What changed in this filing

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Item 1A. Risk Factors

2022-05-10 compared with 2021-11-09 · 32 added, 525 removed, 0 unchanged (100% of the section changed)

as described below, there have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K filed

with the SEC on March 11, 2021 as amended by Form 10-K/A filed on May 10, 2021.The disclosure of risks identified below does not imply

that the risk has not already materialized.

Lack of availability and quality of raw

materials, labor, and shipping services, or increases in the cost of such inputs, could cause and has caused delays that could result

in our inability to provide goods to our customers or could increase our costs, either of which could decrease our earnings.

In manufacturing products,

we use various commodity components, such as polyurethane foam, oil, our spring units, ingredients for our Hyper-Elastic Polymer material,

our water-based adhesive and other raw materials.

Because we are dependent on outside suppliers for our raw materials, lack of availability,

and quality could have a negative effect on our cost of sales and our ability to meet our customers’ demands.

Competitive and marketing

pressures may prevent us from passing along price increases to our customers, and the inability to meet our customers’ demands could

cause us to lose sales.

Some components, such as foam

and spring units, are widely used in our industry.

Shortages in such components, due to any reason including increase in demand, weather

events, supply chain difficulties within the supplier or otherwise, could adversely affect our production capacity and financial results.

If we were unable to obtain raw materials and components from suppliers, we would have to find replacement suppliers.

Any new arrangements

for raw materials and components might not be on favorable terms, if we are able to enter into new arrangements at all.

If a supplier

for a component failed to supply such component in required amounts this could significantly interrupt production and increase costs.

Even if we are able to obtain

raw materials and other production inputs in a timely manner, supply chain constraints, inflation, and other factors may increase the

costs of shipping, raw materials, labor, and other production and operational resources.

We have experienced and expect to continue to

experience increases in the cost of core materials and labor needed to manufacture our products.

Such cost increases could adversely impact

our production capacity and efficiency and reduce our gross margins and earnings.

The ongoing COVID-19 pandemic, including measures taken in response

by governments and businesses worldwide to contain its spread, and general economic conditions have adversely impacted and are expected

to continue to adversely impact global supply chain, manufacturing, and logistics operations.

Shipping and freight costs and delays have

also been increasing as port closures, port congestion, and shipping container and ship shortages have increased over the last several

To the extent the COVID-19 pandemic and other events result in continuation or worsening of manufacturing and shipping delays

and constraints, our suppliers of raw materials and other components may have difficulty obtaining and providing the materials we require

to manufacture our products or may increase the costs of such materials, which could adversely affect our earnings and our ability to

acquire and maintain adequate inventory and meet demand for our products.

Any significant delay or interruption in our supply chain, or

our inability to obtain substitute components or materials from alternate sources at acceptable prices in a timely manner, could impair

our ability to meet the demand of our customers and could harm our business.

Our future growth and profitability depend,

in part, upon our ability to achieve and maintain sufficient production capacity to meet customer demands.

We manufacture our mattresses

using our proprietary and patented Mattress Max machinery to make our Hyper-Elastic Polymer cushioning material.

Because these

machines are proprietary and we do not yet have a long history of their maintenance needs, we may not be able to sufficiently maintain

them for operation at full capacity or at all when needed.

We have experienced unexpected maintenance issues following a shutdown of these

machines that took longer to bring them up to full operating capacity then what we expected.

Also, because of the unique features of our

Mattress Max machines, and due to continuing improvements to these machines, new machines are not readily available and must be constructed

which takes time.

We also have experienced inefficiencies in sourcing of materials and production of finished products.

We have taken

steps to improve our processes and capabilities, but if we are unable to maintain our improvements and continue our improvement initiatives

to increase efficiencies, we may not be able to keep up with demand which would harm our business.

If we are unable to construct new Mattress

Max machines and implement them into our production process in a timely manner, if our existing Mattress Max machines are unable to function

at the desired capacity, or if we are unable to develop replacements for the existing Mattress Max machines if such replacements should

become necessary, our production capacity may be constrained and our ability to respond to customer demand may be adversely impacted.

We manufacture mattresses and other products using components provided by third-party suppliers.

If those third-party suppliers are unable

to provide us with such components or if our assembly capacity is insufficient, our ability to respond to customer demand may be adversely

This would negatively impact our ability to grow our business and achieve profitability.

Disruption of operations in our manufacturing

facilities, including as a result of, among other things, workplace injuries, pandemics or natural disasters, has and could increase our

costs of doing business or lead to delays in shipping our products and could materially adversely affect our operating results and our

ability to grow our business.

We have three manufacturing

plants, which are located in Alpine, Utah, Grantsville, Utah, and McDonough, Georgia.

We began operations on March 3, 2021 in McDonough,

In the future we may also enter into leases for additional manufacturing plants.

The disruption of operations

of our manufacturing facilities for a significant period of time, or even permanently, or disruptions to the planned further build-out

of the Georgia facility such as through a closure related to the COVID-19 pandemic or the loss of a lease, may increase our costs of doing

business and lead to delays in manufacturing and shipping our products to customers and could materially and adversely affect our operating

results and our ability to grow our business.

In addition, the occurrence of workplace injuries or other industrial accidents at one or

more of our manufacturing plants has required, and may require in the future, that we suspend production or modify our operations, which

could lead to delays in manufacturing and shipping our products to customers.

Likewise, acts of workplace violence may require us to temporarily

suspend production or modify our operations.

Such delays could adversely affect our sales, customer satisfaction, profitability, cash

flows, liquidity and financial condition.

Because two of our currently operating manufacturing plants are located within the same geographic

region, regional economic downturns, natural disasters, closures due to COVID-19, the unavailability of utilities as a result of climate

events or otherwise, or other issues could potentially disrupt a significant portion of our manufacturing and other operating activities,

which could adversely affect our business.

Our Utah facilities are near earthquake fault lines and our Georgia facility is located in

an area that may be subject to hurricanes;

such natural disasters in these areas could disrupt manufacturing and other operating activities,

which could adversely affect our business.

The ongoing COVID-19 pandemic and responses

thereto have adversely affected and may continue to adversely affect aspects of our business, including, among other things, our supply

chain, workforce, and operations.

The COVID-19 pandemic has

resulted in far-reaching economic and financial disruptions that have adversely affected, and are likely to continue to adversely affect,

the Company’s business, financial condition, capital, liquidity and results of operations.

federal government, U.S.

and many local jurisdictions have issued at various times, and others in the future may issue, “shelter-in-place” orders,

quarantines, mandatory vaccinations, executive orders and similar government orders, restrictions, and recommendations for their residents

and employers within their jurisdictions to control the spread of COVID-19.

Such orders, restrictions and recommendations, and the perception

that additional orders, restrictions or recommendations could occur, have resulted in widespread closures of businesses not deemed “essential,”

work stoppages, slowdowns and delays, supply chain constraints (including, for example, shipping delays, capacity constraints, and supply

shortages), work-from-home policies, travel restrictions, cancellation of events and decreased employee satisfaction, as well as increased

volatility in stock prices, among other effects.

While certain jurisdictions may ease some restrictions, we cannot be certain that other

jurisdictions will do so or that eased restrictions are permanent.

Furthermore, many jurisdictions have experienced a resurgence in COVID-19

cases, which has prompted governments to reinstate previously scaled back restrictions and propose new restrictions.

If other jurisdictions

experience a resurgence in COVID-19 cases, they may also prolong restrictions or adopt additional restrictions that could negatively affect

our business, including, but not limited to, requiring us to close our manufacturing facilities or to require our employees to be vaccinated

including those employees who are concerned about being vaccinated as required by federal, state or local rule or regulation.

policies in the United States regarding the government response to the COVID-19 pandemic may further change.

We continue to monitor our

operations and government mandates and may elect or be required to temporarily close our offices, manufacturing plants or Company showrooms

to protect our employees, and limit our access to customers and limit customer use of our products as they are required to prioritize

resources to address the public healthcare needs arising from the COVID-19 pandemic.

The disruptions to our activities and operations

may negatively impact our business, operating results and financial condition.

There is a risk that government actions, or lack thereof,

will not be effective at containing COVID-19, and that government actions or inactions, including the orders and restrictions described

above and premature lessening of those restrictions, that are intended to contain the spread of COVID-19 while also minimizing harm to

the economy, will have a devastating negative impact on the world economy at large, in which case the risks to our sales, operating results

and financial condition described herein would be elevated significantly.

The duration of the COVID-19

pandemic’s impact on our business may be difficult to assess or predict.

The widespread pandemic has resulted, and may continue

to result for an extended period, in significant disruption of global financial markets, and may restrict our ability to access capital,

which would negatively affect our liquidity.

While we have been able to reverse some previous actions undertaken, such as, among others,

temporarily deferring capital expenditures, furloughing certain employees, and temporarily deferring compensation for our senior executives,

we may be required to take such actions again, or take additional actions, if there is a resurgence of COVID-19 cases or reinstatement

of government restrictions.

As a result of such actions or restrictions, we may be unable to complete capital expenditure projects or

investments in the future, which would limit our ability to grow our business, and our results of operations and financial condition will

be adversely affected.

Further, quarantines or government

reaction or shutdowns for COVID-19 could disrupt our supply chain.

Travel and import restrictions may also disrupt our ability to manufacture

or distribute our products.

Any import or export or other cargo restrictions related to our products or the raw materials used to manufacture

our products would restrict our ability to manufacture and ship products and harm our business, financial condition and results of operations.

Our key personnel and other employees could also be affected by COVID-19, potentially reducing their availability.

In addition, the government

responses to COVID-19 or the procedures we take to mitigate its effect on our workforce could reduce the efficiency of our operations

or prove insufficient to mitigate the adverse impact of COVID-19 on our business.

We may delay or reduce certain capital spending and

related projects until the travel and logistical impacts of COVID-19 are lifted, which could delay the completion of such projects.

While many initial quarantines and other government restrictions have

been scaled back, there is risk that we will be unable to continue normal production and operations, due to, among other things, disruptions

and delays in our supply chain, government relief programs that enable production workers to remain out of the workforce, and difficulties

in ramping up our own operations.

Quarantines and other restrictions may also be reestablished in response to further outbreaks of COVID-19

or its variants.

We may also experience disputes with our suppliers and/or customers as a result of such difficulties.

Further, there

may be subsequent outbreaks of COVID-19 that could disrupt our operations.

In addition, as employees return to work, we may face claims

by such employees or regulatory authorities that we have not provided adequate protection to our employees with respect to the spread

of COVID-19 at our facilities.

The global outbreak of COVID-19

continues to rapidly evolve.

The ultimate impact of the COVID-19 outbreak is highly uncertain and subject to change.

We do not yet know

the full extent of potential delays or impacts on our business or the global economy as a whole.

We do not yet know the impact that vaccines

may have in mitigating or ending the outbreak of COVID-19, or how the availability of such vaccines may affect our work force.

do not know the impact that government mandated vaccine policies for employers will have on our workforce.

However, these effects could

have a continuing material impact on our operations, sales and ability to continue as a going concern.

To the extent the COVID-19 pandemic

adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in

this “Risk Factors” section, such as those relating to our level of indebtedness, our need to generate sufficient cash flows

to service our indebtedness and our ability to comply with the covenants contained in the agreements that govern our indebtedness.

Our manufacturing processes involve the

use of heavy machinery and equipment, which exposes us to potentially significant financial losses and reputational harm due to workplace

injuries or industrial accidents that may occur at our facilities.

Our manufacturing processes

involve the use of heavy machinery and equipment and are subject to risks involving workplace injuries, mechanical failures, and industrial

accidents, including, among other things, personal injury or death resulting from such incidents at our manufacturing plants.

accident, mechanical failure, industrial accident or any similar problem involving any one or more of our facilities has required, and

may require in the future, that we suspend production at one or more of our manufacturing plants, which could lead to delays in manufacturing

and shipping our products and adversely affect our business and results of operations.

The occurrence of such incidents, or any perceived

insufficiency in our response to any such deficiency or problem, could also adversely and materially affect our reputation.

unable to meet workplace safety standards or, if our employees or customers perceive us having a poor safety record, it could materially

impact our ability to attract and retain new employees and our reputation with our customers could suffer, which could adversely affect

our business and results of operations.

In 2021, we experienced an

incident involving our manufacturing equipment that resulted in the death of one of our employees.

As a result, we shut down our manufacturing

equipment while we evaluated the safety of our manufacturing equipment and identified and implemented safety improvements.

once safety improvements were implemented and manufacturing resumed, we experienced unanticipated

mechanical and maintenance issues while ramping up to normal production.

These delays in production limited our ability to fill

customer orders, which has adversely affected our financial results and relationships with customers, including wholesale partners delaying

when they started or intend to start ordering products again.

Other incidents could result in further production delays, which could adversely

affect our operating performance and reputation with our customers.

While we have lowered our risk of future safety incidents by committing

significant financial resources and time to implementing safety improvements, these safety improvements may cause our production output

to decrease and could materially adversely affect our operating results and our ability to grow our business.

The occurrence of such incidents has resulted in and could in the future

result in investigations by or the imposition of fines from regulatory authorities or require us to implement corrective actions to address

the causes of such incidents, which could require the expenditure of significant resources and may adversely affect our financial condition

and operations.

Further, the occurrence of such incidents may result in litigation, including personal injury or workers’ compensation

claims, which could also adversely affect our financial condition and reputation.

While we maintain insurance coverage for certain types

of losses, such insurance coverage may be insufficient to cover all losses that may arise.

We have in some instances kept excess amounts

of raw material inventory and some finished goods inventory, which could be susceptible to shrinkage that may harm our ability to use

or sell such inventory and may adversely impact our profitability.

Although we attempt to maintain

only the necessary amounts of raw material inventory on hand, in some instances we have accumulated excess amounts of raw materials inventory.

We also have accumulated in the past excess amounts of some finished goods inventory, and we may again have excess amounts of some of

our inventory.

All such excess inventory is subject to shrinkage from destruction, theft, obsolescence and factors that render such inventory

unusable or unsellable, and we have lost inventory for such reasons.

Excessive inventory also takes warehouse space that prevents efficient

use for other activities.

While we take efforts to right-size all raw materials and finished goods inventory, if our efforts

are not successful, we could continue to experience excess amounts of some items of raw materials and finished goods and related shrinkage

and inefficiencies that could adversely impact our cash flow, margins and profitability.

As a result of production

delays earlier this year that limited our ability to fill customer orders, many of our wholesale partners had to adjust their business

plans due to the disruption this caused them and they stopped ordering the volume of products we had anticipated, and has taken longer

to ramp to volumes that predated the production delays.

Despite our ability to again produce enough products to meet the needs of our

wholesale customers, expected orders were not received at the levels we anticipated, and it is unknown when they will be received, which

could leave us with a larger than desired inventory of finished mattress products that we are ready to deliver.

Until we receive orders

and are able to deliver these products, they are subject to the risks associated with holding excess inventory.

If this occurs, this also

could unfavorably impact our cash flow and available working capital and could increase our accounts receivables when orders are received

and filled in accordance with payment terms with our wholesale customers.

Our business could

suffer if we are unsuccessful in making, integrating, and maintaining commercial agreements, strategic alliances, and other business relationships.

successfully operate our business, we rely on commercial agreements and strategic relationships with suppliers, service providers and

certain wholesale partners and customers.

As we grow, we may acquire other businesses to incorporate into our operations.

These arrangements

can be complex and require substantial infrastructure capacity, personnel, and other resource commitments.

Further, our business partners

may have disruptions in their businesses or choose to no longer do business with us and the impact of such disruption or choices could

be magnified to the extent such business partners represent a significant part of our business.

We may not be able to implement, maintain,

or develop the components of these commercial relationships.

Moreover, we may not be able to enter into additional commercial relationships

and strategic alliances on favorable terms or at all.

wholesale relationships may from time to time be terminated by us or our partners, or the terms of such relationships may be amended or

As a result of such terminations, we would lose sales previously generated through such relationships, which could have a material

adverse impact on our net sales, profitability and financial position.

Disputes with wholesale partners also may arise related to such

relationships, or any terminations of related agreements, which could cause us to incur expenses, delay our receipt of amounts owed to

us, interfere with our relationship with other retailers, subject us to liabilities and distract us from our strategic objectives.

our agreements terminate or relationships unwind, we may be unable to renew or replace these agreements on comparable terms, or at all,

and the loss of sales from such relationships could harm our business.

We may in the future enter into amendments on less favorable terms

or encounter parties that have difficulty meeting their contractual obligations to us, which could adversely affect our operating results.

present and future services agreements, other commercial agreements, and strategic relationships and acquisitions create additional risks

failure to effectively integrate acquisitions;

disruption of our ongoing business, including loss of management focus on existing businesses;

impairment of other relationships;

variability in revenue and income from entering into, amending, or terminating such agreements or relationships;

difficulty integrating under the commercial agreements.

have entered into arrangements with several wholesale partners through which we sell certain of our products in their retail stores.

anticipate increasing the number of these partnerships.

Our relationships with our wholesale partners may not be profitable to us or may

impose additional costs that we would not otherwise incur under our DTC operations.

Our wholesale partners may choose not to continue

doing business with us or may choose to reduce the amount of our products they order, which would result in a corresponding loss of revenue.

Our wholesale partners may experience their own business disruptions, including for example bankruptcy, that could affect their ability

to continue to do business with us.

Our wholesale partners may engage in conduct that could breach the contractual rights we owe other

wholesale partners or interfere with their other legal rights.

Our wholesale partners may compete against us in DTC or other channels

that are important to us and may erode our business in such channels.

Further, maintaining these relationships may require the commitment

of significant amounts of time, financial resources and management attention, and may result in prohibitions on certain sales channels

through exclusivity requirements, which may adversely affect other aspects of our business.

have opened and plan to continue to open a growing number of Company showrooms in cities across the U.S.

Our business is expanding into

additional Company showrooms which, like our online e-commerce retail store, may compete more directly with our wholesale partners

for customers.

In our effort to make our products available to consumers in multiple retail channels, there is the risk that sales may

diminish in other channels, costs may be incurred without an increase in overall sales and our wholesale partners may no longer carry

our products.

Managing an omni-channel distribution strategy, including the relationships with business partners in each channel, may

require significant amounts of time, resources and attention which may adversely affect other aspects of our business.

We attempt to maintain only the necessary

amounts of raw material inventory and products, which could leave us vulnerable to shortages in supply of components and products that

may harm our ability to satisfy consumer demand and may adversely impact our sales and profitability.

We attempt to maintain only

the necessary amounts of products and raw material inventory on hand, which could leave us vulnerable to shortages in supply of products

or components that may harm our ability to satisfy consumer demand and may adversely impact our sales and profitability.

Lead times for

ordered components and products may vary significantly, especially as we source some of our materials and products from China or other

Our business may be harmed by legal, regulatory, economic, political, health concerns and unforeseen risks associated with

international trade in those countries.

Moreover, we may experience increased costs in sourcing Chinese materials as a result of the uncertain

status of the U.S.-China trade relationship or may experience related disruption if we seek to replace Chinese suppliers with suppliers

in other countries.

In addition, some components used to manufacture our products are provided on a sole source basis.

Any unexpected

shortage of products or materials caused by any disruption of supply or an unexpected increase in the demand for our products, could lead

to delays in shipping our products to customers.

Any such delays could adversely affect our sales, customer satisfaction, profitability,

cash flows and financial condition.

We rely upon several key suppliers

that are, in some instances, the only source of supply currently used by us for particular products, materials, components or services.

A disruption in the supply or substantial increase in cost of any of these products or services could harm our sales, profitability, cash

flows and financial condition.

We currently obtain all of

the raw materials and components used to produce our mattresses, pillows and cushions from outside sources.

In some cases, we have chosen

to obtain these materials and components from suppliers who serve as the only source of supply, or who supply the vast majority of our

needs of the particular material or component.

While we believe that these materials and components, or suitable replacements, could be

obtained from other sources, in the event of a disruption or loss of supply of relevant materials or components for any reason, we may

not be able to find alternative sources of supply, or if found, may not be found on comparable terms.

In addition, a change in the financial

condition of some of our suppliers could impede their ability to provide products to us in a timely manner.

If our relationship with the

primary supplier of our mineral oil is terminated, we could have short-term difficulty in replacing this source since there are relatively

few other suppliers presently capable of supplying the local volume that we would need in a short period of time.

In addition, shipping and

freight delays have also been increasing as port closures, port congestion, and shipping container and ship shortages have increased over

the last several months.

These events, combined with the impacts of the ongoing COVID-19 pandemic, could result in manufacturing and shipping

delays and constraints and limit the ability of our suppliers to provide raw materials and other components in a timely manner, which

could adversely affect our ability to acquire and maintain adequate inventory and meet demand for our products.

Shipping delays could

also adversely affect our ability to deliver products to our customers in a timely manner, which could harm our business.

Our success is highly dependent on our ability to provide timely delivery

on a cost-effective basis to our customers, and any disruption in our delivery capabilities or our related planning and control processes

may adversely affect our operating results.

An important part of our success

is due to our ability to deliver our products to our customers in a timely manner.

This in turn is due to our successful planning and

distribution infrastructure, including ordering, transportation and receipt processing, the ability of our suppliers to meet our distribution

requirements and the ability of our contractors to meet our delivery requirements.

Our ability to maintain this success depends on the

continued identification and implementation of improvements to our planning processes, distribution infrastructure and supply chain.

also need to ensure that our distribution infrastructure and supply chain keep pace with our anticipated growth and increased product

The cost of these enhanced processes could be significant and any failure to maintain, grow or improve them could adversely affect

our operating results.

We rely on common carriers

and freight forwarders to deliver our products to customers on a timely, convenient, and cost-effective basis.

We also rely on the systems

of such carriers to provide us with accurate information about the status and delivery of our products.

Any disruption to the business

of delivery carriers could cause our business to be adversely affected.

Any significant delay in deliveries to our customers could lead

to increased cancellations and returns and cause us to lose sales.

Any increase in freight charges could increase our costs of doing business

and harm our sales, profitability, cash flows and financial condition.

Lack of accurate information from such carriers could damage our

brand and our relationship with our customers.

In some areas, we are testing Company-owned delivery services that have been successful

and efficient, and we intend to continue growing such services as demand and volume dictate.

If our Company-owned delivery services do

not continue to deliver products in a timely or cost-effective manner, we may need to revert to third party carriers and our reputation

and business may be adversely affected.

Our business could also be

adversely affected if there are delays in product shipments to us due to freight difficulties, supply chain disruptions or delays (including,

for example, from port closures or shipping or labor shortages), delays in product shipments clearing U.S.

Customs and Border Protection

(“CBP”) for reasons of non-compliance or otherwise, challenges with our suppliers or contractors involving strikes

or other difficulties at their principal transport providers or otherwise.

The adverse effect on our business could include increase in

freight costs if we choose to use more air freight.

Our business could also be adversely affected if the business of our suppliers is

disrupted because of infectious diseases or fear thereof such that quarantines, factory closures, labor disturbances, and transportation

delays result.

Such delays and events could adversely affect our profitability and reputation, as well as demand for our products.

In addition, if we are unable to deliver our products in a timely manner,

our customers, both DTC and wholesale, may choose to limit future orders of our products, or choose to not order products from us at all.

If, as a result of production or shipment issues, demand for our products declines or does not increase, our business and results of operations

could be materially and adversely affected.

We depend on executive employees, and if

we lose the services of members of the executive team, we may not be able to run our business effectively.

Our future success depends

in part on our ability to attract and retain key executive, merchandising, marketing, sales, finance, operations and engineering personnel.

If any of our executives cease to be employed by us, or if our growth or other changes in circumstances require executives with additional

skill sets, we would have to hire replacement or additional qualified personnel.

Our ability to successfully attract and hire other experienced

and qualified executives cannot be assured and may be difficult because we face competition for these professionals from our competitors,

our suppliers and other companies operating in our industry and in our geographic locations.

Departures and any delay in replacing executives

could significantly disrupt our ability to grow and pursue our strategic plans.

While we believe our current executives have benefitted

and will continue to benefit us, finding qualified replacements is time-consuming, takes Company resources, and can disrupt our growth

and achievement of strategic plans.

We do not maintain key-person insurance for members of our executive management team.

We have identified a material weakness in

our internal control over financial reporting and if we are unable to develop and maintain an effective system of internal control over

financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor

confidence in us and materially and adversely affect our business and operating results

During the Quarter ended September

30, 2021, we identified a material weakness in internal control over financial reporting related to ineffective information technology

general controls (“ITGCs”) in the areas of user access and segregation of duties related to certain information technology

(“IT”) systems that support the Company’s financial reporting processes.

We believe that these control deficiencies

were a result of turnover of critical IT leadership;

insufficient training of IT resources;

and inadequate risk-assessment processes to

identify and assess access in certain IT environments that could impact internal controls over financial reporting.

The material weakness

did not result in any identified misstatements in the consolidated financial statements, and there were no changes to previously issued

financial results.

However, because the material weakness creates a reasonable possibility that a material misstatement to our consolidated

financial statements would not be prevented or detected on a timely basis, the Company’s management concluded that at September

30, 2021, the Company’s internal control over financial reporting was ineffective.

We continue to evaluate, design

and work through the process of implementing controls and procedures under a remediation plan designed to address this material weakness,

but there can be no assurance that we will be able to remediate this material weakness in a timely manner or at all.

If our remediation

measures are insufficient to address the material weaknesses, or if additional material weaknesses or significant deficiencies in our

internal control are discovered or occur in the future, our financial statements may contain material misstatements and we could be required

to restate our financial results, which could lead to substantial additional costs for accounting and legal fees and stockholder litigation.

Any failure to maintain such internal control could adversely impact

our ability to report our financial position and results from operations on a timely and accurate basis.

If our financial statements are

not accurate, investors may not have a complete understanding of our operations.

Likewise, if our financial statements are not filed on

a timely basis, we could be subject to sanctions or investigations by the stock exchange on which our common stock is listed, the SEC

or other regulatory authorities.

In either case, this could result in a material adverse effect on our business.

Failure to timely file

will cause us to be ineligible to utilize short form registration statements on Form S-3, which may impair our ability to obtain capital

in a timely fashion to execute our business strategies or issue shares to effect an acquisition.

Ineffective internal controls could also

cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our

Regulatory requirements relating to the

manufacture and disposal of mattresses may increase our product costs and increase the risk of disruption to our business.

Consumer Product

Safety Commission (“CPSC”) and other jurisdictions have adopted rules relating to fire retardancy standards for the mattress

Some states and the U.S.

Congress continue to consider fire retardancy regulations that may be different from or more stringent

than the current standard.

In addition, these regulations require manufacturers to implement quality assurance programs and encourage

manufacturers to conduct random testing of products.

These regulations also require maintenance and retention of compliance documentation.

These quality assurance and documentation requirements are costly to implement and maintain.

If any product testing, other evidence, or

regulatory inspections yield results indicating that any of our products may not meet the flammability standards, we may be required to

temporarily cease production and distribution or to recall products from the field, and we may be subject to fines or penalties, any of

which outcomes could harm our business, reputation, sales, profitability, cash flows and financial condition.

The CPSC adopted new flammability

standards and related regulations which became effective nationwide in July 2007 for mattresses and mattress and foundation sets.

with these requirements has resulted in higher materials and manufacturing costs for our products and has required modifications to our

information systems and business operations, further increasing our costs and negatively impacting our capacity.

Some states and the U.S.

Congress continue to consider fire retardancy regulations that may be different from or more stringent than the CPSC standard.

of multi-layered regulatory regimes, particularly if they conflict with each other, could increase our costs, alter our manufacturing

processes and impair the performance of our products which may have an adverse effect on our business.

Also, California recently

enacted laws effective in 2021 requiring mattress retailers delivering mattresses via common carrier in California to offer to pick up

their customers’ old mattresses at no cost to the customer.

Additionally, California, Rhode Island and Connecticut have all enacted

laws requiring the recycling of mattresses discarded in their states.

State and local bedding industry regulations vary among the states

in which we operate but generally impose requirements as to the proper labeling of bedding merchandise, restrictions regarding the identification

of merchandise as “new” or otherwise, controls as to hygiene and other aspects of product handling, disposal, sales, resales

and penalties for violations.

We or our suppliers may be required to incur significant expense to the extent that these regulations change

and require new and different compliance measures.

New legislation aimed at improving

the fire retardancy of mattresses, regulating the handling of mattresses in connection with preventing or controlling the spread of bed

bugs could be passed, or requiring the collection or recycling of discarded mattresses, could result in product recalls or in a significant

increase in the cost of operating our business.

In addition, failure to comply with these various regulations may result in penalties,

the inability to conduct business as previously conducted or at all, or adverse publicity, among other things.

Adoption of multi-layered

regulatory regimes, particularly if they conflict with each other, could increase our costs, alter our manufacturing processes and impair

the performance of our products which may have an adverse effect on our business.

We are also subject to various health and environmental

provisions such as 16 CFR Part 1633 (Standard for the Flammability (Open Flame) of Mattress Sets).

Our business and our reputation could be adversely affected by

the failure to protect sensitive employee, customer and consumer data, or to comply with evolving regulations relating to our obligation

to protect such data.

In the ordinary course of

our business, we collect and store certain personal information from individuals, such as our customers and suppliers, and we process

customer payment card and check information for purchases via our website.

In addition, we may share with third-parties personal information

we have collected.

Cyber-attacks designed to gain access to sensitive information by breaching security systems of large organizations

leading to unauthorized release of confidential information have occurred recently at a number of major U.S.

companies despite widespread

recognition of the cyber-attack threat and improved data protection methods.

Computer hackers may attempt to penetrate our computer system

or the systems of third-parties with which we have shared personal information and, if successful, misappropriate personal information,

payment card or check information or confidential Company business information.

In addition, a Company employee, contractor or other third

party with whom we do business may attempt to circumvent our security measures in order to obtain such information and may purposefully

or inadvertently cause a breach involving such information.

Breaches involving any such information could be more likely to the extent

we have any material weakness in internal control over financial reporting related to ITGCs in the areas of user access and segregation

of duties related to certain IT systems that support the Company’s financial reporting processes.

We and third-parties with which we have shared

personal information have been subject to attempts to breach the security of networks, IT infrastructure, and controls through cyber-attack,

malware, computer viruses, social engineering attacks, and other means of unauthorized access.

To the best of our knowledge, attempts

to breach our networks and IT infrastructure have not been successful to date, but we have been a victim of a spear-phishing attack.

breach of systems that resulted in the unauthorized release of sensitive data could adversely affect our reputation and lead to financial

losses from remedial actions or potential liability, possibly including punitive damages.

An electronic security breach resulting in the

unauthorized release of sensitive data from information systems could also materially increase the costs we already incur to protect against

We continue to balance the additional risk with the cost to protect us against a breach.

Additionally, while losses arising

from a breach may be covered in part by insurance that we carry, such coverage may not be adequate for liabilities or losses actually

We may be subject to data privacy and data breach laws in the states

in which we do business, and as we expand into other countries, we may be subject to additional data privacy laws and regulations.

data privacy laws (such as the California Consumer Privacy Act), including application and interpretation, are rapidly evolving.

evolving nature of state and federal privacy laws, including potential inconsistencies between such laws and uncertainty as to their application,

adds additional compliance costs and increases our risk of non-compliance.

While we attempt to comply with such laws, we may not be in

compliance at all times in all respects.

Failure to comply with such laws may subject us to fines, administrative actions, and reputational

RISK FACTORS to be updated

as described below, there have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K

filed with the SEC on March 1, 2022.The disclosure of risks identified below does not imply that the risk has not already materialized.

We are required to make certain prepayments

to any revolving loans and thereafter may not be able to draw upon our revolving line of credit.

Under the 2020 Credit Agreement,

as amended, if the aggregate amount of cash and cash equivalents we hold exceeds $25.0 million, we are required to prepay an amount

equal to the lesser of (i) the outstanding revolving loans and (ii) the amount of cash and cash equivalents in excess of $25.0 million.

In addition, we are prohibited from making additional borrowings under the revolver if after giving effect to any borrowing, and any transactions

to be consummated therewith, the aggregate amount of cash and cash equivalents exceeds $25.0 million.

As a result of these two restrictions,

our ability to accumulate cash in excess of $25.0 million is limited.

If for any reason we are unable to borrow on our revolving

credit facility, we would be limited in available cash to pay expenses and meet our obligations, which lack of liquidity could impair

our relationships with suppliers and vendors, delay our growth plans or prevent us from taking actions in our best interest or even continue

We may issue debt and equity securities

or securities convertible into equity securities, any of which may be senior to our Class A Stock as to distributions and in liquidation,

which could negatively affect the value of our Class A Stock.

In the future, we may attempt

to increase our capital resources by entering into additional debt or debt-like financing that is unsecured or secured by up to all of

our assets, or by issuing additional debt or equity securities, which could include issuances of secured or unsecured notes, preferred

stock, hybrid securities or securities convertible into or exchangeable for equity securities.

For example, in March 2022 we completed

a public offering of shares of Class A Stock.

In the event of our liquidation, our lenders and holders of our debt would receive distributions

of our available assets before distributions to holders of our Class A Stock, and holders of securities senior to the Class A Stock would

receive distributions of our available assets before distributions to the holders of our Class A Stock.

Because our decision to incur

debt and issue securities in future offerings may be influenced by market conditions and other factors beyond our control, we cannot predict

or estimate the amount, timing or nature of our future offerings or debt financings.

Further, market conditions could require us to accept

less favorable terms for the issuance of our securities in the future.

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-Q

Item 1A. Risk Factors