Item 1A. Risk Factors
ITEM
1A. RISK FACTORS.
Risk
factors that affect our business and financial results are discussed in Part I, Item 1A “Risk Factors,” in our Annual
Report on Form 10-K for the year ended December 31, 2022 (“Annual Report”) as filed with the SEC on March 27, 2023 and
below. There have been no material changes in our risk factors from those previously disclosed in our Annual Report, except as set
forth below. You should carefully consider the risks described in our Annual Report and below, which could materially affect our
business, financial condition or future results. The risks described in our Annual Report and below are not the only risks we face.
Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially
adversely affect our business, financial condition, and/or operating results. If any of the risks actually occur, our business,
financial condition, and/or results of operations could be negatively affected.
Economic uncertainty may affect our access to
capital and/or increase the costs of such capital.
Global economic conditions continue
to be volatile and uncertain due to, among other things, consumer confidence in future economic conditions, fears of recession and trade
wars, the price of energy, fluctuating interest rates, the availability and cost of consumer credit, the availability and timing of government
stimulus programs, levels of unemployment, increased inflation, tax rates, and the war between Ukraine and Russia which began in February
2022, and Israel and Hamas, which began in October 2023 and which threatens to spread to other Middle Eastern countries. These conditions
remain unpredictable and create uncertainties about our ability to raise capital in the future. In the event required capital becomes
unavailable in the future, or more costly, it could have a material adverse effect on our business, future results of operations, and
financial condition.
Our outstanding options and warrants may adversely
affect the trading price of our securities.
As of September 30, 2023,
we had (i) outstanding stock options to purchase an aggregate of 2,513,912 shares of common stock at a weighted average exercise
price of $1.91 per share; (ii) outstanding Pre-Funded warrants to purchase 1,913,661 shares of common stock with an exercise price of $0.0001; and (iii) outstanding
warrants to purchase 397,500 shares of common stock with a weighted average exercise price of $4.11 per share (when not including
the Pre-Funded warrants). For the life of the options and warrants, the holders have the opportunity to profit from a rise in the
market price of our common stock without assuming the risk of ownership. The issuance of shares upon the exercise of outstanding
securities will also dilute the ownership interests of our existing stockholders.
The availability of these shares
for public resale, as well as any actual resales of these shares, could adversely affect the trading price of our common stock. We cannot
predict the size of future issuances of our common stock pursuant to the exercise of outstanding options or warrants or conversion of
other securities, or the effect, if any, that future issuances and sales of shares of our common stock may have on the market price of
our common stock. Sales or distributions of substantial amounts of our common stock (including shares issued in connection with an acquisition),
or the perception that such sales could occur, may cause the market price of our common stock to decline.
In addition, the common stock
issuable upon exercise/conversion of outstanding convertible securities may represent overhang that may also adversely affect the market
price of our common stock. Overhang occurs when there is a greater supply of a company’s stock in the market than there is demand
for that stock. When this happens the price of our stock will decrease, and any additional shares which stockholders attempt to sell in
the market will only further decrease the share price. If the share volume of our common stock cannot absorb shares sold by holders of
our outstanding convertible securities, then the value of our common stock will likely decrease.
A significant number of our shares are eligible
for sale and their sale or potential sale may depress the market price of our common stock.
Sales of a significant
number of shares of our common stock in the public market could harm the market price of our common stock. Most of our common stock
is available for resale in the public market, including (a) outstanding stock options to purchase an aggregate of 2,513,912 shares
of common stock at a weighted average exercise price of $1.91 per share; (b) Pre-Funded warrants to purchase 1,913,661 shares of
common stock with an exercise price of $0.0001; and (c) 3,241,076 shares of common stock, the resale of which has been registered under the Securities Act. If a
significant number of shares were sold, such sales would increase the supply of our common stock, thereby potentially causing a
decrease in its price. Some or all of our shares of common stock, including those discussed above, may be offered from time to time
in the open market pursuant to effective registration statements and/or compliance with Company insider trading policy, Exchange Act
Section 16 and/or Rule 144, which sales could have a depressive effect on the market for our shares of common stock. Subject to
certain restrictions, a person who has held restricted shares for a period of six months may generally sell common stock into the
market. The sale of a significant portion of such shares when such shares are eligible for public sale may cause the value of our
common stock to decline in value.
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