Item 1A. Risk Factors
ITEM 1A. Risk Factors
We have been a party to litigation, a consent
solicitation and a proxy contest with shareholders controlling a majority of the Company’s stock, which is costly and time-consuming
and has had a material adverse effect on our business, results of operations and financial condition and could adversely affect our stock
price.
In March 2019, stockholders of the Company representing
a majority of the outstanding shares of the Company’s common stock delivered signed written consents to the Company removing Ronald
Buschur, William Anderson and Si Ryong Yu as members of the Company’s Board and electing Ms. Cipora Lavut, Mr. David Mann and Dr.
Robert Lempert as directors of the Company. Because of Aura’s refusal to recognize the legal effectiveness of the consents,
on April 8, 2019 the stockholders filed suit in the Court of Chancery of the State of Delaware pursuant to Section 225 of the
Delaware General Corporations Law, seeking an order confirming the validity of the consents. On July 8, 2019 the Court of Chancery entered
final judgment in favor of the stockholder plaintiffs, confirming that (a) Ronald Buschur, Si Ryong Yu and William Anderson had been validly
removed by the holders of a majority of the Company’s outstanding stock acting by written consent (b) Ms. Lavut, Mr. Mann and Dr.
Lempert had been validly elected by the holders of a majority of the Company’s outstanding stock acting by written consent, and
(c) the Company’s Board of Directors validly consists of Cipora Lavut, David Mann, Robert Lempert, Gary Douglas and Salvador Diaz-Versón,
Jr. Aura’s refusal to recognize the legal effectiveness of the consents and the decision by the Company’s former leadership
team to utilize corporate resources to vigorously contest the shareholder action has consumed significant financial resources, temporarily
stagnated operations, and resulted in substantial costs, all of which had a material adverse effect on our business, operating results
and financial condition.
We have a history of losses, and we may not be profitable in
any future period.
Except for Fiscal 2018 and Fiscal 2021, in each
fiscal year since our reorganization in 2006, we have reported losses. For Fiscal year 2022, we recorded a net loss of $4.0 million. Since
the Company’s Chapter 11 Plan reorganization in 2006, we have spent considerable amounts on, among other things, building market
awareness and infrastructure for sales and distribution, enhancing our engineering capabilities, perfecting an all-electric refrigeration
transport system for midsize trucks, developing a 15 kW product, and developing a six-inch system capable of delivering approximately
4 kW of power. We continue to need substantial funds for the development of new products, enhancement of existing products and in order
to expand sales. However, sales of our products have not increased as we expected them to and may never increase to the level that we
need to expand our operations, or even to sustain them. We can provide no assurance as to when, or if, we will be profitable in the future.
Even if we achieve profitability, we may not be able to sustain it.
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The effects of a pandemic or widespread
outbreak of an illness, such as the COVID-19 pandemic, has had and could continue to have a material adverse impact on our business, results
of operations and financial condition.
The outbreak of COVID-19 was declared a pandemic
by the World Health Organization (“WHO”) during our fourth quarter of Fiscal 2020 and continues to impact our operations and
cash flows up to the filing date of this Annual Report for Fiscal 2022. While we have implemented measures to mitigate the impact of the
COVID-19 pandemic, we expect our Fiscal 2023 results of operations to continue to be adversely affected by the COVID-19 pandemic.
As a result of the COVID-19 pandemic, we have
experienced varying degrees of business disruptions and periods of closure of our corporate facilities, as have our customers, partners,
suppliers, and vendors, as described in Item 1 — “Business — Recent Developments.” Collectively, these disruptions
have had a material adverse impact on our business throughout Fiscal 2022 and Fiscal 2021. Despite the introduction of COVID-19 vaccines,
the pandemic remains highly volatile and continues to evolve. Accordingly, we cannot predict for how long and to what extent this crisis
will continue to impact our business operations or the global economy as a whole. Potential impacts to our business include, but are not
limited to:
● our ability to successfully execute our long-term growth strategy;
● potential declines in the level of purchases of products, including our products, caused
by higher unemployment and lower disposal income levels, travel and social gathering restrictions, work-from-home arrangements, or other
factors beyond our control;
● our ability to generate sufficient cash flows to support our operations, including repayment
of our debt obligations as they become due;
● the potential loss of one or more of our significant customers or partners, or the loss of
a large number of smaller customers or partners, if they are not able to withstand prolonged periods of adverse economic conditions,
and our ability to collect outstanding receivables;
● temporary closures or other operational restrictions of our facilities;
● supply chain disruptions resulting from closed factories, reduced workforces, scarcity of
raw materials, and scrutiny or embargoing of goods produced in infected areas, including any related cost increases;
● our ability to access capital markets and maintain compliance with covenants associated with
our existing debt instruments, as well as the ability of our key customers, suppliers, and vendors to do the same with regard to their
own obligations;
● additional costs to protect the health and safety of our employees, customers, and communities,
such as more frequent and thorough cleanings of our facilities and supplying personal protection equipment;
● diversion of management attention and resources from ongoing business activities and/or a
decrease in employee morale; and
● our ability to maintain an effective system of internal controls and compliance with the
requirements under the Sarbanes-Oxley Act of 2002.
Additional discussion
related to the various risks and uncertainties described above is included elsewhere within this “Risk Factors” section of
our Form 10-K.
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We derive a substantial portion of our revenues
from customers in industries susceptible to trends and factors affecting those industries, including the COVID-19 pandemic.
Our AuraGen ® system is geared toward
end-markets such as commercial vehicles, communications, transportation industries, and consumer and industrial equipment markets. Factors
negatively affecting these industries also negatively affect our business, financial condition and results of operations. Any adverse
occurrence, including industry slowdown, recession, costly or constraining regulations, excessive inflation, prolonged disruptions in
one or more of our customers’ production schedules or labor disturbances, that results in significant decline in the volume of sales
in these industries, or in an overall downturn in the business and operations of our customers in these industries, could materially adversely
affect our business, financial condition and results of operations.
As a result of the COVID-19 pandemic, global vehicle
production has decreased, and some manufacturers have completely shut down manufacturing operations in some countries and regions, including
the United States and Europe. As a result, we have experienced, and are likely to continue to experience, delays in the production and
distribution of our products and the loss of sales. If the global economic effects caused by the COVID-19 pandemic continue or increase,
overall customer demand may continue to decrease which could have a further adverse effect on our business, results of operations and
financial condition.
We will need additional capital in the future
to meet our obligations and financing may not be available. During Fiscal 2022 and Fiscal 2021, the Company attempted to increase
its engineering and manufacturing activities, but it still struggled with meeting its financial requirements. If we cannot obtain additional
capital, we will not be able to continue our operations.
As a result of our operating losses, we have largely
financed our operations through sales of our equity securities. Beginning with Fiscal 2017, the Company significantly reduced its engineering,
manufacturing, sales, and marketing activities to focus on renegotiating numerous financial obligations and conserving cash. For Fiscal
2022 and Fiscal 2021, we had approximately $2.6 million negative and $1.9 million negative cash flows from operations, respectively, due
primarily to the impact of the COVID-19 pandemic. The Company’s engineering and manufacturing activities remained limited due to
our inability to increase sales and raise significant amounts of new financing. Our ability to continue as a going concern is directly
dependent upon our ability to obtain additional operating capital and generating sufficient operating cash flow. The impacts of the
COVID-19 pandemic have caused significant uncertainty and volatility in the credit markets and there can be no assurance that lenders
or investors will make additional commitments to provide financing to us under current circumstances. As a result of the impacts of the
COVID-19 pandemic, we may be required to raise additional capital and our access to and cost of financing will depend on, among other
things, global economic conditions, conditions in the global financing markets, the availability of sufficient amounts of financing, and
our prospects. If we are unable to obtain additional funding as and when we need it, we will not be able to recommence operations or undertake
our planned expansion.
There is substantial doubt about our ability
to continue as a going concern.
Our independent registered public accounting
firm in their report on the Company’s February 28, 2022 audited financial statements raised substantial doubt about our
ability to continue as a going concern. We do not have any sufficient committed sources of capital and do not know whether
additional financing will be available when needed on terms that are acceptable, if at all. This going concern statement from our
independent public accounting firm may discourage some investors from purchasing our stock or providing alternative capital
financing. The failure to satisfy our capital requirements will adversely affect our business, financial condition, results of
operations and prospects.
We have identified material weaknesses in our disclosure controls and
procedures internal control over financial reporting. The matters involving internal controls and procedures that our management considered
to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: (1) ineffective controls over transactions
for debt issuances to provide for review of all terms in a timely and accurate manner, to ensure reporting is in conformance with generally
accepted accounting principles and properly reflected in the financial results; and (2) ineffective controls over transactions for common
stock issuances and options to provide for review of all terms in a timely and accurate manner, to ensure reporting is in conformance
with generally accepted accounting principles and properly reflected in the financial results. These material weaknesses resulted in the
restatement of our financial statements for the year ended February 28, 2021. The Company plans to remediate the identified
material weaknesses and other deficiencies and enhance our internal controls and disclosure controls over financial reporting in fiscal
2023, but there can be no guarantee that this will be accomplished.
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If we do not receive additional financing
when and as needed, we may not be able to continue the research, development and commercialization of our technology and products. In
that case, our business and results of operations would be materially and adversely affected.
Our capital requirements have been and will continue
to be significant. We will require substantial additional funds in excess of our current financial resources for research,
development and commercialization of products, to obtain and maintain patents and other intellectual property rights in these technologies
and products, and for working capital and other purposes, the timing and amount of which are difficult to ascertain. When
and as we need additional funds, such funds may not be available on commercially reasonable terms or at all. If we cannot obtain
additional funding when and as needed, our business and results of operation would be materially and adversely affected.
Our intellectual property rights are valuable,
and any inability or failure to protect them could reduce the value of our products, services and brand, which would have a material adverse
effect on our business.
Our patents, trademarks, and all of our other
intellectual property rights are important assets for us. There are events that are outside of our control that pose a threat
to our intellectual property rights. For example, effective intellectual property protection may not be available in every
country in which our products and services are distributed or made available. Also, the efforts we have taken to protect our
proprietary rights may not be sufficient or effective. Due to our lack of financial resources, we may not be able to adequately
protect our technology portfolio or apply for new patents to extend our intellectual property portfolio. The expiration of patents in
our patent portfolio may also have an adverse effect on our business. Any significant impairment of our intellectual property rights could
harm our business and or our ability to compete. Protecting our intellectual property rights is costly and time consuming and
we may need to resort to litigation to enforce our patent rights or to determine the scope and validity of third-party intellectual property
rights and we may not have the financial resources to pay for such litigation. Some of our competitors may be able to sustain
the costs of complex patent litigation more effectively than we can because they have substantially greater resources.
We seek to obtain patent protection for our innovations. It
is possible, however, that some of these innovations may not be protectable. In addition, given the costs of obtaining patent
protection, we may choose not to protect certain innovations that later turn out to be important. Furthermore, there is always
the possibility, despite our efforts, that the scope of the protection gained will be insufficient or that an issued patent may be deemed
invalid or unenforceable. Our inability or failure to protect our intellectual property rights could have a material adverse
effect on our business by reducing the value of our products, services and brand.
We occasionally become subject to commercial
disputes that could harm our business by distracting our management from the operation of our business, by increasing our expenses and,
if we do not prevail, by subjecting us to potential monetary damages and other remedies.
From time to time, we are engaged in disputes
regarding our commercial transactions. These disputes could result in monetary damages or other remedies that could adversely
impact our financial position or operations. Even if we prevail in these disputes, they may distract our management from operating our
business and the cost of defending these disputes would reduce our operating results.
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We have been named as a party in various
legal proceedings, and we may be named in additional litigation, all of which will require significant management time and attention,
result in significant legal expenses and may result in an unfavorable outcome, which could have a material adverse effect on our business,
operating results and financial condition.
We have been and may in the become subject to
various legal proceedings and claims that arise in or outside the ordinary course of business. Certain current lawsuits and pending proceedings
are described under Part I, Item 3. “Legal Proceedings.”
The results of these lawsuits and future legal
proceedings cannot be predicted with certainty. Also, our insurance coverage may be insufficient or not provide any coverage at all for
certain claims, our assets may be insufficient to cover any amounts that exceed our insurance coverage, and we may have to pay damage
awards or otherwise may enter into settlement arrangements in connection with such claims. Any such payments or settlement arrangements
in current or future litigation could have a material adverse effect on our business, operating results or financial condition. Even if
the plaintiffs’ claims are not successful, current future litigation could result in substantial costs and significantly and adversely
impact our reputation and divert management’s attention and resources, which could have a material adverse effect on our business,
operating results or financial condition. In addition, such lawsuits may make it more difficult to finance our operations.
We have substantial indebtedness and obligations to pay interest.
We currently have, and will likely continue to
have, a substantial amount of indebtedness and obligations to pay interest from various financing and settlement arrangements. Our indebtedness
and interest obligations could, among other things, make it more difficult for us to satisfy our debt obligations, require us to use a
large portion of our cash flow from operations to repay and service our debt or otherwise create liquidity problems, limit our flexibility
to adjust to market conditions, and place us at a competitive disadvantage. As of February 28, 2022, we had total notes payable debt outstanding
plus accrued interest of approximately $18.7 million, of which $18.4 million was short term.
In March 2022, the Company reached a settlement
that resolves the various claims asserted against us by former director, Robert Kopple, and his affiliated entities. In July 2017, Mr.
Kopple and his affiliates brought suit against the Company relating to more than $13 million and the current equivalent of more than approximately
23 million warrants, exercisable for seven years at a price of $0.10 per share, which Mr. Kopple and his affiliated entities (collectively
the “Kopple Parties”) claimed to be owed to them pursuant to various agreements with the Company entered into between 2013-2016.
Under the terms of the settlement, we have agreed to pay an aggregate amount of $10 million over a period of seven years; $3 million of
which is to be paid within approximately three months of the settlement date, after which, interest will accrue on the unpaid balance
at a rate of 6%, compounded annually. All amounts, including all accrued interest, are to be paid no later than eight years from the date
of the initial payment. The Kopple Parties have also received seven-year warrants to purchase up to an aggregate of approximately 3.3
million shares of our common stock at a price of $0.85 per share. The settlement also provides for standard mutual general release provisions
and includes customary representations, warranties, and covenants, including certain increases in the amount payable to the Kopple Parties
and the right of such parties to enter judgment against the Company if the Company remains in uncured default in its payment obligations
under the settlement. See Item 3. “Legal Proceedings”, “Liquidity and Capital Resources” in “Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations” and Footnote 19 “Subsequent Events “in the
Notes to Financial Statements included elsewhere in this Annual Report on Form 10-K for additional information regarding the transactions
under dispute.
We expect to obtain the money to pay our expenses and pay the principal
and interest on our indebtedness from cash flow from our operations and potentially from securities offerings. Accordingly, our ability
to meet our obligations depends on our future performance and capital raising activities, which will be affected by financial, business,
economic and other factors, many of which are beyond our control. If our cash flow and capital resources prove inadequate to allow us
to pay the principal and interest on our debt and meet our other obligations, we could face substantial liquidity problems and might be
required to dispose of material assets or operations, restructure or refinance our debt, which we may be unable to do on acceptable terms,
and forego attractive business opportunities. In addition, the terms of our existing or future debt agreements may restrict us from pursuing
any of these alternatives.
Our business is not diversified. If
we cannot increase market acceptance of our products, modify our products and services, or compete with new technologies, we may never
be profitable.
We currently focus all of our resources on the
successful commercialization of the AuraGen ® family of products. Because we have elected to focus our business
on a single technology line rather than diversifying into other areas, our success will be dependent upon the commercial success of these
products. If we are unable to increase market acceptance of our products, if we are unable to modify our products and services
on a timely basis so that we lose customers, or if new technologies make our technology obsolete, we may never be profitable.
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Most of our competitors are larger and better
financed than we are and have a greater presence in the marketplace. Our business may be adversely affected by industry competition.
Both in the U.S. and internationally, the industries
in which we operate are extremely competitive. We face substantial competition from companies that have a long history of offering
traditional auxiliary power units (portable generators), traditional automotive alternators, and inverters (a device that inverts battery
direct current electricity to alternating current). Most of our competitors have substantially greater financial resources,
spend considerably larger sums than we spend on research, new product development and marketing, and have long-standing customer relationships. Furthermore,
we must compete with many larger and better-established companies in the hiring and retention of qualified personnel. Although
we believe we have significant technological advantages over our competitors, realizing and maintaining such advantages will require us
to develop customer relationships and will also depend on market acceptance of our products. We may not have the financial
resources, technical expertise, or marketing and support capabilities to compete successfully, which would materially and adversely affect
our business.
We may not be able to establish an effective
distribution network or strategic OEM relationships; in which case our sales will not increase as expected and our financial condition
and results of operations would be adversely affected.
We are in the very beginning stages of developing
our distribution network and establishing strategic relationships with original equipment manufacturer (OEM) customers. We
may not be able to identify appropriate distributors or OEM customers on a timely basis. The distributors with which we partner
may not focus adequate resources on selling our products or may otherwise be unsuccessful in selling them. In addition, we
cannot assure you that we will be able to establish OEM relationships on favorable terms or at all. The lack of success of
distributors or OEM customers in marketing our products would adversely affect our financial condition and results of operations.
If we are successful in executing our business
plan to grow our business, our failure to efficiently manage our growth could have an adverse effect on our business.
If we are successful in executing our business
plan, we may experience growth in our business that could place a significant strain on our management and other resources. Our
ability to manage this growth will require us to successfully assimilate new employees, improve existing management information systems
and reorganize our operations. If we fail to manage growth efficiently, our business could be adversely affected.
We may experience delays in product shipments
and increased product costs because we depend on third party manufacturers for certain product components. Delays in product
shipment or an inability to replace certain suppliers could have a material adverse effect on our business and results of operations.
We currently do not have the capability to manufacture
most of the AuraGen ® components on a commercial scale. Therefore, we rely extensively on contracts with third
party manufacturers for such components. The use of third-party manufacturers increases the risk of delay of shipments to our
customers and increases the risk of higher costs if our manufacturers are not available when required. Our suppliers and manufacturers
may not supply us with a sufficient number of components or components of adequate quality, which would delay production of our product. We
do not currently have written agreements with any suppliers. Furthermore, those suppliers who make certain components may not
be easily replaced. Any of these disruptions in the supply of components could have a material adverse effect on our business or
results of operations. Furthermore, we are monitoring the impact of the COVID-19 pandemic on the operations of the Company, particularly
with respect to possible delays and other disruptions to the supply-chain.
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Although we generally aim to use standard
parts and components for our products, some of our components are currently available only from limited sources.
We may experience delays in production of the
AuraGen ® if we fail to identify alternate vendors, or if any parts supply is interrupted or reduced or if there is a significant
increase in production costs, each of which could materially adversely and affect our business and operations.
We will need to renew sources of component
supplies to meet increases in demand for the AuraGen ® . There is no assurance that our suppliers can or will
supply the components to us on favorable terms or at all.
As we recommence our operations and in order to
meet future demand for AuraGen ® systems, we will need to renew contracts or form new contracts with our prior manufacturers
and suppliers or locate other suitable manufacturers and suppliers for subassemblies and other components. Recently, we entered into discussions
with several of our prior suppliers and we are in the process of negotiating settlements of old payables and arranging new supply contracts.
Although we believe that there are a number of potential manufacturers and suppliers of the components, we cannot guarantee that contracts
for components can be obtained on favorable terms or at all. Any material adverse change in terms of the purchase of these
components could increase our cost of goods.
We need to invest in tooling to have a more
extensive line of products. If we cannot expand our tooling, it may not be possible for us to expand our operations.
We are currently limited in the products that
we are able to manufacture because of the limitations of our tooling capabilities. In order to have a broader line of products
that address industrial and commercial needs, we must make a significant investment in additional tooling or pursue new alternatives to
replace traditional tooling. We do not currently have the funds required to acquire new tooling or to obtain replacements and
no assurances can be given that we will have the required funds in the future. If we do not acquire the required funds for
tooling or replacement tooling, we may not be able to expand our product line to meet industrial and commercial needs.
We are subject to government regulation
that may restrict our ability to use certain suppliers outside the U.S. or to sell our products into certain countries. If we cannot
obtain the required approval from government agencies, then our business may be adversely affected.
We depend on third party suppliers for our parts
and components, some of which are located outside of the United States. In the event that some of these suppliers are barred
from selling their products in the United States, or cannot meet other U.S. government regulations, we would need to locate other suppliers,
which could delay or prevent us from shipping product to our customers. We use copper, steel and aluminum in our product and
in the event of government regulations or restrictions of these materials we may experience a shortage of these materials to manufacture
our product. Furthermore, U.S. law restricts us from selling products in some potential foreign markets without U.S. government
approval. If we cannot obtain the required approvals from government agencies to obtain materials or contract with suppliers
or if we are restricted by government regulation from selling our products into certain countries, our business may be adversely affected.
Acquisitions, joint ventures, and strategic
alliances may have an adverse effect on our business.
In March 2017, we entered into a joint venture
agreement with a Chinese partner. This joint venture arrangement and other transactions and arrangements involve significant challenges
and risks, including that they do not advance our business strategy, that we get an unsatisfactory return on our investment, that we have
difficulty integrating and retaining new employees, business systems, and technology, or that they distract management from our other
businesses. If an arrangement fails to adequately anticipate changing circumstances and interests of a party, it may result in early termination
or renegotiation of the arrangement. The success of these transactions and arrangements will depend in part on our ability to leverage
them to enhance our existing products and services or develop compelling new ones. It may take longer than expected to realize the full
benefits from these transactions and arrangements, such as increased revenue, enhanced efficiencies, or increased market share, or the
benefits may ultimately be smaller than we expected. These events could adversely affect our operating results or financial condition.
During Fiscal 2020, the Company recorded an impairment expense of $250,000 writing-off the Jiangsu Shengfeng investment due to operational
and future cash-flow uncertainties associated with AuraGen ® market development prospects in China through the joint venture.
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We rely on highly skilled
personnel and, if we are unable to retain or motivate key personnel or hire qualified personnel, we may not be able to grow effectively.
Our performance is largely dependent on the talents
and efforts of highly skilled individuals. Our future success depends on our continuing ability to identify, hire, develop,
motivate, and retain highly skilled personnel for all areas of our organization. We are currently in default under several agreements
with various key consultants which may make those parties unwilling to continue to work with the Company. Our continued ability to compete
effectively depends on our ability to attract new employees and to retain and motivate our existing employees and consultants. The
incentives to attract, retain and motivate employees and consultants provided by our ability to pay competitive salaries and rates as
well as offering additional incentives such as stock option grants or by future arrangements may not be as effective as in the past. If
we do not succeed in attracting excellent personnel or retaining or motivating existing personnel, we may be unable to grow effectively.
Our business is subject to the risks of
earthquakes and other natural catastrophic events, and to interruptions by man-made problems such as computer viruses, terrorism, or pandemics.
Our corporate headquarters and our research and
development operations are located in the State of California in regions known for seismic activity. A significant natural disaster, such
as an earthquake, in this region could have a material adverse effect on our business, financial condition and results of operations.
In addition, our servers are vulnerable to computer viruses, break-ins, and similar disruptions from unauthorized tampering with our computer
systems. Any such event could have a material adverse effect on our business, financial condition and results of operations.
Failure to maintain effective internal controls
over financial reporting could adversely affect our business and the market price of our Common Stock.
Pursuant to rules adopted by the SEC under the
Sarbanes-Oxley Act of 2002, we are required to assess the effectiveness of our internal controls over financial reporting and provide
a management report on our internal controls over financial reporting in all annual reports. This report contains, among other matters,
a statement as to whether our internal controls over financial reporting are effective and the disclosure of any material weaknesses in
our internal controls over financial reporting identified by management. Section 404 also requires our independent registered public
accounting firm to audit the effectiveness of our internal control over financial reporting.
As described in ITEM 9A, Controls and Procedures
contained herein in this Annual Report, we have concluded that the Company’s internal controls over financial reporting are not
effective for the Fiscal year ended February 28, 2022 and have identified a material weakness in our financial reporting internal controls.
The Company plans to remediate the material weakness in fiscal 2023, but there is no guarantee that this will be accomplished. Presently,
the Company does not have the financial resources to fully comply with all requirements of Section 404. If, in the future, we identify
one or more material weaknesses in our internal controls over financial reporting during this continuous evaluation process, our management
may not be able to assert that such internal controls are effective. Therefore, if we are unable to assert that our internal controls
over financial reporting are effective in the future, or if our auditors are unable to attest that our internal controls are effective
or they are unable to express an opinion on the effectiveness of our internal controls, we could lose investor confidence in the accuracy
and completeness of our financial reports, which would have an adverse effect on our business and the market price of our Common Stock.
Trading on the OTC Markets is volatile and
sporadic, which could depress the market price of our common stock and make it difficult for our stockholders to resell their shares .
Our common stock is quoted on the Pink Sheets
of the OTC Markets. Trading in stock quoted on the OTC Markets is often thin and characterized by wide fluctuations in trading prices,
due to many factors, some of which may have little to do with our operations or business prospects. This volatility could depress the
market price of our common stock for reasons unrelated to operating performance. Moreover, the OTC Markets is not a stock exchange, and
trading of securities on the OTC Markets is often more sporadic than the trading of securities listed on a quotation system like NASDAQ
or a stock exchange like the New York Stock Exchange. These factors may result in investors having difficulty reselling any shares of
our common stock.
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ITEM 1B. UNRESOLVED STAFF COMMENTS
None
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