What changed in this filing

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Item 1A. Risk Factors

2025-03-31 compared with 2024-03-27 · 130 added, 130 removed, 367 unchanged (41% of the section changed)

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● We may not be able to develop technologies and products to satisfy changes in customer demand or industry standards, and our competitors could develop products that decrease the demand for our products.

● If MicroLED technology is not widely adopted by display manufacturers, our business would be harmed.

● We compete in highly competitive markets characterized by rapid technological changes, and existing and new companies may introduce products that compete with ours, which may adversely affect our business and operating results.

● If we are unable to establish sales capabilities on our own or through third parties, we may not be able to market and sell our existing or future products - or generate product revenue.

● We rely on the CPI and ITRI for access to fabrication and expect to enter into arrangements with third-party fabricators to produce our products at commercial scale.

The loss of access to the CPI and/or the ITRI facilities, or our inability to enter into agreements with third-party fabricators could have a material adverse effect on our business development.

● We rely on access to third-party facilities for prototyping and commercial process development and expect to enter into arrangements with third parties to fabricate our products at commercial scale.

The loss of access to a third-party facility, or our inability to enter into agreements with third-party fabricators could have a material adverse effect on our business development .

● Because we will depend on third-party fabricators to manufacture products for us, we will be susceptible to manufacturing delays and pricing fluctuations that could prevent us from shipping customer orders on time, if at all, or on a cost-effective basis, which may result in the loss of sales, income and customers.

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● An active trading market for our common stock may not develop or be sustained, which may make it difficult for investors to sell shares of our common stock and may make it difficult for us to raise capital.

● If our common stock were to be delisted from Nasdaq due to our failure to meet all applicable Nasdaq listing requirements the market liquidity of our common stock would be adversely affected, the market price of our common stock could decrease and our ability to access the capital markets could be negatively impacted.

● We do not anticipate paying dividends on our common stock, and investors may lose the entire amount of their investment.

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If this were to occur, our stockholders could lose all or part of their investment.

We have recorded recurring losses from operations and will likely require additional capital to support our business and objectives.

Our recurring losses from operations have raised substantial doubt regarding our ability to continue as a going concern and will likely require additional capital to support our business and objectives .

We have incurred recurring losses since inception and, as of December 31, 2024, had an accumulated deficit of $114.6 million.

We anticipate operating losses to continue for the foreseeable future due to, among other things, costs related to research funding, further development of our technology and products and expenses related to the commercialization of our products, and it is possible we will never achieve profitability.

We believe that our existing cash will be sufficient to fund our operations through the end of April 2025 and that we will require additional capital to continue our operations and research and development activity thereafter.

There can be no assurance, however, that such financing will be available by the end of April 2025, if at all, or on acceptable terms and conditions.

These efforts may be more costly than we expect, and we may not be able to generate revenue to offset our increased operating expenses.

We expect our cash and cash equivalents of $7.1 million as of December 31, 2024 to be insufficient to meet our operating expenses and capital expenditure requirements for at least 12 months from the filing of this Form 10-K.

Our forecast of the period of time through which our current financial resources will be adequate to support our operations and the costs to support our general and administrative and research and development activities are forward-looking statements and involve risks and uncertainties.

Our consolidated financial statements do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern.

Our ability to continue as a going concern is dependent on our ability to raise additional working capital through public or private equity or debt financings or other sources, which may include collaborations with third parties.

There can be no assurance, however, that such financing will be available, on acceptable terms and conditions, or at all.

The precise amount and timing of the funding needs cannot be determined accurately at this time, and will depend on a number of factors, including our ability to generate significant revenue, the market demand for our products, the quality of product development efforts including potential joint collaborations, management of working capital, and the continuation of normal payment terms and conditions for purchase of services.

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If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce or terminate commercialization, our research and product development, or grant rights to develop and market our products that we would otherwise prefer to develop and market ourselves, it may also impact our ability to continue as a going concern.

The perception that we may not be able to continue as a going concern may cause others to choose not to deal with us due to concerns about our ability to meet our contractual obligations.

The perception that we may not be able to continue as a going

concern may cause others to choose not to deal with us due to concerns about our ability to meet our contractual obligations.

Our quarterly results of operations are likely to vary from period to period, which could cause the market price of our common stock to fluctuate or decline.

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Our financial performance depends, in part, on our ability to design, develop, manufacture, assemble, test, market and support new products and enhancements on a timely and cost-effective basis.

We have not commercialized any of our products.

We have not sold our products at commercial scale.

Our principal focus has been on research and development activities to improve our technology and make our product offerings more attractive to potential customers.

These projects are subject to various risks and uncertainties we are not able to control, including changes in customer demand or industry standards and the introduction of new or superior technologies by others.

Moreover, any failure by us in the future to develop new technologies or timely react to changes in existing technologies could materially delay our development of new products, which could result in product obsolescence, decreased revenues and a loss of our market share to our competitors.

Moreover, any failure by us in the future to develop new technologies or timely reaction to changes in existing technologies could materially delay our development of new products, which could result in product obsolescence, decreased revenues and a loss of our market share to our competitors.

In addition, products or technologies developed by others may render our products or technologies obsolete or non-competitive.

Further, if our products are not in compliance with prevailing industry standards, such non-compliance could materially and adversely affect our financial condition, cash flows and results of operations.

We compete in highly competitive markets characterized by rapid technological changes, and existing and new companies may introduce products that compete with ours, which may adversely affect our business and operating results.

The markets in which we compete are highly competitive.

Further, if our products are not in compliance with prevailing industry

standards, such non-compliance could materially and adversely affect our financial condition, cash flows and results of operations.

If MicroLED technology is not widely adopted by display manufacturers, our business would be harmed.

A significant share of our growth is dependent on the adoption by display manufacturers of MicroLED technology.

To date, MicroLED technology has not achieved widespread adoption because of the complexity and high cost of manufacturing MicroLED displays using existing materials, device architecture and processes.

Given the high cost of manufacturing (resulting in approximately $100,000 sales price for a large high-definition display screen), it is unlikely that MicroLED technology will be adopted for use in consumer products unless significant efficiencies and fundamental process changes in the manufacturing of MicroLED displays occur.

For example, in 2024 Apple Inc.

abandoned a project to manufacture its own MicroLED displays for its Apple Watch products.

While we believe our technology, including its use in chip-first architectures, has the potential to make manufacturing of MicroLED displays more efficient and cheaper, our technology has not been utilized commercially and there can be no assurance that our technology will reduce the cost and improve the efficiency of manufacturing MicroLEDs to the point where display manufacturers can profitably price MicroLED displays for mass market consumption.

In addition, even if our technology achieves its goals, there may be technical delays in implementing our technology that could affect the willingness of display manufacturers to manufacture MicroLEDs at commercial scale or could affect the timing and extent of such manufacturing.

It is also possible that, despite the advantages of MicroLED displays, other technologies that, while not having all of benefits of MicroLEDs, are less expensive or easier to manufacture, will emerge and be adopted by display manufacturers for similar applications.

If the market for MicroLED technology does not develop as we expect or develops more slowly than we expect, our business, prospects, financial condition and operating results will be harmed.

We participate in highly competitive markets characterized by rapid technological changes, and existing and new companies may introduce products that compete with ours, which may adversely affect our business and operating results .

The markets in which we participate are highly competitive .

We expect competition to intensify in the future as existing competitors and new market entrants introduce new products into our markets.

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Some of our larger competitors have substantially broader product offerings and may be able to leverage their relationships with channel partners and customers based on other products to gain business in a manner that discourages users from purchasing our products, including by selling at zero or negative margins or product bundling.

Potential customers may also prefer to purchase from their existing suppliers rather than a new supplier regardless of product performance or features.

Potential customers may also prefer to purchase from their existing suppliers rather than a new supplier regardless of

product performance or features.

As a result, even if the features of our products are superior, customers may not purchase our products.

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If we are unable to build an effective sales organization and/or if we are unable to secure relationships with third-party distributors, we will not be able to successfully commercialize our products, our future product revenue will suffer, and we would incur significant additional losses.

We rely on CPI and ITRI for access to fabrication and expect to enter into arrangements with third-party fabricators to produce our products at commercial scale.

The loss of access to the CPI facility and/or the ITRI facilities, or our inability to enter into agreements with third-party fabricators could have a material adverse effect on our business development.

We do not have our own fabrication facility and rely on CPI and ITRI for access to its facility for fabrication of prototypes and demonstration products.

If we lost access to CPI’s fabrication facility and/or ITRI’s fabrication facility, it could materially and adversely affect our ability to manufacture prototypes and demonstrate products for potential customers.

The loss of access may also significantly impede our ability to engage in product development and process improvement activities.

We expect to enter into arrangements with third-party fabricators to produce products for customers for demonstration products or for commercial product sale, other than for our formulated materials.

We rely on access to third-party facilities for prototyping and commercial process development and expect to enter into arrangements with third parties to fabricate our products at commercial scale.

The loss of access to a third-party facility, or our inability to enter into agreements with third-party fabricators could have a material adverse effect on our business development .

We do not have our own prototyping or fabrication facilities, and we rely on CPI for access to its facility for fabrication of prototypes and demonstration products.

We also rely on access to ITRI’s facilities for the development of commercial processes for the future commercial manufacturing of our products.

The current agreement with CPIIS expires on March 31, 2025, but has been extended as described below.

CPIIS is in the process of reviewing the operation of the clean room facility used by Smartkem and is seeking to reduce the facility’s operating costs by, among other things, consolidating its clean rooms and seeking to pass more of its operating costs to users including us.

On March 28, 2025, we entered into an agreement with CPIIS pursuant to which the term of the current CPIIS agreement was extended until May 31, 2025.

We intend to use the extension period to complete negotiations with CPIIS regarding a longer-term agreement.

Under the terms of the extension, we have agreed to an increase in our share of the costs of the CPI facility and to increased minimum usage obligations during the extension period.

We expect that any longer-term agreement with CPIIS will require us to bear additional costs.

If we are unable to reach a new agreement with CPIIS on terms that are satisfactory to us, we intend to find an alternative facility.

We believe that there are adequate alternative sites available at which we could conduct our prototyping operations.

In the event that we decide to move our prototyping operation to an alternative facility, we believe that the move would take between two and nine months, depending on equipment availability and any required facility modifications, during which time we would incur additional costs to prepare the new facility and install any necessary equipment.

In such event, we intend to schedule our prototyping activities to minimize any disruption to those operations and would use ITRI’s prototyping line as an interim facility for such work.

If we are unable to obtain access to another prototyping facility on similar terms to our arrangements with CPI, our business would be materially and adversely affected.

We have approximately 11 employees located at CPI.

Even if we are able to locate a suitable replacement facility on acceptable terms, we cannot assure investors that the key employees at CPI would accept positions at a new facility, particularly if it is located remotely from the CPI facility.

Even if we locate a suitable replacement facility, it is possible that our ability to engage in product development,

prototyping of demonstration products and process improvement activities may be significantly delayed as a result of the relocation of those functions.

If we lost access to ITRI’s fabrication facility, our ability to co-develop commercial scale manufacturing processes could also be significantly delayed until such time as we found a suitable replacement facility and completed the transfer of technology and know-how from ITRI to another fabricator.

Accordingly, the loss of access to ITRI’s facility could delay our commercialization efforts.

We expect to enter into arrangements with third-party fabricators to produce products for customer demonstration and for commercial product sale, other than for our formulated materials.

The third-party fabricators are often located in Asia but could also be in the United States.

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We expect to rely on third-party fabricators to manufacture products containing our proprietary inks for certain of our future customers.

Our reliance on these third-party fabricators reduces our control over the manufacturing process and exposes us to risks, including reduced control over quality assurance, product costs, and product supply and timing.

Any manufacturing disruption by these third-party fabricators could severely impair our ability to fulfill orders.

Our reliance on third-party fabricators also creates the potential for infringement or misappropriation of our intellectual property.

timely delivery, our ability to ship products to our customers would be severely impaired, and our business and results of operations would be seriously harmed.

If we are unable to manage our relationships with third-party fabricators effectively, or if our third-party fabricators experience delays or disruptions for any reason, increased manufacturing lead-times, capacity constraints or quality control problems in their fabrication operations, or if they otherwise fail to meet our future requirements for timely delivery, our ability to ship products to our customers would be severely impaired, and our business and results of operations would be seriously harmed.

We expect that our sales cycles will be long and unpredictable, and our sales efforts will require considerable time and expense.

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However, in the event of an accident or incident at these facilities, we cannot assure you that the amounts or coverage of insurance will be sufficient to satisfy any damages and losses.

Certain of our partners are and many of our potential customers will be located in Taiwan, which increases the risk that a natural disaster, epidemic, labor strike, war or political unrest could have a material adverse effect on our business, financial condition and results of operations.

Certain of our partners, including ITRI, are located in Taiwan.

In addition, we expect that many of our potential customers will be located in Taiwan.

From time to time, Taiwan has been impacted by significant seismic activity in the area, including earthquakes and related aftershocks, and it is expected that similar events will happen in the future.

Because of the relatively small size of Taiwan and the proximity of our partners and future customers to each other, earthquakes, tsunamis, fires, floods, other natural disasters, epidemics such as the COVID-19 outbreak, political unrest or war, including as a result of current tensions with China, labor strikes or work stoppages could simultaneously affect our partners’ production capability, our ability to supply our customers, and our customers’ ability to produce products incorporating our technology.

As a result, we may be subject to unanticipated costs and delays that could have a material adverse effect on our business, financial condition and results of operations.

We rely on our management team and other key employees and will need additional personnel to grow our business.

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If we fail to implement these improvements effectively, our ability to manage growth and ensure ongoing operation of key business systems would be impaired, and our business, financial condition and results of operations would be harmed.

The COVID-19 global pandemic and resulting adverse economic conditions adversely impacted our business.

Future pandemics or similar events could also have a material adverse impact on our business, financial condition, and results of operations .

The COVID-19 global pandemic adversely impacted us by disrupting our operations and increasing our costs as a result of, among other things, measures to address the health and safety of our employees, government work from home directives, quarantines, worker absenteeism as a result of illness, social distancing and travel restrictions that prevented face to face meetings with joint development partners, prospects and suppliers.

Future pandemics and similar events could also materially and adversely affect our business, financial condition and results of operations.

The COVID-19 global pandemic also resulted in severe disruptions and volatility in the global economy and financial markets.

At various times during the outbreak, the countries in which we operate and do business took dramatic action including, without limitation, ordering all nonessential workers to stay home, mandating the closure of schools and nonessential business premises and imposing isolation measures on large portions of the population.

Public health crises, such as pandemics, epidemics, or widespread outbreaks of infectious disease, have had, and could in the future have, an adverse effect on our business, financial condition and results of operations .

The occurrence of pandemics, epidemics, or widespread outbreaks of infectious diseases, as well as the imposition of related public health measures and travel and business restrictions or other actions that may be taken by governmental authorities in an effort to contain such pandemics, epidemics or outbreaks, have had, and could in the future have, a material adverse effect on our business.

For example, the COVID-19 global pandemic adversely impacted us by disrupting our operations and increasing our costs as a result of, among other things, measures to address the health and safety of our employees, government work from home directives, quarantines, worker absenteeism as a result of illness, social distancing and travel restrictions that prevented face to face meetings with joint development partners, prospects and suppliers.

Future pandemics and similar events could materially increase our costs, severely negatively impact business development and commercialization, net income, and other results of operations, and impact our liquidity position.

The duration of any such impacts cannot be predicted, and such impacts may also have the effect of heightening many of the other material risks we face .

The COVID-19 pandemic and a supply shortage experienced by the semiconductor industry disrupted normal business activity and similar events may have an adverse effect on our results of operations.

The global spread of COVID-19 and the efforts to control disrupted, and reduced the efficiency of, normal business activities in much of the world.

The pandemic resulted in authorities around the world implementing numerous unprecedented measures such as travel restrictions, quarantines, shelter in place orders, factory and office shutdowns and vaccine mandates.

COVID-19 measures adversely impacted our operations and those of our customers, contract manufacturers, suppliers and logistics providers.

At the same time, and to some extent relatedly, the global silicon semiconductor industry is experiencing a shortage in supply and difficulties in ability to meet customer demand and led to an increase in lead-times of the production of semiconductor chips and components.

In 2023 we experienced, and expect to continue to experience, disruption to parts of our semiconductor supply chain, including procuring necessary components and inputs, such as wafers and substrates, in a timely fashion, with suppliers increasing lead times or placing products on allocation and raising prices.

We have also incurred higher costs to secure available inventory or have extended our purchase commitments or placed non-cancellable orders with suppliers, which introduces inventory risk if our forecasts and assumptions are inaccurate.

In addition, disruptions to commercial transportation infrastructure have increased delivery times for materials and components to our facilities and, in some cases, our ability to timely ship our products to customers.

We believe the global supply chain challenges and their adverse impact on our business will persist and the degree to which the future pandemics and similar events ultimately impact our business and results of operations will depend on future developments beyond our control.

We are subject to a number of risks associated with international sales and operations.

We have small teams that are engaged in marketing, selling and supporting our products internationally.

As a result, we must hire and train experienced personnel to staff and manage our foreign operations.

To the extent that we experience difficulties in recruiting, training, managing and retaining international employees, particularly managers and other members of our international sales team, we may experience difficulties in sales productivity in, or market penetration of, foreign markets.

We also enter into strategic distributor and reseller relationships with companies in certain international markets where we do not have a local presence.

If we are not able to maintain successful strategic distributor and reseller relationships with our international channel partners or recruit additional channel partners, our future success in these international markets could be limited.

We are subject to risks associated with international operations.

Disruptions in global supply chains have impacted, and may in the future, impact, our business, results of operations and financial condition.

An interruption within our supply chain may increase costs or otherwise impact our business, results of operations and financial condition.

For example, the COVID-19 pandemic adversely impacted our operations and those of our customers, contract manufacturers, suppliers and logistics providers.

At the same time, the global silicon semiconductor industry experienced a shortage in supply and difficulties in ability to meet customer demand and led to an increase in lead-times of the production of semiconductor chips and components.

From 2020 - 2023, we experienced disruption to parts of our semiconductor supply chain, including procuring necessary components and inputs, such as wafers and substrates, in a timely fashion, with suppliers increasing lead times or placing products on allocation and raising prices.

We also incurred higher costs to secure available inventory or had extended our purchase commitments or placed non-cancellable orders with suppliers, which introduced inventory risk if our forecasts and assumptions were inaccurate.

The degree to which the future pandemics and similar events ultimately impact our business and results of operations will depend on future developments beyond our control.

We are subject to risks associated with international sales and operations.

We have operations in the United Kingdom and Asia and expect that most of our sales revenue will result from sales to customers in Asia.

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pound value arising from transactions denominated in foreign currencies and the translation of certain foreign currency subsidiaries balances;

● difficulties in staffing and managing multi-national operations;

● difficulties in staffing and managing multinational operations;

● adverse changes in economic and political conditions resulting from political instability, acts of terrorism, armed conflict, social unrest, and other circumstances impacting countries in which we or our customers operate, including as a result of any escalation of the current tensions between Taiwan and China;

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● compliance with a variety of international laws as well as U.K.

regulations, rules and practices affecting the

activities of companies abroad;

regulations, rules and practices affecting the activities of companies abroad;

● difficulties in managing and staffing international operations and the required infrastructure costs, including legal, tax, accounting, and information technology.

We face political and other risks conducting business in Taiwan, particularly due to its tense relationships with China.

Certain of our partners are located in Taiwan, including ITRI, and we expect many of our customers will be located in Taiwan.

Therefore, our business, financial condition and results of operations may be affected by changes in governmental and economic policies in Taiwan, social instability, and diplomatic and social developments in or

affecting Taiwan due to its international political status, including current tensions with China.

Any deterioration in the relations between Taiwan and China, and other factors affecting military, political or economic conditions in Taiwan, could disrupt our business operations and materially and adversely affect our results of operations.

The ongoing conflict between Russia and Ukraine has negatively impacted and may continue to negatively impact the global economy and economic markets, which could have a materially adverse effect on our business, financial condition, and results of operations.

Russia’s military invasion of Ukraine had an immediate impact on the global economy and economic markets.

Financial and economic sanctions imposed on certain industry sectors and parties in Russia by the U.S., U.K.

and European Union, as well as potential retaliatory actions by Russia, could also have a negative impact on the global economy.

There can be no certainty regarding the impacts stemming from the conflict, including the imposition of additional sanctions, embargoes, asset freezes or other economic or military measures resulting from the invasion.

The impact of these developments, and additional events that may occur as a result could adversely affect our business, supply chain, suppliers and customers and potential customers.

It is not possible to predict the broader consequences of this conflict, which could include further sanctions, embargoes, regional instability, geopolitical shifts and adverse effects on macroeconomic conditions, the availability and cost of materials, supplies, labor, currency exchange rates and financial markets, all of which could negatively impact our business, financial condition and results of operations.

In addition, we have small teams that are engaged in marketing, selling and supporting our products internationally.

As a result, we must hire and train experienced personnel to staff and manage our foreign operations.

We may enter into strategic distributor and reseller relationships with companies in certain international markets where we do not have a local presence.

We are subject to economic, political and other risks that could have a materially adverse effect on our business, financial condition and results of operations.

Our operations and our financial results, including our ability to execute our business strategy, can be adversely affected by changes in global economic conditions as well as the potential impacts of geopolitical uncertainties and international conflicts.

We have operations in the United Kingdom and Asia and certain of our partners, including ITRI, are located in Taiwan.

In addition, we expect that many of our potential customers will be located in Taiwan.

As a result, the escalation of tensions between Taiwan and China could lead to embargoes, blockades, trade sanctions, military invasion and other risks that could significantly affect political or economic conditions in Taiwan.

Any of these events could significantly disrupt our business operations and those of our partners and prospective customers, which would have a material adverse effect our business.

Moreover, other conflicts around the world, including the Ukraine-Russia war and the conflict in the Middle East could escalate and expand, which in turn could negatively impact the global economy and financial markets.

It is not possible to predict the broader consequences of these conflicts, which could include further sanctions, embargoes, regional instability, geopolitical shifts and adverse effects on macroeconomic conditions, the availability and cost of materials, supplies, labor, currency exchange rates and financial markets, all of which could negatively impact our business, financial condition and results of operations.

In addition, recently there has been a significant increase in the imposition of tariffs and other trade restrictions around the world.

In many cases, the imposition of tariffs or other trade restrictions have resulted in retaliatory actions by governments in the affected countries.

Uncertainty surrounding the length, severity, scope and timing of these trade actions may disrupt trade throughout the world which could result in the inability or unwillingness of customers to purchase our products.

The escalation or broadening of these trade actions could also significantly increase our costs or make it more difficult for us to sell our products, which could materially and adversely affect our business.

Failure to comply with anti-bribery, anti-corruption and anti-money laundering laws as well as export control laws, import and customs laws, trade and economic sanctions laws and other laws governing our operations could subject us to penalties and other adverse consequences.

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We are also subject to other laws and regulations governing international operations, including regulations administered by the governments of the U.K and the U.S., and authorities in the European Union, including applicable export control regulations, economic sanctions and embargoes on certain countries and persons, anti-money laundering laws, import and customs requirements and currency exchange regulations, collectively referred to as the Trade Control laws.

Any violation of the Bribery Act, FCPA or other applicable anti-bribery, anti-corruption laws and anti-money laundering laws including Trade Control laws could result in whistleblower complaints, adverse media coverage, investigations, imposition of significant legal fees, loss of export privileges, severe criminal or civil sanctions or suspension or debarment from government contracts, substantial diversion of management’s attention, drop in stock price or overall adverse consequences to our business, all of which may have an adverse effect on our reputation, business, financial condition, and results of operations.

price or overall adverse consequences to our business, all of which may have an adverse effect on our reputation, business, financial condition, and results of operations.

In order to comply with environmental laws and regulations, we may need to modify our activities or incur substantial costs, and such laws and regulations, including any failure to comply with such laws and regulations, could subject us to substantial costs, liabilities, obligations and fines.

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In addition, our software stores and transmits customers’ confidential business information in our facilities and on our equipment, networks, corporate systems and in the cloud.

Security incidents could expose us to litigation, remediation

costs, increased costs for security measures, loss of revenue, damage to our reputation and potential liability.

Security incidents could expose us to litigation, remediation costs, increased costs for security measures, loss of revenue, damage to our reputation and potential liability.

Our customer data and corporate systems and security measures may be compromised due to the actions of outside parties, employee error, malfeasance, capacity constraints, a combination of these or otherwise and, as a result, an unauthorized party may obtain access to our data or our customers’ data.

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This makes piracy of our technology and products more likely.

Steps we take to protect our proprietary

information may not be adequate to prevent theft of our technology.

Steps we take to protect our proprietary information may not be adequate to prevent theft of our technology.

We may not be able to prevent our competitors from independently developing technologies and products that are similar to or better than ours.

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For example, we are subject to the information and reporting requirements of the Securities Act of 1933, as amended (the “Securities Act”), the Exchange Act and other federal securities laws, rules and regulations related thereto, including compliance with the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), and the Dodd-Frank Wall Street Reform and Consumer Protection Act.

In addition, the Nasdaq Stock Market (“Nasdaq”) listing requirements and other applicable securities rules and regulations impose various requirements on public companies.

In addition, Nasdaq listing requirements and other applicable securities rules and regulations impose various requirements on public companies.

Our management and other personnel are required to devote a substantial amount of time to these compliance initiatives.

Moreover, these rules and regulations significantly increase our legal and financial compliance costs and make some activities more time-consuming and costly.

Moreover, these rules and regulations significantly increase our legal and

financial compliance costs and make some activities more time-consuming and costly.

Among other things, we are required to:

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● involve, to a greater degree, our outside legal counsel, and accountants in the above activities.

The costs of preparing and filing annual and quarterly reports, proxy statements and other information with the SEC and furnishing audited reports to stockholders is expensive and compliance with these rules and regulations involves a material increase in regulatory, legal and accounting expenses and the attention of our board of directors and

In addition, being a public company makes it more expensive for us to obtain director and officer liability insurance.

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A material weakness is defined as a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected and corrected on a timely basis.

In connection with our preparation of our financial statements for the second quarter of 2023, a material weakness in our internal control over financial reporting was identified relating to the complex financial reporting and accounting associated with the June 2023 PIPE (as defined below), a non-cash item.

a non-cash item.

None of our filed financial statements were impacted.

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The remediation actions included the enhancement of control activity evidence, improvement of management review controls, and recording of the fair value of the warrant liability.

In connection with the preparation of our financial statements for the first quarter of 2024, a material weakness in our internal control over financial reporting was identified relating to the complex financial reporting and accounting associated with the Consent, Conversion and Amendment Agreement we entered into on January 26, 2024, a non-cash item .

None of the Company’s filed financial statements were impacted.

Management implemented measures designed to ensure that the control deficiency contributing to the material weakness was remediated, such that the controls are designed, implemented, and operating effectively.

The remediation actions included the implementation of an additional step in the valuation process used to work with external consultants to review all equity-related activity and events that may have occurred since the prior fair value calculations were performed.

Additionally, the Company’s move to Nasdaq has facilitated a change in its approach to the stock price input used in its fair value models.

Rather than using a calculated stock price in these models, the Company now uses the quoted stock price thereby reducing subjectivity and judgment in the fair value models and equity-based compensation calculations.

Our management evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15 and 15d-15(e) under the Exchange Act, as of December 31, 2024.

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Failure to maintain effective internal control over financial reporting also could potentially subject us to sanctions or investigations by the SEC or other regulatory authorities or stockholder lawsuits, which could require additional financial and management resources.

The terms of the June 2023 PIPE contain restrictions on our operations and on our ability to raise additional capital that may have an adverse effect on us.

The terms of the June 2023 PIPE include a number of restrictions on our operations and on our ability to raise additional capital.

The Purchase Agreement (as defined below), among other things, provides that, for a period ending

on June 14, 2024, we may not use cash from operating activities (as defined under U.S.

generally accepted accounting principles) of more than an average of $2.8 million for any consecutive three-month period (subject to certain exceptions).

This provision may cause us to delay certain actions that may benefit our business and may prevent us from pursuing potentially favorable business opportunities, even if a majority of our board of directors believes such actions or opportunities are in the best interest of our company and our stockholders.

Under the terms of the Purchase Agreement, as amended, for a period ending on December 15, 2025, in the event that we issue common stock or common stock equivalents in a subsequent financing (as defined in the Purchase Agreement), the significant purchasers (defined in the Purchase Agreement as a purchaser acquiring at least 1,000 shares of Series A-1 Preferred Stock) will have the right to purchase up to 40% of the securities sold in the subsequent financing.

This provision may make it more difficult for us to raise additional capital because other investors may want to provide all, or a larger portion of the capital provided in the subsequent financing or may be unwilling to co-invest with one or more of the significant purchasers or may be unwilling to commit to provide financing without knowing how much of the subsequent financing will be provided by the significant purchasers.

In addition, during such period, we may not issue common stock or common stock equivalents in a subsequent financing with an effective price per share of common stock that is or may become lower than the then-effective conversion price of the Series A-1 Preferred Stock without the consent of the significant purchasers, which must include AIGH Investment Partners LP and its affiliates for so long as they are holding at least $1,500,000 in aggregate stated value of Series A-1 Preferred Stock acquired pursuant to the Purchase Agreement.

This provision may prevent us from obtaining additional capital on market terms even if a majority of our board of directors believes that the terms of the subsequent financing are in the best interests of our company and our stockholders.

This provision may also have the effect of increasing the cost of obtaining additional capital either because the significant purchasers refuse to consent to any such subsequent financing unless provided by them on terms approved by them or because we are required to provide additional consideration to such significant purchasers in exchange for their consent.

In the event that we issue common stock or common stock equivalents in a subsequent financing prior to the time our common stock is listed on a national securities exchange, the Purchase Agreement provides that if a significant purchaser reasonably believes that any of the terms and conditions of the subsequent financing are more favorable to an investor in the subsequent financing than the terms of the June 2023 PIPE, such significant purchaser has the right to require us to amend the terms of the June 2023 PIPE to include such more favorable term for such significant purchaser.

This provision may make it more expensive to obtain additional capital prior to an uplisting because it permits any significant purchaser to “cherry pick” the terms of the subsequent financing and to require any term deemed to be more favorable to be included retroactively in the terms of the June 2023 PIPE.

This provision also potentially creates uncertainty around the terms of a subsequent financing because the significant purchasers have the right to review terms of a completed subsequent financing before deciding which, if any, of the terms thereof they find more favorable to them.

The Purchase Agreement provides that, until June 14, 2025, a significant purchaser may participate in a subsequent transaction by exchanging some or all of its Series A-1 Preferred Stock having a stated value equal to its subscription amount in the subsequent financing.

This provision may adversely affect the amount of capital we raise in a subsequent financing, as it permits a significant purchaser to roll its existing investment into the new financing rather than being required to invest cash.

This provision also has the potential to make it more difficult for us to raise additional capital as other investors may want to provide all or a larger portion of the capital provided in the subsequent financing or may require us to raise a minimum amount of new capital or may be unwilling to commit to provide financing without knowing how much of the subsequent financing will be provided by the significant purchasers in cash.

If we are unable to raise additional capital when needed, we may be required to delay, limit, reduce or terminate commercialization, our research and product development, or grant rights to develop and market our products that we would otherwise prefer to develop and market ourselves and may have a material adverse effect on our business, financial condition and results of operations.

The Series A-1 Preferred Stock contains certain terms and restrictions that may have a material adverse effect on our business, financial condition and results of operations.

The Series A-1 Preferred Stock provides that if the volume weighted average price of our common stock for the 30-day period ending on December 14, 2024 is less than the then-current conversion price of the Series A-1 Preferred Stock, the Series A-1 Preferred Stock will accrue dividends at an annual rate of 19.99% of the stated value thereof.

Those dividends must be paid in cash unless certain equity conditions are met, in which case we may pay such dividends by issuing shares of common stock having a per share value equal to 90% of the volume weighted average price of our common stock for the 10-day period ending on the date of payment.

No assurance can be given that we would satisfy the conditions permitting us to pay dividends on the Series A-1 Preferred Stock in shares of common stock.

Any cash dividends required to be paid would materially and adversely affect our financial condition.

Even if we are able to pay such dividends in shares of common stock, the issuance of such shares would have a dilutive effect on the ownership interests of the holders of our common stock.

Among other things, the Series A-1 Preferred Stock prohibits us from (i) issuing additional shares of preferred stock ranking on a parity as to dividends or upon liquidation, (ii) incurring more than $1,000,000 in new debt, (iii) granting liens and security interests on our assets (subject to certain exceptions), or (iv) repurchasing shares of common stock, common stock equivalents or junior securities (as defined in the certificate of designation) subject to certain exceptions, or paying dividends on junior securities debt, without the vote or consent of the holders of a majority of the then outstanding shares of Series A-1 Preferred Stock which must include AIGH Investment Partners LP and its affiliates for so long as they are holding at least $1,500,000 in aggregate stated value of Series A-1 Preferred Stock acquired pursuant to the Purchase Agreement.

These restrictions have the potential to limit our ability to issue shares of preferred stock to raise capital as investors are unlikely to invest in preferred stock which is structurally subordinated to the Series A-1 Preferred Stock or to make the use of preferred stock more expensive as investors are likely to demand premium terms to invest in a series of junior preferred stock.

These provisions may also have the effect of increasing the cost of obtaining additional capital either because the holders of the Series A-1 Preferred Stock refuse to consent to the issuance of a parity series of preferred stock unless issued to them on terms approved by them or because we are required to provide additional consideration to such holders in exchange for their consent.

The restrictions on our ability to incur debt or grant liens on our assets may prevent us from acquiring equipment or other assets using purchase price financing or leasing even if the acquisition of such equipment or other assets is in the best interests of our stockholders.

The terms and restrictions summarized above may have a material adverse effect on our business, financial condition and results of operations.

If our estimates or judgments relating to our critical accounting policies are based on assumptions that change or prove to be incorrect, our results of operations could fall below the expectations of investors, resulting in a decline in the market price of our common stock.

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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.

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 a smaller reporting company, we are only required to provide two years of audited financial statements and two years of selected financial data in this Report.

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However, similar to emerging growth companies, smaller reporting companies are able to provide simplified executive compensation disclosures in their filings;

are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that independent registered public accounting firms provide an attestation report on the effectiveness of internal control

over financial reporting;

and have certain other decreased disclosure obligations in their SEC filings, including, among other things, only being required to provide two years of audited financial statements in annual reports and in a registration statement under the Exchange Act on Form 10.

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The lack of an active market for our common stock may impair investors’ ability to sell their common stock at the time they wish to sell them or at a price that they consider reasonable, may reduce the fair market value of their shares of common stock and may impair our ability to raise capital to continue to fund operations by selling securities.

No assurance can be given that an active trading market for our common stock will develop or be sustained.

No assurance can be given that an active

trading market for our common stock will develop or be sustained.

The lack of an active market for our common stock may make it difficult for investors to sell shares of our common stock and may make it difficult for us to raise capital.

We may never be able to satisfy the listing requirements for our common stock to be listed on a national securities exchange, which may cause the trading of our common stock to suffer, cause the trading market for our common stock to be less liquid and subject our common stock price to increased volatility.

We may not ever be able to satisfy the listing requirements for our common stock to be listed on a national securities exchange, which is often a more widely traded and liquid market.

Some, but not all, of the factors which may delay or prevent the listing of our common stock on a more widely-traded and liquid market include the following:

our stockholders’ equity may be insufficient;

the market value of our outstanding securities may be too low;

our net income from operations may be too low;

our common stock may not be sufficiently widely held;

we may not be able to secure market makers for our common stock;

and we may fail to meet the rules and requirements mandated by the several exchanges and markets to have our common stock listed.

Should we fail to satisfy the initial listing standards of the national exchanges, or our common stock is otherwise rejected for listing, the trading price of our common stock could suffer, the trading market for our common stock may be less liquid and our common stock price may be subject to increased volatility.

The designation of our common stock as a “penny stock” limits the liquidity of our common stock.

Our common stock is deemed a “penny stock” (as that term is defined under Rule 3a51-1 of the Exchange Act).

Generally, “penny stock” is common stock that is not listed on a securities exchange and trades for less than $5.00 a share.

Prices often are not available to buyers and sellers and the market may be very limited.

Penny stocks in start-up companies are among the riskiest equity investments.

Broker-dealers who sell penny stocks must provide purchasers of these stocks with a standardized risk-disclosure document prepared by the SEC.

The document provides information about penny stocks and the nature and level of risks involved in investing in the penny stock market.

A broker must also provide purchasers with bid and offer quotations and information regarding broker and salesperson compensation and make a written determination that the penny stock is a suitable investment for the purchaser and obtain the purchaser’s written agreement to the purchase.

Many brokers and investors choose not to participate in penny stock transactions, which may result in further liquidity constraints and declines in the trading price of our common stock.

Because of the penny stock rules, there may be less trading activity in penny stocks in any market that develops for our common stock in the future and stockholders are likely to have difficulty selling their shares of our common stock.

If we fail to meet all applicable Nasdaq listing requirements our common stock would be subject to delisting from Nasdaq which could negatively affect the trading price of our common stock, reduce the liquidity of our common stock and restrict our ability to access the capital markets.

Our common stock is listed on The Nasdaq Capital Market.

We must satisfy the continued listing requirements of Nasdaq to maintain the listing of our common stock on The Nasdaq Capital Market.

On November 15, 2024, we received a letter (the “Letter”) from the Listing Qualifications Department of Nasdaq indicating that we were not in compliance with the minimum stockholders’ equity requirement for continued listing on the Nasdaq Capital Market, under Listing Rule 5550(b)(1) (the “Minimum Stockholders’ Equity Requirement”), because our stockholders’ equity of $2.3 million as reported in our Quarterly Report on Form 10-Q for the period ended September 30, 2024 was below the required minimum of $2.5 million, and because, as of November 15, 2024, we did not meet the alternative compliance standards relating to the market value of listed securities of $35 million or net income from continuing operations of $500,000 in the most recently completed fiscal year or in two of the last three most recently completed fiscal years.

Pursuant to the Letter, Nasdaq gave us 45 calendar days, or until December 30, 2024, to submit to Nasdaq a plan to regain compliance.

As a result of the closing of the December 2025 Offering (as defined below), our stockholders’ equity increased above the $2.5 million requirement, and Nasdaq informed us that we were not required to submit a plan to regain compliance.

There can be no assurance that we will be able to maintain compliance with the Nasdaq continued listing requirements, and if we are unable to maintain compliance with the continued listing requirements, including the $1.00 minimum bid price requirement set forth in Nasdaq Listing Rule 5550(a)(2) and the Minimum Stockholders’ Equity Requirement, our shares may be delisted from Nasdaq, which could reduce the liquidity of our common stock materially and result in a corresponding material reduction in the price of our common stock.

In addition, delisting could harm our ability to raise capital through alternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, employees, suppliers, customers and business development opportunities.

Such a delisting likely would impair your ability to sell or purchase our common stock when you wish to do so.

Further, if we were to be delisted from Nasdaq, our common stock may no longer be recognized as a “covered security,” and we would be subject to regulation in each state in which we offer our securities.

Delisting can also lead a termination that our common stock is stock is a “penny stock” which will require brokers trading in our common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our common stock.

Thus, delisting from Nasdaq could adversely affect our ability to raise additional financing through the public or private sale of equity securities, would significantly impact the ability of investors to trade our securities and would negatively impact the value and liquidity of our common stock .

We do not anticipate paying dividends on our common stock, and investors may lose the entire amount of their investment.

Cash dividends have never been declared or paid on our common stock, and we do not anticipate such a declaration or payment for the foreseeable future.

Any future determination about the payment of dividends will be made at the

discretion of our board of directors and will depend upon our earnings, if any, capital requirements, operating and financial conditions, contractual restrictions, including any loan or debt financing agreements, and on such other factors as our board of directors deems relevant.

Any future determination about the payment of dividends will be made at the discretion of our board of directors and will depend upon our earnings, if any, capital requirements, operating and financial conditions, contractual restrictions, including any loan or debt financing agreements, and on such other factors as our board of directors deems relevant.

In addition, we may enter into agreements in the future that could contain restrictions on payments of cash dividends.

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We do not currently have and may never obtain research coverage by securities and industry analysts.

In addition, because we did not become a reporting company by conducting an underwritten initial public offering of our common stock, security analysts of brokerage firms may not provide coverage of our company.

We cannot assure you that brokerage firms will provide analyst coverage of our company in the future or continue such coverage if started.

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The failure to receive research coverage or support in the market for shares of our common stock will have an adverse effect on our ability to develop a liquid market for our common stock, which will negatively impact the trading price of our common stock.

In the event we obtain securities or industry analyst coverage, if any of the analysts who cover us issue an adverse or misleading opinion regarding us, or if our operating results fail to meet the expectations of analysts, our stock price

would likely decline.

If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.

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As a result, these stockholders, acting together have the ability to significantly impact the outcome of matters submitted to our stockholders for approval, including the election of directors and any merger, consolidation, or sale of all or substantially all of our assets.

In addition, these stockholders, acting together, have the ability to significantly impact the management and affairs of our company.

In addition, these stockholders, acting together, have the ability to significantly impact the management and affairs of our

The interests of these stockholders may not be the same as or may even conflict with your interests.

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The significant concentration of stock ownership may also adversely affect the trading price of our common stock due to investors’ perception that conflicts of interest may exist or arise.

Provisions in our certificate of incorporation and bylaws and Delaware law might discourage, delay or prevent a change of control of our company or changes in our management and, therefore, depress the trading price of our common stock.

Our certificate of incorporation and bylaws contain provisions that could depress the trading price of our common stock by acting to discourage, delay or prevent a change in control of our company or changes in our management that the stockholders of our company may deem advantageous.

Provisions in our amended and restated certificate of incorporation and bylaws and Delaware law might discourage, delay or prevent a change of control of our company or changes in our management and, therefore, depress the trading price of our common stock.

Our amended and restated certificate of incorporation and bylaws contain provisions that could depress the trading price of our common stock by acting to discourage, delay or prevent a change in control of our company or changes in our management that the stockholders of our company may deem advantageous.

These provisions:

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Because we did not become a reporting company by conducting an underwritten initial public offering of our common stock, security analysts of brokerage firms may not provide coverage of our company.

In addition, investment banks may be less likely to agree to underwrite secondary offerings on our behalf than they might if we became a public reporting company by means of an underwritten initial public offering, because they may be less familiar with our company as a result of more limited coverage by analysts and the media, and because we became public at an early

stage in our development.

The failure to receive research coverage or support in the market for shares of our common stock will have an adverse effect on our ability to develop a liquid market for our common stock.

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