Barfresh Food Group (BRFH) risk factors, FY2024 10-K

Risks Related to Our Business

1. 01We have a history of operating losses
2. 02As described more fully in Item 7, we experienced product quality issues with a contract manufacturer (the “Manufacturer”) that provided approximately 52% of our products in the year ended December 31, 2022. Complaints from customers led us to withdraw product from the market and destroy existing inventory
3. 03We may need additional financing in the future, which may not be available when needed or may be costly and dilutive
4. 04A worsening of economic conditions or a decrease in consumer spending may adversely impact our ability to implement our business strategy
5. 05The challenges of competing with the many food services businesses may result in reductions in our revenue and operating margins
6. 06It is difficult to predict the timing and amount of our sales because our distributors and national accounts may not be required to place minimum orders with us
7. 07Our ability, through our suppliers, business partners, contract manufacturers, independent distributors and retailers, to produce, transport, distribute and sell products is critical to our success
8. 08Our dependence on independent contract manufacturers could make management of our manufacturing and distribution efforts inefficient or unprofitable
9. 09If we do not adequately manage our inventory levels, our operating results could be adversely affected
10. 10Increases in costs of packaging, ingredients and contract manufacturing tolling fees may have an adverse impact on our gross margin
11. 11Supplies and prices of the various ingredients that we are going to use can be affected by a variety of factors, such as weather, seasonal fluctuations, demand, politics and economics in the producing countries
12. 12As an increasing portion of our sales is coming from school districts, our business is becoming more seasonal, which presents certain challenges with respect to cash flow
13. 13Our business depends substantially on the continuing efforts of our senior management and other key personnel, and our business may be severely disrupted if we lose their services
14. 14We may be unable to attract and retain qualified, experienced, highly skilled personnel, which could adversely affect the implementation of our business plan
15. 15Product liability exposure may expose us to significant liability
16. 16Litigation or legal proceedings could expose us to significant liabilities and damage our reputation
17. 17Our inability to protect our intellectual property rights may force us to incur unanticipated costs
18. 18Our products may infringe the intellectual property rights of third parties, and third parties may infringe our proprietary rights, either of which may result in lawsuits, distraction of management and the impairment of our business
19. 19We will continue to incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time to compliance initiatives and corporate governance practices
20. 20Failure to comply with the United States Foreign Corrupt Practices Act could subject us to penalties and other adverse consequences
21. 21Our use of information technology and third-party service providers exposes us to cybersecurity breaches and other business disruptions

Risks Related to Ownership of Our Common Stock

1. 22If we are unable to adequately fund our operations, we may be forced to voluntarily file for deregistration of our common stock with the SEC
2. 23We may not be able to continue to comply with Nasdaq listing standards
3. 24If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about our business, our share price and trading volume could decline
4. 25Because we became public by means of a “reverse merger”, we may not be able to attract the attention of major brokerage firms
5. 26Future sales of our common stock in the public market could lower the price of our common stock and impair our ability to raise funds in future securities offerings
6. 27Our common stock is subject to price volatility unrelated to our operations
7. 28Because we do not intend to pay dividends, shareholders will benefit from an investment in our common stock only if it appreciates in value
8. 29The price of our common stock may become volatile, which could lead to losses by investors and costly securities litigation
9. 30Investors may experience dilution of their ownership interests because of future issuances of additional shares of our common stock
10. 31Provisions in our Company charter documents and under Delaware law could make an acquisition of our company, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management
11. 32Our board of directors controls the majority of the outstanding shares of voting stock