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Risk Related to Our Company and Business
−Removed: Our recent financial performance was affected substantially by a spike in demand for sanitation products and services created by the COVID-19 Pandemic and such demand may not be sustainable.
−Removed: During the first half of 2020, the COVID-19 pandemic increased the global demand for sanitizing products and services which help prevent the proliferation of COVID-19.
−Removed: Our products and services were among those that have experienced a significant increase in demand due to the COVID-19 pandemic, causing us to realize substantial increase in revenues and making us profitable for the first time.
−Removed: As the pandemic continued in the second half of 2020 that negatively affected the operation of our customers, and as the disease came under control due to the implementation of various protective measures, including the wider availability and administration of vaccines, we experienced a reduction of orders for our products from our customers.
−Removed: This reduction led to a significant decrease of our revenue and profitability in 2021.
−Removed: While we are implementing various strategies to acquire new customers and generate new demands, there is no guarantee that we will be able to achieve the same level of sales and revenues as those during the height of the pandemic.
We have a history of losses and may not be able to achieve profitability in the future.
−Removed: We generated a net loss of approximately $4.4 million for the year ended December 31, 2021, and net income of $4.4 million for the year ended December 31, 2020, which was primarily due to a spike of demand for our products during the onset of COVID-19 pandemic.
+Added: We generated a net loss of approximately $2.9 and $4.4 million for the years ended December 31, 2022 and 2021, respectively.
We also had an accumulated deficit of $46.4 million as of December 31, 2022.
−Removed: Prior to 2020, we have not generated any profit from our business operations.
+Added: Prior to 2020, we had not generated any profit from our business operations.
While we experienced an increase of our revenue and net income in 2020, primarily due to a significant increase of demand for our products as protective measures against the spread of the COVID-19 disease during the pandemic, such demand subsided in 2021 as the pandemic gradually came under control, which caused us to incur a net loss in 2021.
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In addition, future changes in the law and legal decisions by courts in the United States and foreign countries may affect our ability to obtain adequate protection for our technology and products and the enforcement of intellectual property.
−Removed: We face significant competition in our industry, some of which have longer operating histories, more established products or greater resources than we do
+Added: We face significant competition in our industry, some of which have longer operating histories, more established products or greater resources than we have currently.
The decontamination and environmental infectious disease control industry is extremely competitive.
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We have a limited management team size which may reduce our ability to effectively manage our business operations as it grows.
−Removed: We have a limited management team size, even though we keep hiring and redefining job descriptions.
+Added: Despite our current hiring efforts for non-management employees and redefining of job descriptions, we have a limited management team size.
This limited management team may reduce our ability to effectively manage our business as it grows or respond to significant demand from customers.
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Our potential inability to integrate any acquired products or technologies effectively may adversely affect our business, operating results and financial condition.
−Removed: We have identified a material weakness in our internal control over financial reporting, which may adversely affect our ability to report our results of operations and financial condition accurately and in a timely manner.
−Removed: Our management is responsible for establishing and maintaining adequate internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.
−Removed: Our management is likewise required, on a quarterly basis, to evaluate the effectiveness of our internal controls and to disclose any changes and material weaknesses identified through such evaluation in those internal controls.
−Removed: A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
−Removed: As described in Item 9 in this Form 10-K, we identified a material weakness in our internal control over financial reporting related to reserves for bad debt.
−Removed: As a result of this material weakness, our management concluded that our internal control over financial reporting was not effective as of December 31, 2021.
−Removed: Any failure to maintain such internal control could adversely impact our ability to report our financial position and results from operations on a timely and accurate basis, which could result a material adverse effect on our business.
−Removed: If our financial statements are not accurate, investors may not have a complete understanding of our operations.
−Removed: Likewise, if our financial statements are not filed on a timely basis, we could be subject to sanctions or investigations by the stock exchange on which our ordinary shares are listed, the SEC or other regulatory authorities.
−Removed: In addition, we would likely incur additional accounting, legal and other costs in connection with any remediation steps.
−Removed: Failure to timely file may cause us to be ineligible to utilize short form registration statements on Form S-3 in the future, which may impair our ability to obtain capital in a timely fashion to execute our business strategies or issue shares to effect an acquisition.
−Removed: Ineffective internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock.
−Removed: As described in Item 9 of this Form 10-K, we are in the process of implementing a plan to remediate the material weakness.
−Removed: However, we can give no assurance that the measures we have taken and plan to take in the future will remediate the material weakness identified or that any additional material weaknesses or restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls.
−Removed: In addition, even if we are successful in strengthening our controls and procedures, in the future those controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our financial statements.
The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain executive management and qualified board members.
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This ownership could negatively affect the value of our common stock.
+Added: There can be no assurance that we will be able to regain and maintain compliance with continued listing standards of the Nasdaq Capital Market.
+Added: The Nasdaq Capital Market’s continued listing standards for our common stock require, among other things, that (i) we maintain a closing bid price for our common stock of at least $1.00, and (ii) we maintain:
+Added: (A) stockholders’ equity of $2.5 million;
+Added: (B) market value of listed securities of $35 million;
+Added: or (C) 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.
+Added: Any failures to satisfy any continued listing requirements could lead to the receipt of a deficiency notice from the Nasdaq and ultimately to a delisting from trading of our common stock.
+Added: On October 7, 2022, we received a deficiency letter notifying us that we had not maintained a closing bid price for our common stock of at least $1.00 for a 30-day period.
+Added: In accordance with Nasdaq rules, we have been provided an initial period of 180 calendar days, or until April 5, 2023 (the “Compliance Date”), to regain compliance with the bid price requirement.
+Added: If we do not regain compliance with the bid price requirement by the Compliance Date, we may be eligible for an additional 180 calendar day compliance period.
+Added: If we do not regain compliance with the bid price requirement by April 5, 2023 and are not eligible for an additional compliance period at that time, our common stock will be subject to delisting from the Nasdaq Capital Market.
+Added: We cannot be certain that we will be able to regain compliance and then maintain compliance with the minimum bid price and the other standards in order to maintain a listing of our common stock on the Nasdaq Capital Market.
+Added: If our common stock were delisted from the Nasdaq Capital Market, among other things, this could result in a number of negative implications, including reduced liquidity in our common stock as a result of the loss of market efficiencies associated with Nasdaq and the loss of federal preemption of state securities laws as well as the potential loss of confidence by suppliers, customers and employees, institutional investor interest, fewer business development opportunities, greater difficulty in obtaining financing and breaches of certain contractual obligations.
UNRESOLVED STAFF COMMENTS
1 unchanged sentence
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.