What changed in this filing

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Item 1A. Risk Factors

2025-03-25 compared with 2024-03-22 · 51 added, 38 removed, 378 unchanged (19% of the section changed)

8 unchanged sentences

For the year ended December 31, 2024, we reported a net loss of $1.6 million and are dependent upon the availability of financing in order to continue our business.

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 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 $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.

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.

For the year ended December 31, 2024, financing activity to sustain ongoing losses included (1) proceeds from the issuance of common stock and warrants approximately $0.9 million and (2) payment on the 2022 Streeterville Note $1.0 million (Please see Note 7 of our financial statements for the year ended December 31, 2024 included in Part II, Item 8, “Financial Statements and Supplementary Data,” of this Annual Report.).

For the year ended December 31, 2023, financing activity to sustain ongoing losses included (1) selling an aggregate of approximately $6.1 million common stock through several private placement transactions and (2) converting approximately $1.7 million of outstanding promissory notes into common stock.

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

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Our independent registered public accounting firm’s opinion on our audited financial statements for the fiscal year ended December 31, 2024, included in this Annual Report, contains a modification relating to our ability to continue as a going concern.

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.

Our independent registered public accounting firm’s opinion on our audited financial statements for the year ended December 31, 2024 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.

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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Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.

(Please see Note 2 of our financial statements "Going Concern" for the year ended December 31, 2024 included in Part II, Item 8, “Financial Statements and Supplementary Data,” of this Annual Report.)

We have a history of operating losses and will incur losses in the future as we continue our efforts to grow sales and streamline our operations at a profitable level.

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As of December 31, 2024, we had an accumulated deficit of $154.9 million and cash of approximately $0.6 million, compared to an accumulated deficit of $153.3 million and cash of approximately $2.0 million as of December 31, 2023.

In order for us to operate our business profitably, we need to grow our sales, maintain cost control discipline while balancing development of our product pipeline and potential long-term revenue growth, continue our efforts to reduce product cost, drive further operating efficiencies and develop and execute a strategic product pipeline for profitable and compelling MMM and LED lighting and control products.

In order for us to operate our business profitably, we need to grow our sales, maintain cost control discipline while balancing development of our product pipeline and potential long-term revenue growth, continue our efforts to reduce product cost, and drive further operating efficiencies and develop and execute a strategic product pipeline for profitable and compelling MMM and LED lighting and control products.

Management plans to expand into the Asian market in 2025.

There is a risk that our strategy to return to profitability may not be as successful as we envision, or occur as quickly as we expect.

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Historically our customer base has been highly concentrated and a few customers have represented a substantial portion of our net sales.

In 2023, two customers accounted for 48% of net sales.

In 2024, two customers collectively accounted for 33% of net sales.

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

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Navy represented 33% of net sales in 2024.

In 2022, two customers accounted for 27% of net sales.

In 2023, two customers collectively accounted for 48% of net sales.

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

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Given the fiercely competitive lighting market in which we operate, we are constantly trying to balance pricing with the quality-premium our products command both in brand reputation and performance.

As a result, adding new customers could generally be a slow process, and increasing new customers’ sales to more significant levels usually takes a long period of time.

As we continue to develop more customer-centric new products such as EnFocus™ and GaN-based power supply circuitry, we hope to both add new customers more quickly and have our customers scale their purchasing levels more quickly.

As a result, adding new customers could generally be a slow process, and increasing new customers’ sales to more significant levels usually takes a

long period of time.

As we continue to develop more customer-centric new products such as GaN-based power supply circuitry, we hope to both add new customers more quickly and have our customers scale their purchasing levels more quickly.

However, there is no guarantee of faster customer acceptance or performance of these new products or any other that has been or is being developed.

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We may be vulnerable to unanticipated product development delays, price increases and payment term changes.

Significant increases in the prices of sourced components and products and shipping costs, could cause our product prices to increase, which may reduce demand for our products or make us more susceptible to competition.

Significant increases in the prices of sourced components and products, shipping costs and recent tariff policy changes could cause our product prices to increase, which may reduce demand for our products or make us more susceptible to competition.

Furthermore, in the event that we are unable to pass along increases in operating costs to our customers, margins and profitability may be adversely affected.

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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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If customer demand does not materialize at the rate forecasted, we may not be able to scale back our manufacturing expenses or overhead costs to correspond to the demand.

This could result in lower margins, write-downs of our inventory and adversely impact our business and results of operations.

This could result in lower margins, write-downs of our inventory and adverse impacts to our business and results of operations.

Additionally, if product demand decreases or we fail to forecast demand accurately, our results may be adversely impacted due to higher costs resulting from lower factory utilization, causing higher fixed costs per unit produced.

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In certain commercial applications, we typically compete with LED systems produced by large lighting companies.

Our primary competitors include Signify, Osram Sylvania, LED Smart, Revolution Lighting Technologies, Orion Energy Systems, and Keystone Technologies.

Our primary competitors include Signify, Osram Sylvania, LED Smart, Energy Source Group, Orion Energy Systems, and Keystone Technologies.

Some of these competitors offer products with performance characteristics similar to those of our products.

Many of our competitors are larger, more established companies with greater resources to devote to research and development, manufacturing and marketing, as well as greater brand recognition.

Many of our competitors are larger, more established companies

with greater resources to devote to research and development, manufacturing and marketing, as well as greater brand recognition.

In addition, larger competitors who purchase greater unit volumes from component suppliers may be able to negotiate lower costs, thereby enabling them to offer lower pricing to end customers.

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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 addition, we will need to keep pace with rapid changes in LED lighting and control technology, changing customer requirements, new product introductions and cost reductions by competitors and evolving industry standards, any of which could render our existing products obsolete if we fail to respond in a timely manner.

The development, introduction, and acceptance of new, re-designed or reduced cost products incorporating advanced technology is a complex process subject to numerous uncertainties, including:

The development, introduction, and

acceptance of new, re-designed or reduced cost products incorporating advanced technology is a complex process subject to numerous uncertainties, including:

• available funding to sustain adequate development efforts;

64 unchanged sentences

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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Defending against such claims is costly and intellectual property litigation often involves complex questions of fact and law, with unpredictable results.

We may be forced to acquire rights to such third-party intellectual property on unfavorable terms (if rights are made available at all), pay damages, modify accused products to be non-infringing, or stop selling the applicable product altogether.

We may be forced to acquire rights to

such third-party intellectual property on unfavorable terms (if rights are made available at all), pay damages, modify accused products to be non-infringing, or stop selling the applicable product altogether.

We may be subject to confidential information theft or misuse, which could harm our business and results of operation s.

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If we do not anticipate and effectively manage these risks, these factors may have a material adverse impact on our business operations.

Our business and operations are significantly dependent on Sander Electronics, which creates material conflicts of interest and business risks.

Our relationship with Sander Electronics, Inc., a significant shareholder and supplier controlled by our CEO Chiao Chieh (Jay) Huang, creates substantial business and governance risks.

As of December 31, 2024 Sander Electronics represented 54% of our accounts payable, and we have ongoing purchasing agreements with them for TLED products and spare parts.

This concentration of our supply chain with a related party creates risks regarding pricing, payment terms, and supply continuity.

While we believe the terms of our transactions with Sander Electronics are commercially reasonable, the overlapping ownership and management between our companies may result in conflicts of interest that could adversely affect our business.

Moreover, any deterioration in our relationship with Sander Electronics, or their inability to meet our supply requirements, could materially disrupt our operations.

These risks are heightened because we have limited alternative suppliers readily available to replace Sander Electronics' production capacity.

Additionally, our significant reliance on a related party supplier may draw increased regulatory scrutiny and impact our ability to demonstrate adequate internal controls over related party transactions.

The materiality of this relationship could also affect our ability to obtain favorable terms from alternative suppliers.

Our Chief Executive Officer currently serves as our Principal Financial Officer, which may impact our internal controls and increase risks related to financial reporting.

Our Chief Executive Officer currently serves as our Principal Financial Officer and Principal Accounting Officer due to the vacancy in our Chief Financial Officer position.

This dual role may result in:

• Reduced segregation of duties in our internal control framework

• Increased risk of errors or irregularities in financial reporting going undetected

• Limited independent review of financial decisions and reporting processes

• Potential delays in identifying and remediating control deficiencies

• Challenges in maintaining adequate checks and balances in financial operations

• Increased burden on our CEO, potentially affecting overall operational oversight

While we have implemented additional review procedures and controls to mitigate these risks, we cannot assure that these measures will be sufficient.

The concentration of these roles could materially impact the effectiveness of our internal controls over financial reporting and disclosure controls and procedures.

This could result in material misstatements in our financial statements, missed filing deadlines, or other compliance issues that could adversely affect our business, financial condition, and stock price.

Risks Associated with Legal and Regulatory Matters

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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.

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.

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Our business and results of operations may be adversely affected if we experience system usage problems.

The failure of these systems to operate effectively, maintenance problems, system conversions, back-up failures, problems or lack of resources for upgrading or transitioning to new platforms or damage or interruption from circumstances beyond our control, including, without limitation, fire, natural disasters, power outages, systems failure, security breaches, cyber-attacks, viruses or human error could result in, among other things, transaction errors, processing inefficiencies, loss of data, inability to generate timely SEC reports, loss of sales and customers and reduced efficiency in our operations.

human error could result in, among other things, transaction errors, processing inefficiencies, loss of data, inability to generate timely SEC reports, loss of sales and customers and reduced efficiency in our operations.

Additionally, we and our customers could suffer financial and reputational harm if customer or Company proprietary information is compromised by such events.

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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.

In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we were provided an initial period of 180 calendar days, or until February 20, 2023, to regain compliance with the Bid Price Rule.

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 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 (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.

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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.

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.

Throughout the fiscal year ended December 31, 2024, our market price has ranged from $1.28 to $1.35 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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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.

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 shareholders and cause the market price of our common stock to decline.

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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