Polished.com (POLCQ) Risk Analysis

Until holders of our warrants acquire common stock upon exercise thereof, such holders will have no rights with respect to the common stock underlying the warrants. Upon exercise of the warrants, the holders will be entitled to exercise the rights of a common stockholder only as to matters for which the record date occurs after the exercise date.

Our outstanding warrants have a weighted average remaining contractual life of 3.4 years with a weighted average exercise price of $2.30. There can be no assurance that the market price of our common stock will ever equal or exceed the exercise price of the warrants. In the event that the stock price of our common stock does not exceed the exercise price of the warrants during the period when the warrants are exercisable, the warrants may not have any value.

The market price and trading volume of our common stock and warrants may fluctuate significantly. Many factors that are beyond our control may materially adversely affect the market price of your common stock and warrants, the marketability of your common stock and warrants and our ability to raise capital through equity financings. These factors include the following: - actual or anticipated variations in our periodic operating results;- increases in market interest rates that lead investors of our securities to demand a higher investment return;- changes in earnings estimates or financial projections we may provide to the public and any changes in these estimates or projections or our failure to meet these estimates or projections; failure of securities analysts to initiate or maintain coverage of our company, changes in financial estimates or ratings by any securities analysts who follow us or our failure to meet these estimates or the expectations of investors;- changes in market valuations of similar companies;- actions or announcements by us or our competitors of new businesses, services or products, significant technical innovations, acquisitions, strategic partnerships, joint ventures, operating results or capital commitments;- adverse market reaction to any increased indebtedness we may incur in the future;- changes in operating performance and stock market valuations of other technology or retail companies generally, or those in our industry in particular;- price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole;- changes in laws or regulations applicable to our business;- additions or departures of key personnel;- actions by stockholders, including sales of large blocks of our common stock;- speculation in the media, online forums, or investment community; and - our ability to maintain the listing of our common stock and warrants on NYSE American. In addition, stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many technology companies, including e-commerce companies. Stock prices of many technology companies, including e-commerce companies, have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies. Volatility in our stock price could adversely affect our business and financing opportunities and expose us to litigation. Securities litigation can subject us to substantial costs, divert resources and the attention of management from our business and materially adversely affect our business, financial condition and operating results.

As a result of the matters relating to the investigation (See "Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operation – Investigation") our former auditor withdrew its previously issued audit opinion on our December 31, 2021 consolidated financial statements, issued on March 31, 2022, and declined to be associated with the quarterly financial statements for the periods ended June 30, 2021, September 30, 2021, and March 31, 2022, filed on August 8, 2021, November 16, 2021 and May 12, 2022, respectively. If the Company does not make progress consistent with the plan discussed under the Risk Factor "Prior to the filing of this annual report on Form 10-K, we have been delinquent in our SEC reporting obligations for over 12 months. Although we expect to file our periodic reports in a timely fashion going forward, we cannot provide assurance that our business and the price of our common stock will not be materially adversely affected by our previous failure to file required periodic reports." during the plan period discussed therein or if the Company does not complete its Delayed Filings with the Securities and Exchange Commission by the end of the maximum 12-month cure period on August 22, 2023, Exchange staff will initiate delisting proceedings as appropriate. Our common stock and warrants are currently traded on NYSE American. We must meet certain financial and liquidity criteria to maintain the listing of our common stock and warrants. If we fail to meet any listing standards or if we violate any listing requirements, our common stock or warrants may be delisted. In addition, our board of directors may determine that the cost of maintaining our listing on a national securities exchange outweighs the benefits of such listing. A delisting of our common stock and warrants from NYSE American may materially impair our stockholders' ability to buy and sell our common stock and warrants and could have an adverse effect on the market price of, and the efficiency of the trading market for, our common stock and warrants. The delisting of our common stock or warrants could significantly impair our ability to raise capital and the value of your investment.

We have historically relied on the equity markets to raise capital to fund our business and operations. As of December 31, 2022, we had only 2,220,201 shares of common stock available for issuance, of which all shares were reserved for issuance upon vesting or exercise of equity awards and options, under our employee stock purchase and equity incentive plans, and under our at-the-market offering program. The limited number of shares available for issuance may limit our ability to raise capital in the equity markets and satisfy obligations with shares instead of cash, which could adversely impact our ability to fund our business and operations.

Certain provisions of Delaware law and our certificate of incorporation and bylaws may have the effect of delaying or preventing a change of control or changes in our management. Our certificate of incorporation and bylaws include provisions that: - permit the board of directors to establish the number of directors and fill any vacancies and newly created directorships;- provide that the Board is expressly authorized to adopt, amend or repeal our bylaws;- providing indemnification to our directors and officers;- controlling the procedures for the conduct and scheduling of board of directors and stockholder meetings;- do not give the holders of our common stock cumulative voting rights with respect to the election of directors;- provide that directors may only be removed by the majority of the shares of voting stock then outstanding; and - establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings. These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management. They may also make it more difficult for a third party to acquire us, even if the third party's offer may be considered beneficial by many of our stockholders. As a result, our stockholders may be limited in their ability to obtain a premium for their shares. These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management.

As an "emerging growth company" as defined in the Jumpstart Our Business Startups Act ("JOBS Act"), we may take advantage of exemptions from certain disclosure requirements applicable to other public companies that are not emerging growth companies. We are an emerging growth company until the earliest of (i) the last day of the fiscal year during which we have total annual gross revenues of $1.235 billion or more; (ii) the last day of the fiscal year following the fifth anniversary of the first sale of common equity securities pursuant to an effective registration statement under the Securities Act of 1933, as amended (the "Securities Act"); (iii) the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt; or (iv) the date on which we are deemed to be a "large accelerated filer" under the rules of the SEC. For so long as we remain an "emerging growth company," we will not be required to, among other things: - have an auditor report on our internal control over financial reporting pursuant to Sarbanes-Oxley;- comply with any new requirements adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotation or a supplement to the auditor's report providing additional information about our audit and our financial statements;- include detailed compensation discussion and analysis in our filings under the Exchange Act and instead may provide a reduced level of disclosure concerning executive compensation; and - hold a non-binding stockholder advisory vote on executive compensation and stockholder approval of any "golden parachute" payments not previously approved. Notwithstanding the above, we are also currently a "smaller reporting company", meaning that we are not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent company that is not a smaller reporting company and have either: (i) a public float of less than $250 million, or (ii) annual revenues of less than $100 million during the most recently completed fiscal year and: (A) no public float, or (B) a public float of less than $700 million. In the event that we are still considered a smaller reporting company, at such time we cease being an emerging growth company, the disclosure we will be required to provide in our SEC filings will increase but will still be less than it would be if we were not considered either an "emerging growth company" or a smaller reporting company. Specifically, similar to emerging growth companies, smaller reporting companies are able to provide simplified executive compensation disclosures in their filings; are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that independent registered public accounting firms provide an attestation report on the effectiveness of internal control over financial reporting; and have certain other decreased disclosure obligations in their SEC filings, including, among other things, only being required to provide two years of audited financial statements in annual reports. Decreased disclosures in our SEC filings due to our status as an emerging growth company or smaller reporting company may make it harder for investors to analyze the Company's results of operations and financial prospects. Because of these exemptions, some investors may find our common shares less attractive, which may result in a less active trading market for our common stock, and our share price may be more volatile.

The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or authorized for quotation on certain automated quotation systems, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. If we do not retain a listing on NYSE American or another national securities exchange and if the price of our common stock is less than $5.00, our common stock could be deemed a penny stock. The penny stock rules require a broker-dealer, before a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document containing specified information. In addition, the penny stock rules require that before effecting any transaction in a penny stock not otherwise exempt from those rules, a broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive (i) the purchaser's written acknowledgment of the receipt of a risk disclosure statement; (ii) a written agreement to transactions involving penny stocks; and (iii) a signed and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our common stock, and therefore stockholders may have difficulty selling their shares.

Future issuances of our common stock or securities convertible into, or exercisable or exchangeable for, our common stock, could cause the market price of our common stock to decline. We cannot predict the effect, if any, of future issuances of our securities on the price of our common stock. In all events, future issuances of our common stock would result in the dilution of our stockholders' holdings. In addition, the perception that new issuances of our securities could occur could adversely affect the market price of our common stock.

Any trading market for our common stock and warrants may be influenced in part by any research reports that securities industry analysts publish about us, our business, our market and our competitors. We do not currently have and may never obtain research coverage by securities industry analysts. If no securities industry analysts commence coverage of us, the market price and market trading volume of our common stock and warrants could be negatively affected. In the event we are covered by analysts, and one or more of such analysts downgrade our securities, or otherwise reports on us unfavorably, or discontinues coverage of us, the market price and market trading volume of our common stock and warrants could be negatively affected.

Our Executive Chairman, Ellery W. Roberts, is the controlling principal of 1847 Partners LLC (our "Manager"), which provides certain services to us, including administrative supervision and oversight of our day-to-day business operations, for a quarterly management fee equal to $62,500. He may obtain compensation and other benefits in transactions relating to us that involve our Manager. Consequently, Mr. Roberts may be in a position of conflict. Additionally, Edward J. Tobin, a member of our board of directors, also serves as a director of our Manager. These conflicts may not be resolved in our favor. Such conflicts of interest could have a material adverse effect on our business and operations. Further, the appearance of conflicts of interest created by related party transactions could impair the confidence of our investors. In the case of transactions with affiliates, there may be an absence of arms' length negotiations with respect to the terms, conditions and consideration with respect to goods and services provided to or by us.