Item 1A. Risk Factors
Item
1A – RISK FACTORS
You
should carefully consider the following risk factors and all the other information contained in this annual report in evaluating our
business and investment in our common stock. We have not disclosed general risk factors that may be applicable to any for-profit organization,
such as general economic conditions, interest rates, labor supply and technological changes. If any of these risks occur, our business,
financial condition, results of operations and prospects could be materially and adversely affected. In that case, the market price of
our common stock could decline and you could lose all or part of your investment. Additional risks and uncertainties not presently known
to us or that we currently deem immaterial may also materially harm our business, operating results and financial condition and could
result in a complete loss of your investment.
Risk
Relating to Our Business – Sales and Competition
We
are primarily dependent on one product line for most of our sales.
Most
of the Company’s sales are derived from the sale of TracPipe ® and CounterStrike ® flexible gas piping
systems, including Autoflare ® and AutoSnap ® fittings and a variety of accessories. Sales of our flexible
metal hose for other applications represent a small portion of our overall sales and income. Any event or circumstance that adversely
affects our TracPipe ® or CounterStrike ® flexible gas piping could have a greater impact on our business
and financial results than if our business were more evenly distributed across several different product lines. The effects of such an
adverse event or circumstance would be magnified in terms of our Company as a whole as compared to one or more competitors whose product
lines may be more diversified, or who are not as reliant on the sales generated by their respective flexible gas piping products. Therefore,
risks relating to our TracPipe ® and CounterStrike ® flexible gas piping business – in particular,
loss of distributors or sales channels, technological changes, loss of our key personnel involved in the flexible gas piping product
line, increases in commodity prices, particularly in stainless steel, copper, and polyethylene – could damage our business, competitive
position, results of operations or financial condition.
We
face intense competition in all our markets.
The
markets for flexible metal hose are intensely competitive. There are a number of competitors in all markets in which we operate, and
generally none of these markets have one dominant competitor – rather a large number of competitors exist, each having a proportion
of the total market. One or more of our competitors may develop technologies and products that are more effective, or which may cost
less than our current or future products or could potentially render our products noncompetitive or obsolete. Our prior success has been
due to our ability to develop new products and product improvements and establish and maintain an effective distribution network which
to some extent came at the expense of several competing manufacturers. Our business, competitive position, results of operations or financial
condition could be negatively impacted if we are unable to maintain and develop our competitive products.
We
may not retain our independent sales organizations.
Almost
all the Company’s products and product lines are sold by outside sales organizations. These independent sales organizations or
sales representatives are geographically dispersed in certain territorial markets across the U.S., Canada and elsewhere. These outside
sales organizations are independent of us and are typically owned by the individual principals of such firms. We enter into agreements
with such outside sales organizations for the exclusive representation or distribution of our products, but such agreements are generally
terminable on short notice. At the expiration of the agreement, the agent or distributor may elect to represent a different manufacturer.
As a result, we have no ability to control which flexible metal hose manufacturer any such sales organization may represent or carry.
The competition to retain quality outside sales organizations is also intense between manufacturers of flexible metal hose since it is
these sales organizations that generally can direct the sales volume to distributors and, ultimately, contractors and installers in important
markets across the country, and in other countries in which we operate. The failure to obtain the best outside sales organization within
a particular geographic market can limit our ability to generate sales of our products. While we currently have a fully developed sales
and distribution network of superior outside sales organizations, there can be no assurance that any one or more of the outside sales
organizations will elect to remain with us, or that our competitors will not be able to disrupt our distribution network by causing one
or more of our sales representatives to drop our product lines. Our business, competitive position, results of operation or financial
condition could be negatively impacted if we cannot maintain adequate sales and distribution networks.
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We
are dependent on certain sales channels for a significant portion of our business.
Of
the various sales channels that we use to sell our products, a significant portion of such sales are made through our wholesale stocking
distributors. These and other distributors purchase our products, and stock the goods in warehouses for resale, either to their own local
branches or to end users. Because of the breadth and penetration of the distribution networks, and the range of complementary products
they offer for sale, these wholesale distributors are able to sell large amounts of our products to end users across the U.S. and Canada.
The decision by a major wholesaler distributor to stop distributing our products such as TracPipe ® and CounterStrike ®
flexible gas piping, and to distribute a competitive flexible gas piping product, could significantly affect our business, competitive
position, results of operations or financial condition.
Certain
of our competitors may have greater resources, or they may acquire greater resources.
Some
of our competitors have substantially more resources than are available to us as a stand-alone company. For example, in the CSST market,
two of our competitors are divisions of large corporations with revenues measured in the billions of dollars. These competitors may be
able to devote substantially greater resources to the development, manufacture, distribution, and sale of their products than would be
available to us as a stand-alone company. One or more competitors may acquire several other competitors, or may be acquired by a larger
entity, and through a combination of resources be able to devote additional resources to their businesses. These additional resources
could be devoted to product development, reduced costs in an effort to obtain market share, greater flexibility in terms of profit margin
as part of a larger business organization, increased investment in plant, machinery, distribution and sales concessions. As a stand-alone
company, the resources that may be devoted by us to meet any potential developments by larger, well-financed competitors may be limited.
Our
business may be subject to the impact of Brexit.
The
Company’s main operating subsidiary outside of the U.S., Omega Flex Limited, is headquartered in Banbury, England in the U.K. The
result of the referendum held by the U.K. to withdraw from the European Union (“Brexit”) had created a level of uncertainty
regarding the final terms of that withdrawal for a number of years, until an agreement was reached on December 24, 2020, by the U.K.
and the European Union. While an agreement was reached, uncertainty still exists, and adherence to the new rules regarding border and
customs controls could increase costs on materials imported into the U.K. and finished goods exported from the U.K. In addition, it is
possible that logistical delays created by those controls could delay shipments of materials and supplies into the Banbury manufacturing
plant and could also affect our ability to ship goods to customers outside of the U.K., into the European Union, Africa, and the Near
East. Most of the business of Omega Flex Limited is within the U.K. and should therefore not be unduly disrupted. However, the macroeconomic
effects of Brexit on the economies of the U.K. and the European Union remain partially unknown, and those effects could dampen economic
activity and the overall demand for the Company’s products in those markets. However, it is not expected that increased costs,
logistical delays, nor possible economic declines in those markets would be material to the Company.
Our
business may be subject to macroeconomic effects caused by increased trade tariffs and reduced international trade.
Recent
events have caused various governments around the world to impose increased trade tariffs on imported goods. These increased tariffs
may cause the cost of materials to rise and may add additional expense on exported goods. However, the Company does not believe that
increased tariffs will materially affect the Company’s sales or gross profits, as most of the raw materials and supplies used to
manufacture our products are sourced domestically in the U.S. Further, exports of our flexible gas piping products from our Exton, Pennsylvania
facility are primarily to Canada, which recently agreed to a revised North American trade treaty, and to a lesser extent to the Caribbean
and South America. Sales to Europe, Asia and Africa are primarily handled from our Banbury, England facility, which are not affected
by U.S. trade tariffs and retaliatory tariffs but may be subject to other constraints as discussed in the Brexit risk factor,
above.
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Our
international sales subject us to additional risks that can adversely affect our business, operating results, and financial condition.
During
2022, we derived 5% of our revenue from sales to customers located outside the U.S. Our ability to convince customers to expand their
use of our products or renew their agreements with us is directly correlated to our direct engagement with such customers. To the extent
that we are unable to engage with non-U.S. customers effectively, we may be unable to grow sales to international customers to the same
degree we have experienced in the past.
Our
international operations are subject to a variety of risks and challenges, including:
●
general
economic or geopolitical conditions in each country or region;
●
the
effects of a widespread outbreak of an illness or disease, or any other public health crisis, including the COVID-19 pandemic, in
each country or region;
●
economic
uncertainty around the world; and
●
compliance
with laws and regulations imposed on foreign operations, including the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act,
import and export control laws, tariffs, trade barriers, economic sanctions and other regulatory or contractual limitations on our
ability to sell our products in certain foreign markets, and the risks and costs of non-compliance.
For
example, in response to the continuing conflict between Russia and Ukraine, the U.S. has imposed and may further impose, and other countries
may additionally impose, broad sanctions or other restrictive actions against governmental and other entities in Russia, and such sanctions
or actions could cut off or impede the flow of raw materials for our products, including minerals, such as nickel, that are used in our
stainless steel and copper alloys. Additionally, further escalation of geopolitical tensions could have a broader impact that extends
into other markets where we do business. Any of these risks could adversely affect our international sales, reduce our international
revenues, or increase our operating costs, adversely affecting our business, financial condition, and operating results.
Risk
Relating to Our Business – Manufacturing and Operations
Our
manufacturing plants may be damaged, destroyed or disrupted.
The
majority of the Company’s manufacturing capacity is currently located in Exton, Pennsylvania, where we own two manufacturing facilities
which are in close proximity to each other, and in Banbury, England in the U.K. where we rent a manufacturing facility. On a smaller
scale the Company also manufactures products in Houston, Texas. We do not have any operational manufacturing capacity for flexible metal
hose outside of these locations. We cannot replicate our manufacturing methods at a supplier’s facility due to the confidential
and proprietary nature of our manufacturing process. If one of the manufacturing facilities were destroyed or damaged in a significant
manner or otherwise disrupted for more than a short time, we would likely experience a delay or some interruption of our flexible metal
hose operations. This could lead to a reduction in sales volume if customers were to purchase their requirements from our competitors,
claims for breach of contract by certain customers with contracts for delivery of flexible metal hose by a certain date, and costs to
replace our destroyed or damaged manufacturing capacity. The fittings and accessories for the flexible metal hose are manufactured for
us by suppliers not located in Exton, Pennsylvania, and the Company also has outside warehouses which contain finished goods inventory.
Disruption of or damage to our supply of these items could damage our business, competitive position, results of operations or financial
condition.
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We
are dependent on certain raw materials and supplies that could be subject to volatile price escalation .
As
a manufacturer of flexible metal hose, we must use certain raw materials in the manufacture of the hose. The primary raw material is
stainless steel that is used in the forming of the hose, and various other steel products used in the wire braid overlay over some flexible
metal hoses for additional strength and durability, as well as copper alloy for MediTrac ® CMT. We also use polyethylene
in pellet form for the forming and extrusion of a polyethylene jacket over CSST for use in fuel gas applications, underground installations,
and other installations that require that the metal hose be isolated from the environment. Finally, we also purchase brass and stainless
steel for our proprietary fittings used with the flexible metal hose that provide a mechanical means of attaching the hose to an assembly
or junction. We attempt to limit the effects of volatile raw material prices, and to ensure adequate and timely supply of material, by
committing to annual purchase contracts for the bulk of our steel and polyethylene requirements, and for our fitting requirements. The
contracts typically represent a significant portion of the Company’s annual planned usage and are set at a designated fixed price
or a range of prices. These agreements sometimes require the Company to accept delivery of the commodity in the quantities committed,
at the agreed upon prices. Transactions in excess of the pre-arranged commitments are conducted at current market prices at the Company’s
discretion. We have identified multiple qualified vendors to produce or manufacture our critical purchase requirements. The Company does,
however, tend to rely on one to three sources for each or our primary components to leverage the relationship and pricing. Therefore,
there is no assurance that the Company would be able to eliminate all or most of the adverse effects of a sudden increase in the cost
of materials or key components, or that the loss of one or more of our key sources would not lead to higher costs or a disruption in
our business, which could damage our business, competitive position, results of operations or financial condition.
If
we were to lose the services of one or more of our senior management team, we may not be able to execute our business strategy.
Our
future success depends in large part upon the continued service of key members of our senior management team. The senior executives are
critical to the development of our products and our strategic direction and have a keen knowledge of business operations and processes.
Their unique abilities, experience and expertise cannot be easily duplicated or replaced. Although, as much as possible, senior executives
strive to educate and develop other layers of staff for succession planning purposes, and the recent retirement of senior executives
and transition of their roles has gone smoothly, the loss of any of our senior management could seriously harm our business.
Risk
Relating to Our Business – Legal
Susceptibility
of litigation and significant legal costs or settlements.
In
the ordinary and normal conduct of the Company’s business, it is subject to periodic lawsuits, investigations, and claims (collectively,
the “Claims”). The Company has continued to receive repeat pattern Claims relating to our flexible gas piping products, although
the pace of new Claims has generally declined over the last several years. While the Company does not believe the Claims have legal merit,
and has successfully defended itself vigorously against such Claims, there is no guarantee that the pace of claims will not increase
or subside. Any significant increase in the number of Claims, the financial magnitude of Claims brought against the Company, the costs
of defending the Claims, particularly under higher retentions of the Company’s current product liability insurance policies, could
have a detrimental and material impact on the Company’s business, competitive position, results of operations or financial condition.
If
we are not able to protect our intellectual property rights, we may not be able to compete as effectively.
We
possess a wide array of intellectual property rights, including patents, trademarks, copyrights, and applications for the above, as well
as trade secrets, manufacturing know-how, and other proprietary information. Certain of these intellectual property rights form the basis
of our competitive advantage in the marketplace through a superior product design, a superior business process, superior manufacturing
methods or other features that provide an advantage over our competitors. Intellectual property rights are sometimes subject to infringement
or misappropriation by other organizations, and failing an amiable resolution, we may be forced to resort to legal proceedings to protect
our rights in such intellectual property.
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In
the past, the Company has needed to protect itself and resort to legal action, in one instance regarding a trade secret, and other instances
where we sued flexible gas pipe competitors for infringement on one or more of our U.S. patents covering our various piping and/or fitting
products. In each instance, the Company received favorable rulings, thus solidifying the validity of our intellectual property. Although
the Company has had past success, the results we may obtain from resorting to any such legal proceedings are never assured, and it is
possible that an adverse decision may be delivered in any particular proceeding. As a result, we may not be able to retain the exclusive
rights to utilize and practice such intellectual property rights, and one or more of our competitors could utilize and practice such
intellectual property rights. This development may lessen our competitive advantage vis-à-vis one or more competitors, and lead
to a reduction in sales volume in one or more product lines, a reduction in profit margin in such product lines, or both, which would
damage our business, competitive position, results of operations or financial condition.
Risk
Relating to Our Business – General and Macroeconomic
Our
business may be subject to the supply and availability of fuel gas supplies and infrastructure.
With
increasing awareness of the effect of human activities on climate change, there has been a focus on transitioning energy and heating
in buildings away from fossil fuels, such as natural gas and liquid propane, mainly to electric. Several municipalities in the U.S. have
announced policy decisions to move away from fossil fuel applications in the future, including prohibiting the new installation of appliances
fueled by natural gas or liquid propane. Although there are significant technical and economic hurdles, it is possible that a large scale
movement, in individual cities and states or on a federal level, away from fossil fuels may increase in the future. Such moves could
reduce the demand for our flexible gas piping products that carry natural gas or liquid propane from the building’s meter to the
gas-fired appliance, which represent a major part of the Company’s sales and net profits. As a result, it is possible in the future
that proposals to limit or eliminate the use of fossil fuels could adversely impact the financial results of the Company, perhaps materially.
Our
TracPipe ® and CounterStrike ® flexible gas piping products are used to convey fuel gas, primarily natural
gas, but also propane, within a building from the exterior wall of the building to any gas-fired appliances within the building. Because
those products are used in the transmission of fuel gas, the applications are limited to geographic areas where such fuel gas is available.
Certain geographic areas of the U.S. and other countries do not have the infrastructure to make natural gas available. Other types of
fuel gas may be used in areas where there are no natural gas pipelines, but these alternate fuel gas sources have other distribution
issues that may constrict their availability. Our prospects for future growth of the TracPipe ® and CounterStrike ®
products are largely limited to those areas that have natural gas transmission lines available for use in residences and commercial
buildings.
We
may substantially increase our debt in the future or be restricted from accessing funds.
We
are currently not carrying any long-term debt, although the Company has a line of credit facility available for use as described in
Note 6, Line of Credit and Other Borrowings, to the Consolidated Financial Statements included in this report. We may consider borrowing funds for
purposes of working capital, capital purchases, research and development, potential acquisitions, and business development. If we do
use credit facilities, interest costs associated with any such borrowings and the terms of the loan could potentially adversely
affect our profitability. Additionally, the current line of credit has debt covenants associated with it which may restrict the
level of borrowing the Company may incur. Lack of access to financing or to reasonable terms could damage our business, competitive
position, results of operations or financial condition.
Changes
in the method pursuant to which the SOFR rates are determined and potential phasing out of LIBOR and adoption of SOFR after 2022 may
affect our financial results.
Borrowings
under our line of credit facility bear interest at variable rates based on LIBOR. The U.K.’s Financial Conduct Authority, which
regulates LIBOR, has announced that it intends to stop encouraging or requiring banks to submit rates for the calculation of LIBOR rates
after 2022, and it is unclear if LIBOR will cease to exist or if new methods of calculating LIBOR will evolve. The Federal Reserve Bank
formed the Alternative Rates Committee (ARRC) to consider options for transitioning away from LIBOR. The ARRC selected the Secured Overnight
Financing Rate (SOFR) as an appropriate replacement. SOFR is based on transactions in the overnight repurchase markets, which reflects
a transaction-based rate on a large number of transactions, better reflecting current financing costs. If LIBOR ceases to exist or if
the methods of calculating LIBOR change from their current form, or if new methods are implemented such as SOFR, interest rates on our
current or future debt obligations may be adversely affected.
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Our
business may be subject to varying demands based on market interest rates.
Our
TracPipe ® and CounterStrike ® flexible gas piping products are used in the construction industry, both in
residential, commercial, and industrial segments, for the piping of fuel gas within a building. The demand for new or remodeled construction
in the construction industry – and in particular the residential construction industry – is susceptible to fluctuations in
interest rates charged by banks and other financial institutions as well as consumer demand. The purchasers of new or remodeled construction
generally finance the construction or acquisition of the residential, commercial, or industrial buildings, and increases in the interest
rates on such financing raise the acquisition cost of the potential purchaser. Interest rates have been increasing and there is no guarantee
that they will not continue to increase in the future. If costs continue to increase, a higher number of potential buyers may not be
able to support the level of financing under a higher interest rate environment. Increased acquisition costs may lead to a continued
decline in the demand for new or remodeled construction, and as a result may also lead to a continued, reduced demand for our products
used in the construction industry, which could damage our business, competitive position, results of operations or financial condition.
Our
business may be subject to cyclical demands.
The
demand for our products may be subject to cyclical demand in the markets in which we operate. Our customers who use our products in industrial
and commercial applications are generally manufacturing capital equipment for their customers. Similarly, our TracPipe ® and
CounterStrike ® flexible gas piping products are used primarily in residential construction, both in single-family buildings,
and in larger multi-unit buildings. Should there be any change in factors that affect the rate of new residential construction, our growth
rate would likely be impacted. To the extent that interest rates increase, in conjunction with an economic cycle or as part of the general
economic conditions in the U.S. or abroad, the demand for our products in such applications may decrease as well, which could damage
our business, competitive position, results of operations or financial condition.
Our
business may be subject to seasonal or weather related factors.
The
demand for our products may be affected by factors relating to seasonal demand for the product, or a decline in demand due to inclement
weather. Our TracPipe ® and CounterStrike ® flexible gas piping products are installed in new or remodeled
buildings, including homes, apartment buildings, office buildings, warehouses, and other commercial or industrial buildings. Generally,
the rate of new or remodeled buildings in the U.S. and in the other geographic markets in which we are present decline in the winter
months due to the inability to dig foundations, challenges at the job site relating to snow, or generally due to low temperatures and
stormy weather. As the rate of construction activity declines during the winter, the demand for our corrugated stainless steel tubing
may also decrease or remain static.
Our
business may be subject to the impact of currency volatility.
The
Company has operations in the U.K. and France, and does business transactions elsewhere in the world outside of the U.S. While the magnitude
of these transactions outside of the U.S. have thus far not been significant, and typically not in currencies of high volatility, it
is possible that they could be material. Events such as Brexit, as described above, or other instances of political and economic turmoil
or uncertainty, could create a weakened British Pound (“BP”) or Euro in comparison to other currencies. A weakened BP or
Euro would in turn have a direct negative impact, as we would experience losses when settling transactions in other currencies, and experience
unfavorable results due to the translation of financial statements with a lower exchange rate. During 2022 and 2021 there was not any
notable impact due to currency volatility, but going forward, it is possible that the BP, Euro, and other currencies that we engage in
may materially impact the financial position, operations, and liquidity of the Company.
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A
cyber security incident or other technology disruption could harm us.
We
face certain security threats and technology disruptions, including threats to our information technology (“IT”) infrastructure,
attempts to gain access to our or our customers’ proprietary or confidential information, threats of terrorism events, and failures
of our technology tools and systems. Our IT networks and related systems are critical to the operation of our business and essential
to our ability to successfully perform day-to-day operations. Cybersecurity threats, which include, but are not limited to, computer
viruses, spyware, and malware, attempts to access information, denial of service attacks and other electronic security breaches, are
persistent and evolve quickly. In general, such threats have increased in frequency, scope, and potential impact in recent years. Further,
a variety of technological tools and systems, including both company-owned IT and technological services provided by outside parties,
support our critical functions. These technologies, as well as our products, are subject to failure and the user’s inability to
have such technologies properly supported, updated, expanded, or integrated into other technologies and, in certain cases, may contain
open source and third-party software which may unbeknownst to us contain defects or viruses that pose unintended risks. These risks,
if not effectively mitigated or controlled, could materially harm our business or reputation. While we believe that we have implemented
appropriate measures and controls, there can be no assurance that such actions will be sufficient to prevent disruptions to critical
systems, unauthorized release of confidential information or corruption of data.
The
security measures we have implemented may become subject to third-party security breaches, employee error, malfeasance, faulty password
management or other irregularities. For example, third parties may attempt to fraudulently induce employees or customers into disclosing
usernames, passwords, or other sensitive information, which may in turn be used to access our IT systems. These security systems cannot
provide absolute security. To the extent we were to experience a breach of our systems and were unable to protect sensitive data, such
a breach could materially damage business partner and customer relationships and curtail or otherwise impact the use of our IT systems.
Moreover, if a security breach of our IT systems affects our computer systems or results in the release of personally identifiable or
other sensitive information of customers, business partners, employees and other third parties, our reputation and brand could be materially
damaged, use of our products and services could decrease, and we could be exposed to a risk of loss, litigation, and potential liability.
Such an event could require significant management attention and resources, negatively impact our reputation among our customers and
the public, which could have a material adverse effect on our business, financial condition, and results of operations.
The
ongoing COVID-19 pandemic may adversely affect the business.
The
Company has not yet seen a material impact from the COVID-19 pandemic on its business, financial position, liquidity, or ability to service
customers or maintain critical operations. However, some parts of the world are continuing to see a rise in COVID-19 cases and hospitalizations,
and it is possible that new, more virulent strains and variants of COVID-19 may emerge and lead governments and private sectors to re-institute
quarantine and trade restrictions, which could adversely impact market conditions. The Company will continue to monitor the impact of
the COVID-19 pandemic on its business, including how it has impacted and will impact the Company’s employees, customers, suppliers,
and distribution channels. The Company could face liquidity shortages, weaker product demand from its customers, disruptions in its supply
chain, and/or staffing shortages in its workforce in the future due to the direct and indirect effects of the COVID-19 pandemic.
The
impact of the COVID-19 pandemic may also exacerbate other risk factors in this Item 1A, any of which could have a material effect on
the Company. For example, the risks associated with potential cybersecurity threats may be magnified given the increase in the number
of Company employees working remotely using personal electronic devices and home internet connections.
Various
other general and macroeconomic issues may impact the business.
Conflicts,
wars, natural disasters, infectious disease outbreaks (see COVID-19 pandemic above), active shooter or other workplace violence, or terrorist
acts could also cause significant damage or disruption to our operations, employees, facilities, systems, suppliers, supply chain, distributors,
resellers, or customers in the U.S. and internationally for extended periods of time and could also affect demand for our products.
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Risks
Associated with Our Common Stock
The
concentration of ownership of our common stock could impact on its market price.
As
of December 31, 2022, approximately 68% of our issued and outstanding common stock was owned or controlled by certain of our directors
and officers and their respective affiliates, with the largest holders being: The Estate of John E. Reed, Stewart B. Reed, Kevin R. Hoben
and Mark F. Albino. Stewart B. Reed currently serves as Vice Chairman of the Board of Directors. Mr. Hoben and Mr. Albino also serve
on the Board of Directors, with Mr. Hoben being the Chairman of the Board and Chief Executive Officer of the Company. This concentration
of ownership may have the effect of reducing the volume of trading of the common stock on the NASDAQ. A decrease in trading volume could
result in lower prices for the common stock because there is not a sufficient supply of shares to create a vibrant market for our shares
on the NASDAQ, or inversely could drive the common stock price higher when demand exceeds supply.
This
concentration of ownership of common stock could exert significant influence over matters requiring approval by our shareholders, including
the election of directors and the approval of mergers or other business combinations. This concentration also could have the effect of
delaying, preventing, or deterring a change in control of the Company.
Item
1B – UNRESOLVED STAFF COMMENTS
None.