Fabric.AI (FABC) risk factors, FY2024 10-K

Risks Related to Our Business

1. 01Our consolidated financial statements have been prepared on a going concern basis; we must raise additional capital to fund our operations in order to continue as a going concern
2. 02We have a history of losses and have never been profitable. We expect to incur additional losses in the future and may never be profitable
3. 03The market for our products is developing and may not develop as expected
4. 04We are currently evaluating our product development strategy, which may result in significant changes and have a material impact on our business, results of operations and financial condition
5. 05Our business is subject to general economic and market conditions, including trade wars and tariffs
6. 06If disruptions in our transportation network continue to occur or our shipping costs continue to increase, we may be unable to sell or timely deliver our products, and our gross margin could decrease
7. 07Our limited operating history makes evaluating our business and prospects difficult and may increase the risk of any investment in our securities
8. 08If we are unable to effectively implement or manage our growth strategy, our operating results and financial condition could be materially and adversely affected
9. 09Developments in alternative technologies or improvements in the internal combustion engine may have a materially adverse effect on the demand for our electric vehicles
10. 10Our future growth depends on customers’ willingness to adopt electric vehicles
11. 11We may experience lower-than-anticipated market acceptance of our current models and the vehicles in development
12. 12If we are unable to manage our growth and expand our operations successfully, our business and operating results will be harmed, and our reputation may be damaged
13. 13If we fail to include key feature sets relative to the target markets for our electric vehicles, our business will be harmed
14. 14Unanticipated changes in industry standards could render our vehicles incompatible with such standards and adversely affect our business
15. 15Our future success depends on our ability to identify additional market opportunities and develop and successfully introduce new and enhanced products that address such markets and meet the needs of customers in such markets
16. 16Unforeseen or recurring operational problems at our facilities, or a catastrophic loss of our manufacturing facilities, may cause significant lost or delayed production and adversely affect our results of operations
17. 17We may become subject to product liability claims, which could harm our financial condition and liquidity if we are not able to successfully defend or insure against such claims
18. 18If our vehicles fail to perform as expected due to defects, our ability to develop, market and sell our electric vehicles could be seriously harmed
19. 19We depend on key personnel to operate our business, and the loss of one or more members of our management team, or our failure to attract, integrate and retain other highly qualified personnel in the future, could harm our business
20. 20Transitioning from an offshoring to an onshoring business model carries risks
21. 21We currently have limited electric vehicles marketing and sales experience, and if we are unable to establish sales and marketing capabilities or enter into dealer agreements to market and sell our vehicles, we may be unable to generate any revenue
22. 22Failure to maintain the strength and value of our brand could have a material adverse effect on our business, financial condition and results of operations
23. 23The range of our electric vehicles on a single charge declines over time, which may negatively influence potential customers’ decisions whether to purchase our vehicles
24. 24An unexpected change in failure rates of our products could have a material adverse impact on our business, financial condition, and operating results
25. 25Increases in costs, disruption of supply or shortage of raw materials, including but not limited to lithium-ion battery cells, chipsets and displays, could harm our business
26. 26Customer financing and insuring our vehicles may prove difficult because retail lenders are unfamiliar with our vehicles and our vehicles have a limited loss history for determining residual values within the insurance industry
27. 27Our business may be adversely affected by labor and union activities
28. 28We rely on our dealers for the service of our vehicles and have limited experience servicing our vehicles. If we are unable to address the service requirements of our future customers, our business will be materially and adversely affected
29. 29If we fail to deliver vehicles and accessories to market as scheduled, our business will be harmed
30. 30Failure in our information technology and storage systems could significantly disrupt the operation of our business

Risks Relating to Our Financial Position and Need for Additional Capital

1. 31We must raise additional capital to fund our operations in order to continue as a going concern, and such funding may be costly or difficult to obtain and could dilute our stockholders’ ownership interests
2. 32If we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish some rights to our technologies or our products, to grant licenses on terms that are not favorable to us, or to issue equity instruments that may be dilutive to our stockholders
3. 33Our long-term capital requirements are subject to numerous risks
4. 34We may invest in or acquire other businesses, and our business may suffer if we are unable to successfully integrate acquired businesses into our company or otherwise manage the growth associated with multiple acquisitions

Risks Related to Regulatory Matters

1. 35Increased safety, emissions, fuel economy, or other regulations may result in higher costs, cash expenditures, and/or sales restrictions
2. 36Our vehicles are subject to multi-jurisdictional motor vehicle standards
3. 37We may fail to comply with evolving environmental and safety laws and regulations
4. 38Changes in regulations could render our vehicles incompatible with federal, state or local regulations, or use cases
5. 39Unusual or significant litigation, governmental investigations or adverse publicity arising out of alleged defects in our vehicles, or otherwise, may derail our business
6. 40We have identified a material weakness in our internal control over financial reporting, and if we are unable to remediate the material weakness, or if we experience additional material weaknesses in the future, our business may be harmed

Risks Related to Our Series H-7 Preferred Stock

1. 41Under the Purchase Agreement we are subject to certain restrictive covenants that may make it difficult to procure additional financing

Risks Related to Our Intellectual Property

1. 42If we are unable to adequately protect our proprietary designs and intellectual property rights, our competitive position could be harmed
2. 43We may need to license intellectual property from third parties in the future. If we fail to obtain licenses we need or fail to comply with our obligations in agreements under which we license intellectual property and other rights from third parties, we could lose our ability to manufacture our vehicles
3. 44Many of our proprietary designs are in digital form, and a breach of our computer systems could result in these designs being stolen
4. 45Our proprietary designs are susceptible to reverse engineering by our competitors
5. 46If we are unable to protect the confidentiality of our trade secrets or know-how, such proprietary information may be used by others to compete against us
6. 47Legal proceedings or third-party claims of intellectual property infringement and other challenges may require us to spend substantial time and money and could harm our business
7. 48We are generally obligated to indemnify our sales channel partners, customers, suppliers and contractors for certain expenses and liabilities resulting from intellectual property infringement claims regarding our products, which could force us to incur substantial costs

Risks Related to Our International Operations

1. 49We are subject to exposure from changes in the exchange rates of local currencies
2. 50We are subject to governmental export and import controls that could impair our ability to compete in international markets due to licensing requirements and subject us to liability if we are not in compliance with applicable laws
3. 51Our stock price may be volatile
4. 52Our failure to meet the continued listing requirements of the Nasdaq Capital Market (“Nasdaq”) could result in a delisting of our common stock
5. 53An active trading market for our Common Stock may not be sustained
6. 54We incur increased costs and demands on management as a result of compliance with laws and regulations applicable to public companies, which could harm our operating results
7. 55We do not anticipate paying cash dividends on our Common Stock and, accordingly, stockholders must rely on stock appreciation for any return on their investment
8. 56Anti-takeover provisions of our certificate of incorporation, our bylaws and Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove the current members of our board and management