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ITEM 1A RISK FACTORS.
Lack of Sufficient Operating Funds-Going Concern
Our independent registered public accounting firm for the fiscal year endWith unprecedented October 31, 2023, has included an explanatory paragraph in their opinion that accsales, the companies our audited financial statements for the fiscal year endy is concerned October 31, 2023, indicating that as a result of the Company having had net labout posses and negativible cash flows and an accumulated deficit there is substantial doubt about the Companys ability to continue as a issues going concern. Because we are not able to generate sufficient funds from sales and because we are unable to access commercial sources of credit, we are consistently underfunded. As a result, our growth is very limited, and we have difficulty in sustaining our currforward. This problem exists due to the current level of operations. We are not able to initiate adequate marketing programs, hire additional staff, develop new products or have flexibility in ordering Insultex from our mpayment terms with their manufacturer. Additionally, we must replace our quality control testing equipment for our House Wrap product line which we estimate may cost $100,000. In ts versus account payable terms that are issued to accounts. The past, we have depended on borrowcompany is attemptings from our CEO and other priv to negotiate parties, primarily stockholders in the private sale of our common stock or debt. Should we not be able to continue to rely on these sources of fundingbetter terms with its manufacturers in and increase our revenue stream to at least meet our current level of operations and to attempt to avoid purchase new testing equipment the ability of the Company to continue as a goorder financing or obtaining concern will be adversely affected.
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a commercial loan.
Competition
The markets served by the Company are highly competitive. Competitive pricing pressure could result in loss of customers or decreased profit margins. Competition by product type includes the following:
The markets for our products are increasingly competitive. Our competitors have substantially longer operating histories, greater brand name and company name recognition, larger customer bases and greater financial, operating, and technical resources than us. Because we are financially and operationally smaller than our competitors, we willmay encounter difficulties in capturing market share. Our competitors are able to conduct extensive marketing campaigns and create more attractive pricing of their target markets than we are.
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Some of our biggest competitors for our House Wrap product line are;
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Dupont
Kimberly Clark.
Some of our biggest competitors in the Arctic Armor line are:
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Ice Clam Corporation
Vexilar
Mustang Survival
Frabill
Stryker
We compete in the following ways:
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Arct. Emphasize the Advantages of our Products.
Arctic Armor Line
We emphasize the following characteristics and advantages of our Arctic Armor line products:
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light weight
waterproof
windproof
sub-zero protection
buoyancy
Insultex provides a scent barrier which we had a permeation test performed on at the Texas Research Institute Austin, Inc. The product was subjected to gas stimulant for an eight-hour period. The product was tested for permeation of the gas every three minutes for the duration of the test with almost no detection of the gas throughout the test. The testing was based upon accepted industry practices as well as the test method used.
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HOUSE WRAP
Our House Wrap product
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| Utilize our web site to promote, market, and sell our products to consumers. | ||
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| Utilize professional sales representatives, distributors and manufacturer representatives to sell our products to established retailers, contractors and end users. |
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Our products have the following disadvantages in comparison to the products of our competitors:
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| Lack of brand name recognition or recognition of the properties of Insultex and its advantages. We, as well as our products, have little brand name recognition compared to our competitors. And we may encounter difficulties in establishing product recognition. Also, although our products have insulation properties, the material down has a widespread and established reputation as being the superior insulation in the market, while the properties and advantages of Insultex has little public recognition. |
There can be no assurance that we will be able to compete in the sale of our products, which could have a negative impact upon our business.
We do not expect our business to be dependent on one or a few customers or retailers; however, there is no assurance that we will not become so dependent.
Cyclicality
The Companys Arctic Armor apparel sales fluctuate based on temperature and weather conditions. Our products are suitable primarily for cold weather conditions. This will have a cyclical effect on sales. It also makes our revenues totally dependent on cold weather for this product line. For the fiscal year ended October 31, 2023, our cold weather products accounted for approximately 10% of our total revenue. Sales of the companys Insultex House Wrap may fluctuate during the colder months as builders and contractors attain less business. Sales in the typically warmer states will see no changes.
Material Acquisition
The Company has only one supplier of Insultex, the special material which is manufactured within the apparel of our cold weather products and our House Wrap product. Additionally, we have one manufacturer that produces the apparel on behalf of the Company, located in Indonesia. Currently, we are only selling apparel from our inventory. Any delays in getting Insultex will adversely affect our revenue stream. Once we have our own equipment operating, we will be able to produce Insultex. We intend to use such Insultex for our House Wrap product.at the present time.
Geographic Concentration
Most of the Companys sales for its cold weather clothing products to retailers are concentrated in colder climates of the United States and Canada.
Management
The Company is dependent on the management of Joseph Riccelli Jr, our Chief Executive Officer. The loss of Mr. Riccelli Jrs services could have a negative effect on the performance and growth of the Company for some period of time.
Penny Stock Considerations
Our shares are penny stocks as that term is generally defined in the Securities Exchange Act of 1934 as equity securities with a price of less than $5.00. Our shares may be subject to rules that impose sales practice and disclosure requirements on broker-dealers who engage in certain transactions involving a penny stock.
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Under the penny stock regulations, a broker-dealer selling a penny stock to anyone other than an established customer or accredited investor must make a special suitability determination regarding the purchaser and must receive the purchasers written consent to the transaction prior to the sale, unless the broker-dealer is otherwise exempt. Generally, an individual with a net worth, exclusive of ones residence, in excess of $1,000,000 or annual income exceeding $200,000 individually or $300,000 together with his or her spouse is considered an accredited investor. In addition, under the penny stock regulations the broker-dealer is required to:
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| Deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the Securities and Exchange Commission relating to the penny stock market, unless the broker-dealer or the transaction is otherwise exempt; | ||
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| Disclose commissions payable to the broker-dealer and its registered representatives and current bid and offer quotations for the securities; |
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| Send monthly statements disclosing recent price information pertaining to the penny stock held in a customers account, the accounts value and information regarding the limited market in penny stocks; and |
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| Make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchasers written agreement to the transaction, prior to conducting any penny stock transaction in the customers account. |
Because of these regulations, broker-dealers may encounter difficulties in their attempt to sell shares of our stock, which may affect the ability of shareholders or other holders to sell their shares in the secondary market and have the effect of reducing the level of trading activity in the secondary market. These additional sales practice and disclosure requirements could impede the sale of our securities if our securities become publicly traded. In addition, the liquidity of our securities may be adversely affected, with a corresponding decrease in the price of our securities.
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