What changed in this filing

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Item 1A. Risk Factors

2021-05-12 compared with 2020-11-12 · 44 added, 48 removed, 1 unchanged (99% of the section changed)

The risk factors disclosed under the heading “Risk Factors” in our Prospectus (File No.

333-248655) filed pursuant to Rule 424(b)(4) on September 11, 2020 (the “Prospectus”), are hereby incorporated by reference into this Part II, Item 1A of this Quarterly Report on Form 10-Q, except for the risk factors captioned “Our management team will have immediate and broad discretion over the use of the net proceeds from this offering and may not use them effectively” and “Investors in this offering will experience immediate and substantial dilution of $45.01 per share.” Our operations and financial results are subject to various risks and uncertainties including those disclosed therein.

If any of those risks or others not specified materialize, our business, financial condition and results of operations could be materially and adversely affected.

Our operations and financial results are subject to various risks and uncertainties including those disclosed under “Item 1A.

Risk Factors” in our Annual Report .

We provide below the material changes to our risk factors described in our Annual Report .

If any of these risks or others not specified materialize, our business, financial condition and results of operations could be materially and adversely affected.

In that case, the trading price of our common stock could decline and you could lose all or part of your investment in our common stock:

We provide below the material changes to our risk factors described in the Prospectus :

The COVID-19 pandemic caused by the novel coronavirus has had and is expected to continue to have an adverse effect on our business, financial condition and results of operations.

In March 2020, the World Health Organization declared COVID-19 a global pandemic, and governmental authorities around the world have implemented measures to reduce the spread of COVID-19.

These measures have adversely affected workforces, customers, supply chains, consumer sentiment, economies, and financial markets, and, along with decreased consumer spending, have led to an economic downturn across many global economies.

The COVID-19 pandemic rapidly escalated in the United States, creating significant uncertainty and economic disruption, and leading to record levels of unemployment nationally.

Numerous state and local jurisdictions imposed, and others in the future may impose, shelter-in-place orders, quarantines, shut-downs of non-essential businesses, and similar government orders and restrictions on their residents to control the spread of COVID-19.

While some such orders or restrictions have been lifted in certain jurisdictions, certain of those orders have been re-instated, new orders have been imposed and future orders may be imposed as the COVID-19 pandemic continues to spread in waves nationwide.

Such orders or restrictions have resulted in temporary facility closures (including certain of our third-party VRCs), work stoppages, slowdowns and travel restrictions, among other effects, thereby adversely impacting our operations.

Due to the evolving nature of the COVID-19 crisis, we continue to monitor the situation closely and assess the impact on our business.

We expect our operations will continue to be adversely impacted through the end of 2020 and continuing into 2021, however, the magnitude and duration of the ultimate impact is impossible to predict with certainty due to:

uncertainties regarding the duration of the COVID-19 pandemic and the length of time over which the disruptions caused by COVID-19 will continue;

the impact of governmental orders and regulations that have been, and may in the future be, imposed in response to the pandemic;

the impact of COVID-19 on VRCs, wholesale auctions, state DMV titling and registration services, third party vehicle carriers and other third parties on which we rely;

uncertainty as to the impact future increases in transmission could have on our ability to fully staff portions of our business;

the deterioration of economic conditions in the United States, as well as high unemployment levels, which could have an adverse impact on discretionary consumer spending;

uncertainty regarding the potential for, timing and duration of, and severity of future waves of the COVID-19 crisis;

uncertainty as to whether and to what degree governmental economic relief will be provided to soften the negative economic effects of the COVID-19 crisis and the resulting governmental orders and restrictions;

the timing, availability, efficacy and impact of potential vaccines and treatments for COVID-19 that are under development.

In response to the COVID-19 disruptions, we implemented a number of measure s designed to protect the health and safety of our workforce.

These measures include restrictions on non-essential business travel, the institution of work-from-home policies wherever feasible and the implementation of strategies for workplace safety at ou r facilities that remain open.

We are following the guidance from public health officials and government agencies, including limiting the number of employees in our office facilities, implementation of enhanced cleaning measures, social distancing guidelin es, wearing of masks, eliminating non-essential vendor / guest visitation, and requiring health attestations and temperature checks prior to entering facilities, in each case subject to local requirements in that location.

Seating, signage, and cleaning ma terials have been added to ensure adherence to best practices for employee health and safety during this pandemic.

Where feasible, we operate on a rotating team schedule to reduce exposure and also require any diagnosed or exposed employees to self-isolate for up to two weeks before returning to work .

Nevertheless, these actions may not be sufficient to prevent a material disruption in our workforce.

Both TDA and our back-office facility in Houston continued to remain open during the three months ended September 30, 2020 and through the date of this Form 10-Q.

However, as a result of the continuing impact of the COVID-19 pandemic, we have seen a significant reduction in foot traffic at TDA, and a decline in our unit sales at TDA, despite higher overall unit sales.

We also have experienced disruptions in our logistics network and productivity challenges in our back-office operations.

As COVID-19 disruptions continue, we are unsure when TDA will return to normal operations and when the other negative effects on our business will subside.

As a result of these developments, our business, results of operations, cash flows and financial condition for fiscal year 2020 have been and will be significantly affected by the COVID-19 disruptions and could continue to be adversely impacted in the future.

There is no assurance the measures we have taken or may take in the future will be successful in managing the uncertainties caused by COVID-19.

The extent to which COVID-19 ultimately impacts our business, financial condition and results of operations will depend on future developments, which are highly uncertain and unpredictable, including new information which may emerge concerning the severity and duration of the COVID-19 outbreak and the effectiveness of actions taken to contain the COVID-19 outbreak or treat its impact, among others.

The ultimate consequences of the COVID-19 pandemic cannot be predicted with certainty, but it could have a material effect on our business, operating results, financial condition and prospects.

In addition to the COVID-19 disruptions adversely impacting our business and financial results, they may also have the effect of heightening many of the other risks described in “Risk Factors,” including risks relating to changes in consumer demand;

our limited operating history;

our ability to generate sufficient revenue to generate positive cash flow;

the operation of, and concentration of our revenues and gross profit from TDA;

our relationships with third party customer experience teams;

the availability of third-party providers to deliver our vehicles to customers nationwide;

the operation of our VRCs by us and our third party service providers;

the current geographic concentration of reconditioning services and store inventory;

our level of indebtedness;

our agreement with a single lender to finance our vehicle inventory purchases and the expiration of such agreement;

our access to desirable vehicle inventory;

regulatory restrictions;

and the shift by traditional dealers to online sales and deliveries.

Our common stock price may be volatile and the value of our common stock may decline regardless of our operating performance, and you may not be able to resell your shares at or above the price which you paid for them.

It is possible that an active trading market for shares of our common stock will not be sustained, which could make it difficult for you to sell your shares of common stock at an attractive price or at all.

Many factors, some of which are outside our control, may cause the marke t price of our common stock to fluctuate significantly, including those described in the “Risk Factors” sections of our Annual Report and quarterly reports and elsewhere in this Quarterly Report on Form 10-Q, as well as the following:

our operating and financial performance and prospects;

our quarterly or annual earnings or those of other companies in our industry compared to market expectations;

our guidance regarding future quarterly or annual earnings and our financial results in relation to previously issued guidance;

conditions that impact demand for our offerings and platform, including demand in the automotive industry generally and the performance of the third parties through whom we conduct significant parts of our business;

future announcements concerning our business or our competitors’ businesses;

the public’s reaction to our press releases, other public announcements and filings with the SEC;

coverage by or changes in financial estimates by securities analysts or failure to meet their expectations;

market and industry perception of our success, or lack thereof, in pursuing our growth strategy;

strategic actions by us or our competitors, such as acquisitions or restructurings;

changes in laws or regulations which adversely affect our industry or us;

changes in accounting standards, policies, guidance, interpretations or principles;

changes in senior management or key personnel;

issuances, exchanges or sales, or expected issuances, exchanges or sales of our capital stock;

changes in our dividend policy;

new, or adverse resolution of pending, litigation or other claims against us;

changes in general market, economic and political conditions in the United States and global economies or financial markets, including those resulting from natural disasters, terrorist attacks, global pandemics, acts of war and responses to such events.

As a result, volatility in the market price of our common stock may prevent investors from being able to sell their common stock at or above the price which they paid for them.

These broad market and industry factors may materially reduce the market price of our common stock, regardless of our operating performance.

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

As a result, you may suffer a loss on your investment.

Broad market and industry fluctuations, as well as general economic, political, regulatory, and market conditions, may negatively impact the market price of our common stock.

Companies that experience volatility in the market price of their securities often are the subject to securities class action litigation.

For example, multiple putative class actions have been filed in the U.S.

District Court for the Southern District of New York by certain of our stockholders against us and certain of our officers alleging violations of federal securities laws .

See Part II, Item 1.

“Legal Proceedings.” We may be the target of additional securities litigation in the future, which could result in substantial costs and divert our management’s attention.

We are, and may in the future be, subject to legal proceedings in the ordinary course of our business.

If the outcomes of these proceedings are adverse to us, it could have a material adverse effect on our business, financial condition and results of operations.

We are subject to various litigation matters from time to time, the outcome of which could have a material adverse effect on our business, financial condition and results of operations.

Claims arising out of actual or alleged violations of law could be asserted against us by individuals, either individually or through class actions, by governmental entities in civil or criminal investigations and proceedings or by other entities.

These claims could be asserted under a variety of laws, including but not limited to consumer finance laws, consumer protection laws, intellectual property laws, privacy laws, labor and employment laws, securities laws and employee benefit laws.

These actions could expose us to adverse publicity and to substantial monetary d amages and legal defense costs, injunctive relief and criminal and civil fines and penalties, including but not limited to suspension or revocation of licenses to conduct business.

For example, multiple putative class actions have been filed in the U.S.

District Court for the Southern District of New York by certain of our stockholders against us and certain of our officers alleging violations of federal securities laws.

We believe these lawsuits are without merit and intend to vigorously contest these claims.

See Part II, Item 1.

“Legal Proceedings.”

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