Item 1A. Risk Factors
Item
1A. Risk Factors
Smaller
reporting companies are not required to provide the information required by this item. Notwithstanding, in addition to risk factors highlighted
in previous reports, the Company adds the following additional risk factor:
The
loss of our largest customers would significantly reduce our revenue and adversely affect our results of operations.
During
the year ended January 31, 2023 two customers represented approximately 37% or our gross revenues and during the year ended January 31,
2022 three customers represented approximately 58% of our gross revenue. The loss of our largest customers would significantly reduce
our revenue, which would have a material adverse effect on our results of operations. We can provide no assurance that these customers
will continue to place orders in the future.
We
depend on the services of key personnel, and may not be able to operate and grow our business effectively if we lose their services or
are unable to attract qualified personnel in the future.
We
rely heavily on our senior management team, due to their broad experience with consumer focused companies, to identify internal expansion
and external growth companies. Our ability to retain senior management and other key personnel is therefore very important to our future
success. We have employment agreements with our senior management, but these employment agreements do not ensure that they will not voluntarily
terminate their employment with us. In addition, our key personnel are subject to non-solicitation and confidential information restrictions.
We do not have key man insurance for any of our current management or other key personnel. The loss of any key personnel would require
the remaining key personnel to divert immediate attention to seeking a replacement. Competition for senior management personnel is intense,
and fit is important to us. Our inability to find a suitable replacement for any departing executive officer or key employee on a timely
basis could adversely affect our ability to operate and grow our business.
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Adverse
developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults or non-performance
by financial institutions or transactional counterparties, could adversely affect our current and projected business operations and its
financial condition and results of operations.
Actual
events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional
counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors
about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems.
For example, on March 10, 2023, Silicon Valley Bank (“SVB”), was closed by the California Department of Financial Protection
and Innovation, which appointed the Federal Deposit Insurance Corporation (“FDIC”), as receiver. Similarly, on March 12,
2023, Signature Bank and Silvergate Capital Corp. were each swept into receivership. Although a statement by the Department of the Treasury,
the Federal Reserve and the FDIC stated that all depositors of SVB would have access to all of their money after only one business day
of closure, including funds held in uninsured deposit accounts, borrowers under credit agreements, letters of credit and certain other
financial instruments with SVB, Signature Bank or any other financial institution that is placed into receivership by the FDIC may be
unable to access undrawn amounts thereunder. If any of our counterparties to any such instruments were to be placed into receivership,
we may be unable to access such funds. In addition, if any parties with whom we conduct business are unable to access funds pursuant
to such instruments or lending arrangements with such a financial institution, such parties’ ability to pay their obligations to
us or to enter into new commercial arrangements requiring additional payments to us could be adversely affected. In this regard, counterparties
to SVB credit agreements and arrangements, and third parties such as beneficiaries of letters of credit (among others), may experience
direct impacts from the closure of SVB and uncertainty remains over liquidity concerns in the broader financial services industry. Similar
impacts have occurred in the past, such as during the 2008-2010 financial crisis.
Inflation
and rapid increases in interest rates have led to a decline in the trading value of previously issued government securities with interest
rates below current market interest rates. Although the U.S. Department of Treasury, FDIC and Federal Reserve Board have announced a
program to provide up to $25 billion of loans to financial institutions secured by certain of such government securities held by financial
institutions to mitigate the risk of potential losses on the sale of such instruments, widespread demands for customer withdrawals or
other liquidity needs of financial institutions for immediate liquidity may exceed the capacity of such program. There is no guarantee
that the U.S. Department of Treasury, FDIC and Federal Reserve Board will provide access to uninsured funds in the future in the event
of the closure of other banks or financial institutions, or that they would do so in a timely fashion.
Although
we assess our banking relationships as we believe necessary or appropriate, our access to funding sources and other credit arrangements
in amounts adequate to finance or capitalize our current and projected future business operations could be significantly impaired by
factors that affect us, the financial institutions with which we have arrangements directly, or the financial services industry or economy
in general. These factors could include, among others, events such as liquidity constraints or failures, the ability to perform obligations
under various types of financial, credit or liquidity agreements or arrangements, disruptions or instability in the financial services
industry or financial markets, or concerns or negative expectations about the prospects for companies in the financial services industry.
These factors could involve financial institutions or financial services industry companies with which we have financial or business
relationships, but could also include factors involving financial markets or the financial services industry generally.
The
results of events or concerns that involve one or more of these factors could include a variety of material and adverse impacts on our
current and projected business operations and our financial condition and results of operations. These could include, but may not be
limited to, the following:
●Delayed
access to deposits or other financial assets or the uninsured loss of deposits or other financial assets;
●Loss
of access to revolving existing credit facilities or other working capital sources and/or the inability to refund, roll over or extend
the maturity of, or enter into new credit facilities or other working capital resources;
●Potential
or actual breach of contractual obligations that require us to maintain letters or credit or other credit support arrangements; or
10
In
addition, any further deterioration in the macroeconomic economy or financial services industry could lead to losses or defaults by parties
with whom we conduct business, which in turn, could have a material adverse effect on our current and/or projected business operations
and results of operations and financial condition. For example, a party with whom we conduct business may fail to make payments when
due, default under their agreements with us, become insolvent or declare bankruptcy. Any bankruptcy or insolvency, or the failure to
make payments when due, of any counterparty of ours, or the loss of any significant relationships, could result in material losses to
us and may material adverse impacts on our business.
Item
1B. Unresolved Staff Comments.
Not
applicable.