This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) that are based on our management’s beliefs and assumptions and on information currently available to management, and which statements involve substantial risk and uncertainties. All statements contained in this Annual Report on Form 10-K other than statements of historical fact, including statements regarding our future operating results and financial position, our business strategy and plans, market growth and trends, and objectives for future operations are forward-looking statements. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions.
These risks and uncertainties include, among other things, risks related to:
| ● | the COVID-19 pandemic and its impact on our business, operations, and the markets and communities in which we and our customers operate; |
| ● | our inability to successfully identify and secure appropriate sites and timely develop and expand our operations; |
| ● | our inability to protect our brand and reputation; |
| ● | our dependence on a small number of suppliers; |
| ● | our inability to protect against security breaches of confidential customer information; |
| ● | our expectations regarding our future operating and financial performance; |
| ● | the size of our addressable markets, market share, and market trends; |
| ● | our ability to compete in our industry; |
| ● | changes in consumer tastes and nutritional and dietary trends; |
| ● | our ability to effectively manage the continued growth of our workforce and operations; |
| ● | our inability to open profitable locations; |
| ● | our failure to generate projected same location sales growth; |
| ● | the sufficiency of our cash, cash equivalents, and investments to meet our liquidity needs; |
| ● | our dependence on long-term non-cancelable leases; |
| ● | our relationship with our employees and the status of our workers; |
| ● | our inability to maintain good relationships with our future franchising partners; |
| ● | the effects of seasonal trends on our results of operations; |
| ● | our vulnerability to global financial market conditions, including the continuing effects from the recent recession; |
| ● | our ability to attract, retain, and motivate skilled personnel, including key members of our senior management; |
| ● | our vulnerability to adverse weather conditions in local or regional areas where our locations are located; |
| ● | the increased expenses associated with being a public company; and |
| ● | the other factors set forth under “Risk Factors” in this report. |
You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Annual Report on Form 10-K primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors described in the section titled “Risk Factors” and elsewhere in this Annual Report on Form 10-K. We undertake no obligation to update any forward-looking statements after the date of this Annual Report on Form 10-K or to conform such statements to actual results or revised expectations, except as required by law.
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Summary Risk Factors
Investing in our common stock involves a high degree of risk because our business is subject to numerous risks and uncertainties, as further described below. The occurrence of any such risks could adversely affect our business, financial condition, results of operations and prospects. The principal factors and uncertainties that make investing in our common stock speculative or risky include, among others:
| ● | We have incurred recurring losses and may not be profitable in the future. |
| ● | The report of the independent registered public accounting firm includes a going concern uncertainty explanatory paragraph. |
| ● | Evolving consumer preferences and tastes may adversely affect our business. |
| ● | Our financial condition and quarterly results of operations are subject to, and may be adversely affected by, a number of factors, many of which are also largely outside our control and as such our results may fluctuate significantly and may not fully reflect the underlying performance of our business. |
| ● | We may not be able to compete successfully with other coffee locations, QSRs and convenience locations, including the growing number of coffee delivery options. Intense competition in the foodservice and restaurant industry could make it more difficult to expand our business and could also have a negative impact on our operating results if customers favor our competitors or we are forced to change our pricing and other marketing strategies. |
| ● | Our inability to identify, recruit and retain qualified individuals for our locations could slow our growth and adversely impact our ability to operate. |
| ● | Our locations are geographically concentrated in California, and we could be negatively affected by conditions specific to that region. |
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| ● | Interruption of our supply chain of coffee or other ingredients, coffee machines and other restaurant equipment or packaging could affect our ability to produce or deliver our products and could negatively impact our business and profitability. |
| ● | Increases in the cost of high-quality coffee beans or other commodities or decreases in the availability of high-quality coffee beans or other commodities could have an adverse impact on our business and financial results. |
| ● | We are increasingly dependent on information technology and our ability to process data in order to operate and sell our goods and services, and if we (or our vendors) are unable to protect against software and hardware vulnerabilities, service interruptions, data corruption, cyber-based attacks, ransomware or security breaches, or if we fail to comply with our commitments and assurances regarding the privacy and security of such data, our operations could be disrupted, our ability to provide our goods and services could be interrupted, our reputation may be harmed and we may be exposed to liability and loss of customers and business. |
| ● | Pandemics or disease outbreaks such as COVID-19 have had, and may continue to have, an effect on our business and results of operations. |
| ● | Our success depends substantially on the value of our brands and failure to preserve their value could have a negative impact on our financial results. |
| ● | Food safety and quality concerns may negatively impact our brand, business and profitability, our internal operational controls and standards may not always be met and our employees may not always act professionally, responsibly and in our and our customers’ best interests. Any possible instances or reports, whether true or not, of food and/or beverage-borne illness could reduce our sales. |
| ● | Changes in the availability of and the cost of labor could harm our business. |
| ● | Our culture has contributed to our success, and if we cannot maintain this culture as we grow, we could lose the high employee engagement fostered by our culture, which could harm our business. |
| ● | Our growth strategy depends in part on opening new retail locations in existing and new markets. We may be unsuccessful in opening new retail locations or establishing new markets, which could adversely affect our growth. |
| ● | Our operating results and growth strategies will be closely tied to the success of our future franchise partners and we have limited control with respect to their operations. Additionally, our future franchise partners’ interests may conflict or diverge with our interests in the future, which could have a negative impact on our business. |
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