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Financial report summary
?Risks
- Demand for our products could be affected by changes in laws and regulations applicable to food and beverages and changes in consumer preferences.
- Supply chain disruptions could interrupt product manufacturing and increase product costs.
- Raw material inflation or shortage of available materials could harm our financial condition and results of operations.
- We operate in a highly competitive environment and may not be able to compete successfully.
- Unfavorable conditions in our industry or the global economy could limit our ability to grow our business and negatively affect our results of operations.
- Changes in freight carrier costs related to the shipment of our products could have a material adverse impact on our results of operations.
- We may experience delays or disruptions in the shipment of our goods through operational ports.
- Our net sales and profits depend on the level of customer spending for our products, which is sensitive to general economic conditions and other factors.
- Periods of significant or prolonged deflation may negatively impact our results of operations and overall profitability.
- Changes in tax laws or changes in our geographic mix of earnings could have a material impact on our financial condition and results of operation.
- Our business could be harmed if we are unable to accurately forecast demand for our products or our results of operations.
- We may continue to incur significant capital expenditures which could affect our ability to meet our obligations and may otherwise restrict our growth.
- Because we have entered into a significant number of related party transactions through the course of our routine business operations, there is a risk of conflicts of interest involving our management, and that such transactions may not reflect terms that would be available from unaffiliated third parties.
- We may not have adequate insurance coverage.
- If we are unable to successfully design and develop new products, our business may be harmed.
- We may be subject to liability if we infringe upon the intellectual property rights of third parties.
- Our current and future products may experience quality problems from time to time that can result in product returns, negative publicity, litigation, product recalls, and warranty claims, which could result in decreased sales and operating margin, and harm to our brand.
- Labor cost inflation and the unavailability of skilled workers could disrupt our business.
- Our growth depends, in part, on expanding into additional foodservice and geographic markets, and we may not be successful in doing so.
- We rely on third-party contract manufacturers and conflicts with, or loss of, our suppliers or an inability to obtain raw materials could harm our business and results of operations.
- We rely on a combination of purchase orders and supply contracts with our suppliers and manufacturers. Some of these relationships are not exclusive, which means that these suppliers and manufacturers could produce similar products for our competitors.
- We incur significant expenses to maintain our manufacturing equipment and any interruption in the operations of our facilities may harm our operating performance.
- Many of our operating costs and expenses are fixed and will not decline if our revenues decline.
- Our future success depends on the continuing efforts of our management and key employees, and on our ability to attract and retain highly skilled personnel and senior management.
- We may not be able to effectively manage our growth.
- We may become involved in legal or regulatory proceedings and audits.
- We are subject to credit risk.
- Security incidents and attacks on our information technology systems could lead to significant costs and disruptions that could harm our business, financial results, and reputation.
- We have identified material weaknesses in our internal control over financial reporting. If we are unable to remediate these material weaknesses, or if we experience additional material weaknesses or deficiencies in the future or otherwise fail to maintain an effective system of internal controls, we may not be able to accurately or timely report our financial
- results, in which case our business may be harmed, investors may lose confidence in the accuracy and completeness of our financial reports and the price of our common stock may decline.
- If our goodwill, other intangible assets, or our property and equipment become impaired, we may be required to record a charge to our earnings.
- If our estimates or judgments relating to our critical accounting policies prove to be incorrect or change significantly, our results of operations could be harmed.
- The effects of a pandemic are highly unpredictable and could be significant, and may have an adverse effect on our business, operations and our future financial performance.
- Our business is subject to the risk of earthquakes, fire, power outages, floods, pandemics, and other catastrophic events, and to interruption by problems such as terrorism, cyberattacks, or failure of key information technology systems.
- Climate change and sustainability initiatives may result in significant operational changes and expenditures and adversely affect our business.
- We are subject to environmental laws and regulations that expose us to a number of risks and could result in significant liabilities and costs.
- If additional tariffs or other restrictions are placed on foreign imports or any related counter-measures are taken by other countries, our business and results of operations could be harmed.
- International political instability and terrorist activities could result in market instability, which could negatively impact our business results.
- If we fail to timely and effectively obtain shipments of products from our overseas manufacturers, our business and results of operations could be harmed.
- Many of our products are manufactured by third parties outside of the United States, and our business may be harmed by legal, regulatory, economic, and political risks associated with international trade and those markets.
- Foreign exchange rate fluctuations could affect our results of operations.
- Our directors, executive officers, and significant stockholders have substantial control over us and could delay or prevent a change in corporate control.
- Our stock price may be volatile or may decline, including due to factors beyond our control, resulting in substantial losses for investors.
- Acquisitions could result in operating difficulties and may materially adversely affect our business, financial condition, results of operations and growth prospects.
- Substantial future sales, or the perception or anticipation of future sales, of shares of our common stock may cause our stock price to decline. In addition, a significant portion of our common stock is restricted from immediate resale but may be sold into the market in the near future. This could cause the market price of our common stock to drop significantly, even if our business is doing well.
- Our bylaws designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain actions, which could limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with the Company and its directors, officers, or other employees and may discourage lawsuits with respect to such claims.
- We may issue preferred stock, the terms of which could adversely affect the voting power or value of our common stock.
- We intend to pay quarterly dividends for the foreseeable future. If our stock price does not appreciate after you purchase our shares, you may lose some or all of your investment.
- Karat Packaging Inc. is a holding company with no operations of its own and, as such, it depends on its subsidiaries for cash to fund its operations and expenses, including future dividend payments, if any.
- If securities or industry analysts do not publish research or reports about our business, or publish negative reports about our business, our stock price and trading volume could decline.
- Outstanding indebtedness may reduce our available funds.
- We depend on cash generated from outside sources of funding to support our growth.
- We are an emerging growth company and the reduced disclosure requirements applicable to emerging growth companies could make our common stock less attractive to investors.
- The requirements of being a public company may strain our resources, divert management’s attention, and affect our ability to attract and retain executive management and qualified board members.
- If we are unable to maintain effective internal controls, our business, financial position and results of operations could be adversely affected.
Management Discussion
- •During the year ended December 31, 2023, we invested in the significant expansion of our distribution capabilities through opening new warehouses and racking up additional areas in our existing warehouses.
- •We enhanced our sales force in 2023 through the addition of new team members and promotion of our inaugural Chief Revenue Officer.
- •During the year ended December 31, 2023, we executed a strategy to pivot into a more asset-light model by increasing imports and scaling back manufacturing in certain locations in light of dropping ocean freight rates coupled with rising domestic labor and operating costs, resulting in strong margin expansion and cash flows.