What changed in this filing

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Item 1A. Risk Factors

2024-03-22 compared with 2023-03-23 · 69 added, 67 removed, 347 unchanged (28% of the section changed)

Risks Associated with Our Business

The long-term impacts caused by the COVID-19 pandemic could continue to have an adverse effect on our business.

The COVID-19 pandemic continues to have an unprecedented, long-term impact on the U.S.

economy that continues to create significant business uncertainties.

These uncertainties include, but are not limited to, the adverse effect of the pandemic on the economy, our supply chain partners, transportation and logistics providers, our employees and customers.

As infection rates oscillate with new variants, widespread outbreaks, stay-at-home recommendations or mandates from federal, state and local authorities may recur, which may continue to affect our supply chain and our customer base.

Continued impacts of the pandemic could materially adversely affect our near-term and long-term revenues, earnings, liquidity and cash flows, and may require significant actions in response, including, but not limited to, employee furloughs, workforce reductions, plant or other operational shut-downs, expense reductions or discounting of pricing of our products, all in an effort to mitigate such impacts.

The extent of the ongoing impact of the pandemic on our business and financial results will depend largely on future developments, including the duration of the spread of the outbreak within the United States, the timing and success of vaccine programs, the impact on capital and financial markets and the related impact on consumer confidence and spending, all of which are highly uncertain and cannot be predicted.

If we are unable to attract or retain qualified personnel, our business and product development efforts could be harmed.

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For the year ended December 31, 2023, we reported a net loss of $4.3 million and are dependent upon the availability of financing in order to continue our business.

In 2023 to date, financing activity to sustain ongoing losses has included transactions with a member of our Board of Directors as well as certain purchases associated with Sander Electronics, a strategic investor, converting approximately $1.5 million of outstanding bridge debt into common stock and also selling an aggregate of approximately $2.72 million in common stock.

In the year ended December 31, 2023, financing activity to sustain ongoing losses has included (1) selling an aggregate of approximately $6.1 million common stock through several private placement transactions (Please see Note 9 of our financial statements for the year ended December 31, 2023 included in Part II, Item 8, “Financial Statements and Supplementary Data,” of this Annual Report.) and (2) converting approximately $1.7 million of outstanding promissory notes into common stock.

In the year ended December 31, 2022, financing activity to sustain ongoing losses included converting approximately $303 thousand of outstanding bridge financing into common stock, the issue and sale of approximately $1.5 million of unsecured bridge financing from October to December 2022, the issue and sale of approximately $3.2 million of common stock and warrants to purchase common stock in June 2022, and the offer and sale of $2.0 million of unsecured bridge debt financing in April 2022.

In August, 2020, we entered into two Credit Facilities secured by our assets and are subject to customary affirmative and negative operating covenants and events of defaults that restrict indebtedness, liens, corporate transactions, dividends, and affiliate transactions, among others.

In August, 2020, we entered into two Credit Facilities secured by our assets and were subject to customary affirmative and negative operating covenants and events of defaults that restrict indebtedness, liens, corporate transactions, dividends, and affiliate transactions, among others.

The Receivables Facility capacity was $2.5 million, and the Inventory Facility capacity was initially $3.0 million and increased to $3.5 million in April 2021.

As of December 31, 2022, we had cash of approximately $0.1 million and had debt balances of $1.4 million and $1.0 million under the Inventory Facility and the Receivables Facility, respectively.

As of December 31, 2022, we had cash of approximately $52 thousand and had debt balances of $1.4 million and $1.0 million under the Inventory Facility and the Receivables Facility, respectively.

In January 2023, we amended the Inventory Facility, reducing the maximum availability to $500 thousand, reducing monthly fees and paying down an aggregate of $1 million in January and February 2023.

In February 2023, we agreed to terminate the Receivables Facility.

As a result, our availability under the Credit Facilities has been significantly reduced, and there can be no assurance that these lending facilities will be renewed or replaced on commercially reasonable terms or at all.

Even with access to borrowings under the Inventory Facility, we may not generate sufficient cash flows from our operations or be able to borrow sufficient funds to sustain our operations.

As such, we will likely need additional external financing during

2023 and will continue to review and pursue external funding sources including, but not limited to, the following:

In September 2023, we paid down the remaining balance under the Inventory Facility.

As a result, there were no Inventory Facility and Receivables Facility as of December 31, 2023.

We may not generate sufficient cash flows from our operations or be able to borrow sufficient funds to sustain our operations.

As such, we will likely need additional external financing during 2024 and will continue to review and pursue external funding sources including, but not limited to, the following:

• obtaining financing from traditional or non-traditional investment capital organizations or individuals;

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Our independent registered public accounting firm’s opinion on our audited financial statements for the year ended December 31, 2023 includes a modification stating that our losses and negative cash flows from operations and uncertainty in generating sufficient cash to meet our obligations and sustain our operations raise substantial doubt about our ability to continue as a going concern.

In addition, Note 4 “Restructuring”, to our financial statements included in Part II, Item 8 “Financial Statements and Supplementary Data,” of this Annual Report includes disclosure describing the existence of conditions that raise substantial doubt about our ability to continue as a going concern for a reasonable period of time.

While we continue to pursue funding sources and transactions that could raise capital, there can be no assurances that we will be successful in these efforts or will be able to resolve our liquidity issues or eliminate our operating losses.

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Total sales to our primary distributor to the U.S.

Navy, and a primary shipbuilder for the U.S.

Navy combined with sales to shipbuilders for the U.S.

Navy represented 30% of net sales in 2022.

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We rely on arrangements with independent shipping companies for the delivery of our products from vendors abroad.

The failure or inability of these shipping companies to deliver products or the unavailability of shipping or port services, even temporarily, could have a material adverse effect on our business.

The failure or inability of these shipping companies to deliver products or the unavailability of shipping or port services, even

temporarily, could have a material adverse effect on our business.

We may also be adversely affected by an increase in freight surcharges due to global logistics capacity constraints, rising fuel costs and added security costs.

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We are continually taking steps to address our manufacturing capacity needs for our products.

If we are not able to increase or decrease our production capacity at our targeted rate or if there are unforeseen costs associated with adjusting our capacity levels or there are unanticipated interruptions in our global supply chain or logistics from such possibilities as long-term effects of the COVID-19 pandemic, shifting workforces, geopolitical tension or energy policies, we may not be able to achieve our financial targets.

If we are not able to increase or decrease our production capacity at our targeted rate or if there are unforeseen costs associated with adjusting our capacity levels or there are unanticipated interruptions in our global supply chain or logistics from such possibilities as long-term effects of the COVID-19 pandemic, geopolitical tension as the military conflict in Ukraine and the Middle East, shifting workforces, or energy policies, we may not be able to achieve our financial targets.

In addition, as we introduce new products and further refine existing products, we must balance the production and inventory of prior generation products with the production and inventory of new products, whether manufactured by us or our contract manufacturers, to maintain a product mix that will satisfy customer demand and mitigate the risk of incurring cost write-downs on the previous generation products, related raw materials and tooling.

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If our agents do not achieve our sales objectives or these relationships take significant time to develop, our revenue may decline, fail to grow or not increase as rapidly as we intend in order to achieve profitability and grow our business.

During 2022, we refocused our agency relationships on those that were both mutually beneficial and strategically important.

we believe that our agency strategy will increase the role of independent agents and sales representatives over time, direct sales using internal sales personnel still account for a substantial portion of our sales, and our agency plans may take longer to contribute significantly to our operating results.

We improved and continued to maintain our agency relationships that were both mutually beneficial and strategically important.

Although we believe that our agency strategy will increase the role of independent agents and sales representatives over time, direct sales using internal sales personnel still account for a substantial portion of our sales, and our agency plans may take longer to contribute significantly to our operating results.

Furthermore, our agency agreements are generally short-term and can be cancelled by either party without significant financial consequence.

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For example, declining energy prices in certain regions or countries may favor existing lighting technologies that are less energy-efficient, reducing the rate of adoption for LED lighting products in those areas.

Notwithstanding continued performance improvements and cost reductions of LED lighting technologies, limited customer awareness of the benefits of LED lighting products, lack of widely accepted standards governing LED lighting products and customer unwillingness to adopt LED lighting products could significantly limit the demand for LED lighting products.

Notwithstanding continued performance improvements and cost reductions of LED lighting technologies, limited

customer awareness of the benefits of LED lighting products, lack of widely accepted standards governing LED lighting products and customer unwillingness to adopt LED lighting products could significantly limit the demand for LED lighting products.

Even potential customers that are inclined to adopt energy-efficient lighting technology may defer investment as LED lighting products continue to experience rapid technological advances.

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In some cases, our products may contain undetected defects or flaws that only become evident after shipment.

Even if our products meet standard specifications, our customers may attempt to use our products in

applications for which they were not designed or in products that were not designed or manufactured properly, resulting in product failures and creating customer satisfaction issues.

Even if our products meet standard specifications, our customers may attempt to use our products in applications for which they were not designed or in products that were not designed or manufactured properly, resulting in product failures and creating customer satisfaction issues.

Some of our products use line voltages (such as 120- or 240-volts AC), which involve enhanced risk of electrical shock, injury or death in the event of a short circuit or other malfunction.

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Additionally, we could be required to defend against individuals and groups who have been purchasing intellectual property assets for the sole purpose of making claims of infringement and attempting to extract settlements from companies like ours.

Litigation could delay development or sales efforts and an adverse outcome in litigation, or any similar proceedings, could subject us to significant liabilities, require us to license disputed rights from others or require us to cease marketing or using certain products or technologies.

Litigation could delay development or sales

efforts and an adverse outcome in litigation, or any similar proceedings, could subject us to significant liabilities, require us to license disputed rights from others or require us to cease marketing or using certain products or technologies.

We may not be able to obtain any licenses on acceptable terms, if at all, and may attempt to redesign those products that contain allegedly infringing intellectual property, which may not be possible.

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We may be subject to legal claims against us or claims by us that could have a significant impact on our resulting financial performance.

At any given time, we may be subject to litigation or claims related to our products, intellectual property, suppliers, customers, employees, stockholders, distributors, sales representatives and sales of our assets, among other things, the disposition of which may have an adverse effect upon our business, financial condition, or results of operations.

At any given time, we may be subject to litigation or claims related to our products, intellectual property, suppliers, customers, employees, shareholders, distributors, sales representatives and sales of our assets, among other things, the disposition of which may have an adverse effect upon our business, financial condition, or results of operations.

The outcome of litigation is difficult to assess or quantify.

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The inability to obtain certain patents or rights to third-party patents and other intellectual property rights in the future could have a material adverse effect on our business.

We may be subject to intellectual property infringement claims or other allegations by third parties, which may materially and adversely affect our business, results of operations and prospects.

Our products are largely depending on the application of our technology.

From time to time, third parties holding similar technologies and intellectual property rights, including companies, competitors, patent holding companies, customers and/or non-practicing entities, may assert intellectual property claims against us.

Although we believe that our products do not infringe upon the intellectual property rights of third parties, we cannot be certain that our operations do not or will not infringe upon or otherwise violate intellectual property rights or other rights held by third parties, and there may be third-party intellectual property rights or other rights that are infringed by our products without our awareness.

We may be from time to time in the future subject to legal proceedings and claims relating to the intellectual property rights or other rights of third parties, some even without merit.

If we are forced to defend against any infringement or misappropriation claims, whether they are with or without merit, are settled out of court, or are determined in our favor, we may be required to expend significant time and financial resources on the defense of such claims.

Regardless of the merits or eventual outcome, such a claim could adversely impact our brand and business.

Any such assertions may require us to enter into

royalty arrangement or result in us being unable to use certain intellectual property.

Infringement assertions by third parties may involve patent holding companies or other patent owners who have no relevant product revenue, and therefore our own issued and pending patents may provide little or no deterrence to these patent owners in bringing intellectual property right claims against us.

Furthermore, any adverse outcome of a dispute may require us to pay damages, potentially including treble damages and attorney’s fees, if are found to have willfully infringed a party’s intellectual property;

case making, licensing or using our solutions that are alleged to infringe or misappropriate the intellectual property of others;

expend additional development resources to redesign our solutions’ enter into potentially unfavorable royalty or license agreements in order to obtain the right to use necessary technologies or works;

and to indemnify our partners, customers and other third parties.

Any of these events could adversely impact our business, results of operations and financial condition.

If we were found to have violated the intellectual property rights of others, we may be subject to liability for our infringement activities or may be prohibited from using such intellectual property or relevant contents, and we may incur licensing or usage fees or be forced to develop alternatives of our own.

As a result, our reputation may be harmed and our business and financial performance may be materially and adversely affected.

The ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

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Moreover, although we are not aware of any effort to amend any existing certification standard or implement a new certification standard in a manner that would render us unable to maintain certification for our existing products or obtain ratification for new products, our net sales might be adversely affected if such an amendment or implementation were to occur.

If we experience a material weakness in our internal control over financial reporting in the future or fail to otherwise maintain effective financial reporting systems and processes, we may be unable to accurately and timely report our financial results or comply with the requirements of being a public company, which could cause the price of our common stock to decline and harm our business.

As a public company reporting to the SEC, we are subject to the reporting requirements of the Exchange Act and the Sarbanes-Oxley Act of 2002, including Section 404(a) that requires that we annually evaluate and report on our systems of internal controls.

We cannot be certain that we will not in the future have material weaknesses in our internal control over financial reporting, or that we will successfully remediate any that we find.

In addition, the processes and systems of internal controls we have developed to date may not be adequate.

Accordingly, there could be a reasonable possibility that material weaknesses could result in a misstatement of our accounts or disclosures that would result in a material misstatement of our financial statements that would not be prevented or detected on a timely basis, or cause us to fail to meet our obligations to file periodic financial reports on a timely basis.

Any of these failures could result in adverse consequences that could materially and adversely affect our business, including an adverse impact on the market price of our common stock, potential action by the SEC against us, possible defaults under our debt agreements, shareholder lawsuits, delisting of our stock, general damage to our reputation and the diversion of significant management and financial resources.

We rely heavily on information technology in our operations and any material failure, weakness, interruption or breach of security could prevent us from effectively operating our business, which could have a material adverse effect on our business, financial condition, and results of operations.

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Our failure to comply with the continued listing requirements of Nasdaq could adversely affect the price of our common stock and its liquidity.

We have a history of failing to comply with the continued listing requirements of Nasdaq, although we have successfully cured all the pre-existed deficiency, we may not be able to cure any deficiency timely in the future.

On August 23, 2022, we received a letter from the Nasdaq Listing Qualifications Staff (the “Staff”) notifying us that we are not in compliance with Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Rule”), because the closing bid price for our common stock was below the minimum $1.00 per share for 30 consecutive business days.

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During the initial compliance period, our common stock continued to trade on the Nasdaq Capital Market, but did not satisfy the Bid Price Rule.

On February 21, 2023, we received written notification (the “Notification”) from the Staff stating that we had not regained compliance with the Bid Price Rule and were ineligible to obtain a second 180 calendar day period to regain compliance because we did not meet the Nasdaq Capital Market’s minimum $5 million Stockholders’ Equity initial listing requirement as of September 30, 2022.

Pursuant to the Notification, our common stock is subject to delisting from Nasdaq pending our opportunity to request a hearing before the Nasdaq Hearings Panel (the “Panel”).

The Company intends to diligently pursue an appeal of the Notification before the Panel and regain compliance with the Bid Price Rule.

Under Nasdaq rules, the delisting of our common stock will be stayed during the pendency of the appeal and during such time, our common stock will continue to be listed on Nasdaq.

On February 24, 2023, we submitted our request for an appeal before the Panel.

There can be no assurance that such appeal will be successful or that we will be able to regain compliance

with the Bid Price Rule or maintain compliance with other Nasdaq listing requirements.

If our appeal is denied or if we fail to regain compliance with Nasdaq’s continued listing standards during any period granted by the Panel, our common stock will be subject to delisting from Nasdaq.

On November 16, 2022, we received a letter from the Staff notifying us that we were again no longer in compliance with Nasdaq Listing Rule 5550(b)(1), which requires listed companies to maintain stockholders’ equity of at least $2.5 million if they do not meet the alternative compliance standards relating to the market value of listed securities or net income from continuing operations (the “Minimum Stockholders’ Equity Rule”).

On November 16, 2022, we received a letter from the Staff notifying us that we were no longer in compliance with Nasdaq Listing Rule 5550(b)(1), which requires listed companies to maintain stockholders’ equity of at least $2.5 million if they do not meet the alternative compliance standards relating to the market value of listed securities or net income from continuing operations (the “Minimum Stockholders’ Equity Rule”).

Our Form 10-Q for the quarterly period ended September 30, 2022 filed on November 10, 2022 reflected that our stockholders’ equity as of September 30, 2022 was $1.5 million.

Based on our timely submission of our plan to regain compliance, Nasdaq granted us an extension through May 15, 2023 to regain compliance with the Minimum Stockholders’ Equity Rule.

If we do not regain and remain compliant with Nasdaq’s continued listing requirements, then we could be delisted from The Nasdaq Capital Market.

If we were delisted, it would likely have a negative impact on the price of our common stock and our liquidity.

If we are delisted from The Nasdaq Capital Market and we are not able to list our common stock on another exchange, our common stock could be quoted on the OTC Bulletin Board or in the “pink sheets.” As a result, we could face significant adverse consequences including, among others:

• increased borrowing costs under the terms of outstanding bridge financing;

• a limited availability of market quotations for our securities;

• a determination that our common stock is a “penny stock,” which would require broker-dealers trading in our common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;

• a limited amount of news and little or no analyst coverage of the Company;

• we would no longer qualify for exemptions from state securities registration requirements, which may require us to comply with applicable state securities laws;

• a decreased ability to issue additional securities (including pursuant to short-form registration statements on Form S-3) or obtain additional financing in the future.

Based on our timely submission of our plan to regain compliance (the “Plan”), Nasdaq granted us an extension through May 15, 2023 to regain compliance with the Minimum Stockholders’ Equity Rule.

On February 21, 2023, we received written notification (the “Bid Price Notification”) from the Staff stating that we had not regained compliance with the Bid Price Rule and our common stock is subject to delisting from Nasdaq.

On February 24, 2023, we submitted a request for a hearing before the Nasdaq Hearings Panel (the “Panel”) to appeal the delisting (the “Appeal”).

Under Nasdaq rules, the delisting of the Company’s common stock was stayed during the pendency of the Appeal and, during such time, the Company’s common stock continued to be listed on Nasdaq.

On March 28, 2023, the Company received written notification (the “Additional Staff Determination”) from the Staff stating that (i) following the Bid Price Notification, and in accordance with Listing Rule 5810(c)(2)(A), Nasdaq is no longer permitted to consider the stockholders’ equity compliance plan, (ii) the Additional Staff Determination serves as an additional basis for delisting the Company’s common stock from Nasdaq and (iii) the Panel will consider the Additional Staff Determination in rendering a determination regarding the continued listing of the Company’s common stock on Nasdaq.

On April 6, 2023, the Company participated in the Appeal before the Panel.

The Company provided an update to the Panel on the Company’s substantial progress made towards the previously submitted Plan during the three months ended March 31, 2023, and requested the Panel grant the Company an exception to (1) re-allow the previously granted exception until May 15, 2023 for the Company to regain compliance with the Minimum Stockholders’ Equity Rule and (2) grant an exception allowing the Company up to 180 days following the Bid Price Notification to regain compliance with the Bid Price Rule by effecting a reverse stock split following stockholder approval at the Company’s 2023 annual meeting of stockholders.

On May 1, 2023, the Panel granted the Company’s request (the “Panel Decision”) to continue the Company’s listing on Nasdaq, subject to the following conditions:

(1) on or before May 15, 2023, the Company shall file with the SEC its quarterly report for the three months ended March 31, 2023 demonstrating compliance with the Minimum Stockholders’ Equity Rule and (2) on or before July 7, 2023, the Company shall demonstrate compliance with the Bid Price Rule.

On July 27, 2023, the Company received written notification from the Staff stating that the Company has regained compliance with the Bid Price Rule and the Minimum Stockholders’ Equity Rule, as required by the Panel Decision.

Pursuant to Nasdaq Listing Rule 5815(d)(4)(B), the Company will be subject to a mandatory panel monitor for a period of one year from July 27, 2023 (the “Monitoring Period”).

If, within the Monitoring Period, the Staff finds the Company again out of compliance with the Minimum Stockholders’ Equity Rule, notwithstanding Nasdaq Listing Rule 5810(c)(2), the Company will not be permitted to provide the Staff with a plan of compliance with respect to that deficiency and the Staff will not be permitted to grant additional time for the Company to regain compliance with respect to that deficiency, nor will the Company be afforded an applicable cure or compliance period pursuant to Nasdaq Listing Rule 5810(c)(3).

Instead, the Staff will issue a delist determination letter and the Company will have an opportunity to request a new hearing with the initial Panel or a newly convened hearings panel if the initial Panel is unavailable.

The Company will have the opportunity to respond and present to the Panel as provided by Nasdaq Listing Rule 5815(d)(4)(C).

The Company’s common stock may be at that time delisted from Nasdaq.

As of the date of this Annual Report, the Company believes it has maintained compliance with the Minimum Stockholders’ Equity Rule for continued listing on the Nasdaq Capital Market.

To become compliant with the Bid Price Rule, the Company effected a 1-for-7 reverse stock split to increase the per share trading price of the common stock effective on June 16, 2023 (See Note 9, “Stockholders’ Equity”).

However, there can be no assurance that the Company will be able to maintain compliance with the Minimum Stockholders’ Equity Rule, Bid Price Rule, or other Nasdaq listing requirements.

If the Company fails to maintain compliance with Nasdaq’s continued listing standards in accordance with the Panel’s decision, the Company’s common stock will be subject to delisting from Nasdaq.

As a “thinly-traded” stock with a relatively small public float, the market price of our common stock is highly volatile and may decline regardless of our operating performance.

Our common stock is “thinly-traded” and we have a relatively small public float, which increases volatility in the share price and makes it difficult for investors to buy or sell shares in the public market without materially affecting our share price.

Since the beginning of 2022, our market price has ranged from a low of $0.28 to a high of $4.63 and continues to experience significant volatility.

Throughout the fiscal year ended December 31, 2023, our market price has ranged from a low of $0.28 to a high of $4.63 and continues to experience significant volatility.

Broad market and industry factors also may adversely affect the market price of our common stock, regardless of our actual operating performance.

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• sales of our common stock by us or our stockholders, including sales by our directors and officers.

Because our common stock is thinly-traded, investors seeking to buy or sell a certain quantity of our shares in the public market may be unable to do so within one or more trading days and it may be difficult for stockholders to sell all of their shares in the

market at any given time at prevailing prices.

Any attempts to buy or sell a significant quantity of our shares could materially affect our share price.

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Securities litigation, if instituted against us, or any regulatory inquiries or actions that we face could result in substantial costs, diversion of our management’s attention and resources and unfavorable publicity, regardless of the merits of any claims made against us or the ultimate outcome of any such litigation or action.

We could issue additional shares of common stock or preferred stock without stockholder approval, or new securities with terms or rights superior to those of our existing stockholders, which may adversely affect the market price of our common stock.

We could issue additional shares of common stock or preferred stock without stockholder approval, or new securities with terms or rights superior to those of our existing shareholders, which may adversely affect the market price of our common stock.

We expect to require additional financing to fund future operations, including our research, development, sales and marketing activities.

We are authorized to issue 50,000,000 shares of common stock of which 4,443,130 shares were issued and outstanding as of March 18, 2024, and 5,000,000 shares of preferred stock, of which 876,447 were issued and outstanding as of March 18, 2024.

Our Board of Directors has the authority, without action or vote of our stockholders, to issue authorized but unissued shares of common and preferred stock subject to Nasdaq’s rules.

Additionally, if we raise additional funds by issuing equity securities, the percentage ownership of our current stockholders will be reduced, and, if the equity securities issued are preferred shares, the holders of the new preferred shares may have rights superior to those of our existing stockholders, which could adversely affect rights of our existing stockholders and the market price of our common stock.

Our Board of Directors has the authority, without action or vote of our shareholders, to issue authorized but unissued shares of common and preferred stock subject to Nasdaq’s rules.

Additionally, if we raise additional funds by issuing equity securities, the percentage ownership of our current shareholders will be reduced, and, if the equity securities issued are preferred shares, the holders of the new preferred shares may have rights superior to those of our existing shareholders, which could adversely affect rights of our existing shareholders and the market price of our common stock.

In addition, in order to raise additional capital or acquire businesses in the future, we may need to issue securities that are convertible or exchangeable for shares of our common or preferred stock.

If we raise additional funds by issuing debt securities, the holders of those debt securities would have some rights senior to those of our existing stockholders, and the terms of these debt securities could impose restrictions on operations and create a significant interest expense for us which could have a materially adverse effect on our business.

If we raise additional funds by issuing debt securities, the holders of those debt securities would have some rights senior to those of our existing shareholders, and the terms of these debt securities could impose restrictions on operations and create a significant interest expense for us which could have a materially adverse effect on our business.

Any such issuances could be made at a price that reflects a discount to the then-current trading price of our common stock.

These issuances could be dilutive to our existing stockholders and cause the market price of our common stock to decline.

The exercise of outstanding warrants to purchase our common stock or the conversion of shares of our Series A Preferred Stock (as defined below) into shares of common stock may dilute the ownership interest of our common stockholders.

These issuances could be dilutive to our existing shareholders and cause the market price of our common stock to decline.

In connection with past financing activity, we have issued convertible preferred stock and warrants to purchase our common stock.

The exercise of some or all of the outstanding warrants to purchase our common stock or the conversion of some or all of the outstanding Series A Preferred Stock may dilute the ownership interests of our stockholders.

Any sales of our common stock issuable upon the exercise of the warrants or conversion of the Series A Preferred Stock could adversely affect prevailing market prices of our common stock.

In addition, the anticipated exercise of the warrants or conversion of the Series A Preferred Stock could depress the price of our common stock.

As a result of these factors, the value of our common stock could decline significantly.

In addition, the anticipated exercise of the warrants or conversion of the Series A Preferred Stock could depress the price of our common stock, which in turn may result in the value of our common stock declining significantly.

We have never paid dividends on our common stock, and we do not anticipate paying any cash dividends in the foreseeable future.

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The elimination of monetary liability against our directors under Delaware law and the existence of indemnification rights held by our directors and officers may result in substantial expenditures by the Company and may discourage lawsuits against our directors and officers.

Our Certificate of Incorporation eliminates the personal liability of our directors to the Company and our stockholders for damages for breach of fiduciary duty as a director to the extent permissible under Delaware law.

Our Certificate of Incorporation eliminates the personal liability of our directors to the Company and our shareholders for damages for breach of fiduciary duty as a director to the extent permissible under Delaware law.

Further, our Bylaws provide that we are obligated to indemnify any of our directors or officers to the fullest extent authorized by Delaware law and, subject to certain conditions, advance the expenses incurred by any director or officer in defending any action, suit or proceeding prior to its final disposition.

Those indemnification obligations could result in the Company incurring substantial expenditures to cover the cost of settlement or damage awards against our directors or officers, which we may be unable to recoup.

These provisions and resultant costs may also discourage us from bringing a lawsuit against any of our current or former directors or officers for breaches of their fiduciary duties, and may similarly discourage the filing of derivative litigation by our stockholders against our directors and officers even though such actions, if successful, might otherwise benefit us or our stockholders.

UNRESOLVED STAFF COMMENTS

Our principal executive offices and our manufacturing facility are located in an approximately 62,000 square foot facility in Solon, Ohio, under a lease agreement expiring on June 30, 2027.

We believe this facility is adequate to support our current operations.

These provisions and resultant costs may also discourage us from bringing a lawsuit against any of our current or former directors or officers for breaches of their fiduciary duties, and may similarly discourage the filing of derivative litigation by our shareholders against our directors and officers even though such actions, if successful, might otherwise benefit us or our shareholders.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors