial reporting purposes, to operate our business, process orders and to comply with regulatory, legal and tax requirements (which we collectively refer to as Business Functions).

Cyber-attacks, malicious internet-based activity, online and offline fraud, and other similar activities threaten the confidentiality, integrity, and availability of our sensitive information and information technology systems, and those of the third parties upon which we rely.

Such threats are prevalent and continue to rise, are increasingly difficult to detect, and come from a variety of sources, including traditional computer “hackers,” threat actors, “hacktivists,” organized criminal threat actors, personnel (such as through theft or misuse), sophisticated nation states, and nation-state-supported actors.

Some actors now engage and are expected to continue to engage in cyber-attacks, including without limitation nation-state actors for geopolitical reasons and in conjunction with military conflicts and defense activities.

During times of war and other major conflicts, we, the third parties upon which we rely, and our customers may be fundamentally change our business model.

During times of war and other major conflicts, we, the third parties with whom we work, and our customers may fundamentally change our business model.

The risk of unauthorized circumvention of our security measures or those of our third parties has been heightened by advances in computer and software capabilities and the increasing sophistication of hackers, threat actors, personnel (such as through theft or misuse), sophisticated nation-states, and nation-state-supported actors who now engage and are expected to engage in cyber-attacks.

During times of war and other major conflicts, we and the third parties upon which we rely may be vulnerable to a heightened risk of these attacks, including cyber-attacks that could materially disrupt our systems and operations, supply chain, and ability to produce, sell and distribute our goods and services.

We and our third parties may be subject to a variety of evolving threats, including without limitation, the theft or misuse of personal and financial information, counterfeiting, “phishing” or social engineering attacks, ransomware, extortion, publicly announcing security breaches, account takeover attacks, denial or degradation of service attacks (such as credential stuffing), malicious code (such as viruses and worms), supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, malware (including as a result of advanced persistent threat intrusion), fraudulent payment and identity theft, earthquakes, fires, floods, and other similar threats.

During times of war and other major conflicts, we and the third parties with whom we work may be vulnerable to a heightened risk of these attacks, including cyber-attacks that could materially disrupt our systems and operations, supply chain, and ability to produce, sell and distribute our goods and services.

We and the third parties with whom we work may be subject to a variety of evolving threats, including without limitation, the theft or misuse of personal and financial information, counterfeiting, “phishing” or social engineering attacks, ransomware, extortion, publicly announcing security breaches, account takeover attacks, denial or degradation of service attacks (such as credential stuffing), malicious code (such as viruses and worms), supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, malware (including as a result of advanced persistent threat intrusion), fraudulent payment and identity theft, earthquakes, fires, floods, and other similar threats.

Because the techniques used by hackers change frequently, we may be unable to anticipate these techniques or implement adequate preventive measures.

3 unchanged sentences

Ransomware attacks, including those perpetrated by organized criminal threat actors, nation-states, and nation-state-supported actors, are becoming increasingly prevalent and severe and can lead to significant interruptions in our operations, loss of information and income, reputational harm, and diversion of funds.

Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments.

Extortion payments may alleviate the negative impact of a

ransomware attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments.

Similarly, supply-chain attacks have increased in frequency and severity, and we cannot guarantee that third parties and infrastructure in our supply chain or our third parties’ supply chains have not been compromised or that they do not contain exploitable defects or bugs that could result in a breach of or disruption to our information technology systems (including our products and services) or the third-party information technology systems that support us and our services.

As outlined above, we rely on third-party service providers and technologies to operate critical business systems to process sensitive information in a variety of contexts, including, without limitation, cloud-based infrastructure, data center facilities, encryption and authentication technology, employee email, content delivery to customers, and other functions.

We also rely on third-party service providers to provide other products, services, parts, or otherwise to operate our business.

As outlined above, we work with third-party service providers and technologies to operate critical business systems to process sensitive information in a variety of contexts, including, without limitation, cloud-based infrastructure, data center facilities, encryption and authentication technology, employee email, content delivery to customers, and other functions.

We also work with third-party service providers to provide other products, services, parts, or otherwise to operate our business.

Our ability to monitor these third parties’ cybersecurity practices is limited outside of standard system and organizational control reports review procedures, and these third parties may not have adequate information security measures in place.

2 unchanged sentences

In addition, supply-chain attacks have increased in frequency and severity, and we cannot guarantee that third parties’ infrastructure in our supply chain or our third-party partners’ supply chains have not been compromised.

Remote work has become more common and has increased risks to our information technology systems and data, as more of our employees utilize network connections, computers and devices outside our premises or network, including working at home, while in transit and in public locations.

Remote work has increased risks to our information technology systems and data, as more of our employees utilize network connections, computers and devices outside our premises or network, including working at home, while in transit and in public locations.

Future or past business transactions (such as acquisitions or integrations) could expose us to additional cybersecurity risks and vulnerabilities, as our systems could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies.

6 unchanged sentences

No security solution, strategy, or measures can address all possible security threats or block all methods of penetrating a network or otherwise perpetrating a security breach because such threats and techniques change frequently, are often sophisticated in nature, and may not be detected until after a security breach has occurred.

We also take steps designed to detect, mitigate, and remediate vulnerabilities in our information systems (such as our hardware and/or software, including that of third parties upon which we rely).

We also take steps designed to detect, mitigate, and remediate vulnerabilities in our information systems (such as our hardware and/or software, including that of third parties with whom we work).

We may not, however, detect and remediate all such vulnerabilities including on a timely basis.

3 unchanged sentences

Any material disruption of our networks, systems or data processing activities, or those of our third parties, could disrupt our ability to provide our products and services, and to undertake, and cause a material adverse impact to, our Business Functions and our business, reputation and financial condition.

If we (or a third party upon whom we rely) experience a security incident or are perceived to have experienced a security incident, or otherwise suffers damage, security breaches, vulnerabilities, disruption or shutdown, and we do not effectively resolve the issues in a timely manner, we may experience adverse consequences, to our Business Functions and our business, such as government enforcement actions (for example, investigations, fines, penalties, audits, and inspections);

If we (or a third party with whom we work) experience a security incident or are perceived to have experienced a security incident, or otherwise suffers damage, security breaches, vulnerabilities, disruption or shutdown, and we do not effectively resolve the issues in a timely manner, we may experience material adverse consequences, to our Business Functions and our business, such as government enforcement actions (for example, investigations, fines, penalties, audits, and inspections);

additional reporting requirements and/or oversight;

8 unchanged sentences

and other similar harms.

Security incidents and attendant consequences may cause customers to stop using our products, deter new customers from using our products, and negatively impact our ability to grow and operate our business.

Security incidents and attendant material consequences may cause customers to stop using our products, deter new customers from using our products, and negatively impact our ability to grow and operate our business.

For example, a security breach or other interruption could result in unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to information.

30 unchanged sentences

Our contracts may not contain limitations of liability, and even where they do, there can be no assurance that any limitations of liability in our contracts would be enforceable or adequate or would otherwise protect us from liabilities, damages, or claims related to our data privacy and security obligations.

We may not have adequate or sufficient insurance coverage to protect us from or to mitigate liabilities arising out of our privacy and security practices.

In addition, we cannot be sure that such coverage will continue to be available on acceptable terms or at all, or that such coverage will pay any future claims or loss.

We cannot be sure that our insurance coverage will be adequate to protect us from or to mitigate liabilities arising out of our privacy and security practices.

In addition, we cannot be sure that such coverage will continue to be available on commercially reasonable and acceptable terms or at all, or that such coverage will pay any future claims or loss.

We may be unable to adequately obtain, maintain, protect and enforce our intellectual property rights.

11 unchanged sentences

Our confidentiality agreements with our employees and certain of our consultants, contract employees, suppliers and independent contractors, including some of our manufacturers who use our formulations to manufacture our products, generally require that all information made known to them be kept strictly confidential.

The effectiveness of these agreements are important as some of our formulations have been developed by or with our suppliers and manufacturers.

The effectiveness of these agreements are important as some of our formulations have been

developed by or with our suppliers and manufacturers.

However, we may fail to enter into confidentiality agreements with all parties who have access to our trade secrets or other confidential information.

20 unchanged sentences

If we fail to comply with our obligations under our existing license agreements or cannot license rights to use technologies on reasonable terms or at all, we may be unable to license rights that are critical to our business.

We license certain intellectual property which is critical to our business, including pursuant to the Likeness Agreement with Jessica Warren.

If we fail to comply with any of the obligations under our license agreements, we may be required to pay damages and the licensor may have the right to terminate the license.

We license or have the right to use certain intellectual property which, is critical to our business, including in connection with the Mutual Separation Agreement with Jessica Warren.

If we fail to comply with any of the obligations under our license agreements or the Mutual Separation Agreement with Jessica Warren, including not selling licensed products after the agreed timeframe, we may be required to pay damages, dispose of licensed products, increase our reserves for licensed products that cannot be sold, and the licensor may have the right to terminate the license, which could adversely impact our business, financial condition and result of operations.

Termination by the licensor would cause us to lose valuable rights, and could inhibit our ability to commercialize our products.

16 unchanged sentences

We rely on SaaS technologies from third parties, including Salesforce, in order to operate critical functions of our business, including financial management services, customer relationship management services, supply chain services and data storage services.

impaired, our ability to communicate with our suppliers could be weakened and our ability to access or save data stored to the cloud may be impaired until equivalent services, if available, are identified, obtained and implemented, all of which could have an adverse effect on our business, financial condition, results of operations and prospects.

If these services become unavailable due to extended outages or interruptions or because they are no longer available on commercially reasonable terms or prices, or for any other reason, our expenses could increase, our ability to manage our finances could be interrupted, our processes for managing sales of our offerings and supporting our consumers could be impaired, our ability to communicate with our suppliers could be weakened and our ability to access or save data stored to the cloud may be impaired until equivalent services, if available, are identified, obtained and implemented, all of which could have an adverse effect on our business, financial condition, results of operations and prospects.

We must successfully maintain, scale and upgrade our information technology systems, and our failure to do so could have an adverse effect on our business, financial condition, results of operations and prospects.

1 unchanged sentence

As such, we are in the process of implementing, and will continue to invest in and implement, significant modifications and upgrades to our information technology systems and procedures, including replacing legacy systems with successor systems, making changes to legacy systems or acquiring new systems with new functionality, hiring employees with information technology expertise and building new policies, procedures, training programs and monitoring tools.

These types of activities subject us to inherent costs and risks associated with replacing and changing these systems, including impairment of our ability to leverage our Retail channel or fulfill customer orders, potential disruption of our internal control structure, substantial capital expenditures, additional administration and operating expenses, the need to acquire and retain sufficiently skilled personnel to implement and operate the new systems, demands on management time, the introduction of errors or vulnerabilities and other risks and costs of delays or difficulties in transitioning to or integrating new systems into our current systems.

These types of activities subject us to inherent costs and risks associated with replacing and changing these systems, including impairment of our ability fulfill customer orders, potential disruption of our internal control structure, substantial capital expenditures, additional administration and operating expenses, the need to acquire and retain sufficiently skilled personnel to implement and operate the new systems, demands on management time, the introduction of errors or vulnerabilities and other risks and costs of delays or difficulties in transitioning to or integrating new systems into our current systems.

These implementations, modifications and upgrades may not result in productivity improvements at a level that outweighs the costs of implementation, or at all.

23 unchanged sentences

government’s trade policy could adversely affect our business.

International trade disputes could result in tariffs and other protectionist measures that could adversely affect our business.

International trade disputes or changes in government priorities could result in tariffs and other protectionist measures that could adversely affect our business.

Tariffs could increase the cost of our products and the components and raw materials that go into making them.

increased costs could adversely impact the gross margin that we earn on our products.

These increased costs could adversely impact the gross margin that we earn on our products.

Countries may also adopt other protectionist measures that could limit our ability to offer our products.

1 unchanged sentence

It has also initiated tariffs on certain foreign goods and has raised the possibility of imposing significant, additional tariff increases or expanding the tariffs to capture other types of goods.

Although the tariffs that have been initiated to date have not had a material impact on our operating results, to the extent that significant additional tariffs are imposed, depending on the extent of such tariffs, they could have a material impact on our operating results.

Although the tariffs that have been initiated to date have not had a material impact on our operating results, to the extent that significant additional tariffs are imposed including the new tariffs being imposed under the new presidential administration, depending on the extent of such tariffs, they could have a material impact on our operating results.

On February 1, 2025, President Trump signed executive orders imposing tariffs on almost all imports from Canada, Mexico and China, Tariffs on China became effective on February 4, 2025, while Canada and Mexico reached agreements with the U.S.

to delay tariffs until March 4, 2025.

Certain products, such as our baby wipes, are imported from China, our diapers are imported from Mexico and certain other components of our products are sourced from other countries and could be subject to the new tariffs.

The imposition of tariffs in the past have led costs on products from China to increase, including our wipes products, and other new tariffs imposed by the United States could cause costs to increase further, which could lead to price increases on these products, which may not be absorbed by consumers or may lead to decreased demand;

or any such tariffs could require a shift in manufacturing location, which could have an adverse effect on results of operations and could introduce uncertainty, including on product quality, with a new manufacturer.

Any attempt to mitigate the adverse effects of these tariffs may not be successful.

We cannot predict the extent to which the United States or other countries will impose quotas, duties, tariffs, taxes or other similar restrictions upon the import or export of our products in the future, nor can we predict future trade policy or the terms of any renegotiated trade agreements and their impact on our business.

44 unchanged sentences

• announcements or concerns regarding real or perceived quality or health issues with our products or similar products of our competitors;

• adoption of new regulations applicable to the Diapers and Wipes, Skin and Personal Care and Household and Wellness industries or the expectations concerning future regulatory developments;

• adoption of new regulations applicable to our products and industry or the expectations concerning future regulatory developments;

• our involvement in litigation;

4 unchanged sentences

Broad market and industry fluctuations, as well as general economic, political, regulatory and market conditions, may also negatively impact the market price of our common stock, particularly in light of the challenging macroeconomic environment and the related impacts.

If we are unable to maintain listing of our securities on the Nasdaq Capital Market or another reputable stock exchange, it may be more difficult for our stockholders to sell their securities.

Nasdaq requires listing issuers to comply with certain standards in order to remain listed on its exchange.

If we fail to satisfy the continued listing requirements of Nasdaq, such as the minimum closing bid price requirement, Nasdaq may take steps to delist our common stock.

For example, if at any time the bid price of our common stock closes at below $1.00 per share for more than 30 consecutive trading days, we may be subject to delisting from the Nasdaq Capital Market.

If we receive a delisting notice, we would have 180 calendar days to regain compliance (subject to any additional 180-day compliance period which may be available to us), which would mean having a bid price above the minimum of $1.00 for at least 10 consecutive days in the 180-day period.

During this 180-day period, we would anticipate reviewing our options to regain compliance with the minimum bid requirements, including conducting a reverse stock split.

To the extent that we are unable to resolve any listing deficiency, there is a risk that our common stock may be delisted from Nasdaq, which would adversely impact liquidity of our common stock and potentially result in even lower bid prices for our common stock.

On March 5, 2024, the closing price of our common stock was $2.99 per share.

If, for any reason, Nasdaq should delist our securities from trading on its exchange and we are unable to obtain listing on another reputable national securities exchange, such a delisting would likely have a negative effect on the price of our common stock and would impair your ability to sell or purchase our common stock when you wish to do so.

In the event of a delisting, we can provide no assurance that any action taken by us to restore compliance with listing requirements would allow our common stock to become listed again, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below the Nasdaq minimum bid price requirement or prevent future non-compliance with the listing requirements of Nasdaq, each of which could materially adversely affect our stockholders.

Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of our Company more difficult, limit attempts by our stockholders to replace or remove our current management and limit the market price of our common stock.

42 unchanged sentences

An inactive market may also impair our ability to raise capital to continue to fund operations by selling shares and may impair our ability to acquire other companies by using our shares as consideration.

Principal stockholders have substantial control over us and will be able to influence corporate matters.

Based on the number of shares outstanding as of December 31, 2023, our directors, executive officers and stockholders holding more than 5% of our outstanding capital stock, together with their respective affiliates, beneficially owned, in the aggregate, approximately 40.2% of our outstanding capital stock.

As a result, these stockholders will be able to exercise significant influence over all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, such as a merger or other sale of our company or its assets.

For example, these stockholders may be able to control elections of directors, amendments of our organizational documents or approval of any merger, sale of assets or other major corporate transaction.

This may prevent or discourage unsolicited acquisition proposals or offers for our common stock that you may feel are in your best interest as one of our stockholders.

The interests of this group of stockholders may not always coincide with your interests or the interests of other stockholders and they may act in a manner that advances their best interests and not necessarily those of other stockholders, including seeking a premium value for their common stock, and might affect the prevailing market price for our common stock.

Future sales of our common stock in the public market could cause the market price of our common stock to decline.

51 unchanged sentences

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

What changed 10-K

Item 1A. Risk Factors