Local do-good restaurant enterprise Everytable wins big o...
·
Jan 30, 2018
Everytable gets the money Last night's episode of ABC hit business series Shark Tank showcased a local name: Everytable. ...
Deal highlights
- Innovative restaurant chain selling fresh, chef-crafted meals at fast-food prices.
- "Bite-sized" buildout costs (~$200,000 per location), and simple, efficient store-level operations.
- 4.5+ Yelp Stars in all locations (as of January 25, 2018).
- Covered by 200+ media outlets: Over 2B media impressions!
- Raised over $10M from investors include Lerer Hippeau Ventures, TOMS Social Enterprise Fund, Acumen America, M13 Capital, Rams Football Company, Dom Capital, Kimbal Musk, and Jon Sokoloff (Board of Whole Foods).
On almost every major street corner in America, fast food joints sell burgers, fries, and chicken nuggets. These multi-billion dollar businesses have become the landscape of America, the food system itself.
But the world is changing. People are searching for healthier, fresher fare.
Problem
There has been an explosion in demand for nutritious, fresh, and convenient meals, but only in certain markets and at high price points.
Yet there are companies profitably serving all markets at low prices.
Demand for healthy food is exploding, but the truth is that when salads cost $13 and green juice costs $9, healthy food has become a luxury most people can't afford.
And there are some communities, called food deserts, that have virtually no access to healthy food at all.
Solution
Everytable aims to redefine the food landscape the same way McDonald's did fifty years ago. But this time, instead of burgers and fries, we are selling nutritious, fresh food, at fast-food prices.
Salads & Grain Bowls
Hot Plates
Here's how we are making it happen:
Centralized production results in incredible efficiencies in the kitchen and makes our locations significantly cheaper to build and operate. They only need enough space to store our delicious food and can be run by a couple employees!
We have locations in food deserts and in affluent areas. To ensure that everyone can afford our meals, we price them according to the neighborhoods we serve.
Traction
Quarterly Revenue
Yelp Reviews and Ratings
Press
Covered by 200+ Media Outlets: Over 2B Media Impressions
Investors
What's Next
The above graphic includes forward-looking statements. Actual results may differ from forecast.
Founders and Team
Our Story
In 2013 Sam Polk, a former hedge fund trader, founded a nonprofit called Groceryships to address food-related health problems in South LA, where the average income is $13,000 a year, life expectancy is 10 years lower than more affluent areas, and diseases like obesity and diabetes are alarmingly high. Groceryships began helping family food providers make healthy choices through nutrition education, cooking classes, free produce, and support groups.
In 2014 David Foster, a former private equity professional, was so inspired by a Groceryships event that he decided to join the nonprofit full-time.
That year, Sam and David began hearing from Groceryships participants that while fresh produce was great, they often had to buy food on the go because they were juggling multiple jobs and large families. And in South LA, their only options were fast food.
Sam and David saw an opportunity to help families like these. So they created a model for a new company that would sell nutritious food in “food deserts” like South LA at prices competitive with fast food.
Groceryships was built on the belief that every life is equally important. Sam and David wanted this core value embedded in the new company, so they called it Everytable, reflecting a mission to bring healthy, affordable food to every table in the country, with no one left out.
Everytable, PBC was formed as a Delaware Public Benefit Corporation, which means that this mission is legally embedded into the company's legal structure.
Sam Polk, Co-founder & CEO
Sam is Co-founder and CEO of Everytable. He’s also the founder and Executive Director of the non-profit Groceryships. Prior to becoming a social entrepreneur, Sam was a hedge fund trader on Wall Street. After noticing families in low-income areas struggling with access to nutritious food, he started Groceryships, a non- profit working at the intersection of poverty and obesity. Sam’s memoir, For The Love of Money, was published in July 2016 by Scribner. He is a graduate of Columbia University.
David Foster, Co-founder
David is Co-founder of Everytable. David began his career in private equity and investment banking, most recently as a VP at Aurora Capital Group, an LA-based private equity firm. David has always had a passion for social entrepreneurship, which led him to volunteer for Groceryships and eventually join as the Director of Operations. He attended the University of Michigan and earned a degree from the Ross School of Business.
Anar Joshi, VP of Marketing
Anar is VP of Marketing for Everytable. Anar first gained extensive product marketing skills working with startups to build online consumer experiences. With a strong desire to create a lasting community impact, Anar began volunteering with the team in 2015, and later joined full time. Prior, Anar worked in advertising at BBDO Worldwide in New York and PayPal in the Bay Area. Anar is a graduate of University of California, Berkeley's School of Engineering.
Johnny Yoo, Culinary Director
A native of Los Angeles, Johnny Yoo brings exotic flavors and a deep understanding of the LA dining scene to the Everytable menu as Culinary Director. Chef Yoo’s interest in food began during his time living in Hawaii and experiencing the cuisine--so much so that when he returned to LA, he enrolled in culinary school. He began his career at Koi under Chef Rodelio Aglibot and spent the following 15 years in pursuit of honing his knowledge, skills, and experience in the kitchens of renowned chefs including David Myers (Sona), Brendan Collins (Melisse), Christopher Eme (Ortolan) and Roy Choi (A-Frame).
Join us!
Join us in reshaping the American food system to make nutritious, fresh food accessible and affordable for all.
Together we can make the world a healthier and more equitable place.
Deal terms
Valuation cap
$30,000,000
The maximum valuation at which your investment converts
into equity shares or cash.
Learn more.
Discount
10%
If a trigger event for Everytable occurs, the discount provision
gives investors equity shares (or equal value in cash) at a reduced price.
Learn more.
Type of security
Crowd SAFE
·
Learn more
A SAFE is a Simple Agreement for Future Equity. An investor makes a cash investment in a company, but gets company stock at a later date, in connection with a specific event. The Crowd SAFE is a modified SAFE that is better suited for crowdfunding.
Funding goal
$50,000 – $1,070,000
Everytable
needs to raise
$50K
before the deadline.
The maximum amount
Everytable
is willing to raise is
$1.07M.
Learn more
Deadline
Everytable needs to reach their minimum funding goal before the deadline
().
If they don’t, all investments will be refunded.
Learn more
Documents
This securities offering is filed with the SEC. View the official filing and all updates:
Form C
SEC.gov
Company documents
Everytable Crowd SAFE
Perks
In addition to your Crowd SAFE, you'll receive perks for investing in Everytable.
Invest
$25
Receive
- $25 Crowd SAFE
- Website Mention (with your consent)
Invest
$50
Receive
- $50 Crowd SAFE
- Digital Thank You + Website Mention (with your consent)
Invest
$100
Receive
- $100 Crowd SAFE
- Everytable Tote Bag + Digital Thank You + Website Mention (with your consent)
Invest
$250
Receive
- $250 Crowd SAFE
- $20 Gift Card + Everytable Tote Bag + Digital Thank You + Website Mention (with your consent)
Invest
$500
Receive
- $500 Crowd SAFE
- Gift Card for a Week’s Worth of Everytable Meals (10 meals) + Everytable Tote Bag + Digital Thank You + Website Mention (with your consent)
Invest
$2,500
Receive
- $2,500 Crowd SAFE
- Lunch with Founders + Digital Thank You + Website Mention (with your consent)
Invest
$5,000
Receive
- $5,000 Crowd SAFE
- Invitation to VIP dinner to Celebrate our Next Store Opening + Digital Thank You + Website Mention (with your consent)
Invest
$25,000
Receive
- $25,000 Crowd SAFE
- Meet the Team + Meal Prepared by Our Chef for You and the Founders + Digital Thank You + Website Mention (with your consent)
Invest
$50,000
Receive
- $50,000 Crowd SAFE
- Paid Flight Out to Meet the Team (up to $800) + Meal Prepared by Our Chef for You and the Founders + Digital Thank You + Website Mention (with your consent)
Why others invested
See all reviews (374) See all (374)I liked the idea/goal, and believe folks need this type of healthy fast food source. Good luck.
almost 2 years ago
I invested because the food we eat today is processed, pre-packaged, and generally not good for us. Everytable will set a precedent on healthy fast-food. I'm excited to be apart of it.
almost 2 years ago
I have been eating meals from Everytable for nearly a year now in their main (South LA) store, so I bask in their mission & am grateful to help extend their outreach where they envision. It's a genuine joy to continue purchasing food there regularly.
almost 2 years ago
About Everytable
Legal Name
Everytable, PBC
Founded
Oct 2015
Form
Delaware
Corporation
Headquarters
1101 West 23rd Street
, Los Angeles, CA
Headquarters
1101 West 23rd Street, Los Angeles, CA, US
Everytable Team
Everyone helping build Everytable, not limited to employees
Sam Polk
CEO, Co-Founder
David Foster
Co-Founder
Anar Joshi
VP of Marketing
Johnny Yoo
Culinary Director
Christine Hasircoglu
Director of Front of House Operations
Justin Koh
Director of Finance & Analytics
Vanessa Bishop
District Manager
Press
FAQ
What is Everytable?
What is Everytable?
Everytable is reimagining fast food with fresh, nutritious meals everyone can afford. Through our revolutionary model, every meal purchased helps us open locations in underserved communities of LA, where meals are sold at discounted prices.
What is a food desert?
What is a food desert?
A food desert is a low-income neighborhood with little or no access to healthy, fresh food. Across America, 23.5 million people live in food deserts (Source). By pricing our meals according to the neighborhoods we serve, we are building a healthier, more equitable food system.
How did you arrive at prices for each community?
How did you arrive at prices for each community?
We started by creating an efficient, lean business model that enables us to offer fresh, made-from-scratch food at extraordinarily low prices. We then analyzed the incomes in the neighborhoods where we’re located and set prices designed to ensure our meals are affordable for the local community.
Does this model already exist? How did you come up with this model?
Does this model already exist? How did you come up with this model?
We’re the first to bring a variable pricing model to the industry. We believe healthy food is a human right, and wanted to build a business that made fresh, nutritional food accessible to everyone, in every neighborhood.
Did Everytable receive the investment from Rohan Oza discussed on Shark Tank Episode 21?
Did Everytable receive the investment from Rohan Oza discussed on Shark Tank Episode 21?
No. Rohan continues to be a great supporter of Everytable, but ultimately we did not agree to accept his investment.
Still have questions? Check the
discussion section.
Risks
The Company is a new venture with a limited and unprofitable operating history.
The Company is recently formed and has only a brief operating history. The Companys lack of a financial track record makes future performance difficult to predict. Companys limited prior results are likely to differ substantially from future performance. The Company has incurred and is likely to continue to incur a substantial operating deficit. Future losses are likely to be incurred before the Companys operations will become profitable. There is no assurance that the Companys operations will ever prove to be profitable. Companys senior management has not previously managed an entrepreneurial venture of like kind and Companys success will depend in part on managements ability to deal with the problems, expenses, and delays associated with establishing a new business venture of this kind. The Company may not be successful in achieving the objectives necessary for it to overcome these risks and uncertainties.
The development and commercialization of our products is highly competitive.
We face competition with respect to any products that we may seek to develop or commercialize in the future. Our competitors include major companies worldwide. Many of our competitors have significantly greater financial, technical and human resources than we have and superior expertise in research and development and marketing such products and thus may be better equipped than us to develop and commercialize such products. These competitors also compete with us in recruiting and retaining qualified personnel and acquiring technologies. Smaller or early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. Accordingly, our competitors may commercialize products more rapidly or effectively than we are able to, which would adversely affect our competitive position, the likelihood that our products will achieve initial market acceptance and our ability to generate meaningful additional revenues from our products.
We rely on other companies to provide ingredients for our products.
We depend on these suppliers and subcontractors to meet our contractual obligations to our customers and conduct our operations. Our ability to meet our obligations to our customers may be adversely affected if suppliers or subcontractors do not provide the agreed-upon supplies or perform the agreed-upon services in compliance with customer requirements and in a timely and cost-effective manner. Likewise, the quality of our products may be adversely impacted if companies to whom we delegate manufacture of major components or subsystems for our products, or from whom we acquire such items, do not provide ingredients which meet required specifications and perform to our and our customers expectations. Our suppliers may be less likely than us to be able to quickly recover from natural disasters and other events beyond their control and may be subject to additional risks such as financial problems that limit their ability to conduct their operations. The risk of these adverse effects may be greater in circumstances where we rely on only one or two subcontractors or suppliers for a particular ingredient.
We depend on third-party service providers and outsource providers for a variety of services and we outsource a number of our non-core functions and operations.
In certain instances, we rely on single or limited service providers and outsourcing vendors because the relationship is advantageous due to quality, price, or lack of alternative sources. If production or service was interrupted and we were not able to find alternate third-party providers, we could experience disruptions in manufacturing and operations including product shortages, higher freight costs and re-engineering costs. If outsourcing services are interrupted or not performed or the performance is poor, this could impact our ability to process, record and report transactions with our customers and other constituents. Such interruptions in the provision of supplies and/or services could result in our inability to meet customer demand, damage our reputation and customer relationships and adversely affect our business.
We depend on third party providers, suppliers and licensors to supply some of the hardware, software and operational support necessary to provide some of our services.
We obtain these materials from a limited number of vendors, some of which do not have a long operating history or which may not be able to continue to supply the equipment and services we desire. Some of our hardware, software and operational support vendors represent our sole source of supply or have, either through contract or as a result of intellectual property rights, a position of some exclusivity. If demand exceeds these vendors capacity or if these vendors experience operating or financial difficulties, or are otherwise unable to provide the equipment or services we need in a timely manner, at our specifications and at reasonable prices, our ability to provide some services might be materially adversely affected, or the need to procure or develop alternative sources of the affected materials or services might delay our ability to serve our customers. These events could materially and adversely affect our ability to retain and attract customers, and have a material negative impact on our operations, business, financial results and financial condition.
As a reseller of third-party products, our business depends on developing and maintaining close and productive relationships with our vendors.
We depend on our vendors to sell us quality products at favorable prices. Many factors outside our control, including, without limitation, raw material shortages, inadequate manufacturing capacity, labor disputes, transportation disruptions or weather conditions, could adversely affect our vendors ability to deliver to us quality merchandise at favorable prices in a timely manner. Furthermore, financial or operational difficulties with a particular vendor could cause that vendor to increase the cost of the products or decrease the quality of the products we purchase from it. Vendor consolidation could also limit the number of suppliers from which we may purchase products and could materially affect the prices we pay for these products. We would suffer an adverse impact if our vendors limit or cancel the return privileges that currently protect us from inventory obsolescence.
Quality management plays an essential role in determining and meeting customer requirements, preventing defects, improving the Companys products and services and maintaining the integrity of the data that supports the safety and efficacy of our products.
Our future success depends on our ability to maintain and continuously improve our quality management program. An inability to address a quality or safety issue in an effective and timely manner may also cause negative publicity, a loss of customer confidence in us or our current or future products, which may result in the loss of sales and difficulty in successfully launching new products. In addition, a successful claim brought against us in excess of available insurance or not covered by indemnification agreements, or any claim that results in significant adverse publicity against us, could have an adverse effect on our business and our reputation.
One of the potential risks we face in the distribution of our products is liability resulting from counterfeit or tainted products infiltrating the supply chain.
Because we source ingredients from various sources, we rely on various suppliers and their quality control measures. While we have procedures to maintain the highest quality levels in our products, we may be subject to faulty, spoiled or tainted ingredients or components in our products, which would negatively affect our products and our customers experience with them and could decrease customer demand for our products. In addition, if there are serious illness or injury due to our products, there can be no assurance that the insurance coverage we maintain is sufficient or will be available in adequate amounts or at a reasonable cost, or that indemnification agreements will provide us with adequate protection.
Manufacturing or design defects, unanticipated use of our products, or inadequate disclosure of risks relating to the use of the products can lead to injury or other adverse events.
These events could lead to recalls or safety alerts relating to our products (either voluntary or required by governmental authorities) and could result, in certain cases, in the removal of a product from the market. Any recall could result in significant costs as well as negative publicity that could reduce demand for our products. Personal injuries relating to the use of our products can also result in product liability claims being brought against us. In some circumstances, such adverse events could also cause delays in new product approvals. Similarly, negligence in performing our services can lead to injury or other adverse events.
We may implement new lines of business or offer new products and services within existing lines of business.
There are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed. In developing and marketing new lines of business and/or new products and services, we may invest significant time and resources. Initial timetables for the introduction and development of new lines of business and/or new products or services may not be achieved and price and profitability targets may not prove feasible. We may not be successful in introducing new products and services in response to industry trends or developments in technology, or those new products may not achieve market acceptance. As a result, we could lose business, be forced to price products and services on less advantageous terms to retain or attract clients, or be subject to cost increases. As a result, our business, financial condition or results of operations may be adversely affected.
Distributors and resellers of our products may finance purchases of our products.
Declines in the lending environment including fewer lenders, tighter underwriting and loan approval criteria, greater down payment requirements and, in some cases, higher interest rates could impair Distributors and resellers ability to finance and purchase our products. If credit conditions worsen, and adversely affect the ability of Distributors and resellers to finance potential purchases at acceptable terms and interest rates, it could result in a decrease in sales of our products or delay any improvement in our sales.
In general, demand for our products and services is highly correlated with general economic conditions.
A substantial portion of our revenue is derived from discretionary spending by individuals, which typically falls during times of economic instability. Declines in economic conditions in the U.S. or in other countries in which we operate may adversely impact our consolidated financial results. Because such declines in demand are difficult to predict, we or the industry may have increased excess capacity as a result. An increase in excess capacity may result in declines in prices for our products and services.
The use of individually identifiable data by our business, our business associates and third parties is regulated at the state, federal and international levels.
Costs associated with information security such as investment in technology, the costs of compliance with consumer protection laws and costs resulting from consumer fraud could cause our business and results of operations to suffer materially. Additionally, the success of our online operations depends upon the secure transmission of confidential information over public networks, including the use of cashless payments. The intentional or negligent actions of employees, business associates or third parties may undermine our security measures. As a result, unauthorized parties may obtain access to our data systems and misappropriate confidential data. There can be no assurance that advances in computer capabilities, new discoveries in the field of cryptography or other developments will prevent the compromise of our customer transaction processing capabilities and personal data. If any such compromise of our security or the security of information residing with our business associates or third parties were to occur, it could have a material adverse effect on our reputation, operating results and financial condition. Any compromise of our data security may materially increase the costs we incur to protect against such breaches and could subject us to additional legal risk.
Through our operations, we collect and store certain personal information that our customers provide to purchase products or services, enroll in promotional programs, register on our web site, or otherwise communicate and interact with us.
We may share information about such persons with vendors that assist with certain aspects of our business. Security could be compromised and confidential customer or business information misappropriated. Loss of customer or business information could disrupt our operations, damage our reputation, and expose us to claims from customers, financial institutions, payment card associations and other persons, any of which could have an adverse effect on our business, financial condition and results of operations. In addition, compliance with tougher privacy and information security laws and standards may result in significant expense due to increased investment in technology and the development of new operational processes.
Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.
We collect and store sensitive data, including intellectual property, our proprietary business information and that of our customers, suppliers and business partners, and personally identifiable information of our customers and employees, in our data centers and on our networks. The secure processing, maintenance and transmission of this information is critical to our operations and business strategy. Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions. Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, regulatory penalties, disrupt our operations, damage our reputation, and cause a loss of confidence in our products and services, which could adversely affect our business, operating margins, revenues and competitive position.
An intentional or unintentional disruption, failure, misappropriation or corruption of our network and information systems could severely affect our business.
Such an event might be caused by computer hacking, computer viruses, worms and other destructive or disruptive software, "cyber attacks" and other malicious activity, as well as natural disasters, power outages, terrorist attacks and similar events. Such events could have an adverse impact on us and our customers, including degradation of service, service disruption, excessive call volume to call centers and damage to our plant, equipment and data. In addition, our future results could be adversely affected due to the theft, destruction, loss, misappropriation or release of confidential customer data or intellectual property. Operational or business delays may result from the disruption of network or information systems and the subsequent remediation activities. Moreover, these events may create negative publicity resulting in reputation or brand damage with customers.
We are subject to the risk of substantial environmental liability and limitations on our operations due to environmental laws and regulations.
We are subject to extensive federal, state, local and foreign environmental, health and safety laws and regulations concerning matters such as air emissions, wastewater discharges, solid and hazardous waste handling and disposal and the investigation and remediation of contamination. The risks of substantial costs and liabilities related to compliance with these laws and regulations are an inherent part of our business, and future conditions may develop, arise or be discovered that create substantial environmental compliance or remediation liabilities and costs. Compliance with environmental, health and safety legislation and regulatory requirements may prove to be more limiting and costly than we anticipate. We may be subject to legal proceedings brought by private parties or governmental authorities with respect to environmental matters, including matters involving alleged property damage or personal injury. New laws and regulations, including those which may relate to emissions of greenhouse gases, stricter enforcement of existing laws and regulations, the discovery of previously unknown contamination or the imposition of new clean-up requirements could require us to incur costs or become the basis for new or increased liabilities that could have a material adverse effect on our business, financial condition or results of operations.
If we are unable to continue to maintain good relationships with our employees and prevent labor organizations from organizing groups of our employees, our operating costs could significantly increase and our operational flexibility could be significantly reduced.
Despite continual organizing attempts by labor unions, all of our U.S. employees have thus far chosen not to unionize. The U.S. Congress has, in the past, considered adopting changes in labor laws, however, that would make it easier for unions to organize units of our employees. Such legislation could expose our customers to local work stoppages in key areas that interrupt the timely flow of shipments of time-sensitive, high-value goods throughout our global network. Such disruptions could threaten our ability to provide competitively priced shipping options and ready access to global markets. There is also the possibility that Congress could pass other labor legislation that could adversely affect our companies, whose employees are governed by the National Labor Relations Act of 1935, as amended.
Climate Change, Climate Change Regulations and Greenhouse Gas Effects May Adversely Impact our Operations.
There is growing concern from members of the scientific community and the general public that an increase in global average temperatures due to emissions of greenhouse gases (GHG) and other human activities have or will cause significant changes in weather patterns and increase the frequency and severity of natural disasters. Climate change, including the impact of global warming, creates physical and financial risk. Physical risks from climate change include an increase in sea level and changes in weather conditions, such as an increase in changes in precipitation and extreme weather events. Climate change could have a material adverse effect on our results of operations, financial condition, and liquidity. For example, climate change effects may drive up transportation costs for the transport and distribution of our goods; such effects may dramatically increase costs of certain key ingredients due to the effects on agricultural output and the availability of key inputs; and such effects may harm the general economy which in turn would harm our business
We may become subject to legislation and regulation regarding climate change, and compliance with any new rules could be difficult and costly. Concerned parties, such as legislators and regulators, shareholders and non-governmental organizations, as well as companies in many business sectors, are considering ways to reduce GHG emissions. Foreign, federal, state and local regulatory and legislative bodies have proposed various legislative and regulatory measures relating to climate change, regulating GHG emissions and energy policies. If such legislation is enacted, we could incur increased energy, environmental and other costs and capital expenditures to comply with the limitations. Due to the uncertainty in the regulatory and legislative processes, as well as the scope of such requirements and initiatives, we cannot currently determine the effect such legislation and regulation may have on our operations.
We could face increased costs related to defending and resolving legal claims and other litigation related to climate change and the alleged impact of our operations on climate change.
The Companys success depends on the experience and skill of the board of directors, its executive officers and key employees.
In particular, the Company is dependent on Sam Polk and David Foster who are CEO and Director since formation on October 14, 2015 and Vice President and Director since formation on October 14, 2015 of the Company. The Company has entered into employment agreements with Sam Polk and David Foster although there can be no assurance that it will do so or that they will continue to be employed by the Company for a particular period of time. The loss of Sam Polk and David Foster or any member of the board of directors or executive officer could harm the Companys business, financial condition, cash flow and results of operations.
We rely on various intellectual property rights, including trademarks in order to operate our business.
Such intellectual property rights, however, may not be sufficiently broad or otherwise may not provide us a significant competitive advantage. In addition, the steps that we have taken to maintain and protect our intellectual property may not prevent it from being challenged, invalidated, circumvented or designed-around, particularly in countries where intellectual property rights are not highly developed or protected. In some circumstances, enforcement may not be available to us because an infringer has a dominant intellectual property position or for other business reasons, or countries may require compulsory licensing of our intellectual property. Our failure to obtain or maintain intellectual property rights that convey competitive advantage, adequately protect our intellectual property or detect or prevent circumvention or unauthorized use of such property, could adversely impact our competitive position and results of operations. We also rely on nondisclosure and noncompetition agreements with employees, consultants and other parties to protect, in part, trade secrets and other proprietary rights. There can be no assurance that these agreements will adequately protect our trade secrets and other proprietary rights and will not be breached, that we will have adequate remedies for any breach, that others will not independently develop substantially equivalent proprietary information or that third parties will not otherwise gain access to our trade secrets or other proprietary rights.
As we expand our business, protecting our intellectual property will become increasingly important. The protective steps we have taken may be inadequate to deter our competitors from using our proprietary information. In order to protect or enforce our patent rights, we may be required to initiate litigation against third parties, such as infringement lawsuits. Also, these third parties may assert claims against us with or without provocation. These lawsuits could be expensive, take significant time and could divert managements attention from other business concerns. The law relating to the scope and validity of claims in the technology field in which we operate is still evolving and, consequently, intellectual property positions in our industry are generally uncertain. We cannot assure you that we will prevail in any of these potential suits or that the damages or other remedies awarded, if any, would be commercially valuable.
From time to time, third parties may claim that one or more of our products or services infringe their intellectual property rights.
Any dispute or litigation regarding patents or other intellectual property could be costly and time-consuming due to the complexity of our technology and] the uncertainty of intellectual property litigation and could divert our management and key personnel from our business operations. A claim of intellectual property infringement could force us to enter into a costly or restrictive license agreement, which might not be available under acceptable terms or at all, could require us to redesign our products, which would be costly and time-consuming, and/or could subject us to an injunction against development and sale of certain of our products or services. We may have to pay substantial damages, including damages for past infringement if it is ultimately determined that our product candidates infringe a third partys proprietary rights. Even if these claims are without merit, defending a lawsuit takes significant time, may be expensive and may divert managements attention from other business concerns. Any public announcements related to litigation or interference proceedings initiated or threatened against as could cause our business to be harmed. Our intellectual property portfolio may not be useful in asserting a counterclaim, or negotiating a license, in response to a claim of intellectual property infringement. In certain of our businesses we rely on third party intellectual property licenses and we cannot ensure that these licenses will be available to us in the future on favorable terms or at all.
Although dependent on certain key personnel, the Company does not have any key man life insurance policies on any such people.
The Company is dependent on Sam Polk and David Foster in order to conduct its operations and execute its business plan, however, the Company has not purchased any insurance policies with respect to those individuals in the event of their death or disability. Therefore, in any of Sam Polk and David Foster die or become disabled, the Company will not receive any compensation to assist with such persons absence. The loss of such person could negatively affect the Company and its operations.
We have not prepared any audited financial statements.
Therefore, you have no audited financial information regarding the Companys capitalization or assets or liabilities on which to make your investment decision. If you feel the information provided is insufficient, you should not invest in the Company.
We are subject to income taxes as well as non-income based taxes, such as payroll, sales, use, value-added, net worth, property and goods and services taxes.
Significant judgment is required in determining our provision for income taxes and other tax liabilities. In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain. Although we believe that our tax estimates are reasonable: (i) there is no assurance that the final determination of tax audits or tax disputes will not be different from what is reflected in our income tax provisions, expense amounts for non-income based taxes and accruals and (ii) any material differences could have an adverse effect on our financial position and results of operations in the period or periods for which determination is made.
We are not subject to Sarbanes-Oxley regulations and lack the financial controls and safeguards required of public companies.
We do not have the internal infrastructure necessary, and are not required, to complete an attestation about our financial controls that would be required under Section 404 of the Sarbanes-Oxley Act of 2002. There can be no assurance that there are no significant deficiencies or material weaknesses in the quality of our financial controls. We expect to incur additional expenses and diversion of managements time if and when it becomes necessary to perform the system and process evaluation, testing and remediation required in order to comply with the management certification and auditor attestation requirements.
The Company has indicated that it has engaged in certain transactions with related persons.
Please see the section entitled "Transactions with Related Persons and Conflicts of Interest" for further details.
Changes in employment laws or regulation could harm our performance.
Various federal and state labor laws govern our relationship with our employees and affect operating costs. These laws include minimum wage requirements, overtime pay, healthcare reform and the implementation of the Patient Protection and Affordable Care Act, unemployment tax rates, workers compensation rates, citizenship requirements, union membership and sales taxes. A number of factors could adversely affect our operating results, including additional government-imposed increases in minimum wages, overtime pay, paid leaves of absence and mandated health benefits, mandated training for employees, increased tax reporting and tax payment requirements for employees who receive tips, a reduction in the number of states that allow tips to be credited toward minimum wage requirements, changing regulations from the National Labor Relations Board and increased employee litigation including claims relating to the Fair Labor Standards Act.
Maintaining, extending and expanding our reputation and brand image are essential to our business success.
We seek to maintain, extend, and expand our brand image through marketing investments, including advertising and consumer promotions, and product innovation. Increasing attention on marketing could adversely affect our brand image. It could also lead to stricter regulations and greater scrutiny of marketing practices. Existing or increased legal or regulatory restrictions on our advertising, consumer promotions and marketing, or our response to those restrictions, could limit our efforts to maintain, extend and expand our brands. Moreover, adverse publicity about regulatory or legal action against us could damage our reputation and brand image, undermine our customers confidence and reduce long-term demand for our products, even if the regulatory or legal action is unfounded or not material to our operations.
In addition, our success in maintaining, extending, and expanding our brand image depends on our ability to adapt to a rapidly changing media environment. We increasingly rely on social media and online dissemination of advertising campaigns. The growing use of social and digital media increases the speed and extent that information or misinformation and opinions can be shared. Negative posts or comments about us, our brands or our products on social or digital media, whether or not valid, could seriously damage our brands and reputation. If we do not establish, maintain, extend and expand our brand image, then our product sales, financial condition and results of operations could be adversely affected.
Product safety and quality concerns, including concerns related to perceived quality of ingredients, could negatively affect the Companys business.
The Companys success depends in large part on its ability to maintain consumer confidence in the safety and quality of all its products. The Company has rigorous product safety and quality standards. However, if products taken to market are or become contaminated or adulterated, the Company may be required to conduct costly product recalls and may become subject to product liability claims and negative publicity, which would cause its business to suffer. In addition, regulatory actions, activities by nongovernmental organizations and public debate and concerns about perceived negative safety and quality consequences of certain ingredients in our products may erode consumers confidence in the safety and quality issues, whether or not justified, and could result in additional governmental regulations concerning the marketing and labeling of the Companys products, negative publicity, or actual or threatened legal actions, all of which could damage the reputation of the Companys products and may reduce demand for the Companys products.
We must correctly predict, identify, and interpret changes in consumer preferences and demand, offer new products to meet those changes, and respond to competitive innovation.
Consumer preferences our products change continually. Our success depends on our ability to predict, identify, and interpret the tastes and habits of consumers and to offer products that appeal to consumer preferences. If we do not offer products that appeal to consumers, our sales and market share will decrease. We must distinguish between short-term fads, mid-term trends, and long-term changes in consumer preferences. If we do not accurately predict which shifts in consumer preferences will be long-term, or if we fail to introduce new and improved products to satisfy those preferences, our sales could decline. In addition, because of our varied customer base, we must offer an array of products that satisfy the broad spectrum of consumer preferences. If we fail to expand our product offerings successfully across product categories, or if we do not rapidly develop products in faster growing and more profitable categories, demand for our products could decrease, which could materially and adversely affect our product sales, financial condition, and results of operations.
In addition, achieving growth depends on our successful development, introduction, and marketing of innovative new products and line extensions. Successful innovation depends on our ability to correctly anticipate customer and consumer acceptance, to obtain, protect and maintain necessary intellectual property rights, and to avoid infringing the intellectual property rights of others and failure to do so could compromise our competitive position and adversely impact our business.
We are vulnerable to fluctuations in the price and supply of ingredients, packaging materials, and freight.
The prices of the ingredients, packaging materials and freight are subject to fluctuations in price attributable to, among other things, changes in supply and demand of raw materials, crops or other commodities, fuel prices and government-sponsored agricultural and livestock programs. The sales prices to our customers are a delivered price. Therefore, changes in our input costs could impact our gross margins. Our ability to pass along higher costs through price increases to our customers is dependent upon competitive conditions and pricing methodologies employed in the various markets in which we compete. To the extent competitors do not also increase their prices, customers and consumers may choose to purchase competing products or may shift purchases to lower-priced private label or other value offerings which may adversely affect our results of operations.
We use significant quantities of raw materials, food ingredients and other agricultural products as well as packaging materials provided by third-party suppliers. We buy from a variety of producers and manufacturers, and alternate sources of supply are generally available. However, the supply and price are subject to market conditions and are influenced by other factors beyond our control. We do not have long-term contracts with many of our suppliers, and, as a result, they could increase prices or fail to deliver. The occurrence of any of the foregoing could increase our costs and disrupt our operations.
Substantial disruption to production at our manufacturing and distribution facilities could occur.
A disruption in production at our manufacturing facility or at our third-party supplier facilities could have an adverse effect on our business. In addition, a disruption could occur at the facilities of our suppliers or distributors. The disruption could occur for many reasons, including fire, natural disasters, weather, water scarcity, manufacturing problems, disease, strikes, transportation or supply interruption, government regulation, cybersecurity attacks or terrorism. Alternative facilities with sufficient capacity or capabilities may not be available, may cost substantially more or may take a significant time to start production, each of which could negatively affect our business and results of operations.
Future product recalls or safety concerns could adversely impact our results of operations.
We may be required to recall certain of our products should they be mislabeled, contaminated, spoiled, tampered with or damaged. We also may become involved in lawsuits and legal proceedings if it is alleged that the consumption or use of any of our products causes injury, illness or death. A product recall or an adverse result in any such litigation could have an adverse effect on our business, depending on the costs of the recall, the destruction of product inventory, competitive reaction and consumer attitudes. Even if a product liability or consumer fraud claim is unsuccessful or without merit, the negative publicity surrounding such assertions regarding our products could adversely affect our reputation and brand image. We also could be adversely affected if consumers in our principal markets lose confidence in the safety and quality of our products.
The consolidation of retail customers could adversely affect us.
Retail customers, as well as food distributors in our major markets, may consolidate, resulting in fewer customers for our business. Consolidation also produces larger retail customers that may seek to leverage their position to improve their profitability by demanding improved efficiency, lower pricing, increased promotional programs, or specifically tailored products. In addition, larger retailers have the scale to develop supply chains that permit them to operate with reduced inventories or to develop and market their own white-label brands. Retail consolidation and increasing retailer power could adversely affect our product sales and results of operations. Retail consolidation also increases the risk that adverse changes in our customers business operations or financial performance will have a corresponding material and adverse effect on us. For example, if our customers cannot access sufficient funds or financing, then they may delay, decrease, or cancel purchases of our products, or delay or fail to pay us for previous purchases, which could materially and adversely affect our product sales, financial condition, and operating results.
Evolving tax, environmental, food quality and safety or other regulations or failure to comply with existing licensing, labeling, trade, food quality and safety and other regulations and laws could have a material adverse effect on our consolidated financial condition.
Our activities or products, both in and outside of the United States, are subject to regulation by various federal, state, provincial and local laws, regulations and government agencies, which may include the U.S. Food and Drug Administration, U.S. Federal Trade Commission, the U.S. Departments of Agriculture, Commerce and Labor, as well as similar and other authorities outside of the United States, International Accords and Treaties and others, including voluntary regulation by other bodies. These laws and regulations and interpretations thereof may change, sometimes dramatically, as a result of a variety of factors, including political, economic or social events. The manufacturing, marketing and distribution of food products are subject to governmental regulation that control such matters as food quality and safety, ingredients, advertising, product or production requirements, labeling, import or export of our products or ingredients, relations with distributors and retailers, health and safety, the environment, and restrictions on the use of government programs to purchase certain of our products. We are also regulated with respect to matters such as licensing requirements, trade and pricing practices, tax, anticorruption standards, advertising and claims, and environmental matters. The need to comply with new, evolving or revised tax, environmental, food quality and safety, labeling or other laws or regulations, or new, or changed interpretations or enforcement of existing laws or regulations, may have an adverse effect on our business and results of operations. Further, if we are found to be out of compliance with applicable laws and regulations in these areas, we could be subject to civil remedies, including fines, injunctions, termination of necessary licenses or permits, or recalls, as well as potential criminal sanctions, any of which could have an adverse effect on our business. Even if regulatory review does not result in these types of determinations, it could potentially create negative publicity or perceptions which could harm our business or reputation.
Significant additional labeling or warning requirements may inhibit sales of affected products.
Various jurisdictions may seek to adopt significant additional product labeling or warning requirements relating to the content or perceived adverse health consequences of our product(s). If these types of requirements become applicable to our product(s) under current or future environmental or health laws or regulations, they may inhibit sales of such products.
We are dependent on third-party suppliers for key raw materials, packaging materials and production inputs, and our use of natural ingredients exposes us to weather and crop reliability.
We purchase the raw materials used in the production of our products from a number of domestic and foreign third-party suppliers. The demand for certain of these materials has caused shortages in the past, during which times other companies with greater financial resources than us purchased large quantities the materials, and our industry could face shortages again in the future. In addition, many of our raw materials are agricultural products and therefore many outside factors, including weather conditions, farmers rotating out of our ingredients, pests, government regulations and legislation affecting agriculture, could affect quality, price and supply. We are exposed to the quality of ingredient crops each year, and significant failure of a crop would adversely affect our costs.
The process of producing our food utilizes a large amount of electricity and water.
Parts of the country have been experiencing drought and electricity price increases for the last several years. We cannot predict whether water or electricity restrictions may be put in place, or price increases may take place, in the future.
Growth rates higher than planned or the introduction of new products requiring special ingredients could create higher demand for ingredients greater than we can source.
Although we believe that there are alternative sources available for our key ingredients, there can be no assurance that we would be able to acquire such ingredients from substitute sources on a timely or cost effective basis in the event that current suppliers could not adequately fulfill orders, which would adversely affect our business and results of operations.
We source certain packaging materials, such as meal containers, labels, coolers and transport containers, and other packaging and transport materials from a number of third-party suppliers and, in some cases, single-source suppliers.
Although we believe that alternative suppliers are available, the loss of any of our packaging material suppliers could adversely affect our results of operations and financial condition. Our inability to preserve the current economics of these agreements could expose us to significant cost increases in future years.
We are heavily dependent on our distributors.
In the United States, where sell substantially all of our products are sold. Although we currently have a large network of wholesale distributors, sustained growth will require us to maintain such relationships and enter into arrangements with additional distributors in new markets. No assurance can be given that we will be able to maintain our current distribution network or secure additional distributors on terms favorable to us, or at all.
Our distributors often represent competing specialty beer and spirits brands, as well as national beer and spirits brands, and are to varying degrees influenced by their continued business relationships with other brewers and distillers. Our independent distributors may be influenced by a large brewer or distiller, particularly if they rely on that brewer or distiller for a significant portion of their sales, which many distributors do. In addition, certain of our distributors cover a substantial network of certain on-premise retailers. While we believe that the relationships between us and our distributors are generally good, some of these relationships are relatively new and untested and there can be no assurance that any or all of our distributors will continue to effectively market and distribute our products. The loss of any distributor or the inability to replace a poorly performing distributor in a timely fashion could have a material adverse effect on our business, financial condition and results of operations.
Certain distribution relationships may be governed by state laws that in certain respects may supersede the terms of any contractual relationships.
Under certain state laws, distribution agreements can only be terminated by the supplier after the supplier shows some type of "cause" (usually an uncured deficiency in the distributors operation) or upon payment of some sort of compensation to the distributor for the value of the distribution rights. State laws also may limit a suppliers right to object to proposed assignments of distribution rights and/or changes in distributor ownership. Therefore, while we may enter into contractual relationships with certain distributors, state law in various jurisdictions may limit our exercising our contractual termination and enforcement rights. Additionally, our distribution relationships are susceptible to changes in state legislation that could significantly alter the competitive environment for the food industry, which could adversely affect the financial stability of distributors on which we rely.
We are subject to governmental regulations affecting our retail storefronts and food production facilities.
Federal, state and local laws and regulations govern the production and distribution of food products, including permitting, licensing, trade practices, labeling, advertising and marketing, distributor relationships and various other matters. To operate our retail locations and food production facilities, we must obtain and maintain numerous permits, licenses and approvals from various governmental agencies. A variety of federal, state and local governmental authorities also levy various taxes, license fees and other similar charges and may require bonds to ensure compliance with applicable laws and regulations. Our kitchens are subject to food and beverage regulations that generally require us to apply to a state authority for a license that must be renewed annually and may be revoked or suspended for cause at any time. These regulations relate to numerous aspects of daily operations of our storefronts and kitchens, including minimum age of patrons and employees, hours of operation, advertising, trade practices, inventory control and handling, storage, and sale of our products. Noncompliance with such laws and regulations may cause any particular state or jurisdiction to revoke our license or permit, restricting our ability to conduct business, assess additional taxes, interest and penalties or result in the imposition of significant fines.
The retail food business can be seasonal in nature, and we are likely to experience fluctuations in results of operations and financial condition.
Sales of food at retail locations can be somewhat seasonal, with certain quarters historically having lower sales than the rest of the year.
The loss of our third-party distributors could impair our operations and substantially reduce our financial results.
We continually seek to expand distribution of our products by entering into distribution arrangements with regional bottlers or other direct store delivery distributors having established sales, marketing and distribution organizations. Many distributors are affiliated with and manufacture and/or distribute other beverage products. In many cases, such products compete directly with our products. The marketing efforts of our distributors are important for our success. If our brands prove to be less attractive to our existing distributors and/or if we fail to attract additional distributors and/or our distributors do not market and promote our products above the products of our competitors, our business, financial condition and results of operations could be adversely affected.
Inability to secure co-packers for our products could impair our operations and substantially reduce our financial results.
We may eventually rely on third parties, called co-packers in our industry, to produce our products. We currently have 0 co-packing agreements for our products. Our eventual dependence on co-packers may put us at substantial risk in our operations. If we lose such relationships and/or require new co-packing relationships for other products, we may be unable to establish such relationships on favorable terms, if at all.
Our business is substantially dependent upon awareness and market acceptance of our products and brands.
Our business depends on acceptance by both our end consumers as well as our independent distributors of our brands as beverage brands that have the potential to provide incremental sales growth rather than reduce distributors existing beverage sales. We believe that the success of our product name brands will also be substantially dependent upon acceptance of our product name brands. Accordingly, any failure of our brands to maintain or increase acceptance or market penetration would likely have a material adverse affect on our revenues and financial results.
Sales of certain products contributed disproportionately to our historical financial performance and cash flow.
A reduction in the sale of our products would have a material adverse effect on our ability to remain profitable and achieve future growth. A substantial proportion of our sales may be derived from one or more of our leading products. All of our secondary products may represent a relatively small portion of our sales. We cannot be certain that we will be able to continue to commercialize or expand distribution of our existing leading products or that any of our future food products will be accepted in their markets. Any inability on our part to stay current with food and consumer trends through new products could have a material adverse effect on our business performance.
Reductions in sales of our products will have an adverse effect on our profitability and ability to generate cash to fund our business plan.
The following factors, among others, could affect continued market acceptance and profitability of our products:
the introduction of competitive products;
changes in consumer preferences among [type of food] food products;
changes in consumer eating and snacking habits, including trends away from certain categories, including major allergen-free, gluten-free and non-GMO products;
changes in awareness of the social effects of farming and food production;
changes in consumer perception about trendy snack products;
changes in consumer perception regarding the healthfulness of our products;
the level and effectiveness of our sales and marketing efforts;
any unfavorable publicity regarding food products or similar products;
any unfavorable publicity regarding our brand;
litigation or threats of litigation with respect to our products;
the price of our products relative to other competing products;
price increases resulting from rising commodity costs;
any changes in government policies and practices related to our products, labeling and markets;
regulatory developments affecting the manufacturing, labeling, marketing or use of our products;
new science or research that disputes the healthfulness of our products; and
adverse decisions or rulings limiting our ability to promote the benefits of popcorn products.
Adverse developments with respect to the sale of our products would significantly reduce our net sales and profitability and have a material adverse effect on our ability to maintain profitability and achieve our business plan.
As a food production company, our products may be required to be compliant with regulations by the Food and Drug Administration (FDA).
We may be required to comply with certain FDA rules and regulations, such as those regarding product manufacturing, food safety, required testing and appropriate labeling of our products. It is possible that regulations by the FDA and its interpretation thereof may change over time. As such, there is a risk that our products could become non-compliant with the FDAs regulations and any such non-compliance could harm our business.
Certain products may rely on independent certification that they are non-GMO, gluten-free or Kosher.
Certain of our product label representations may rely on independent certification of their non-GMO, gluten-free and Kosher status and must comply with the requirements of independent organizations or certification authorities in order to label our products as such. Currently, the FDA does not directly regulate the labeling of Kosher or non-GMO products as such. The FDA has defined the term "gluten-free" and we must comply with the FDAs definition if we include this label on our products. Our products could lose their non-GMO and gluten-free certifications if our raw material suppliers lose their product certifications for those specified claims. We could also lose our Kosher product certification if a contract manufacturing plant is found to be in violation of required manufacturing or cleaning processes. The loss of any of these independent certifications, including for reasons outside of our control, could harm our business.
Ingredient and packaging costs are volatile and may rise significantly, which may negatively impact the profitability of our business.
Costs of ingredients and packaging are volatile and can fluctuate due to conditions that are difficult to predict, including global competition for resources, weather conditions, natural or man-made disasters, consumer demand and changes in governmental trade and agricultural programs. As such, any material upward movement in raw materials pricing could negatively impact our margins, if we are not able to pass these costs on to our customers, or sales if we are forced to increase our prices, which would adversely affect our business, results of operations and financial condition.
Certain of our raw material contracts have minimum purchase commitments that could require us to continue to purchase raw materials even if our sales have declined.
We are contractually obligated to purchase a certain amount of raw materials from our suppliers even if we do not have the customer demand to sustain such purchases. The purchase of raw materials, which we are not able to convert into finished products and sell to our customers would have a negative effect on our business and results of operations.
Our future business, results of operations and financial condition may be adversely affected by reduced availability of our core ingredients.
Our ability to ensure a continuing supply of our core ingredients at competitive prices depends on many factors beyond our control, such as the number and size of farms that grow crops, poor harvests, changes in national and world economic conditions and our ability to forecast our ingredient requirements. The main ingredients used in our products are vulnerable to adverse weather conditions and natural disasters, such as floods, droughts, frosts, earthquakes, hurricanes and pestilences. Adverse weather conditions and natural disasters can lower crop yields and reduce crop size and quality, which in turn could reduce the available supply of our core ingredients. If supplies of our core ingredients are reduced or there is greater demand for such ingredients, from us and others, we may not be able to obtain sufficient supply on favorable terms, or at all, which could impact our ability to supply products to distributors and retailers.
Failure by our transportation providers to deliver our products on time or at all could result in lost sales.
We currently rely upon third-party transportation providers for a significant portion of our product shipments. Our utilization of delivery services for shipments is subject to risks, including increases in fuel prices, which would increase our shipping costs, and employee strikes and inclement weather, which may impact the ability of providers to provide delivery services that adequately meet our shipping needs. We may, from time to time, change third-party transportation providers, and we could therefore face logistical difficulties that could adversely affect deliveries. We may not be able to obtain terms as favorable as those we receive from the third-party transportation providers that we currently use or may incur additional costs, which in turn would increase our costs and thereby adversely affect our operating results.
If our brand or reputation is damaged, the attractive characteristics that we offer retailers may diminish, which could diminish the value of our business.
We are currently an attractive brand for our customers because our products are high quality and generate a high level of retail sales at a premium margin relative to their shelf space. This is due to both our premium price point and our sales velocity. If our brand or reputation is damaged for any reason, consumers may no longer be willing to pay a premium price for our products and we may no longer be able to generate a high sales velocity at our then-current prices. If we no longer offer these characteristics, retailers may decrease their orders of our products and downgrade the in-store placement of our products, which could have an adverse effect on our business and results of operations.
There are general economic risks associated with the restaurant industry.
Restaurants are a very cyclical business. Economic recessions can lead to fewer customers as consumers become more cost conscientious and curb spending amid unemployment and other economic uncertainty. Increasing costs for energy can prevent customers from traveling to our location, increase the price of packaging of products that we purchase, increase shipping and delivery charges for our ingredients and supplies and increase the cost of heating and refrigeration.
Inflationary pressure, particularly on food costs, labor costs (especially associated with increases in the minimum wage) and health care benefits, can negatively affect the operation of the business. Shortages of qualified labor are sometimes experienced in certain local economies. All of these events could have a negative effect on our business.
Our inability to successfully and sufficiently raise menu prices could result in a decline in profitability.
We utilize menu price increases to help offset cost increases, including increased cost for commodities, minimum wages, employee benefits, insurance arrangements, construction, utilities and other key operating costs. If its selection and amount of menu price increases are not accepted by consumers and reduce guest traffic, or are insufficient to counter increased costs, our financial results could be harmed.
The sale of food products at our stores subjects us to additional regulations and potential liability.
Because we sell food products, we are required to comply with the licensing and other requirements of the federal government, state and municipal authorities where our restaurant is located. Food control regulations require applications to state authorities and, in certain locations, county and municipal authorities for a license and permit to sell our products on the premises. Typically, the licenses are renewed annually and may be revoked or suspended for cause at any time. Food regulations relate to numerous aspects of the daily operations of restaurants and retail food establishments, including hours of operation, advertising, wholesale purchasing, inventory control and handling, storage and sale of our products. If we fail to comply with federal, state or local regulations, our licenses may be revoked, and we may be forced to terminate the sale of our products. Further, growing movements to change laws relating to food products may negatively impact operations or result in the loss of liquor licenses.
Damage to our reputation could negatively impact our business, financial condition and results of operations.
Our reputation and the quality of our brand are critical to our business and success in existing markets, and will be critical to our success as we enter new markets. Any incident that erodes consumer loyalty for our brand could significantly reduce its value and damage our business.
We may be adversely affected by any negative publicity, regardless of its accuracy, including with respect to:
_ food safety concerns, including food tampering or contamination;
_ food-borne illness incidents;
_ the safety of the food commodities we use, particularly beef;
_ guest injury;
_ security breaches of confidential guest or employee information;
_ employment-related claims relating to alleged employment discrimination, wage and hour violations, labor standards or health care and benefit issues; or
_ government or industry findings concerning our restaurant, restaurants operated by other food service providers, or others across the food industry supply chain.
Also, there has been a marked increase in the use of social media platforms and similar devices, including blogs, social media websites and other forms of internet-based communications that provide individuals with access to a broad audience of consumers and other interested persons. The availability of information on social media platforms is virtually immediate as is its impact. Information posted may be adverse to our interests or may be inaccurate, each of which may harm our performance, prospects or business. The harm may be immediate without affording us an opportunity for redress or correction.
Our reliance on third-party food suppliers and distributors increases the risk that food-borne illness incidents could be caused by factors outside of our control.
We cannot ensure that all food items will be properly maintained during transport throughout the supply chain or that our employees will identify all products that may be spoiled and should not be used in our restaurant. If our guests become ill from food-borne illnesses, we could be forced to temporarily close. Furthermore, any instances of food contamination, whether or not at our restaurant, could subject us or our suppliers to a food recall pursuant to the United States Food and Drug Administrations ("FDA") recently enacted Food Safety Modernization Act ("FSMA").
Shortages or interruptions in the supply or delivery of food products could adversely affect our operating results.
We are dependent on frequent deliveries of food products that meet our specifications.
Shortages or interruptions in the supply of food products caused by problems in production or distribution, inclement weather, unanticipated demand or other conditions could adversely affect the availability, quality and cost of ingredients, which would adversely affect our operating results.
Security breaches of confidential guest information, in connection with our electronic processing of credit and debit card transactions, or confidential employee information may adversely affect our business.
Our business requires the collection, transmission and retention of large volumes of guest and employee data, including credit and debit card numbers and other personally identifiable information, in various information technology systems that we maintain and in those maintained by third parties with whom we contract to provide services. The integrity and protection of that guest and employee data is critical to us. The information, security and privacy requirements imposed by governmental regulation are increasingly demanding. Our systems may not be able to satisfy these changing requirements and guest and employee expectations, or may require significant additional investments or time in order to do so. A breach in the security of our information technology systems or those of our service providers could lead to an interruption in the operation of our systems, resulting in operational inefficiencies and a loss of profits. Additionally, a significant theft, loss or misappropriation of, or access to, guests or other proprietary data or other breach of our information technology systems could result in fines, legal claims or proceedings.
We are subject to risks associated with leasing property subject to long-term non-cancelable leases.
We do not own any real property and our restaurant is located on a leased premises. Our leases have terms of 5 to 10 years and may provide for renewal options as well as for rent escalations. We generally cannot cancel the lease. If we close the restaurant, we may still be obligated to perform our monetary obligations under the lease. We depend on cash flows from operations to pay our lease expenses and to fulfill our other cash needs. If our business does not generate sufficient cash flow from operating activities we may not be able to service our lease expenses.
Increased food commodity and energy costs could decrease our operating profit margins.
Our profitability depends on our ability to anticipate and react to changes in the price and availability of food commodities, including among other things beef, poultry, grains, dairy and produce. Prices may be affected due to market changes, shortages or interruptions in supply due to weather, disease or other conditions beyond our control, or other reasons. Other events could increase commodity prices or cause shortages that could affect the cost and quality of the items we buy or require us to further raise prices or limit our menu options. These events could impact our pricing and negatively affect our sales and profit margins. There can be no assurance that future cost increases can be offset by increased menu prices or that increased menu prices will be accepted by our guests.
We are subject to many federal, state and local laws with which compliance is both costly and complex.
The restaurant industry is subject to extensive federal, state and local laws and regulations, including the comprehensive health care reform legislation and those relating to the preparation and sale of food. Such laws and regulations are subject to change from time to time. The failure to comply with these laws and regulations could adversely affect our operating results. Typically, licenses, permits and approvals under such laws and regulations must be renewed annually and may be revoked, suspended or denied renewal for cause at any time if governmental authorities determine that our conduct violates applicable regulations. Difficulties or failure to maintain or obtain the required licenses, permits and approvals could adversely affect our business.
There is also a potential for increased regulation of certain food establishments in the United States, where compliance with a Hazard
HACCP refers to a management system in which food safety is addressed through the analysis and control of potential hazards from production, procurement and handling, to manufacturing, distribution and consumption of the finished product. Many states have required restaurants to develop and implement HACCP Systems, and the United States government continues to expand the sectors of the food industry that must adopt and implement HACCP programs. Additionally, our suppliers may initiate or otherwise be subject to food recalls that may impact the availability of certain products, result in adverse publicity or require us to take actions that could be costly for us or otherwise impact our business.
We are subject to the ADA, which, among other things, requires our restaurant to meet federally mandated requirements for the disabled.
The ADA prohibits discrimination in employment and public accommodations on the basis of disability.
Under the Americans with Disabilities Act, we could be required to modify our restaurant to provide service to, or make reasonable accommodations for the employment of, disabled persons.
We are subject to the INS and must comply with federal immigration law.
Our employment practices are subject to the requirements of the Immigration and Naturalization Service relating to citizenship and residency. We are unable to ensure compliance with all immigration laws and often rely upon employee-provided information to make employment decisions.
We may in the future rely on licensees or franchisees for the operation of licensed or franchised restaurants, and we may have limited control with respect to the operations of licensed or franchised restaurants, which could have a negative impact on our reputation and business.
We may in the future rely on licensees or franchisees and the manner in which they operate their restaurants to develop and promote our business. Our licensees are required to operate their restaurants according to the specific guidelines we set forth that are essential to maintaining brand integrity and reputation as well as in accordance with all laws and regulations applicable to our restaurants. We cannot give assurance that there will not be differences in product and service quality, operations, marketing or profitably or that there will be adherence to all of our guidelines and applicable laws at these restaurants. Failure of these restaurants to operate effectively could have a negative impact on our reputation or our business.
Legislation and regulations requiring the display and provision of nutritional information for our menu offerings, and new information or attitudes regarding diet and health or adverse opinions about the health effects of consuming our menu offerings, could affect consumer preferences and negatively impact our business, financial condition and results of operations.
We serve food and beverages. Government regulation and consumer eating habits may impact our business as a result of changes in attitudes regarding diet and health or new information regarding the health effects of consuming our menu offerings. These changes have resulted in, and may continue to result in, the enactment of laws and regulations that impact the ingredients and nutritional content of our menu offerings, or laws and regulations requiring us to disclose the nutritional content of our food offerings. For example, a number of states, counties and cities have enacted menu labeling laws requiring multi-unit restaurant operators to disclose certain nutritional information to customers, or have enacted legislation restricting the use of certain types of ingredients in restaurants. Furthermore, the Patient Protection and Affordable Care Act of 2010 (the "PPACA") establishes a uniform, federal requirement for certain restaurants to post certain nutritional information on their menus. The imposition of menu-labeling laws, nutritional information disclosure and public sentiment could have an adverse effect on our results of operations and financial position, as well as the hospitality industry in general.
Our insurance may not provide adequate levels of coverage against claims.
We believe that we maintain insurance customary for businesses of our size and type. However, there are types of losses we may incur that cannot be insured against or that we believe are not economically reasonable to insure. Such losses could have a material adverse effect on our business and results of operations.
Our business is subject to seasonal fluctuations
Our business is subject to seasonal fluctuations in that our sales are typically nominally higher during certain months affecting performance during affected quarters of the fiscal year. As a result of these factors, our financial results for any single quarter or for periods of less than a year are not necessarily indicative of the results that may be achieved for a full fiscal year.
Because our retail storefronts are in a single area, we are susceptible to economic and other trends and developments, including adverse weather conditions and frequently-occurring natural disasters in this area.
Our financial performance dependent on our retail food locations in Los Angeles. As a result, adverse economic conditions in this area could have a material adverse effect on our overall results of operations. In addition, local strikes, terrorist attacks, increases in energy prices, inclement weather or natural or man-made disasters could have a negative effect on our business. For example, we may experience temporary or permanent storefront closures due to mudslides, wildfires, droughts, floods, and earthquakes. Temporary or prolonged closures may occur and guest traffic may decline due to the actual or perceived effects of future weather related events.
Because our business is seasonal, with the highest volume of net sales during the fourth quarter, adverse events during the fourth quarter could materially affect our financial statements as a whole.
We generally recognize our highest volume of net sales during the holiday selling season, which occurs in the fourth quarter of our fiscal year. In anticipation of this holiday, we purchase substantial amounts of seasonal inventory. Adverse events, such as deteriorating economic conditions, higher unemployment, higher gas prices, public transportation disruptions, or unanticipated adverse weather could result in lower-than-planned sales during the holiday season. An excess of seasonal merchandise inventory could result if our net sales during the holiday selling season fall below seasonal norms or expectations. If our fourth quarter sales results were substantially below expectations, our financial performance and operating results could be adversely affected by unanticipated markdowns, especially in seasonal merchandise.
The seasonality of our business places increased strain on our operations.
A disproportionate amount of our sales normally occur during our fourth quarter. If we do not stock or are otherwise unable to source products sufficient to meet customer demand, our business would be adversely affected. If we liquidate products, as we have in the past, we may be required to take significant inventory markdowns or write-offs, which could reduce profits. We may experience an increase in our shipping cost due to complimentary upgrades, split-shipments, and additional long-zone shipments necessary to ensure timely delivery for the holiday season. If too many customers access our Website within a short period of time due to increased holiday demand, we may experience system interruptions that make our Website unavailable or prevent us from efficiently fulfilling orders, which may reduce the volume of goods we sell and the attractiveness of our products and services. In addition, we may be unable to adequately staff our fulfillment and customer service centers during peak periods, and delivery services and other fulfillment companies and customer service providers may be unable to meet the seasonal demand.
Our profitability may be negatively affected by inventory shrinkage.
We are subject to the risk of inventory loss and theft. We experience significant inventory shrinkage and cannot be sure that incidences of inventory loss and theft will decrease in the future or that the measures we are taking will effectively reduce the problem of inventory shrinkage. Although some level of inventory shrinkage is an unavoidable cost of doing business, if we were to experience higher rates of inventory shrinkage or incur increased security costs to combat inventory theft, our business and results of operations could be affected adversely.
Failure to execute our inventory management process could adversely affect our business.
We must also properly execute our inventory management strategies by appropriately allocating merchandise among our stores, timely and efficiently distributing inventory to stores, maintaining an appropriate mix and level of inventory in stores, appropriately changing the allocation of floor space of stores among product categories to respond to customer demand and effectively managing pricing and markdowns, and there is no assurance we will be able to do so. Failure to effectively execute our inventory management strategies could adversely affect our performance and our relationship with our customers.
Our business could suffer if we are unsuccessful in making, integrating, and maintaining commercial agreements, strategic alliances, and other business relationships.
We provide e-commerce and other services to businesses through commercial agreements, strategic alliances, and business relationships. Under these agreements, we enable sellers to offer products or services through our websites. These arrangements are complex and require substantial infrastructure capacity, personnel, and other resource commitments, which may limit the amount of business we can service. We may not be able to implement, maintain, and develop the components of these commercial relationships, which may include web services, fulfillment, customer service, inventory management, tax collection, payment processing, hardware, content, and third-party software, and engaging third parties to perform services. The amount of compensation we receive under certain of our commercial agreements is partially dependent on the volume of the other companys sales. Therefore, if the other companys offering is not successful, the compensation we receive may be lower than expected or the agreement may be terminated. Moreover, we may not be able to enter into additional commercial relationships and strategic alliances on favorable terms. We also may be subject to claims from businesses to which we provide these services if we are unsuccessful in implementing, maintaining, or developing these services.
As our agreements terminate, we may be unable to renew or replace these agreements on comparable terms, or at all. 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.
Our present and future e-commerce services agreements, other commercial agreements, and strategic alliances create additional risks such as: 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; and difficulty integrating under the commercial agreements.
Our business may be adversely affected by catastrophic events and extreme or unseasonable weather conditions.
Unforeseen events, including war, terrorism and other international conflicts, public health issues and natural disasters such as earthquakes, hurricanes or tornadoes, whether occurring in the United States or abroad, could disrupt our supply chain operations, [international trade] or result in political or economic instability. Any of the foregoing events could result in property losses, reduce demand for our products or make it difficult or impossible to obtain merchandise from our suppliers.
Extreme weather conditions in the areas in which our stores are located, particularly in markets where we have multiple stores, could adversely affect our business. For example, heavy snowfall, rainfall or other extreme weather conditions over a prolonged period might make it difficult for our customers to travel to our stores and thereby reduce our sales and profitability. Our business is also susceptible to unseasonable weather conditions. For example, extended periods of unseasonably warm temperatures during the winter season or cool weather during the summer season could render a portion of our inventory incompatible with those unseasonable conditions. Reduced sales from extreme or prolonged unseasonable weather conditions could adversely affect our business.
We may not timely identify or effectively respond to consumer trends or preferences, whether involving physical retail, e-commerce retail or a combination of both retail offerings, which could negatively affect our relationship with our customers and the demand for our products and services.
It is difficult to predict consistently and successfully the products and services our customers will demand. The success of our business depends in part on how accurately we predict consumer demand, availability of merchandise, the related impact on the demand for existing products and the competitive environment, whether for customers purchasing products at our stores and clubs, through our e-commerce businesses or through the combination of both retail offerings. A critical piece of identifying consumer preferences involves price transparency, assortment of products, customer experience and convenience. These factors are of primary importance to customers and they continue to increase in importance, particularly as a result of digital tools and social media available to consumers and the choices available to consumers for purchasing products online, at physical locations or through a combination of both retail offerings. Failure to timely identify or effectively respond to changing consumer tastes, preferences (including the key factors described above) and spending patterns, whether for our physical retail offerings, e-commerce offerings or through a combination of these retail offerings, could negatively affect our relationship with our customers and the demand for our products and services.
Decreases in discretionary consumer spending may have an adverse effect on us.
A substantial portion of the products and services we offer are products or services that consumers may view as discretionary items rather than necessities. As a result, our results of operations are sensitive to changes in macroeconomic conditions that impact consumer spending, including discretionary spending. Difficult macroeconomic conditions, particularly high levels of unemployment, also impact our customers ability to obtain consumer credit. Other factors, including consumer confidence, employment levels, interest rates, tax rates, consumer debt levels, and fuel and energy costs could reduce consumer spending or change consumer purchasing habits. Slowdowns in the U.S. or global economy, or an uncertain economic outlook, could adversely affect consumer spending habits and our results of operations.
If we do not continue to source new products, our ability to compete will be undermined, and we may be unable to implement our business plan.
Our ability to compete in the direct marketing industry and to expand into the traditional retail environment depends to a great extent on our ability to develop or acquire new innovative products under particular brands and to complement these products with related families of products under those brands. If we do not source new products as our existing products mature through their product life cycles, or if we do not develop related families of products under our brands, we will not be able to implement our business plan, and the value of your investment may decrease.
Our business and results of operations may be adversely affected if we are unable to maintain our customer experience or provide high quality customer service.
The success of our business largely depends on our ability to provide superior customer experience and high quality customer service, which in turn depends on a variety of factors, such as our ability to continue to provide a reliable and user-friendly website interface for our customers to browse and purchase our products, reliable and timely delivery of our products, and superior after sales services. Our sales may decrease if our website services are severely interrupted or otherwise fail to meet our customer requests. Should we or our third-party delivery companies fail to provide our product delivery and return services in a convenient or reliable manner, or if our customers are not satisfied with our product quality, our reputation and customer loyalty could be negatively affected. In addition, we also depend on our call center and online customer service representatives to provide live assistance to our customers. If our call center or online customer service representatives fail to satisfy the individual needs of customers, our reputation and customer loyalty could be negatively affected and we may lose potential or existing customers and experience a decrease in sales. As a result, if we are unable to continue to maintain our customer experience and provide high quality customer service, we may not be able to retain existing customers or attract new customers, which could have an adverse effect on our business and results of operations.
We depend upon designers, vendors and other sources of merchandise, goods and services.
Our business could be affected by disruptions in, or other legal, regulatory, political or economic issues associated with, our supply network. Our relationships with established and emerging designers have been a significant contributor to our past success. Our ability to find qualified vendors and access products in a timely and efficient manner is often challenging. In addition, our procurement of all our goods and services is subject to the effects of price increases, which we may or may not be able to pass through to our customers. All of these factors may affect our ability to access suitable merchandise on acceptable terms, are beyond our control and could negatively affect our business and results of operations.
Our advertising and marketing efforts may be costly and may not achieve desired results.
We incur substantial expense in connection with our advertising and marketing efforts. Although we target our advertising and marketing efforts on current and potential customers who we believe are likely to be in the market for the products we sell, we cannot assure you that our advertising and marketing efforts will achieve our desired results. In addition, we periodically adjust our advertising expenditures in an effort to optimize the return on such expenditures. Any decrease in the level of our advertising expenditures, which may be made to optimize such return could adversely affect our sales.
We may be required to collect sales tax on our direct marketing operations.
With respect to the direct sales, sales or other similar taxes are collected primarily in states where we have retail stores, another physical presence or personal property. However, various states or foreign countries may seek to impose sales tax collection obligations on out-of-state direct mail companies. A successful assertion by one or more states that we or one or more of our subsidiaries should have collected or should be collecting sales taxes on the direct sale of our merchandise could have an adverse effect on our business.
Government regulation is evolving and unfavorable changes could harm our business.
We are subject to general business regulations and laws, as well as regulations and laws specifically governing the Internet, e-commerce, electronic devices, and other services. Existing and future laws and regulations may impede our growth. These regulations and laws may cover taxation, privacy, data protection, pricing, content, copyrights, distribution, mobile communications, electronic device certification, electronic waste, energy consumption, environmental regulation, electronic contracts and other communications, competition, consumer protection, web services, the provision of online payment services, information reporting requirements, unencumbered Internet access to our services, the design and operation of websites, the characteristics and quality of products and services, and the commercial operation of unmanned aircraft systems. It is not clear how existing laws governing issues such as property ownership, libel, and personal privacy apply to the Internet, e-commerce, digital content, and web services. Jurisdictions may regulate consumer-to-consumer online businesses, including certain aspects of our seller programs. Unfavorable regulations and laws could diminish the demand for our products and services and increase our cost of doing business.
Changes in federal, state or local laws and regulations could increase our expenses and adversely affect our results of operations.
Our business is subject to a wide array of laws and regulations. The current political environment, financial reform legislation, the current high level of government intervention and activism and regulatory reform may result in substantial new regulations and disclosure obligations and/or changes in the interpretation of existing laws and regulations, which may lead to additional compliance costs as well as the diversion of our managements time and attention from strategic initiatives. If we fail to comply with applicable laws and regulations we could be subject to legal risk, including government enforcement action and class action civil litigation that could disrupt our operations and increase our costs of doing business. Changes in the regulatory environment regarding topics such as privacy and information security, product safety or environmental protection, including regulations in response to concerns regarding climate change, collective bargaining activities, minimum wage laws and health care mandates, among others, could also cause our compliance costs to increase and adversely affect our business and results of operations.
Our profitability is vulnerable to cost increases, inflation and energy prices.
Future increases in our costs, such as the cost of merchandise, shipping rates, freight and fuel costs, and store occupancy costs, may reduce our profitability. The minimum wage has increased or is scheduled to increase in multiple states and local jurisdictions, and there is a possibility Congress will increase the federal minimum wage. These cost changes may be the result of inflationary pressures, which could further reduce our sales or profitability. Increases in other operating costs, including changes in energy prices, wage rates and lease and utility costs, may increase our costs of sales or operating expenses and reduce our profitability.
Company lacks internal controls including reporting and detection systems.
The Company lacks a substantial internal control infrastructure including internal reporting and compliance detection systems. As a consequence, company management may be unable to properly detect and mitigate important events related to its operating and other risks, including but not limited to violations of employment law or employment contracts, violations of food safety regulations, and violations of data security and customer privacy laws. There can be no assurance that there are not significant deficiencies or material weaknesses in the quality of the Company's operating, financial, and disclosure controls and procedures. The cost to the Company of implementing improved controls and reporting and detection systems could be substantial and could have a material adverse effect on the Company's operations. Company does not presently have plans to adopt such controls or reporting and detection systems.
The company does not have audited financial statements nor does it have any plans to provide investors with annual audited financial statements or quarterly unaudited financial statements.
The Company does not have its financial statements reviewed by outside auditors, and any supplied financial statements may or may not be prepared in accordance with GAAP. The limited information provided herewith may not completely or accurately represent the financial condition of the company. Company is not obligated to provide annual audited or quarterly unaudited financial statements to accredited purchasers of its securities. As a consequence, any such purchasers may lack important financial information about the Company prior to making an investment and such purchasers may not be apprised of important financial developments in the Companys operations after making an investment. The lack of transparency caused by the lack of financial reporting and independent audit thereof creates increased risk of fraud or malfeasance that could not easily be detected by investors.
Company may pursue public benefit and stakeholder interests that are adverse to the interests of holders of company securities.
Company is a Delaware public benefit corporation formed pursuant to Delaware Code Title 8 Chapter 1, the Delaware General Corporation Law (DGCL) Subchapter XV, Public Benefit Corporations. The DGCL defines a public benefit corporation as follows (emphasis added): (a)_A public benefit corporation is a for-profit corporation organized under and subject to the requirements of this chapter that is intended to produce a public benefit or public benefits and to operate in a responsible and sustainable manner. To that end, a public benefit corporation shall be managed in a manner that balances the stockholders' pecuniary interests, the best interests of those materially affected by the corporation's conduct, and the public benefit or public benefits identified in its certificate of incorporation. In the certificate of incorporation, a public benefit corporation shall: (1)_Identify within its statement of business or purpose pursuant to 102(a)(3) of this title 1 or more specific public benefits to be promoted by the corporation; and (2)_State within its heading that it is a public benefit corporation. (b)_Public benefit means a positive effect (or reduction of negative effects) on 1 or more categories of persons, entities, communities or interests (other than stockholders in their capacities as stockholders) including, but not limited to, effects of an artistic, charitable, cultural, economic, educational, environmental, literary, medical, religious, scientific or technological nature. Public benefit provisions means the provisions of a certificate of incorporation contemplated by this subchapter.
Company has stated the following public benefit provisions in its certificate of incorporation, Article Third: The specific public benefit purpose of the Corporation is to increase the populations access to affordable healthy meals. The public benefit corporation status of the Company may permit or require the Corporations directors or officers to undertake corporate actions materially adverse to the pecuniary interests of the Corporation and its creditors or stockholders. Public benefit corporation directors and officers have unique fiduciary duties distinct from those of directors and officers of traditional stock corporations. The limits of those duties and protections for public benefit activities under the business judgment rule have not yet been significantly tested in American courts and as a consequence Purchasers may not be able to rely on certain concepts of fiduciary duties to govern Companys directors and officers.
The uncertainty surrounding the fiduciary duties and stockholder rights unique to the public benefit corporation legal structure creates supplemental risk of direct or derivative litigation.
Company managers are significant equity owners and may possess conflicts of interest or interests distinct from those of other security holders.
Companys management team owns a significant proportion of the Companys equity securities presently outstanding, and comprises two of the Companys five-member board of directors. Because the Company's executive officers are among the Company's largest stockholders, such persons can exert significant influence and control over the Company's business and affairs. Companys management team is positioned to control the operations of the Company, determine its business objectives and means of pursuing them, and determine appropriate compensation without significant independent oversight or interference.
Such persons may have actual or potential financial or other interests that significantly depart from those of purchasers of Company securities. The holdings of the Company's directors and executive officers may increase in the future upon vesting or other maturation of exercise rights under any of the options or warrants they may hold or in the future be granted or if they otherwise acquire additional equity or otherwise control-related interests in the Company. In addition to holding board seats and offices, such persons will have significant influence over and control all corporate actions requiring stockholder approval, irrespective of how the Company's other stockholders, including purchasers in the offering, may vote, including the following actions:
to elect or defeat the election of the Company's directors;
to amend or prevent amendment of the Company's Certificate of Incorporation or By-laws;
to effect or prevent a merger, sale of assets or other corporate transaction; and
to control the outcome of any other matter submitted to the Company's stockholders for vote.
Such persons' control interests may discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of the Company, which in turn could reduce the Company's stock price or prevent the Company's stockholders from realizing a premium over the Company's stock price. As a consequence, purchasers of Company SAFE securities may be unable to convert their SAFE interests into shares of Company equity securities, or may be unable to secure repayment of the SAFE obligation even if company is financially competent to render such repayment.
Company management lacks certain applicable experience and qualified managers may not be available for hire.
Companys senior management team lacks experience in the management and development of a startup retail food chain. Companys successful execution of its business plans may require or benefit from sophistication and expertise in startup development and retail food chain management. Company will rely on its management team until additional expertise can be hired, and Company may need to attract and retain additional qualified individuals in order to carry out its business objectives. The competition for such persons can be intense and there are no assurances that such individuals will be available to the Company on favorable terms or at all.
Company performance depends on performance and continuity of management team which may be inhibited by a catastrophic event.
The Company is dependent upon its current Management Team to pursue its business objectives. It would be difficult for the Company to find adequate replacements for the current Management Team if the happening of an event interrupted or inhibited their service to the Company. The death, disability, or termination of any member of the Management Team (each a Catastrophic Event) would cause a serious disruption to the operations of Company and potentially prevent it from executing on its growth and development plans. The occurrence of a Catastrophic Event may result in Companys insolvency. Company possesses no current key man insurance, nor buy-sell agreements governing transfer of stock in the case of such an event, nor a disaster management plan to manage a Catastrophic Event should one occur.
The Everytable Crowd Safe Units of SAFE (Simple Agreement for Future Equity) will not be freely tradable until one year from the initial purchase date. Although the Everytable Crowd Safe Units of SAFE (Simple Agreement for Future Equity) may be tradable under federal securities law, state securities regulations may apply and each Purchaser should consult with his or her attorney.
You should be aware of the long-term nature of this investment. There is not now and likely will not be a public market for the Everytable Crowd Safe Units of SAFE (Simple Agreement for Future Equity). Because the Everytable Crowd Safe Units of SAFE (Simple Agreement for Future Equity) have not been registered under the Securities Act or under the securities laws of any state or non-United States jurisdiction, the Everytable Crowd Safe Units of SAFE (Simple Agreement for Future Equity) have transfer restrictions and cannot be resold in the United States except pursuant to Rule 501 of Regulation CF. It is not currently contemplated that registration under the Securities Act or other securities laws will be effected. Limitations on the transfer of the Everytable Crowd Safe Units of SAFE (Simple Agreement for Future Equity) may also adversely affect the price that you might be able to obtain for the Everytable Crowd Safe Units of SAFE (Simple Agreement for Future Equity) in a private sale. Purchasers should be aware of the long-term nature of their investment in the Company. Each Purchaser in this Offering will be required to represent that it is purchasing the Securities for its own account, for investment purposes and not with a view to resale or distribution thereof.
Neither the Offering nor the Securities have been registered under federal or state securities laws, leading to an absence of certain regulation applicable to the Company.
No governmental agency has reviewed or passed upon this Offering, the Company or any Securities of the Company. The Company also has relied on exemptions from securities registration requirements under applicable state securities laws. Investors in the Company, therefore, will not receive any of the benefits that such registration would otherwise provide. Prospective investors must therefore assess the adequacy of disclosure and the fairness of the terms of this Offering on their own or in conjunction with their personal advisors.
Company securities are illiquid, restricted securities that have no public market, and are neither transferable nor registerable without approval of company.
The securities will not be registered under the Securities Act of 1933 and in offering the Shares the Company will rely upon one or more exemptions from registration. There has been no public or private market for Company securities, and there can be no assurance that any such market would develop in the foreseeable future. There is, therefore, no assurance that the securities can be resold at all, or near the offering price. Company securities must be acquired for investment purposes only and not with a view to resale or distribution. Accordingly, investors must bear the economic risk of an investment in the securities for an indefinite period of time.
Even if an active market for such securities develops, the securities cannot be resold unless they are subsequently registered or an exemption from registration is available. Any proposed transfer must comply with restrictions on transfer imposed by the Company and by federal and state securities laws. Rule 144 promulgated under the Securities Act (Rule 144), which provides for an exemption from the registration requirements under the Securities Act under certain conditions, requires, among other conditions, for resales of securities acquired in a non public offering without having to satisfy such registration requirements, a six-month holding period following acquisition of and payment in full for such securities assuming the issuer of such securities has filed periodic reports with the SEC under the Securities Exchange Act of 1934, as amended (the Exchange Act) for a period of 90 days prior to the proposed sale. If the issuer of such securities has not made such filings, such securities will be subject to a one-year holding period before they can be resold under Rule 144. There can be no assurance that the Company will fulfill any reporting requirements in the future under the Exchange Act or disseminate to the public any current financial or other information concerning the Company, as is required by Rule 144 as part of the conditions of its availability.
Accordingly, there is no assurance that an investor ever will be able to liquidate an investment in the Company. The securities are not freely transferable and, in any event, investors must bear the full economic risk of an investment in the securities for an indefinite period of time because the securities have not been registered under the Act or applicable state Blue Sky or securities laws. Investors in Company securities should be prepared to hold the securities acquired in Company offerings indefinitely and cannot expect to be able to liquidate any or all of their investment even in case of an emergency.
Company Securities are Restricted Securities under the federal securities laws as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations, such Securities may be resold without registration under the Act only in certain limited sets of circumstances. Because the securities have not been registered under the Act, the Securities must be held indefinitely unless subsequently registered under the Act or an exemption from such registration is available. Each investor in Company securities should be familiar with the provisions of Rule 144 promulgated under the Act as presently in effect and understand the resale limitations imposed thereby and by the Act prior to consummating any purchase of Company securities.
The Company may permit the transfer of such securities out of a subscriber's name only when his or her request for transfer is accompanied by an opinion of counsel satisfactory to the Company that neither the sale nor the proposed transfer results in a violation of the Securities Act or any applicable state securities or blue sky laws. No transfer of Company securities is permitted without Company approval.
Company securities have not been registered with federal or state regulatory authorities.
The securities being offered have not been registered under the Securities Act of 1933 (the Securities Act), in reliance, among other exemptions, on the exemptive provisions of article 4(2) of the Securities Act and Regulation D under the Securities Act. Similar reliance has been placed on apparently available exemptions from securities registration or qualification requirements under applicable state securities laws. No assurance can be given that any offering currently qualifies or will continue to qualify under one or more of such exemptive provisions due to, among other things, the adequacy of disclosure and the manner of distribution, the existence of similar offerings in the past or in the future, or a change of any securities law or regulation that has retroactive effect. If, and to the extent that, claims or suits for rescission are brought and successfully concluded for failure to register any offering or other offerings or for acts or omissions constituting offenses under the Securities Act, the Securities Exchange Act of 1934, or applicable state securities laws, the Company could be materially adversely affected, jeopardizing the Company's ability to operate successfully. Furthermore, the human and capital resources of the Company could be adversely affected by the need to defend actions under these laws, even if the Company is ultimately successful in its defense. Compliance with the criteria for securing exemptions under federal securities laws and the securities laws of the various states is extremely complex, especially in respect of those exemptions affording flexibility and the elimination of trading restrictions in respect of securities received in exempt transactions and subsequently disposed of without registration under the Securities Act or state securities laws.
No one has passed upon the adequacy or accuracy of the disclosure contained in the offering or the fairness of the terms of the offering.
No governmental agency has reviewed this offering and no state or federal agency has passed upon either the adequacy or accuracy of the disclosure contained herein or the fairness of the terms of any offering. The exemptions relied upon for such offerings are significantly dependent upon the accuracy of the representations of the investors to be made to the Company in connection with the offering. In the event that any such representations prove to be untrue, the registration exemptions relied upon by the Company in selling the securities might not be available and substantial liability to the Company would result under applicable securities laws for rescission or damages.
Company securities bear no protective covenants.
Company securities offered herewith bear no protective covenants to prevent dilution or impairment by third-party investors. Company may be required to acquire additional capital investment on terms adverse to the interests of certain purchasers of Company securities. By way of example, Company SAFE securities purchased by investor may be subordinated to new debt from third parties; Company equity securities into which Company convertible SAFE securities would convert upon the occurrence of certain events may be utilized as collateral in Companys procurement of new debt financing rendering such conversion impossible or available only on terms less favorable than described in the offering; and even if purchasers Company SAFE securities are converted into Company equity securities, upon such conversion such resulting equity securities may be subject to substantial dilution including as a consequence of the issuance or exercise of securities by or to Company directors or officers. Purchasers of Company securities should fully appreciate the risk of dilution, subordination, and transfer or impairment of purchasers vested or unvested interests as a consequence of Companys supplemental financing activities before purchasing Company securities.
Equity securities acquired upon conversion of SAFE securities may be significantly diluted as a consequence of subsequent financings.
Company equity securities will be subject to dilution. Company intends to issue additional equity to employees and third party financing sources in amounts that are uncertain at this time, and as a consequence holders of equity securities resulting from SAFE conversion will be subject to dilution in an unpredictable amount. Such dilution may reduce the purchasers control and economic interests in the Company.
The amount of additional financing needed by Company will depend upon several contingencies not foreseen at the time of this offering. Each such round of financing (whether from the Company or other investors) is typically intended to provide a Portfolio Company with enough capital to reach the next major corporate milestone. If the funds are not sufficient, Company may have to raise additional capital at a price unfavorable to the existing investors, including the purchaser. The availability of capital is at least partially a function of capital market conditions that are beyond the control of the Company. There can be no assurance that the Portfolio Companies will be able to predict accurately the future capital requirements necessary for success or that additional funds will be available from any source. Failure to obtain such financing on favorable terms could dilute or otherwise severely impair the value of the purchasers Company securities.
Equity securities issued upon conversion of company SAFE securities may be substantially different from other equity securities offered or issued at the time of conversion.
Company may issue to converting SAFE holders equity securities that are materially distinct from equity securities it will issue to new purchasers of equity securities. This paragraph does not purport to be a complete summary of all such distinctions. Equity securities issued to Noteholders upon their conversion of Company SAFE securities will be distinct from the equity securities issued to new purchasers in at least the following respects: to the extent such equity securities bear any liquidation preferences, dividend rights, or anti-dilution protections, any equity securities issued at the Conversion Price (as provided in the Note Purchase Agreements and Notes of Company) shall bear such preferences, rights, and protections only in proportion to the Conversion Price and not in proportion to the price per share paid by new investors in the equity securities. Company may not provide converting Noteholders the same rights, preferences, protections, and other benefits or privileges provided to other purchasers of Company equity securities.
Securities of company are subject to significant control limitations.
Purchasers of Company SAFE securities will have no stockholder voting, information, or other rights other than those provided as an unwaivable matter of law to stockholders, and only then such rights shall not accrue unless and until such SAFE securities are converted into Company equity securities. Unless a purchaser of Company securities holds at least 2% of the Companys authorized shares of stock, the purchaser may not be permitted to bring a derivative lawsuit to enforce the requirements set forth in the Delaware General Corporation Law (DGCL, Title 8, Chapter 1, Subchapter XV 365(a)). Even if a purchaser of Company SAFE securities converts its SAFE security into an equity security of Company, if as a consequence of such conversion the purchaser is a minority stockholder in the Company, unless otherwise authorized by Company in a signed agreement in writing, such purchaser may not possess the right, power, or authority to effect or affect any nomination, election, appointment, or other determination of the Companys management, board, or other governing persons or bodies otherwise duly appointed within the confines of the DGCL and the Companys governing documents.
No Guarantee of Return on Investment
There is no assurance that a Purchaser will realize a return on its investment or that it will not lose its entire investment. For this reason, each Purchaser should read the Form C and all Exhibits carefully and should consult with its own attorney and business advisor prior to making any investment decision.
The Company has the right to extend the Offering deadline.
The Company may extend the Offering deadline beyond what is currently stated herein. This means that your investment may continue to be held in escrow while the Company attempts to raise the Minimum Amount even after the Offering deadline stated herein is reached. Your investment will not be accruing interest during this time and will simply be held until such time as the new Offering deadline is reached without the Company receiving the Minimum Amount, at which time it will be returned to you without interest or deduction, or the the Company receives the Minimum Amount, at which time it will be released to the Company to be used as set forth herein. Upon or shortly after release of such funds to the Company, the Securities will be issued and distributed to you.
There is no present market for the Securities and we have arbitrarily set the price.
We have arbitrarily set the price of the Securities with reference to the general status of the securities market and other relevant factors. The Offering price for the Securities should not be considered an indication of the actual value of the Securities and is not based on our net worth or prior earnings. We cannot assure you that the Securities could be resold by you at the Offering price or at any other price.
Purchasers will not become equity holders until the Company decides to convert the Securities into CF Shadow Securities or until an IPO or sale of the Company.
Purchasers will not have an ownership claim to the Company or to any of its assets or revenues for an indefinite amount of time, and depending on when and how the Securities are converted, the Purchasers may never become equity holders of the Company. Purchasers will not become equity holders of the Company unless the Company receives a future round of financing great enough to trigger a conversion and the Company elects to convert the Securities. The Company is under no obligation to convert the Securities into CF Shadow Securities (the type of equity Securities Purchasers are entitled to receive upon such conversion). In certain instances, such as a sale of the Company, an IPO or a dissolution or bankruptcy, the Purchasers may only have a right to receive cash, to the extent available, rather than equity in the Company.
Purchasers will not have voting rights, even upon conversion of the Securities into CF Shadow Securities.
Purchasers will not have the right to vote upon matters of the Company even if and when their Securities are converted into CF Shadow Securities. Upon such conversion, CF Shadow Securities will have no voting rights and even in circumstances where a statutory right to vote is provided by state law, the CF Shadow Security holders are required to vote with the majority of the security holders in the new round of equity financing upon which the Securities were converted. For example, if the Securities are converted upon a round offering Series B Preferred Shares, the Series B-CF Shadow Security holders will be required to vote the same way as a majority of the Series B Preferred Share holders vote. Thus, Purchasers will never be able to freely vote upon any director or other matters of the Company.
Purchasers will not be entitled to any inspection or information rights other than those required by Regulation CF.
Purchasers will not have the right to inspect the books and records of the Company or to receive financial or other information from the Company, other than as required by Regulation CF. Other security holders may have such rights. Regulation CF requires only the provision of an annual report on Form C and no additional information. This lack of information could put Purchasers at a disadvantage in general and with respect to other security holders.
In a dissolution or bankruptcy of the Company, Purchasers will not be treated as priority debt holders.
In a dissolution or bankruptcy of the Company, Purchasers of Securities which have not been converted will be entitled to distributions as described in the Crowd SAFE. This means that such Purchasers will be at the lowest level of priority and will only receive distributions once all creditors as well as holders of more senior securities, including any preferred stock holders, have been paid in full. If the Securities have been converted into CF Shadow Securities, the Purchasers will have the same rights and preferences (other than the ability to vote) as the holders of the Securities issued in the equity financing upon which the Securities were converted.
Purchasers will be unable to declare the Security in "default" and demand repayment.
Unlike convertible notes and some other securities, the Securities do not have any "default" provisions upon which the Purchasers will be able to demand repayment of their investment. The Company has ultimate discretion as to whether or not to convert the Securities upon a future equity financing and Purchasers have no right to demand such conversion. Only in limited circumstances, such as a liquidity event, may the Purchasers demand payment and even then, such payments will be limited to the amount of cash available to the Company.
The Company may never elect to convert the Securities or undergo a liquidity event.
The Company may never receive a future equity financing or elect to convert the Securities upon such future financing. In addition, the Company may never undergo a liquidity event such as a sale of the Company or an IPO. If neither the conversion of the Securities nor a liquidity event occurs, the Purchasers could be left holding the Securities in perpetuity. The Securities have numerous transfer restrictions and will likely be highly illiquid, with no secondary market on which to sell them. The Securities are not equity interests, have no ownership rights, have no rights to the Companys assets or profits and have no voting rights or ability to direct the Company or its actions.
Disclaimer of Shark Tank Presentation
The Companys officers participated in the filming of a Shark Tank television series and in the course of the filming, presented certain business information to the investor panel appearing on the show (the ST Presentation). The Company did not pass upon the merits of, certify, approve, or otherwise authorize the statements made in the ST Presentation. The ST Presentation commentary was made over six months prior to the initiation of the offering memorialized in this Form C. Accordingly, the statements made in the ST Presentation, unless reiterated in the offering materials provided herein, are stale and of no application to the Companys business and operations as of the date of this offering. Moreover, the ST Presentation may involve several statements constituting puffery, that is, exaggerations not to be taken literally or otherwise as indication of factual data or historical or future performance.
Disclaimer of Certain Statements Made in Crowdfunding Video and Other Marketing
Certain statements made in the Companys crowdfunding video and other marketing should be regarded as puffery, that is, exaggerations not to be taken literally or otherwise as indication of factual data or historical or future performance. For example, statements are made with respect to the nature of competition in affluent and lower-income markets, that affluent market competitors are priced higher than the Companys products, and lower-income markets do not have competitors offering products similar to those of Company (i.e., purportedly healthy, fresh, or nutritious). These statements should not be taken as entirely factually accurate, as competitors with comparable product offerings at comparable prices may now or soon exist in each market. The same may be said of the Companys statements concerning competitive positioning, that the companys meals are healthier or fresher than those of competitors, or better-priced. These may be exaggerations and are not to be taken literally. Moreover, references to the Company and its business as a game-changer should be regarded as puffery. The game may or may not be changed by the Company and its business. Finally, it should be noted that the videos claims that the Companys products are healthy should not be taken literally, nor should it be taken to mean that the Companys products satisfy the requirements for use of healthy in labeling its products under applicable food laws including FDA food labeling regulations. In several cases, the Companys products do not satisfy the requirements for making healthy claims under FDA labelling regulations and other applicable regulations.
Discussion
Everytable successfully raised
$291,268
from 849 investors
on April 2, 2018
Hans, Marissa, Patricia, Michael, Atul, and 844 others
invested.
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