Risks Specific to Native American Natural Foods
Our business operates in a highly competitive space - the premium meat and fruit bars market. Many of our competitors, including General Mills, Hershey, and JackLinks, have substantially greater financial resources, marketing strength and distribution networks than we do. Moreover, the introduction of new products by competitors that compete directly with our Tanka bars or that diminish the importance of our product to retailers and other establishments may have a material adverse effect on our business and results of operations.
In an attempt to drive us out of the food bar category, our competitors may heavily discount at losses, undercut our prices with vendors, or block us from in-store shelf spaces or future distribution partnerships.
2. The Company may never receive a future equity financing or elect to convert the Securities upon such future financing. In addition, the Company may never undergo a liquidity event such as a sale of the Company or an IPO. If neither the conversion of the Securities nor a liquidity event occurs, the Purchasers could be left holding the Securities in perpetuity. The Securities have numerous transfer restrictions and will likely be highly illiquid, with no secondary market on which to sell them. The Securities are not equity interests, have no ownership rights, have no rights to the Company’s assets or profits and have no voting rights or ability to direct the Company or its actions.
3. We are launching new products in a highly competitive market. Our future performance will largely depend on consumer interest in our food bars. If we are unable to compete in the market effectively or if consumers are drawn to our competitors’ products, our future sales and results of operations would be adversely affected. For example, if we have not gauged consumer preferences correctly or if our marketing activities do not successfully attract consumers to our food bars, the Tanka brand may decline. Furthermore, if we have issues with the quality, taste or delivery of our product, confidence in the Tanka brand may diminish. Any of these occurrences would likely have an adverse effect on our future sales and results of operations.
The less funds we raise, the greater the risk of failing. Additional financing may not be available on favorable terms, if at all. The production and distribution of food bars is a capital intensive business, requiring significant working capital to scale and grow. We particularly rely on working capital to purchase our inventory of buffalo at strategic intervals. We may also need additional funds to expand or meet all of our operational needs. For example, we expect to continue to make significant marketing, operational and promotional expenditures to enhance the Tanka brand. If we need additional financing to support these activities, we cannot be certain that it will be available on favorable terms, if at all. Furthermore, if we issue additional shares of our capital stock, unit-holders will experience additional dilution, which may be substantial. If we need funds and cannot raise them on acceptable terms, we may not be able to continue our operations at the current level or at all.
5. Consolidation in the retail space may reduce the number of potential distribution partners, and therefore decrease the opportunity for small emerging brands like the Tanka bar to establish a presence.
6. We may not be successful in securing distribution partnerships. A key component of our strategy includes developing relationships with leading local, regional and national distributors to expand our product reach and shelf space. Our inability to solidify such relationships could adversely affect our results of operations and ability to increase revenue.
7. We need to recruit and retain key personnel. Our future success depends upon the continued service of our team. The loss of the service of any of our executive officers, key employees or advisors could have a material adverse effect on our business. In addition, if we are unable to hire and retain a sufficient number of qualified personnel, particularly in operations and sales and marketing, our ability to grow our business could be adversely affected. Competition for qualified personnel is intense and we cannot guarantee that we will be successful in attracting and retaining such personnel. Furthermore, the departure or addition of any key personnel may be disruptive and could negatively impact our business.
8. The prices of buffalo - or other raw materials we source - may increase to the point where our products are unaffordable to most consumers. Further, global warming or an extended draught may impact the cost of raising buffalo.
9. We are under no obligation to convert the SAFEs into preferred stock. We may never receive a future equity financing or experience a liquidity event, in which case, the holders could be left holding the SAFEs indefinitely. Unlike convertible notes and other securities convertible into or exchangeable for preferred stock, the SAFEs do not have any “default” provisions permitting the holders to demand repayment. We have the discretion as to whether or not to enter into a transaction that causes the conversion of the SAFEs into preferred stock, and the holders have no right to demand such a conversion. Only in limited circumstances, such as a liquidity or dissolution event, may the holders demand payment and even then, such payment will be limited to the cash available to us to make such payments.
10. The SAFEs will be converted into shares of our preferred stock upon certain circumstances, with no action on the part of the holder. As a result, the SAFEs may be converted at times or under circumstances that are out of the control of the holders. In certain circumstances, such as the sale of the company, an initial public offering or dissolution or bankruptcy, holders may only have a right to receive cash to the extent available, rather than preferred stock or other securities. In addition, if the SAFEs are so converted, the holders will lose any rights and preferences of the SAFEs that are not included in the terms of our preferred stock.