EFTA Document EFTA01381273

Form S-1 Table of Content& required. and bringing this facility up to full production will continue to require, additional capital expenditures and the efforts and attention of our management and other personnel, which has and will continue to divert resources from our existing business operations. Even if our Heartland facility is brought up to full production according to our current schedule, our Heartland facility may not provide us with all of the operational and financial benefits that we expect to receive. Once our Heartland facility ramps up to full capacity, we expect it will provide us with in-house dry food manufacturing of up to 30 million pounds a month and account for 30-60% of our forecasted dry food production needs over the next several years Our Heartland facility is located in an area susceptible to tornadoes and other adverse weather conditions, and the damage or destruction of such facility due to fire or natural disasters, including tornadoes, power failures or disruptions or equipment breakdown, failure or substandard performance could severely affect our ability to operate it. Our Heartland facility and the manufacturing equipment we use to produce ow products would be difficult or costly to replace or repair and may require substantial lead-time to do so. For example. if we were unable to use our heartland facility, the use of any new facility would need to be approved by various federal and local planning. zoning and health agencies, including the U.S. Department of Agriculture, the Missouri Department of Health and the Missouri Department of Agriculture. and registered with the FDA, in addition to passing our internal quality assurance requirements which may take up to 18 months and would result in significant production delays. We also may not be able to find suitable alternatives with contract manufacturers on a timely basis and al a reasonable cost. In addition. we may in the future experience plant shutdowns or periods of reduced production as a result of regulatory issues, equipment failure or delays in deliveries. Any such disruption or unanticipated event may cause significant interruptions or delays in our business and low of inventory and/or data or render us unable to accept and fulfill customer orders in a timely manner, or at all. We have proµ.' ty and business disruption insurance coverage in place for ow Heartland facility. However, such insurance coverage may not be sufficient to cover all of our potential losses and may not continue to be available to us on acceptable terms, or at all. We may not be able to manage our manufacturing and supply chain effectively which may adversely affect our results of operations. We must accurately forecast demand for our products in order to ensure we have adequate available manufacturing capacity. Ow forecasts are based on multiple assumptions which may cause our estimates to be inaccurate and affect our ability to obtain adequate manufacturing capacity (whether our own manufacturing capacity or contract manufacturing capacity) in order to meet the demand for our products. which could prevent us from meeting increased customer or consumer demand and harm our brand and our business. However. if we overestimate our demand and overbuild our capacity, we may have significantly underutilized assets and may experience reduced margins. If we do not accurately align our manufacturing capabilities with demand, our business, financial condition and results of operations may be materially adversely affected. In addition, we must continuously monitor our inventory and product mix against forecasted demand. If we underestimate demand, we risk having inadequate supplies. We also face the risk of having too much inventory on hand that may reach its expiration date and become unsaleable, and we may be forced to rely on markdowns or promotional sales to dispose of excess or slow-moving inventory. If we are unable to manage our supply chain effectively, our operating costs could increase and our profit margins could decrease. We rely upon a number of third parties to manage or provide distribution centers for our products. In addition to our Heartland warehouse which we operate, our distribution operations include the use of two third-party distribution centers as well as the use of third parties to manage such distribution centers. These third-party distribution centers may distribute our products as well as the products of other companies. Our distribution operations at these third-party distribution centers could be disrupted by a number of factors. including labor issues, failure to meet customer standards, bankruptcy or other financial issues affecting our third-party providers, or other issues affecting any such third party's ability to service our customers effectively. If there is any disruption of these distribution centers, our business may be materially adversely affected. 25 http://vrow.see.gov/Arehivestedgar/datat I 609989/000119312515218883/d734898dsl.htm17/20/2015 10:30:13 AM) CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) CONFIDENTIAL DB-SDNY-0080112 SDNY GM_00226296 EFTA01381273