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suppliers. As such, we are exposed to risks relating to the quality of such products. In the event that any of our products prove to be |
defective, we may be required to recall or redesign such products, which would result in significant unexpected costs. 55 We are also exposed to potential claims arising |
from the conduct of our employees and contractors, for which we may be contractually liable. We have in the past been, and may in |
the future be, subject to penalties and other liabilities in connection with injury or damage incurred in conjunction with the installation of |
our products. In addition, our contracts, particularly those |
with large single-family and multi-family homebuilders, contain certain performance and installation schedule requirements. Many factors, |
some of which our outside of our control, may affect our ability to meet these requirements, including shortages of material or skilled |
labor, unforeseen engineering problems, work stoppages, weather interference, floods, unanticipated cost increases, and legal or political |
challenges. If we do not meet these requirements, we may be subject to liquidated damages or other penalties, as well as claims for breach |
of contract. Product liability, workmanship warranty, casualty, |
negligence, construction defect, breach of contract and other claims and legal proceedings can be expensive to defend and can divert the |
attention of management and other personnel for significant periods of time, regardless of the ultimate outcome. In addition, lawsuits |
relating to construction defects typically have statutes of limitations that can run as long as ten years. Claims of this nature could |
also have a negative impact on customer confidence in us and our services. Although we currently maintain what we believe to be suitable |
and adequate insurance, we may be unable to maintain such insurance on acceptable terms or such insurance may not provide adequate protection |
against potential liabilities. In addition, some liabilities may not be covered by our insurance. Current or future claims could have |
a material adverse effect on our reputation, business, financial condition and results of operations. If we are unable to compete successfully |
with our competitors, our financial condition and results of operations may be harmed. We operate in a highly |
fragmented and very competitive industry. Our competitors include national and local carpentry manufacturers. These can be large, consolidated |
operations which house their manufacturing facilities in large and efficient plants, as well as relatively small, local cabinetmakers. |
Although we believe that we have superior name and reputation of direct marketing of custom designed carpentry, we compete with numerous |
competitors in our primary markets in which we operate, with reputation, price, workmanship and services being the principal competitive |
factors. Some of our competitors have achieved substantially more market penetration in certain of the markets in which we operate. Some |
of our competitors have greater resources available and are less highly leveraged, which may provide them with greater financial flexibility. |
We also compete against retail chains, including Sears, Costco, Builders Square, Sam’s Warehouse Club and other stores, which offer |
similar products and services through licensees. We compete, to a lesser extent, with small home improvement contractors and with large |
“home center” retailers such as Home Depot and Lowes. As a result of the implementation of our business strategy to conduct |
more remodel, condo/multi-family, and commercial projects in the new construction markets, we anticipate that we will compete to a greater |
degree with large “home center” retailers. To remain competitive, we will need to invest continuously in manufacturing, customer |
service and support, marketing and our dealer network. We may have to adjust the prices of some of our products to stay competitive, which |
would reduce our revenues or harm our financial condition and result of operations. We may not have sufficient resources to continue to |
make such investments or maintain our competitive position within each of the markets we serve. We have historically depended on a limited |
number of third parties to supply key finished goods and raw materials to us. Failure to obtain a sufficient supply of these finished |
goods and raw materials in a timely fashion and at reasonable costs could significantly delay our delivery of products, which would cause |
us to breach our sales contracts with our customers. We have historically |
purchased certain key finished goods and raw materials, such as pre-manufactured doors, cabinets, countertops, lumber and hardware, from |
a limited number of suppliers. We purchased finished goods and raw materials on the basis of purchase orders. In the absence of firm and |
long-term contracts, we may not be able to obtain a sufficient supply of these finished goods and raw materials from our existing suppliers |
or alternates in a timely fashion or at a reasonable cost. If we fail to secure a sufficient supply of key finished goods and raw materials |
in a timely fashion, it would result in a significant delay in our delivery of products, which may cause us to breach our sales contracts |
with our customers. Furthermore, failure to obtain sufficient supply of these finished goods and raw materials at a reasonable cost could |
also harm our revenue and gross profit margins. Increased prices |
for finished goods or raw materials could increase our cost of sales and decrease demand for our products, which could adversely affect |
our revenue or profitability. Our profitability is |
affected by the prices of the finished goods and raw materials used in the manufacturing and sale of our products. These prices may fluctuate |
based on a number of factors beyond our control, including, among others, changes in supply and demand, general economic conditions, labor |
costs, competition, import duties, tariffs, currency exchange rates and, in some cases, government regulation. Increased prices could |
adversely affect our profitability or revenues. We do not have long-term supply contracts for the finished goods and raw materials; however, |
we enter into pricing agreements with certain customers which fix their pricing for specified periods ranging from one to twelve months. |
Significant increases in the prices of finished goods and raw materials could adversely affect our profit margins, especially if we are |
not able to recover these costs by increasing the prices we charge our customers for our products. 56 Interruptions in |
deliveries of finished goods and raw materials could adversely affect our revenue or profitability. Our dependency upon regular |
deliveries from particular suppliers means that interruptions or stoppages in such deliveries could adversely affect our operations until |
arrangements with alternate suppliers could be made. If any of our suppliers were unable to deliver finished goods and raw materials to |
us for an extended period of time, as the result of financial difficulties, catastrophic events affecting their facilities or other factors |
beyond our control, or if we were unable to negotiate acceptable terms for the supply of finished goods and raw materials with these or |
alternative suppliers, our business could suffer. We may not be able to find acceptable alternatives, and any such alternatives could |
result in increased costs for us. Even if acceptable alternatives are found, the process of locating and securing such alternatives might |
be disruptive to our business. Extended unavailability of a necessary finished good or raw material could cause us to cease manufacturing |
or selling one or more of our products for a period of time. Environmental requirements |
applicable to our facilities may impose significant environmental compliance costs and liabilities, which would adversely affect our results |
of operations. Our facilities are subject |
to numerous federal, state and local laws and regulations relating to pollution and the protection of the environment, including those |
governing emissions to air, discharges to water, storage, treatment and disposal of waste, remediation of contaminated sites and protection |
of worker health and safety. We believe we are in substantial compliance with all applicable requirements. However, our efforts to comply |
with environmental requirements do not remove the risk that we may be held liable, or incur fines or penalties, and that the amount of |
liability, fines or penalties may be material, for, among other things, releases of hazardous substances occurring on or emanating from |
current or formerly owned or operated properties or any associated offsite disposal location, or for contamination discovered at any of |
our properties from activities conducted by previous occupants. Changes in environmental |
laws and regulations or the discovery of previously unknown contamination or other liabilities relating to our properties and operations |
could result in significant environmental liabilities. In addition, we might incur significant capital and other costs to comply with |
increasingly stringent air emission control laws and enforcement policies which would decrease our cash flow. We may fail to |
fully realize the anticipated benefits of our growth strategy within the multi-family and commercial properties channels. Part of our growth strategy |
depends on expanding our business in the multi-family and commercial properties channels. We may fail to compete successfully against |
other companies that are already established providers within those channels. Demand for our products within the multi-family and commercial |
properties channels may not grow, or might even decline. In addition, trends within the industry change often, we may not accurately gauge |
consumer preferences and successfully develop, manufacture and market our products. Our failure to anticipate, identify or react to changes |
in these trends could lead to, among other things, rejection of a new product line, reduced demand and price reductions for our products, |
and could adversely affect our sales. Further, the implementation of our growth strategy may place additional demands on our administrative, |
operational and financial resources and may divert management’s attention away from our existing business and increase the demands |
on our financial systems and controls. If our management is unable to effectively manage growth, our business, financial condition or |
results of operations could be adversely affected. If our growth strategy is not successful then our revenue and earnings may not grow |
as anticipated or may decline, we may not be profitable, or our reputation and brand may be damaged. In addition, we may change our financial |
strategy or other components of our overall business strategy if we believe our current strategy is not effective, if our business or |
markets change, or for other reasons, which may cause fluctuations in our financial results. 57 Risks Related to Our Automotive Supply Business If we fail to offer |
a broad selection of products at competitive prices or fail to maintain sufficient inventory to meet customer demands, our revenue could |
decline. In order to expand our |
business, we must successfully offer, on a continuous basis, a broad selection of products that meet the needs of our customers, including |
by being the first to market with new products. In addition, to be successful, our product offerings must be broad and deep in scope, |
competitively priced, well-made, innovative and attractive to a wide range of consumers. We cannot predict with certainty that we will |
be successful in offering products that meet all of these requirements. Moreover, even if we offer a broad selection of products at competitive |
prices, we must maintain sufficient in-stock inventory to meet consumer demand. If our product offerings fail to satisfy our customers’ |
requirements or respond to changes in customer preferences or we otherwise fail to maintain sufficient in-stock inventory, our revenue |
could decline. We are highly dependent |
upon key suppliers and an interruption in such relationships or our ability to obtain products from such suppliers could adversely affect |
our business and results of operations. In 2021 and 2020, Wolo |
purchased a substantial portion of finished goods from four third-party vendors which comprised of 61.4% and 56% of its purchases, respectively. |
Our ability to acquire products from our suppliers in amounts and on terms acceptable to us is dependent upon a number of factors that |
could affect our suppliers and which are beyond our control. For example, financial or operational difficulties that some of our suppliers |
may face could result in an increase in the cost of the products we purchase from them. If we do not maintain our relationships with our |
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