Item 1A. Risk Factors.
Investing in our common stock involves a high degree of risk. Before deciding whether to purchase shares of our common stock, you should consider carefully the risks and uncertainties described below, our consolidated financial statements and related notes, and all of the other information in this Annual Report on Form 10-K. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that affect our business. These risk factors could materially and adversely affect our business, financial condition and results of operations, and the market price of our common stock could decline. These risk factors do not identify all risks that we face – our operations could also be affected by factors that are not presently known to us or that we currently consider to be immaterial to our operations. Due to risks and uncertainties, known and unknown, our past financial results may not be a reliable indicator of future performance and historical trends should not be used to anticipate results or trends in future periods.
The risks and uncertainties described therein and below could materially adversely affect our business, operating results and financial condition, as well as cause the value of our securities to decline. You may lose all or part of your investment as a result. You should also refer to the other information contained in this Annual Report on Form 10-K, including our financial statements and the notes to those statements, and the information set forth under the caption “Special Note Regarding Forward-Looking Statements.” Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks mentioned below. Forward-looking statements included in this Annual report on Form 10-K are based on information available to us on the date hereof. We disclaim any intent to update any forward-looking statements. The risks described are not the only ones that we face. Additional risks not presently known to us or that we currently deem immaterial may also adversely affect our business operations.
RISK FACTORS SUMMARY
Below is a summary of the principal risks we face, organized under relevant headings.
Risks Related to the US Salt Acquisition, Backstop Agreements, and Financings
We and US Salt may incur significant cost, time, effort and attention on integration and the development of necessary support. These may hinder our ability to realize the expected benefits of the US Salt Acquisition.
As owner of US Salt, we operate a substantially larger entity in an industry and locations in which we did not previously operate, subject to additional regulations, risks and uncertainties that we have not previously faced. These could exceed our expectations and have a negative impact on our financial condition and results of operations.
The market price of ContextLogic common stock after the US Salt Acquisition may be affected by factors different from those affecting our shares prior to the US Salt Acquisition.
The US Salt Acquisition may not be accretive to earnings and if not accretive, may cause dilution to our earnings per share.
Our acquisition of US Salt may expose us to unknown or contingent liabilities for which we will not be adequately indemnified.
The proposed Financings in connection with the US Salt Acquisition and future debt financing arrangements that we or our subsidiaries may enter into otherwise, may contain various covenants that limit our ability to take certain actions and also require us to meet financial maintenance tests. Failure to comply with these limits could have a material adverse effect on our operations, business and financial results.
Impairment of US Salt’s intangible assets could result in significant charges that could adversely impact our future operating results.
We may invest or spend the proceeds in this Rights Offering in our discretion, which may include ways with which holders may not agree and in ways that may not earn a profit.
Risks Related to Our Business
If we are deemed to be an investment company, our results of operations could be harmed.
We continue to incur the expense of complying with public company reporting requirements.
We have been, and may in the future be, involved in litigation matters or other legal proceedings that are expensive and time consuming.
We depend upon our subsidiary, ContextLogic Holdings, LLC, for our cash flows and we may not have sufficient cash flows or cash on hand to satisfy our obligations.
Our subsidiary, Holdings, is subject to certain restrictions under A&R LLCA, which could affect our ability to execute our operational and strategic objectives.
The holders of the Preferred Units have rights, preferences and privileges in Holdings that are not held by, and are preferential to, the rights of the Company. Holdings may be required, under certain circumstances, to repurchase the outstanding Preferred Units for cash.
We have counterparty risk with the Buyer for certain ongoing obligations under the Asset Purchase Agreement and failure of Buyer and its affiliates to perform their obligations could result in losses.
Risks Related to our NOLs and Other Tax Attributes
We may not obtain the expected benefits of the Reorganization.
The imposition of transfer restrictions may cause the market price of our common stock to decline.
The transfer restrictions may not be enforceable, and an ownership change may occur with the result that the ability to use the tax attributes could be severely limited.
Future legislation may result in being unable to realize the benefits of the Company’s tax attributes.
We may not be able to make use of the existing tax benefits of the NOLs without taxable income.
The Internal Revenue Service ("IRS") could challenge the amount of the NOLs or claim that we experienced an ownership change, which could reduce the amount of NOLs that we can use.
We may not be able to utilize a significant portion of our net operating loss carryforwards, and other tax attributes, which could adversely affect the value of our common stock.
An “ownership change” could limit the use of our NOLs and potential to derive a benefit them.
Risks Related to our Business Plan, Future Operations and Internal Controls
We may face difficulties or delays or be unsuccessful in a search to acquire additional operating businesses or assets, and we may expend significant time and capital on a prospective business or asset acquisition that is not ultimately consummated.
Our business could suffer if we are unsuccessful in making, integrating, and maintaining any future acquisitions and investments.
The success of our business will depend, in part, on the continued services of certain key personnel and our ability to attract and retain qualified personnel.
Our officers and directors, including our President, will allocate their time to other businesses, thereby causing potential conflicts of interest as to how much time to devote to our affairs.
Certain of our officers and directors are now, and may in the future become, affiliated with entities engaged in business activities similar to ours, and, accordingly, may have conflicts of interest in determining to which entity a particular business opportunity should be presented.
Certain of our officers and directors presently have, and any of them in the future may have, additional, fiduciary or contractual obligations to other entities, which may cause conflicts of interest in determining whether to present opportunities to us or to such other entities.
We have previously identified material weaknesses in our internal control over financial reporting and may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, which may result in material misstatements of our consolidated financial statements or cause us to fail to meet our periodic reporting obligations.
Risks Related to Our Common Stock
Because ContextLogic common stock is traded on the OTC Markets, our stockholders' ability to sell their shares in the secondary trading market may be limited.
Our stockholders may not be afforded any opportunity to evaluate or approve an asset or business acquisition as we pursue strategic alternatives.
We are a smaller reporting company, and any decision on our part to comply only with reduced reporting and disclosure requirements could make our common stock less attractive to investors.
We do not intend to pay dividends on our capital stock, so any returns will be limited to increases in the value of ContextLogic common stock.
We do not expect to pay any cash dividends to the holders of ContextLogic common stock in the foreseeable future and the availability and timing of future cash dividends, if any, is uncertain.
The price of ContextLogic common stock has been and continues to be volatile. Declines in the price of ContextLogic common stock have resulted in and could subject us to future litigation.
RISK FACTORS
Risks Related to the US Salt Acquisition, Backstop Agreements, and Financings
We and US Salt may incur significant cost, time, effort and attention on integration and the development of necessary support. These may hinder our ability to realize the expected benefits of the US Salt Acquisition.
We are a company that has recently exited the operation of our e-commerce business and other historical operations due to the Asset Sale. Accordingly, US Salt represents a significantly larger operating business than the Company. US Salt maintains its own sales, marketing, product development, manufacturing and other administrative teams, legal, purchasing, information technology (“IT”), tax and certain other financial and operating services such as human resources (“HR”), insurance and treasury.
While we intend to operate US Salt predominantly as a stand-alone business with substantially the same organizational structure, operations, management team, employees and locations as are presently used in US Salt, the success of the US Salt Acquisition will substantially depend on our ability to incorporate US Salt into the Company and support its business needs, as well as to effectively manage this significantly larger business. Such challenges include (i) the integration of US Salt into our accounting reporting system and functions, (ii) the development, adaptation and maintenance of the operating and administrative support systems historically provided by US Salt on which US Salt has relied, including legal, purchasing, IT, tax, HR, insurance and treasury, and (iii) the ability of US Salt and management to adapt to our policies, procedures and support systems.
Incorporation of, and development of the necessary support for, US Salt could be a lengthy process, requiring substantial expenditures by the Company, as well as significant time, effort and attention from the management teams and key employees of both the Company and US Salt. Such demands could divert needed resources from both businesses. Further, these challenges could result in the loss of key employees, disruption of the ongoing businesses and relationships with customers, suppliers and other third parties, diversion of management and corporate attention to integration issues, tax costs and inefficiencies, and inconsistencies in standards, controls, IT systems, accounting systems, procedures, policies, Sarbanes-Oxley controls and other administrative systems. If any of these factors limit our ability to integrate US Salt successfully or on a timely basis, we may not achieve the strategic, operational, financial and other benefits anticipated to result from the US Salt Acquisition to the fullest extent, on a timely basis or at all.
As owner of US Salt, we operate a substantially larger entity in an industry and locations in which we did not previously operate, subject to additional regulations, risks and uncertainties that we have not previously faced. These could exceed our expectations and have a negative impact on our financial condition and results of operations.
Following the consummation of the US Salt Acquisition on February 26, 2026, the size of the Company and our primary operating segment has changed substantially compared with our previous operations. As a result, any risk or uncertainty that is significant to US Salt, including those discussed below under “Risks Related to US Salt,” is also significant to us and can have a negative effect on our financial condition and results of operations.
If US Salt is unable to maintain compliance with U.S. federal, state and non-U.S. regulatory requirements, we could incur substantial costs, including fines, civil penalties and criminal sanctions, or costs associated with upgrades to improve facilities or changes in manufacturing processes in order to achieve and maintain regulatory compliance. While we intend to operate US Salt largely as a stand-alone business, our results of operations, financial condition and stock price will largely depend on how US Salt can handle its business risks and uncertainties. These risks and uncertainties may exceed our expectations, and it may take time for us to mitigate them.
The market price of ContextLogic common stock after the US Salt Acquisition may be affected by factors different from those affecting our shares prior to the US Salt Acquisition.
Our previous business differs significantly from US Salt in several ways, including size, industry, geographic area, and applicable regulations. As a result, with the consummation of the US Salt transaction, the results of operations of the combined company and the market price of shares of ContextLogic common stock may be affected by factors different from those previously affecting our independent results of operations.
The US Salt Acquisition may not be accretive to earnings and if not accretive, may cause dilution to our earnings per share.
We currently anticipate that the US Salt Acquisition will be accretive to our adjusted earnings per share in the first complete fiscal year following its consummation. This expectation is based on our preliminary estimates, which may change materially. We may encounter additional or unforeseen transaction and integration-related costs, or we may fail to realize all of the anticipated benefits of the US Salt Acquisition. Any of these factors could cause a decrease in our adjusted earnings per share or decrease or delay the expected accretive effect of the US Salt Acquisition and contribute to a decrease in the price of ContextLogic common stock.
Our acquisition of US Salt may expose us to unknown or contingent liabilities for which we will not be adequately indemnified.
The entities that we acquired in the US Salt Acquisition may have unknown or contingent liabilities, including liabilities for failure to comply with environmental and other laws and regulations, and for litigation or other claims. The Purchase Agreement does not include indemnification provisions and, generally, US Salt will not be obligated to indemnify us. Based on these provisions we may incur material liabilities for the past activities of US Salt. Such liabilities and related legal or other costs and/or resulting reputational damage could negatively impact our business, financial condition and results of operations.
The proposed Financings in connection with the US Salt Acquisition and future debt financing arrangements that we or our subsidiaries may enter into otherwise, may contain various covenants that limit our ability to take certain actions and also require us to meet financial maintenance tests. Failure to comply with these limits could have a material adverse effect on our operations, business and financial results.
US Salt has additional borrowing capacity under the Financings to finance a portion of the US Salt Acquisition. Interest costs related to this indebtedness will be substantial. The facilities pursuant to the Financings and the instruments governing our other future indebtedness contain, or will contain, certain customary restrictions, covenants, provisions for mandatory repayment upon the occurrence of certain events, and provisions for events of default that will require us or US Salt to satisfy certain financial tests and maintain certain financial ratios, restrict our or US Salt’s ability to engage in specified types of transactions, and otherwise limit the distributions of funds from US Salt to us. This overall leverage and the terms of our financing arrangements could:
limit the ability to pay dividends;
make it more difficult to satisfy obligations under the terms of this indebtedness;
limit the ability to refinance this indebtedness on terms acceptable to US Salt or us, or at all;
limit the flexibility to plan for and adjust to changing business and market conditions in the industries in which we or US Salt operate and increase the vulnerability to general adverse economic and industry conditions;
require the dedication of a substantial portion of cash flow to make interest and principal payments on such debt, thereby limiting the availability of cash flow to distribute to us or to fund future acquisitions, working capital, business activities, and other general corporate requirements;
restrict sales of key assets;
limit the ability to substantially change our business or enter into new lines of business;
limit the ability to obtain additional financing for working capital, to fund growth or acquisitions or for general corporate purposes, even when necessary to maintain adequate liquidity, particularly if any ratings assigned to our debt securities by rating organizations were revised downward; or
subject us to higher levels of indebtedness than our competitors, which may cause a competitive disadvantage and may reduce our flexibility in responding to increased competition.
In addition, the restrictive covenants pertaining to the Facilities and certain other indebtedness would or could require us to maintain specified financial ratios and satisfy other financial conditions and tests. Our ability to meet those financial
ratios, conditions and tests will depend on our ongoing financial and operating performance, which, in turn, will be subject to economic conditions and to financial, market, and competitive factors, many of which are beyond our control. A breach of any of these covenants could result in a default under the instruments governing our indebtedness.
With respect to the US Salt Acquisition, challenges with integration, the industry, operations and other business, market and acquisition-related risks, as well as various uncertainties and events beyond our control, could affect our ability to comply with such restrictions and covenants. Failure to comply with any of the restrictions and covenants in our existing or future financing arrangements could result in a default under those arrangements and under other arrangements containing cross-default provisions.
Upon the occurrence of an event of default under any such financing arrangement, the relevant lenders could assess increased interest rates, accelerate the maturity of the debt or foreclose upon any collateral securing the debt. In this event, we may lack sufficient funds or other resources to satisfy all of our obligations. In addition, any limitations imposed by financing agreements on our ability to incur additional debt or to take other actions could significantly impair our ability to obtain other financing.
Impairment of US Salt’s intangible assets could result in significant charges that could adversely impact our future operating results.
US Salt is expected to have significant intangible assets, including goodwill, which are susceptible to impairment charges as a result of changes in various factors or conditions. We will assess the potential impairment of goodwill and indefinite-lived intangible assets on an annual basis, as well as whenever events or changes in circumstances indicate that the carrying value may exceed fair value. We will assess finite-lived intangible assets whenever events or changes in circumstances indicate that the carrying value may exceed fair value. Adverse changes in the operations of our businesses or other unforeseeable factors could result in an impairment charge in future periods that could adversely impact our results of operations and financial position in that period.
We may invest or spend the proceeds in this Rights Offering in our discretion, which may include ways with which holders may not agree and in ways that may not earn a profit.
We used the net proceeds from the Rights Offering and the other Financings to pay expenses incurred in connection with the US Salt Acquisition and to pay the purchase price under the Purchase Agreement. However, we will retain discretion over the use of the net proceeds from the Rights Offering and amounts we raised in excess of the amount necessary to pay expenses incurred in connection with the US Salt Acquisition and to pay the purchase price under the Purchase Agreement. We may use such proceeds for financing future acquisition opportunities, working capital and capital expenditures. Stockholders may not agree with the ways we decide to use these proceeds, and our use of the proceeds may not yield any profits.
Risks Related to Our Business
If we are deemed to be an investment company under the ICA, our results of operations could be harmed.
Under Sections 3(a)(1)(A) and (C) of the Investment Company Act of 1940, as amended (the “ICA”), a company generally will be deemed to be an “investment company” for purposes of the ICA 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 and cash items) on an unconsolidated basis. By virtue of acquiring controlling interests in subsidiary operating companies (including US Salt), we expect to hold less than 40% of the value of our total assets (exclusive of U.S. government securities and cash items) in “investment securities”. However, if we were obligated to register as an “investment company,” we would have to comply with a variety of substantive requirements under the ICA that impose, among other things, limitations on capital structure, restrictions on specified investments, prohibitions on transactions with affiliates, and compliance with reporting, record keeping, voting, proxy disclosure and other rules and regulations that would increase our operating and compliance costs, could make it impractical for us to continue our business as contemplated, and would have an adverse effect on our results of operations.
We continue to incur the expense of complying with public company reporting requirements.
As a public company, we incur substantial legal, accounting, and other expenses to comply with the reporting requirements of the Exchange Act. For example, we are subject to the reporting requirements of the Exchange Act, the
applicable requirements of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules and regulations of the SEC.
In addition, as a public company, our management and other key personnel must divert attention from other business matters to devote substantial time to the reporting and other requirements of being a public company. In particular, we incur significant expense and devote substantial management effort to complying with the requirements of Section 404 of the Sarbanes-Oxley Act.
As a result of our obligations as a public company, we may be subject to threatened or actual litigation, including by stockholders and competitors. If such claims are successful, our business and operating results could be adversely affected, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and adversely affect our business and operating results.
We have been, and may in the future be, involved in litigation matters or other legal proceedings that are expensive and time consuming.
We have been, and may in the future be, involved in litigation matters, including class action lawsuits. Any lawsuit to which we are a party, with or without merit, may result in an unfavorable judgment. We also may decide to settle lawsuits on unfavorable terms. Any such negative outcome could result in payments of substantial damages or fines, damage to our reputation, loss of rights, or adverse changes to our offerings or business practices. Any of these results could adversely affect our business. In addition, defending claims is costly and can impose a significant burden on our management.
Additionally, the market price of ContextLogic common stock has been and may continue to be volatile. As a result, we have been named in lawsuits, and may be subject to both ongoing litigation and other requests related to our stock price/performance and/or performance and independence of our Board.
We are currently party to three putative class action lawsuits that were filed in the U.S. District Court for the Northern District of California against the Company, its directors, certain of its officers and the underwriters named in its initial public offering (“IPO”) registration statement alleging violations of securities laws based on statements made in its registration statement on Form S-1 filed with the SEC in connection with its IPO and seeking monetary damages and that have been coordinated and consolidated (the “IPO Case”). In May 2022, the Court appointed lead plaintiffs, who subsequently filed an amended consolidated class action complaint pursuant to Sections 11 and 15 of the Securities Act and Sections 10(b) and 20(a) of the Exchange Act and in April 2023, the plaintiffs filed a first amended consolidated class action complaint and asserted only claims made under Sections 11 and 15 of the Securities Act. The Court dismissed this complaint in December 2023 with leave to amend. In February 2024, the plaintiffs filed a second amended consolidated class action complaint, which Defendants have moved to dismiss. In August 2024, the Court granted the motion to dismiss without leave to amend and with prejudice. In September 2024, plaintiffs filed a motion to alter judgment noticed for hearing in January 2025. In February 2025, the court denied the plaintiffs' motion to alter judgment. In March 2025, plaintiffs filed a notice of appeal to the Ninth Circuit. In September 2025, plaintiffs filed their opening brief to the Ninth Circuit. The Company filed its answering brief with the Ninth Circuit in December 2025. In January 2026, plaintiffs filed their answering brief.
In addition, in August 2021, a shareholder derivative action purportedly brought on behalf of the Company, Patel v. Szulczewski, was filed in the U.S. federal court alleging that the Company’s directors and officers made or caused the Company to make false and/or misleading statements about the Company’s business operations and financial prospects in various public filings. This matter is stayed pending certain motion practice in the IPO Case.
We cannot predict the outcome of these cases at this time and we may continue to be the target of securities litigations, and/or may receive other civil and regulator inquiries and requests, in the future. Securities litigation or inquiries or investigations against us could result in substantial costs and divert our management’s attention from other business concerns, which could adversely affect our business, results of operation, and/or reputation.
We depend upon our subsidiary, ContextLogic Holdings, LLC, for our cash flows and we may not have sufficient cash flows or cash on hand to satisfy our obligations, or we may not be able to effectively manage our business.
In connection with the up to $150 million investment in our subsidiary, Holdings, in March 2025, we contributed $142 million to Holdings (the “Parent Cash Contribution”) in exchange for common units in Holdings and committed to contribute an aggregate additional $5 million, which was all contributed by August 2025. Following the Parent Cash Contribution, almost all of our cash is held by Holdings. Consequently, our cash flows and our ability to meet our obligations, including our expenses as a publicly traded company, depend upon the cash flows of Holdings and the payment of funds
by Holdings to us in the form of distributions or otherwise. Any failure to receive distributions from Holdings when needed could have a material adverse effect on our business, results of operations or financial condition.
Our subsidiary, Holdings, is subject to certain restrictions under A&R LLCA, which could affect our ability to execute our operational and strategic objectives.
Legal and contractual restrictions in the agreements governing Holdings, such as the A&R LLCA, as well as its financial condition and operating requirements, may limit the ability of Holdings to make distributions to the Company. Holdings is and will be a separate legal entity, and although it is controlled by us, it has no obligation to make any funds available to us, whether in the form of loans, distributions or otherwise, except as set forth in the A&R LLCA. The ability of Holdings to distribute cash to us will also be subject to, among other things, restrictions that are contained in the A&R LLCA, availability of sufficient funds and applicable state laws and regulatory restrictions. With certain exceptions, holders of Preferred Units have priority as to the distribution of cash and assets of Holdings over our claims. To the extent the ability of Holdings to make distributions or other payments to us could be limited in any way, this could materially limit our ability to fund and conduct our business or fund dividends, redemptions or repurchases.
The holders of the Preferred Units have rights, preferences and privileges in Holdings that are not held by, and are preferential to, the rights of the Company. Holdings may be required, under certain circumstances, to repurchase the outstanding Preferred Units for cash, and such obligations could adversely affect our liquidity and financial condition.
The holders of Preferred Units have certain approval rights relating to, among other things, the operation of Holdings, acquisitions and dispositions of assets, affiliate transactions, the incurrence of indebtedness and the issuance of securities or other instruments. These approval rights could limit Holdings’ ability to implement future strategic objectives. The preferential rights could also result in divergent interests between us as a holder of Common Units in Holdings and the holders of the Preferred Units.
Risks Related to our NOLs and Other Tax Attributes
We may not obtain the expected benefits of the Reorganization.
We believe our reorganization into a holding company structure will provide us with benefits in the future, however, these expected benefits may not be obtained if we fail to complete acquisitions or if market conditions or other circumstances prevent us from taking advantage of the strategic, business and financing flexibility that it affords us. In addition, the holding company structure may not keep the assets and liabilities of related subsidiaries and any new businesses we acquire legally separate. As a result, we may incur the costs of implementing the Reorganization without realizing the possible benefits. These costs include the increased administrative costs and expenses associated with keeping separate records, and in some cases making separate regulatory filings.
The transfer restrictions included in our Certificate of Incorporation may cause the market price of ContextLogic common stock to decline.
These shares of our ContextLogic common stock are subject to transfer restrictions. It is possible that the transfer restrictions will have an adverse effect on the liquidity and market price of ContextLogic common stock. The transfer restrictions will remain in effect until the earlier of (i) the repeal of Section 382 of the Tax Code or any successor statute if the Board determines that the transfer restrictions are no longer necessary or desirable for the preservation of the tax attributes; (ii) such date as the Board shall fix in its discretion; (iii) the beginning of a tax year of the Company which the Board determines that no attributes may be carried forward; or (iv) July 25, 2028, being the third anniversary of the filing and effectiveness of ContextLogic’s Second Amended and Restated Certificate of Incorporation.
The transfer restrictions may impede or discourage efforts by a third party to acquire us, even if doing so would benefit stockholders.
Although the transfer restrictions are designed as a protective measure to preserve the Company’s tax attributes, the transfer restrictions may have the effect of impeding or discouraging a merger, tender offer or proxy contest, even if such a transaction may be favorable to the interests of some or all of our stockholders. This effect might prevent stockholders from realizing an opportunity to sell all or a portion of their shares of ContextLogic common stock at a premium above market prices. In addition, the transfer restrictions may delay the assumption of control by a holder of a large block of ContextLogic common stock and the removal of incumbent directors and management, even if such removal may be beneficial to some or all of our stockholders.
The transfer restrictions may not be enforceable, and an ownership change may occur with the result that the ability to use the tax attributes could be severely limited.
The transfer restrictions could be challenged, and a court could refuse to enforce them. It is also possible that the IRS and other tax authorities could take the position that the transfer restrictions were not effective and did not protect the Company from an ownership change for tax purposes.
Future legislation may result in us being unable to realize the tax benefits of the Company’s tax attributes.
It is possible that legislation or regulations will be adopted that would limit our ability to use the tax benefits associated with the Company’s tax attributes.
We may not be able to make use of the existing tax benefits of the NOLs because we may not generate taxable income.
The use of the NOLs is subject to uncertainty because it is dependent upon the amount of taxable income and capital gains generated by us and our consolidated subsidiaries. There can be no assurance that we will have sufficient taxable income or capital gains in future years to use the NOLs.
The IRS could challenge the amount of the NOLs or claim that we experienced an ownership change including in connection with the US Salt Acquisition, which could reduce the amount of NOLs that we can use.
The amount of the NOLs has not been audited or otherwise validated by the IRS. The IRS could challenge the amount of the NOLs, which could result in an increase in our future income tax liability. In addition, calculating whether an ownership change has occurred is subject to uncertainty, both because of the complexity and ambiguity of Section 382 and because of limitations on a publicly traded company’s knowledge as to the ownership of, and transactions in, its securities. Therefore, we cannot assure our investors that a governmental authority will not claim that we experienced an ownership change and attempt to reduce or eliminate the benefit of the NOLs even though ContextLogic common stock is subject to the transfer restrictions. The Company has received from its tax advisor, Ernst & Young U.S. LLP ("EY"), an opinion concluding that during the period between January 01, 2018 and ended September 30, 2025, the Company should not have undergone an “ownership change” within the meaning of Section 382(g) of the Tax Code (the “Roll forward Opinion”). EY performed another opinion following the close of the transaction concluding that the Company should not have experienced an "ownership change" upon consummating the US Salt Acquisition.
We may not be able to utilize a significant portion of our net operating loss carryforwards, and other tax attributes, which could adversely affect the value of our common stock.
As of December 31, 2025, we had federal NOLs available to reduce future taxable income, if any, of $886 million that begin to expire in 2030 and continue to expire through 2037 and $2.1 billion that have an unlimited carryover period. As of December 31, 2025, we had state NOLs available to reduce future taxable income, if any, of $4.0 billion that begin to expire in 2026 and continue to expire through 2045 and $4.0 billion that have an unlimited carryover period. Under legislation enacted in 2017, informally titled the Tax Act, as modified by the CARES Act, unused U.S. federal NOLs generated in tax years beginning after December 31, 2017, will not expire and may be carried forward indefinitely, but the deductibility of such federal NOLs in tax years beginning after December 31, 2020, is limited to 80% of taxable income. Additionally, portions of these NOLs could expire unused and be unavailable to offset future income tax liabilities. In addition, at the state level, there may be periods during which the use of NOLs is suspended or otherwise limited. As a result, even if we acquire income producing assets and attain profitability in the future, we may be unable to use a material portion of our NOLs and other tax attributes, which could adversely affect our future cash flows and the value of our common stock.
An “ownership change” could limit the use of our NOLs and our potential to derive a benefit from our NOLs.
The utilization of NOLs and other tax attributes to offset future taxable income or taxes may be subject to limitations under Sections 382 and 383 of the Tax Code, and similar state statutes as a result of ownership changes that could occur in the future. While we have amended our Certificate of Incorporation to add transfer restrictions to ContextLogic common stock, there is no guarantee that we have not undergone an ownership change in the past or that such transfer restrictions will be enforceable and thus prevent us from experiencing an ownership change in the future which would limit our ability to use our NOLs.
In general, an “ownership change” would occur if there is a cumulative change in the ownership of our common stock of more than 50% by one or more “5% stockholders” during a three-year test period.
Risks Related to our Business Plan and Future Operations
We may face difficulties or delays or be unsuccessful in a search to acquire additional operating businesses or assets, and we may expend significant time and capital on a prospective business or asset acquisition that is not ultimately consummated.
Our Board is evaluating strategic alternatives for acquiring additional operating businesses or assets. The investigation of any specific target assets or a business and any subsequent negotiation and drafting of related agreements, SEC disclosure and other documents may require substantial amounts of management’s time and attention and material additional costs in connection with outsourced services from accountants, attorneys and other professionals. We would likely expend significant time and resources searching for, conducting due diligence on, and negotiating transaction terms in connection with a proposed asset or a business acquisition that may not ultimately come to fruition. Unanticipated issues which may be beyond our control or that of the seller of the applicable assets or business may arise that force us to terminate discussions with a target company, such as the target’s failure or inability to provide adequate documentation to assist in our investigation, a party’s failure to obtain required waivers or consents to consummate the transaction as required by the inability to obtain the required audits, applicable laws, charter documents and agreements, the appearance of a competitive bid from another prospective purchaser, or the seller’s inability to maintain its operations for a sufficient time to allow the transaction to close. Such risks are inherent in any search for new assets or a business and investors should be aware of them before investing in an enterprise such as ours and we can provide no assurance that we will be successful in our efforts to acquire assets or a revenue producing business.
We expect to face intense competition in our search for additional operating businesses or assets. Other parties, such as private equity and venture capital firms, larger companies, and other strategic investors, may have greater capital or human resources than we do and/or more experience in a particular industry within which we choose to search. These competitors may have a certain amount of liquid cash available to take advantage of favorable market conditions for a prospective asset or business purchase. Any delay or inability to locate, negotiate and enter into a transaction as a result of any disadvantages we have relative to those other potential purchasers could cause us to lose valuable business opportunities to those other potential purchasers, which would have a material adverse effect on our business plan and results of operations. Moreover, economic factors that are beyond our control, including inflation and higher interest rates and economic uncertainty, as well as geopolitical instability may hinder our ability to locate and obtain assets or a business on terms that are favorable to us.
In addition, we have limited capital, and we may not be able to take advantage of any available business opportunities on favorable terms or at all. There can be no assurance that we will have sufficient capital or be able to raise additional capital to provide us with the necessary funds to successfully acquire assets or a business we deem to be appropriate or necessary to accomplish our objectives, in which case we may be forced to terminate our efforts to acquire assets or a revenue producing business and our investors' investment in ContextLogic common stock could be materially and adversely impacted. In addition, any debt financing that we may secure in connection with an acquisition, could result in additional operating and financial covenants that would limit or restrict our ability to take certain actions. There is no guarantee that financing would be available to us in amounts or on terms acceptable to us, if at all.
We may attempt to complete an acquisition with a private target company about which little information is available, and such target entity may not generate revenue as expected or otherwise be compatible with us as expected.
In pursuing our search for additional operating businesses or assets, we may seek to complete an acquisition with a privately-held company or acquire assets from a privately-held company. Very little public information generally exists about private companies, and the only information available to us prior to making a decision may be from documents and information provided directly to us by the target company in connection with the transaction. Such documents or information or the conclusions we draw therefrom could prove to be inaccurate or misleading. As such, we may be required to make our decision on whether to pursue a potential asset or business acquisition based on limited, incomplete or faulty information, which may result in our subsequent operations generating less revenue than expected, which could materially harm our financial condition and results of operations.
When evaluating the desirability of a potential business acquisition, our ability to assess the target business’s management may be limited due to a lack of time, resources or information. Our management’s assessment of the capabilities of the target’s management, therefore, may prove to be incorrect and such management may lack the skills, qualifications or abilities expected. Should the target’s management not possess the skills, qualifications or abilities necessary to manage a public company or assist with their former entity’s merger or combination into ours, the operations and profitability of the post-acquisition business may be negatively impacted, and our stockholders could suffer a reduction in the value of their shares.
Our business could suffer if we are unsuccessful in making, integrating, and maintaining any future acquisitions and investments.
We may acquire assets, businesses or technologies in the future. Integrating an acquired asset, business or technology is difficult and can be risky. These potential and completed transactions create risks such as:
the risks associated with assuming liabilities related to the activities of the acquired business before and after the acquisition, including liabilities for violations of laws and regulations, commercial disputes, cyberattacks, taxes, and other matters; and
the difficulty of integrating new assets, businesses and technologies into our infrastructure.
Acquisitions also may require us to spend a substantial portion of our available cash, issue stock, incur debt or other liabilities, amortize expenses related to intangible assets, or incur write-offs of goodwill or other assets. Finally, acquisitions could be viewed negatively by analysts, investors or our users.
The success of our business will depend, in part, on the continued services of certain key personnel and our ability to attract and retain qualified personnel.
The success of our business will depend, in part, on the continued services of certain members of our management. Our inability to attract and retain qualified personnel could significantly disrupt our business. Although we take prudent steps to retain key personnel, we face competition for qualified individuals from numerous professional services and other companies. For example, our competitors may be able to attract and retain more qualified professional and technical personnel by offering more competitive compensation packages. If we are unable to attract new personnel and retain our current personnel, we may not be able execute our business plan.
Our officers and directors, including our President, will allocate their time to other businesses, thereby causing potential conflicts of interest in their determination as to how much time to devote to our affairs.
Some of our officers and directors are not required to, and will not, commit their full time to our affairs. In particular, our President, Mark Ward, is employed by BC Partners, a global investment platform that manages multiple funds with investment strategies that may overlap with or relate to our business. BC Partners and its affiliates may pursue opportunities in the same industries or sectors in which we may operate or pursue strategic initiatives. Mr. Ward has no duty to communicate or offer business, strategic or investment opportunities to us, and Mr. Ward’s obligations to BC Partners may require him to devote significant time to BC Partners’ business affairs, which could limit the time he devotes to our business. Some of our officers and directors also serve or may in the future serve as officers and board members for other entities. In addition, our officers and directors affiliated with BC Partners or Abrams Capital may have time and attention requirements for other entities that BC Partners or Abrams Capital may sponsor in the future. If our officers’ and directors’ other business affairs require them to devote substantial amounts of time to such affairs, it could limit their ability to devote time to our affairs which may have a negative impact on our ability to pursue and complete our business strategy.
Certain of our officers and directors are now, and may in the future become, affiliated with entities engaged in business activities similar to ours, and, accordingly, may have conflicts of interest in determining to which entity a particular business opportunity should be presented.
BC Partners and Abrams Capital and their affiliates engage in a broad range of investment and business activities, and may pursue opportunities in industries and sectors in which we currently operate or may operate in the future. Certain of our officers and directors, including our President, are affiliated with BC Partners or Abrams Capital, and may, in the future, become affiliated with additional entities that are engaged in similar activities. Accordingly, they may have conflicts of interest in determining whether a particular business, strategic, or investment opportunity should be presented to us or to BC Partners or Abrams Capital or one of their affiliates or clients. Investment ideas and opportunities generated within BC Partners or Abrams Capital or any of their affiliates, including by Mr. Ward, and other persons who may make decisions for our company, may be suitable for both us and for BC Partners or Abrams Capital or any of their affiliates, and may be directed initially to BC Partners or Abrams Capital rather than to us. None of our officers and directors, BC Partners, Abrams Capital, or any of their affiliates, have any obligation to present us with any opportunity of which they become aware unless it is offered to them solely in their capacity as our director or officer and after they have satisfied their contractual and fiduciary obligations to other parties, including BC Partners or Abrams Capital. BC Partners or Abrams Capital may offer investment opportunities that fit within the investment program of a BC Partners or Abrams Capital fund to such fund before offering it to us, and may choose to allocate all or part of any such opportunity to any BC Partners or Abrams Capital affiliate or any business in which a BC Partners or Abrams Capital affiliate has invested instead of offering such opportunity to us. If BC Partners or Abrams Capital or any of their affiliates decides to pursue any such opportunity, including opportunities that our company might otherwise have had the ability or desire to pursue, it is acknowledged that we may be precluded from pursuing the same. ContextLogic has renounced any interest or expectancy in, or in being offered an opportunity to participate in, any such opportunity.
Certain of our officers and directors presently have, and any of them in the future may have, additional, fiduciary or contractual obligations to other entities, which may cause conflicts of interest in determining whether to present opportunities to us or to such other entities.
Certain of our officers and directors, including our President, presently have, and any of them in the future may have, additional fiduciary or contractual obligations to other entities, including BC Partners or Abrams Capital and their affiliates. As a result, they may be required to present certain opportunities to BC Partners or Abrams Capital instead of to us. These conflicts may not be resolved in our favor, and business, strategic or investment opportunities that could be beneficial to us may be directed to BC Partners or Abrams Capital or their affiliates before being considered by us, if they are considered by us at all.
Risks Related to the Asset Purchase Agreement
We have counterparty risk with the Buyer and its affiliates for certain ongoing obligations under the Asset Purchase Agreement and the failure of the Buyer and its affiliates to perform their obligations could cause us to suffer losses.
In connection with the Asset Sale, under the Asset Purchase Agreement, the Buyer agreed to assume any and all third party claims, liabilities, and obligations disclosed by the Seller except for certain agreed upon excluded claims and liabilities including, but not limited to, state and federal tax obligations, liabilities and claims related to international subsidiaries, vendor disputes, etc. However, although the Buyer would be responsible for such liabilities, claims, and obligations under the terms of the Asset Purchase Agreement, we can provide no assurance that we would be successful in obtaining payment or reimbursement from the Buyer or Qoo10 for such losses.
Risks Related to Our Internal Controls
We have previously identified material weaknesses in our internal control over financial reporting and may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, which may result in material misstatements of our consolidated financial statements or cause us to fail to meet our periodic reporting obligations.
We designed a new control environment with new IT systems, processes, and controls commensurate with our current business operations. Following the effective implementation of the new controls, management has concluded that the material weaknesses were remediated as of December 31, 2024. With the US Salt Acquisition, we cannot guarantee that additional material weaknesses in our internal control over financial reporting will not be identified in the future. Our failure to implement and maintain effective internal control over financial reporting could result in errors in our consolidated financial statements that could result in a restatement of our consolidated financial statements and could cause us to fail to meet our reporting obligations, any of which could diminish investor confidence and cause a decline in the price of our common stock.
Our management is required to evaluate the effectiveness of our disclosure controls and internal control over financial reporting. If we are unable to maintain effective disclosure controls and internal control over financial reporting, investors may lose confidence in the accuracy of our financial reports.
As a public company, we are required to maintain internal control over financial reporting and to report any material weaknesses in such internal control. Section 404 of the Sarbanes-Oxley Act requires that we evaluate and determine the effectiveness of our internal control over financial reporting. We expect that the requirements of these rules and regulations will continue to increase our legal, accounting, and financial compliance costs, make some activities more difficult, time-consuming, costly, and place significant strain on our personnel, systems, and resources.
We are continuing to develop and refine our disclosure controls and other procedures that are designed to ensure that information required to be disclosed in the reports that we will file with the SEC is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive and financial officers. While we have developed a new control environment with new systems, processes and controls commensurate with our ongoing business going forward, and new business processes and controls were designed and documented in order to improve our internal control over financial reporting through remediation measures. We cannot guarantee that these changes will remediate future deficiencies or that additional material weaknesses in our internal control over financial reporting will not be identified in the future.
In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we have expended, and anticipate that we will continue to expend, significant resources, including accounting-related costs and significant management oversight. If any of these new or improved controls and systems do not perform as expected, we may experience further deficiencies in our controls.
Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business. Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm our results of operations, cause us to fail to meet our reporting obligations, and adversely affect the results of periodic management evaluations. Ineffective disclosure controls and procedures and internal control over financial reporting could diminish investor confidence and negatively affect the price of our common stock.
Risks Related to Our Common Stock
We transferred the trading of our common stock from The Nasdaq Stock Market to the OTCQB. Because ContextLogic common stock is traded on the OTC Markets, our stockholders' ability to sell their shares in the secondary trading market may be limited.
On May 30, 2025, we notified Nasdaq of our decision to voluntarily withdraw from the Nasdaq hearings process, which resulted in our common stock being delisted from The Nasdaq Global Market. We filed a Form 25 with the SEC relating to the delisting of our common stock on June 9, 2025, and the delisting of our common stock from Nasdaq became effective June 19, 2025. On June 3, 2025, our common stock was quoted for trading with the OTCQB. The decision to move our common stock from trading on Nasdaq to the OTC Markets was influenced by several factors, including our evaluation of our ability to continue maximizing the value of our assets while also considering the advantages of remaining traded on Nasdaq versus the regulatory requirements, the time management dedicated to compliance and reporting, and the costs involved in maintaining the listing.
As a result of the transfer of our common stock from Nasdaq to the OTCQB, we anticipate that our stockholders could experience negative consequences related to our securities, including but not limited to: limited availability of market quotations for our securities; a reduced level of trading activity in the secondary trading market for shares of our common stock; a limited amount of analyst coverage; and decreased ability to issue additional securities or obtain additional financing in the future.
Because ContextLogic common stock is traded on the OTCQB market, our stockholders' ability to sell their shares in the secondary trading market may be limited. Since June 3, 2025, the OTCQB is the only liquidity platform for our common stock. We cannot assure our stockholders that ContextLogic common stock will continue to trade on this liquidity platform, whether broker-dealers will continue to provide public quotes of ContextLogic common stock on this liquidity platform, whether the trading volume of ContextLogic common stock will be sufficient to provide for respective efficient liquidity platforms or whether quotes for our common stock will continue on this liquidity platform in the future, which could result in significantly lower trading volumes and reduced liquidity for investors seeking to buy or sell our common stock. As a result, prices for shares of ContextLogic common stock may be lower than might otherwise prevail if ContextLogic common stock was listed on a national securities exchange.
Our stockholders may not be afforded any opportunity to evaluate or approve an asset or business acquisition as we pursue strategic alternatives.
Our stockholders may not be afforded the opportunity to evaluate and approve a proposed business acquisition. In most cases, asset or business acquisitions do not require stockholder approval under applicable law, and ContextLogic's Certificate of Incorporation and bylaws do not afford our stockholders with the right to approve such a transaction. In order to develop and implement our business plan, we may in the future hire lawyers, accountants, technical experts, appraisers, or other consultants to assist with determining our direction and consummating any transactions contemplated thereby. We may rely on such persons in making difficult decisions in connection with the Company’s future business and prospects. The selection of any such persons will be made by our Board, and any expenses incurred, or decisions made based on any of the foregoing could prove to be adverse to the Company in hindsight, the result of which could be diminished value to our stockholders.
We are a smaller reporting company, and any decision on our part to comply only with reduced reporting and disclosure requirements applicable to such companies could make our common stock less attractive to investors.
As of December 31, 2025, we qualified as a “smaller reporting company,” as defined in the Exchange Act, meaning that we are not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent company that is not a “smaller reporting company,” and the market value of shares of ContextLogic common stock held by non-affiliates,
or our public float, is less than $250 million. As a “smaller reporting company,” we may choose to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not smaller reporting companies. This includes reduced disclosure obligations in our SEC filings such as simplified executive compensation disclosures, exemption from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that independent registered public accounting firms provide an attestation report on the effectiveness of internal control over financial reporting and only being required to provide two years of audited consolidated financial statements in annual reports. Decreased disclosures in our SEC filings due to our status as a “smaller reporting company” may make it harder for investors to analyze our operating results and financial prospects and investors may find shares of ContextLogic common stock less attractive, which may result in a less active trading market for ContextLogic common stock and greater stock price volatility.
We do not intend to pay dividends on our capital stock, so any returns will be limited to increases in the value of ContextLogic common stock.
We have never declared or paid any cash dividends on our capital stock. We currently anticipate that we will retain future earnings for the operation and expansion of our business. Accordingly, we do not anticipate declaring or paying any cash dividends for the foreseeable future. In addition, any future credit facility or financing we obtain may contain, terms prohibiting or limiting the amount of dividends that may be declared or paid on ContextLogic common stock. Any return to stockholders will therefore be limited to increases in the price of ContextLogic common stock, if any.
We do not expect to pay any cash dividends to the holders of ContextLogic common stock in the foreseeable future and the availability and timing of future cash dividends, if any, is uncertain.
We do not expect to declare or pay any cash dividends on our common stock in the foreseeable future. Our Board will determine the amount and timing of stockholder dividends, if any, that we may pay in future periods. In making this determination, our directors will consider all relevant factors, including the amount of cash available for dividends, capital expenditures, covenants, prohibitions or limitations with respect to dividends, applicable law, general operational requirements and other variables. We cannot predict the amount or timing of any future dividends our stockholders may receive, and if we do commence the payment of dividends, we may be unable to pay, maintain or increase dividends over time. Therefore, our stockholders may not be able to realize any return on their investment in our common stock for an extended period of time, if at all, other than by selling their shares.
The price of ContextLogic common stock has been and continues to be volatile. Declines in the price of ContextLogic common stock have resulted in and could subject us to future litigation.
The market price of ContextLogic common stock has fluctuated and declined and may continue to fluctuate or decline substantially. Accordingly, the price of ContextLogic common stock has been subject to wide fluctuations and could continue to be subject to wide fluctuations for many reasons, many of which are beyond our control, including those described in this "Risk Factors" section and others such as:
failure of analysts to initiate or maintain coverage of our company, changes in their estimates of our operating results or changes in recommendations by analysts that follow our common stock;
uncertainty among investors relating to the strategic alternative that we will choose, including any prospective asset or business acquisition and the terms and conditions thereof;
the operating performance of any business we may acquire, if any, including any failure to achieve material revenues therefrom;
the performance of our competitors in the marketplace;
the public’s reaction to our press releases, SEC filings, website content and other public announcements and information;
changes in earnings estimates of any business that we acquire, if any, or recommendations by any research analysts who may follow us or other companies in the industry of a business that we acquire, if any;
variations in general economic conditions, including as may be caused by uncontrollable events such as future pandemics, global conflicts and interest rates;
the public disclosure of the terms of any financing we disclose in the future;
the number of shares of ContextLogic common stock that are eligible to be publicly traded in the future;
litigation or claims against us; and
any other factors discussed in this report.
Many of these factors are beyond our control and may decrease the market price of ContextLogic common stock, regardless of whether we choose to pursue and consummate an asset or business acquisition and of our current or subsequent operating performance and financial condition. In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted. A securities class action suit against us could result in substantial costs and divert our management’s time and attention, which would otherwise be used to benefit our business.
ContextLogic's Certificate of Incorporation provides that the Court of Chancery of the State of Delaware and the federal district courts of the United States of America are the exclusive forums 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.
ContextLogic's Certificate of Incorporation provides that the Court of Chancery of the State of Delaware and the federal district courts of the United States of America are 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. ContextLogic's Certificate of Incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for: (i) any derivative action or proceeding brought on behalf of us; (ii) any action asserting a claim of breach of a fiduciary duty; (iii) any action arising pursuant to any provision of the DGCL, our Certificate of Incorporation or bylaws (as either may be amended from time to time); (iv) any action to interpret, apply, enforce or determine the validity of ContextLogic's Certificate of Incorporation or its bylaws; or (v) any action asserting a claim against us that is governed by the internal affairs doctrine.
This provision does not apply to suits brought to enforce a duty or liability created by the Exchange Act. Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions. Accordingly, both state and federal courts have jurisdiction to entertain such claims. To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, our Certificate of Incorporation further provides that the U.S. federal district courts are the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions. In such instance, we would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of our Certificate of Incorporation. This may require significant additional costs associated with resolving such action in other jurisdictions and there can be no assurance that the provisions will be enforced by a court in those other jurisdictions.
These exclusive-forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees. If a court were to find either exclusive forum provision of our Certificate of Incorporation to be inapplicable to or unenforceable in an action, we may incur further significant additional costs associated with resolving the dispute in other jurisdictions, all of which could seriously harm our business.
Risks Related to US Salt
As a result of the US Salt Acquisition, we are subject to the following additional risks and uncertainties relating to US Salt. The risks described below are not the only ones facing US Salt. Any risk or uncertainty that could have a material adverse effect on US Salt’s business, operations and financial condition could also have a material adverse effect on the Company’s business, operations and financial condition. Additional risks and uncertainties not currently known to US Salt or that US Salt currently deems to be immaterial may also materially and adversely affect our business, financial condition or results of operations.
Operational Risks
Native geological conditions could adversely affect results of US Salt’s operations.
Geological environments always carry uncertainties due to scale and natural occurrence. These uncertainties are particularly true for solution mining, where unexpected challenges encountered in the geological setting cannot be addressed by direct human interaction. The extensive successful mining history of US Salt’s Glen Watkins brinefield provides some reassurance that the geological setting is tolerant of a wide variety of solution-mining outcomes without negatively impacting the surface or underground sources of drinking water. This history, along with the success of the
collocated gas storage facility, generally indicates a sound geological setting. However, US Salt cannot ensure that the geological environment will remain consistent in the years to come.
The main risk focus with respect to the brinefield involves maintaining roof salt and hydraulic integrity across all caverns in active galleries. Maintaining a salt roof between the top of the cavern and top of the formation provides structural and fluid integrity, thus taking advantage of salt’s high impermeability. A salt roof provides a primary barrier against cavern fluid migration upward toward the underground sources of drinking water. Contamination of the underground sources of drinking water is a highly unlikely risk, but the impact could be significant and, depending on circumstances, could lead to injection permit revocation and loss of both brinefields. Proper spacing and mining control of current and future caverns reduces the risk of losing hydraulic integrity within the salt formation. While a loss of integrity between separate galleries in the salt has a less deleterious effects, it can remove the affected gallery from service. US Salt employs attentive cavern monitoring and operational flexibility to help reduce these risks.
US Salt’s concentration in salt products limits diversification and amplifies exposure to end-market, regulatory and competitive risks.
US Salt focuses exclusively on salt products. As a result, adverse developments specific to the salt industry, including new environmental restrictions, regulatory developments, changes in food or pharmaceutical specifications, or increased import competition among other risks, could disproportionately impact US Salt. US Salt lacks the product diversification that could otherwise mitigate the volatility of a single commodity-driven business.
US Salt is subject to customer concentration, with a limited number of customers accounting for a portion of US Salt’s revenues.
A portion of US Salt’s sales may be concentrated among larger customers. The loss of or reduction in purchases by significant customers or failure to deliver during peak periods to certain customers could negatively affect sales and margins.
US Salt’s operations are concentrated at a single, integrated facility, and US Salt is also dependent on critical equipment.
US Salt conducts all production at a single, integrated solution-mining and mechanical-evaporation facility in Watkins Glen, New York, supplemented by third-party co-packers and warehouses. A disruption at US Salt’s Watkins Glen facility could significantly affect production of US Salt’s products or distribution of US Salt’s products, which could damage US Salt’s customer relationships. Because US Salt does not operate additional plants, US Salt’s ability to replace lost production is limited. Insurance may not cover all resulting losses, and prolonged or repeated disruptions could lead to penalties, loss of customer awards, or non-renewals.
US Salt’s operations depend upon critical equipment, such as brine wells, brine conveyance, vacuum pans, crystallizers, boilers, steam distribution, dryers, conveyors, and packaging lines. Certain components and repairs require specialized contractors or long-lead equipment; shortages or delays could extend an outage and increase costs. Although US Salt employs preventive maintenance programs, holds select critical spare parts, stages inventory at third-party warehouse locations, and maintains disaster-recovery and business-interruption insurance, these measures may not fully offset or prevent the effects of a disruption. If US Salt is unable to maintain operations at Watkins Glen or promptly restore production following a disruption, US Salt’s business, financial condition, and results of operations could be adversely affected.
US Salt’s business is capital intensive, and the inability to fund necessary capital expenditures or successfully complete US Salt’s capital projects could have an adverse effect on US Salt’s growth and profitability.
In recent years, US Salt has made significant expenditures on large capital projects. In addition, maintaining US Salt’s existing facilities requires significant capital expenditures, which may fluctuate materially. US Salt also may make significant capital expenditures in the future to expand or modify US Salt’s existing operations, including projects to expand or improve US Salt’s facilities or equipment and projects to improve US Salt’s computer systems, information technology and operations technology. These activities or other capital improvement projects may require the temporary suspension of production at US Salt’s facilities, which could have a material adverse effect on the results of US Salt’s operations.
Any capital project US Salt undertakes involves risks, including cost overruns, delays and performance uncertainties, and could interrupt US Salt’s ongoing operations. The expected benefits from any of US Salt’s capital projects may not be realized in accordance with US Salt’s projections. US Salt’s capital projects may also result in other unanticipated
adverse consequences, such as the diversion of management’s attention from other operational matters or significant disruptions to US Salt’s ongoing operations.
Although US Salt currently finances most of US Salt’s capital expenditures through cash provided by operations, US Salt also may depend on increased borrowing or other financing arrangements to fund future capital expenditures. If US Salt is unable to obtain suitable financing on favorable terms or at all, US Salt may not be able to complete future capital projects and US Salt’s ability to maintain or expand US Salt’s operations may be limited. The occurrence of these events could have a material adverse effect on US Salt’s business, financial condition and results of operations.
Strikes, other forms of work stoppage or slowdown and other union activities could disrupt US Salt’s business and negatively impact US Salt’s financial results.
The majority of US Salt’s workforce is represented by a CBA. There can be no assurance that labor disruptions by such employees will not occur in the future. The current CBA is scheduled to expire in November 2026 and, as a result, US Salt expects to negotiate a new CBA in 2026.
Unsuccessful contract negotiations, adverse labor relations at any of US Salt’s locations or other factors could in the future, result in strikes, work stoppages, work slowdowns, dissatisfied employees or other actions, which could disrupt US Salt’s business and operations. These disruptions could negatively impact US Salt’s business, US Salt’s operations, US Salt’s ability to produce or sell US Salt’s products, US Salt’s ability to service US Salt’s customers and US Salt’s ability to recruit and retain personnel and could result in significant additional costs as well as adversely affect US Salt’s reputation, financial condition and operating results.
Financial Risks
US Salt’s indebtedness and any potential inability due to outside factors to pay US Salt’s indebtedness could adversely affect US Salt’s business and financial condition.
US Salt has a significant amount of indebtedness and may incur additional debt in the future. US Salt pays significant interest on US Salt’s indebtedness, with variable interest on US Salt’s borrowing under US Salt’s senior secured credit facilities based on prevailing interest rates. Significant increases in interest rates will increase the interest US Salt pays on US Salt’s debt. US Salt’s indebtedness could:
require US Salt to agree to less favorable terms, including higher interest rates, in order to incur additional debt, and otherwise limit US Salt’s ability to borrow additional money to fund US Salt’s working capital, capital expenditures and debt service requirements;
impact US Salt’s ability to implement US Salt’s business strategy and limit US Salt’s flexibility in planning for, or reacting to, changes in US Salt’s business as well as changes to economic, regulatory or other competitive conditions;
place US Salt at a competitive disadvantage compared to US Salt’s competitors with greater financial resources;
make US Salt more vulnerable to a downturn in US Salt’s business or the economy;
require US Salt to dedicate a substantial portion of US Salt’s cash flow from operations to the repayment of US Salt’s indebtedness, thereby reducing the availability of US Salt’s cash flow for other purposes;
restrict US Salt from making strategic acquisitions or cause US Salt to make non-strategic divestitures; and
materially and adversely affect US Salt’s business and financial condition if US Salt is unable to meet US Salt’s debt service requirements or obtain additional financing.
In the future, US Salt may incur additional indebtedness or refinance US Salt’s existing indebtedness. If US Salt incurs additional indebtedness or refinance, the risks that US Salt faces as a result of US Salt’s leverage could increase. Financing may not be available when needed or, if available, may not be available on commercially reasonable or satisfactory terms. Any downgrades from credit rating agencies such as Moody’s or Standard & Poor’s may adversely impact US Salt’s ability to obtain financing or the terms of such financing.
US Salt’s ability to make payments on US Salt’s indebtedness, refinance US Salt’s indebtedness and fund planned capital expenditures will depend on US Salt’s ability to generate future cash flows from operations. This, to a certain extent,
is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond US Salt’s control. There can be no assurance that US Salt’s business will generate sufficient cash flows from operations or that future borrowings will be available to US Salt under US Salt’s revolving credit facility in an amount sufficient to enable US Salt to make payments with respect to US Salt’s indebtedness or to fund US Salt’s other liquidity needs. If this were the case, US Salt might need to refinance all or a portion of US Salt’s indebtedness on or before maturity, sell assets, reduce or delay capital expenditures or seek additional equity financing. US Salt’s inability to obtain needed financing or generate sufficient cash flows from operations may require US Salt to abandon or curtail capital projects, strategic initiatives or other investments, cause US Salt to divest US Salt’s business or impair US Salt’s ability to make acquisitions, enter into joint ventures or engage in other activities, which could materially impact US Salt’s business.
US Salt and its owners may be subject to tax liabilities which could adversely impact their profitability, cash flow and liquidity.
Because US Salt is pass-through for U.S. federal income tax purposes, its income and loss is generally recognized by its owners (including ContextLogic following the Closing Date) for U.S. federal income tax purposes. US Salt’s (and its owners’, including ContextLogic’s following the Closing Date) effective tax rate, tax expense and cash flows could be adversely affected by changes in tax laws. US Salt may be subject to audits in various jurisdictions and US Salt and its owners (including ContextLogic following the Closing Date) may be assessed additional taxes as a consequence of an audit. In the ordinary course of US Salt’s business, there are many transactions and calculations that could be challenged by taxing authorities. The final determination of any tax audits and litigation may take several years and, if additional taxes are assessed as a result of an audit, assessment or litigation, there could be a material adverse effect on US Salt’s (or its owners’, including ContextLogic’s following the Closing Date) financial condition, income tax provision and net income in the affected periods as well as future profitability, cash flows and ability to make distributions and service debt.
US Salt has identified a material weakness in its internal controls, and US Salt cannot provide assurances that this weaknesses will be effectively remediated or that additional material weaknesses will not occur in the future.
US Salt has identified a material weakness in its internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis. In fiscal year 2023, US Salt identified a material weakness in its internal control over financial reporting resulting from its lack of a formalized internal control framework in accordance with COSO, which relates to (a) an insufficient complement of personnel with an appropriate degree of internal controls knowledge, which caused management to be unable to appropriately define responsibilities to create an effective control environment; (b) the lack of a formalized risk assessment process; and (c) selection and development of control activities, including over information technology.
Following the US Salt Acquisition, the Company will be required to expend time and resources to further improve its internal controls over financial reporting, which may include review and enhancement of processes and controls; review and enhancement of IT general controls over information systems relevant to financial reporting; and realignment of existing personnel and the addition of both internal and external personnel to strengthen processes and controls including management’s review and documentation over internal control over financial reporting. However, we cannot assure our investors that the Company’s internal control over financial reporting, as modified, will enable us to identify or avoid material weaknesses in the future.
US Salt’s current controls and any new controls that we develop may become inadequate because of changes in conditions in US Salt’s business. Further, weaknesses in our disclosure controls or our internal control over financial reporting may be discovered in the future. Any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement, could harm our operating results or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods. Any failure to implement and maintain effective internal control over financial reporting could also adversely affect the results of management reports and independent registered public accounting firm audits of US Salt’s internal control over financial reporting that we will eventually be required to include in ContextLogic’s periodic reports that will be filed with the SEC. Ineffective disclosure controls and procedures, and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, which would likely have a negative effect on the market price of ContextLogic common stock.
Because US Salt was a private company, its independent registered public accounting firm has not been required to audit the effectiveness of its internal control over financial reporting. Following the US Salt Acquisition, 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 US Salt’s internal control over financial reporting is documented, designed or operating. Any failure to maintain effective
disclosure controls and internal control over financial reporting could have a material and adverse effect on US Salt’s and ContextLogic’s business and operating results, and cause a decline in the market price of ContextLogic common stock.
Competition, Sales and Pricing Risks
US Salt’s products face strong competition and if US Salt fails to successfully attract and retain customers and invest in capital improvements, productivity, quality improvements and product development, sales of US Salt’s products could be adversely affected.
The market price for the product mix and competing cost of goods sold, especially labor and materials expenses, are challenges to US Salt’s operations and remain a risk through the foreseeable future. US Salt encounters strong competition in many areas of US Salt’s business and US Salt’s competitors may have significantly more financial resources than US Salt does. Competition in US Salt’s product lines is based on a number of factors, including product quality and performance, logistics, brand reputation, price and quality of customer service and support. To remain competitive, US Salt needs to invest in manufacturing, productivity, product innovation, marketing, customer service and support and US Salt’s distribution networks. US Salt may not have sufficient resources to continue to make such investments or maintain US Salt’s competitive position. US Salt may have to adjust US Salt’s prices, strategy, product innovation, distribution or marketing efforts to stay competitive.
Changes in competitors’ production, geographic or marketing focus could have a material impact on US Salt’s business. US Salt faces global competition from new and existing competitors who have entered or may enter the markets in which US Salt sells, particularly in the specialty salt categories. Some of US Salt’s competitors may have greater financial and other resources than US Salt does or are more diversified, making them less vulnerable to industry downturns and better positioned to pursue new expansion and development opportunities. US Salt’s competitive position could suffer if US Salt is unable to expand US Salt’s operations through investments in new or existing operations or through acquisitions, joint ventures or partnerships.
Inflation could result in higher costs and decreased profitability.
US Salt’s business can be affected by inflation, including increases in freight rates, prices for energy and other costs. Sustained inflation could result in higher costs for transportation, energy, materials, supplies and labor. US Salt’s efforts to recover inflation-based cost increases from US Salt’s customers may be hampered as a result of the structure of US Salt’s contracts and the contract bidding process as well as the competitive industries, economic conditions and countries in which US Salt operates. Accordingly, substantial inflation may result in a material adverse impact on US Salt’s costs, profitability and financial results.
Increasing costs or a lack of availability of transportation services could have an adverse effect on US Salt’s ability to deliver products at competitive prices.
Transportation and handling costs are a significant component of US Salt’s total delivered salt cost. The high relative cost of transportation favors producers whose mines or facilities are located near the customers they serve. US Salt contracts (directly and, from time to time, through third parties) trucking and rail services to move US Salt’s products from US Salt’s production facilities to third-party warehouses and customers. A reduction in the dependability or availability of transportation services, a significant increase in transportation service rates, and adverse weather could impair US Salt’s ability to deliver US Salt’s products economically to US Salt’s customers or expand US Salt’s markets. Disruptions caused by driver shortages, rail service constraints, extreme weather, labor disruptions at carriers or terminals, or diesel price spikes can delay shipments, increase costs, strain customer relationships and trigger contractual penalties. Limited availability of equipment during peak seasons may require use of premium carriers or expedited options, reducing margin.
In addition, diesel fuel is a significant component of US Salt’s transportation costs. Some of US Salt’s customer contracts allow for full or partial recovery of changes in diesel fuel costs through an adjustment to the selling price. However, a significant increase in the price of diesel fuel that is not passed through to US Salt’s customers could materially increase US Salt’s costs and adversely affect US Salt’s financial results.
Significant transportation costs relative to the cost of US Salt’s products may limit US Salt’s ability to increase US Salt’s market share or serve new markets.
Legal, Regulatory and Compliance Risks
US Salt relies solely on its own on-site power generation to power its manufacturing operations and any disruption or failure in its power system could adversely impact its business, results of operations and financial condition.
US Salt’s plant is not connected to the electricity grid. Instead, US Salt operates its own proprietary on-site power generation through combined heat and power systems that generate the electricity required for US Salt’s operations and captures waste heat for use in the evaporation process. US Salt relies exclusively on two 5 MW and 3 MW on-site gas-fired generators for its manufacturing operations, which primarily run on byproducts from US Salt’s facility, for the majority of its electricity needs. While this off-grid configuration provides certain cost stability and reduced exposure to regional power-market volatility. It also concentrates US Salt’s operational risk in US Salt’s own energy infrastructure.
Historically, US Salt has experienced occasional power disruptions, primarily due to isolated boiler shutdowns and generator failures. Any boiler or generator failure caused by mechanical malfunction, extreme weather, or other unforeseen events could negatively affect US Salt’s business, results of operations and financial condition. Because US Salt’s plant is not interconnected with the local power grid, resuming full operations depends on US Salt’s ability to repair the affected equipment or secure substitute electricity, such as through rented backup generators, either of which could involve significant expense and delay. In 2025, US Salt installed a 2.5 MW backup black-start generator to help mitigate these risks and support the restoration of power; however, it may not prevent extended outages or fully maintain production. Extended outages or other issues with US Salt’s energy infrastructure could result in lost production, particularly during the drying stage of the salt production process, as well as damage to customer relationships and to US Salt’s reputation. Any such events could have a material adverse effect on US Salt’s business, financial condition, and results of operations.
In July 2019, New York enacted the Climate Leadership and Community Protection Act ("CLPCA"). The CLPCA sets statewide goals for reducing greenhouse gas emissions and requires the New York State Department of Environmental Conservation (“NYSDEC”) to promulgate regulations which will achieve these goals. NYSDEC currently is required by court order to issue regulations implementing the CLPCA no later than February 6, 2026. Any regulation NYSDEC passes to comply with the CLPCA could impact how US Salt’s energy system operates, and US Salt may be required to reduce greenhouse gas emissions in accordance with CLPCA limits, which could have a material adverse effect on US Salt’s business, results of operations and financial condition.
US Salt’s operations heavily rely on natural gas and are therefore exposed to changes in the price and availability of natural gas.
US Salt’s operations are energy intensive, and production processes rely on the consumption of natural gas. Natural gas is a primary energy source used in the mechanically evaporated salt production process. A significant interruption in the supply or an increase in the price of natural gas could adversely affect US Salt’s business, results of operations and financial condition. Energy costs represent a substantial part of US Salt’s total production costs and natural gas is its largest variable input cost. US Salt’s profitability is impacted by the price and availability of natural gas that US Salt purchases from third parties. US Salt currently benefits from a fixed-price supply contract with DTE that runs through March 2026. Upon expiration, US Salt expects to negotiate a renewal or pursue other supply alternatives. While future market pricing cannot be predicted with certainty, natural-gas cost variability may affect its production costs beginning in 2026 if market rates materially differ from the terms of the existing contract.
A significant increase in the price of natural gas that is not recovered through an increase in the price of US Salt’s products or covered through US Salt’s contract arrangements, or an extended interruption in the supply of natural gas to US Salt’s production facilities, could have a material adverse effect on US Salt’s business, financial condition and results of operations.
US Salt’s operations depend on US Salt’s rights and governmental authorizations to mine and operate US Salt’s properties.
US Salt holds numerous environmental and mineral extraction permits, water withdrawal permits, and other permits, licenses and approvals from governmental authorities authorizing operations at US Salt’s facility. These permits are typically issued at the discretion of the relevant governmental authority and require periodic and timely renewal in the ordinary course of business. Changes in legislation, standards or enforcement — at federal, state or local levels — may result in permit modifications mandating additional controls, abatement equipment, monitoring, reporting or operational modifications, including for air emissions, wastewater, stormwater and waste management. Enhanced stormwater management requirements at third-party warehouses could increase US Salt’s distribution costs or limit depot availability. A decision by a governmental agency to revoke, substantially modify, deny or delay renewal of or apply conditions to an existing permit, license or approval could have a material adverse effect on US Salt’s ability to continue operations at US Salt’s single salt production facility, increase compliance costs and result in significant costs.
Expansion of US Salt’s existing operations or production capacity, or preservation of existing rights in some cases, is also predicated upon securing any necessary permits, licenses and approvals.
Unanticipated litigation or investigations, or negative developments in pending litigation or investigations or with respect to other contingencies, could adversely affect US Salt.
US Salt may in the future become subject to litigation, arbitration or other legal proceedings with other parties. Any claim that is successfully asserted against US Salt in legal proceedings that could be brought against US Salt in the future, may adversely affect US Salt’s financial condition, results of operations or prospects.
US Salt is subject to Environmental, Health and Safety laws and regulations which could become more stringent and adversely affect US Salt’s business.
US Salt’s operations are subject to an evolving set of federal, state, and local Environmental, Health and Safety laws and regulations. New or proposed Environmental, Health and Safety regulatory programs, as well as future interpretations and enforcement of existing Environmental, Health and Safety laws and regulations, could result in the assessment of fines or penalties, may require modification to US Salt’s facility, require substantial increases in equipment and operating costs, or subject US Salt to adverse decisions regarding the renewal or modification of air emission, underground injection, wastewater discharge, and other environmental permits that are essential for the operation of its single facility, resulting in interruptions, modifications or a termination of operations.
US Salt could incur significant environmental liabilities with respect to US Salt’s current facility, adjacent or nearby third-party facilities or off-site disposal locations.
Risks of environmental liabilities is inherent in US Salt’s operations. The use, handling, disposal and remediation of hazardous substances currently or formerly used by US Salt, or the liabilities arising from past releases of, or exposure to, hazardous substances may result in future expenditures that could materially and adversely affect US Salt’s financial results, cash flows or financial condition. US Salt’s facility is also subject to laws and regulations which require US Salt to monitor and detect potential environmental hazards and damages. US Salt’s procedures and controls may not be sufficient to timely identify and protect against potential environmental damages and related costs.
Groundwater samples historically collected at US Salt’s facility identified chloride at concentrations above standards established by NYSDEC. This data was initially reported to NYSDEC several decades ago. While NYSDEC has not required that US Salt further investigate or take other action in response to these conditions, it could do so in the future and any required mitigation efforts could have a material adverse effect on US Salt’s business, results of operations and financial condition.
US Salt records accruals for contingent environmental liabilities when US Salt believes it is probable that US Salt will be responsible, in whole or in part, for environmental investigation, asset retirement obligation or remediation activities and the expenditures for these activities are reasonably estimable. However, the extent and costs of any environmental investigation, asset retirement obligation or remediation activities are inherently uncertain and difficult to estimate and could exceed US Salt’s expectations, which could materially affect US Salt’s financial condition and operating results.
Compliance with import and export requirements, the Foreign Corrupt Practices Act and other applicable anti-corruption laws may increase the cost of doing business.
US Salt’s operations and activities inside and outside the U.S., as well as the shipment of US Salt’s products across international borders, require US Salt to comply with a number of federal, state, local and foreign laws and regulations, which are complex and increase US Salt’s cost of doing business. These laws and regulations include import and export requirements, economic sanctions laws, customs laws, tax laws and anti-corruption laws, such as the Foreign Corrupt Practices Act, as well as the Canadian Corruption of Foreign Public Officials Act despite US Salt’s sales to Canada and Mexico accounting for less than 5% of total revenue. US Salt cannot predict how these or other laws or their interpretation, administration and enforcement will change over time. There can be no assurance that US Salt’s employees, contractors, agents, distributors, customers, payment parties or third parties working on US Salt’s behalf will not take actions in violation of these laws. Any violations of these laws could subject US Salt to civil or criminal penalties, including fines or prohibitions on US Salt’s ability to offer US Salt’s products in one or more countries, debarment from government contracts (and termination of existing contracts) and could also materially damage US Salt’s reputation, brand, international expansion efforts, business and operating results. In addition, changes to trade or anticorruption laws and regulations could affect US Salt’s operating practices or impose liability on US Salt in a manner that could materially and adversely affect US Salt’s business, financial condition and results of operations.
US Salt is subject to costs and risk associated with a complex regulatory, compliance and legal environment, and US Salt may be adversely affected by changes in laws, industry standards and regulatory requirements.
US Salt’s global business is subject to complex requirements of federal, state, local and foreign laws, regulations, treaties and regulatory authorities as well as industry standard-setting authorities. These requirements are subject to change. Changes in the standards and requirements imposed by these laws, regulations, treaties and authorities or adoption of any new laws, regulations or treaties could negatively affect US Salt’s ability to serve US Salt’s customers or US Salt’s business. In the event that US Salt is unable to meet any existing, new or modified standards when adopted, US Salt’s business could be adversely affected. Some of the federal, state, local and foreign laws and regulations that affect US Salt include those relating to Environmental, Health and Safety matters; taxes; antitrust and anti-competition laws; data protection and privacy; advertisement and marketing; labor and employment; import, export and anti-corruption; product liability; U.S. Food and Drug Administration (“FDA”) Current Good Manufacturing Practices and import and export requirements for food and pharmaceutical products; export requirements in jurisdictions outside of the United States where US Salt markets its food and pharmaceutical grade products; facility registrations; product registrations and labeling requirements; and intellectual property. US Salt could be adversely affected by the adoption of global minimum taxes as countries implement the Organization for Economic Co-operation and Development’s Pillar II regime.
Certain U.S. states have either enacted or proposed legislation that would provide a preference for their agencies or municipalities to use salt mined in the U.S., their home state or selected states. If such legislation is adopted, it could adversely impact the amount of salt sales contracts awarded to US Salt for salt supplied from US Salt’s Watkins Glen mine in New York.
US Salt may face significant product liability claims and product recalls, which could harm US Salt’s business and reputation.
US Salt supplies food-grade and USP sodium chloride for human consumption and pharmaceutical, medical and dialysis applications, where quality, safety, purity and traceability standards are exacting. US Salt also supplies high-purity salt for industrial, textile and dye applications and water conditioning products. Quality deviations, foreign material contamination, mislabeling, adulteration, or failure to meet specifications or certifications could result in rejections, recalls, regulatory actions, customer claims, reputational damage and loss of business. US Salt faces exposure to product liability and other claims if US Salt’s products cause harm, are alleged to have caused harm or have the potential to cause harm to consumers or their property. In addition, US Salt’s products or products manufactured by US Salt’s customers using US Salt’s products could be subject to a product recall as a result of product contamination, US Salt’s failure to meet product specifications or other causes. Claims associated with downstream products that incorporate US Salt’s salt, particularly food items or medical applications, could subject US Salt to product liability claims or indemnity obligations. For example, US Salt’s customers use US Salt’s food-grade salt products in food items they produce, such as cheese and bread, which could be subject to a product recall if US Salt’s products are contaminated or adulterated.
A product recall due to contamination, other adulteration, or mislabeling of salt products that US Salt provided could result in significant losses due to the costs of a recall, the destruction of product inventory and production delays to investigate, identify, and address the underlying cause of the recall. US Salt could be held liable for costs related to US Salt’s customers’ product recall if US Salt’s products cause the recall or other product liability claims if US Salt’s products cause harm to US Salt’s customers or their property. Additionally, a significant product liability case, product recall or failure to meet product specifications could result in adverse publicity, harm to US Salt’s brand and reputation and significant costs, which could have a material adverse effect on US Salt’s business and financial performance. Even with quality systems and certifications, US Salt may face costs and liabilities in excess of insurance coverage or retention levels.
US Salt’s intellectual property may be misappropriated or subject to claims of infringement.
Intellectual property rights, including patents, trademarks, and trade secrets, are a valuable aspect of US Salt’s business. US Salt attempts to protect US Salt’s intellectual property rights primarily through a combination of patent, trademark, and trade secret protection. The patent rights that US Salt obtains may not provide meaningful protection to prevent others from selling competitive products or using similar production processes. Pending patent applications may not result in an issued patent. If US Salt does receive an issued patent, US Salt cannot guarantee that US Salt’s patent rights will not be challenged, invalidated, circumvented, or rendered unenforceable.
Although US Salt occasionally enters into confidentiality agreements with US Salt’s employees, third-party consultants and advisors to protect US Salt’s trade secrets, US Salt cannot guarantee that these agreements provide meaningful protection or that adequate remedies will be available in the event of an unauthorized use or disclosure of US Salt’s trade secrets.
US Salt’s brand names and the goodwill associated therewith are an important part of US Salt’s business. US Salt seeks to register US Salt’s brand names as trademarks where it makes business sense. US Salt’s trademark registrations may not prevent US Salt’s competitors from using similar brand names. Many of US Salt’s brand names are registered as
trademarks in the U.S. and in Canada. The laws in certain foreign countries in which US Salt may do business do not protect trademark rights to the same extent as U.S. law. As a result, these factors could weaken US Salt’s competitive advantage with respect to US Salt’s products, services and brands in foreign jurisdictions, which could adversely affect US Salt’s financial performance.
US Salt’s intellectual property rights may not be upheld if challenged. Such claims, if proven, could materially and adversely affect US Salt’s business and may lead to the impairment of the amounts recorded for goodwill and other intangible assets. If US Salt is unable to maintain the proprietary nature of US Salt’s technologies, US Salt may lose any competitive advantage provided by US Salt’s intellectual property. In addition, although any such claims may ultimately prove to be without merit, the necessary management attention to and legal costs associated with defending US Salt’s intellectual property rights could be significant.
Strategic and Other Business Risks
US Salt may not successfully implement its strategies.
US Salt’s success depends, to a significant extent, on successful implementation of US Salt’s business strategies, including US Salt’s cost savings initiatives and continuous improvement initiatives. US Salt cannot assure that US Salt will be able to successfully implement US Salt’s strategies or, if successfully implemented, US Salt may not realize the expected benefits of US Salt’s strategies.
Although US Salt makes investments in product innovation, US Salt cannot be certain that US Salt will be able to develop, obtain or successfully implement new products or technologies on a timely basis or that they will be well-received by US Salt’s customers. Moreover, US Salt’s investments in new products and technologies involve certain risks and uncertainties and could disrupt US Salt’s ongoing business. New investments may not generate sufficient revenue, may incur unanticipated liabilities and may divert US Salt’s limited resources and distract management from US Salt’s current operations. US Salt cannot be certain that US Salt’s ongoing investments in new products and technologies will be successful, will meet US Salt’s expectations and will not adversely affect US Salt’s reputation, financial condition and operating results.
US Salt’s business is dependent upon personnel, including highly skilled personnel. A labor shortage or the loss of key personnel may have a material adverse effect on US Salt’s performance.
US Salt’s business is dependent on US Salt’s ability to attract, develop and retain skilled production, maintenance, quality and logistics personnel. US Salt may encounter difficulty recruiting sufficient numbers of personnel at acceptable wage and benefit levels due to the competitive labor market for skilled workers. If US Salt is unable to attract, develop and retain the personnel necessary for the efficient operation of US Salt’s business, this could result in higher costs and decreased productivity and efficiency, which may have a material adverse effect on US Salt’s performance.
US Salt’s business is also dependent on the ability to attract, develop and retain highly skilled personnel. An inability to attract, develop and retain personnel with the necessary skills and experience could result in decreased productivity and efficiency, higher costs, the use of less-qualified personnel and reputational harm, which may have a material adverse effect on US Salt’s performance.
To help attract, retain and motivate qualified personnel, US Salt uses stock-based incentive awards. If the value of these stock awards does not appreciate, performance conditions in these awards are not met or if the stock-based compensation otherwise ceases to be viewed as a valuable benefit, US Salt’s ability to attract, retain and motivate personnel could be weakened, which could harm US Salt’s business.
The loss of certain key employees could result in the loss of vital institutional knowledge, experience and expertise, damage critical customer relationships and impact US Salt’s ability to successfully operate US Salt’s business and execute US Salt’s business strategy. US Salt may not be able to find qualified replacements for these key positions and the integration of replacements may be disruptive to US Salt’s business. In addition, the loss of US Salt’s key employees who have in-depth knowledge of US Salt’s mining, manufacturing, engineering or research and development processes could lead to increased competition to the extent that those employees are hired by a competitor and are able to recreate US Salt’s processes or share US Salt’s confidential information.
If US Salt’s computer systems, information technology or operations technology are disrupted or compromised, US Salt’s ability to conduct US Salt’s business will be adversely impacted.
US Salt relies on computer systems, information technology and operations technology to conduct US Salt’s business, including cash management, order entry, invoicing, plant operations, vendor payments, employee salaries and
recordkeeping, inventory and asset management, shipping of products, and communication with employees and customers. US Salt also uses US Salt’s systems to analyze and communicate US Salt’s operating results and other data to internal and external recipients. While US Salt maintains some of US Salt’s critical computer and information technology systems, US Salt is also dependent on third parties to provide important computer and information technology services. Cybersecurity incidents, ransomware attacks, phishing, third-party system compromises, and other data security events could disrupt operations, delay shipments, compromise confidential or personal information, trigger legal and regulatory obligations, and result in material costs. US Salt continues to make updates and improvements to US Salt’s enterprise resource planning system, network and other core applications, which could impact substantially all of US Salt’s key processes. Any implementation issues could have adverse effects on US Salt’s ability to properly capture, process and report financial transactions, distribute US Salt’s products, invoice and collect from US Salt’s customers and pay US Salt’s vendors and could lead to increased expenditures or operational disruptions.
US Salt is susceptible to cyber-attacks, computer viruses and other technological disruptions, which generally continue to increase due to evolving threats and US Salt’s expanding information technology footprint. US Salt has experienced attempts by unauthorized agents to gain access to US Salt’s computer systems through the internet, e-mail and other access points. To date, none have resulted in any material adverse impact to US Salt’s business or operations. While US Salt has programs, policies and procedures in place to identify, prevent and detect any unauthorized access, this does not guarantee that US Salt will be able to detect or prevent unauthorized access to US Salt’s computer systems. In addition, remote work arrangements for US Salt’s employees could strain US Salt’s technology resources and introduce operational risks, including heightened cybersecurity risk. Remote working environments may be less secure and more susceptible to hacking attacks, including phishing and other social engineering attempts. These risks may in the future impact the third parties on which US Salt relies, and security measures employed by these third parties may also prove to be ineffective at countering threats.
A material failure or interruption of access to US Salt’s computer systems for an extended period of time or the loss of confidential or proprietary data could adversely affect US Salt’s operations, reputation and regulatory compliance. While US Salt has mitigation and data recovery plans in place, it is possible that significant expenditures, capital investments and time may be required to correct any of these issues. Additional capital investment and expenditures needed to address, prevent, correct or respond to any of these issues may negatively impact US Salt’s business, financial condition and results of operations.
Climate change and related laws and regulations could adversely affect US Salt.
The potential impact of climate change on US Salt’s resources and operations remains uncertain. Scientists have proposed that the impacts of climate change could include changes in rainfall patterns, water shortages, changing sea levels, changes to the water levels of lakes and other bodies of water, changing storm patterns and intensities and changing temperature levels. Climate change could also lead to disruptions in the production or distribution of US Salt’s products due to major storm events or prolonged adverse conditions, changing temperature levels, lake or river level fluctuations or flooding from sea level changes.
In addition, legislative and regulatory measures to address climate change and greenhouse gas emissions (including carbon or emissions taxes) have been enacted and are also in various phases of consideration at both the state and federal level, as well as internationally. These measures could restrict US Salt’s operations, require US Salt to make capital expenditures to be compliant with these initiatives, increase US Salt’s costs, impact US Salt’s ability to compete or negatively impact efforts to obtain permits, licenses and other approvals for existing and new facilities. These measures could also result in increased cost of fuel and other consumables used in US Salt’s operations or in transporting US Salt’s products. US Salt’s inability to timely respond to the risks posed by climate change and the costs of compliance with climate change laws and regulations could have a material impact on US Salt.
Item 1B. Unresolve d Staff Comments.
Not applicable.
Item 1C. Cybersecurity.
Our Company recognizes the importance of maintaining the safety and security of our critical systems, information, and broader information technology environment. We have developed a comprehensive cyber, data governance, and privacy program intended to (i) protect the confidentiality, integrity, and availability of our information systems and data, and (ii) assess, identify, and manage material risks associated with cybersecurity threats. Our cybersecurity program is consistent with the National Institute of Standards and Technology ("NIST") Cybersecurity Framework ("CSF") 2.0, incorporating the core functions of governance, identification, protection, detection, response, and recovery as an integrated approach to cybersecurity risk management supporting enterprise-wide risk management objectives.
Since the acquisition of US Salt, our Company has initiated various cybersecurity, governance, and privacy assessments, focused on operational continuity and managing the new industry risk landscape. As we integrate US Salt into our cyber, data governance, and privacy program, we will continue to adhere to our Company's integrated approach to cybersecurity risk management, while also focusing on those threats specific to US Salt and the mining and manufacturing sectors.
In order to protect Company data and any other data we manage or handle, we have adopted a number of safeguards and security measures. For example, we have implemented software-as-a-service firewalls, endpoint protection, detection and response solutions, intrusion detection systems, access controls including multi-factor authentication, vulnerability scanning, email security and threat protection, data loss prevention, device management and remote wipe capabilities, software static analysis, dynamic analysis, cloud monitoring and threat analytics, third-party independent business continuity testing, and independent third-party control audits. In addition, we have implemented several policies and programs to improve compliance and reduce risk, ensure appropriate responses in the event of an incident, and reduce the cost and scope of an incident should it occur, including:
a robust Incident Response Policy (“IRP”),
an Information Technology and Information Security Policy (“IT & IS Policy”),
a data governance program to oversee our Records Retention Policy,
a Data Governance Working Group comprised of legal, finance, human resources, and third-party privacy and data governance consultants to review policies, programs, and data governance, and make reports and recommendations to management and the Board,
mandatory cyber and information security training for all employees, and
cybersecurity insurance designed to reduce the risk of loss resulting from cybersecurity incidents
Our IRP, in conjunction with the IT & IS Policy, is designed to equip our employees and managers with the necessary tools to detect, respond to, and ultimately prevent cybersecurity incidents. It contains detailed processes and procedures to assist employees in managing cybersecurity incidents when they happen, including techniques for detecting and identifying suspicious activity in our data environment, response and escalation protocols to defend against intrusions and contain any potential data leakage, enhanced forensic evidence preservation procedures aligned with NIST guidance for system state and cloud environment preservation, data preservation measures to ensure data integrity going forward, and remediation steps to diagnose root causes and secure gaps to prevent future attacks.
The Incident Response Team (“IRT”) coordinates and aligns key resources and team members during a security incident to minimize impact, restore operations as quickly as possible, and assess and fulfill the Company’s legal and contractual obligations. The IRT is also responsible for centrally managing internal and external communications to ensure that disclosures are accurate and complete. The IRT is led by our Chief Compliance Officer, legal team, and Cybersecurity Response Leader, and is supported by a multi-tier team comprised of key stakeholders across the business including finance, HR, our dedicated IT managed service provider, and other external response partners, including cybersecurity consultants, cybersecurity insurance providers, and outside legal counsel. The IRT and external response partners operate under the supervision of our executive management team with oversight from the Audit Committee of our Board.
Finally, the IRP is also supported by a full curriculum of training for employees that is drafted and administered under the supervision of our Chief Compliance Officer. Importantly, these training sessions include several modules and quizzes for both technical and non-technical employees to assist our employees in comprehensively understanding the importance of data security to our stakeholders and our business and the various ways they can promote a security environment
throughout our company. We conduct monthly phishing simulations and quarterly targeted campaigns, with annual cybersecurity training required for all personnel.
Risk Management and Strategy
Incident Response Lifecycle - Assessing and Responding to Cyber Incidents
Our IRP sets forth the Company’s process for assessing cyber threats. The IRP serves as the incident response plan to effectively manage, mitigate, and contain the risk of a security incident or data breach and it applies to all ContextLogic personnel, including employees, contractors, consultants, and any other individuals acting for or on behalf of the Company. The IRP incident response lifecycle is comprised of four phases: (1) Preparation, (2) Detection and Analysis, (3) Incident Response, Investigation, and Notification, and (4) Post-Incident Analysis and Lessons Learned.
The preparation phase of our IRP includes maintaining protective measures to minimize the likelihood and impact of a security incident, regularly reviewing and updating our policies and procedures to maintain alignment with industry standards and guidance, and periodic training of all Company personnel on information security, data privacy, and the procedures for reporting suspected incidents.
The detection and analysis phase addresses the responsibility of Company personnel to notify our IRT Leader and IT managed service provider upon noticing, suspecting, or being notified of any actual or suspected security incident, which will prompt our IT provider to perform an initial investigation of the issue and determine whether the event is a security incident and whether the Cybersecurity Response Leader needs to be notified.
The incident response, investigation, and notification phase of our IRP addresses the distinct but simultaneous workstreams that occur internally once an event has been determined to be a security incident. This includes technical response such as forensic evidence collection and preservation, following NIST-guided procedures, threat containment and eradication, and system and data restoration. Additionally, incident investigation efforts begin to determine the scope and severity of the security incident with legal and finance stakeholders. If appropriate, further measures are taken to comply with disclosure obligations as required by governance guidelines, committee charters, and applicable laws and contracts. We maintain comprehensive tracking systems for technical response activities, partner engagement, and legal notification timelines to ensure regulatory compliance.
The post-incident analysis phase includes evaluating the internal security policies, preparedness, posture, and technical environment, allowing the Company to conduct a holistic assessment and identify and remediate shortcomings and gaps.
Evaluation
As part of our IRP, we conduct regular testing to ensure that the IRP is functional and effective. Tests may include tabletop exercises, verbal walkthroughs with relevant stakeholders, or responses to actual security incidents. We conduct annual tabletop exercises with external cybersecurity partners to stress test our incident response plans and assess team coordination. Our most recent exercise was conducted in the fourth quarter of 2025 with our cybersecurity insurance carrier, simulating a sophisticated ransomware attack. This exercise validated the effectiveness of our response protocols and identified improvement areas that were implemented within 30 days.
We also engage third-party services from time to time to conduct evaluations of our security controls, including the IRP, whether through business continuity testing, vulnerability assessments performed semi-annually, or consulting on best practices to address new challenges and risks. Security patches on business applications and security software are updated at least monthly, with critical patches applied upon release.
Data Protection and Backup Ecosystem
We maintain a three-tier backup strategy for critical Company data to ensure data availability and resilience: primary backup through Microsoft 365 Cloud Backup for Exchange, OneDrive, and SharePoint; secondary backup through a cloud-based SaaS data protection platform with AES-256 bit encryption; and tertiary backup using network-attached storage with backup software providing physical redundancy.
Supply Chain and Third-Party Risk Management
Consistent with NIST CSF 2.0 guidance, we implement supply chain cybersecurity risk management through comprehensive vendor risk assessments for all technology vendors, annual security reviews for critical vendors and those of financial significance pursuant to Sarbanes-Oxley requirements, contractual requirements for cybersecurity standards compliance, and incident notification requirements defined in vendor agreements. We verify software integrity through cryptographic signatures and impose secure development lifecycle requirements for custom software vendors.
Artificial Intelligence Considerations
We recognize that artificial intelligence ("AI") technologies present both opportunities and risks in the cybersecurity landscape. AI and machine learning capabilities may enhance both the ability of companies to defend against cybersecurity threats and the capacity of threat actors to launch sophisticated attacks, including through AI-enabled phishing attempts, automated vulnerability scanning, and generation of malicious code. Our risk assessment processes include evaluation of AI-related cybersecurity risks, and our vendor risk management program includes comprehensive security and compliance assessments of any AI tools being considered for business use. We assess AI tools for data protection capabilities, contractual safeguards, audit rights, and suitability for handling confidential information. Our IT&IS Policy addresses the use of AI tools and requires that data input into these tools adhere to Company policies, with any unauthorized data input without express written approval strictly prohibited.
Risk Assessment and Program Updates
Recognizing the evolving nature of cybersecurity threats, including those related to emerging technologies such as AI, we conduct comprehensive data and system security risk assessments at least annually, with more frequent assessments for new technologies and high-risk scenarios. Our risk assessment process covers identification of cybersecurity governance risks, protection of Company networks and information, risks associated with fund transfer requests, vendor and third-party risks including AI tool providers, and detection of unauthorized activity. Following each assessment, we implement necessary action items, identify and remediate areas of high risk, ensure previously identified high-risk areas are addressed, and integrate changes into our policies and procedures.
Board and Management Oversight
The Company's management is involved in overseeing our cyber, data governance, and privacy program as members of our Data Governance Working Group, and assessing security incidents with the IRT to the extent discussed in the IRP above. The Board and Audit Committee actively oversee our enterprise risk management, including cybersecurity risks, and are notified and updated on any security incidents on a regular basis. The Audit Committee is responsible for overseeing our cyber, data governance, and privacy program and receives regular updates from management and the IRT leader about the Company's ongoing compliance and risk management, and reports to the Board regularly. The Audit Committee receives quarterly reports on cybersecurity metrics, risk posture, incident response activities, and program updates.
Our Chief Compliance Officer leads our overall cybersecurity governance and compliance efforts, coordinates incident response activities, oversees policy development and updates, and serves as the primary liaison between management, the Board, and external response partners.
Cybersecurity Threat Disclosure
To date, we are not aware of any cybersecurity threats that have materially affected or are reasonably likely to materially affect us.
Item 2. Pro perties.
Our corporate headquarters is a virtual office in Oakland, California.
