What changed in this filing

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Item 1A. Risk Factors

2024-04-01 compared with 2023-03-16 · 37 added, 67 removed, 259 unchanged (29% of the section changed)

11 unchanged sentences

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.

In addition, we have been increasing our headcount and expenses to support our continued product development and planned growth, and if demand for our products declines and we are unable to sustain our recent increases in our net income, we may not be able to sustain profitability.

A pandemic, epidemic or outbreak of an infectious disease in the United States or worldwide, including the outbreak of the novel strain of coronavirus disease, COVID-19, could adversely affect our business.

If a pandemic, epidemic or outbreak of an infectious disease occurs in the United States or worldwide, our business may be adversely affected.

In December 2019, a novel strain of coronavirus, SARS-CoV-2, was identified in Wuhan, China.

Since then, the SARS-CoV-2 virus, and the resulting disease, COVID-19, has spread to most countries, and had caused the worldwide COVID-19 Pandemic.

While the demand for our products generated from the COVID-19 Pandemic has positively impacted our financial position in 2020, it has negatively impacted our operational condition in two divisions by forcing us to implement various policies for the safety of our employees, including “work from home” policies and office social distancing policies, which may lead to lower productivity of our employees and a decrease in the innovation and advancement of our products.

Beyond our own policies, numerous state and local jurisdictions have previously imposed, and others in the future may impose, “shelter-in-place” orders, quarantines, executive orders and similar government orders and restrictions for their residents to control the spread of COVID-19, which negatively affects our operations and potentially the demand for our products and services.

However, these challenges will likely continue for the duration of the pandemic, which is uncertain, and may continue to negatively impact our operations.

Other disruptions or potential disruptions include restrictions on the ability of our sales representatives and other personnel to travel and access customers for training and case support;

disruptions in our production schedule and ability to manufacture and assemble products;

delays in actions of regulatory bodies;

diversion of or limitations on employee resources that would otherwise be focused on the operations of our business, including because of sickness of employees or their families or the desire of employees to avoid contact with groups of people;

business adjustments or disruptions of certain third parties, including suppliers;

increase in bad debts due to an adverse impact of the pandemic on our clients’ cash flows and resulting decrease in collectability of our account receivables;

and additional government requirements or other incremental mitigation efforts that may further impact our or our suppliers’ capacity to manufacture our products.

While the potential economic impact brought by, and the duration of any pandemic, epidemic or outbreak of an infectious disease, including COVID-19, may be difficult to assess or predict, the widespread COVID-19 pandemic could further disrupt the global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity.

In addition, a recession or market correction resulting from the spread of an infectious disease, including COVID-19, could materially affect our business for the same reasons.

Rapid growth may strain our internal resources, which would hamper our ability to manage our growth effectively, create operating efficiencies or sustain profitability.

We previously experienced rapid growth in the demand for our products and services in connection with the COVID-19 Pandemic and we may experience such rapid growth in the future, which may strain our financial and operational resources that were established to meet a lower level of demand.

Due to such rapid growth, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel at the pace needed to meet the demand for our products and services.

Further, the expansion of our operations may lead to significant costs and may divert our management and business development resources.

Any inability to manage our growth could delay the execution of our development and strategic objectives or disrupt our operations.

Any operational disruptions may take the form of a decrease in the quality of customer service, reporting problems and delays in meeting important deadlines, all of which could result in a loss of market share and other problems that could adversely affect our reputation and financial performance.

In addition, we have been considering increasing our headcount and expenses to support our continued product development and planned growth, and if demand for our products declines and we are unable to sustain our recent increases in our net income, we may not be able to sustain profitability.

COVID-19 has adversely affected, and any resurgence of COVID-19 pandemic or another global health epidemic may in the future, directly or indirectly, adversely affect our business, results of operations and financial condition.

COVID-19 has had a significant impact globally, prompting governments and businesses to take unprecedented measures in response.

In the United States, COVID-19 has and may continue in the future to, directly or indirectly, adversely affect our business, results of operations and financial condition.

In the future, our business could be materially adversely affected, directly or indirectly, by the widespread outbreak of contagious disease.

If national, state and local governments in affected regions implement safety precautions, similar to those implemented in response to COVID-19, including quarantines, border closures, increased border controls, travel restrictions, governmental orders and shutdowns, business closures, cancellations of public gatherings and other measures, such precautions could, and for COVID-19 did, disrupt normal business operations both in and outside of affected areas and could have significant negative impacts on businesses and financial markets worldwide.

The impact of COVID-19 has had, and any resurgence of the COVID-19 pandemic or another pandemic or public health crisis, could in the future have, significant repercussions across regional, national and global economies and financial markets, and could trigger a period of regional, national and global economic slowdown or regional, national or global recessions.

The outbreak of COVID-19 in many countries adversely impacted regional, national and global economic activity and has continued to contribute to significant volatility and negative pressure in financial markets.

As a result, our customers may terminate or amend their agreements for the purchase of our products and services due to bankruptcy, lack of liquidity, lack of funding, operational failures or other reasons.

Our SteraMist ® family of products currently accounts for the majority of our revenue, and our success is almost completely dependent on the success of our SteraMist ® brand.

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our ability to achieve and maintain compliance with all regulatory requirements applicable to our SteraMist ® products.

We have hired and trained additional sales personnel to account for the increased demand for our products.

Despite this growth in sales personnel, we expect that our additional sales force will require lead time in the field to grow their network of accounts and achieve the productivity levels we expect them to reach in any individual territory.

We have hired and trained additional sales personnel.

Furthermore, the use of our products will often require or benefit from direct support from us.

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significant variations in tax rates among the countries in which we do business, and tax withholding obligations in respect of our earnings;

exchange controls or other trade restrictions including, the impact of the COVID-19 Pandemic on our supply chain and the industries in which we operate;

exchange controls or other trade restrictions including, constraints on our supply chain and the industries in which we operate;

customs clearance and shipping delays;

general economic and political conditions in countries where we operate or where end users of our products are situated, including the potential implications of the COVID-19 Pandemic;

general economic and political conditions in countries where we operate or where end users of our products are situated;

natural disasters, political and economic instability, including wars, terrorism and political unrest, outbreak of disease, travel, social distancing and quarantine policies, boycotts, curtailment of trade, and other business restrictions affecting our ability to manufacture or sell our products;

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and difficulties associated with compliance with a variety of laws and regulations governing international trade.

In late February 2022, Russia launched a large-scale military attack on Ukraine.

The invasion significantly amplified already existing geopolitical tensions among Russia, Ukraine, Europe, NATO and the West, including the United States.

In response to the military action by Russia, various countries, including the United States, the United Kingdom, and European Union issued broad-ranging economic sanctions against Russia.

Such sanctions included, among other things, a prohibition on doing business with certain Russian companies, large financial institutions, officials and oligarchs;

a commitment by certain countries and the European Union to remove selected Russian banks from the Society for Worldwide Interbank Financial Telecommunications (“SWIFT”), the electronic banking network that connects banks globally;

and restrictive measures to prevent the Russian Central Bank from undermining the impact of the sanctions.

Additional sanctions may be imposed in the future.

Such sanctions (and any future sanctions) and other actions against Russia may adversely impact, among other things, the Russian economy and various sectors of the economy;

result in a decline in the value and liquidity of Russian securities;

result in boycotts, tariffs, and purchasing and financing restrictions on Russia’s government, companies and certain individuals;

weaken the value of the ruble;

downgrade the country’s credit rating;

freeze Russian securities and/or funds invested in prohibited assets and impair the ability to trade in Russian securities and/or other assets;

and have other adverse consequences on the Russian government, economy, companies and region.

Further, several large corporations and U.S.

states have announced plans to divest interests or otherwise curtail business dealings with certain Russian businesses.

The ramifications of the hostilities and sanctions, however, may not be limited to Russia and Russian companies but may spill over to and negatively impact other regional and global economic markets (including Europe and the United States), companies in other countries (particularly those that have done business with Russia) and on various sectors, industries and markets for securities and commodities globally, such as oil and natural gas.

In late February 2022, Russia launched a large-scale military attack on Ukraine, amplifying already existing geopolitical tensions among Russia, Ukraine, Europe, NATO and the West, including the United States, and resulting in global sanctions against Russia by various countries, including the United States, the United Kingdom, and European Union.

In addition, the Israel-Hamas War and wider Middle East geopolitical developments may negatively impact regional and global economic markets (including Europe and the United States), companies in other countries (particularly those that have done business with Russia, Ukraine, or Israel) and on various sectors, industries and markets for securities and commodities globally.

Accordingly, the actions discussed above and the potential for a wider conflict could increase financial market volatility, cause severe negative effects on regional and global economic markets, industries, and companies and have a negative effect on the Company’s performance.

In addition, Russia may take retaliatory actions and other countermeasures, including cyberattacks and espionage against other countries and companies around the world, which may negatively impact such countries.

The extent and duration of the military action or future escalation of such hostilities, the extent and impact of existing and future sanctions, market disruptions and volatility, and the result of any diplomatic negotiations cannot be predicted.

The extent and duration of these military actions or future escalation of such hostilities, the extent and impact of existing and future sanctions, market disruptions and volatility, and the result of any diplomatic negotiations cannot be predicted.

These and any related events could have a significant impact on the Company’s performance.

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Additionally, supply chain disruptions and access to materials have impacted our suppliers’ ability to deliver products to us in a timely manner.

In 2021, we saw significant disruptions to key supply chains that caused a delay in the delivery of batteries and molds from China.

In addition, there was a shortage in the supply of bottles domestically that we use to carry our solutions.

We expect such delays and shortages to continue in 2023.

If these issues persist, they may further delay our ability to deliver our products and to recognize revenue.

Any delay or impediment to our ability to recognize revenue for any given period could materially adversely affect our results of operations.

Because of our reliance upon third parties to supply us with our products, we do not have control over the manufacturing process of our third-party suppliers and are dependent on such third-party suppliers for compliance with the regulations applicable to our products.

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Any such litigation could result in adverse determinations that could have a material adverse effect on our business, financial condition or results of operations.

In addition, we rely in part upon unpatented trade secrets, unpatented know-how, and continuing technological innovation which may not yet, or may never be, patented, to develop and maintain our competitive position, which we seek to protect, in part, by confidentiality agreements with our employees and consultants.

We also have agreements with our employees and consultants that obligate them to assign their inventions to us.

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Further, our trade secrets could otherwise become known or be independently discovered by our competitors, which would harm our business.

The risk of loss of the Company’s intellectual property, trade secrets or other sensitive business information or disruption of operations could negatively impact the Company’s financial results.

The Company has sensitive information, including intellectual property, trade secrets, and other sensitive, business critical information as well as on-premises and cloud-based business applications critical to conducting business.

In addition, our research and development facility uses modern computer systems.

Cyber-incidents affecting the Company, its supply chain or customers could compromise confidential, business critical information, cause a disruption in the Company’s operations, harm the Company’s reputation, or endanger the environment if the Company, its suppliers or customers do not effectively prevent, detect and recover from these or other security breaches.

While the Company has not encountered cyber security challenges that have materially impaired our operations or financial condition it may be the target of cyber security related incidents.

Although management believes the Company has not experienced any cyber security related incident or losses to date related to these cyber security incidents, there can be no assurance that such losses will not be suffered in the future.

The Company seeks to actively manage the risks within its control that could lead to business disruptions and cyber security incidents through a comprehensive cyber security program.

As cyber security threats present themselves, the Company may be required to expend significant resources to enhance its control environment, processes, practices, and other protective measures.

Despite these efforts, such events could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows.

We may be unable to enforce our intellectual property rights throughout the world.

As part of our growth strategy, we are seeking to expand our operations internationally.

As part of our growth strategy, we are continuing to expand our operations internationally.

The laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the United States.

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The decontamination and environmental infectious disease control industry is extremely competitive.

The competition includes remediators and disinfection/decontamination companies such as Steris, Bioquell (Eco-lab) and Clorox, various ultraviolet companies and quad ammonia-chemical companies.

The competition includes remediators and disinfection/decontamination companies such as Steris, Bioquell (Eco-lab) and Clorox, various miscellaneous hydrogen peroxide companies, ultraviolet companies and hundreds of quad ammonia-chemical companies.

These competitors may have longer operating histories, greater name recognition, larger installed customer bases, a greater ability to provide similar products and services at a lower cost and substantially greater financial and marketing resources than us to develop new products and commercialize existing products.

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The stock markets generally have experienced, and will probably continue to experience, extreme price and volume fluctuations that have affected the market price of the shares of many small-cap companies.

These fluctuations have often been unrelated to the operating results of such companies and in recent times have been exasperated by investors’ concerns stemming from the COVID-19 pandemic.

Factors that may affect the volatility of our stock price include the following:

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our success, or lack of success, in developing and marketing our products and services;

changes in general economic, political and market conditions in or any of the regions in which we conduct our business, including as a result of the COVID-19 pandemic and related governmental responses;

changes in general economic, political and market conditions in or any of the regions in which we conduct our business;

changes in financial estimates by us or of securities or industry analysts;

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Accordingly, realization of a gain on your investment will depend on the appreciation of the price of our common stock, which may never occur.

We have a substantial number of options, warrants and convertible preferred stock outstanding, which could give rise to additional issuances of our common stock and potential dilution of ownership to existing shareholders.

As of December 31, 2022, we had outstanding options, warrants and convertible preferred stock to purchase approximately an aggregate of 3.3 million shares of our common stock at exercise prices ranging from $0.80 to $8.40 per share.

Of these, approximately 413,000 represent shares underlying options with exercise prices ranging from $0.80 to $7.06 per share, approximately 2.8 million represent shares underlying warrants at exercise prices ranging from $0.80 to $8.40 per share and approximately 63,750 represent shares underlying our shares of convertible $0.01 preferred A stock.

We have a substantial number of options, warrants, convertible notes and convertible preferred stock outstanding, which could give rise to additional issuances of our common stock and potential dilution of ownership to existing shareholders.

As of December 31, 2023, we had outstanding convertible note, options, warrants and convertible preferred stock to purchase approximately an aggregate of 5.5 million shares of our common stock at exercise prices ranging from $0.80 to $6.95 per share.

Of these, approximately 2,100,000 represent shares underlying convertible notes with an exercise price of $1.25, approximately 618,000 represent shares underlying options with exercise prices ranging from $0.80 to $7.06 per share, approximately 2.8 million represent shares underlying warrants at exercise prices ranging from $0.64 to $6.95 per share and approximately 63,750 represent shares underlying our shares of convertible $0.01 Series A preferred stock.

To the extent any holders of options, warrants or convertible preferred stock exercise the same, the issuance of shares of our common stock upon such exercise will result in dilution of ownership to existing shareholders.

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The concentration of our common stock ownership with our executive officers, directors and affiliates will limit your ability to influence corporate matters.

Our executive officers, directors and owners of 5% or more of our outstanding common stock and their respective affiliates beneficially owned, in the aggregate approximately 22.6% of our outstanding common stock as of February 25, 2022.

Our executive officers, directors and owners of 5% or more of our outstanding common stock and their respective affiliates beneficially owned, in the aggregate approximately 23.5% of our outstanding common stock as of March 7, 2024.

This percentage includes outstanding shares of common stock, convertible preferred stock, warrant and stock options that are vested and exercisable as of that date.

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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.

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.

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.

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.

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.

On February 4, 2024, 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.

In accordance with Nasdaq rules, we have been provided an initial period of 180 calendar days, or until August 15, 2024 (the “Compliance Date”), to regain compliance with the bid price requirement.

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, otherwise our common stock will be subject to delisting from the Nasdaq Capital Market.

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.

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

Not applicable.

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