What changed in this filing

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Item 1A. Risk Factors

2022-03-31 compared with 2021-04-02 · 1021 added, 946 removed, 88 unchanged (96% of the section changed)

3 unchanged sentences

You should carefully consider the risks and uncertainties described below, together with all of the other information

in this Annual Report on Form 10-K, including the section titled “Management’s Discussion and Analysis of Financial Condition

and Results of Operations”

and our consolidated financial statements and related notes, before making a decision to invest in our

in this Annual Report on Form 10-K, including the section titled “Management’s Discussion and Analysis of Financial Condition

and Results of Operations” and our consolidated financial statements and related notes, before making a decision to invest in our

common stock.

4 unchanged sentences

of our common stock could decline, and you could lose part or all of your investment.

Related to Our Business and Industry

We have a history of losses, expect to continue

to incur losses in the near term and may not achieve or sustain profitability in the future, and as a result, our management has identified

and our auditors agreed that there is a substantial doubt about our ability to continue as a going concern.

Risks Related to Our Business and Industry

We have a history of losses, expect to continue to incur losses

in the near term and may not achieve or sustain profitability in the future, and as a result, our management has identified, and our

auditors agreed that there is a substantial doubt about our ability to continue as a going concern.

We have incurred significant losses in each fiscal

year since our inception in 2016.

We have experienced net losses of approximately $21.6 million and $3 million for the years ended December

31, 2020 and 2019, respectively.

We expect our OpEx, to increase in the future due to expected increased sales and marketing expenses,

operational costs, product development costs, and general and administrative costs and, therefore, our operating losses will continue

or even increase at least through the near term.

In addition, since the consummation of our initial public offering (the “IPO”)

on February 1, 2021, we have incurred and will continue to incur significant legal, accounting and other expenses as a public company

that we did not incur as a private company.

Furthermore, to the extent that we are successful in increasing our customer base, we will

also incur increased expenses because costs associated with generating and supporting customer agreements are generally incurred up front,

while revenue is generally recognized ratably over the term of the agreement.

You should not rely upon our recent revenue growth as indicative

of future performance.

We may not reach profitability in the near future or at any specific time in the future.

If and when our operations

do become profitable, we may not sustain profitability.

We have experienced net losses of approximately $32.5 million and $21.6 million for the years ended

December 31, 2021 and 2020, respectively.

We expect our operating expenses (“OpEx”), to increase in the future due to expected

increased sales and marketing expenses, operational costs, product development costs, and general and administrative costs and, therefore,

our operating losses will continue or even increase at least through the near term.

In addition, since the consummation of our initial

public offering (the “IPO”) on February 1, 2021, we have incurred and will continue to incur significant legal, accounting,

and other expenses as a public company that we did not incur as a private company.

Furthermore, to the extent that we are successful in

increasing our customer base, we will also incur increased expenses because costs associated with generating and supporting customer agreements

are generally incurred up front, while revenue is generally recognized ratably over the term of the agreement.

You should not rely upon

our recent revenue growth as indicative of future performance.

We may not reach profitability in the near future or at any specific time

in the future.

If and when our operations do become profitable, we may not sustain profitability.

We have a relatively short operating history, which makes it

difficult to evaluate our business and future prospects .

We have a relatively short operating history,

which makes it difficult to evaluate our business and future prospects.

We have a relatively short

operating history, which makes it difficult to evaluate our business and future prospects.

We have been in existence since June 2016

and much of our revenue growth has occurred during 2020.

We have encountered, and will continue to encounter, risks and difficulties

frequently experienced by growing companies in rapidly changing industries, including those related to:

● market acceptance

of our current and future products and services;

regulatory environments and costs associated with compliance, particularly as related to

our operations in the cannabis sector;

ability to compete with other companies offering similar products and services;

ability to effectively market our products and services and attract new clients;

amount and timing of OpEx, particularly sales and marketing expenses, related to the maintenance

We have been in existence since June 2016 and much of our revenue

growth has occurred during 2020 and 2021.

We have encountered, and will continue to encounter, risks and difficulties frequently experienced

by growing companies in rapidly changing industries, including those related to:

market acceptance of our current and future products and services;

changing regulatory environments and costs associated with compliance, particularly as related

to our operations in the cannabis sector;

our ability to compete with other companies offering similar products and services;

our ability to effectively market our products and services and attract new clients;

the amount and timing of OpEx, particularly sales and marketing expenses, related to the maintenance

and expansion of our business, operations, and infrastructure;

ability to control costs, including OpEx;

ability to manage organic growth and growth fueled by acquisitions;

perception and acceptance of cannabis-related products and services generally;

economic conditions and events.

If we do not manage these risks

successfully, our business and financial performance will be adversely affected.

We may require additional financing to achieve

our goals, and a failure to obtain this necessary capital when needed on acceptable terms, or at all, may force us to delay, limit, reduce

or terminate our product manufacturing and development, and other operations.

At March 29, 2021, we had cash and cash equivalents

of approximately $139 million, which we believe will be sufficient to fund our planned operations for the next 12 months.

Our operating

plan may change because of factors currently unknown to us, and we may need to seek additional funds sooner than planned.

are able to substantially increase revenue and reduce OpEx, we may need to raise additional capital, either through borrowings, private

offerings, public offerings, or some type of business combination, such as a merger, or buyout, and there can be no assurance that we

will be successful in such pursuits.

Accordingly, if we are unable to generate adequate cash from operations, and if we are unable to

find sources of funding, it may be necessary for us to sell one or more lines of business or all or a portion of our assets, enter into

a business combination, or reduce or eliminate operations.

These possibilities, to the extent available, may be on terms that result

in significant dilution to our shareholders or that result in our investors losing all of their investment in our company.

If we are able to raise additional

capital, we do not know what the terms of any such capital raising would be.

In addition, any future sale of our equity securities would

dilute the ownership and control of your shares and could be at prices substantially below prices at which our shares currently trade.

Our inability to raise capital could require us to significantly curtail or terminate our operations.

We may seek to increase our cash

reserves through the sale of additional equity or debt securities.

The sale of convertible debt securities or additional equity securities

could result in additional and potentially substantial dilution to our shareholders.

The incurrence of indebtedness would result in increased

debt service obligations and could result in operating and financing covenants that would restrict our operations and liquidity and ability

our ability to control costs, including OpEx;

our ability to manage organic growth and growth fueled by acquisitions;

public perception and acceptance of cannabis-related products and services generally;

general economic conditions and events.

If we do not manage these risks successfully,

our business and financial performance will be adversely affected.

Potential risk of loss associated with our TTK Solution Offerings

During 2021, we introduced our TTK Solution, which

among other things, include financing arrangements related to both facility design and build services and equipment.

These arrangements

require a significant upfront investment of working capital over a one- to two-year period, before we start to receive repayment on the

upfront construction advances and on our recurring monthly SaaS fees and production fees.

As of December 31, 2021, a significant amount

of our working capital has been invested in funding our TTK Solutions construction and equipment commitments.

We expect to continue

to allocate a significant portion of our working capital towards existing and future TTK partnerships.

We believe that there is a potential risk of loss

associated with our ability to receive anticipated future payments that are in line with our projected financial unit metrics due to a

host of variables including, but not limited to the following:

As we are in the early stages of our TTK Solution offerings, the TTK

Solution is currently an unproven business model;

The TTK Solution offering requires a significant amount of capital and our collection of advanced amounts is subject to customer credit risk;

Our anticipated downstream production fee revenue assumes that our VFUs will successfully produce 35 pounds of product per VFU per year;

Our anticipated returns are reliant upon our customer’s ability to market and sell the products.

We may require additional financing to achieve our goals, and

a failure to obtain this necessary capital when needed on acceptable terms, or at all, may force us to delay, limit, reduce or terminate

our product manufacturing and development, and other operations.

At December 31, 2021, we had cash and cash equivalents

and current marketable securities of approximately $56.6 million, which we believe will be sufficient to fund our planned operations for

the next 12 months.

Our operating plan may change because of factors currently unknown to us, and we may need to seek additional funds

sooner than planned.

Even if we are able to substantially increase revenue and reduce OpEx, we may need to raise additional capital, either

through borrowings, private offerings, public offerings, or some type of business combination, such as a merger, or buyout, and there

can be no assurance that we will be successful in such pursuits.

Accordingly, if we are unable to generate adequate cash from operations,

and if we are unable to find sources of funding, it may be necessary for us to sell one or more lines of business or all or a portion

of our assets, enter into a business combination, or reduce or eliminate operations.

These possibilities, to the extent available, may

be on terms that result in significant dilution to our shareholders or that result in our investors losing all of their investment in

If we are able to raise additional capital, we

do not know what the terms of any such capital raising would be.

In addition, any future sale of our equity securities would dilute the

ownership and control of your shares and could be at prices substantially below prices at which our shares currently trade.

Our inability

to raise capital could require us to significantly curtail or terminate our operations.

We may seek to increase our cash reserves through

the sale of additional equity or debt securities.

The sale of convertible debt securities or additional equity securities could result

in additional and potentially substantial dilution to our shareholders.

The incurrence of indebtedness would result in increased debt

service obligations and could result in operating and financing covenants that would restrict our operations and liquidity and ability

to pay dividends.

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funds on favorable terms could have a material adverse effect on our liquidity and financial condition.

Three customers accounted for approximately

79.2% of our total revenue during the year ended December 31, 2020, and two customers accounted for approximately 99% of our total revenue

during the year ended December 31, 2019.

In the event of any material decrease in revenue from these customers, or if we are unable to

replace the revenue through the sale of our products to additional customers, our financial condition and results from operations could

be materially and adversely affected .

We face risks associated with strategic acquisitions.

Since our inception, we have strategically acquired

several businesses, and plan to continue to make strategic acquisitions, some of which may be material.

These acquisitions may involve

a number of financial, accounting, managerial, operational, legal, compliance and other risks and challenges, including the following,

any of which could adversely affect our results of operations:

Any acquired business could under-perform relative to our expectations and the price that we paid

for it, or not perform in accordance with its anticipated timetable;

We may incur or assume significant debt in connection with its acquisitions;

Acquisitions could cause our results of operations to differ from our own or the investment community’s

expectations in any given period, or over the long term;

Acquisitions could create demands on our management that it may be unable to effectively address,

or for which it may incur additional costs.

Additionally, following any business acquisition,

we could experience difficulty in integrating personnel, operations, financial and other systems, and in retaining key employees and

We may record goodwill and other intangible assets

on our consolidated balance sheet in connection with its acquisitions.

If we are not able to realize the value of these assets, we may

be required to incur charges relating to the impairment of these assets, which could materially impact our results of operations.

We have substantial

debt and other financial obligations, and we may incur even more debt.

Any failure to meet our debt and other financial obligations or

maintain compliance with related covenants could harm our business, financial condition and results of operations.

On March 14, 2022, we entered into a Securities

Purchase Agreement (the “Purchase Agreement”) with an institutional investor (the “Investor”).

The Purchase Agreement

provides for of the issuance of a senior secured note in the aggregate amount of $65 million (the “Note”) and a warrant exercisable

6,881,108 shares of the Company’s common stock, with the potential for two potential subsequent closings for notes with an original

principal amount of $35 million each.

The Note will mature on March 1, 2026.

Pursuant to the terms of the Notes, we are subject

to various covenants, including negative covenants that restrict our ability to engage in certain transactions, which may limit our ability

to respond to changing business and economic conditions.

Such negative covenants include, among other things, limitations on our ability

and the ability of our subsidiaries to:

make investments (including acquisitions),

sell assets, and

pay dividends on our capital stock.

In addition, the Notes contains certain financial

covenants, including minimum liquidity, which will be tested monthly, and adjusted EBITDA and minimum revenue, each of which will be tested

at the end of each fiscal quarter.

If we are not in compliance with certain of these

covenants, in addition to other actions the Investors may require, the amounts outstanding under the Purchase Agreement may become immediately

due and payable.

This immediate payment may negatively impact our financial condition.

In addition, any failure to make scheduled payments

of interest and principal on our outstanding indebtedness would likely harm our ability to incur additional indebtedness on acceptable

Our cash flow and capital resources may be insufficient to pay interest and principal on our debt in the future.

If that should

occur, our capital raising or debt restructuring measures may be unsuccessful or inadequate to meet our scheduled debt service obligations,

which could cause us to default on our obligations and further impair our liquidity.

Further, based upon our actual performance levels,

our covenants relating to liquidity and adjusted EBITDA could limit our ability to incur additional debt, which could hinder our ability

to execute our current business strategy.

Our ability to make scheduled payments on our

debt and other financial obligations and comply with financial covenants depends on our financial and operating performance.

Our financial

and operating performance will continue to be subject to prevailing economic conditions and to financial, business and other factors,

some of which are beyond our control.

Failure within any applicable grace or cure periods to may such payments, comply with the financial

covenants, or any other non-financial or restrictive covenant, would create a default under the Note.

Our cash flow and existing capital

resources may be insufficient to repay our debt at maturity, in which such case prior thereto we would have to extend such maturity date,

or otherwise repay, refinance and or restructure the obligations under the Note, including with proceeds from the sale of assets, and

additional equity or debt capital.

If we are unsuccessful in obtaining such extension, or entering into such repayment, refinance or restructure

prior to maturity, or any other default existed under the Note, the Investor could accelerate the indebtedness under the Note, foreclose

against its collateral or seek other remedies, which would jeopardize our ability to continue our current operations.

We may be required to record impairment charges against the

carrying value of our goodwill and other intangible assets in the future.

As of December 31, 2021 and 2020, we had

recorded goodwill and intangible assets with a net book value of $64.2 million and $2.3 million, respectively.

We are required to

test for impairment at least annually and whenever evidence of impairment exists.

We have not recorded any impairment charges against

the carrying value of our goodwill and intangible assets in the past.

The carrying value of our goodwill and intangible asset values are

measured using a variety of factors, including values of comparable companies, overall stock market and economic data and our own projections

of future financial performance.

We may be required in the future to record impairment charges that could have a material adverse effect

on our reported results.

Two customers, each of which are related parties, accounted for

approximately 52.5% (or $31.4 million) of our total revenue during the year ended December 31, 2021.

During the year ended December 31,

31, 2020, three customers accounted for approximately 79.2% (or $9,576,000) of our total revenue, and during the year ended December

31, 2019, two customers accounted for approximately 99% (or $4,047,000) of our total revenue.

This concentration of customers leaves

us exposed to the risks associated with the loss of one or more of these significant customers, which would materially and adversely

affect our revenues and results of operations.

In addition, some of these customers have experienced construction delays in building

out their facilities and we have been assisting these customers in addressing these delays, including in certain cases extending their

payment terms.

2020, two customers accounted for approximately 46.8% (or $5.7 million) of our total revenue and one related party customer accounted

for approximately 32.4% (or $3.9 million) of our total revenue.

In the event of any material decrease in revenue from these customers,

or if we are unable to replace the revenue through the sale of our products to additional customers, our financial condition and results

from operations could be materially and adversely affected .

This concentration of customers leaves us exposed

to the risks associated with the loss of one or more of these significant customers, which would materially and adversely affect our revenues

and results of operations.

In addition, some of these customers have experienced and may continue to experience construction delays in

building out their facilities and we have been assisting these customers in addressing these delays, including in certain cases extending

their payment terms.

Any continued delays will likely result in a negative impact on our revenues.

Further, if these customers were to significantly

reduce their relationship with us, or in the event that we are unable to replace the revenue through the sale of our products to additional

customers, our financial condition and results from operations could be negatively impacted, and such impact would likely be significant.

Our reliance on a limited base of suppliers

for our products may result in disruptions to our supply chain and business and adversely affect our financial results .

We rely on a limited number

of suppliers for our products and other supplies.

If we are unable to maintain supplier arrangements and relationships, if we are unable

to contract with suppliers at the quantity and quality levels needed for our business, if any of our key suppliers becomes insolvent

or experience other financial distress or if any of our key suppliers is negatively impacted by COVID-19, including with respect to staffing

and shipping of products, we could experience disruptions in our supply chain, which could have a material adverse effect on our financial

condition, results of operations and cash flows.

Many of our suppliers are experiencing operational

difficulties as a result of COVID-19, which in turn may have an adverse effect on our ability to provide products to our customers.

The measures being taken to

combat the pandemic are impacting our suppliers and may destabilize our supply chain.

For example, manufacturing plants have closed and

work at others curtailed in many places where we source our products.

Some of our suppliers have had to temporarily close a facility

for disinfecting after employees tested positive for COVID-19, and others have faced staffing shortages from employees who are sick or

apprehensive about coming to work.

Further, the ability of our suppliers to ship their goods to us has become difficult as transportation

networks and distribution facilities have had reduced capacity and have been dealing with changes in the types of goods being shipped.

Although the ability of our

suppliers to timely ship their goods has affected some of our deliveries, currently the difficulties experienced by our suppliers have

not yet materially impacted our ability to deliver products to our customers and we do not significantly depend on any one supplier;

however, if this continues, it may negatively affect any inventory we may have and more significantly delay the delivery of merchandise

to our customers, which in turn will adversely affect our revenues and results of operations.

If the difficulties experienced by our

suppliers continue, we cannot guarantee that we will be able to locate alternative sources of supply for our merchandise on acceptable

terms, or at all.

If we are unable to adequately purchase appropriate amounts of supplies for our products, our business and results

of operations may be materially and adversely affected.

As a company with clients operating in the

cannabis industry, we face many particular and evolving risks associated with that industry.

We currently serve private

clients as they operate in a growing cannabis industry.

Any risks related to the cannabis industry that may adversely affect our clients

and potential clients may, in turn, adversely affect demand for our products.

Specific risks faced by companies operating in the cannabis

industry include, but are not limited to, the following:

Marijuana remains illegal

under United States federal law

Marijuana is a Schedule-I controlled

substance under the Controlled Substances Act and is illegal under federal law.

It remains illegal under United States federal law to

grow, cultivate, sell or possess marijuana for any purpose or to assist or conspire with those who do so.

Further, if these customers were to

significantly reduce their relationship with us, or in the event that we are unable to replace the revenue through the sale of our products

to additional customers, our financial condition and results from operations could be negatively impacted, and such impact would likely

be significant.

Our reliance on a limited base of suppliers for our products

may result in disruptions to our supply chain and business and adversely affect our financial results .

We rely on a limited number of suppliers for

our products and other supplies.

If we are unable to maintain supplier arrangements and relationships, if we are unable to contract with

suppliers at the quantity and quality levels needed for our business, if any of our key suppliers becomes insolvent or experience other

financial distress or if any of our key suppliers is negatively impacted by COVID-19, including with respect to staffing and shipping

of products, we could experience disruptions in our supply chain, which could have a material adverse effect on our financial condition,

results of operations and cash flows.

Many of our suppliers are experiencing operational difficulties

as a result of COVID-19, which in turn may have an adverse effect on our ability to provide products to our customers.

The measures being taken to combat the pandemic

are impacting our suppliers and may destabilize our supply chain.

For example, manufacturing plants have closed and work at others curtailed

in many places where we source our products.

Some of our suppliers have had to temporarily close a facility for disinfecting after employees

tested positive for COVID-19, and others have faced staffing shortages from employees who are sick or apprehensive about coming to work.

Further, the ability of our suppliers to ship their goods to us has become difficult as transportation networks and distribution facilities

have had reduced capacity and have been dealing with changes in the types of goods being shipped.

Although the ability of our suppliers to timely

ship their goods has affected some of our deliveries, currently the difficulties experienced by our suppliers have not yet materially

impacted our ability to deliver products to our customers and we do not significantly depend on any one supplier;

however, if this continues,

it may negatively affect any inventory we may have and more significantly delay the delivery of merchandise to our customers, which in

turn will adversely affect our revenues and results of operations.

If the difficulties experienced by our suppliers continue, we cannot

guarantee that we will be able to locate alternative sources of supply for our merchandise on acceptable terms, or at all.

unable to adequately purchase appropriate amounts of supplies for our products, our business and results of operations may be materially

and adversely affected.

As a company with clients operating in the cannabis industry,

we face many particular and evolving risks associated with that industry.

We currently serve private clients as they operate

in a growing cannabis industry.

Any risks related to the cannabis industry that may adversely affect our clients and potential clients

may, in turn, adversely affect demand for our products.

Specific risks faced by companies operating in the cannabis industry include,

but are not limited to, the following:

Marijuana remains illegal under United

States federal law

Marijuana is a Schedule-I controlled substance

under the Controlled Substances Act and is illegal under federal law.

It remains illegal under United States federal law to grow, cultivate,

sell or possess marijuana for any purpose or to assist or conspire with those who do so.

Additionally, 21 U.S.C.

makes it illegal to “knowingly open, lease, rent, use, or maintain any place, whether permanently or temporarily, for the purpose

of manufacturing, distributing, or using any controlled substance.”

Even in those states in which the use of marijuana has been

authorized, its use remains a violation of federal law.

Since federal law criminalizing the use of marijuana is not preempted by state

laws that legalize its use, strict enforcement of federal law regarding marijuana would likely result in our clients’

to proceed with their operations, which would adversely affect demands for our products.

Uncertainty of federal enforcement

and the need to renew temporary safeguards

On January 4, 2018, former

Attorney General Sessions rescinded the previously issued memoranda (known as the Cole Memorandum) from the U.S.

Department of Justice

(“DOJ”) that had de-prioritized the enforcement of federal law against marijuana users and businesses that comply with state

marijuana laws, adding uncertainty to the question of how the federal government will choose to enforce federal laws regarding marijuana.

Attorney General Sessions issued a memorandum to all United States Attorneys in which the DOJ affirmatively rescinded the previous guidance

as to marijuana enforcement, calling such guidance “unnecessary.”

This one-page memorandum was vague in nature, stating that

federal prosecutors should use established principles in setting their law enforcement priorities.

Under previous administrations, the

DOJ indicated that those users and suppliers of medical marijuana who complied with state laws, which required compliance with certain

criteria, would not be prosecuted.

As a result, it is now unclear if the DOJ will seek to enforce the Controlled Substances Act against

those users and suppliers who comply with state marijuana laws.

Despite former Attorney General

Sessions’

rescission of the Cole Memorandum, the Department of the Treasury, Financial Crimes Enforcement Network, has not rescinded

the “FinCEN Memo”

dated February 14, 2014, which de-prioritizes enforcement of the Bank Secrecy Act against financial institutions

and marijuana-related businesses which utilize them.

856 makes it illegal

to “knowingly open, lease, rent, use, or maintain any place, whether permanently or temporarily, for the purpose of manufacturing,

distributing, or using any controlled substance.” Even in those states in which the use of marijuana has been authorized, its use

remains a violation of federal law.

Since federal law criminalizing the use of marijuana is not preempted by state laws that legalize

its use, strict enforcement of federal law regarding marijuana would likely result in our clients’ inability to proceed with their

operations, which would adversely affect demands for our products.

Uncertainty of federal enforcement and

the need to renew temporary safeguards

On January 4, 2018, former Attorney General Sessions

rescinded the previously issued memoranda (known as the Cole Memorandum) from the U.S.

Department of Justice (“DOJ”) that

had de-prioritized the enforcement of federal law against marijuana users and businesses that comply with state marijuana laws, adding

uncertainty to the question of how the federal government will choose to enforce federal laws regarding marijuana.

Attorney General Sessions

issued a memorandum to all United States Attorneys in which the DOJ affirmatively rescinded the previous guidance as to marijuana enforcement,

calling such guidance “unnecessary.” This one-page memorandum was vague in nature, stating that federal prosecutors should

use established principles in setting their law enforcement priorities.

Under previous administrations, the DOJ indicated that those

users and suppliers of medical marijuana who complied with state laws, which required compliance with certain criteria, would not be

As a result, it is now unclear if the DOJ will seek to enforce the Controlled Substances Act against those users and suppliers

who comply with state marijuana laws.

Despite former Attorney General Sessions’

rescission of the Cole Memorandum, the Department of the Treasury, Financial Crimes Enforcement Network, has not rescinded the “FinCEN

Memo” dated February 14, 2014, which de-prioritizes enforcement of the Bank Secrecy Act against financial institutions and marijuana-related

businesses which utilize them.

This memo appears to be a standalone document and is presumptively still in effect.

At any time, however, the Department of the Treasury, Financial Crimes Enforcement Network, could elect to rescind the FinCEN Memo.

would make it more difficult for our clients and potential clients to access the U.S.

banking systems and conduct financial transactions,

which would adversely affect our operations.

In 2014, Congress passed a

spending bill (“2015 Appropriations Bill”) containing a provision (“Appropriations Rider”) blocking federal funds

and resources allocated under the 2015 Appropriations Bill from being used to “prevent such States from implementing their own

State medical marijuana law.”

The Appropriations Rider seemed to have prohibited the federal government from interfering with the

ability of states to administer their medical marijuana laws, although it did not codify federal protections for medical marijuana patients

and producers.

Moreover, despite the Appropriations Rider, the Justice Department maintains that it can still prosecute violations of

the federal marijuana ban and continue cases already in the courts.

At any time, however,

the Department of the Treasury, Financial Crimes Enforcement Network, could elect to rescind the FinCEN Memo.

This would make it more

difficult for our clients and potential clients to access the U.S.

banking systems and conduct financial transactions, which would adversely

affect our operations.

In 2014, Congress passed a spending bill (“2015

Appropriations Bill”) containing a provision (“Appropriations Rider”) blocking federal funds and resources allocated

under the 2015 Appropriations Bill from being used to “prevent such States from implementing their own State medical marijuana

law.” The Appropriations Rider seemed to have prohibited the federal government from interfering with the ability of states to

administer their medical marijuana laws, although it did not codify federal protections for medical marijuana patients and producers.

Moreover, despite the Appropriations Rider, the Justice Department maintains that it can still prosecute violations of the federal marijuana

ban and continue cases already in the courts.

Additionally, the Appropriations Rider must be re-enacted every year.

While it was continued in 2016, 2017, 2018, 2019 and 2020, and remains in effect, continued re-authorization of the Appropriations Rider

cannot be guaranteed.

If the Appropriation Rider is no longer in effect, the risk of federal enforcement and override of state marijuana

laws would increase.

Further legislative development

beneficial to our operations is not guaranteed

One aspect of our business

involves selling goods and services to state-licensed cannabis cultivators.

The success of our business may partly depend on the continued

development of the cannabis industry and the activity of commercial business within the industry.

The continued development of the cannabis

industry is dependent upon continued legislative and regulatory authorization of cannabis at the state level and a continued laissez-faire

approach by federal enforcement agencies.

While it was continued

in subsequent years and remains in effect, continued re-authorization of the Appropriations Rider cannot be guaranteed.

If the Appropriation

Rider is no longer in effect, the risk of federal enforcement and override of state marijuana laws would increase.

Further legislative development beneficial

to our operations is not guaranteed

One aspect of our business involves selling goods

and services to state-licensed cannabis cultivators.

The success of our business may partly depend on the continued development of the

cannabis industry and the activity of commercial business within the industry.

The continued development of the cannabis industry is

dependent upon continued legislative and regulatory authorization of cannabis at the state level and a continued laissez-faire approach

by federal enforcement agencies.

Any number of factors could slow or halt progress in this area.

Further regulatory progress

beneficial to the industry cannot be assured.

While there may be ample public support for legislative action, numerous factors impact

the legislative and regulatory process, including election results, scientific findings or general public events.

Any one of these factors

could slow or halt progressive legislation relating to cannabis and the current tolerance for the use of cannabis by consumers, which

could adversely affect demand for our products and operations.

The cannabis industry could

face strong opposition from other industries

We believe that established

businesses in other industries may have a strong economic interest in opposing the development of the cannabis industry.

be seen by companies in other industries as an attractive alternative to their products, including recreational marijuana as an alternative

to alcohol, and medical marijuana as an alternative to various commercial pharmaceuticals.

Many industries that could view the emerging

cannabis industry as an economic threat are well established, with vast economic and federal and state lobbying resources.

It is possible

that companies within these industries could use their resources to attempt to slow or reverse legislation legalizing cannabis.

these companies make in halting or impeding legislative initiatives that would be beneficial to the cannabis industry could have a detrimental

impact on some of our clients and, in turn on our operations.

The legality of marijuana

could be reversed in one or more states

The voters or legislatures

of states in which marijuana has already been legalized could potentially repeal applicable laws which permit the operation of both medical

and retail marijuana businesses.

These actions might force businesses, including those that are our clients, to cease operations in one

or more states entirely.

Changing legislation and

evolving interpretations of law

Laws and regulations affecting

the medical and adult-use marijuana industry are constantly changing, which could detrimentally affect some of our clients and, in turn,

our operations.

Local, state and federal marijuana laws and regulations are broad in scope and subject to evolving interpretations, which

could require our clients and thus us to incur substantial costs associated with modification of operations to ensure such clients’

In addition, violations of these laws, or allegations of such violations, could disrupt our clients’

business and result

in a material adverse effect on our operations.

In addition, it is possible that regulations may be enacted in the future that will limit

the amount of cannabis growth or related products that our commercial clients are authorized to produce.

We cannot predict the nature

of any future laws, regulations, interpretations or applications, nor can we determine what effect additional governmental regulations

or administrative policies and procedures, when and if promulgated, could have on our operations.

Dependence on client licensing

Our business is partly dependent

on certain of our customers obtaining various licenses from various municipalities and state licensing agencies.

Further regulatory progress beneficial

to the industry cannot be assured.

While there may be ample public support for legislative action, numerous factors impact the legislative

and regulatory process, including election results, scientific findings or general public events.

Any one of these factors could slow

or halt progressive legislation relating to cannabis and the current tolerance for the use of cannabis by consumers, which could adversely

affect demand for our products and operations.

The cannabis industry could face strong

opposition from other industries

We believe that established businesses in other

industries may have a strong economic interest in opposing the development of the cannabis industry.

Cannabis may be seen by companies

in other industries as an attractive alternative to their products, including recreational marijuana as an alternative to alcohol, and

medical marijuana as an alternative to various commercial pharmaceuticals.

Many industries that could view the emerging cannabis industry

as an economic threat are well established, with vast economic and federal and state lobbying resources.

It is possible that companies

within these industries could use their resources to attempt to slow or reverse legislation legalizing cannabis.

Any inroads these companies

make in halting or impeding legislative initiatives that would be beneficial to the cannabis industry could have a detrimental impact

on some of our clients and, in turn on our operations.

The legality of marijuana could be reversed

in one or more states

The voters or legislatures of states in which

marijuana has already been legalized could potentially repeal applicable laws which permit the operation of both medical and retail marijuana

These actions might force businesses, including those that are our clients, to cease operations in one or more states entirely.

Changing legislation and evolving interpretations

Laws and regulations affecting the medical and

adult-use marijuana industry are constantly changing, which could detrimentally affect some of our clients and, in turn, our operations.

Local, state and federal marijuana laws and regulations are broad in scope and subject to evolving interpretations, which could require

our clients and thus us to incur substantial costs associated with modification of operations to ensure such clients’ compliance.

In addition, violations of these laws, or allegations of such violations, could disrupt our clients’ business and result in a material

adverse effect on our operations.

In addition, it is possible that regulations may be enacted in the future that will limit the amount

of cannabis growth or related products that our commercial clients are authorized to produce.

We cannot predict the nature of any future

laws, regulations, interpretations or applications, nor can we determine what effect additional governmental regulations or administrative

policies and procedures, when and if promulgated, could have on our operations.

Our business depends in part on client licensing

Our business is partly dependent on certain of

our customers obtaining various licenses from various municipalities and state licensing agencies.

There can be no assurance that any

or all licenses necessary for our clients to operate their businesses will be obtained, retained or renewed.

If a licensing body were

to determine that a client of ours had violated applicable rules and regulations, there is a risk the license granted to that client

could be revoked, which could adversely affect our operations.

There can be no assurance that our existing clients will be able to retain

their licenses going forward, or that new licenses will be granted to existing and new market entrants.

Banking regulations could limit access

to banking services

Since the use of marijuana is illegal under federal

law, there is a compelling argument that banks cannot lawfully except for deposit funds from businesses involved with marijuana.

Consequently,

businesses involved in the cannabis industry often have trouble finding a bank willing to accept their business.

The inability to open

bank accounts may make it difficult for some of our clients to operate and their reliance on cash can result in a heightened risk of

theft, which could harm their businesses and, in turn, harm our business.

Although the proposal of the Secure and Fair Enforcement Banking

Act, also referred to as the SAFE Banking Act, would allow banks to work with cannabis businesses and prevent federal banking regulators

from intervening or punishing those banks, the legislation still requires the approval of the United States Senate.

There can be no assurance

that any or all licenses necessary for our clients to operate their businesses will be obtained, retained or renewed.

If a licensing

body were to determine that a client of ours had violated applicable rules and regulations, there is a risk the license granted to that

client could be revoked, which could adversely affect our operations.

There can be no assurance that our existing clients will be able

to retain their licenses going forward, or that new licenses will be granted to existing and new market entrants.

Banking regulations could

limit access to banking services

Since the use of marijuana

is illegal under federal law, there is a compelling argument that banks cannot lawfully accept for deposit funds from businesses involved

with marijuana.

Consequently, businesses involved in the cannabis industry often have trouble finding a bank willing to accept their

The inability to open bank accounts may make it difficult for some of our clients to operate and their reliance on cash can

result in a heightened risk of theft, which could harm their businesses and, in turn, harm our business.

Although the proposal of the

Secure and Fair Enforcement Banking Act, also referred to as the SAFE Banking Act, would allow banks to work with cannabis businesses

and prevent federal banking regulators from intervening or punishing those banks, the legislation still requires the approval of the

United States Senate.

There can be no assurance that that the SAFE Banking Act will become law in the United States.

Additionally, most

courts have denied marijuana-related businesses bankruptcy protection, thus, making it very difficult for lenders to recoup their investments,

which may limit the willingness of banks to lend to our clients and to us.

Insurance risks

In the United States, many

marijuana-related businesses are subject to a lack of adequate insurance coverage.

In addition, many insurance companies may deny claims

for any loss relating to marijuana or marijuana-related operations based on their illegality under federal law, noting that a contract

for an illegal transaction is unenforceable.

Evolving industry

The cannabis industry is not

yet well-developed, and many aspects of this industry’s development and evolution cannot be accurately predicted.

While we have

attempted to identify many risks specific to the cannabis industry, you should carefully consider that there are other risks that cannot

be foreseen or are not described in this report, which could materially and adversely affect our business and financial performance.

We expect that the cannabis market and our business will evolve in ways that are difficult to predict.

Our long-term success may depend

on our ability to successfully adjust our strategy to meet the changing market dynamics.

If we are unable to successfully adapt to changes

in the cannabis industry, our operations could be adversely affected.

that that the SAFE Banking Act will become law in the United States.

Additionally, most courts have denied marijuana-related businesses

bankruptcy protection, thus, making it very difficult for lenders to recoup their investments, which may limit the willingness of banks

to lend to our clients and to us.

We may face insurance risks

In the United States, many marijuana-related

businesses are subject to a lack of adequate insurance coverage.

In addition, many insurance companies may deny claims for any loss relating

to marijuana or marijuana-related operations based on their illegality under federal law, noting that a contract for an illegal transaction

is unenforceable.

We participate in an evolving industry

The cannabis industry is not yet well-developed,

and many aspects of this industry’s development and evolution cannot be accurately predicted.

While we have attempted to identify

many risks specific to the cannabis industry, you should carefully consider that there are other risks that cannot be foreseen or are

not described in this report, which could materially and adversely affect our business and financial performance.

We expect that the

cannabis market and our business will evolve in ways that are difficult to predict.

Our long-term success may depend on our ability to

successfully adjust our strategy to meet the changing market dynamics.

If we are unable to successfully adapt to changes in the cannabis

industry, our operations could be adversely affected.

The inability of our customers to meet their financial or contractual

obligations to us may result in disruption to our results of operations and could result in financial losses.

We have exposure to several

customers and at least some of these customers are experiencing financial difficulties.

We have in the past, and may in the future, need

to take allowances against and need to write off receivables due to the creditworthiness of these customers.

Further, the inability of

these customers to purchase our products could materially adversely affect our results of operations.

Our reliance on our relationship with our

strategic investor, Inventronics, without a definitive agreement in place may have an adverse effect on our ability to provide products

and services to our customers .

Inventronics Inc., based in

Hangzhou, Zhejiang, China, is currently one of the largest companies in the world engaged in the design and manufacture of high efficiency,

high reliability and long-life LED drivers, and has worked with us to develop our LED lighting technology.

Inventronics is a shareholder

of our company and the founder of Inventronics is a member of our board of directors.

We intend to continue to rely on our strategic

relationship with Inventronics with respect to various aspects of our business, including access to the most advanced LED driver technology,

component suppliers and contract manufacturing located in Asia, as well as research and development support.

Although we intend in due

course to memorialize our relationship with Inventronics in a formal written agreement, we are currently not a party to a definitive

We have exposure to several customers and at

least some of these customers are experiencing financial difficulties.

We have in the past, and may in the future, need to take allowances

against and need to write off receivables due to the creditworthiness of these customers.

Further, the inability of these customers to

purchase our products could materially adversely affect our results of operations.

Our reliance on our relationship with our strategic investor,

Inventronics, without a definitive agreement in place may have an adverse effect on our ability to provide products and services to our

Inventronics Inc.

(“Inventronics”),

based in Hangzhou, Zhejiang, China, is currently one of the largest companies in the world engaged in the design and manufacture of high

efficiency, high reliability and long-life LED drivers, and has worked with us to develop our LED lighting technology.

Inventronics is

a shareholder of our company and the founder of Inventronics is a member of our board of directors.

We intend to continue to rely on our

strategic relationship with Inventronics with respect to various aspects of our business, including access to the most advanced LED driver

technology, component suppliers and contract manufacturing located in Asia, as well as research and development support.

Although we intend

in due course to memorialize our relationship with Inventronics in a formal written agreement, we are currently not a party to a definitive

agreement that governs our relationship with Inventronics.

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would otherwise be included in a definitive agreement with another third party.

If we are unable to maintain our strong relationship

with Inventronics, our lack of a definitive agreement with such company may have an adverse effect on our ability to provide products

and services to our customers.

Although we believe our current sales backlog,

which consists of purchase orders or purchase commitments, and our qualified pipeline of carefully vetted potential sales opportunities,

will translate into future revenue, there can be no assurance that we will be successful in such pursuit.

As of December 31, 2020, our

backlog, which consists of purchase orders or purchase commitments, was $58.6 million.

We expect to recognize revenue of approximately

$40 million from the backlog as revenue in 2021 and the rest gradually thereafter.

Additionally, as of December 31, 2020, we have $105

million of carefully vetted potential sales opportunities (which we refer to as our qualified pipeline).

Of this, $78 million of qualified

pipeline was generated through our company directly and $27 million through our Agrify-Valiant Joint-Venture.

Although we conduct a detailed

due diligence investigation on our current and potential customers and place a heavy emphasis on the qualification process to ensure

that all active customer purchase orders and commitments relating to our backlog and all active opportunities in our qualified pipeline

have been meticulously vetted, the criteria we rely on and the internal analysis we undertake is subjective.

Furthermore, we have a relatively

short operating history and do not have significant data relating to the conversion of our backlog into revenue and the conversion of

our qualified pipeline into customer contracts.

Accordingly, although we are confident that our backlog and qualified pipeline will translate

into bookings over the next 12 months, there can be no assurance that we will be successful in such pursuit.

In the event that our backlog

and qualified pipeline do not translate into bookings as projected, it could materially and adversely affect our business and financial

Certain of our officers and directors may

become subject to conflicts of interests arising out of our relationship with Bluezone and Enozo.

We are a party to two distribution

agreements with companies in which certain of our officers and directors have an interest.

Specifically, Guichao Hua, a member of our

board of directors, has an ownership interest in Bluezone Products, Inc.

of approximately 3%.

Raymond Chang, our Chairman of the Board

and Chief Executive Officer, is a director of Bluezone and one of the funds he manages, NXT Venture Fund II, has an ownership interest

If we are unable to maintain our strong relationship with

Inventronics, our lack of a definitive agreement with such company may have an adverse effect on our ability to provide products and services

to our customers.

Changes in our credit profile may affect our relationship with

our suppliers, which could have a material adverse effect on our liquidity.

Changes in our credit profile may affect the

way our suppliers view our ability to make payments and may induce them to shorten the payment terms of their invoices.

Given the large

dollar amounts and volume of our purchases from suppliers, a change in payment terms may have a material adverse effect on our liquidity

and our ability to make payments to our suppliers and, consequently, may have a material adverse effect on our business and results of

Although we believe our current sales backlog, which consists

of purchase orders or purchase commitments, and our qualified pipeline of carefully vetted potential sales opportunities, will translate

into future revenue, there can be no assurance that we will be successful in such pursuit.

As of December 31, 2021, our backlog, which consists

of purchase orders or purchase commitments, was $837 million.

We expect to recognize revenue of approximately $110 million from the backlog

as revenue in 2022 and the rest gradually thereafter.

Although we conduct a detailed due diligence investigation on our current and potential

customers and place a heavy emphasis on the qualification process to ensure that all active customer purchase orders and commitments relating

to our backlog and all active opportunities in our qualified pipeline have been meticulously vetted, the criteria we rely on and the internal

analysis we undertake is subjective.

Furthermore, we have a relatively short operating history and do not have significant data relating

to the conversion of our backlog into revenue and the conversion of our qualified pipeline into customer contracts.

Accordingly, although

we are confident that our backlog and qualified pipeline will translate into bookings over the next 12 months, there can be no assurance

that we will be successful in such pursuit.

In the event our backlog and qualified pipeline do not translate into bookings as projected,

it could materially and adversely affect our business and financial performance.

Certain of our officers and directors may become subject to conflicts

of interests arising out of our relationship with Bluezone Products, Inc.

(“Bluezone”) and Enozo Technologies, Inc.

We are a party to two distribution agreements

with companies in which certain of our officers and directors have an interest.

Specifically, Guichao Hua, a member of our board of directors,

has an ownership interest in Bluezone of approximately 3%.

Raymond Chang, our Chairman of the Board and Chief Executive Officer, has a

minority ownership interest in and manages NXT Venture Fund II, a now inactive fund, of approximately 5% which has a minority interest

in Bluezone of approximately 8%.

Similarly, Mr.

Hua has an ownership interest in Enozo Technologies, Inc.

of approximately 12% and Mr.

Chang is a director of Enozo and has an ownership interest in Enozo of approximately 15%.

The overlapping nature of these relationships

could cause conflicts of interest for Messrs.

Hua and Chang, which may not be easily resolved, or if they are resolved, they may not

be resolved on terms advantageous to our company.

Our operations may be impaired if our information

technology systems fail to perform adequately or if we are the subject of a data breach or cyber-attack .

We rely on information technology

systems in order to conduct business, including communicating with employees and our key commercial customers, ordering and managing

materials from suppliers, shipping products and providing SaaS services to our customers and analyzing and reporting results of operations.

While we have taken steps to ensure the security of our information technology systems, our systems may nevertheless be vulnerable to

computer viruses, security breaches and other disruptions from unauthorized users.

If our information technology systems are damaged

or cease to function properly for an extended period of time, whether as a result of a significant cyber incident or otherwise, our ability

to communicate internally as well as with our customers could be significantly impaired, which may adversely impact our business.

Additionally, in the normal

course of our business, we collect, store and transmit proprietary and confidential information regarding our customers, employees, suppliers

and others, including personally identifiable information.

An operational failure or breach of security from increasingly sophisticated

cyber threats could lead to loss, misuse or unauthorized disclosure of this information about our employees or customers, which may result

in regulatory or other legal proceedings, and have a material adverse effect on our business and reputation.

We also may not have the

resources or technical sophistication to anticipate or prevent rapidly-evolving types of cyber-attacks.

Any such attacks or precautionary

measures taken to prevent anticipated attacks may result in increasing costs, including costs for additional technologies, training and

third party consultants.

The losses incurred from a breach of data security and operational failures as well as the precautionary measures

required to address this evolving risk may adversely impact our financial condition, results of operations and cash flows.

Privacy regulation is an evolving area and

compliance with applicable privacy regulations may increase our operating costs or adversely impact our ability to service our clients

and market our products and services .

Because we store, process and

use data, some of which contains personal information, we are subject to complex and evolving federal, state, and foreign laws and regulations

regarding privacy, data protection, and other matters.

While we believe we are currently in compliance with applicable laws and regulations,

many of these laws and regulations are subject to change and uncertain interpretation, and could result in investigations, claims, changes

to our business practices, increased cost of operations, and declines in user growth, retention, or engagement, any of which could seriously

harm our business.

We rely on third parties for certain services

made available to our customers, which could limit our control over the quality of the user experience and our cost of providing services .

Some of the applications and

services available through our proprietary Agrify “Precision Elevated™”

cultivation solution, including our flagship

hardware product, the Agrify Vertical Farming Unit (AVFU), and our proprietary SaaS product, Agrify Insights™, are provided through

This results in Mr.

Chang having approximately a 0.4% indirect ownership interest in Bluezone.

is a board member of Enozo and has an ownership interest of approximately 12% in the company.

Chang also is owed approximately $500

thousand of debt from Enozo in accordance with a certain promissory note.

The overlapping nature of these relationships could cause conflicts

of interest for Messrs.

Hua and Chang, which may not be easily resolved, or if they are resolved, they may not be resolved on terms advantageous

to our company.

We rely on third parties for certain services made available

to our customers, which could limit our control over the quality of the user experience and our cost of providing services .

Some of the applications and services available

through our proprietary Agrify “Precision Elevated™” cultivation solution, including our flagship hardware product,

the Agrify Vertical Farming Unit (“VFU”), and our proprietary SaaS product, Agrify Insights software, are provided through

relationships with third party service providers.

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These third-party service providers could experience service outages, data loss, privacy breaches, including cyber-attacks, and other

events relating to the applications and services they provide that could diminish the utility of these services and which could harm

users thereof.

events relating to the applications and services they provide that could diminish the utility of these services and which could harm users

Our platform is currently hosted by a third-party service provider.

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available should we desire or need to move to a different web host.

Certain ancillary services provided by us also uses the services

of third party providers, for which, we believe, there are readily available alternatives on comparable economic terms.

Certain ancillary services provided by us also uses the services of

third-party providers, for which, we believe, there are readily available alternatives on comparable economic terms.

Offering integrated

platforms which rely, in part, on the services of other providers lessens the control that we have over the total client experience.

Should the third party service providers we rely upon not deliver at standards we expect and desire, acceptance of our platforms could

suffer, which would have an adverse effect on our business and financial performance.

Further, we cannot be assured of entering into

agreements with such third party service providers on economically favorable terms.

The growth and success of our business depends

on the continued contributions of Raymond Chang, as our key executive officer, as well as our ability to attract and retain qualified

Our growth and success is dependent

upon the continued contributions made by our Chairman of the Board and Chief Executive Officer, Raymond Chang.

the third-party service providers we rely upon not deliver at standards we expect and desire, acceptance of our platforms could suffer,

which would have an adverse effect on our business and financial performance.

Further, we cannot be assured of entering into agreements

with such third-party service providers on economically favorable terms.

The growth and success of our business depends on the continued

contributions of Raymond Chang, as our key executive officer, as well as our ability to attract and retain qualified personnel .

Our growth and success are dependent upon the

continued contributions made by our Chairman of the Board and Chief Executive Officer, Raymond Chang.

We rely on Mr.

Chang’s

expertise in business operations when we are developing new products and services.

Chang cannot serve us or is no longer willing

to do so, we may not be able to find alternatives in a timely manner or at all.

Chang’s expertise

in business operations when we are developing new products and services.

Chang cannot serve us or is no longer willing to do so,

we may not be able to find alternatives in a timely manner or at all.

This may have a material adverse effect on our business.

In addition, our growth and success will depend to a significant extent on our ability to identify, attract, hire, train and retain qualified

professional, creative, technical and managerial personnel.

Competition for experience and qualified talent in the indoor agriculture

marketplace can be intense.

We may not be successful in identifying, attracting, hiring, training and retaining such personnel in the

If we are unable to hire, assimilate and retain qualified personnel in the future, such inability could adversely affect our

We face intense competition that could prohibit

us from developing or increasing our customer base .

The indoor agriculture industry

is highly competitive.

our growth and success will depend to a significant extent on our ability to identify, attract, hire, train and retain qualified professional,

creative, technical and managerial personnel.

Competition for experience and qualified talent in the indoor agriculture marketplace can

We may not be successful in identifying, attracting, hiring, training and retaining such personnel in the future.

unable to hire, assimilate and retain qualified personnel in the future, such inability could adversely affect our operations.

We face intense competition that could prohibit us from developing

or increasing our customer base .

The indoor agriculture industry is highly competitive.

We may compete with companies that have greater capital resources and facilities.

More established companies with

much greater financial resources which do not currently compete with us may be able to more easily adapt their existing operations to

our line of business.

In addition, the continued growth of the cannabis industry will likely attract some of these existing companies

and incentivize them to produce solutions that are competitive with those offered by us.

Our competitors may also introduce new and improved

products, and manufacturers may sell equipment direct to consumers.

We may not be able to successfully compete with larger enterprises

devoting significant resources to compete in our target marketspace.

Due to this competition, there is no assurance that we will not

encounter difficulties in increasing revenues and maintaining and/or increasing market share.

In addition, increased competition may

lead to reduced prices and/or margins for products we sell.

Protecting and defending against intellectual

property claims may have a material adverse effect on our business .

Our ability to compete depends,

in part, upon successful protection of our intellectual property relating to our proprietary Agrify “Precision Elevated™”

cultivation solution, including our flagship hardware product, the AVFU, and our proprietary SaaS product, Agrify Insights™.

seek to protect our proprietary and intellectual property rights through patent applications, common law copyright and trademark laws,

nondisclosure agreements, and non-disclosure provisions within our licensing and distribution arrangements with reputable companies in

our target markets.

Enforcement of our intellectual property rights would be costly, and there can be no assurance that we will have

the resources to undertake all necessary action to protect our intellectual property rights or that we will be successful.

Any infringement

of our material intellectual property rights could require us to redirect resources to actions necessary to protect same and could distract

management from our underlying business operations.

An infringement of our material intellectual property rights and resulting actions

could adversely affect our operations.

We have one pending U.S.

application as well as its pending Patent Cooperation Treaty (PCT) counter-part application, and we will likely file national applications

from this PCT in other countries.

PCT stands for Patent Cooperation Treaty, which is an international patent law treaty.

A PCT application

is a “placeholder”

utility application that establishes a filing date for the invention, and that can subsequently be “nationalized”

in any of the more than 140 countries that are members of the PCT.

Within 30 months (longer in some jurisdictions) from the application

priority date, the applicant must “nationalize”

the application and select the countries to which patent protection is sought.

After nationalization, country-specific procedures for patent prosecution to patent grant are pursued as to each country or jurisdiction

Utilization of the PCT application process allows us to defer patent application deadlines and costs while we consider, for

example, our international filing strategy, obtain funding and refine our patent claims.

We cannot assure investors

that we will continue to innovate and file new patent applications, or that this application or any future patent applications will result

in granted patents.

Further, we cannot predict how long it will take for such patents to issue, if at all.

It is possible that, for any

of our patents that may issue in the future, our competitors may design their products around our patented technologies.

cannot assure investors that other parties will not challenge any patents granted to us, or that courts or regulatory agencies will hold

our patents to be valid, enforceable, and/or infringed.

We cannot guarantee investors that we will be successful in defending challenges

made against our patents and patent applications.

Any successful third-party challenge or challenges to our patents could result in the

unenforceability or invalidity of such patents, or such patents being interpreted narrowly and/or in a manner adverse to our interests.

Our ability to establish or maintain a technological or competitive advantage over our competitors and/or market entrants may be diminished

because of these uncertainties.

More established companies with much greater financial

resources which do not currently compete with us may be able to adapt their existing operations more easily to our line of business.

addition, the continued growth of the cannabis industry will likely attract some of these existing companies and incentivize them to produce

solutions that are competitive with those offered by us.

Our competitors may also introduce new and improved products, and manufacturers

may sell equipment direct to consumers.

We may not be able to successfully compete with larger enterprises devoting significant resources

to compete in our target marketspace.

Due to this competition, there is no assurance that we will not encounter difficulties in increasing

revenues and maintaining and/or increasing market share.

In addition, increased competition may lead to reduced prices and/or margins

for products we sell.

Protecting and defending against intellectual property claims

may have a material adverse effect on our business .

Our ability to compete depends, in part, upon

successful protection of our intellectual property relating to our proprietary Agrify cultivation solution, including our flagship hardware

product, the VFU, and our proprietary SaaS product, Agrify Insights software.

We seek to protect our proprietary and intellectual property

rights through patent applications, common law copyright and trademark laws, nondisclosure agreements, and non-disclosure provisions within

our licensing and distribution arrangements with reputable companies in our target markets.

Enforcement of our intellectual property rights

would be costly, and there can be no assurance that we will have the resources to undertake all necessary action to protect our intellectual

property rights or that we will be successful.

Any infringement of our material intellectual property rights could require us to redirect

resources to actions necessary to protect same and could distract management from our underlying business operations.

An infringement

of our material intellectual property rights and resulting actions could adversely affect our operations.

We cannot assure investors that we will continue

to innovate and file new patent applications, or that any current or future patent applications will result in granted patents.

we cannot predict how long it will take for such patents to issue, if at all.

It is possible that, for any of our patents that may issue

in the future, our competitors may design their products around our patented technologies.

Further, we cannot assure investors that other

parties will not challenge any patents granted to us, or that courts or regulatory agencies will hold our patents to be valid, enforceable,

and/or infringed.

We cannot guarantee investors that we will be successful in defending challenges made against our patents and patent

applications.

Any successful third-party challenge or challenges to our patents could result in the unenforceability or invalidity of

such patents, or such patents being interpreted narrowly and/or in a manner adverse to our interests.

Our ability to establish or maintain

a technological or competitive advantage over our competitors and/or market entrants may be diminished because of these uncertainties.

For these and other reasons, our intellectual property may not provide us with any competitive advantage.

● we may not have been

the first to make the inventions claimed or disclosed in our patent application;

may not have been the first to file patent application.

To determine the priority of these

inventions, we may have to participate in interference proceedings or derivation proceedings

declared by the U.S.

Patent and Trademark Office (“USPTO”), which could result

in substantial cost to us, and could possibly result in a loss or narrowing of patent rights.

No assurance can be given that our granted patents will have priority over any other patent

or patent application involved in such a proceeding, or will be held valid as an outcome

of the proceeding;

parties may independently develop similar or alternative products and technologies or duplicate

any of our products and technologies, which can potentially impact our market share, revenue,

and goodwill, regardless of

is possible that our issued patents may not provide intellectual property protection of commercially

viable products or product features, may not provide us with any competitive advantages,

or may be challenged and invalidated by third parties, patent offices, and/or the courts;

may be unaware of or unfamiliar with prior art and/or interpretations of prior art that could

potentially impact the validity or scope of our patents or patent applications that we may

take efforts and enter into agreements with employees, consultants, collaborators, and advisors

we may not have been the first to make the inventions claimed or disclosed

in our patent application;

we may not have been the first to file patent application.

To determine the priority of these inventions,

we may have to participate in interference proceedings or derivation proceedings declared by the U.S.

Patent and Trademark Office

(“USPTO”), which could result in substantial cost to us, and could possibly result in a loss or narrowing of patent rights.

No assurance can be given that our granted patents will have priority over any other patent or patent application involved in such

a proceeding, or will be held valid as an outcome of the proceeding;

other parties may independently develop similar or alternative products and technologies or duplicate

any of our products and technologies, which can potentially impact our market share, revenue, and goodwill, regardless of

it is possible that our issued patents may not provide intellectual property protection of commercially

viable products or product features, may not provide us with any competitive advantages, or may be challenged and invalidated by

third parties, patent offices, and/or the courts;

we may be unaware of or unfamiliar with prior art and/or interpretations of prior art that could

potentially impact the validity or scope of our patents or patent applications that we may file;

we take efforts and enter into agreements with employees, consultants, collaborators, and advisors

to confirm ownership and chain of title in intellectual property rights.

However, an inventorship

or ownership dispute could arise that may permit one or more third parties to practice or

enforce our intellectual property rights, including possible efforts to enforce rights against

may elect not to maintain or pursue intellectual property rights that, at some point in time,

However, an inventorship or ownership dispute could arise

that may permit one or more third parties to practice or enforce our intellectual property rights, including possible efforts to

enforce rights against us;

we may elect not to maintain or pursue intellectual property rights that, at some point in time,

may be considered relevant to or enforceable against a competitor;

may not develop additional proprietary products and technologies that are patentable, or

we may develop additional proprietary products and technologies that are not patentable;

patents or other intellectual property rights of others may have an adverse effect on our

apply for patents relating to our products and technologies and uses thereof, as we deem

However, we or our representatives or their agents may fail to apply for patents

on important products and technologies in a timely fashion or at all, or we or our representatives

or their agents may fail to apply for patents in potentially relevant jurisdictions.

To the extent our intellectual

property offers inadequate protection, or is found to be invalid or unenforceable, we would be exposed to a greater risk of direct or

indirect competition.

If our intellectual property does not provide adequate coverage over our competitors’

products, our competitive

position could be adversely affected, as could our business.

we may not develop additional proprietary products and technologies that are patentable, or we

may develop additional proprietary products and technologies that are not patentable;

the patents or other intellectual property rights of others may have an adverse effect on our business;

we apply for patents relating to our products and technologies and uses thereof, as we deem appropriate.

However, we or our representatives or their agents may fail to apply for patents on important products and technologies in a timely

fashion or at all, or we or our representatives or their agents may fail to apply for patents in potentially relevant jurisdictions.

To the extent our intellectual property offers

inadequate protection, or is found to be invalid or unenforceable, we would be exposed to a greater risk of direct or indirect competition.

If our intellectual property does not provide adequate coverage over our competitors’ products, our competitive position could

be adversely affected, as could our business.

Our success depends in part upon our ability to protect our

core technology and intellectual property .

Our success depends in part upon our ability

to protect our core technology and intellectual property.

Our success depends in part

upon our ability to protect our core technology and intellectual property.

To establish and protect our proprietary rights, we rely on

a combination of trademark, copyright, patent, trade secret and unfair competition laws of the United States and other countries, as

well as contract provisions, license agreements, confidentiality procedures, non-disclosure agreements with third parties, employee disclosure

and invention assignment agreements, and other contractual rights, as well as procedures governing internet/domain name registrations.

However, there can be no assurance that these measures will be successful in any given case.

We may be unable to prevent the misappropriation,

infringement or violation of our intellectual property rights, breach of any contractual obligations to us, or independent development

of intellectual property that is similar to ours, any of which could reduce or eliminate any competitive advantage we have developed,

adversely affecting our revenues or otherwise harming our business.

We generally control access

to and use of our proprietary technology and other confidential information through the use of internal and external controls, including

contractual protections with employees, contractors, customers, and partners, and our software is protected by U.S.

To establish and protect our proprietary rights, we rely on a combination of

trademark, copyright, patent, trade secret and unfair competition laws of the United States and other countries, as well as contract

provisions, license agreements, confidentiality procedures, non-disclosure agreements with third parties, employee disclosure and invention

assignment agreements, and other contractual rights, as well as procedures governing internet/domain name registrations.

However, there

can be no assurance that these measures will be successful in any given case.

We may be unable to prevent the misappropriation, infringement

or violation of our intellectual property rights, breach of any contractual obligations to us, or independent development of intellectual

property that is similar to ours, any of which could reduce or eliminate any competitive advantage we have developed, adversely affecting

our revenues or otherwise harming our business.

We generally control access to and use of our

proprietary technology and other confidential information through the use of internal and external controls, including contractual protections

with employees, contractors, customers, and partners, and our software is protected by U.S.

Despite efforts to protect

our proprietary rights through intellectual property laws, licenses, and confidentiality agreements, unauthorized parties may still copy

or otherwise obtain and use our software and technology.

Companies in the Internet, technology, and software industries frequently enter

into litigation based on allegations of infringement, misappropriation, or violations of intellectual property rights or other laws.

From time to time, we may face allegations that we have infringed the trademarks, copyrights, patents, trade secrets and other intellectual

property rights of third parties, including competitors.

If it became necessary for us to resort to litigation to protect these rights,

any proceedings could be burdensome, costly and divert the attention of our personnel, and we may not prevail.

In addition, any repeal

or weakening of laws or enforcement in the United States or internationally intended to protect intellectual property rights could make

it more difficult for us to adequately protect our intellectual property rights, negatively impacting their value and increasing the

cost of enforcing our rights.

We have obtained and applied

trademark and service mark registrations and will continue to evaluate the registration of additional trademarks and service

marks or, as appropriate.

We cannot guarantee that any of our pending trademark applications will be approved by the applicable governmental

Moreover, even if the trademark applications are approved, third parties may seek to oppose or otherwise challenge these

registrations.

A failure to obtain registrations for our trademarks could limit and impede our marketing efforts.

We may need to enter into intellectual property

license agreements in the future, and if we are unable to obtain these licenses, our business could be harmed .

We may need or may choose to

obtain licenses and/or acquire intellectual property rights from third parties to advance our research or commercialization of our current

or future products.

We also cannot provide any assurances that third-party patents do not exist that might be enforced against our current

or future products in the absence of such a license or acquisition.

We may fail to obtain any of these licenses or intellectual property

rights on commercially reasonable terms.

Even if we are able to obtain a license, it may be non-exclusive, thereby giving our competitors

access to the same technologies licensed to us.

In that event, we may be required to expend significant time and resources to develop

or license replacement technology.

If we are unable to do so, we may be unable to develop or commercialize the affected products, which

could materially harm our business and the third parties owning such intellectual property rights could seek either an injunction prohibiting

our sales, or, with respect to our sales, an obligation on our part to pay royalties and/or other forms of compensation.

Others may assert intellectual property infringement

claims against us .

Companies in the software and

technology industries can own patents, copyrights, trademarks, and trade secrets, and frequently enter into litigation based on allegations

of infringement, misappropriation, or other violations of intellectual property or other rights.

In addition, various “non-practicing

entities”

that own patents (colloquially known as “patent trolls”) often attempt to aggressively assert their rights

to extract value from technology companies.

It is possible that, from time to time, third parties may claim that our products misappropriate

or infringe their intellectual property rights.

Irrespective of the validity or the successful assertion of any such claims, we could

incur significant costs and diversion of resources in defending against these claims, which could adversely affect our operations.

may receive unfavorable preliminary or interim rulings in the course of litigation, and there can be no assurances that favorable final

outcomes will be obtained in all cases.

Despite efforts to protect our proprietary rights

through intellectual property laws, licenses, and confidentiality agreements, unauthorized parties may still copy or otherwise obtain

and use our software and technology.

Companies in the Internet, technology, and software industries frequently enter into litigation

based on allegations of infringement, misappropriation, or violations of intellectual property rights or other laws.

From time to time,

we may face allegations that we have infringed the trademarks, copyrights, patents, trade secrets and other intellectual property rights

of third parties, including competitors.

If it became necessary for us to resort to litigation to protect these rights, any proceedings

could be burdensome, costly and divert the attention of our personnel, and we may not prevail.

In addition, any repeal or weakening of

laws or enforcement in the United States or internationally intended to protect intellectual property rights could make it more difficult

for us to adequately protect our intellectual property rights, negatively impacting their value and increasing the cost of enforcing

We have obtained and applied for U.S.

and service mark registrations and will continue to evaluate the registration of additional trademarks and service marks or, as appropriate.

We cannot guarantee that any of our pending trademark applications will be approved by the applicable governmental authorities.

even if the trademark applications are approved, third parties may seek to oppose or otherwise challenge these registrations.

to obtain registrations for our trademarks could limit and impede our marketing efforts.

We may need to enter into intellectual property license agreements

in the future, and if we are unable to obtain these licenses, our business could be harmed .

We may need or may choose to obtain licenses

and/or acquire intellectual property rights from third parties to advance our research or commercialization of our current or future

We also cannot provide any assurances that third-party patents do not exist that might be enforced against our current or future

products in the absence of such a license or acquisition.

We may fail to obtain any of these licenses or intellectual property rights

on commercially reasonable terms.

Even if we are able to obtain a license, it may be non-exclusive, thereby giving our competitors access

to the same technologies licensed to us.

In that event, we may be required to expend significant time and resources to develop or license

replacement technology.

If we are unable to do so, we may be unable to develop or commercialize the affected products, which could materially

harm our business and the third parties owning such intellectual property rights could seek either an injunction prohibiting our sales,

or, with respect to our sales, an obligation on our part to pay royalties and/or other forms of compensation.

Others may assert intellectual property infringement claims

Companies in the software and technology industries

can own patents, copyrights, trademarks, and trade secrets, and frequently enter into litigation based on allegations of infringement,

misappropriation, or other violations of intellectual property or other rights.

In addition, various “non-practicing entities”

that own patents (colloquially known as “patent trolls”) often attempt to aggressively assert their rights to extract value

from technology companies.

It is possible that, from time to time, third parties may claim that our products misappropriate or infringe

their intellectual property rights.

Irrespective of the validity or the successful assertion of any such claims, we could incur significant

costs and diversion of resources in defending against these claims, which could adversely affect our operations.

We may receive unfavorable

preliminary or interim rulings in the course of litigation, and there can be no assurances that favorable final outcomes will be obtained

in all cases.

We may decide to settle such lawsuits and disputes on terms that are unfavorable to us.

result, we may also be required to develop alternative non-infringing technology or practices or discontinue the practices.

The development

of alternative non-infringing technology or practices could require significant effort and expense or may not be feasible.

to the extent claims against us are successful, we may have to pay substantial money damages or discontinue, modify, or rename certain

products or services that are found to be in violation of another party’s rights.

We may have to seek a license (if available on

acceptable terms, or at all) to continue offering products and services, which may significantly increase our operating expenses.

Data privacy and security concerns relating

to our technology and our practices could damage our reputation, cause us to incur significant liability, and deter current and potential

users or customers from using our products and services.

Software bugs or defects, security breaches, and attacks on our systems could

result in the improper disclosure and use of user data and interference with our users and customers’

ability to use our products

and services, harming our business operations and reputation .

Concerns about our practices

with regard to the collection, use, disclosure, or security of personal information or other data-privacy-related matters, even if unfounded,

could harm our reputation, financial condition, and operating results.

Our policies and practices may change over time as expectations

regarding privacy and data change.

Our products and services involve the storage and transmission of proprietary information, and bugs,

theft, misuse, defects, vulnerabilities in our products and services, and security breaches expose us to a risk of loss of this information,

improper use and disclosure of such information, litigation, and other potential liability.

Systems and control failures, security breaches

and/or inadvertent disclosure of user data could result in government and legal exposure, seriously harm our reputation and brand and,

therefore, our business, and impair our ability to attract and retain customers.

We may experience cyber-attacks

and other attempts to gain unauthorized access to our systems.

We may experience future security issues, whether due to employee error

or malfeasance or system errors or vulnerabilities in our or other parties’

systems, which could result in significant legal and

financial exposure.

We may be unable to anticipate or detect attacks or vulnerabilities or implement adequate preventative measures.

Attacks and security issues could also compromise trade secrets and other sensitive information, harming our business.

As a result, we

may suffer significant legal, reputational, or financial exposure, which could harm our business, financial condition, and operating

Our ability to use our net operating losses

to offset future taxable income may be subject to certain limitations .

As of December 31, 2020, we

had net operating loss (NOL) carryforwards for federal and state income tax purposes which may be available to offset taxable income

in the future, and which expire in various years for federal purposes if not utilized.

The state NOLs will expire depending upon the

various rules in the states in which we operate.

A lack of future taxable income would adversely affect our ability to utilize these

NOLs before they expire.

In general, under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, a corporation that

undergoes an “ownership change”

(as defined under Section 382 of the Code and applicable Treasury Regulations) is subject

to limitations on its ability to utilize its pre-change NOLs to offset its future taxable income.

We may experience a future ownership

change under Section 382 of the Code that could affect our ability to utilize the NOLs to offset our income.

Furthermore, our ability

to utilize NOLs of companies that we have acquired or may acquire in the future may be subject to limitations.

There is also a risk that

due to regulatory changes, such as suspensions on the use of NOLs or other unforeseen reasons, our existing NOLs could expire or otherwise

be unavailable to reduce future income tax liabilities, including for state income tax purposes.

For these reasons, we may not be able

to utilize a material portion of our NOLs, even if we attain profitability, which could potentially result in increased future tax liability

to us and could adversely affect our results of operations and financial condition.

There are no assurances that our outstanding

loans will be forgivable in whole or in part .

In May and July 2020, we entered

into two separate Loan Agreements and Promissory Notes (the “PPP Loans”) with Bank of America pursuant to the Paycheck Protection

Program (the “PPP”) under the recently enacted Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”)

administered by the U.S.

As a result, we may also be required

to develop alternative non-infringing technology or practices or discontinue the practices.

The development of alternative non-infringing

technology or practices could require significant effort and expense or may not be feasible.

In addition, to the extent claims against

us are successful, we may have to pay substantial money damages or discontinue, modify, or rename certain products or services that are

found to be in violation of another party’s rights.

We may have to seek a license (if available on acceptable terms, or at all)

to continue offering products and services, which may significantly increase our operating expenses.

Our ability to use our net operating losses to offset future

taxable income may be subject to certain limitations .

As of December 31, 2021, we had net operating

loss (“NOL”) carryforwards for federal and state income tax purposes which may be available to offset taxable income in future

Approximately $675 thousand federal NOLs will expire if not utilized by 2037 and approximately $51.5 million of federal NOLs carryforward

indefinitely but are only available to offset 80% of taxable income per year.

The state NOLs will expire depending upon the various rules

in the states in which we operate.

A lack of future taxable income would adversely affect our ability to utilize these NOLs before they

The utilization of our NOLs could be subject to annual limitations under Section 382 and 383 of the Internal Revenue Code (“IRC”

or the “Code”) of 1986, and similar state tax provisions due to ownership change limitations that may have occurred previously

or that could occur in the future.

In general, under Section 382, a corporation that undergoes an “ownership change” (as defined

under Section 382 of the Code and applicable Treasury Regulations) is subject to limitations on its ability to utilize its pre-change

NOLs to offset its future taxable income.

As of December 31, 2021, we have not conducted an analysis of an ownership change under Section

To the extent that a study is completed, and an ownership change is deemed to occur, in the past or future, our NOLs and any NOLs

of companies that we have acquired could be limited to offset any future taxable income.

There is also a risk that due to regulatory changes,

such as suspensions on the use of NOLs or other unforeseen reasons, our existing NOLs could expire or otherwise be unavailable to reduce

future income tax liabilities for federal and state income tax purposes.

For these reasons, we may not be able to utilize a material

portion of our NOLs, even if we attain profitability, which could result in increased future tax liability to us and could adversely

affect the results of our operations and overall financial condition.

There are no assurances that our outstanding loans will be forgivable

in whole or in part .

In May and July 2020, we entered into two separate

Loan Agreements and Promissory Notes (the “PPP Loans”) with Bank of America pursuant to the Paycheck Protection Program (the

“PPP”) under the recently enacted Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) administered

Small Business Administration.

We received total proceeds of $779,000 and $44,410 from the unsecured PPP Loans.

The PPP Loans are is scheduled to mature on May 7, 2022 and July 27, 2025, respectively, and have an interest rate of 1.00% per annum

and is are subject to the terms and conditions applicable to loans administered by the U.S.

Small Business Administration (the “SBA”)

We received total proceeds of $779 thousand and $44 thousand from the unsecured PPP Loans.

The PPP Loans are scheduled to mature on May 7, 2022 and July 27, 2025, respectively, and have an interest rate of 1.00% per annum and

is are subject to the terms and conditions applicable to loans administered by the U.S.

Small Business Administration (the “SBA”)

under the CARES Act.

The PPP Loans may be prepaid at any time prior to its maturity with no prepayment penalties.

The PPP Loans contain customary

events of default relating to, among other things, payment defaults and breaches of representations and warranties.

Subject to certain

conditions, the PPP Loans may be forgiven in whole or in part by applying for forgiveness pursuant to the CARES Act and the PPP.

amount of loan proceeds eligible for forgiveness is based on a formula based on a number of factors, including the amount of loan proceeds

used by us for certain eligible expenses including payroll costs, rent payments on certain leases and certain qualified utility payments,

provided that, among other things, at least 60% of the loan amount is used for eligible payroll costs, the employer maintaining or rehiring

employees and maintaining salaries at a certain level.

According to the PPP, the lender has 60 days from receipt of the completed application

to issue a decision to the SBA.

If the lender determines that the borrower is entitled to forgiveness of some or all of the amount applied

for under the statute and applicable regulations, the lender must request payment from the SBA at the time the lender issues its decision

In September 2021, the

loan for $44 thousand was 100% forgiven by the SBA.

The Company’s application for forgiveness of the balance of the remaining $779

thousand PPP Loan is still under review by the SBA.

The PPP Loans contain customary events of default

relating to, among other things, payment defaults and breaches of representations and warranties.

Subject to certain conditions, the

PPP Loans may be forgiven in whole or in part by applying for forgiveness pursuant to the CARES Act and the PPP.

The amount of loan proceeds

eligible for forgiveness is based on a formula based on a number of factors, including the amount of loan proceeds used by us for certain

eligible expenses including payroll costs, rent payments on certain leases and certain qualified utility payments, provided that, among

other things, at least 60% of the loan amount is used for eligible payroll costs, the employer maintaining or rehiring employees and

maintaining salaries at a certain level.

According to the PPP, the lender has 60 days from receipt of the completed application to issue

a decision to the SBA.

If the lender determines that the borrower is entitled to forgiveness of some or all of the amount applied for

under the statute and applicable regulations, the lender must request payment from the SBA at the time the lender issues its decision

The SBA will, subject to any SBA review of the loan or loan application, remit the appropriate forgiveness amount to the

lender, plus any interest accrued through the date of payment, not later than 90 days after the lender issues its decision to the SBA.

In accordance with the requirements

of the CARES Act and the PPP, we have used all of the proceeds from the PPP Loan primarily for payroll costs.

We have not yet applied

for forgiveness of this loan.

We believe that we will be eligible for full forgiveness under the program, but there is no assurance that

the full loan amount will be forgiven and we cannot anticipate the timing of any such forgiveness.

If the principal amount is not forgiven

in full, we would be obligated to repay by May 7, 2022 and July 27, 2025 any principal amount not forgiven and interest accrued from

May 7, 2020 and July 27, 2020, respectively.

In accordance with the requirements of the CARES

Act and the PPP, we have used all of the proceeds from the PPP Loan primarily for payroll costs.

We believe that we will be eligible for

the remaining loan forgiveness under the program, but there is no assurance that the full loan amount will be forgiven, and we cannot

anticipate the timing of any such forgiveness.

Although we believe that we satisfied all eligibility criteria for the PPP Loan and that

2 unchanged sentences

and adverse publicity, which could have a material adverse effect on our business, results of operations, and financial condition.

Risks Related to Ownership

of our Common Stock

Concentration of ownership among our existing

executive officers, directors and their affiliates may prevent new investors from influencing significant corporate decisions .

Risks Related to Ownership of our Common Stock

Concentration of ownership among our existing executive officers,

directors and their affiliates may prevent new investors from influencing significant corporate decisions .

Our executive officers, directors and their affiliates

beneficially own, in the aggregate, approximately 6.7% of our outstanding shares of common stock.

In particular, Raymond Chang, our

Chairman of the Board and Chief Executive Officer, beneficially owns approximately 5.6% of our outstanding shares of common stock.

a result, these stockholders will be able to exercise a significant level of control over all matters requiring stockholder approval,

including the election of directors, amendment of our articles of incorporation and approval of significant corporate transactions.

control could have the effect of delaying or preventing a change of control of our company or changes in management and will make the

approval of certain transactions difficult or impossible without the support of these stockholders.

A total of 7,696,246, or 37.9%, of our total outstanding shares

are restricted from immediate resale, but may be sold on a stock exchange in the near future.

The large number of shares eligible for

public sale could depress the market price of our common stock .

The market price of our common stock could decline

as a result of sales of a large number of shares of our common stock in the market after our IPO and the underwritten public offering

we closed on February 19, 2021 (the “February Offering”), and the perception that these sales could occur may also depress

In particular, Raymond Chang, our Chairman

of the Board and Chief Executive Officer, beneficially owns approximately 3.3% of our outstanding shares of common stock.

these stockholders will be able to exercise a significant level of control over all matters requiring stockholder approval, including

the election of directors, amendment of our articles of incorporation and approval of significant corporate transactions.

could have the effect of delaying or preventing a change of control of our company or changes in management and will make the approval

of certain transactions difficult or impossible without the support of these stockholders.

The large number of shares eligible for public sale could depress

the market price of our common stock .

We have 20,295,134 shares of common stock outstanding as of March 29, 2021.

Of these shares, the

12,598,888 shares of common stock sold in our IPO and the February Offering (including the shares issued from the exercise of the over-allotment

options) are freely tradable in the United States, except for any shares purchased by our “affiliates”

as defined in Rule

144 under the Securities Act.

The holders of 6,308,943 shares of outstanding common stock have agreed with the underwriters, subject

to certain exceptions, not to dispose of or hedge any of their common stock during the 180-day period beginning on the date of the IPO

prospectus (which period may be reduced to a minimum of 90 days if we meet certain stock price milestones), except with the prior written

consent of the underwriters.

After the expiration of such restricted period, these shares may be sold in the public market in the United

States, subject to prior registration in the United States, if required, or reliance upon an exemption from U.S.

registration, including,

in the case of shares held by affiliates or control persons, compliance with the volume restrictions of Rule 144.

In addition, we may file a

registration statement to register the approximately 4,359,509 shares of common stock underlying outstanding options and shares reserved

for future issuance under our equity compensation plans.

Upon effectiveness of that registration statement, subject to the satisfaction

of applicable exercise periods and, in certain cases, lock-up agreements with the representatives of the underwriters in our IPO referred

to above, the shares of common stock issued upon exercise of outstanding options will be available for immediate resale in the United

States in the open market.

Sales of our common stock as

restrictions end or pursuant to registration rights may make it more difficult for us to sell equity securities in the future at a time

and at a price that we deem appropriate.

These sales also could cause our stock price to fall and make it more difficult for you to sell

shares of our common stock.

Provisions in our articles of incorporation,

our by-laws and Nevada law might discourage, delay or prevent a change in control of our company or changes in our management and, therefore,

depress the trading price of our common stock .

Provisions of our articles

of incorporation, our by-laws and Nevada law may have the effect of deterring unsolicited takeovers or delaying or preventing a change

in control of our company or changes in our management, including transactions in which our stockholders might otherwise receive a premium

for their shares over then current market prices.

In addition, these provisions may limit the ability of stockholders to approve transactions

that they may deem to be in their best interests.

We have filed a registration statement to register

the shares of common stock underlying outstanding options and shares reserved for future issuance under our equity compensation plans.

Upon effectiveness of that registration statement, subject to the satisfaction of applicable exercise periods and subject to our insider

trading policy, the shares of common stock issued upon exercise of outstanding options will be available for immediate resale in the

United States in the open market.

Sales of our common stock as restrictions end

or pursuant to registration rights may make it more difficult for us to sell equity securities in the future at a time and at a price

that we deem appropriate.

These sales also could cause our stock price to fall and make it more difficult for you to sell shares of our

common stock.

The exercise of all or any number of outstanding

warrants or the issuance of stock-based awards may dilute your holding of shares of our common stock.

We have issued several securities providing for

the right to purchase our common stock.

Investors could be subject to increased dilution upon the exercise of our Convertible Notes issued

in Fiscal 2020, which have a $0.02 exercise price.

A total of 271,844 warrants issued on connection with the 2020 convertible notes are

outstanding as of December 31, 2021.

Subsequent to December 31, 2021, the Company completed a private placement of our common stock and

entered into a securities purchase agreement.

Both of these arrangements include warrant issuance provisions.

On January 25, 2022, the

Company issued a total of 4,586,389 warrants in connection with the private placement entered into with an institutional investor and

other accredited investors.

The warrant issuance included 1,570,644 pre-funded warrants, with an exercise price of $0.001, and 3,015,745

warrants with exercise prices ranging between $6.80 and $6.90.

On March 23, 2022, the Company issued a total of 6,881,108 warrants in

connection with its entrance into a securities purchase agreement with an accredited investor.

The warrants issued have an exercise price

Additionally, shares of common stock were reserved

for issuance of equity-based awards to employees, directors and certain other individuals under the Company’s 2020 Omnibus Equity

Incentive Plan.

The exercise of equity awards, including any restricted stock units that we may grant in the future, and the exercise

of warrants and the subsequent sale of shares of common stock issued thereby, could have an adverse effect on the market for our common

stock, including the price that an investor could obtain for their shares.

Investors may experience dilution in the value of their investment upon the exercise of the warrants and any

equity awards that may be granted or issued pursuant to the 2020 Omnibus Equity Incentive Plan.

Provisions in our articles of incorporation, our by-laws and

Nevada law might discourage, delay or prevent a change in control of our company or changes in our management and, therefore, depress

the trading price of our common stock .

Provisions of our articles of incorporation,

our by-laws and Nevada law may have the effect of deterring unsolicited takeovers or delaying or preventing a change in control of our

company or changes in our management, including transactions in which our stockholders might otherwise receive a premium for their shares

over then current market prices.

In addition, these provisions may limit the ability of stockholders to approve transactions that they

may deem to be in their best interests.

These provisions include:

● the inability of

stockholders to call special meetings;

ability of our board of directors to designate the terms of and issue new series of preferred

stock without stockholder approval, which could include the right to approve an acquisition

or other change in our control or could be used to institute a rights plan, also known as

a poison pill, that would work to dilute the stock ownership of a potential hostile acquirer,

likely preventing acquisitions that have not been approved by our board of directors.

The existence of the forgoing

provisions and anti-takeover measures could limit the price that investors might be willing to pay in the future for shares of our common

They could also deter potential acquirers of our company, thereby reducing the likelihood that you could receive a premium for

your common stock in an acquisition.

We are an “emerging growth company,”

as defined in the JOBS Act, and a “smaller reporting company”

within the meaning of the Securities Act, and we cannot be

certain if the reduced disclosure requirements applicable to emerging growth companies or smaller reporting companies will make our common

stock less attractive to investors.

We are an “emerging growth

company,”

the inability of stockholders to call special meetings;

the ability of our board of directors to designate the terms of and issue new series of preferred

stock without stockholder approval, which could include the right to approve an acquisition or other change in our control or could

be used to institute a rights plan, also known as a poison pill, that would work to dilute the stock ownership of a potential hostile

acquirer, likely preventing acquisitions that have not been approved by our board of directors.

The existence of the forgoing provisions and

anti-takeover measures could limit the price that investors might be willing to pay in the future for shares of our common stock.

could also deter potential acquirers of our company, thereby reducing the likelihood that you could receive a premium for your common

stock in an acquisition.

We are an “emerging growth company,” as defined

in the JOBS Act, and a “smaller reporting company” within the meaning of the Securities Act, and we cannot be certain if

the reduced disclosure requirements applicable to emerging growth companies or smaller reporting companies will make our common stock

less attractive to investors.

We are an “emerging growth company,”

as defined in the JOBS Act.

For as long as we continue to be an emerging growth company, we may take advantage of exemptions

from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including (1)

not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, (2) reduced disclosure

obligations regarding executive compensation in this report and our periodic reports and proxy statements and (3) exemptions from the

requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments

not previously approved.

In addition, as an emerging growth company, we are only required to provide two years of audited financial statements

and two years of selected financial data in this report.

For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various

reporting requirements that are applicable to other public companies that are not emerging growth companies, including (1) not being

required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, (2) reduced disclosure obligations

regarding executive compensation in this report and our periodic reports and proxy statements and (3) exemptions from the requirements

of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously

In addition, as an emerging growth company, we are only required to provide two years of audited financial statements and two

years of selected financial data in this report.

We could be an emerging growth company for up to five years, although circumstances

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than $1.0 billion in non-convertible debt during any three-year period before that time, we would cease to be an emerging growth company

Additionally, we are a “smaller

reporting company”

as defined in Item 10(f)(1) of Regulation S-K.

Smaller reporting companies may take advantage of certain reduced

disclosure obligations, including, among other things, providing only two years of audited financial statements.

We will remain a smaller

reporting company until the last day of the fiscal year in which (1) the market value of our shares of common stock held by non-affiliates

exceeds $250 million as of the prior June 30, or (2) our annual revenues exceeded $100 million during such completed fiscal year and

the market value of our ordinary shares held by non-affiliates exceeds $700 million as of the prior June 30.

To the extent we take advantage

of such reduced disclosure obligations, it may also make comparison of our financial statements with other public companies difficult

or impossible.

After we are no longer an “emerging

growth company,”

we expect to incur additional management time and cost to comply with the more stringent reporting requirements

applicable to companies that are deemed accelerated filers or large accelerated filers, including complying with the auditor attestation

requirements of Section 404 of the Sarbanes-Oxley Act.

We cannot predict or estimate the amount of additional costs we may incur or the

timing of such costs.

We have not and do not expect to declare any

dividends to our shareholders in the foreseeable future .

We have not and do not anticipate

declaring any cash dividends to holders of our common stock in the foreseeable future.

Consequently, investors may need to rely on sales

of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment.

Investors seeking cash dividends should not purchase our common stock.

Additionally, we are a “smaller reporting

company” as defined in Item 10(f)(1) of Regulation S-K.

Smaller reporting companies may take advantage of certain reduced disclosure

obligations, including, among other things, providing only two years of audited financial statements.

We will remain a smaller reporting

company until the last day of the fiscal year in which (1) the market value of our shares of common stock held by non-affiliates exceeds

$250 million as of the prior June 30, or (2) our annual revenues exceeded $100 million during such completed fiscal year and the market

value of our ordinary shares held by non-affiliates exceeds $700 million as of the prior June 30.

To the extent we take advantage of

such reduced disclosure obligations, it may also make comparison of our financial statements with other public companies difficult or

After we are no longer an “emerging growth

company,” we expect to incur additional management time and cost to comply with the more stringent reporting requirements applicable

to companies that are deemed accelerated filers or large accelerated filers, including complying with the auditor attestation requirements

of Section 404 of the Sarbanes-Oxley Act.

We cannot predict or estimate the amount of additional costs we may incur or the timing of

We have not and do not expect to declare any dividends to our

shareholders in the foreseeable future .

We have not and do not anticipate declaring any

cash dividends to holders of our common stock in the foreseeable future.

Consequently, investors may need to rely on sales of their common

stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment.

Investors seeking

cash dividends should not purchase our common stock.

General Risk Factors

The COVID-19 pandemic and the efforts to mitigate

its impact may have an adverse effect on our business, liquidity, results of operations, financial condition and price of our securities .

The pandemic involving the

novel strain of coronavirus and related respiratory disease (which we refer to as COVID-19) and the measures taken to combat it, have

had an adverse effect on our business.

Public health authorities and governments at local, national and international levels have announced

various measures to respond to this pandemic.

The COVID-19 pandemic and the efforts to mitigate its impact

may have an adverse effect on our business, liquidity, results of operations, financial condition and price of our securities .

The pandemic involving the novel strain of coronavirus

and related respiratory disease (which we refer to as COVID-19) and the measures taken to combat it, have had an adverse effect on our

Public health authorities and governments at local, national and international levels have announced various measures to respond

to this pandemic.

Some measures that directly or indirectly impact our business include:

● voluntary or mandatory

voluntary or mandatory quarantines;

restrictions on travel;

● limiting gatherings

of people in public places.

We have undertaken measures

in an effort to mitigate the spread of COVID-19 including limiting company travel and in-person meetings.

We also have enacted our business

continuity plans, including implementing procedures requiring employees working remotely where possible which may make maintaining our

normal level of corporate operations, quality controls and internal controls difficult.

Notwithstanding these efforts, our results of

operations have been adversely impacted by COVID-19 and this may continue.

Moreover, the COVID-19 pandemic

has previously caused some temporary delays in the delivery of our inventory, although recently we are no longer experiencing such delays.

In addition, the travel restrictions imposed as a result of COVID-19 have impacted our ability to visit customer sites to perform services

related to our products.

Further, the COVID-19 pandemic and mitigation efforts have also adversely affected our customers’

condition, resulting in reduced spending for the products we sell.

As events are rapidly changing,

we do not know how long the COVID-19 pandemic, or localized outbreaks or recurrences of COVID-19, and the measures that have been introduced

to respond to COVID-19 will disrupt our operations or the full extent of that disruption.

Further, once we are able to restart normal

operations doing so may take time and will involve costs and uncertainty.

We also cannot predict how long the effects of COVID-19 and

the efforts to contain it will continue to impact our business after the pandemic is under control.

Governments could take additional

restrictive measures to combat the pandemic that could further impact our business or the economy in the geographies in which we operate.

It is also possible that the impact of the pandemic and response on our suppliers, customers and markets will persist for some time after

governments ease their restrictions.

These measures have negatively impacted, and may continue to impact, our business and financial

condition as the responses to control COVID-19 continue.

A prolonged economic downturn, particularly

limiting gatherings of people in public places.

We have undertaken measures in an effort to mitigate

the spread of COVID-19 including limiting company travel and in-person meetings.

We also have enacted our business continuity plans,

including implementing procedures requiring employees working remotely where possible which may make maintaining our normal level of

corporate operations, quality controls and internal controls difficult.

Notwithstanding these efforts, our results of operations have

been adversely impacted by COVID-19 and this may continue.

Moreover, the COVID-19 pandemic has previously

caused some temporary delays in the delivery of our inventory, although recently we are no longer experiencing such delays.

the travel restrictions imposed as a result of COVID-19 have impacted our ability to visit customer sites to perform services related

to our products.

Further, the COVID-19 pandemic and mitigation efforts have also adversely affected our customers’ financial condition,

resulting in reduced spending for the products we sell.

As events are rapidly changing, we do not know

how long the COVID-19 pandemic, or localized outbreaks or recurrences of COVID-19, and the measures that have been introduced to respond

to COVID-19 will disrupt our operations or the full extent of that disruption.

Further, once we are able to restart normal operations

doing so may take time and will involve costs and uncertainty.

We also cannot predict how long the effects of COVID-19 and the efforts

to contain it will continue to impact our business after the pandemic is under control.

Governments could take additional restrictive

measures to combat the pandemic that could further impact our business or the economy in the geographies in which we operate.

possible that the impact of the pandemic and response on our suppliers, customers and markets will persist for some time after governments

ease their restrictions.

These measures have negatively impacted, and may continue to impact, our business and financial condition as

the responses to control COVID-19 continue.

A prolonged economic downturn, particularly in light of the

COVID-19 pandemic, could adversely affect our business .

Uncertain global economic conditions, in particular

in light of the COVID-19 pandemic, could adversely affect our business.

Uncertain global economic conditions,

in particular in light of the COVID-19 pandemic, could adversely affect our business.

Negative global and national economic trends, such

as decreased consumer and business spending, high unemployment levels and declining consumer and business confidence, pose challenges

to our business and could result in declining revenues, profitability and cash flow.

Although we continue to devote significant resources

to support our brands, unfavorable economic conditions may negatively affect demand for our products.

Increases in costs, disruption of supply or

shortage of raw materials could harm our business .

We may experience increases

in the cost or a sustained interruption in the supply or shortage of raw materials.

For example, the tariffs currently imposed for importing

goods from China has significantly increased.

Any such an increase or supply interruption could materially negatively impact our business,

prospects, financial condition and operating results.

Negative global and national economic trends, such as decreased

consumer and business spending, high unemployment levels and declining consumer and business confidence, pose challenges to our business

and could result in declining revenues, profitability and cash flow.

Although we continue to devote significant resources to support

our brands, unfavorable economic conditions may negatively affect demand for our products.

Increases in costs, disruption of supply or shortage of raw

materials could harm our business .

We may experience increases in the cost or a

sustained interruption in the supply or shortage of raw materials.

For example, the tariffs currently imposed for importing goods from

China has significantly increased.

Any such an increase or supply interruption could materially negatively impact our business, prospects,

financial condition and operating results.

We use various raw materials in our business including aluminum.

The prices for

these raw materials fluctuate depending on market conditions and global demand for these materials and could adversely affect our business

and operating results.

The prices for these raw

materials fluctuate depending on market conditions and global demand for these materials and could adversely affect our business and

operating results.

Substantial increases in the prices for our raw materials increase our operating costs and could reduce our margins

if we cannot recoup the increased costs through increased prices for our products and services.

Litigation may adversely affect our business,

financial condition and results of operations .

From time to time in the normal

course of our business operations, we may become subject to litigation involving intellectual property, data privacy and security, consumer

protection, commercial disputes and other matters that may negatively affect our operating results if changes to our business operation

are required.

Due to our manufacturing and sale of our products, including hardware and software, we may also be subject to a variety

of claims including product warranty, product liability, and consumer protection claims related to product defects, among other litigation.

We may also be subject to claims involving health and safety, hazardous materials usage, other environmental impacts, or service disruptions

Matters relating to the employment market and prevailing wage

standards may adversely affect our business.

Our ability to meet our labor needs on a cost-effective

basis is subject to numerous external factors, including the availability of qualified personnel in the workforce in the markets in which

we operate, unemployment levels within those markets, prevailing wage rates, which have increased significantly, health and other insurance

costs and changes in employment and labor laws.

In the event prevailing wage rates continue to increase in the markets in which we operate,

we may be required to concurrently increase the wages paid to our employees to maintain the quality of our workforce.

To the extent such

increases are not offset by price increases, our business and operating results could be adversely affected.

If we are unable to hire

and retain employees capable of meeting our business needs and expectations, our business and reputation may be impaired.

to meet our staffing needs or any material increase in turnover rates of our employees may adversely affect our business, results of

operations and financial condition.

Further, we rely on the ability to attract and

retain employees on a cost-effective basis.

The availability of employees in the markets in which we operate has declined in recent years

and competition for such personnel has increased, especially under the economic crises experienced throughout the COVID-19 pandemic.

Our ability to attract and retain a sufficient workforce on a cost-effective basis depends on several factors, including the ability

to protect staff during the COVID-19 pandemic.

We may not be able to attract and retain a sufficient workforce on a cost-effective basis

in the future.

In the event of increased costs of attracting and retaining a workforce, our business and operating results could be adversely

Litigation may adversely affect our business, financial condition

and results of operations .

From time to time in the normal course of our

business operations, we may become subject to litigation involving intellectual property, data privacy and security, consumer protection,

commercial disputes and other matters that may negatively affect our operating results if changes to our business operation are required.

Due to our manufacturing and sale of our products, including hardware and software, we may also be subject to a variety of claims including

product warranty, product liability, and consumer protection claims related to product defects, among other litigation.

We may also be

subject to claims involving health and safety, hazardous materials usage, other environmental impacts, or service disruptions or failures.

The cost to defend such litigation may be significant and may require a diversion of our resources.

There also may be adverse

publicity associated with litigation that could negatively affect customer perception of our business, regardless of whether the allegations

are valid or whether we are ultimately found liable.

As a result, litigation may adversely affect our business, financial condition and

results of operations.

In addition, insurance may not cover existing or future claims, be sufficient to fully compensate us for one or

more of such claims, or continue to be available on terms acceptable to us.

A claim brought against us that is uninsured or underinsured

could result in unanticipated costs, thereby adversely affecting our results of operations and resulting in a reduction in the trading

price of our stock.

An active, liquid and orderly trading market

for our common stock may not develop, the price of our stock may be volatile, and you could lose all or part of your investment .

The trading price of our common

stock may be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control.

Our stock price could be subject to wide fluctuations in response to a variety of factors, which include:

● whether we achieve

our anticipated corporate objectives;

● actual or anticipated

fluctuations in our quarterly or annual operating results;

● changes in our financial

or operational estimates or projections;

● our ability to implement

our operational plans;

● termination of the

lock-up agreement or other restrictions on the ability of our stockholders to sell shares;

● changes in the economic

performance or market valuations of companies similar to ours;

● general economic

or political conditions in the United States or elsewhere.

In addition, the stock market

in general, and the market for technology companies in particular, has experienced extreme price and volume fluctuations that have often

been unrelated or disproportionate to the operating performance of those companies.

Broad market and industry factors may seriously affect

the market price of companies’

There also may be adverse publicity

associated with litigation that could negatively affect customer perception of our business, regardless of whether the allegations are

valid or whether we are ultimately found liable.

As a result, litigation may adversely affect our business, financial condition and results

of operations.

In addition, insurance may not cover existing or future claims, be sufficient to fully compensate us for one or more of

such claims or continue to be available on terms acceptable to us.

A claim brought against us that is uninsured or underinsured could

result in unanticipated costs, thereby adversely affecting our results of operations and resulting in a reduction in the trading price

of our stock.

An active, liquid, and orderly trading market for our common

stock may not develop, the price of our stock may be volatile, and you could lose all or part of your investment .

The trading price of our common stock may be

highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control.

price could be subject to wide fluctuations in response to a variety of factors, which include:

whether we achieve our anticipated corporate objectives;

actual or anticipated fluctuations in our quarterly or annual operating results;

changes in our financial or operational estimates or projections;

our ability to implement our operational plans;

termination of the lock-up agreement or other restrictions on the ability of our stockholders to

changes in the economic performance or market valuations of companies similar to ours;

general economic or political conditions in the United States or elsewhere.

In addition, the stock market in general, and

the market for technology companies, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate

to the operating performance of those companies.

Broad market and industry factors may seriously affect the market price of companies’

stock, including ours, regardless of actual operating performance.

In addition, in the past, following

periods of volatility in the overall market and the market price of a particular company’s securities, securities class action

litigation has often been instituted against these companies.

This litigation, if instituted against us, could result in substantial

costs and a diversion of our management’s attention and resources.

Our failure to meet the continuing listing

requirements of the NASDAQ Capital Market could result in a de-listing of our securities .

If we fail to satisfy the continuing

listing requirements of NASDAQ, such as the corporate governance, stockholders equity or minimum closing bid price requirements, NASDAQ

In addition, in the past, following periods of volatility in the overall

market and the market price of a particular company’s securities, securities class action litigation has often been instituted against

these companies.

This litigation, if instituted against us, could result in substantial costs and a diversion of our management’s

attention and resources.

Our failure to meet the continuing listing requirements of the

NASDAQ Capital Market could result in a de-listing of our securities .

If we fail to satisfy the continuing listing

requirements of NASDAQ, such as the corporate governance, stockholders’ equity or minimum closing bid price requirements, NASDAQ

may take steps to delist our common stock.

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In the event of a delisting, we would likely take

actions to restore our compliance with NASDAQ’s listing requirements, but we can provide no assurance that any such action taken

by us would allow our common stock to become listed again, stabilize the market price or improve the liquidity of our securities, prevent

our common stock from dropping below the NASDAQ minimum bid price requirement or prevent future non-compliance with NASDAQ’s listing

requirements.

We incur increased costs and demands upon

management as a result of complying with the laws and regulations affecting public companies, which could adversely affect our operating

As a public company, we incur

significant legal, accounting and other expenses that we did not incur as a private company, including costs associated with public company

reporting and corporate governance requirements.

These requirements include compliance with Section 404 and other provisions of the Sarbanes-Oxley

Act, as well as rules implemented by the Securities and Exchange Commission, or SEC, and the NASDAQ.

In addition, our management team

also has to adapt to the requirements of being a public company.

We incur increased costs and demands upon management as a result

of complying with the laws and regulations affecting public companies, which could adversely affect our operating results .

As a public company, we incur significant legal,

accounting, and other expenses that we did not incur as a private company, including costs associated with public company reporting and

corporate governance requirements.

These requirements include compliance with Section 404 and other provisions of the Sarbanes-Oxley Act,

as well as rules implemented by the Securities and Exchange Commission, or (“SEC”), and the NASDAQ.

In addition, our management

team also has to adapt to the requirements of being a public company.

We expect complying with these rules and regulations will substantially

increase our legal and financial compliance costs and to make some activities more time-consuming and costly.

The increased costs associated

with operating as a public company will decrease our net income or increase our net loss, and may require us to reduce costs in other

areas of our business or increase the prices of our products or services.

Additionally, if these requirements divert our management’s

attention from other business concerns, they could have a material adverse effect on our business, financial condition and operating

As a public company, we also

expect that it may be more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required

to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage.

it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as our executive officers.

As a public company, we are obligated to develop

and maintain proper and effective internal control over financial reporting.

We may not complete our analysis of our internal control

over financial reporting in a timely manner, or these internal controls may not be determined to be effective, which may adversely affect

investor confidence in our company and, as a result, the value of our common stock .

We will be required, pursuant

to Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the effectiveness of our internal

control over financial reporting for the first fiscal year beginning after the effective date of the IPO.

This assessment will need to

include disclosure of any material weaknesses identified by our management in our internal control over financial reporting, as well

as a statement that our auditors have issued an attestation report on effectiveness of our internal controls.

We are in the very early stages

of the costly and challenging process of compiling the system and processing documentation necessary to perform the evaluation needed

to comply with Section 404.

We may not be able to remediate future material weaknesses, or to complete our evaluation, testing and any

required remediation in a timely fashion.

During the evaluation and testing process, if we identify one or more material weaknesses in

our internal control over financial reporting, we will be unable to assert that our internal controls are effective.

If we are unable

to assert that our internal control over financial reporting is effective, or if our auditors 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 a material adverse effect on the price of our common stock.

If our shares of common stock become subject

to the penny stock rules, it would become more difficult to trade our shares .

The SEC has adopted rules that

regulate broker-dealer practices in connection with transactions in penny stocks.

Penny stocks are generally equity securities with a

price of less than $5.00, other than securities registered on certain national securities exchanges or authorized for quotation on certain

automated quotation systems, provided that current price and volume information with respect to transactions in such securities is provided

by the exchange or system.

If we do not retain a listing on NASDAQ and if the price of our common stock is less than $5.00, our common

stock will be deemed a penny stock.

The penny stock rules require a broker-dealer, before a transaction in a penny stock not otherwise

exempt from those rules, to deliver a standardized risk disclosure document containing specified information.

In addition, the penny

stock rules require that before effecting any transaction in a penny stock not otherwise exempt from those rules, a broker-dealer must

make a special written determination that the penny stock is a suitable investment for the purchaser and receive (i) the purchaser’s

written acknowledgment of the receipt of a risk disclosure statement;

The increased costs associated with operating

as a public company will decrease our net income or increase our net loss and may require us to reduce costs in other areas of our business

or increase the prices of our products or services.

Additionally, if these requirements divert our management’s attention from other

business concerns, they could have a material adverse effect on our business, financial condition, and operating results.

As a public company, we also expect that it may

be more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced

policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage.

As a result, it may be more difficult

for us to attract and retain qualified individuals to serve on our board of directors or as our executive officers.

As a public company, we are obligated to develop and maintain

proper and effective internal control over financial reporting.

These internal controls may not be determined to be effective, which

may adversely affect investor confidence in our company and, as a result, the value of our common stock .

We are required, pursuant to Section 404 of the

Sarbanes-Oxley Act, to annually furnish a report by management on, among other things, the effectiveness of our internal control over

financial reporting.

This assessment includes disclosure of any material weaknesses identified by our management in our internal control

over financial reporting, as well as a statement that our auditors have issued an attestation report on effectiveness of our internal

We are in the very early stages of the costly

and challenging process of compiling the system and processing documentation necessary to perform the evaluation needed to comply with

We may not be able to remediate future material weaknesses, or to complete our evaluation, testing and any required remediation

in a timely fashion.

During the evaluation and testing process, if we identify one or more material weaknesses in our internal control

over financial reporting, we will be unable to assert that our internal controls are effective.

If we are unable to assert that our internal

control over financial reporting is effective, or if our auditors 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 a material adverse

effect on the price of our common stock.

Data privacy and security concerns relating to our technology

and our practices could damage our reputation, cause us to incur significant liability, and deter current and potential users or customers

from using our products and services.

Software bugs or defects, security breaches, and attacks on our systems could result in the improper

disclosure and use of user data and interference with our users and customers’ ability to use our products and services, harming

our business operations and reputation .

Concerns about our practices with regard to the

collection, use, disclosure, or security of personal information or other data-privacy-related matters, even if unfounded, could harm

our reputation, financial condition, and operating results.

Our policies and practices may change over time as expectations regarding

privacy and data change.

Our products and services involve the storage and transmission of proprietary information, and bugs, theft,

misuse, defects, vulnerabilities in our products and services, and security breaches expose us to a risk of loss of this information,

improper use and disclosure of such information, litigation, and other potential liability.

Systems and control failures, security breaches

and/or inadvertent disclosure of user data could result in government and legal exposure, seriously harm our reputation and brand and,

therefore, our business, and impair our ability to attract and retain customers.

We may experience cyber-attacks and other attempts

to gain unauthorized access to our systems.

We may experience future security issues, whether due to employee error or malfeasance or

system errors or vulnerabilities in our or other parties’ systems, which could result in significant legal and financial exposure.

We may be unable to anticipate or detect attacks or vulnerabilities or implement adequate preventative measures.

Attacks and security

issues could also compromise trade secrets and other sensitive information, harming our business.

As a result, we may suffer significant

legal, reputational, or financial exposure, which could harm our business, financial condition, and operating results.

Our operations may be impaired if our information technology

systems fail to perform adequately or if we are the subject of a data breach or cyber-attack .

We rely on information technology systems to conduct

business, including communicating with employees and our key commercial customers, ordering and managing materials from suppliers, shipping

products and providing SaaS services to our customers and analyzing and reporting results of operations.

While we have taken steps to

ensure the security of our information technology systems, our systems may nevertheless be vulnerable to computer viruses, security breaches

and other disruptions from unauthorized users.

If our information technology systems are damaged or cease to function properly for an

extended period of time, whether as a result of a significant cyber incident or otherwise, our ability to communicate internally as well

as with our customers could be significantly impaired, which may adversely impact our business.

Additionally, in the normal course of our business,

we collect, store and transmit proprietary and confidential information regarding our customers, employees, suppliers and others, including

personally identifiable information.

An operational failure or breach of security from increasingly sophisticated cyber threats could

lead to loss, misuse or unauthorized disclosure of this information about our employees or customers, which may result in regulatory or

other legal proceedings, and have a material adverse effect on our business and reputation.

We also may not have the resources or technical

sophistication to anticipate or prevent rapidly evolving types of cyber-attacks.

Any such attacks or precautionary measures taken to prevent

anticipated attacks may result in increasing costs, including costs for additional technologies, training, and third-party consultants.

The losses incurred from a breach of data security and operational failures as well as the precautionary measures required to address

this evolving risk may adversely impact our financial condition, results of operations and cash flows.

Privacy regulation is an evolving area and compliance with applicable

privacy regulations may increase our operating costs or adversely impact our ability to service our clients and market our products and

Because we store, process, and use data, some

of which contains personal information, we are subject to complex and evolving federal, state, and foreign laws and regulations regarding

privacy, data protection, and other matters.

While we believe we are currently in compliance with applicable laws and regulations, many

of these laws and regulations are subject to change and uncertain interpretation, and could result in investigations, claims, changes

to our business practices, increased cost of operations, and declines in user growth, retention, or engagement, any of which could seriously

harm our business.

If our shares of common stock become subject to the penny stock

rules, it would become more difficult to trade our shares .

The SEC has adopted rules that regulate broker-dealer

practices in connection with transactions in penny stocks.

Penny stocks are generally equity securities with a price of less than $5.00,

other than securities registered on certain national securities exchanges or authorized for quotation on certain automated quotation

systems, provided that current price and volume information with respect to transactions in such securities is provided by the exchange

If we do not retain a listing on NASDAQ and if the price of our common stock is less than $5.00, our common stock will be

deemed a penny stock.

The penny stock rules require a broker-dealer, before a transaction in a penny stock not otherwise exempt from

those rules, to deliver a standardized risk disclosure document containing specified information.

In addition, the penny stock rules

require that before effecting any transaction in a penny stock not otherwise exempt from those rules, a broker-dealer must make a special

written determination that the penny stock is a suitable investment for the purchaser and receive (i) the purchaser’s written acknowledgment

of the receipt of a risk disclosure statement;

(ii) a written agreement to transactions involving penny stocks;

and (iii) a signed and dated copy of a written suitability statement.

These disclosure requirements may have the effect of reducing the

trading activity in the secondary market for our common stock, and therefore stockholders may have difficulty selling their shares.

The financial and operational projections

that we may make from time to time are subject to inherent risks .

The projections that our management

may provide from time to time (including, but not limited to, those relating to potential peak sales amounts, production and supply dates,

and other financial or operational matters) reflect numerous assumptions made by management, including assumptions with respect to our

specific as well as general business, economic, market and financial conditions and other matters, all of which are difficult to predict

and many of which are beyond our control.

Accordingly, there is a risk that the assumptions made in preparing the projections, or the

projections themselves, will prove inaccurate.

There will be differences between actual and projected results, and actual results may

be materially different from those contained in the projections.

The inclusion of the projections in this report should not be regarded

as an indication that we or our management or representatives considered or consider the projections to be a reliable prediction of future

events, and the projections should not be relied upon as such.

If we were to dissolve, the holders of our

securities may lose all or substantial amounts of their investments .

If we were to dissolve as a

corporation, as part of ceasing to do business or otherwise, we may be required to pay all amounts owed to any creditors before distributing

any assets to the investors.

There is a risk that in the event of such a dissolution, there will be insufficient funds to repay amounts

owed to holders of any of our indebtedness and insufficient assets to distribute to our other investors, in which case investors could

lose their entire investment.

If securities or industry analysts do not

publish or cease publishing research or reports about us, our business or our market, or if they change their recommendations regarding

our stock adversely, our stock price and trading volume could decline .

The trading market for our

common stock will be influenced by the research and reports that industry or securities analysts may publish about us, our business,

our market or our competitors.

If any of the analysts who may cover us change their recommendation regarding our stock adversely, or

provide more favorable relative recommendations about our competitors, our stock price would likely decline.

If any analyst who may cover

us were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets,

which in turn could cause our stock price or trading volume to decline.

Unresolved Staff

and (iii) a signed and

dated copy of a written suitability statement.

These disclosure requirements may have the effect of reducing the trading activity in

the secondary market for our common stock, and therefore stockholders may have difficulty selling their shares.

The financial and operational projections that we may make from

time to time are subject to inherent risks .

The projections that our management may provide

from time to time (including, but not limited to, those relating to potential peak sales amounts, production, and supply dates, and other

financial or operational matters) reflect numerous assumptions made by management, including assumptions with respect to our specific

as well as general business, economic, market and financial conditions and other matters, all of which are difficult to predict and many

of which are beyond our control.

Accordingly, there is a risk that the assumptions made in preparing the projections, or the projections

themselves, will prove inaccurate.

There will be differences between actual and projected results, and actual results may be materially

different from those contained in the projections.

The inclusion of the projections in this report should not be regarded as an indication

that we or our management or representatives considered or consider the projections to be a reliable prediction of future events, and

the projections should not be relied upon as such.

If we were to dissolve, the holders of our securities may lose

all or substantial amounts of their investments .

If we were to dissolve as a corporation, as part

of ceasing to do business or otherwise, we may be required to pay all amounts owed to any creditors before distributing any assets to

the investors.

There is a risk that in the event of such a dissolution, there will be insufficient funds to repay amounts owed to holders

of any of our indebtedness and insufficient assets to distribute to our other investors, in which case investors could lose their entire

If securities or industry analysts do not publish or cease publishing

research or reports about us, our business, or our market, or if they change their recommendations regarding our stock adversely, our

stock price and trading volume could decline .

The trading market for our common stock will

be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market or our

If any of the analysts who may cover us change their recommendation regarding our stock adversely, or provide more favorable

relative recommendations about our competitors, our stock price would likely decline.

If any analyst who may cover us were to cease coverage

of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause

our stock price or trading volume to decline.

Unresolved Staff Comments.

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