Risk Factors Summary
The principal risks and uncertainties affecting our business include the following:
Risks Related to our Liquidity and Indebtedness
• Our financial condition previously raised and may in the future raise substantial doubt as to our ability to continue as a going concern.
• We may be unable to realize expected benefits from any ongoing strategic plans, restructuring and cost reduction efforts, and operational improvements.
• We depend on cash generated from our operations to support our business.
• Our substantial indebtedness and the terms of our Amended Credit Agreement limit our ability to invest in the ongoing needs of our business.
Risks Related to our Business and Industry
• Our business depends on maintaining and strengthening our brand and generating and maintaining ongoing demand for our products, and a significant reduction in such demand could harm our results of operations.
• If we are unable to successfully design, develop, and introduce new products, our business will be harmed.
• Tariffs or other restrictions placed on foreign imports and any related counter-measures taken by other countries harm our business and results of operations.
• Our products are manufactured by third parties outside of the United States, and our business may be harmed by legal, regulatory, economic, societal, and political risks associated with those markets.
• We rely on third-party manufacturers and problems with, or the loss of, our suppliers or an inability to obtain raw materials could harm our business and results of operations.
• Our historic growth rates have not been sustained and are not likely indicative of future growth.
• Our business could be harmed if we are unable to accurately forecast demand for our products or our results of operations.
• Our marketing strategy may not be successful with existing and future customers.
• If we fail to attract new customers in a cost-effective manner, our business may be harmed.
• Our net sales and profits depend on the level of customer spending for our products, which is sensitive to general economic conditions and other factors.
• The markets in which we compete are highly competitive and we could lose our market positions.
• Competitors have imitated and will likely continue to imitate our products. If we are unable to protect or preserve our brand image and proprietary rights, our business may be harmed.
• If we fail to timely and effectively deliver products to our retail partners and customers, our business and results of operations could be harmed.
• Our future success depends on the continuing efforts of our management and key employees, and on our ability to attract and retain highly skilled personnel and senior management.
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• Our collection, use, storage, disclosure, transfer and other processing of personal information could give rise to significant costs and liabilities, including as a result of governmental regulation, uncertain or inconsistent interpretation and enforcement of legal requirements or differing views of personal privacy rights, which may have a material adverse effect on our reputation, business, financial condition and results of operations.
• We rely significantly on the use of information technology and data, including that of our third-party service providers. Any significant failure, inadequacy, interruption or data security incident involving our information technology systems or data, or that of our third-party service providers, could disrupt our business operations, which could have a material adverse effect on our business, prospects, results of operations, financial condition and/or cash flows.
• Our business may be affected by the evolving regulatory framework for AI technologies.
• Government regulation of the Internet and e-commerce is evolving, and unfavorable changes or failure by us to comply with these regulations could substantially harm our business and results of operations.
• Our results of operations are subject to seasonal and quarterly variations, which could cause the price of our stock to decline.
• Our plans for continuing operations in international markets may not be successful.
• An adverse determination in any material product liability related claim against us could adversely affect our operating results or financial condition.
Risks Related to Ownership of our Class A Common Stock
• The price of our Class A common stock has fluctuated and will likely continue to fluctuate and you may not be able to sell the shares you purchase at or above your purchase price.
• We may be unable to maintain compliance with NYSE listing requirements and our Class A common stock could be delisted, which would adversely affect our stock price, liquidity, and ability to raise capital.
• Sales of a substantial number of shares of our Class A common stock in the public market could cause our stock price to fall.
General Risk Factors
• We may become involved in legal or regulatory proceedings and audits.
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PART I
Item 1. Business
Our Mission
We aim to help the customers in our communities live a good life by inspiring moments that create lasting memories. When we are at our best, our products serve as the centerpiece of awesome experiences and unlock nostalgia for past ones. We own and operate premium authentic outdoor brands with ingenious products influenced by customer feedback. We consistently deliver innovative, high-quality products that are loved by our customers and revolutionize the outdoor experience, build community and help everyday people reconnect with what matters most.
Who We Are
Solo Brands operates four premium outdoor brands: Solo Stove, Oru Kayak (“Oru”), International Surf Ventures (“ISLE”) and Chubbies. Our brands develop innovative products and market them directly to customers primarily through our direct-to-consumer (“DTC”) channel, which includes e-commerce and owned retail stores, as well as partnerships with key retailers. Solo Stove offers portable, low-smoke and propane fire pits and camping stoves for backyard and outdoor use in different sizes, as well as indoor fire pits that allow the customer to bring the fire inside, griddles, pizza ovens, coolers and a variety of accessories for each. Chubbies is a fun-loving, premium apparel brand that offers well-fitted comfortable clothing with unique style. Watersports, which is comprised of our two primarily water-oriented brands, Oru and ISLE, offers a flagship line of lightweight, foldable kayaks and produces high-quality stand-up paddle boards with colorful designs that are engineered to accommodate every skill level, style, and interest. In 2025, the Company completed the disposition of the manufacturing operations for the TerraFlame brand. However, we continue to own the intellectual property of TerraFlame, as well as sole distribution rights of TerraFlame branded products. Solo Brands distributes its products through international iterations of the Solo Stove website and other partners across North America, Europe and Australia.
Solo Stove’s historical growth and free cash flow allowed us to make significant investments in our global supply chain and bring fulfillment, research and development, sales and marketing, and customer service in-house. This infrastructure aims to provide an authentic end-to-end customer experience, expedited delivery, greater cost efficiencies, and redundancy in manufacturing. It also laid the groundwork for the creation of Solo Brands, Inc. and acquisition of additional brands.
We believe our business has distinct competitive advantages, including our broadened product assortment from prior acquisitions of outdoor brands, while sharing our values of authenticity, product quality, and community. Through our DTC and retail channels, we develop connections with our customers, receive real-time feedback that informs our product development roadmap and marketing decisions, and enhance our brands. This connection with our customers helps to drive favorability within the communities in which we operate, including with our retail partners.
For more information, see “Where You Can Find More Information; Available Information” above.
Segment Information
Based on the manner in which our Chief Executive Officer (“CEO”), who we have determined to be the chief operating decision maker (“CODM”), assesses financial performance and allocates resources, we operate as two reportable segments: Solo Stove, which includes the Solo Stove and TerraFlame brands and primarily offers indoor and outdoor fire pits, stoves, and accessories, and Chubbies, which offers premium casual apparel and activewear. The remaining operating segments, including Oru and ISLE, are included within the Corporate and All Other category. The CODM makes operating decisions, assesses financial performance, and allocates resources based upon discrete financial information at the reportable segment level.
Product Design and Development
Solo Brands and its products are driven by the “create good” philosophy and are designed to get you in touch with whatever “good” is for you. We create good products that foster good moments and memories, so our customers can create a good life.
Our products undergo a rigorous development process designed to maximize performance while minimizing complexity, delivering a superior degree of quality, functionality, portability, style, and ease-of-use. The Lite set the standard, and we have continued to design and develop groundbreaking, high-performance products engineered with purposeful simplicity. We carefully design and engineer every product for immediate enjoyment, free of complexity and intimidating learning curves often found in engineered outdoor and lifestyle products. While employing the same approach that led to the success of our stoves, we have successfully broadened our product line to include virtually smokeless indoor and outdoor fire pits and bowls, propane fire pits, pizza ovens, griddles, coolers, home and patio accessories, such as outdoor furniture and heaters, and storage units, and added portable kayaks and paddle boards, lifestyle apparel, and other accessories.
At Solo Brands, not only are our products innovative, but we believe our approach to innovation stands apart from the competition. Our focus is on producing products our customers desire, across all of our brands, leveraging a customer-driven product development approach. We have expanded our product lines by designing solutions around consumer demand, including new products and accessories and additional sizes of existing product lines, as well as through strategic acquisitions that complement the Solo Brands platform.
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The Solo Brands product design teams control every aspect of our innovation, including design, construction, material performance requirements, manufacturing protocols, supplier selection, packaging specifications, and quality plans. Utilizing our in-house research and development center at our headquarters, as well as industry leading partners, the product development team is able to apply continued design, testing, and quality control. Once we approve the final design and specifications of a new product, depending on the product, we either source materials directly or partner with specialized third-party manufacturers to produce our products according to our performance and quality standards. Each of our brands has established, long-standing relationships with trusted third-party manufacturers—predominantly in Southeast Asia, as well as in Mexico through a dedicated facility operated by a consolidated variable interest entity (“VIE”) that provides outsourced manufacturing labor.
Products
We offer wide-ranging and high-quality products directly to our customers through our platform. Our products are carefully designed to maximize performance while minimizing complexity. We create highly functional, yet simple products that are both durable and easy-to-use.
The following product categories represent the significant products produced by our Solo Stove segment:
Camping Stoves. We revolutionized the camp stove category with the launch of our Lite in 2011. This ultralight and portable product does not require synthetic fuel and can boil water in under 10 minutes using just twigs, sticks, and leaves found outside. Today, our Stoves include the Lite, Titan, and Campfire, each of which is wood burning and incorporates our secondary burn technology, creating a hotter flame great for cooking. Each Stove also has a variety of cooking pots and accessories.
Fire Pits. We created a new fire pit category in late 2016 with our portable, low smoke product offerings. Solo Stove fire pits provide a mesmerizing, virtually smokeless fire experience in minutes, anywhere our customers want to be—in the mountains under the stars, on the beach, at the campground, tailgating at the game, or at home in the backyard—our products are designed to go where you go. Made of lightweight, durable stainless steel, our fire pits epitomize the Solo Stove brand promise of uncompromising quality, portability, and function.
In 2025, we reinvigorated our fire pit offerings with the addition of the Summit, which pairs a taller, brighter and more mesmerizing flame with the ability to be lit 3X faster and refined look with built-in stand, and the Infinity Flame, Solo Stove’s first ever propane-fired fire pit that leverages an innovative burner designed to mimic the look and movement of our wood burning fire pits, all wrapped in an attractive package. These new additions joined a family of existing Solo Stove fire pit product offerings, which include the tabletop Mesa, Ranger, Bonfire, Yukon, and Canyon, each of which burns wood fuel to a fine ash for easy cleaning.
Cooking. In 2023, we continued to lean into expanding the cooking category by launching Pi Prime, an easy-to-use standalone durable stainless steel pizza oven with a lower entry price than our original pizza oven. In 2025, we introduced the Steelfire Griddle, which delivers an elevated griddle cooking experience through use of our proprietary Racetrack Burner system and triple-layered stainless steel griddle surface. To further support our end users and enhance the cooking experience, we additionally offer a variety of cooking tools and ingredients for one-time delivery or subscription.
Indoor Fire Products . Through our acquisition activity in 2023, we “brought the fire inside” with indoor fire products that allow our customers to enjoy the warmth and comfort of a fire year-round. Utilizing our proprietary fire burning gel and bioethanol, multi-hour burns with the familiar crackle and flame of a traditional wood fire can now be enjoyed anywhere.
The following products are produced by our Chubbies segment:
Lifestyle Apparel. Chubbies is a fun-loving, premium apparel brand that offers well-fitted comfortable clothing with unique style. The Chubbies brand, which launched its iconic casual shorts in 2011, now offers a variety of adjacent product lines for men and kids, such as Swimwear, Pants, Polos, Button-Ups, Tees, Outerwear and Lounge. Chubbies has continued to challenge the men’s and kids apparel worlds, with bold patterns, innovative products designed with customer insights in mind and collaborations our customers love, such as the NFL line launched in 2024 and expanded in 2025 and the holiday inspired lines that are introduced each year. Created with high performance stretch fabric, Chubbies offers premium quality with a lightweight and breathable design that can be worn anywhere and anytime. In February 2026, Chubbies launched Cheekies, its new women’s swimwear line, to expand our product offerings to a new customer base.
The following products are produced by our All Other segment:
Recreation. Oru Kayak is the original origami kayak that allows users to go from box to boat in a matter of minutes. Oru offers premier kayaks that require minimal storage space, are portable, and easy-to-use. The Oru brand includes models and sizes to fit the customers’ needs, including the Inlet, Lake, Beach, Bay, Coast and Haven, along with the edgier and eye-pleasing Sport versions of the Beach and Inlet that come exclusively in black. Built with durable, corrugated OruPlast™ technology, our kayaks offer premium quality, exceptional control and stability, and starting at just 17 pounds, they are highly portable and can be transported in the trunk of a small car or carried on public transportation.
ISLE produces high-quality inflatable and hard board stand-up paddle boards, hybrid kayaks, surfboards and floats with colorful designs that are engineered to accommodate every skill level, style, and interest. With an emphasis on form and function, ISLE’s products are intended to help users reconnect with the simple joy of getting outside, and their innovative portable designs allow users to take them anywhere they can find floatable water.
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In 2025, ISLE introduced HĀVN, the world’s first inflatable, modular greenhouse. Leveraging the same composite used in the inflatable paddleboards, the HĀVN exhibits strength similar to that of traditional metal and wooden structures, all with the portability of an inflatable.
Oru and ISLE support their product offerings with a variety of accessories that enable the customer to use them to their fullest, such as paddles, storage bags, personal flotation devices, amongst other accessories.
Marketing
Our multifaceted marketing strategy engages existing and new customers to promote sales generation and to build brand awareness and affinity. We utilize data-driven performance marketing tactics to engage with our targeted customer base and create differentiated brand marketing content designed to drive an authentic customer experience and fuel brand awareness and loyalty for each of our brands independently.
We employ a wide range of marketing tactics and outlets to cultivate our relationships with experts, enthusiasts, and everyday consumers. Our marketing teams actively utilize a combination of digital, social media, traditional, and grass-roots initiatives to support our brands. Our marketing teams are a major differentiator and strength for the brands, as they enable us to execute quickly, pivot when needed, and deliver creative content that drives customer engagement. While our in-house marketing teams remain the primary focus, we continue to leverage the expertise and enhanced penetration available through industry leading external marketing agencies.
Sales Channels
We are an omni-channel company that leverages the power of e-commerce as well as physical retail stores. In addition to our DTC execution, we strategically expand our retail channel through retail partners that support our brand image and share our passion and dedication for innovative, best-in-class products of uncompromising design and performance. Our net sales are concentrated in the United States, though we have a growing international presence.
Direct-to-Consumer (“DTC”). We follow a digital-first strategy which prioritizes a direct connection with customers through e-commerce channels. Our currently owned brands generate the majority of sales online, including through owned social channels such as TikTok, Facebook and Instagram that route visitors to our sites. This is supplemented by our DTC business via relationships with select third-party e-commerce marketplaces, such as Amazon. We believe these sales channels provide incremental sales reach for our business and opportunities to increase awareness for our brands. In fiscal year 2025, DTC sales accounted for 63.5% of Solo Brands sales. In 2025, we continued to make meaningful investments in our e-commerce and digital platform to drive growth, including the implementation of cutting-edge technology, marketing, and analytics to increase speed and ease of use on both our desktop and mobile sites.
Through our owned brand websites, we offer our entire product portfolio and create a differentiated experience for our customers that reflects some of the same design principles that we incorporate into our products—simple, elegant and high performance. Our sites provide a content-rich and educational shopping experience, inviting customers to experience our brands, learn about our products through extensive overviews, specifications and intuitive FAQs, discover ways to enjoy our products, and hear firsthand from our customers’ experiences with our brands. Customers can access blogs through our websites, where we publish premium digital content, share customer stories and information on products, and further cultivate our community. With ongoing improvement of our existing websites and a shift to increasingly scalable platforms, we believe we are continually enhancing the customer experience. We believe our digital expertise provides us a competitive advantage and is replicable and extendible across other brands.
Our owned brand websites are also where we engage with our corporate customers, which represent a rapidly growing customer segment, particularly as we introduce additional customization options such as logo etchings to our fire pits. We believe our corporate customers and organizations appreciate our authentic brands and product quality and value the opportunity to attach their brands to Solo Brands products, including to provide valued gifts. Our customized products and corporate sales have meaningfully contributed to sales growth while generating attractive margins. The corporate customers represent opportunities for substantial repeat business.
We also operate eleven Chubbies retail stores with plans to continue expanding, and one ISLE surf pro-shop, which provide additional opportunities to interact directly with our customers in person and strengthen customer relationships.
Retail. We have built relationships with well-known outdoor products and sporting goods retailers. We choose our retail partners carefully based on their reputation, demographic, and commitment to appropriately learn and showcase Solo Brands’ portfolio of products, provide hands-on customer service, and willingness to abide by our terms and conditions. We also sell products on websites of retailers. These sites give Solo Brands even more online presence in our effort to ensure customers find us wherever they choose to shop for outdoor and recreation products. Our strategic retail channel distribution is supported by our dedicated sales and account management team. As an added benefit to our strategic retail partners, we provide the opportunity to leverage a variety of our products, including specialized items specific to certain of these partners, further demonstrating our desire to operate as a value adding partner. This team serves our retail partner base and identifies potential new retailers to expand our geographic footprint.
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Seasonality
We believe that our sales include a seasonal component. Historically, our net sales have been highest in our second and fourth quarters, with the first quarter typically generating the lowest sales. This historical sales trend is supported by the demand for our products at the beginning of the summer and holiday shopping seasons. We expect that this seasonality will continue to be a factor in our results of operations and sales. In 2025, we saw a shift in the seasonal demand within our retail channel with the first quarter far exceeding the third quarter. We believe that this change in trend in 2025 could be indicative of a potential long-term change in our seasonality, which we will continue to monitor in future periods.
Supply Chain and Quality Assurance
We manage a supply chain of third-party manufacturing and logistics partners to produce and distribute our products. We work with partners who allow for production flexibility, efficiency and scalability, possess capabilities to support new products, meet our expanding sales channel strategies and other required operational needs. We currently have a number of manufacturing partners located in various countries including the United States, India, Vietnam, Cambodia, Mexico, and China. In 2025, in connection with the tariff increases described below, we diversified our supply base and began to place a small portion of purchase orders from Vietnam and Cambodia, reducing our reliance on sourcing from China for the Solo Stove segment and eliminated our sourcing from China almost entirely for the Chubbies segment.
Our supply chain management team researches materials and equipment, vets potential manufacturing partners, directs our internal demand and production planning, approves and manages product purchasing plans, and oversees product transportation. While we have selected our current manufacturers for commercial and operational reasons, there are currently alternative suppliers that we believe we can qualify and engage to supply products and materials of the same quality, in similar quantities, and on substantially similar terms as our current providers if needed. From time to time, we source new suppliers and manufacturers to support our ongoing innovation and growth, particularly in our more recently introduced product categories, and we evaluate all new suppliers and manufacturers to assess if their standards for quality of manufacturing, ethical working conditions and environmental sustainability practices are shared with ours.
Quality is critically important to us and we work closely with our manufacturing partners with respect to product quality and manufacturing process efficiency. As part of our quality assurance program, we have developed and implemented comprehensive product inspection and facility oversight processes that are performed by our employees and third-party resources, who work with our suppliers to assist them in meeting our quality standards, as well as improving their production yields and throughput. While we do not directly source significant amounts of raw materials and components for most of our products, we control the specifications for key raw materials used in our products.
The U.S. presidential administration recently imposed new or increased tariffs on goods manufactured in China, Vietnam, Mexico and Canada. During 2024, the majority of our products that were imported into the United States from China were already subject to tariffs that were as high as 25%, with 2025 experiencing tariffs as high as 70%, which adversely impacted our expenses. As noted above, we diversified our supply base in 2025 as a tariff mitigation strategy, significantly reducing our dependence on goods manufactured in China.
In addition, our product lines involve production with steel manufactured outside the U.S., including steel manufactured in Mexico, that has also been subject to new tariffs. These new tariffs and retaliatory actions by foreign governments had an adverse effect on our inventory and cost of goods sold in 2025 and we expect, on a per unit basis, further adverse effects in future periods as a result of these tariffs, to the extent they remain effective. Various tariffs enacted in 2025 have been subject to successful legal challenge, but it remains unclear whether and to whom those tariffs may be refunded, and the federal government may attempt to impose new or similar tariffs under alternative statutory mechanisms. For additional information, see Part I, Item 1A, Risk Factors, “Tariffs or other restrictions placed on foreign imports and any related counter-measures taken by other countries harm our business and results of operations” and “Our products are manufactured by third parties outside of the United States, and our business may be harmed by legal, regulatory, economic, societal, and political risks associated with those markets.”
Distribution and Inventory Management
A majority of our products are shipped from our manufacturers to one of our two United States distribution centers in Grapevine, Texas and Manchester, Pennsylvania. These distribution centers, which we operate, are strategically located across the United States, allowing us to provide faster delivery throughout the United States. Certain of our products are distributed directly from our manufacturing facility in Mexicali, Mexico. The remaining portion of our products are shipped directly to one of our national retail partners or one of our distributors.
We manage inventory by analyzing product sell-through, forecasting demand, and working with our supply chain to ensure sufficient availability. Additionally, we lease a 20,000 square foot facility in Canada and a 72,000 square foot facility in Rotterdam, Netherlands. Our domestic and international warehouses position Solo Brands to reach customers quickly. We use a warehouse management system at these distribution centers that interfaces with our enterprise resource planning (“ERP”) system so that we can maintain visibility and control over inventory levels and customer shipments. We believe our domestic capacity and the capacity of international providers is sufficient to meet our future needs.
Intellectual Property and Brand Protection
We take the protection of our intellectual property very seriously and have taken a variety of operational and legal measures to protect our distinctive brand, designs, and inventions. Our engineering and industrial design teams collaborate at our Grapevine, Texas headquarters to create new products, and are supported by individual product design teams at the various brand levels. As part of this process, product designs, specifications, and
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performance characteristics are developed. After these aspects of the process are complete, we seek intellectual property protection, including applying for patents and for registration of trademarks for new classes where applicable.
We own the patents, trademarks, copyrights, trade dress, and other intellectual property rights that relate to our brands and to key aspects of certain of our products. We have sought to protect these intellectual property rights in the United States as well as in other countries where our products are manufactured and/or sold. We believe these intellectual property rights, combined with our innovation and distinctive product design, performance, and brand name reputation, provide us with a competitive advantage.
We aggressively pursue and defend intellectual property rights to protect our distinctive brand, designs, and inventions. We use third-party enforcement agencies, and have processes and procedures in place to identify, protect, and optimize our intellectual property assets on a global basis. Our experienced legal and brand protection teams initiate claims against those offering infringing products to protect our intellectual property assets, including our distinctive designs, copyrights, and trade dress. In the future, we intend to continue to seek intellectual property protection for our new products and prosecute those who infringe against these valuable assets.
Information Technology
Information technology (“IT”) systems are integral to our ability to operate, analyze and manage our business, research and develop new products, enhance our customers’ experience, and optimize our operating costs. Our infrastructure is cloud-first, as we believe it provides the most flexibility, scalability, and is inherently resilient with platform level redundancy in networking and computer hardware. We leverage third-party components and software to enhance our platform capabilities and ERP and e-commerce systems to improve our operations and manage our growth potential. We utilize leading software solutions for key aspects of our information systems. We believe our planned systems infrastructure will be sufficient to support our business for the foreseeable future.
Competition
We compete in the large outdoor, leisure, recreation, and lifestyle apparel markets and may compete in other addressable lifestyle markets. Competition in our markets is based on a number of factors including product quality, performance, durability, styling, ease-of-use, and price, as well as brand image and recognition. We believe that we have been able to compete successfully on the basis of our superior design capabilities and product development, brands and our omni-channel approach. We believe that our innovative products are highly distinguished from competing products, with Solo Stove bringing to market new and innovative takes on their virtually smokeless fire pit design and branching into new categories with the introduction of the propane fire pit, griddle and cooler in 2025, Chubbies continually evolving its approach to patterns and product assortment that caters to its consumers’ needs and Watersports creating unique product offerings that provide their customers with a variety of ways to embrace the water.
Human Capital Management
The Solo Brands management team has a dedicated focus on developing a strong, intentional company culture. We continue to invest in our people, adding key management personnel to our platform with the goal of accelerating growth, strengthening and complementing our existing leadership team, and leveraging the sharing of best practices across the platform. Our increasingly well-known portfolio of brands and our culture of innovation, collaboration and personal development has enabled us to recruit top talent in all areas of our business.
We are focused on recruitment, retention, and training, all areas where we see significant opportunity as we scale and bring on new team members. We believe the dedicated team of Solo Brands employees is a critical factor to our past and future success and intend to continue investing in our team’s well-being. None of our employees are currently covered by a collective bargaining agreement. We have experienced no labor-related work stoppages and employee relations are considered to be good. As of December 31, 2025, we had approximately 327 employees.
Government Regulation
Our products sold in the United States are subject to the provisions of multiple statutes, including, but not limited to, the Consumer Product Safety Act (“CPSA”), the Federal Hazardous Substances Act (“FHSA”), the Consumer Product Safety Improvement Act of 2008 (“CPSIA”) and the Flammable Fabrics Act (“FFA”), and the regulations promulgated pursuant to such statutes. These statutes and the related regulations ban from the market any consumer products that fail to comply with applicable product safety laws, regulations, and standards. The Consumer Product Safety Commission may require the recall, repurchase, replacement, or repair of any such banned products or products that otherwise create a substantial risk of injury and may seek penalties for regulatory noncompliance under certain circumstances. Similar laws exist in some U.S. states and our products sold worldwide are subject to the provisions of similar laws and regulations in many jurisdictions, including Canada, Australia, and Europe.
We maintain a quality control program to help maintain compliance with applicable product safety requirements. We use independent third-party laboratories that employ testing and other procedures intended to maintain compliance with the CPSA, the FHSA, the CPSIA, the FFA, other applicable domestic and international product standards, as well as our own standards and those of some of our larger retail customers. Nonetheless, there can be no assurance that our products are or will be hazard free, and we may in the future experience issues in products that result in recalls, withdrawals, or replacements of products. A product recall could have a material adverse effect on our results of operations and financial condition, depending on the product affected by the recall and the extent of the recall efforts required. A product recall could also negatively affect our reputation and the sales of other products. See Item 1A, “Risk Factors.”
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In relation to our sales and marketing activities, we are subject to various consumer protection rules and regulations promulgated and/or enforced by various federal and state regulators such as the U.S. Federal Trade Commission, and state attorneys general as well as non-U.S. regulatory authorities that relate to advertising, product delivery and other consumer-facing practices. In addition, our collection of personal information, such as through our online products and services, including our e-commerce and digital communications activities, are or may be subject to U.S. and non-U.S. data privacy and cybersecurity laws, such as the U.S. Children’s Online Privacy Protection Act, the California Consumer Privacy Act, as amended by the California Privacy Rights Act (collectively, the “CCPA”), the General Data Protection Regulation (the “GDPR”), and the UK General Data Protection Regulation and the UK Data Protection Act 2018 (collectively, the “UK GDPR”).
We are subject to various other federal, state, local and international laws and regulations applicable to our business, including export controls, and have established processes for compliance with these laws and regulations.
For the year ended December 31, 2025, compliance with governmental regulations did not have a material effect on our capital expenditures, earnings or competitive position, and, at this time, we do not expect to incur material capital expenditures related to compliance with regulations in 2026.
Corporate Simplification
On December 17, 2025, as part of the Corporate Simplification transactions, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Holdings and Solo Merger Sub LLC (“Merger Sub”), a subsidiary of the Company and SP SS Blocker Purchaser, LLC (“Blocker”), formed for the sole purpose of merging with and into Holdings. Pursuant to the Merger Agreement, effective January 1, 2026 (the “Effective Time”), Merger Sub was merged with and into Holdings, with Holdings continuing as the surviving entity (the “Merger”) and our wholly-owned subsidiary.
Pursuant to the Merger Agreement, at the Effective Time, each of the issued and outstanding common units of Holdings (“LLC Units”) beneficially owned by members of Holdings were cancelled and converted automatically into a right to receive one share of our Class A common stock, except for any LLC Units beneficially owned by either us or Blocker, which were cancelled for no consideration in accordance with the Merger Agreement and Holdings’ Amended and Restated Limited Liability Company Agreement (the “Holdings LLC Agreement”). At the Effective Time, the limited liability company interests of Merger Sub were converted into limited liability company interests of Holdings as the surviving entity, resulting in Holdings continuing as a wholly-owned subsidiary of the Company. In addition, immediately following the Effective Time, (i) all of the issued and outstanding shares of our Class B common stock were retired and cancelled in accordance with our Amended and Restated Certificate of Incorporation and the Holdings LLC Agreement and (ii) the Company contributed all of its interests in Holdings to Newco, a wholly-owned subsidiary of the Company. As a result, upon completion of the Merger, there were no LLC Units or shares of Class B common stock of the Company outstanding.
The Merger and related transactions did not terminate or accelerate our obligations under the Tax Receivable Agreement (“Tax Receivable Agreement”), dated as of October 27, 2021, by and among us, Holdings and the other parties from time to time party thereto (the “TRA Participants”). However, as a result of the Merger, the total future potential cash payments due under the Tax Receivable Agreement are generally limited.
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Item 1A. Risk Factors
Our business involves significant risks, some of which are described below. You should carefully consider the risks and uncertainties described below, together with all of the other information in this Annual Report on Form 10-K. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of or that we deem immaterial may also become important factors that adversely affect our business. References to past events are provided by way of example only and are not intended to be a complete listing or a representation as to whether or not such factors have occurred in the past or their likelihood of occurring in the future. The realization of any of these risks and uncertainties could have a material adverse effect on our results of operations and financial condition. In that event, the trading price and value of our Class A common stock could decline, and you may lose part or all of your investment.
Risks Related to our Liquidity and Indebtedness
Our financial condition previously raised and may in the future raise substantial doubt as to our ability to continue as a going concern.
In connection with the filing of this Annual Report on Form 10-K, we evaluated our ability to continue as a going concern for the twelve months following the issuance of the financial statements contained herein and determined that conditions and events, including the risk of variability in operating results that could affect future covenant compliance, raise substantial doubt about our ability to continue as a going concern within one year after the issuance of such financial statements. While management has developed plans intended to mitigate these conditions such that the plans are expected to alleviate such substantial doubt, the Company’s mitigating plans may not be successful. If the Company does not achieve the expected benefits from the planned operational initiatives to mitigate the going concern or if operating results or liquidity deteriorate, the Company may not have capital to finance its operations for the next twelve months. The Company could be required to seek further relief from lenders, additional capital through equity or debt financings or other sources or strategic alternatives.
Additional financing, strategic transactions or additional relief may not be available to us on acceptable terms, on a timely basis, or at all. If adequate funds are not available, or if the terms of potential funding sources or other strategic transactions are unfavorable, our business would be materially harmed. Furthermore, any new equity or equity-linked instruments we issue, similar to the issuance of shares in connection with the June 2025 refinancing transactions, will likely result in substantial dilution to our existing stockholders. If we cannot continue as a going concern, we could have to liquidate our assets, and potentially realize significantly less than the values at which they are carried on our financial statements, or commence proceedings under Chapter 11 of the U.S. Bankruptcy Code, and, in such cases, stockholders could lose all or part of their investment. If we were required to commence proceedings under Chapter 11 of the U.S. Bankruptcy Code, our operations and ability to develop and execute our business plan, and our ability to continue as a going concern, will be subject to the risks and uncertainties associated with . As such, filing for Chapter 11 would likely have a material effect on our business, financial condition, results of operations and liquidity.
Additionally, our financial statements have been prepared assuming that we will continue to operate as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Thus, our financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.
We may be unable to realize expected benefits from any ongoing strategic plans, restructuring and cost reduction efforts, and operational improvements.
Since 2024, we have effected restructuring plans and other cost savings initiatives, including re-balancing of products, workforce reductions, closure of distribution centers, and engagement of strategic consulting firms. We continue to execute on these efforts, and as a result, we may engage in discussions with our lenders, financial advisors, and other parties. For more detail regarding these activities, see Note 3 - Restructuring, Contract Termination and Impairment Charges.
These restructuring and cost reduction activities are complex and costly and may result in unintended consequences, such as unforeseen delays in their implementation, business and operational disruptions, decreased employee morale, loss of institutional knowledge and potential impacts on financial reporting. Reductions in workforce also make it difficult for us, and may prevent us from, pursuing new business opportunities and initiatives or require us to incur additional and unanticipated costs to hire new personnel to pursue such opportunities or initiatives. If we do not successfully manage our ongoing or future initiatives and restructuring activities, expected efficiencies and benefits might be delayed or not realized, and our business, financial condition, and results of operations may be materially affected.
Our limited liquidity poses additional risks to our business and operations.
Our limited liquidity has required and will continue to require substantial time and attention from our senior management team, to develop strategies and plans to address such limited liquidity. This diversion of management’s attention may have a material adverse effect on the conduct of our business, and, as a result, on our financial condition and results of operations. Other risks include, but are not limited to, the high costs of negotiating agreements and seeking and executing liquidity initiatives; our ability to maintain our relationships with our suppliers, service providers, customers, and other third parties; our ability to retain and attract employees; and our ability to maintain contracts that are critical to our operations. These risks affect our business and operations and the price of our Class A common stock.
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We depend on cash generated from our operations to support our business.
We primarily rely on cash flow generated from our sales to fund our current operations. We require significant amounts of cash to purchase inventory, work on our product development, maintain our manufacturer and supplier relationships, pay personnel, pay public company operating costs, and to further invest in our sales and marketing efforts. As of December 31, 2025, we had cash and cash equivalents of $20.0 million. If our business does not generate sufficient cash flow and sufficient funds are not otherwise available from financing sources or other strategic transactions, we will not be able to sustain and continue our operations. In such case, we could be required to liquidate our assets, and potentially realize significantly less than the values at which they are carried on our financial statements, and stockholders could lose all or part of their investment.
Our substantial indebtedness and the terms of our Amended Credit Agreement limit our ability to invest in the ongoing needs of our business.
On June 13, 2025, we entered into Amendment No. 4 to Credit Agreement and Limited Waiver and Amendment No. 1 to Security Agreement (the “2025 Refinancing Amendment”), which amended the credit agreement dated as of May 12, 2021 (as amended to date, the “Amended Credit Agreement”). The Amended Credit Agreement and our substantial indebtedness place conditions on us and restrict our business activities, including by:
• requiring us to utilize a portion of our cash flow from operations and dispositions of assets to make repayments of our indebtedness, reducing the availability of our cash flow to fund working capital, capital expenditures, development activity, return capital to our stockholders, and other general corporate purposes;
• increasing our vulnerability to adverse economic or industry conditions;
• limiting our flexibility in planning for, or reacting to, changes in our business or markets;
• making us more vulnerable to increases in interest rates, as borrowings under the 2025 Revolving Credit Facility bear interest at variable rates;
• limiting our ability to obtain additional financing in the future for working capital or other purposes; and
• placing us at a competitive disadvantage compared to our competitors that have less indebtedness.
In addition, the Amended Credit Agreement places certain limitations on our ability to incur additional indebtedness. However, subject to the qualifications and exceptions in the Amended Credit Agreement, we could incur substantial additional indebtedness, if available. The Amended Credit Agreement also places certain limitations on our ability to enter into certain types of transactions, financing arrangements and investments, to make certain changes to our capital structure, and to guarantee certain indebtedness, among other things. The Amended Credit Agreement also places certain restrictions on the payment of dividends and distributions and certain management fees. These restrictions limit or prohibit, among other things, and in each case, subject to certain customary exceptions, our ability to: (a) pay dividends on, redeem or repurchase our stock, or make other distributions; (b) incur or guarantee additional indebtedness; (c) sell stock in our subsidiaries; (d) create or incur liens; (e) make acquisitions or investments; (f) transfer or sell certain assets or merge or consolidate with or into other companies; (g) make certain payments or prepayments of indebtedness subordinated to our obligations under the 2025 Revolving Credit Facility; and (h) enter into certain transactions with our affiliates.
The Amended Credit Agreement requires us to comply with certain covenants and failure to comply with our Amended Credit Agreement, including the financial and operational covenants thereunder, the occurrence of a change of control or a failure to make scheduled payments on our debt, could result in an event of default.
If an event of default and acceleration of our obligations occurs, the lenders under the Amended Credit Agreement would have the right to foreclose against the collateral we granted them to secure such indebtedness, which consists of substantially all of our assets, including the equity of Holdings and certain of its subsidiaries. If the debt under the Amended Credit Agreement were to be accelerated, we would not have sufficient cash or may not be able to sell sufficient collateral to repay this debt, which would immediately and materially harm our business, results of operations, and financial condition. The threat of our debt being accelerated in connection with a change of control also makes it more difficult for us to attract potential buyers or to consummate a change of control transaction that could otherwise be beneficial to our stockholders.
Risks Related to our Business and Industry
Our business depends on maintaining and strengthening our brand and generating and maintaining ongoing demand for our products, and reductions in such demand harm our results of operations.
We have developed a strong and trusted brand that we believe has contributed significantly to our success. Maintaining, promoting and positioning our brand and reputation depends on, among other factors, the success of our product offerings, quality assurance, marketing and merchandising efforts, the reliability and reputation of our supply chain, our ability to grow and capture share of the outdoor lifestyle category, and our ability to provide a consistent, high-quality consumer experience. We have made substantial investments in these areas, and will need to continue to invest in these actions, in order to maintain and enhance our brand and these experiences, but such investments are not always successful. Any negative publicity, regardless of its accuracy, could materially adversely affect our business. For example, we may not be able to maintain and enhance a loyal customer base if we receive customer complaints, publicity or otherwise to live up to consumers’ expectations, which could materially affect our business, operating results and growth prospects.
The growing use of social and digital media increases the speed and extent that information or misinformation and opinions can be shared. Negative publicity about us, our brand or our products on social or digital media could seriously damage our brand and reputation. For example, consumer
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perception could be influenced by negative media attention regarding any consumer complaints about our products, our management team, ownership structure, sourcing practices and supply chain partners, employment practices, ability to execute against our mission and values, and our products or brand, such as any advertising campaigns or media allegations that challenge the sustainability of our products and our supply chain, or that challenge our marketing efforts regarding the quality of our products, which could have an adverse effect on our business, brand and reputation. Similar factors or events could impact the success of any brands or products we introduce in the future. Any incident that erodes the loyalty of our consumers, customers, suppliers or manufacturers, including adverse publicity or a governmental investigation or litigation, could significantly reduce the value of our brand and significantly our business, which would have a material effect on our business, financial condition, results of operations and cash flows.
If we are unable to successfully design, develop and introduce new products, our business will be harmed.
The Solo Stove and Chubbies segments made up the majority of our total revenue in the year ended December 31, 2025. Our business and financial results depend in part on our ability to expand sales of our other existing products and to introduce new and enhanced products. The success of these products depends on many factors, including anticipating consumer preferences, finding innovative solutions to consumer problems, differentiating our products from those of our competitors, and maintaining the strength of our brand while also expanding our brand beyond the categories of products we currently sell. The design, development and introduction of our products is costly and we typically have several products in development at the same time. If we misjudge or fail to anticipate consumer preferences or there are problems in the design or quality of our products, or delays in product introduction, our brand, business, financial condition, and results of operations could be harmed.
Tariffs or other restrictions placed on foreign imports and any related counter-measures taken by other countries harm our business and results of operations.
Geopolitical uncertainties and events damage and disrupt international commerce and the global economy, and could have a material adverse effect on us, our suppliers, logistics providers, manufacturing vendors and customers. Changes in commodity prices may also cause political uncertainty and increase currency volatility that can affect economic activity and, in turn, adversely impact our business, results of operations and financial condition.
In recent years, tariffs on goods manufactured in many countries, including China, Mexico and Canada, have increased and/or fluctuated significantly and other countries have retaliated or may retaliate with tariffs on goods manufactured in, or exported by, the United States. During 2024, the majority of our products that were imported into the United States from China were already subject to tariffs that were as high as 25%, which adversely impacted our expenses. In addition, our product lines involve production with steel manufactured outside the U.S., including in Mexico that is subject to tariffs, including virtually all of our Solo Stove and TerraFlame brands’ products. Further, certain of our Solo Stove, Oru and TerraFlame brands’ products are produced in Mexico and are subject to the new tariffs on Mexico. These tariffs and retaliatory actions have had, and any future tariffs could have, an adverse effect on our results of operations and margins and sales of our products outside the U.S. However, these mitigation strategies may not be successful in the future. In addition, there can be no assurances that we will be able to pass any additional increased costs from tariffs on to our customers, that demand or will not be further materially impacted, or that we will be in implementing any additional efforts to mitigate the effect of tariffs on our business.
In February 2026, the United States Supreme Court ruled that the use of the International Emergency Economic Powers Act ("IEEPA") to impose tariffs was not authorized by Congress, invalidating a significant portion of tariffs that had been in effect since April 2025. While the ruling struck down the IEEPA-based tariffs, it does not necessarily prevent the U.S. Presidential Administration from imposing tariffs using other legal authorities, and the administration has indicated its intention to pursue alternative statutory mechanisms to reinstate or impose new tariffs. The ruling has created substantial uncertainty regarding the tariff environment, including with respect to (i) whether and to what extent refunds will be issued for tariffs previously collected under the IEEPA, (ii) the timing and scope of any new tariffs that may be imposed under alternative legal authorities and (iii) the potential for further legal challenges to any such tariffs. Any prolonged uncertainty or volatility in tariff policy could disrupt our supply chain planning, increase our costs and adversely affect our ability to price our products competitively. Given that substantially all of our products are currently manufactured outside of the United States, including in China, India, Vietnam, Cambodia and Mexico, any future tariffs imposed on goods from these countries, whether under the IEEPA or other statutory authorities, could significantly increase our product costs and our business, results of operations and financial condition.
Changes in domestic social, political, regulatory and economic conditions or in laws and policies governing foreign trade, manufacturing, development and investment in the territories and countries where we currently develop and sell products, and any negative sentiments towards the United States as a result of such changes, could also adversely affect our business. If the United States government withdraws or materially modifies existing or proposed trade agreements or places greater restriction on free trade generally, our business, financial condition and results of operations will be adversely affected. In addition, negative sentiments towards the United States among non-U.S. customers and among non-U.S. employees or prospective employees could adversely affect sales or hiring and retention, respectively.
The foreign policies of governments are volatile, and have resulted and may result in rapid changes to import and export requirements, customs classifications, tariffs, trade sanctions and embargoes or other retaliatory trade measures that may cause us to raise prices, prevent us from offering products or providing services to particular entities or markets, may cause us to make changes to our operations, or create delays and inefficiencies in our supply chain. Furthermore, if the U.S. government imposes new sanctions against certain countries or entities, such sanctions could sufficiently restrict our ability to market and sell our products and may materially adversely affect our results of operation.
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Our products are manufactured by third parties outside of the United States, and our business may be harmed by legal, regulatory, economic, societal, and political risks associated with those markets.
Our products are manufactured outside of the United States, and we sell a small percentage of our products outside of the United States. Our reliance on suppliers and manufacturers in foreign markets, as well as our sales in non-U.S. markets, creates risks inherent in doing business in foreign jurisdictions, including: (a) complying with various foreign laws and regulations, including trade and labor restrictions and laws relating to the importation and taxation of goods; (b) weaker protection for and practical difficulties in enforcing intellectual property and other legal rights than in the United States; (c) compliance with the U.S. Foreign Corrupt Practices Act (the “FCPA”), the UK Bribery Act 2010 (“the Bribery Act”), and other applicable anti-corruption laws, which generally prohibit companies from making improper payments to government officials (or in some cases commercial counterparties) for the purpose of obtaining or retaining business or securing an improper business advantage; (d) compliance with rules and regulations relating to export controls and economic trade sanctions and , such as the sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Controls (“OFAC”) as well as export controls administered by the U.S. Department of Commerce; (e) compliance with U.S. anti-money regulations; (f) economic and political and acts of terrorism in the countries where our suppliers are located; (g) transportation or increases in transportation costs; (h) public health ; and (i) the imposition of tariffs on components and products that we import into the United States or other markets. We cannot you that our directors, officers, employees, representatives, manufacturers, or suppliers have not engaged and will not engage in conduct for which we may be held responsible, nor can we you that our manufacturers, suppliers, or other business partners have not engaged and will not engage in conduct that could materially their ability to perform their contractual obligations to us or even result in our being held liable for such conduct. of sanctions, export control, anti-, anti-money , and anti-terrorism laws, or of such acts, could our reputation and subject us to civil or in the United States and in other jurisdictions and related shareholder lawsuits, could lead to substantial civil and , monetary and nonmonetary and could cause us to incur significant legal and investigatory fees, which could our business, financial condition, cash flows and results of operations.
Our historic growth rates have not been sustained and are not likely indicative of future growth.
We expanded our operations rapidly previously, primarily due to our digital marketing strategy and increased demand for outdoor recreation and leisure lifestyle products, as well as acquisitions. However, our historical growth rates have not been sustained and are likely not indicative of future growth. We believe that revenue growth will depend upon, among other factors:
• Improving and managing our current limited liquidity;
• Increasing U.S. brand awareness;
• Our ability to obtain adequate protections for our intellectual property; and
• Product innovation to expand our total addressable market and sustain existing demand.
We have a limited history operating our business at its current scale. As a result of our historic growth, our employee headcount and the scope of our business increased substantially, and we are continuing to implement appropriate policies and procedures for a public company. We may experience difficulties as we continue to implement changes to keep pace with our development and, if our operations resume growth, in managing such growth and building the appropriate processes and controls in the future. Growth may increase the strain on our resources, and we could experience operating difficulties, including in sourcing, logistics, recruiting, maintaining internal controls, marketing, designing innovative products, and meeting consumer needs. If we do not adapt to meet these evolving challenges, the strength of our brand may erode, the quality of our products may suffer, we may not be able to deliver products on a timely basis to our customers, and our corporate culture may be harmed.
In addition, we expect to continue to make strategic investments in our research and development and sales and marketing organizations, align our operations and infrastructure to current and expected demand, design and develop new products, and enhance our existing products with newly developed products. If our sales do not increase at a sufficient rate to offset these increases in our operating expenses, our profitability may continue to decline.
Our business could be harmed if we are unable to accurately forecast demand for our products or our results of operations.
To ensure adequate inventory supply, we must accurately forecast inventory needs and place orders with our manufacturers before we receive firm orders from our retail partners or customers. We have experienced and may continue to experience excess inventory levels or a shortage of products and delays in delivering to our retail partners and through our DTC channel, particularly due to uncertainty and delays related to global supply chain challenges, which could cause a decline in sales and harm our results of operations and financial condition.
If we underestimate the demand for our products, our manufacturers may not be able to scale quickly enough to meet demands, and this could result in delays in the shipment of our products and our failure to satisfy demand, as well as damage to our reputation and retail partner relationships. If we overestimate the demand for our products, we could face inventory levels in excess of demand, which has resulted and could in the future result in inventory write-downs or write-offs and the sale of excess inventory at discounted prices, which harms our gross margins. Factors that may impact our ability to forecast demand for our products include shifting consumer trends, unforeseen supply chain delays, global economic conditions, increased competition, our limited operating experience, expansion into new markets and geographies and development and marketing of new products. Our historical sales, expense levels, and profitability may not be an appropriate basis for forecasting future results in these new markets and with new products.
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Failure to accurately forecast our results of operations and growth rate could result in excess or insufficient inventory, meaning actual results could be materially lower than anticipated. Even if the markets in which we compete expand, we cannot assure you that our business or profitability will grow at similar rates, if at all.
Our marketing strategy may not be successful with existing and future customers.
We market our products by associating our brand and products with indoor and outdoor activities to be experienced with family and friends, as well as other influencer and product-related campaigns. To sustain long-term growth, we must continue to successfully promote our products to new and existing consumers who identify with or aspire to these activities, as well as to individuals who value the differentiated function, high quality, and specialized design of our products. We must also promote new types of products. If we fail to successfully market and sell our products to our existing customers or expand our customer base, our sales could decline or we may be unable to grow our business.
In particular, our marketing strategy has focused on digital marketing, which we depend on for our DTC channel. We rely on internet search engines and social media platforms, which frequently update and change the algorithms that determine the placement and display of results of a user’s search or the content a user sees, to drive traffic to our website. If we are unable to appear prominently in the search results or social media feeds for relevant queries or if changes to algorithms reduce the visibility of our content, traffic to our website could decline, which we may not be able to replace from other channels in a timely manner or at all, which could harm our business, financial condition and results of operations.
If we fail to attract new customers in a cost-effective manner, our business may be harmed.
A large part of our success depends on our ability to attract new customers in a cost-effective manner. We have made, and may continue to make, significant investments in attracting new customers through increased advertising spends on social media, influencers and brand affiliates, radio, podcasts, linear television, and targeted email communications. Marketing campaigns can be expensive and may not be cost-effective. In addition, if platforms we invest our advertising spend in are unavailable, that adversely affects the efficacy of that spend. Further, as our brand becomes more widely known, future marketing campaigns may not attract new customers at the same rate as past campaigns and the cost of acquiring new customers may increase over time. If we are unable to attract new customers, or fail to do so in a cost-effective manner, our business may be harmed.
Our growth depends, in part, on expanding into additional consumer markets, and we may not be successful in doing so.
We believe that our future growth depends, in part, on enlarging our customer base in the United States and international markets. We have invested significant resources in these areas, and we may face new and existing challenges including competitive, merchandising, distribution, and hiring difficulties, and we may encounter difficulties attracting customers due to lack of brand familiarity or resistance to paying for premium products, particularly in international markets. In addition, our sales and marketing activities may not be successful. If we are not successful, our business and results of operations may be harmed.
Our net sales and profits depend on the level of customer spending for our products, which is sensitive to general economic conditions and other factors.
Our products are discretionary items for customers and the success of our business depends on factors influencing consumer spending, including actual and perceived economic conditions, consumer confidence, disposable income, consumer credit availability, interest rates, unemployment, inflation, and tax rates. As global economic conditions continue to be volatile, and economic uncertainty remains, trends in consumer discretionary spending also remain unpredictable and subject to declines. Any of these factors could harm discretionary consumer spending, resulting in a reduction in demand for our products, decreased prices, increased costs to make sales and harm to our business and results of operations. Consumer purchases of discretionary items tend to decline during recessionary periods, which may slow our growth. A downturn in the economies in markets in which we sell our products, particularly in the United States, may materially harm our sales, and financial condition.
The markets in which we compete are highly competitive and we could lose our market positions.
The markets in which we compete are highly competitive, typically with low barriers to entry. Competition is based on product quality, performance, durability, availability, styling, brand image and recognition and price. Competitors may be able to develop similar products, sell for lower prices, offer products in more areas, adapt to changes in consumers’ needs and preferences more quickly, devote greater resources to design, sourcing, distribution, and marketing, or generate greater brand recognition. In addition, as we expand into new areas and product categories we will continue to face, different and, in some cases, more formidable competition. Many competitors have significant competitive advantages, including learning from our experiences and taking advantage of new product popularity, greater financial strength, larger research and development teams, larger marketing budgets and more distribution and other resources than we do. Some of our competitors may aggressively discount products or offer other attractive sales terms in order to market share, which could impact our pricing, profit margins and market share. If we are not to these potential competitive , effectively market our current and future products and otherwise compete effectively our current or potential competitors, our prospects, results of operations and financial condition could be .
The markets in which we operate are subject to evolving, and increasingly stringent, consumer laws.
International markets have seen an increase in consumer protection laws. For example, the United Kingdom (“UK”) Digital Markets, Competition and Consumers Act 2024 (“DMCCA”) introduces prescriptive rules for unfair commercial practices, online interface design, and price transparency,
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and will affect how we design products, market to consumers, and manage the customer lifecycle. The Competition and Markets Authority has direct civil enforcement powers with ability to impose significant turnover‑based penalties, require consumer redress, and secure undertakings. Implementing these measures may require changes to our product flows, pricing presentation and marketing. The DMCCA increases the likelihood and consequences of consumer law enforcement in the UK. There is still some uncertainty regarding the timing, scope and interpretation of the DMCCA and related secondary rules. We may need to revise customer communications and terms, alter cancellation and refund processes, enhance disclosures and consent mechanisms, and pause or discontinue certain promotions or features. Failure to comply with the DMCCA or other consumer protection laws, or changes in its implementation or enforcement priorities, could increase costs, reduce revenue, delay product launches, impair our competitive position, or otherwise adversely affect our business, financial condition, results of operations and cash flows.
Competitors have imitated and will likely continue to imitate our products. We may not be able to adequately protect our intellectual property, and if we are unable to protect or preserve our brand image and proprietary rights, our business may be harmed.
We attempt to protect our intellectual property rights, both in the United States and in foreign countries, through a combination of patent, trademark, copyright, design, and trade secret laws, as well as licensing, assignment, and confidentiality agreements with our employees, consultants, suppliers and manufacturers. We cannot be sure that the actions we have taken to establish and protect our patents, trademarks and other proprietary rights will be adequate to protect us, or that any of our intellectual property will not be challenged or held invalid or unenforceable.
Our success depends in large part on our brand image and, in particular, on the strength of our Solo Stove, ISLE, Oru and Chubbies trademarks. We rely on trademark protection to protect our brands, and we have registered or applied to register many of these trademarks in the United States and several other markets, but we have not registered all of our marks in all of the jurisdictions in which we currently conduct or intend to conduct business. Further, we cannot be sure that our trademark applications will be successful. These applications may also be challenged or opposed by third parties. In the event that our trademarks are successfully challenged and we lose the rights to use those trademarks, we could be forced to rebrand our products, requiring us to devote resources to advertising and marketing new brands.
In addition, we rely on design patents, as well as registered designs, to protect our products and designs. We have also applied for, and expect to continue to apply for, utility patent and design protection relating to proprietary aspects of existing and proposed products. We cannot be sure that any of our patent or design applications will result in issued patents or registered designs, or that any patents issued as a result of our patent applications will be of sufficient scope or strength to provide us with any meaningful protection or commercial advantage. Third parties may challenge the validity and enforceability of certain of our patents, including through patent office ex parte reexamination, inter partes review or post-grant proceedings. Regardless of outcome, such challenges may result in substantial legal expenses and diversion of management’s time and attention from our other business operations. In some instances, our patent claims could be substantially narrowed or declared invalid or unenforceable. Any significant adverse finding by a patent office or adverse of a court as to the validity, enforceability, or scope of certain of our patents could affect our competitive position and otherwise our business.
We regard our intellectual property rights as critical to our success. We regularly monitor for infringement, and we employ third-party watch services in support of these efforts and have from time to time instituted litigation to enforce our trademarks, patents and other intellectual property, and we expect to do so in the future. Nevertheless, the steps we take may be inadequate and we may experience difficulty in effectively limiting the unauthorized use of our patents, trademarks, trade dress, and other intellectual property and proprietary rights worldwide. As our business continues to expand, some of our competitors have imitated, and will likely continue to imitate, our product designs and branding, which could harm our business and results of operations. In addition, our use of third-party suppliers and manufacturers, including in countries where counterfeiting is more prevalent, presents a risk of counterfeit goods entering the marketplace. We intend to increase our sales overseas over the long term and may experience increased copying of our products. Intellectual property protection may be limited or in some foreign countries where we choose to do business. It may therefore be more for us to the use of our intellectual property rights by other parties in these countries, which could the value of our brands or products and cause our competitive position and growth to .
As we develop new products and seek to sustain performance internationally, we expect we will continue to incur greater costs in connection with securing the issuance or registration of patents, trademarks, copyrights, and other intellectual property rights, which will also increase our costs to monitor and enforce these rights. If difficulties arise securing such rights or protracted litigation is necessary to enforce such rights, our business and financial condition could be harmed.
Additionally, we could incur significant costs and management distraction in pursuing claims to enforce our intellectual property rights through litigation and defending any alleged counterclaims. If we are unable to protect or preserve the value of our patents, trade dress, trademarks, copyrights, or other intellectual property rights for any reason, or if we fail to maintain our brand image due to actual or perceived product or service quality issues, adverse publicity, governmental investigations or litigation, or other reasons, our brand and reputation could be damaged and our business may be harmed.
We may be subject to liability if we infringe upon the intellectual property rights of third parties and have incurred and may continue to incur costs protecting our intellectual property rights.
Third parties may sue us for alleged infringement of their intellectual property rights. The party claiming infringement might have greater resources than we do to pursue its claims, and we could be forced to incur substantial costs and devote significant management resources to defend against such litigation, even if the claims are meritless and even if we ultimately prevail. Also, third parties may make infringement claims against us that relate to technology developed or used by one of our manufacturers for which our manufacturers may or may not indemnify us. Even if we are indemnified
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against such costs, the indemnifying party may be unable or unwilling to comply with its contractual obligations and disputes over the scope of these obligations could require additional litigation. If the party claiming infringement were to prevail, we could be forced to modify or discontinue our products, pay significant damages, or enter into expensive royalty or licensing arrangements with the prevailing party, any of which could have a material adverse effect on our business, financial condition and results of operations. Further, we cannot guarantee that a license from the prevailing party would be available on acceptable terms, or at all.
We rely on third-party manufacturers and problems with, or the loss of, our suppliers or an inability to obtain raw materials could harm our business and results of operations.
Our products are produced by third-party manufacturers. We face the risk that these third-party manufacturers may not produce and deliver our products on a timely basis, or at all, may not comply with our quality standards, or may decide to raise prices in the future. We have experienced, and could experience in the future, operational difficulties with our manufacturers and we may face similar or unknown operational difficulties or other risks with respect to future manufacturers, including with respect to new products. These difficulties include reductions in the availability of production capacity, errors in complying with product specifications and regulatory and customer requirements, insufficient quality control, failures to meet production deadlines, failure to achieve our product quality standards, increases in costs of manufacturing and materials and manufacturing or other business interruptions. The ability of our manufacturers to effectively satisfy our production requirements could also be impacted by manufacturer financial or to their operations caused by fire, terrorist attack, riots, natural , public health issues, pandemics, or other events. The of any manufacturer to perform to our expectations could result in supply or for certain products and our business. If we develop new products with significantly increased or new manufacturing requirements, otherwise experience significantly increased demand, or need to replace an existing manufacturer due to of performance, we may be to supplement or replace our manufacturing capacity on a timely basis or on terms that are acceptable to us, which may increase our costs, reduce our margins and our ability to deliver our products on time.
Additionally, we do not have long-term agreements in place with most of our third-party manufacturers, and such manufacturers could decide to stop working with us, which would require us to identify and qualify new manufacturers. For certain of our products, it may take a significant amount of time to identify and qualify a manufacturer that has the capability and resources to produce our products to our specifications in sufficient volume and satisfy our service and quality control standards. Those with whom we have executed supply contracts may breach these agreements, and we may not be able to enforce our rights under these agreements or may incur significant costs attempting to enforce them. As a result, we cannot predict our ability to obtain supplies and finished products in adequate quantities, of required quality and at acceptable prices from our suppliers and manufacturers in the future. Any one of these risks could harm our ability to deliver our products on time, or at all, damage our reputation and our relationships with our retail partners and customers and increase our product costs thereby reducing our margins.
In addition, we do not have written agreements requiring exclusivity with all of our manufacturers and suppliers. As a result, they could produce similar products for our competitors, some of which could potentially purchase products in significantly greater volume. Our competitors could enter into restrictive or exclusive arrangements with our manufacturers or suppliers that could impair or eliminate our access to manufacturing capacity or supplies. Our manufacturers or suppliers could also be acquired by our competitors, and may become our direct competitors, thus limiting or eliminating our access to supplies or manufacturing capacity.
The capacity of our manufacturers to produce our products is also dependent upon the availability of raw materials, equipment, labor, and transportation at a competitive rate. Our manufacturers may not be able to obtain sufficient supply of raw materials or do so at a competitive price, which could result in delays in deliveries of our products by our manufacturers or significantly increased costs. Any shortage of raw materials or inability of a manufacturer to produce or ship our products in a timely manner, or at all, could impair our ability to ship orders of our products in a cost-efficient, timely manner and could cause us to miss the delivery requirements of our customers. As a result, we could experience cancellations of orders, refusals to accept deliveries, increased costs, or reductions in our prices and margins, any of which could harm our financial performance, reputation and results of operations.
We also depend on a limited number of third-party manufacturers for the sourcing of our products. We currently have a number of manufacturing partners located in various locations, including China, India, Vietnam, Cambodia, United States and Mexico. The majority of our fire pits, our highest grossing product, are currently made in China, with additional limited production in Vietnam and Cambodia. As a result of this concentration in our supply chain, our business and operations would be negatively affected if our key manufacturer or suppliers were to experience significant disruption, including continuing political tensions between China and Taiwan, affecting the price, quality, availability, or timely delivery of products or were to refuse to supply us. The partial or complete loss of these manufacturers or suppliers, or a significant adverse change in our relationship with any of these manufacturers or suppliers, could result in lost sales, added costs, and distribution delays that could harm our business and customer relationships.
In addition, a former supplier holds certain intellectual property in China related to certain products manufactured there. If that manufacturer attempted to revoke or block the production of those products, or began to produce those products for one or more of our competitors, it would likely result in protracted litigation and could harm our other manufacturer relationships, increase our costs, and harm our business, including potentially forcing us to manufacture certain products outside of China.
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If we fail to timely and effectively deliver products to our retail partners and customers, our business and results of operations could be harmed.
Our business depends on our ability to distribute products in a timely manner, but we cannot control all factors that affect this process. Our third-party manufacturers ship most of our products to our distribution centers in the United States, the largest of which is in Texas. Our large reliance on our distribution center in Texas makes us vulnerable to natural disasters, weather-related disruptions, accidents, system failures, public health issues, or other unforeseen events that could delay or impair our ability to fulfill retailer orders and/or ship merchandise purchased on our website, which could harm our sales. We import our products, and thus we are also vulnerable to risks associated with products manufactured abroad, including, among other things: (a) risks of damage, destruction, or confiscation of products while in transit to our distribution centers; and (b) transportation and other in shipments, including as a result of heightened security screening, port congestion, and inspection processes or other port-of-entry or restrictions in the United States. In order to meet demand for a product, we may choose in the future to arrange for additional quantities of the product, if available, to be delivered through air freight, which is significantly more expensive than standard shipping by sea and, consequently, could our gross margins. to procure our products from our third-party manufacturers and deliver merchandise to our retail partners and DTC channels in a timely, , and economically viable manner could reduce our sales and gross margins, our brand, and our business.
We also rely on the timely and free flow of goods through open and operational international shipping lanes and ports from our suppliers and manufacturers. Labor disputes or disruptions of shipping lanes, such as the Suez Canal blockage in 2021 or any issues at the Panama Canal or increased or continued delays at ports, our common carriers, or our suppliers or manufacturers could create significant risks for our business, particularly if these disputes result in work slowdowns, lockouts, strikes, or other disruptions during periods of significant importing or manufacturing, potentially resulting in delayed or cancelled orders by customers, unanticipated inventory accumulation or shortages, and harm to our business, results of operations and financial condition.
In addition, we rely upon independent land-based and air freight carriers for product shipments from our distribution centers to our retail partners and customers who purchase through our DTC channel. We may not be able to obtain sufficient freight capacity on a timely basis or at favorable shipping rates and, therefore, may not be able to receive products from suppliers or deliver products to retail partners or customers in a timely and cost-effective manner.
Accordingly, we are subject to the risks, including labor disputes, union organizing activity, inclement weather, public health issues, and increased transportation costs, associated with our third-party manufacturers’ and carriers’ ability to provide products and services to meet our requirements. The cost of logistics and transportation fluctuates in large part due to the price of oil, and availability can be limited as a result of political and economic issues. In addition, if the cost of fuel rises, the cost to deliver products may rise, which could harm our profitability.
We depend in part on our retail partners to display and present our products to customers, and our failure to maintain and further develop our relationships with our domestic retail partners could harm our business.
The physical placement of our products at retail partners plays an important part in our sales strategy. Retail partners may decide to emphasize competitors’ products, redeploy floor space to other product categories, or take other actions reducing purchases and visibility of our products. We do not receive long-term purchase commitments from retail partners, and orders are subject to cancellation. Factors affecting sales to retail partners include failure to identify customer needs, lack of customer acceptance of new products, unwillingness of our retail partners and customers to attribute premium value to our new or existing products or product expansions relative to competing products, failure to obtain shelf space, new competitor product introductions, damage to retail partner relationships, delays or defaults on our retail partners’ payment obligations to us, store closures, decreased foot traffic, recession or other adverse effects resulting from events outside of our control. Key retail partners could develop competing private-label products in the same or similar categories. If we any of our key retail partners or any key retail partner reduces its purchases of our existing or new products or its number of stores or operations or promotes products of our competitors over ours, our brand, as well as our results of operations and financial condition, could be . Because we are a premium brand, our sales depend, in part, on retail partners effectively displaying our products, including providing space and point of purchase displays in their stores, and training sales personnel. If our retail partners reduce or those activities, we may experience reduced sales of our products, resulting in lower gross margins, which would our results of operations.
Insolvency, credit problems or other financial difficulties that could confront our retail partners expose us to financial risk.
We sell to the large majority of our retail partners on open account terms and do not require collateral or a security interest in the inventory we sell them. Insolvency, credit problems, or other financial difficulties confronting our retail partners could expose us to financial risk if they are unable to pay for the products they purchase from us. As of December 31, 2025, a single retail partner accounted for 28.0% of our total outstanding accounts receivable. Impairment of outstanding accounts receivables from this and other significant retail partners, their inability to perform under their contracts, or their default in payment could materially harm our business and results of operations. In addition, financial difficulties of our retail partners could also cause them to reduce their sales staff, use of attractive displays, number or size of stores, and the amount of floor space dedicated to our products. Any reduction in sales by, or of, our current retail partners or customer demand, or credit risks associated with our retail partners, could our business, results of operations, and financial condition.
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If our independent suppliers, manufacturing partners and retail partners do not comply with ethical business practices or with applicable laws and regulations, our reputation, business, and results of operations would be harmed.
Our reputation and our customers’ willingness to purchase our products depend in part on our suppliers’, manufacturers’, and retail partners’ compliance with ethical employment practices, such as with respect to child labor, wages and benefits, forced labor, discrimination, safe and healthy working conditions, and with all legal and regulatory requirements relating to the conduct of their businesses and, in the case of retail partners, the promotion and sale of our products. The U.S. government also prohibits imports of items that are made or manufactured (in whole or in part) using forced labor, including under the Tariff Act of 1937 and the Uyghur Forced Labor Protection Act. While we attempt to only work with entities who agree to our Vendor Code of Conduct, they may not comply with ethical and lawful business practices. If our current or future suppliers, manufacturers, or retail partners fail to comply with applicable laws, regulations, safety codes, employment practices, human rights standards, quality standards, environmental standards, production practices, or other obligations, norms, or ethical standards, our reputation and brand image could be harmed, our ability to import certain items in the United States could be impacted, and we could be exposed to and additional costs that would our business, reputation, and results of operations.
We are subject to payment-related risks that may result in higher operating costs or the inability to process payments, either of which could harm our brand, reputation, business, financial condition and results of operations.
For our DTC sales, as well as for sales to certain retail partners, we accept a variety of payment methods, including credit cards, debit cards, electronic funds transfers, electronic payment systems, and gift cards, subjecting us to significant and evolving regulations and compliance requirements, including obligations to implement enhanced authentication processes that could result in increased costs and liability, and reduce the ease of use of certain payment methods. For certain payment methods, we pay interchange and other fees, which may increase over time. We rely on independent service providers for payment processing. If these independent service providers become unwilling or unable to provide these services to us or if the cost of using these providers increases, our business could be harmed. We are also subject to payment card association operating rules and agreements, including data security rules and agreements, certification requirements and rules governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for us to comply. In particular, we must comply with the Payment Card Industry Data Security Standard (“PCI-DSS”), a set of requirements designed to ensure that all companies that process, store or transmit payment card information maintain a secure environment to protect cardholder data. We rely on vendors to handle PCI-DSS matters and ensure compliance. Should a vendor be subject to of non-compliance, or if our data security systems are or compromised, we may be liable for incurred by card issuing banks or customers, subject to and higher transaction fees, our ability to accept credit or debit card payments from our customers, or process electronic fund transfers or facilitate other types of payments. Any to comply could significantly our brand, reputation, business, financial condition and results of operations. In addition, PCI-DSS compliance may not prevent or use of our payment systems or the theft, , or of payment card data or transaction information.
We may acquire or invest in other companies, which could divert our management’s attention, result in dilution to our stockholders, and otherwise disrupt our operations, harm our results of operations and negatively impact our financial condition.
We have acquired, and may in the future acquire or invest in, other businesses, products, or technologies that we believe could complement or expand our business, enhance our capabilities, or otherwise offer growth opportunities. The pursuit of potential acquisitions may divert the attention of management and cause us to incur various costs and expenses in identifying, investigating, and pursuing suitable acquisitions, whether or not they are consummated.
In any future acquisitions, we may not be able to successfully integrate acquired personnel, operations, and technologies, or effectively manage the combined business following the acquisition because of unforeseen complexity or costs. We also may not achieve the anticipated benefits from either past or future acquisitions due to a number of factors, including:
• risks associated with conducting due diligence;
• problems integrating the purchased businesses, products or technologies;
• anticipated and unanticipated costs or liabilities associated with the acquisition;
• inability to achieve anticipated synergies;
• issues maintaining uniform standards, procedures, controls and policies across our brands;
• the diversion of management’s attention from other business concerns;
• the loss of our or the acquired business’s key employees;
• adverse effects on existing business relationships with suppliers, distributors, retail partners and customers;
• risks associated with entering new markets in which we have limited or no experience;
• increased legal, accounting and compliance costs; or
• the issuance of dilutive equity securities, the incurrence of debt, or the use of cash to fund such acquisitions.
If our acquisitions do not yield expected returns, we may be required to take charges on acquired goodwill and other intangible assets, which could harm our results of operations. For example, in 2024, we incurred impairment charges related to acquired goodwill associated with the IcyBreeze reporting unit after we determined to wind-down that business unit.
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Our future success depends on the continuing efforts of our management and key employees, and on our ability to attract and retain highly skilled personnel and senior management.
We depend on the talents and continued efforts of our senior management, key employees and skilled personnel, and any loss of these members can disrupt our business and harm our results of operations. We believe that our senior management team is key to establishing our focus and executing our corporate strategies and is difficult to replace. There can be no assurance that our current or new members of our management team will be able to successfully execute our business, operating strategies and liquidity initiatives.
Furthermore, our ability to manage our business requires us to continue to attract, motivate, and retain additional qualified personnel. For instance, we rely on skilled and well-trained engineers for the research, development and design of our products and marketing personnel for our overall brand and individual brand’s growth. Our inability to attract or retain qualified employees in these functions or elsewhere could result in diminished quality of our products and delinquent production schedules, impede our ability to develop new products and prevent us from growing our brand, in aggregate and individually. Competition for this type of personnel is intense, particularly in Texas where several of our brands are headquartered, and we may not be successful in attracting, integrating, and retaining the personnel required to grow and operate our business effectively, which risk is exacerbated by our current liquidity situation. In particular, our recent restructuring initiatives and low stock price may make retention of key employees more difficult.
Our plans for continuing international operations may not be successful.
Continued operations in markets outside the United States is one of our key long-term strategies for the future of our business. These continued operations require significant investments of capital and human resources, new business processes and marketing platforms, legal compliance, and the attention of many managers and other employees who would otherwise be focused on other aspects of our business. There are significant costs and risks inherent in selling our products in international markets, including: (a) failure to effectively establish our core brand identity; (b) increased employment costs; (c) increased shipping and distribution costs, which could increase our expenses and reduce our margins; (d) potentially lower margins in some regions; (e) longer collection cycles in some regions; (f) increased competition from local providers of similar products; (g) compliance with foreign laws and regulations, including taxes and duties, laws governing the marketing and use of e-commerce websites and enhanced data privacy laws and security, rules, and regulations; (h) establishing and maintaining effective internal controls at foreign locations and the associated increased costs; (i) increased counterfeiting and other challenges involving intellectual property rights; (j) compliance with anti-bribery, anti-, sanctions, export controls, and anti-money laws, such as the FCPA, the Act, and OFAC regulations, by us, our employees, and our business partners; (k) currency exchange rate fluctuations and related effects on our results of operations; (l) economic , including inflation, or political in foreign economies and markets; (m) compliance with tax, employment, immigration, and labor laws for employees living or traveling abroad; (n) workforce uncertainty in countries where labor is more common than in the United States; (o) business resulting from geopolitical actions, including war and terrorism, such as the recent wars between Russia and Ukraine and between Israel and surrounding areas, or natural , including earthquakes, typhoons, floods, fires, and public health issues; (p) the imposition of tariffs on products that we import into international markets that could make such products more expensive compared to those of our competitors; (q) our ability to sustain performance internationally could be impacted by the intellectual property rights of third parties that with or are to ours; (r) developing retail relationships; and (r) other costs and risks of doing business internationally.
Further, we may incur significant operating expenses as a result of our planned continued international operations, and they may not be successful. We have limited experience with regulatory environments and market practices internationally, and we may not be able to further penetrate or continue to successfully operate in these new markets. We may also encounter difficulty continuing operations in international markets because of limited brand recognition, leading to delayed or limited acceptance of our products by customers in these markets, and increased marketing and customer acquisition costs to continue to establish our brand. These and other factors could harm our international operations and, consequently, harm our business, results of operations, and financial condition.
Our business involves the potential for injury, property damage, quality problems, product recalls, product liability and other claims against us, which could affect our earnings and financial condition.
Our Solo Stove products are designed to involve fire. If not properly handled, the fire our products involve poses significant danger for a number of reasons, including the possibility of burns, death, and significant property damage, including as a result of wildfires. As a result of fire or otherwise, if our Solo Stove or other products are defective or misused or if users of our products exercise impaired or otherwise poor judgment in the use of our products, the results could include personal injury to our customers or other third parties, death and significant property damage or destruction, and we could be exposed to significant liability and reputational damage. Moreover, heightened regulatory scrutiny and potential restrictions on fire products in regions with elevated wildfire risk may impact demand for our products. Climate changes related to increases in conditions and wildfire frequency may these risks over time.
We are subject to the U.S. Consumer Products Safety Act of 1972, as amended by the Consumer Product Safety Improvement Act of 2008, which empowers the U.S. Consumer Products Safety Commission to exclude from the market products that are found to be unsafe or hazardous, and similar laws under foreign jurisdictions. Under certain circumstances, the Consumer Products Safety Commission or a comparable foreign agency could require us to repurchase or recall one or more of our products. Additionally, other laws and agencies regulate certain consumer products we sell in the United States and abroad, and more restrictive laws and regulations may be adopted in the future. Real or perceived quality problems or material defects in our current and future products could also expose us to credit, warranty or other claims. Although we currently have insurance in place, we also face exposure to product liability claims in the event that one of our products is alleged to have resulted in property , bodily or other effects, and class action lawsuits related to the performance, safety or advertising of our products.
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Any such quality issues or defects, product safety concerns, voluntary or involuntary product recall, government investigation, regulatory action, product liability or other claim or class action lawsuit may result in significant adverse publicity and damage our reputation and competitive position. In addition, real or perceived quality issues, safety concerns or defects could result in a greater number of product returns than expected from customers and our retail partners, and if we are required to remove, or voluntarily remove, one of our products from the market, we may have large quantities of finished products that we cannot sell. In the event of any governmental investigations, regulatory actions, product liability claims or class action lawsuits, we could face substantial monetary judgments or fines and , or related to the sale of our products.
Although we maintain product liability insurance in amounts that we believe are reasonable, that insurance is, in most cases, subject to large policy premiums for which we are responsible. In addition, we may not be able to maintain such insurance on acceptable terms, if at all, in the future and product liability claims may exceed the amount of insurance coverage. We maintain a limited amount of product recall insurance and may not have adequate insurance coverage for claims asserted in class action lawsuits. As a result, product recalls, product liability claims and other product-related claims could have a material adverse effect on our business, results of operations and financial condition. We devote substantial resources to compliance with governmental and other applicable standards. However, compliance with these standards does not necessarily prevent individual or class action lawsuits, which can entail significant cost and risk. As a result, these types of claims could have a material adverse effect on our business, results of operations and financial condition.
Our collection, use, storage, disclosure, transfer and other processing of personal information could give rise to significant costs and liabilities, including as a result of governmental regulation, uncertain or inconsistent interpretation and enforcement of legal requirements or differing views of personal privacy rights, which may have a material adverse effect on our reputation, business, financial condition and results of operations.
We collect, store, process, transmit and use personal data, including from and about employees, customers and suppliers. A variety of state, federal, and foreign laws, regulations industry standards, contractual requirements, and other obligations apply to the collection, use, retention, protection, disclosure, transfer and other processing of personal data, including the CCPA, Canada’s Personal Information Protection and Electronic Documents Act, and the GDPR. As we seek to expand our business, we are, and may increasingly become subject to various current and new laws, regulations and standards, as well as contractual obligations, relating to data privacy and security in the jurisdictions in which we operate, which are continuously evolving and may be interpreted and applied differently over time and from jurisdiction to jurisdiction in ways that have a material adverse effect on our reputation, business, financial condition and results of operations. This evolution may affect our ability to operate in certain jurisdictions or to collect, store, transfer, use and share personal information, necessitate the acceptance of more onerous obligations in our contracts, and result in liability or impose additional costs on us. Any failure or perceived failure by us to comply with federal, state or foreign laws or regulations, our policies and procedures or our contracts governing our processing of personal information could result in publicity, government and enforcement actions, by third parties and to our reputation, any of which could have a material effect on our business, results of operations, and financial condition.
U.S. Privacy Laws
Domestic privacy and data security laws are complex and changing rapidly. Within the United States, many states have enacted, or are considering adopting, privacy laws and regulations. For example, the CCPA requires covered businesses that process the personal information of California residents to, among other things: (i) provide certain disclosures to California residents regarding the business’s collection, use, and disclosure of their personal information (including for cross-context behavioral advertising and sale); (ii) receive and respond to requests from California residents to access, delete, and correct their personal information, or to opt out of certain disclosures of their personal information; and (iii) enter into specific contractual provisions with service providers that process California resident personal information on the business’s behalf. Additional compliance investment and potential business process changes may also be required. In addition, similar laws have been enacted in other states, and are continuing to be proposed at the state and federal level, reflecting a trend toward more stringent privacy legislation in the United States. Together, these laws will add additional complexity, variation in requirements, restrictions and potential legal risk, require additional investment in resources to compliance programs, could impact strategies and availability of previously useful data, and could result in increased compliance costs and/or changes in business practices and policies.
Our communications with our customers are subject to certain laws and regulations, including the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2023 (“CAN-SPAM”), the Telephone Consumer Protection Act of 1991 (“TCPA”), and the Telemarketing Sales Rule and analogous state laws, that could expose us to significant damages awards, fines and other penalties that could materially impact our business. For example, the TCPA imposes various consumer consent requirements and other restrictions in connection with certain telemarketing activity and other communication with consumers by phone, fax or text message. The CAN-SPAM and the Telemarketing Sales Rule and analogous state laws also impose various restrictions on marketing conducted use of email, telephone, fax or text message. As laws and regulations, including the Federal Trade Commission (“FTC”), enforcement, rapidly evolve to govern the use of these communications and marketing platforms, the failure by us, our employees or third parties acting at our direction to abide by applicable laws and regulations could adversely impact our business, financial condition and results of operations or subject us to or other . The Federal Communications Commission, as the agency that implements and enforces the TCPA, may with our interpretation of the TCPA and subject us to and other consequences for . Determination by a court or regulatory agency that our practices the TCPA could subject us to civil and could require us to change some portions of our business. Even an by or regulatory authorities of our activities could result in publicity and could require a response from and defense by us.
In addition, some laws may require us to notify governmental authorities, supervisory bodies, the media, other parties, and/or affected individuals of data breaches involving certain personal information or other unauthorized or inadvertent access to or disclosure of such information. For example,
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laws in all 50 U.S. states may require businesses to provide notice to consumers whose personal information has been disclosed as a result of a data breach. These laws are not consistent, and compliance in the event of a widespread data breach may be difficult and costly. We also may be contractually required to notify consumers or other counterparties of a security breach. Any actual or perceived security breach or breach resulting in a loss of, or damage to, our data systems or inappropriate disclosure of confidential or proprietary or personal information could harm our reputation and brand, erode confidence in the effectiveness of our security measures and lead to regulatory scrutiny, us to potential liability, including exposure, and , regulatory action or , or require us to expend significant resources on data security and in responding to any such actual or perceived , which could materially and affect our business, results of operations or financial condition.
Non-U.S. Privacy Laws
In Canada, the Personal Information Protection and Electronic Documents Act (“PIPEDA”), and various provincial laws require that companies give detailed privacy notices to consumers, obtain consent to use personal information, with limited exceptions, allow individuals to access and correct their personal information, and report certain data breaches. In addition, Canada’s Anti-Spam Legislation (“CASL”), prohibits email marketing without the recipient’s consent, with limited exceptions. Failure to comply with PIPEDA, CASL, or provincial privacy or data protection laws could result in significant fines and penalties or possible damage awards.
In the European Economic Area (the “EEA”), we are subject to the GDPR and in the UK, we are subject to the UK GDPR, in each case in relation to our collection, control, processing, sharing, international transfers, disclosure and other use of personal data. The GDPR and national implementing legislation in EEA member states, and the UK regime, impose a strict data protection compliance regime including: providing detailed disclosures about how personal data is collected and processed (in a concise, intelligible and easily accessible form); demonstrating that an appropriate legal basis is in place or otherwise exists to justify data processing activities; granting rights for data subjects in regard to their personal data (including data access rights, the right to be “forgotten” and the right to data portability); introducing the obligation to notify data protection regulators or supervisory authorities (and in certain cases, affected individuals) of significant data breaches; defining pseudonymized ( i.e. , key-coded) data; imposing limitations on retention of personal data; maintaining a record of data processing; and complying with the principal of accountability and the obligation to demonstrate compliance through policies, procedures, training and audit. The GDPR and the UK GDPR impose substantial fines for breaches and violations (up to the of €20 million (or £17.5 million) or 4% of global annual turnover). In addition to , a may result in regulatory , reputational , orders to / change our data processing activities, enforcement notices, assessment notices (for a compulsory audit) and/ or civil (including class actions). Since we are under the supervision of relevant data protection authorities in the EEA and the UK, we may be under both the GDPR and UK GDPR for the same . In addition to the foregoing, a of the GDPR or UK GDPR could result in regulatory , reputational , orders to / change our processing of our data, enforcement notices, and/ or assessment notices (for a compulsory audit). We may also face civil including representative actions and other class action type (where individuals have ), potentially amounting to significant compensation or liabilities, as well as associated costs, of internal resources, and reputational . As we may continue to expand into other foreign countries and jurisdictions, we may be subject to additional laws and regulations that may affect how we conduct business.
Third Party Data Processing and Transfers
We depend on a number of third parties in relation to the operation of our business, a number of which process personal data on our behalf. With each such provider we attempt to mitigate the associated risks of using third parties by performing security assessments and due diligence, entering into contractual arrangements to ensure that providers only process personal data according to our instructions, and that they have sufficient technical and organizational security measures in place. There is no assurance that these contractual measures and our own privacy and security-related safeguards will protect us from the risks associated with the third-party processing, storage and transmission of such information. Any violation of data or security laws by our third party processors could have a material adverse effect on our business and result in the fines and penalties outlined below.
We are also subject to the European Union (“EU”) and UK rules with respect to cross-border transfers of personal data from the EEA and the UK to the United States and other jurisdictions that the European Commission/ UK competent authorities do not recognize as having “adequate” data protection laws unless a data transfer mechanism has been put in place, and the efficacy and longevity of current transfer mechanisms between the EEA and the United States remains uncertain. Case law from the Court of Justice of the European Union (“CJEU”) states that reliance on the standard contractual clauses - a standard form of contract approved by the European Commission as an adequate personal data transfer mechanism - alone may not necessarily be sufficient in all circumstances and that transfers must be assessed on a case-by-case basis. In relation to cross-border transfers of personal data, we expect the existing legal complexity and uncertainty regarding international personal data transfers to continue. In particular, we expect the European Commission approval of the current EU-US Data Privacy Framework for data transfers to be certified entities in the United States to be challenged and international transfers to the United States and to other jurisdictions more generally to continue to be subject to enhanced scrutiny by regulators. On October 12, 2023, the UK Extension to the Data Privacy Framework came into effect (as approved by the UK Government), as a data transfer mechanism from the UK to U.S. entities self-certified under the Data Privacy Framework. As we continue to expand into other foreign countries and jurisdictions, we may be subject to additional laws and regulations that may affect how we conduct business. As a result, we may have to make certain operational changes and we will have to implement revised standard contractual clauses and other relevant documentation for existing data transfers within required time frames. As supervisory authorities issue further guidance on personal data export mechanisms, including circumstances where the SCCs cannot be used, and/or start taking enforcement action, we could additional costs, and/or regulatory or , and/or if we are otherwise to transfer personal data between and among countries and
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regions in which we operate, it could affect the manner in which we provide our services, the geographical location or segregation of our relevant systems and operations, and could adversely affect our financial results.
Self-Regulatory Industry Standards
In addition to government regulation, privacy advocates and industry groups have proposed, and may propose in the future, self-regulatory standards. These and other industry standards may legally or contractually apply to us, or we may elect to comply with such standards. If we fail to comply with these contractual obligations or standards, we may face substantial liability or fines. We expect that there will continue to be new proposed laws and regulations concerning data privacy and security in the United States and other jurisdictions in which we operate. We cannot yet determine the impact such future laws, regulations and standards may have on our business or operations.
Consumer Protection Laws and FTC Enforcement
We make public statements about our use and disclosure of personal information through our privacy policies that are posted on our websites. The publication of our privacy policies and other statements that provide promises and assurances about data privacy and security can subject us to potential government or legal action if they are found to be deceptive, unfair or misrepresentative of our actual practices.
In addition, the FTC expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities. Our failure to take any steps perceived by the FTC as appropriate to protect consumers’ personal information may result in claims by the FTC that we have engaged in unfair or deceptive acts or practices in violation of Section 5(a) of the FTC Act. State consumer protection laws provide similar causes of action for unfair or deceptive practices for alleged privacy, data protection and data security violations. Federal and state consumer protection laws are also increasingly being applied by FTC and states’ attorneys general to regulate the collection, use, storage, and disclosure of personal or personally identifiable information, through websites or otherwise, and to regulate the presentation of website content.
We rely on a variety of marketing techniques and practices to sell our products and to attract new customers and consumers, and we are subject to various current and future data protection laws and obligations that govern marketing and advertising practices. Governmental authorities continue to evaluate the privacy implications inherent in the use of third-party “cookies” and other methods of online tracking for behavioral advertising and other purposes, such as by regulating the level of consumer notice and consent required before a company can employ cookies or other electronic tracking tools or the use of data gathered with such tools. In the EU and the UK, regulators are increasingly focusing on compliance with requirements in the online behavioral advertising ecosystem, and informed consent is required for the placement of certain cookies or similar technologies on a user’s device and for direct electronic marketing. The GDPR also imposes conditions on obtaining valid consent, such as a prohibition on pre-checked consents and a requirement to ensure separate consents are sought for each type of cookie or similar technology. Further, recent European court and regulator decisions and guidance and recent campaigns by a not for profit organization are driving increased attention to cookies and tracking technologies. If regulators start to enforce the strict approach to opt-in consent for all but essential use cases, as seen in recent guidance and decisions, this could lead to substantial costs, require significant systems changes, limit the effectiveness of our marketing activities, divert the attention of our technology personnel, affect our margins, increase costs and subject us to additional liabilities. In the US, comprehensive state privacy laws such as the CCPA generally permit individuals to opt-out of the use of cookies and other tracking technologies used for advertising purposes, which could our ability to effectively advertise. Recently, California enacted a law requiring web browsers to provide individuals with a signal to allow them to opt-out of the disclosure of personal information for sales and cross context behavioral advertising, which could also our advertising abilities (particularly if adopted in other states as well). In light of the complex and evolving nature of privacy laws on cookies and tracking technologies, there can be no assurance that we will be in our efforts to comply with such laws; of such laws could result in regulatory , , orders to / change our use of such technologies, as well as civil including class actions and reputational . Additionally, some providers of consumer devices, web browsers and application stores have implemented, or announced plans to implement, means to make it for Internet users to prevent the placement of cookies or to block other tracking technologies, require additional consents, or limit the ability to track user activity, which could if widely adopted result in the use of third-party cookies and other methods of online tracking becoming significantly less . Private parties are also seeking to limit the ability to monitor and market customer behavior. Those increased may also impact marketing techniques and effectiveness.
We rely significantly on the use of information technology and data, including that of our third-party service providers. Any significant failure, inadequacy, interruption or data security incident involving our information technology systems or data, or that of our third-party service providers, could disrupt our business operations, which could have a material adverse effect on our business, prospects, results of operations, financial condition and/or cash flows.
Information Technology Dependencies
We increasingly rely on information technology systems to market and sell our products, process, transmit and store electronic, personal, financial, and other confidential information, manage a variety of business processes and activities and comply with regulatory, legal and tax requirements. These information technology systems, most of which are managed by third parties, may be susceptible to damage, disruptions or shutdowns due to failures during the process of upgrading or replacing software, databases or components, power outages, hardware failures, computer viruses, and malware, misconfigurations, “bugs” or other vulnerabilities, malicious code, natural disasters, terrorism, war, telecommunication and electrical failures, cyberattacks, phishing attacks and other social engineering schemes, employee theft or misuse, human , , or of service attacks, sophisticated nation-state and nation-state--supported actor, attacks by computer hackers, telecommunication , user or events. Any material of our systems, or the systems of our third-party service providers, could our ability to track, record and analyze the products that we sell and could impact our operations, shipment of goods, ability to process financial information
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and transactions, and our ability to receive and process online orders or engage in normal business activities, any of which could materially and adversely affect our business, financial condition and results of operations, and we could experience delays in reporting our financial results.
E-commerce is central to our business. We generate a majority of our sales through our websites, which is also a key component of our marketing strategy. We supplement our websites through relationships with select third-party e-commerce marketplaces, such as Amazon, and we cannot guarantee that they will respond satisfactorily to website downtime and other technical failures. Our or such third parties’ failure to successfully respond to these risks could reduce e-commerce sales and, in the case of our website, damage our brand’s reputation. The future operation, success and growth of our business depends on streamlined processes made available through information systems, global communications, internet activity and other network processes.
Our information technology systems, and those of our third-party service providers, strategic partners, and other contractors or consultants, may be subject to damage or interruption from telecommunications problems, data corruption, software errors, fire, flood, global pandemics and other natural disasters, power outages, systems disruptions, system conversions, and/or human error. Our existing safety systems, data backup, access protection, user management and information technology emergency planning may not be sufficient to prevent data loss or long-term network outages.
In addition, we may have to upgrade or incorporate new technology systems to support the increasing needs of our expanding business. Costs and potential problems and interruptions associated with the implementation of new or upgraded systems and technology or with maintenance or adequate support of existing systems could disrupt or reduce the efficiency of our operations, including through impairment of our ability to leverage our e-commerce channels and fulfill customer orders, potential disruption of our internal control structure, substantial capital expenditures, additional administration and operating expenses, acquisition and retention of sufficiently skilled personnel to implement and operate the new systems, demands on management time, the introduction of errors or vulnerabilities and other risks and costs of delays or difficulties in transitioning to or integrating new systems into our current systems. These implementations, modifications and upgrades may not result in productivity improvements at a level that outweighs the costs of implementation, or at all. Additionally, these may cause in our business operations and have a material effect on our business, financial condition and results of operations.
Further, as part of our normal business activities, we collect and store certain confidential information, including personal information with respect to customers and employees, as well as information related to intellectual property, and the success of our e-commerce operations depends on the secure transmission of confidential and personal data over public networks, including the use of cashless payments. We may share some of this information with third-party service providers and any failure on the part of us or our third-party service providers to maintain the security of this confidential data and personal information, including via the penetration of our network security (or those of our third party service providers) and the misappropriation of this data, could result in business disruption, damage to our reputation, financial obligations to third parties, fines, penalties, regulatory proceedings and private litigation (including class actions), any or all of which could result in the Company incurring potentially substantial costs. Such events could also result in the deterioration of confidence in the Company by employees, consumers and customers and cause other competitive .
Security Incidents
Security incidents compromising the confidentiality, integrity, and availability of our confidential or personal information and our third-party service providers’ information technology systems could result from cyber-attacks, computer malware, viruses, social engineering, credential stuffing, supply chain attacks, efforts by individuals or groups of hackers and sophisticated organizations, including state-sponsored organizations, errors or malfeasance of our personnel, and security vulnerabilities in the software or systems on which we and our third party service providers rely. Cyberattacks could also result in the theft of our intellectual property. If we gain greater visibility, we may face a higher risk of being targeted by cyberattacks. Advances in computer capabilities (including through artificial intelligence), new technological discoveries or other developments may result in cyberattacks becoming more sophisticated and more difficult to detect. Security can also occur as a result of non-technical issues, including or actions by our employees, our third-party service providers, or their personnel.
Moreover, we and our third-party service providers may be more vulnerable to such attacks in remote work environments. As techniques used by cyber criminals change frequently, a disruption, cyberattack or other security breach of our information technology systems or infrastructure, or those of our third-party service providers, may go undetected for an extended period and could result in the theft, transfer, unauthorized access to, disclosure, modification, misuse, loss or destruction of our employee, representative, customer, vendor, consumer and/or other third-party data, including sensitive or confidential data, personal information and/or intellectual property. We cannot guarantee that our security efforts will prevent breaches or breakdowns of our or our third-party service providers’ information technology systems. If we or our third-party service providers , or are believed to have , a or disclosure of personal or confidential information as a result of an actual or potential of our information technology systems, we may reputational, competitive and/or business , incur significant costs and be subject to government , , and/or , which could have a material effect on our business, prospects, results of operations, financial condition and/or cash flows. Moreover, while we maintain cyber insurance that may help provide coverage for these types of , we cannot you that our insurance will be adequate to cover financial, legal, business, or reputational , costs, and liabilities related to these , or will be available to us in the future. There can be no assurance that our cybersecurity risk management program and processes, including our IRP, and other preventative actions the Company has taken and continues to take that are designed to reduce the risk of cybersecurity and and protect its systems and information, will be fully implemented, complied with or in protecting all cybersecurity and .
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In addition, any such access, disclosure or other loss or unauthorized use of information or data, whether actual or perceived, could result in legal claims or proceedings, regulatory investigations or actions, and other types of liability under laws that protect the privacy and security of personal information, including federal, state and foreign data protection and privacy regulations, violations of which could result in significant penalties and fines in the United States, Canada, EU and UK. Further, the costs associated with the investigation, remediation and potential notification of the breach to counterparties and data subjects could be material. In addition, although we seek to detect and investigate all data security incidents, security breaches and other incidents of unauthorized access to our information technology systems and data can be to detect and even if identified, we may be to or remediate or due to attackers increasingly using tools and techniques that are designed to controls, to avoid detection, and to remove or obfuscate forensic evidence. Any in identifying such or may lead to increased and legal exposure of the type described above.
Our business may be affected by the evolving regulatory framework for AI Technologies.
We have incorporated and expect to continue to incorporate machine learning and artificial intelligence technologies (collectively, “AI Technologies”) into our business operations. For example, we are currently using chatbots as one of our customer service tools. As the use of AI Technologies is a novel business model without an established track record, data sourcing, technology, integration and process issues, program bias into decision-making algorithms, concerns over intellectual property, the evolving regulatory landscape, security problems, and the protection of privacy could impair the adoption and acceptance of AI solutions and expose us to new risks. Any sensitive information that we input into a third-party generative AI platform could be leaked or disclosed to others.
The regulatory framework for AI Technologies is rapidly evolving as many federal, state, and foreign government bodies and agencies have introduced or are currently considering additional laws and regulations. Existing laws and regulations may be interpreted in ways that would affect the operation of our AI Technologies. As a result, we cannot yet determine the impact future laws, regulations, standards, or market perception of their requirements may have on our business and may not always be able to anticipate how to respond to these laws or regulations.
It is possible that new laws and regulations will be adopted in the United States and in other non-U.S. jurisdictions, or that existing laws and regulations, including competition and antitrust laws, may be interpreted in ways that would limit our ability to use AI Technologies for our business, or require us to change the way we use AI Technologies in a manner that negatively affects the performance of our products, services, and business and the way in which we use AI Technologies. We may need to expend resources to adjust our products or services in certain jurisdictions if the laws, regulations, or decisions are not consistent across jurisdictions. Further, the cost of compliance, could be significant and would increase our operating expenses (such as by imposing additional reporting obligations regarding our use of AI Technologies). Such an increase in operating expenses, as well as any actual or perceived failure of compliance, could adversely affect our business, financial condition and results of operations. Any failure or perceived failure by us to comply with our policies or applicable legal and regulatory requirements related to consumer protection, information security, data protection, use of AI and privacy could result in a of confidence in us; to our brands; the of users of our services, consumers, business partners and advertisers; and proceedings us by governmental authorities or others, including regulatory and private , any of which could our operations and affect our business.
Our business may be adversely affected if we are unable to provide our customers a cost-effective e-commerce platform that is able to respond and adapt to rapid changes in technology.
The number of people who access the internet through devices other than personal computers has increased dramatically. The smaller screen size, functionality, and memory associated with some alternative devices may make the use of our sites less compelling and purchasing our products more difficult. In addition, it is time consuming and costly to keep pace with rapidly changing and continuously evolving technology. In 2025, the majority of orders were placed from a mobile device. However, we cannot be certain that our mobile applications or our mobile-optimized sites will be successful in the future.
As existing mobile devices and e-commerce platforms evolve and new mobile devices and e-commerce platforms are released, it is difficult to predict the problems we may encounter in adjusting and developing applications for changed and alternative devices and platforms, and we may need to devote significant resources to the creation, support and maintenance of such applications. If we are unable to attract consumers to our e-commerce websites through these devices or are slow to develop a version of our websites that is more compatible with alternative devices or a mobile application, we may fail to capture a significant share of consumers, which could materially and adversely affect our business.
Government regulation of the Internet and e-commerce is evolving, and unfavorable changes or failure by us to comply with these regulations could substantially harm our business and results of operations.
We are subject to general business regulations and laws as well as regulations and laws specifically governing the Internet and e-commerce. Existing and future regulations and laws could impede the growth of the Internet, e-commerce or mobile commerce. These regulations and laws may involve taxes, tariffs, privacy, data protection, data security, anti-spam, content protection, electronic contracts and communications, consumer protection, website accessibility, Internet neutrality and gift cards. It is not clear how existing laws governing issues such as property ownership, sales and other taxes and consumer privacy apply to the Internet as many of these laws were adopted prior to the advent of the Internet and do not contemplate or address the unique issues raised by the Internet or e-commerce. Interpretation and application of these regulations and laws can be inconsistent from one jurisdiction to another and may conflict with other rules or our practices. We cannot be sure that our practices have complied, comply or will comply fully with all such laws and regulations. Any failure, or perceived failure, by us to comply with any of these laws or regulations could result in damage to our reputation, a in business and proceedings or actions us by governmental entities or others, which could our
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reputation, force us to spend significant amounts in defense of these proceedings, distract our management, increase our costs of doing business, decrease the use of our sites by consumers and suppliers and may result in the imposition of monetary liability. We may also be contractually liable to indemnify and hold harmless third parties from the costs or consequences of non-compliance with any such laws or regulations. In addition, it is possible that governments of one or more countries or territories may seek to censor content available on our sites or may even attempt to completely block access to our sites. In particular, in the event that we are restricted, in whole or in part, from operating in one or more countries or territories, our ability to retain or increase our customer base may be adversely affected, and we may not be able to maintain or grow our net sales and expand our business as anticipated.
Failure to establish and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could adversely affect our business and stock price.
As a public company, we are required to comply with the SEC’s rules implementing Sections 302 and 404 of the Sarbanes-Oxley Act, which require management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of internal controls over financial reporting. However, as an emerging growth company, our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal control over financial reporting pursuant to Section 404(b) until the date we are no longer an emerging growth company. At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our controls are documented, designed or operating.
To comply with the requirements of being a public company, we have undertaken various actions, and may need to take additional actions, such as implementing new internal controls and procedures and hiring additional accounting or internal audit staff. Testing and maintaining internal controls can divert our management’s attention from other matters that are important to the operation of our business. Additionally, in the past, when evaluating our internal control over financial reporting, we have identified material weaknesses, which have since been remediated. If we identify any additional material weaknesses in our internal control over financial reporting, are unable to comply with the requirements of Section 404 in a timely manner or are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting if we are subject to Section 404(b) of the Sarbanes-Oxley Act, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our Class A common stock could be affected, and we could become subject to by the stock exchange on which our securities are listed, the SEC or other regulatory authorities, which could require additional financial and management resources.
Our results of operations are subject to seasonal and quarterly variations, which could cause the price of our Class A common stock to decline.
We believe that our sales include a seasonal component. In the DTC channel, our historical net sales tend to be highest in our second and fourth quarters, while our retail channel has generated higher sales in the first and third quarters. In 2025, we saw a shift in the seasonal demand within our retail channel with the first quarter far exceeding the third quarter. We believe that this change in trend in 2025 could be indicative of a potential long-term change in our seasonality, which we will continue to monitor in future periods. However, fluctuations in our quarterly operating results and the price of our Class A common stock may be particularly pronounced in the current economic environment.
Our annual and quarterly results of operations may also fluctuate significantly as a result of a variety of other factors, including, among other things, the timing of the introduction of and advertising for our new products and those of our competitors and changes in our product mix. Variations in weather conditions may also harm our quarterly results of operations. In addition, we may not be able to adjust our spending in a timely manner to compensate for any unexpected shortfall in our sales. As a result of these seasonal and quarterly fluctuations, we believe that comparisons of our results of operations between different quarters within a single fiscal year, or the same quarters of different fiscal years, are not necessarily meaningful and that these comparisons cannot be relied upon as indicators of our future performance. In the event that any seasonal or quarterly fluctuations in our net sales and results of operations result in our failure to meet our forecasts or the forecasts of the research analysts that may cover us in the future, the market price of our Class A common stock could fluctuate or decline.
If our goodwill or long-lived assets, to include our intangible assets, become impaired, we may be required to record a charge to our earnings.
We have in the past recorded and may be required to record future impairments of goodwill, other intangible assets, or fixed assets to the extent the fair value of these assets falls below their book value. For example, in 2025, we incurred impairment charges related to the long-lived assets of Solo Stove. Our estimates of fair value are based on assumptions regarding future cash flows, gross margins, expenses, discount rates applied to these cash flows, and current market estimates of value. Estimates used could cause us to record material non-cash impairment charges, which could harm our results of operations and financial condition.
An adverse determination in any material product liability related claim against us could adversely affect our operating results or financial condition.
The use of our products by consumers exposes us to risks associated with product liability claims. If our products are defective or used incorrectly, bodily injury, property damage or other injury, including death, may result in, and could give rise to product liability claims against us, which could adversely affect our brands’ image or reputation. We have encountered product liability claims in the past and carry product liability insurance, although our insurance may not be sufficient to cover all losses. Any losses that we may suffer from product liability claims, and the effect that any product liability litigation may have upon the reputation and marketability of our products, may have a impact on our business, financial condition or results of operations.
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Risks Related to Our Organizational Structure and the Tax Receivable Agreement
Solo Brands, Inc.’s principal asset is its indirect interest in Holdings, and, accordingly, it will depend on distributions from its subsidiaries (including Holdings and Newco) to pay its taxes and expenses, including payments under the Tax Receivable Agreement. Holdings’ and Newco’s ability to make such distributions may be subject to various limitations and restrictions, and payments under the Tax Receivable Agreement will not benefit holders of Solo Brands, Inc. Class A common stock unless such holders are also TRA Participants.
Solo Brands, Inc. is a holding company and has no material assets other than its indirect ownership in Holdings. As such, Solo Brands, Inc. has no independent means of generating revenue or cash flow, and its ability to pay taxes and operating expenses or declare and pay dividends in the future, if any, is dependent upon the financial results and cash flows of Holdings and its subsidiaries, and distributions Solo Brands, Inc. receives from Holdings through Holdings’ distributions to Newco and Newco’s distributions to Solo Brands, Inc. There can be no assurance that Holdings and its subsidiaries will generate sufficient cash flow to distribute funds to Solo Brands, Inc., or that applicable state law and contractual restrictions, including negative covenants in any debt agreements of Newco or Holdings or its subsidiaries (including the Revolving Credit Facility), will permit such distributions. The terms of Newco’s, Holdings’ or its subsidiaries’ current and future debt instruments or other agreements may restrict the ability of Newco to make distributions to Solo Brands, Inc. or of Holdings or its subsidiaries to make distributions to Newco.
Under the Tax Receivable Agreement, Solo Brands, Inc. generally is required to make cash payments to the TRA Participants equal to 85% of the tax benefits, if any, that Solo Brands, Inc. actually realizes, or in certain circumstances is deemed to realize, as a result of (1) increases in Solo Brands, Inc.’s proportionate share of the tax basis of the assets of Holdings resulting from prior redemptions or exchanges of LLC Interests by the Prior Continuing LLC Owners for Solo Brands, Inc. Class A common stock or cash (including redemptions or exchanges made pursuant to the Corporate Simplification) and (2) certain other tax benefits arising from payments under the Tax Receivable Agreement. No such payments will be made to any holders of Solo Brands, Inc. Class A common stock unless such holders are also TRA Participants. Although Solo Brands, Inc. will retain 15% of such tax benefits, the Tax Receivable Agreement may adversely impact the future trading market for the Class A common stock.
Following the Corporate Simplification, the amount of the cash payments that Solo Brands, Inc. will be required to make under the Tax Receivable Agreement is generally limited. Payments under the Tax Receivable Agreement are not conditioned on the Prior Continuing LLC Owners’ ownership of our shares. The actual amounts payable under the Tax Receivable Agreement will be determined in part by reference to the market value of our Class A common stock at the time of the prior redemptions and exchanges and the prevailing tax rates applicable to us over the life of the Tax Receivable Agreement and will generally be dependent on us generating sufficient future taxable income to realize the benefit. Any payments made by Solo Brands, Inc. to the TRA Participants under the Tax Receivable Agreement will not be available for reinvestment in the business and will generally reduce the amount of cash that might have otherwise been available to Solo Brands, Inc. and its subsidiaries. To the extent Solo Brands, Inc. is unable to make timely payments under the Tax Receivable Agreement for any reason, the unpaid amounts will be deferred and will accrue interest until paid. Furthermore, Solo Brands, Inc.’s future obligations to make payments under the Tax Receivable Agreement could make Solo Brands, Inc. and its subsidiaries a less attractive target for an acquisition, particularly in the case of an acquirer that cannot use some or all of the tax benefits that are the subject of the Tax Receivable Agreement.
Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our results of operations and financial condition.
We are subject to taxes by the U.S. federal, state, local and foreign tax authorities, and our tax liabilities will be affected by the allocation of expenses to differing jurisdictions. Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including:
• changes in the valuation of our deferred tax assets and liabilities;
• expected timing and amount of the release of any tax valuation allowances;
• tax effects of equity-based compensation;
• changes in tax laws, regulations or interpretations thereof; or
• future earnings being lower than anticipated in countries where we have lower statutory tax rates and higher than anticipated earnings in countries where we have higher statutory tax rates.
In addition, we may be subject to audits of our income, sales and other transaction taxes by U.S. federal, state, local and foreign taxing authorities. Outcomes from these audits could adversely affect our business, results of operations and financial condition. The U.S. government, state governments, and foreign jurisdictions may also enact significant changes to the taxation of business entities, including, among others, an increase in the corporate income tax rate and the imposition of minimum taxes.
Additionally, tax authorities at the foreign, federal, state and local levels are currently reviewing the appropriate treatment of companies engaged in e-commerce. New or revised foreign, federal, state or local tax regulations or court decisions may subject us or our customers to additional sales, income and other taxes. There is also uncertainty over sales tax liability as a result of the U.S. Supreme Court’s decision in South Dakota v. Wayfair, Inc. , which held that states could impose sales tax collection obligations on out-of-state sellers even if those sellers lack any physical presence within the states imposing the sales taxes. Under Wayfair , a person requires only a “substantial nexus” with the taxing state before the state may subject the person to sales tax collection obligations therein. An increasing number of states (both before and after the publication of Wayfair ) have considered or adopted laws that attempt to impose sales tax collection obligations on out-of-state sellers. The Supreme Court’s Wayfair decision has removed a significant impediment to the enactment and enforcement of these laws. While we do not expect the Court’s decision to have a significant impact on our business, other new or revised taxes and, in particular, sales taxes, VAT and similar taxes could increase the cost of doing business online and
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decrease the attractiveness of selling products over the internet. New taxes and rulings could also create significant increases in internal costs necessary to capture data and collect and remit taxes.
If we were deemed to be an investment company under the Investment Company Act of 1940, as amended, (“the 1940 Act”), applicable restrictions could make it impractical for us to continue our business as contemplated and could adversely affect our business, results of operations and financial condition.
Under Sections 3(a)(1)(A) and (C) of the 1940 Act, a company generally will be deemed to be an “investment company” for purposes of the 1940 Act if (i) it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities or (ii) it engages, or proposes to engage, in the business of investing, reinvesting, owning, holding or trading in securities and it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities, shares of registered money market funds under Rule 2a-7 of the Investment Company Act, and cash items) on an unconsolidated basis.
Rule 3a-1 under the Investment Company Act generally provides that notwithstanding the Section 3(a)(1)(C) a company will not be deemed to be an “investment company” for purposes of the Investment Company Act if no more than 45% of the value of its assets (exclusive of U.S. government securities, shares of registered money market funds that comply with Rule 2a-7 of the 1940 Act, and cash items) consists of, and no more than 45% of its net income after taxes (for the past four fiscal quarters combined) is derived from, securities other than U.S. government securities, shares of registered money market funds under Rule 2a-7 of the Investment Company Act, securities issued by employees’ securities companies, securities issued by qualifying majority owned subsidiaries of such entity and securities issued by qualifying companies that are controlled primarily by such entity. We do not believe that we are an “investment company” as such term is defined in either Section 3(a)(1)(A) or Section 3(a)(1)(C) of the Investment Company Act.
We believe we satisfy the elements of Rule 3a-1 and therefore are deemed not to be an investment company under, and we intend to conduct our operations such that we will not be deemed an investment company under, Section 3(a)(1)(C). We believe that we are not an investment company pursuant to Rule 3a-1 under the 1940 Act because, on a consolidated basis with respect to wholly-owned subsidiaries but otherwise on an unconsolidated basis, no more than 45% of the value of the Company’s total assets (exclusive of U.S. government securities, shares of registered money market funds that comply with Rule 2a-7 of the 1940 Act, and cash items) consists of, and no more than 45% of the Company’s net income after taxes (for the last four fiscal quarters combined) is derived from, securities other than U.S. government securities, shares of registered money market funds under Rule 2a-7 of the 1940 Act, securities issued by employees’ securities companies, securities issued by qualifying majority owned subsidiaries of the Company and securities issued by qualifying companies that are controlled primarily by the Company.
However, if we were to be deemed an investment company, restrictions imposed by the 1940 Act, including limitations on our capital structure and our ability to transact with affiliates, could make it impractical for us to continue our business as contemplated and could adversely affect our business, results of operations and financial condition. In addition, if we were to become inadvertently subject to the 1940 Act, any violation of the 1940 Act could subject us to material adverse consequences, including potentially significant regulatory penalties.
Solo Brands, Inc. is significantly influenced by the Original LLC Owners, whose interests may differ from those of our public stockholders.
The Original LLC Owners control a significant amount of the voting power of our common stock. The Original LLC Owners have the ability to significantly influence us through their ownership position over corporate management and affairs, and significantly influence or potentially control many matters requiring stockholder approval. The Original LLC Owners are able to, subject to applicable law, and the voting arrangements described in our stockholders agreement, elect a majority of the members of our board of directors and control actions to be taken by us and our board of directors, including amendments to our certificate of incorporation and bylaws and approval of significant corporate transactions, including mergers and sales of substantially all of our assets. The directors so elected will have the authority, subject to the terms of our indebtedness and applicable rules and regulations, to issue additional stock, implement stock repurchase programs, declare dividends and make other decisions. It is possible that the interests of the Original LLC Owners may in some circumstances conflict with our interests and the interests of our other stockholders, including you. For example, the Prior Continuing LLC Owners may have different tax positions from us, especially in light of the Tax Receivable Agreement that could influence our decisions regarding whether and when to dispose of assets, whether and when to incur new or refinance existing indebtedness, and whether and when Solo Brands, Inc. should the Tax Receivable Agreement and accelerate its obligations thereunder. In addition, the determination of future tax reporting positions and the structuring of future transactions may take into consideration the Prior Continuing LLC Owners’ tax or other considerations, which may differ from the considerations of us or our other stockholders.
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Risks Related to Ownership of our Class A Common Stock
The price of our Class A common stock has fluctuated and will likely continue to fluctuate and you may not be able to sell the shares you purchase at or above your purchase price.
The market price of our Class A common stock has fluctuated significantly and is highly volatile and may continue to fluctuate substantially due to many factors, including:
• our ability to continue as a going concern;
• our ability to satisfy the covenants under our Amended Credit Agreement;
• the execution of liquidity, cost-saving and restructuring initiatives;
• the volume and timing of sales of our products;
• the introduction of new products or product enhancements by us or our competitors;
• disputes or other developments with respect to our or others’ intellectual property rights;
• our ability to develop, obtain regulatory clearance or approval for, and market new and enhanced products on a timely basis;
• product liability claims or other litigation;
• quarterly variations in our growth, profitability or results of operations, or those of our competitors;
• media exposure of our products or our competitors;
• announcement or expectation of additional equity or debt financing efforts;
• additions or departures of key personnel;
• issuance of new or updated research or reports by securities analysts;
• failure to meet or exceed financial estimates and projections of the investment community or that we provide to the public;
• changes in governmental regulations or in reimbursement;
• changes in earnings estimates or recommendations by securities analysts; and
• general market conditions and other factors, including factors unrelated to our operating performance or the operating performance of our competitors.
In recent years, the stock markets generally have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry factors may significantly affect the market price of our Class A common stock, regardless of our actual operating performance.
In addition, in the past, class action litigation has often been instituted against companies whose securities have experienced periods of volatility in market price. Securities litigation brought against us following volatility in our stock price, regardless of the merit or ultimate results of such litigation, could result in substantial costs, which would hurt our financial condition and operating results and divert management’s attention and resources from our business.
If we fail to maintain compliance with NYSE listing requirements, our Class A common stock could be delisted, which would adversely affect our stock price, liquidity, and ability to raise capital.
Our Class A common stock is listed on the NYSE. If we fail to satisfy NYSE’s continued listing standards, in particular the minimum market capitalization and minimum bid price requirements, NYSE may initiate delisting proceedings.
In April 2025, NYSE commenced delisting proceedings due to our Class A common stock trading at an average per share closing price below $1.00 over 30 consecutive trading days and subsequently determined we were non-compliant with market capitalization requirements. In July 2025, we effected a 1-for-40 reverse stock split to regain compliance, and NYSE reinstated trading in our Class A common stock on July 18, 2025. However, we cannot assure you that we will maintain compliance with NYSE listing standards. The market price increase from the reverse stock split has not been sustained, and if our stock price falls below the minimum bid price, NYSE rules restrict us from implementing another reverse stock split for one year from the July 2025 effective date. In addition, failure to comply with the market capitalization requirement could lead to immediate delisting. Accordingly, we may be unable to remediate any future non-compliance, and our Class A common stock could be delisted.
The reverse stock split reduced the total number of outstanding shares of Class A common stock, which leads to reduced trading volumes for our Class A common stock and may lead to a more volatile trading price. The reverse stock split also increased the number of stockholders who own “odd lots” of less than 100 shares of Class A common stock. A purchase or sale of less than 100 shares of common stock (an “odd lot” transaction) may result in incrementally higher trading costs through certain brokers, particularly “full service” brokers. Therefore, those stockholders who own fewer than 100 shares of Class A common stock following the reverse stock split may be required to pay higher transaction costs if they sell their Class A common stock.
Any suspension and delisting procedures taken by the NYSE, any future failure to remain in compliance with the NYSE’s continued listing standards, and any subsequent failure to timely resume compliance with the NYSE’s continued listing standards within the applicable cure period, if any, could have adverse consequences, including, among others, reducing the number of investors willing to hold or acquire our common stock, reducing the liquidity and market price of our Class A common stock, adverse publicity, and a reduced interest in us from investors, analysts and other market participants. In addition, a suspension or delisting could impair our ability to raise additional capital through the public markets, result in negative publicity, adversely affect the market liquidity of our securities, decrease securities analysts’ coverage of us, diminish investor, supplier and employee confidence and our ability to attract and retain employees by means of equity compensation.
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Sales of a substantial number of shares of our Class A common stock in the public market could cause our stock price to fall.
Sales of a substantial number of shares of our Class A common stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our Class A common stock. In addition, shares of Class A common stock that are either subject to outstanding options or reserved for future issuance under our employee benefit plans will become eligible for sale in the public market to the extent permitted by the provisions of various vesting schedules, Rule 144 and Rule 701 under the Securities Act of 1933, as amended (“Securities Act”).
As of March 16, 2026, 2,562,567 shares of Class A common stock were issued and outstanding and an additional 184,283 shares had the potential to vest in the future. As of March 16, 2026, we have an aggregate of 472,437,433 shares of Class A common stock authorized but unissued.
In June 2025, we entered into a subscription agreement with certain lenders in connection with our entry into the 2025 Refinancing Amendment, pursuant to which we issued an aggregate of 121,998 shares of our Class A common stock (giving effect to the reverse stock split). Even though these shares are “restricted securities” within the meaning of Rule 144 and may be resold only pursuant to an effective registration statement or pursuant to the requirements of Rule 144 or other applicable exemption from registration under the Securities Act and as required under applicable state securities laws, once those requirements are satisfied, these shares could be sold in the market at any time. If these additional shares of Class A common stock are resold, or if it is perceived that they will be resold, the trading price of our Class A common stock could decline.
We have entered into the Registration Rights Agreement with the Original LLC Owners, certain of our other stockholders and Holdings pursuant to which certain shares of Class A common stock held by the Prior Continuing LLC Owners and the shares of Class A common stock issued to the Former LLC Owners in connection with the Reorganization Transactions are eligible for resale, subject to certain limitations set forth therein.
In addition, any shares of Class A common stock that we issue under the Solo Brands, Inc. 2021 Incentive Award Plan (the “2021 Incentive Plan”), the Solo Brands, Inc. 2021 Employee Stock Purchase Plan (the “2021 ESPP”) or other equity incentive plans that we may adopt in the future would dilute the percentage ownership held by holders of our Class A common stock.
The issuance of these shares of Class A common stock have diluted, and any shares of Class A common stock we may in the future issue may dilute, the percentage ownership held by holders of our Class A common stock.
Taking advantage of the reduced disclosure requirements applicable to “emerging growth companies” and “smaller reporting companies” may make our Class A common stock less attractive to investors.
The JOBS Act provides that, so long as a company qualifies as an “emerging growth company,” it will, among other things:
• be exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that its independent registered public accounting firm provide an attestation report on the effectiveness of its internal control over financial reporting;
• be exempt from the “say on pay”, “pay versus performance” and “say on golden parachute” advisory vote requirements of the Dodd-Frank Wall Street Reform and Customer Protection Act, or the Dodd-Frank Act; and
• be exempt from certain disclosure requirements of the Dodd-Frank Act relating to compensation of its executive officers and be permitted to omit the detailed compensation discussion and analysis from proxy statements and reports filed under the Exchange Act.
Similar exceptions apply for “smaller reporting companies.” For as long as we continue to be an emerging growth company or a smaller reporting company, we may choose to take advantage of certain exemptions from various reporting requirements, as well as the cost savings as a result of such exemptions, which are applicable to other public companies that do not qualify as an emerging growth company or a smaller reporting company. We may remain an “emerging growth company” until as late as December 31, 2026, the fiscal year-end following the fifth anniversary of the completion of our initial public offering, though we may cease to be an “emerging growth company” earlier under certain circumstances, including if we issue more than $1.0 billion of non-convertible debt over a three-year period. Additionally, even after we no longer qualify as an emerging growth company, we may still qualify as a smaller reporting company if the market value of our common stock held by non-affiliates is below $250 million (or $700 million if our annual revenue is less than $100 million) as of the last business day of our second fiscal quarter in any given year, which would allow us to continue taking advantage of certain of these exemptions.
We cannot predict if investors will find our Class A common stock less attractive if we continue to rely on these exemptions, or if taking advantage of these exemptions would result in less active trading or more volatility in the price of our Class A common stock. Also, as a result of our intention to take advantage of some or all of the reduced regulatory and reporting requirements that are available to us as long as we qualify as an “emerging growth company” or as a “smaller reporting company” our financial statements may not be comparable to those of companies that fully comply with regulatory and reporting requirements upon the public company effective dates.
Our amended and restated certificate of incorporation contains provisions renouncing our interest and expectation to participate in certain corporate opportunities identified or presented to certain of our Original LLC Owners.
Certain of the Original LLC Owners are in the business of making or advising on investments in companies and these Original LLC owners may hold, and may, from time to time in the future, acquire interests in or provide advice to businesses that directly or indirectly compete with certain portions of our business or the business of our suppliers. Our amended and restated certificate of incorporation provides that, to the fullest extent
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permitted by law, none of the Original LLC Owners or any director who is not employed by us or his or her affiliates has any duty to refrain from engaging in a corporate opportunity in the same or similar lines of business as us. The Original LLC Owners may also pursue acquisitions that may be complementary to our business, and, as a result, those acquisition opportunities may not be available to us. As a result, these arrangements could adversely affect our business, results of operations, financial condition or prospects if attractive business opportunities are allocated to any of the Original LLC Owners instead of to us.
We may issue shares of preferred stock in the future, which could make it difficult for another company to acquire us or could otherwise adversely affect holders of our Class A common stock, which could depress the price of our Class A common stock.
Our amended and restated certificate of incorporation authorizes us to issue one or more series of preferred stock. Our board of directors has the authority to determine the preferences, limitations and relative rights of the shares of preferred stock and to fix the number of shares constituting any series and the designation of such series, without any further vote or action by our stockholders. Our preferred stock could be issued with voting, liquidation, dividend and other rights superior to the rights of our Class A common stock. The potential issuance of preferred stock may delay or prevent a change in control of us, discourage bids for our Class A common stock at a premium to the market price, and materially and adversely affect the market price and the voting and other rights of the holders of our Class A common stock.
Anti-takeover provisions in our governing documents and under Delaware law could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove our current management and depress the market price of our common stock.
Our amended and restated certificate of incorporation, amended and restated bylaws and Delaware law contain provisions that could have the effect of rendering more difficult, delaying or preventing an acquisition deemed undesirable by our board of directors. Among others, our amended and restated certificate of incorporation and amended and restated bylaws include the following provisions:
• authorizes the issuance of “blank check” preferred stock that could be issued by our board of directors to increase the number of outstanding shares and thwart a takeover attempt;
• a classified board of directors so that not all members of our board of directors are elected at one time;
• the removal of directors only for cause;
• prohibits the use of cumulative voting for the election of directors;
• limits the ability of stockholders to call special meetings or amend our bylaws;
• requires all stockholder actions to be taken at a meeting of our stockholders; and
• advance notice and duration of ownership requirements for nominations for election to the board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings.
These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management. As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation Law (“the DGCL”), which prevents interested stockholders, such as certain stockholders holding more than 15% of our outstanding common stock from engaging in certain business combinations unless (i) prior to the time such stockholder became an interested stockholder, the board approved the transaction that resulted in such stockholder becoming an interested stockholder, (ii) upon consummation of the transaction that resulted in such stockholder becoming an interested stockholder, the interested stockholder owned 85% of the common stock or (iii) following board approval, the business combination receives the approval of the holders of at least two-thirds of our outstanding common stock not held by such interested stockholder. Because we have “opted out” of Section 203 of the DGCL in our amended and restated certificate of incorporation, the statute will not apply to business combinations involving us.
Any provision of our amended and restated certificate of incorporation, amended and restated bylaws or Delaware law that has the effect of delaying, preventing or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock and could also affect the price that some investors are willing to pay for our common stock.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Our amended and restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the exclusive forum for the following types of actions or proceedings under Delaware statutory or common law:
• any derivative action or proceeding brought on our behalf;
• any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees, or stockholders to us or our stockholders;
• any action asserting a claim arising pursuant to any provision of the DGCL or our amended and restated certificate of incorporation and bylaws; and
• any action asserting a claim governed by the internal affairs doctrine.
Furthermore, our amended and restated certificate of incorporation also provides that unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. However, these provisions would not apply to suits brought to enforce a duty or liability created by the Exchange
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Act or any other claim for which the federal courts have exclusive jurisdiction. In addition, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. To the extent the exclusive forum provision restricts the courts in which claims arising under the Securities Act may be brought, there is uncertainty as to whether a court would enforce such a provision. We note that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder.
Any person purchasing or otherwise acquiring or holding any interest in shares of our capital stock is deemed to have received notice of and consented to the foregoing provisions. These choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds more favorable for disputes with us or with our directors, officers, other employees or agents, or our other stockholders, which may discourage such lawsuits against us and such other persons, or may result in additional expense to a stockholder seeking to bring a claim against us. Alternatively, if a court were to find this choice of forum provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, results of operations and financial condition.
General Risk Factors
We may become involved in legal or regulatory proceedings and audits.
Our business requires compliance with many laws and regulations, including labor and employment, sales and other taxes, customs, data privacy, data security, and consumer protection laws and ordinances that regulate retailers generally and/or govern the importation, promotion, and sale of merchandise, and the operation of e-commerce and warehouse facilities. Failure to comply with these laws and regulations could subject us to lawsuits and other proceedings, and could also lead to damage awards, fines, and penalties. We have in the past and may become in the future involved in a number of legal proceedings and audits, including government and agency investigations, and consumer, employment, tort, and other litigation. The outcome of some of these legal proceedings, audits, and other contingencies could require us to take, or refrain from taking, actions that could harm our operations or require us to pay substantial amounts of money, harming our financial condition and results of operations. Additionally, we may pursue legal action of our own to protect our business interests. Prosecuting or these lawsuits and proceedings may be necessary, which could result in substantial costs and of management’s attention and resources, our business, financial condition, and results of operations. Any pending or future legal or regulatory proceedings and audits could our business, financial condition, and results of operations.
Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.
We are subject to the periodic reporting requirements of the Exchange Act. We are designing our disclosure controls and procedures to provide reasonable assurance that information we must disclose in reports we file or submit under the Exchange Act is accumulated and communicated to management, recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC. Disclosure controls and procedures, no matter how well-conceived and operated, can provide reasonable, but not absolute, assurance that the objectives of the control system are met.
These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by individuals or groups of persons or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements in our public reports due to error or fraud may occur and not be detected.
Our business is subject to the risk of earthquakes, fire, power outages, floods, and other catastrophic events, and to interruption by problems such as terrorism, cyberattacks, or failure of key information technology systems.
Our business is vulnerable to damage or interruption from earthquakes, fires, floods, power losses, telecommunications failures, terrorist attacks, acts of war, human errors, criminal acts, public health crises and pandemics, and similar events. Our corporate offices and primary distribution center are located in Texas, a state that frequently experiences floods and storms. In addition, the facilities of our suppliers and where our manufacturers produce our products are located in parts of Asia that frequently experience typhoons and earthquakes. Acts of terrorism and public health crises (or other future pandemics or epidemics) could also cause disruptions in our or our suppliers’, manufacturers’, and logistics providers’ businesses or the economy as a whole. We may not have sufficient protection or recovery plans in some circumstances, such as natural disasters affecting Texas or other locations where we have operations or store significant inventory.
Our ESG and sustainability initiatives and the adoption of ESG regulatory frameworks may impose additional costs and expose us to emerging areas of risk.
Companies across all industries are facing increasing scrutiny from stakeholders related to their ESG and sustainability practices. Investor advocacy groups, certain institutional investors, investment funds and other influential investors are also increasingly focused on ESG practices.
We have adopted certain practices and policies to align our ESG and sustainability approach with our business strategy. However, our stakeholders may look to us to implement more or different ESG procedures, standards or goals in order to continue engaging with us, to remain invested in us, or before they make further investments in us. Stakeholders may also require us to retract or reverse any ESG procedures. If we do not meet, or are
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perceived not to meet, our stakeholders’ expectations or we are not effective in addressing social and environmental responsibility matters or achieving relevant sustainability goals, or choose to modify or terminate certain sustainability goals or other ESG practices, trust in our brand may suffer and our business and/or our ability to access capital could be harmed. Moreover, both advocates and opponents to certain ESG matters, are increasingly resorting to a range of activism forms, including media campaigns and litigation, to advance their perspectives. To the extent we are subject to such activism, it may require us to incur costs or otherwise adversely impact our business.
Further, there is an increased focus, and changing expectations, by governmental and nongovernmental organizations on climate change matters, including increased pressure to expand disclosures related to the physical and transition risks related to climate change or to establish sustainability goals, such as the reduction of greenhouse gas emissions, which could expose us to market, operational and execution costs or risks. Our failure to establish, or decision to modify or terminate sustainability targets or targets that are perceived to be appropriate, as well as to achieve progress on those targets on a timely basis, or at all, could adversely affect the reputation of our brands and sales of and demand for our products. If we are required to comply in whole or in part with new climate change rules such as SB 253 and SB 261 in California, or with additional legislation that has already been or may be passed, we may incur significant additional costs of compliance due to the need for expanded data collection, analysis, and certification with respect to greenhouse gas emissions and other climate change related risks. We may also incur additional costs or require additional resources to monitor, report and comply with such stakeholder expectations and standards and legislation, and to meet climate change targets and commitments if established. In addition, the European Union Corporate Sustainability Reporting Directive (“CSRD”) became in 2023. CSRD applies to both EU and non-EU in-scope entities and would require them to provide expansive disclosures on various sustainability and ESG topics. We are assessing our obligations under CSRD which will become in 2027, in a phased approach given the European Parliament’s approval of the Omnibus package on December 16, 2025 within the EU Competitiveness Compass, for U.S. companies with subsidiaries in the EU that meet certain criteria and expect that compliance could require substantial effort in the future. These requirements may not always be uniform across jurisdictions, and we will likely need to be prepared to with overlapping, yet distinct, climate-related disclosure requirements. Additionally, many of our customers, business partners, and suppliers may be subject to similar expectations, which may augment or create additional risks, including risks that may not be known to us.
The occurrence of any of the foregoing could have a material adverse effect on our business and financial condition and expose us to market, operational and execution costs or risks.
