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Item 1A. Risk Factors

2026-03-31 compared with 2025-04-14 · 113 added, 123 removed, 183 unchanged (56% of the section changed)

RISK FACTORS.

Our business routinely encounters and attempts to address risks, some of which will cause our future results to differ, sometimes materially, from those originally anticipated.

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We have a history of losses and may not be able to achieve profitability in the future.

We generated a net loss of approximately $4.5 and $3.4 million for the years ended December 31, 2024 and 2023, respectively.

We generated a net loss of approximately $3.7 million and $4.5 million for the years ended December 31, 2025 and 2024, respectively.

We also had an accumulated deficit of $58.1 million as of December 31, 2025.

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 and such trend has continued, and there is no guarantee that any similar pandemic or global health crisis will emerge.

Prior to 2020, we did not generate any profit from our business operations.

The increase in our revenue and net income during 2020 was primarily due to a significant increase in 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 and such trend has continued.

In addition, if we decrease our headcount and expenses, we may be unable to support our continued product development and planned growth, and we may not be able to achieve profitability.

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As such, our unfilled orders and previously completed sales should not be relied on as a measure of anticipated demand or future revenue.

Our agreements with restoration industry specialists are not exclusive, which may allow for our competitors to sell their products and services to such specialists.

Our agreements with restoration industry specialists are not exclusive, which may allow our competitors to sell their products and services to such specialists.

Our agreements with restoration industry specialists under our TOMI Service Network program, which allows certain restoration specialists to use and sell our products, are not exclusive.

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Our success depends upon broad market acceptance of our technology that has not yet been achieved in the Hospital-Healthcare market.

Our BIT technology as a Hospital-Healthcare disinfectant is relatively new, having received full Hospital registration for Clostridium difficile spores from the EPA in mid-2017.

Our BIT technology as a Hospital-Healthcare disinfectant has been proven successful in reducing infections in hospital ICU, BIT having received full Hospital registration for Clostridium difficile spores from the EPA in mid-2017.

Our sales are dependent upon broad market acceptance of our technology that replaces long-standing failing manual cleaning techniques such as quaternary ammonium compounds and bleach for disinfection, with our no-touch mechanical process.

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There is substantial doubt about the Company’s ability to continue as a going concern.

For the years ended December 31, 2024 and 2023, our net loss was approximately $4,477,000 and $3,403,000, respectively, and the cash used in operations was approximately $1,440,000 and $3,599,000, respectively.

For the years ended December 31, 2025 and 2024, our net loss was approximately $3.7 million and $4.5 million, respectively, and the cash used in operations was approximately $1.2 million and $1.4 million, respectively.

As of December 31, 2025, we had approximately $88,000 of cash and cash equivalents and an accumulated deficit of $58.1 million.

These factors raise substantial doubt about our ability to continue as a going concern within one year after the date the financial statements are issued.

We intend to fund ongoing activities by utilizing our current cash on hand, the cash generated from operations, and by raising additional capital through equity or debt financings.

We intend to fund ongoing activities by utilizing our current cash on hand, the cash generated from operations, and by raising additional capital through equity or debt financing.

We continue to pursue various options to raise capital to enhance our cash position, including more recently by issuing convertible notes to accredited investors.

However, there can be no assurance that we will be successful in raising that additional capital or that such capital, if available, will be on terms that are acceptable to us, as our ability to raise capital may be affected by various factors, including general market conditions, volatility of our stock price, investor interests and expectations, and our financial performance.

In November 2025, we entered into an ELOC, pursuant to which we have the right, but not the obligation, to sell up to $20,000,000 of shares of our common stock over a 24-month period subject to certain conditions.

However, the availability of ELOC and our ability to sell stock depends substantially on the trading price and volume of our stock, which may materially limit our ability to utilize the ELOC to raise capital.

There can be no assurance that we will be successful in raising additional capital or that such capital, if available, will be on terms that are acceptable to us, as our ability to raise capital may be affected by various factors, including general market conditions, volatility of our stock price, investor interests and expectations, and our financial performance.

We are subject to a variety of risks associated with doing business internationally.

We maintain significant international operations, including operations in the U.S., Canada, Mexico, Europe, Asia Pacific and Latin America.

As a result, we are subject to a number of risks and complications associated with international manufacturing, sales, services, and other operations.

We sell our products internationally through exclusive and non-exclusive sales representatives and distributors in Canada, Mexico, Europe, Asia Pacific and Latin America.

As a result, we are subject to a number of risks and complications associated with international sales and other operations.

These include:

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customs clearance and shipping delays;

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;

difficulties associated with managing a large organization spread throughout various countries;

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

difficulties in enforcing intellectual property rights or weaker intellectual property right protections in some countries;

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The recent imposition by the United States of tariffs, sanctions or other restrictions on goods exported from the United States or imported into the United States, or countermeasures imposed in response to such government actions, could increase the cost of goods for our products or reduce our ability to sell products globally, which may adversely affect our operating results and financial condition.

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.

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.

We are subject to risks associated with international conflicts, geopolitical instability, and related economic disruptions .

Our business and operations may be adversely affected by geopolitical events and international conflicts, including armed conflicts, wars, terrorism, and political instability in regions where we operate or where our customers, suppliers, or distributors are located.

Such events can cause significant disruptions to global supply chains, energy markets, financial markets, and international trade, any of which could adversely affect our ability to source products, serve international customers, and operate our business.

Current and ongoing geopolitical tensions, including conflicts in the Middle East and Eastern Europe, the imposition of economic sanctions, trade restrictions, and countermeasures by affected nations, have contributed to elevated energy costs, supply chain disruptions, and financial market volatility.

The duration, scope, and ultimate resolution of these conflicts and related diplomatic and economic measures cannot be predicted, and the consequences for global commerce, energy supply, and financial stability remain uncertain.

These and any related geopolitical events could have a material adverse effect on our business, results of operations, financial condition, and cash flows.

If our procedures to ensure compliance with export control laws are ineffective, our business could be harmed.

Our sales to foreign entities are subject to far reaching and complex export control laws and regulations in the United States and elsewhere.

Our sales to foreign entities are subject to far-reaching and complex export control laws and regulations.

Violations of those laws and regulations could have material negative consequences for us including large fines, criminal sanctions, prohibitions on participating in certain transactions and government contracts, sanctions on other companies if they continue to do business with us and adverse publicity.

Failure to comply with the U.S.

Foreign Corrupt Practices Act (“FCPA”), and similar laws associated with our activities outside of the United States could subject us to penalties and other adverse consequences.

Failure to comply with the FCPA, and similar laws associated with our activities outside of the United States could subject us to penalties and other adverse consequences.

We face significant risks if we fail to comply with the FCPA and other anti-corruption laws that prohibit improper payments or offers of payment to foreign governments and political parties for the purpose of obtaining or retaining business.

In many foreign countries, particularly in countries with developing economies, it may be a local custom that businesses operating in such countries engage in business practices that are prohibited by the FCPA or other applicable laws and regulations.

Any violation of the FCPA or other applicable anti-corruption laws could result in severe criminal or civil sanctions and, in the case of the FCPA, suspension or debarment from U.S.

government contracting, which could have a material and adverse effect on our reputation, businesses, financial conditions, operating results and cash flows.

Our operations are subject to environmental laws and regulations that may increase costs of operations and impact or limit our business plans.

We are subject to environmental laws and regulations affecting many aspects of our present and potential future operations, including a wide variety of EPA labeling and other state regulatory agency requirements.

For example, under the Federal Insecticide, Fungicide, and Rodenticide Act, we are required to register with the EPA and certain state regulatory authorities as a seller of disinfectants, and we are subject to EPA labeling requirements for each use that SteraMist ® is intended to address.

Compliance with these laws and regulations may result in increased costs and delays as a result of administrative proceedings and certain reporting obligations.

Public officials and entities may seek injunctive relief or other remedies to enforce applicable environmental laws and regulations.

If we are found to not have complied with these laws and are unable to sell out products, our business and financial results will be negatively impacted.

Our reliance upon third-party contractors, suppliers and manufacturers for the manufacture of our products increases the risk that we will not have sufficient quantities of our products or such quantities at an acceptable cost and reduces our control over the manufacturing process.

Climate-related risks, evolving environmental regulations, and increased focus on environmental, social and governance matters could adversely affect our business, financial condition and results of operations.

Our operations and those of our customers and suppliers may be subject to increased regulatory requirements related to climate change, greenhouse gas emissions, and environmental sustainability.

Federal, state and foreign governmental authorities continue to consider and implement new or more stringent environmental regulations, including potential requirements relating to carbon emissions, energy consumption, chemical usage, and product lifecycle impacts.

Compliance with any such new or expanded regulations could increase our operating costs, require modification of our manufacturing or distribution processes, or require changes to our product formulations, any of which could have a material adverse effect on our business, financial condition and results of operations.

Also, natural disasters, extreme weather events, floods, droughts and other disruptions — could adversely affect our operations, our suppliers' ability to deliver materials and components in a timely manner, and our customers' ability to operate their facilities.

Such disruptions could reduce demand for our products, impair our supply chain, or require us to incur additional costs to maintain business continuity.

Separately, investors, customers, regulators and other stakeholders are increasingly focused on environmental, social and governance (“ESG”) matters.

We may face pressure to adopt or report on ESG initiatives, set emissions reduction targets, or meet third-party sustainability standards.

Failure to meet evolving ESG expectations, whether or not mandated by regulation, could harm our reputation, make it more difficult for us to attract or retain customers and employees, or adversely affect our access to capital.

Responding to ESG demands may also require us to divert management attention and incur costs that could adversely affect our operating results.

We cannot predict the ultimate scope or timing of future climate-related or ESG regulatory requirements, and our failure or inability to comply with applicable requirements or meet stakeholder expectations could have a material adverse effect on our business, financial condition and results of operations.

Our reliance upon third-party contractors, suppliers and manufacturers for the manufacture of our products increases the risk that we will not have enough of our products or such quantities at an acceptable cost, and reduces our control over the manufacturing process.

We rely upon third parties to supply us with our products.

We outsource the manufacturing of our SteraMist ® line of equipment to two manufacturing companies and use contract manufacturers to build our BIT-based systems, as we do not maintain our own manufacturing facilities.

If we fail to maintain relationships with our current suppliers, we may not be able to effectively commercialize and market our products, due to risks including increased product costs, limited inventory that is not capable of meeting demand and the possible misappropriation of our proprietary information, such as our trade secrets and know-how.

Further, as we maintain a limited number of manufacturers for our SteraMist ® line of equipment and blenders for our SteraMist ® solutions, alternative production facilities may not be available in the event of a disruption, or if alternative production facilities are available, the number of third-party suppliers with the necessary manufacturing and regulatory expertise to produce our products at their current quality level is limited, and it could be expensive and take a significant amount of time to arrange for and qualify alternative suppliers, which could have a material adverse effect on our business.

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

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.

Third-party suppliers may not be able, or fail, to comply with applicable regulatory requirements, which could result in sanctions being imposed on us, including fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, seizures or recalls, operating restrictions and criminal prosecutions, any of which could significantly and adversely harm our business and results of operations.

Our results of operations could be materially harmed if we are unable to accurately forecast customer demand for our products and manage our inventory.

To ensure adequate inventory supply, we must forecast inventory needs and place orders with suppliers based on our estimates of future demand for our products and services.

Our limited historical experience in foreign markets and recent increase in demand in the United States may lead us to inadequately forecast such inventory needs.

Further, our ability to accurately forecast demand for our products could be negatively affected by many factors, including our failure to adequately manage our expansion efforts, product introductions by competitors, an increase or decrease in customer demand for products of our competitors, our failure to accurately forecast customer acceptance of new product enhancements, unanticipated changes in general market conditions or regulatory matters, and weakening of economic conditions or consumer confidence in future economic conditions.

In addition, our demand may be affected by macro-economic factors beyond our control, which can cause sudden and substantial increase or decrease of demand on short notice, making it more difficult to us to obtain accurate forecasts of customer demand.

Inventory levels in excess of customer demand may result in inventory write-downs or write-offs, which would cause our gross margin to be adversely affected and could impair the strength of our brand.

Similarly, a portion of our inventory could become obsolete or expire, which could have a material and adverse effect on our earnings and cash flows due to the resulting costs associated with inventory impairment charges and costs required to replace obsolete inventory.

Any of these occurrences could negatively impact our financial performance.

Conversely, if we underestimate customer demand, we may not be able to deliver sufficient products to meet our customers’ requirements, which could result in damage to our reputation and customer relationships.

In addition, if we experience a significant increase in demand, additional supplies of raw materials or additional manufacturing capacity may not be available when required on terms that are acceptable to us, or at all, and suppliers or our third-party manufacturers may not be able to allocate sufficient resources to meet our increased requirements, which could have an adverse effect on our ability to meet customer demand for our products and our results of operations.

We outsource the manufacturing of our SteraMist® line of equipment to a single manufacturing company and use contract manufacturers to build our BIT-based systems, as we do not maintain our own manufacturing facilities.

Our dependence on a single manufacturer for our primary equipment line means that any disruption to that relationship, whether due to financial difficulties, operational failures, loss of key personnel, or disagreements over terms, could have an immediate and material impact on our ability to fulfill customer orders and generate revenue.

If we fail to maintain our relationship with our current primary manufacturer, we may not be able to effectively commercialize and market our products due to risks including increased product costs, limited inventory, and the possible misappropriation of our proprietary information, such as our trade secrets and know-how.

Alternative production facilities may not be available in the event of a disruption.

The number of third-party suppliers with the necessary manufacturing capability, regulatory expertise, and quality standards to produce our products is limited.

Arranging for and qualifying an alternative supplier would be expensive and time-consuming, potentially requiring many months, during which period we could be unable to fulfill customer orders.

This risk is amplified by the fact that a significant portion of our revenue is concentrated among a small number of customers;

a supply disruption affecting our ability to deliver products could therefore have a disproportionate impact on our revenue and customer relationships.

Additionally, supply chain disruptions, component shortages, and input cost inflation, including those attributable to U.S.

tariff policy and countermeasures imposed by foreign governments, have previously impacted our suppliers' ability to deliver products to us in a timely manner and at acceptable costs, and may continue to do so.

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

This includes compliance with the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) and EPA registration requirements that govern the manufacture of SteraMist® and its active ingredients.

Third-party suppliers may fail, or be unable, to comply with applicable regulatory requirements, which could result in sanctions being imposed on us or our suppliers, including fines, injunctions, civil penalties, delays, suspension or withdrawal of regulatory approvals, seizures or recalls, and operating restrictions, any of which could significantly and adversely harm our business and results of operations.

The loss of an EPA registration or a supplier's regulatory standing could require us to cease sales of affected products until the matter is resolved, which could take an extended period of time.

If we are unable to accurately forecast customer demand or effectively manage our inventory, our results of operations could be materially harmed.

We rely on demand forecasts to place orders with our third-party suppliers.

Accurately predicting demand is inherently uncertain and may be adversely affected by factors outside our control, including competitive product introductions, shifts in customer preferences and changes in general economic conditions.

If we overestimate demand, we may accumulate excess inventory, resulting in inventory write-downs, write-offs, or obsolescence charges that would reduce our gross margins and adversely affect our financial results.

As of December 31, 2025, our reserve for obsolete inventory was $500,000, compared to $1.1 million as of December 31, 2024, resulting from write-offs of inventory identified as obsolete, damaged, or no longer saleable during the year.

Future demand shortfalls or product changes could require additional reserves or write-downs.

If we underestimate demand, we may be unable to fulfill customer orders in a timely manner, which could be potentially damaging to our customer relationships.

In periods of rapidly increasing demand, our third-party suppliers may lack the capacity necessary to scale production quickly, further limiting our ability to meet demand.

Either outcome could have a material adverse effect on our revenue, gross margins, and results of operations.

Our success depends on our ability to adequately protect our intellectual property.

Our commercial success depends, in part, on our ability to obtain, maintain, defend, file new or enforce our existing patents, trademarks, trade secrets and other intellectual property rights covering our technologies and products throughout the world.

We may, however, be unable to adequately preserve such rights due to a number of reasons, including the following:

We may, however, be unable to adequately preserve such rights due to several reasons, including the following:

our rights could be invalidated, circumvented, challenged, breached or infringed upon,

we may not have sufficient resources to adequately prosecute or protect our intellectual property rights;

we may not have sufficient resources to adequately prosecute or protect our intellectual property right,

upon expiration of our patents, certain of our key technology may become widely available;

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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, third party manufacturers, and consultants.

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

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

It is possible that technology relevant to our business will be independently developed by a person that is not a party to such an agreement.

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

Our ability to protect our intellectual property rights internationally is also subject to significant uncertainty.

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

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Companies have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions.

To the extent that we have obtained or are able to obtain patents, trademarks or other intellectual property rights in any foreign jurisdictions, it may be difficult to stop the infringement of our patents, trademarks or the misappropriation of other intellectual property rights.

To the extent that we have obtained or are able to obtain patents, trademarks or other intellectual property rights in any foreign jurisdiction, it may be difficult to stop the infringement of our patents, trademarks or the misappropriation of other intellectual property rights.

For example, some foreign countries have compulsory licensing laws under which a patent owner must grant licenses to third parties.

In addition, some countries limit the availability of certain types of patent rights and enforceability of patents against third parties, including government agencies or government contractors.

In these countries, patents may provide only limited benefit or no benefit.

In these countries, patents may provide only limited or no benefit.

Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business.

Accordingly, efforts to protect our intellectual property rights in such countries may be inadequate.

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.

We face significant competition in our industry, some of which have longer operating histories, more established products or greater resources than we have currently.

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Our development goals include the development and commercialization of a variety of sanitizing robotic devices and backpack units.

Despite our reasonable efforts, it may not be possible for us to innovate in a way to keep us competitive with other companies due to financial and time constraints which will negatively impact our business.

The development and initial production and enhancement of the decontamination systems we produce is often accompanied by design and production delays and related costs.

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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.

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.

Despite our current hiring efforts for non-management employees and redefining 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 responds to significant demand from customers.

As we expand, we expect to increase the size of our management team.

However, our management team may not be able to adequately manage our business, and any failure to do so could lead to a general negative impact to our business.

We are dependent on our key personnel, the loss of whom could adversely affect our operations, and if we fail to attract and retain the talent required for our business, we could be materially harmed.

Our success is substantially dependent on the performance of our executive officers, including our Chairman and Chief Executive Officer, Dr.

Shane, the loss of whom would have a material adverse effect on our business.

We depend to a significant degree on our ability to attract, retain and motivate quality personnel.

We further note that competition for highly skilled personnel is often intense.

Moreover, our new sales representatives require a lengthy training process to achieve the requisite level of competency with our products.

We may not be successful in attracting, integrating or retaining qualified personnel to fulfill our current or future needs, the failure of which would have a material adverse effect on our business.

Our operations, and those of our suppliers, are subject to a variety of business continuity hazards and risks, any of which could interrupt production or operations or otherwise adversely affect our performance and results.

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Misuse of our products may cause an increased risk of injury to customers, which could harm our reputation in the marketplace, as well as lead to potential product liability lawsuits.

We may seek to grow our business through acquisitions of complementary products or technologies, and the failure to manage acquisitions, or the failure to integrate them with our existing business, could harm our business, financial condition and operating results.

From time to time, we may consider opportunities to acquire other companies, products or technologies that may enhance our product platform or technology, expand the breadth of our markets or customer base, or advance our business strategies.

Potential acquisitions involve numerous risks, including:

problems assimilating the acquired products or technologies;

issues maintaining uniform standards, procedures, controls and policies;

unanticipated costs associated with acquisitions;

diversion of management’s attention from our existing business;

risks associated with entering new markets in which we have limited or no experience;

increased legal and accounting costs relating to the acquisitions or compliance with regulatory matters;

and unanticipated or undisclosed liabilities of any target.

We have no current commitments with respect to any acquisition.

We do not know if we will be able to identify acquisitions, we deem suitable, whether we will be able to successfully complete any such acquisitions on favorable terms or at all, or whether we will be able to successfully integrate any acquired products or technologies.

Our potential inability to integrate any acquired products or technologies effectively may adversely affect our business, operating results and financial condition.

If we are unable to develop and maintain an effective system of internal controls over financial reporting, we may not be able to accurately report our financial results in a timely manner

Our management is responsible for establishing and maintaining adequate internal controls over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with U.S.

Our management also evaluates the effectiveness of our internal controls, and we disclose any changes and material weaknesses identified through such evaluation of our internal controls.

A material weakness is a deficiency, or a combination of deficiencies, in the internal controls over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis.

Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition, results of operations or cash flows.

If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines that we have a material weakness in our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our securities could decline.

As disclosed in Item 9A of this Form 10-K , we concluded that as of December 31, 2024, material weaknesses existed because (I) There are limited resources within the finance and accounting departments with sufficient knowledge and experience in applying U.S.

GAAP, including but not limited to developing appropriate accounting estimates, reserves, and allowances in a timely manner and to maintain proper segregation of duties;

and (II) Policies and procedures with respect to the review, supervision and monitoring of our accounting and SEC reporting functions were either not designed and in place or not operating effectively, For a detailed description of such material weaknesses, please see Item 9A Control and Procedures.

In response to the material weaknesses, we are in the process of developing and implementing remediation plans, which include, among other things (i) We plan to expand the resources within the finance and accounting departments with personnel who possess sufficient knowledge and experience in applying U.S.

GAAP, including but not limited to developing appropriate accounting estimates, reserves, and allowances in a timely manner and to maintain proper segregation of duties.

(ii) We will design and implement additional policies and procedures with respect to the review, supervision and monitoring of our accounting and SEC reporting functions to improve the effectiveness of our internal controls and to ensure the timely reporting with the SEC in accordance with GAAP.

(iii) We will continue to recruit and train personnel with appropriate internal controls, accounting knowledge and experience commensurate with our accounting and reporting requirements, in addition to engaging and utilizing third party consultants and specialists.

Our management also continued to reallocate and align roles and responsibilities within the accounting team to optimize and leverage the skills and experience of various personnel.

See Item 9A Control and Procedures .

While we believe these measures will remediate the control deficiencies we have identified and strengthen our internal control over financial reporting, there is no guarantee that such remedial measures will be implemented successfully or completed in a timely manner, and failure to do so may adversely affect the Company.

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.

We have and likely will continue to incur significant legal, accounting and other expenses as a public company subject to the reporting requirements of the Securities Exchange Act of 1934, the Sarbanes-Oxley Act of 2002 (“SOX”), the Dodd–Frank Wall Street Reform and Consumer Protection Act and other applicable rules and regulations.

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

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

For example, applicable rules and regulations could make it more difficult for us to attract and retain qualified persons to serve on our board of directors (the “Board), or as executive officers.

In addition, SOX requires, among other things, that we maintain effective internal control over financial reporting and disclosure controls and procedures.

Our testing, or the potential subsequent testing by our independent registered public accounting firm in future periods, may reveal deficiencies in our internal control over financial reporting that are deemed to be material weaknesses.

Our compliance with Section 404 of SOX may require that we incur substantial expense and expend significant management time on compliance-related issues.

Moreover, if our independent registered public accounting firm identifies deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, such as the material weaknesses described in “Item 9A Control and Procedures” in this Form 10-K, the market price of our stock could decline, and we could be subject to sanctions or investigations by regulatory authorities, which would require additional financial and management resources.

For more information, please see risk factor above entitled “If we are unable to develop and maintain an effective system of internal controls over financial reporting, we may not be able to accurately report our financial results in a timely manner”

As a result of disclosure of information, our business and financial condition are more visible, which we believe may result in threatened or actual litigation, including by competitors and other third parties.

If such claims are successful, our business and operating results could be adversely affected.

Even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and adversely affect our business and operating results.

If we are unable to develop and maintain an effective system of internal controls over financial reporting, or if the requirements of being a public company strain our resources, we may not be able to accurately report our financial results in a timely manner.

A material weakness is a deficiency, or combination of deficiencies, in internal controls such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis.

Any failure to maintain effective internal controls could severely inhibit our ability to accurately report our financial condition, results of operations, or cash flows.

If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines that we have a material weakness in our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our securities could decline.

As disclosed in Item 9A of this Form 10-K, we concluded that as of December 31, 2025, material weaknesses existed because:

(I) there are limited resources within the finance and accounting departments with sufficient knowledge and experience in applying U.S.

GAAP, including developing appropriate accounting estimates, reserves, and allowances in a timely manner and maintaining proper segregation of duties;

and (II) policies and procedures with respect to the review, supervision, and monitoring of our accounting and SEC reporting functions were either not fully designed and in place or not operating effectively.

For a detailed description of the material weaknesses and the remediation actions taken during fiscal year 2025, please see Item 9A, Controls and Procedures.

While we have taken a number of remediation actions during fiscal year 2025, the material weaknesses had not been fully remediated as of December 31, 2025, and there is no guarantee that our remediation efforts will be successfully completed or that new control deficiencies will not arise.

Failure to remediate these material weaknesses, or the identification of additional deficiencies, could result in inaccurate financial reporting, regulatory sanctions, or a loss of investor confidence in our financial statements.

In addition, as a public company subject to SOX, the Exchange Act, and Dodd-Frank, we incur significant legal, accounting, and compliance costs.

These requirements consume substantial management time, may make it more difficult to attract and retain qualified board members and executive officers, and could expose us to sanctions, regulatory investigations, or litigation if we fail to maintain effective controls.

Our compliance with Section 404 of SOX requires ongoing investment as we work to complete the remediation of the identified material weaknesses.

Risk Related to Our Securities

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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;

changes in general economic, political and market conditions in either 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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The continued operation and expansion of our business will require substantial funding.

Accordingly, we currently intend to retain earnings, if any, for use in the business and we do not anticipate that we will pay any cash dividends on shares of our common stock for the foreseeable future.

Accordingly, we currently intend to retain earnings, if any, for use in the business and we do not anticipate that we will pay any cash dividends on shares of our common stock at this time.

Any determination to pay dividends in the future will be at the discretion of our Board and will depend upon results of operations, financial condition, contractual restrictions, restrictions imposed by applicable law and other factors our Board deems relevant.

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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, 2024, we had outstanding convertible note, options, warrants and convertible preferred stock to purchase approximately an aggregate of 5.7 million shares of our common stock at exercise prices ranging from $0.64 to $7.06 per share.

Of these, approximately 2,100,000 represent shares underlying convertible notes with an exercise price of $1.25, approximately 805,000 represent shares underlying options with exercise prices ranging from $0.71 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.

The trading market for our common stock will rely in part on the research and reports that securities or industry analysts publish about us and our business.

If one or more of the analysts who cover us downgrades our common stock or issues other unfavorable commentary or research the price of our common stock may decline.

If one or more analysts ceases coverage of our company or fails to publish reports on us regularly, demand for our stock could decrease, which in turn could cause the trading price or trading volume of our common stock to decline and could result in the loss of all or part of your investment in us.

As of December 31, 2025, we had outstanding convertible notes, options, warrants, convertible preferred stock and restricted stock units representing approximately 6.0 million potential shares of our common stock.

Additionally, 66,666 RSUs remain unvested and will result in automatic share issuance upon vesting through May 2027, with no exercise price.

To the extent any of these securities are exercised, converted or vest, existing shareholders will experience dilution.

Our outstanding convertible notes impose financial obligations, carry risks of dilution upon conversion, and may adversely affect our ability to raise additional capital.

As of December 31, 2025, we had outstanding convertible notes payable with an aggregate principal amount of approximately $3.1 million, net of amortized debt discount of approximately $222,000, resulting in a carrying value of approximately $2.9 million on our balance sheet.

These notes bear interest at a rate of 12% per annum, payable in equal monthly installments, and are convertible into shares of our common stock at the option of the holder at a conversion price of $1.25 per share, subject to adjustment.

The notes mature on the fifth anniversary of their respective issuance dates.

The interest payments required under our convertible notes represent a recurring cash obligation that could strain our liquidity, particularly given our going concern conditions and our current cash position of approximately $88,000 as of December 31, 2025.

Our failure to make required interest payments when due could constitute an event of default under the applicable securities purchase agreements, which could result in the acceleration of the outstanding principal balance and materially and adversely affect our financial condition and results of operations.

If the holders of our convertible notes elect to convert some or all of their notes into shares of our common stock at the $1.25 per share conversion price, existing shareholders would experience dilution.

As of December 31, 2025, the outstanding convertible notes were convertible into approximately 2,508,000 shares in the aggregate.

Because our common stock has recently traded significantly below the $1.25 conversion price, voluntary conversion is currently unattractive to holders.

However, if our stock price recovers above the conversion price, the likelihood of conversion and the resulting dilutive impact on existing shareholders would increase materially.

In addition, we have the right to require holders to convert the notes if our common stock maintains a closing bid price at or above $1.55 per share for any twenty trading days within a thirty consecutive trading day period.

Given the recent trading price of our common stock, there is no assurance that such forced conversion conditions will be met within a timeframe sufficient to reduce our debt obligations.

Furthermore, the existence of our outstanding convertible notes, and any future issuances of convertible debt, may make it more difficult for us to obtain additional equity or debt financing on acceptable terms, as potential investors or lenders may view the conversion and dilution risk as an impediment to investment.

Our inability to raise additional capital when needed could have a material adverse effect on our business, financial condition and results of operations.

Substantial future sales of our common stock, or the perception in the public markets that these sales may occur, may depress our stock price.

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We may not be able to maintain compliance with Nasdaq’s listing standards, which could limit shareholders’ ability to trade our common stock.

As a listed company on the Nasdaq, we are required to meet certain financial, public float, bid price and liquidity standards on an ongoing basis in order to continue the listing of our common stock.

If we fail to meet these continued listing requirements, our common stock may be subject to delisting, which could materially impact the liquidity of our common stock making it more challenging to buy and sell shares of our common stock.

On March 28, 2025, we received a deficiency letter from the Listing Qualifications Department (the “Staff”) of the Nasdaq Stock Market (“Nasdaq”) notifying us that, for the preceding 30 consecutive business days, the closing bid price for the Company’s common stock, par value $0.01 per share (the “Common Stock”) was below the minimum $1.00 per share requirement for continued inclusion on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Requirement”).

The notification received has no immediate effect on the Company’s Nasdaq listing.

In accordance with Nasdaq rules, the Company has been provided an initial period of 180 calendar days, or until September 24, 2025 (the “Compliance Date”), to regain compliance with the Bid Price Requirement.

There is no guarantee that we will be able to regain compliance with the Bid Price Requirement by the Compliance Date, and failure to do so may subject us to delisting proceedings of NASDAQ.

As a listed company on Nasdaq, we are required to meet certain financial, public float, bid price, and liquidity standards on an ongoing basis.

If we fail to meet these continued listing requirements, our common stock may be subject to delisting, which could materially impact its liquidity and make it more challenging for shareholders to buy and sell our shares.

We are currently subject to two concurrent Nasdaq deficiency proceedings.

On November 17, 2025, we received a deficiency notice that our closing bid price had been below the minimum $1.00 per share requirement (Nasdaq Listing Rule 5550(a)(2)) for 30 consecutive business days.

We have until May 18, 2026 to regain compliance, which may include a potential reverse stock split subject to shareholder approval.

Additionally, as of December 31, 2025, the Company's total stockholders' equity of $588,504 is below the $2,500,000 minimum required under Nasdaq Listing Rule 5550(b)(1).

On November 21, 2025, the Company received a deficiency letter from the Listing Qualifications Department (the "Staff") of the Nasdaq Stock Market notifying the Company that, based on its Form 10-Q for the period ended September 30, 2025, which reported stockholders' equity of $2,206,482, the Company no longer complies with the minimum stockholders' equity requirement for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(b)(1), and that the Company does not meet the alternatives of market value of listed securities or net income from continuing operations.

We submitted a compliance plan within the required 45-day period;

if accepted, Nasdaq may grant an extension of up to 180 days from November 21, 2025.

Both deficiencies are subject to concurrent review by Nasdaq.

There is no guarantee that we will be able to regain compliance with either requirement within the applicable timeframes, and failure to do so may subject us to delisting proceedings.

We are a “smaller reporting company” under the U.S.

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Our anti-takeover provisions could prevent or delay a change in control of our company, even if such change in control would be beneficial to our shareholders.

Provisions of our articles of incorporation, as amended, and amended bylaws as well as provisions of Florida law could discourage, delay or prevent a merger, acquisition or other change in control of our company, even if such change in control would be beneficial to our shareholders.

Provisions of our articles of incorporation, as amended, and amended by laws as well as provisions of Florida law could discourage, delay or prevent a merger, acquisition or other change in control of our company, even if such change in control would be beneficial to our shareholders.

These include:

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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