What changed in this filing

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Item 1A. Risk Factors

2024-03-29 compared with 2023-03-28 · 178 added, 229 removed, 646 unchanged (39% of the section changed)

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new personnel;

the diversion of our management’s attention from our existing product programs and initiatives in pursuing such a strategic merger

or acquisition;

· the diversion of our management’s attention from our existing product programs and initiatives in pursuing such a strategic

merger or acquisition;

· retention of key employees, the loss of key personnel, and uncertainties in our ability to maintain key business relationships;

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inability could impair our ability to grow or obtain access to technology or products that may be important to the development of our

Our PeriShip Global Solutions segment relies on one key strategic

partner for shipping services for our customers and as a source for customers representing a substantial percentage of our revenues.

Our Precision Logistics segment relies on one key strategic partner

for shipping services for our customers and as a source for customers representing a substantial percentage of our revenues.

Our business is dependent, and we believe that

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Sales through our strategic

partner accounted for approximately 13% of revenue of our PeriShip Global Solutions segment for the year ended December 31, 2022.

fail to maintain certain minimum service level requirements related to our service with this strategic partner, it may terminate our agreement

partner accounted for approximately 17% of revenue of our Precision Logistics segment for the year ended December 31, 2023.

to maintain certain minimum service level requirements related to our service with this strategic partner, it may terminate our agreement

to provide them with such service.

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materially adversely affected.

Our key strategic partner has announced that it is developing

a service that may be competitive to our own, and others may do the same.

In the second quarter of 2020 our key strategy

partner publicly announced that it plans to develop an inhouse software solution in collaboration with a multinational software company

that may ultimately be competitive with our service offerings.

In January 2022, our key strategy partner announced the development of

a logistics as a service solution as a result of this collaboration.

The details regarding this product offering, and whether this inhouse

solution will ultimately be developed and successfully launched commercially, are unclear.

To date we do not believe that this product

offering has been adopted by our existing clients or adversely impacted our results in a material way.

However, if our key strategic partner

takes steps to position this product offering as a replacement or competitor to our service offerings, there can be no assurance that

such steps would not increase our cost of delivering our services to our customers, hinder our ability to deliver our services to our

customers, entice our existing customers to discontinue using our services, or reduce the number of customers referred to us by our strategic

In addition, other carriers or companies, such as Amazon, may develop services that compete with ours.

Further, some of our existing

customers may develop their own logistics capabilities such that they no longer require our services.

Any of these events could harm our

business, financial condition and results of operations and may have a material adverse impact on our business.

Our business is subject to seasonal trends.

Historically, our operating results in the PeriShip

Global Solutions segment have been subject to seasonal trends when measured on a quarterly basis.

Historically, our operating results in the Precision

Logistics segment have been subject to seasonal trends when measured on a quarterly basis.

Our first and second quarters have traditionally

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The transportation and logistics industry is highly

competitive and cyclical, and is expected to remain so for the foreseeable future.

The traceability and consumer engagement industry is

also highly competitive.

competitive, cyclical, and is expected to remain so for the foreseeable future.

The traceability and consumer engagement industry is also

highly competitive.

We face competition in all geographic markets and each industry sector in which we operate.

Many of these competitors

have significantly more resources and are actively pursuing acquisition opportunities and are developing new technologies to gain competitive

We have and may face continued

competition by strategic partners.

Many of these competitors have significantly more resources and are actively pursuing acquisition opportunities

and are developing new technologies to gain competitive advantages.

The primary competitive factors are price and quality of service.

Increased competition or our inability to compete successfully

may lead to a reduction in our volume, reduced revenues, reduced profit margins, increased pricing pressure, or a loss of customer relationships,

any one of which could affect our business and financial results.

Numerous competitive factors could impair our ability to maintain our

current profitability, including the following:

our competitors may periodically reduce their prices to gain business, especially during times of weak economic conditions, which may

limit our ability to maintain or increase prices or impede our ability to maintain or grow our customer relationships;

Increased competition or our inability to compete successfully may lead to a reduction in our volume, reduced revenues, reduced profit

margins, increased pricing pressure, or a loss of customer relationships, any one of which could affect our business and financial results.

Numerous competitive factors could impair our ability to maintain our current profitability, including the following:

· our competitors may periodically reduce their prices to gain business, especially during times of weak

economic conditions, which may limit our ability to maintain or increase prices or impede our ability to maintain or grow our customer

relationships;

· our inability to achieve expected customer retention levels or sales growth targets;

we compete with many other transportation and logistics service providers, and companies providing traceability and consumer engagement

solutions, some of which have greater capital resources or lower cost structures than us;

our inability to compete with new entrants in the market that may offer similar services at lower cost or have greater technological capabilities;

· we compete with many other transportation and logistics service providers, and companies providing traceability

and consumer engagement solutions, which has included and may include our strategic partners, some of which have greater capital resources

or lower cost structures than us;

· our strategic partners may take steps to position their own product offerings as a replacement or competitor

to our service offerings;

· our inability to compete with existing and new entrants in the market that may offer similar services

at lower cost or have greater technological capabilities;

· customers may choose to provide for themselves the services that we now provide;

many customers periodically accept proposals from multiple carriers for their shipping needs, and this process may depress rates or result

in the loss of some of our business to competitors;

advances in technology require increased investments to remain competitive, and our customers may not be willing to accept higher prices

to cover the cost of these investments;

· many customers periodically accept proposals from multiple carriers for their shipping needs, and this

process may depress rates or result in the loss of some of our business to competitors;

· advances in technology require increased investments to remain competitive, and our customers may not

be willing to accept higher prices to cover the cost of these investments;

· we may not have sufficient resources to develop and market our services effectively, or at all.

There can be no assurance that such competitive

factors will not increase our cost of delivering our services to our customers, hinder our ability to deliver our services to our customers,

entice our existing customers to discontinue using our services, or reduce the number of customers referred to us by strategic partners.

Any of these factors could harm our business, financial condition and results of operations and may have a material adverse impact on

our business.

The shipping and logistics industry is rapidly

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The Company has recorded significant goodwill

and other identifiable intangible assets on its balance sheet as a result of its acquisition of the PeriShip business in 2022.

of factors may result in impairments to goodwill and other intangible assets, including significant negative industry or economic trends,

disruptions to our business, increased competition and significant changes in the use of the assets.

Impairment charges could adversely

affect the Company's financial condition or results of operations in the periods recognized.

and other identifiable intangible assets on its balance sheet as a result of its acquisition of the PeriShip business in 2022 and Trust

Codes business in 2023.

A number of factors may result in impairments to goodwill and other intangible assets, including significant negative

industry or economic trends, disruptions to our business, increased competition and significant changes in the use of the assets.

charges could adversely affect the Company's financial condition or results of operations in the periods recognized.

Our customers’ businesses may be negatively

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to reductions from time to time in discretionary consumer spending.

For example, demand for high-end perishable items and cannabis products,

and subsequently the demand for shipping, brand protection, and other services related to such, can be affected by changes in the economy

and consumer tastes, both of which are difficult to predict and beyond our control.

Unfavorable changes in general economic conditions,

including recessions, economic slowdowns, sustained high levels of unemployment, and rising prices or the perception by consumers of weak

or weakening economic conditions, may reduce consumer’s disposable income or result in a decrease in demand for our services and

As a result, we cannot ensure that demand for our services and products will materialize or remain constant.

In early September,

2022, the major global carrier company that PeriShip partners with disclosed that a global recession could be coming based on various

indicators in its business including the demand for packages weakening considerably in the final weeks of August 2022, a negative impact

on its express delivery business due to the weakening global economy, particularly in Asia and Europe, and a decline in the volume of

freight it handles in every region around the world.

The major global carrier stated that it expects business conditions to further weaken

during its current quarter and is responding by reducing flights, temporarily parking aircraft, trimming hours for its staff, delaying

some hiring plans and closing ninety office locations as well as five corporate offices.

It also stated it is cutting $500 million from

its capital expenditure budget for its fiscal year, which runs through May of 2023.

For example, demand for high-end perishable items, and subsequently

the demand for shipping, brand protection, and other services related to such, can be affected by changes in the economy and consumer

tastes, both of which are difficult to predict and beyond our control.

Unfavorable changes in general economic conditions, including recessions,

economic slowdowns, sustained high levels of unemployment, and rising prices or the perception by consumers of weak or weakening economic

conditions, may reduce consumer’s disposable income or result in a decrease in demand for our services and products.

we cannot ensure that demand for our services and products will materialize or remain constant.

In response to market conditions and lower

demand some carriers have implemented strategies to address a potential global recession.

In April 2023, the major carrier that PeriShip

Global partners with laid out steps it was taking to slash $4 billion in permanent costs by the end of its 2025 fiscal year in response

to these market conditions and lower demand.

In June 2023, the major carrier stated that due to ongoing demand its plans to ground 29

more aircraft in its fiscal year that started in June 2024.

In mid-December 2023 the carrier forecasted a low single digit percentage

decline in revenue year over year for 2024.

We have seen a softening in demand for some services

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immediately before the ownership change.

In 2022, we completed the IRC Section 382 analysis, and determined that an ownership change occurred

sufficient to impose additional limitations on the use of NOL carryforwards.

For the year ended December 31, 2022, Federal and state NOLs

of $23.1 million and $0, respectively, will expire unutilized due to the limitations of Section 382, leaving Federal and state NOL carryforwards

of $24.4 million and $13.1 million, respectively that may be offset against future taxable income.

In the event future ownership changes

are determined, we might be unable to offset our taxable income with losses, or our tax liability with credits, before such losses and

credits expire, in which event we could incur larger federal and state income tax liabilities than we would have had we not experienced

an ownership change.

The Company completed an IRC Section 382 analysis in 2022, and determined that an ownership change

occurred sufficient to impose additional limitations on the use of NOL carryforwards.

The Company has not completed an IRC Section 382

analysis in 2023.

In the event future ownership changes are determined, we might be unable to offset our taxable income with losses, or

our tax liability with credits, before such losses and credits expire, in which event we could incur larger federal and state income tax

liabilities than we would have had we not experienced an ownership change.

Because our name and brand could be confused

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We rely on strategic partnerships with one large

logistics carrier for our PeriShip Global Solutions segment and larger companies which integrate our technologies into their product offerings

for our legacy VerifyMe Solutions segment.

logistics carrier for our Precision Logistics segment and larger companies which integrate our technologies into their product offerings

for our legacy Authentication segment.

These strategies leave us largely dependent upon the success of our partners.

If any of our

strategic partners who include our technology in their products cease to do so, or we fail to obtain other partners who will incorporate,

embed, integrate or bundle our technology, or these partners are unsuccessful in their efforts, expanding deployment of our technology,

our business and future growth would be materially and adversely affected.

If any of our strategic

partners who include our technology in their products cease to do so, or we fail to obtain other partners who will incorporate, embed,

integrate or bundle our technology, or these partners are unsuccessful in their efforts, expanding deployment of our technology, our business

and future growth would be materially and adversely affected.

If we cannot manage

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and ability to become profitable.

Because a small number of customers account

for most of our revenue, the loss of any of these customers would have a material adverse impact on our operating results and cash flows .

We derive our revenue from a limited number of

customers and our revenue in 2022 grew to $19,576 thousand with the acquisition of PeriShip Global, compared to $867 thousand in 2021.

Our principal revenue has been generated from thirty customers in 2022, compared to five customers in 2021.

Certain of our agreements

with customers have short terms or can be terminated on short notice.

Any termination of a business relationship with, or a significant

sustained reduction in business received from, one of these customers could have a material adverse effect on our operating results and

If we are unable to materially increase the number of our customers and the number of products for which they use our service,

it could adversely impact our financial condition and our business.

We will need to expand our sales, marketing

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Our management concluded that our disclosure controls

and procedures were effective as of December 31, 2022, and the remediated material weaknesses in our internal control over financial reporting

identified in Item 9A of the Report covering the year ended December 31, 2021 have been remediated.

Any failure to develop or maintain

effective controls or any difficulties encountered in their implementation or improvement could harm our results of operations or cause

us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods.

to implement and maintain effective internal control over financial reporting also could adversely affect the results of periodic management

evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control

over financial reporting that we will eventually be required to include in our periodic reports that will be filed with the SEC.

and procedures were effective as of December 31, 2023.

Any failure to develop or maintain effective controls or any difficulties encountered

in their implementation or improvement could harm our results of operations or cause us to fail to meet our reporting obligations and

may result in a restatement of our financial statements for prior periods.

Any failure to implement and maintain effective internal control

over financial reporting also could adversely affect the results of periodic management evaluations and annual independent registered

public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that we will eventually

be required to include in our periodic reports that will be filed with the SEC.

Material weaknesses in our disclosure controls

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or to meet our obligations to our users, and our business, financial condition and operating results could be materially and adversely

Fluctuations in labor costs, raw materials,

changes in the availability of key suppliers, or catastrophic events may increase the cost of our products and services.

Fluctuations in labor costs, changes in

the availability of key suppliers, or catastrophic events may increase the cost of our products and services.

Increases in labor costs might be difficult to

pass on to our customers.

In our VerifyMe Solutions segment, security pigments, ink canisters, labels and bar codes are key elements in

the cost of our products.

Our inability to offset material price inflation could adversely affect our results of operations.

one global carrier for transportation services, one supplier to procure our raw materials, one strategic partner to produce our ink canisters,

and it is difficult to predict what effects shortages or price increases for the raw materials we use to make our products may have in

Our ability to manage inventory and meet delivery requirements may be constrained by our supplier’s inability to scale

production and adjust delivery during times of volatile demand.

Our inability to fill our supply needs would jeopardize our ability to

fulfill obligations under current contracts or enter new contracts to sell our products, which would, in turn, result in reduced sales

and profits, contract penalties or terminations, and damage to customer relationships.

In our Authentication segment (formerly VerifyMe Solutions segment), security pigments, ink canisters, labels

and bar codes are key elements in the cost of our products.

Our inability to offset material price inflation could adversely affect our

results of operations.

We rely on one global carrier for transportation services, one supplier to procure our raw materials, one strategic

partner to produce our ink canisters, and it is difficult to predict what effects shortages or price increases for the raw materials we

use to make our products may have in the future.

Our ability to manage inventory and meet delivery requirements may be constrained by

our supplier’s inability to scale production and adjust delivery during times of volatile demand.

Our inability to fill our supply

needs would jeopardize our ability to fulfill obligations under current contracts or enter new contracts to sell our products, which would,

in turn, result in reduced sales and profits, contract penalties or terminations, and damage to customer relationships.

Our ability to become profitable is largely

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If we are unable to develop new products to meet market demands, our business could be materially adversely affected.

As a company with revenues deriving from

clients in the cannabis industry, we face many unique and evolving risks.

We currently derive approximately 5% of revenues

from clients in the cannabis industry from use of our track and trace and customer engagement technologies.

As such, any risks related

to the cannabis industry may adversely impact our clients, and potential clients, which may in turn, impact the demand for our products

and services.

Specific risks impacting the cannabis industry include, but are not limited, to the following:

United States federal law

prohibits Marijuana

Under the Controlled Substances

Act (“CSA”), marijuana is a Schedule-I controlled substance making it illegal under federal law to grow, cultivate, distribute,

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

Although the use of marijuana is legal in certain

states under state law, since federal law supersedes state law, strict enforcement of federal law would likely result in adverse effects

on our clients’ operations, which would in turn, adversely impact our revenues.

Banking regulations could

limit access to banking services and expose us to risk

Funds received from our clients

in the cannabis industry, operating legally under state law, may subject us to a variety of federal laws and regulations involving money

laundering, financial record keeping and proceeds of crime, since the funds are considered illegal under the CSA and as such banks and

other financial institutions providing services to us risk violation of anti money laundering statutes and other applicable statutes.

Furthermore, banks often refuse to provide banking services to businesses involved in the cannabis industry due to the federal and state

laws and regulations governing financial institutions.

The difficulty and potential inability to open bank accounts that our clients in

the cannabis industry deal with, makes it difficult to conduct business and as such could affect our ability to collect revenues earned.

Furthermore, our clients in this industry are more susceptible to theft, and potentially lack the ability to insure themselves against

We may experience similar difficulties in obtaining banking and financial services because of the activities of our clients in

the cannabis industry.

The legality of cannabis

could be reversed in one or more states

The voters or legislatures

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

and retail marijuana businesses.

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

more states entirely.

Additionally, these actions could negatively impact us and lead to a decrease of our revenue through the loss of

current and potential customers.

Recent and changing interpretations

of the law regarding medical and recreational use of marijuana

State laws and regulations

surrounding medical and recreational use of marijuana are fairly recent and constantly changing resulting in a potential challenge to

maintain compliance.

As such, violations of these laws, or allegations of such violations, could be disruptive to our clients’ business

and in return cause a disruption in our operations.

Future modifications of state and local laws surrounding marijuana, may limit operations

of our clients’ business in this industry, which could negatively impact our revenues.

Dependence on client licensing

Our clients in the cannabis

industry must obtain various licenses from various local and state licensing agencies.

As such, there is a risk that our existing clients

will not be able to retain their licenses going forward, should they violate applicable rules and regulations, or should renewal become

more stringent.

If our customers are not able to maintain or renew their licenses, this would adversely impact our operations.

Insurance Risk

Insurance companies may limit

policies to only cover claims legal under federal law.

As such our clients in the cannabis industry may not be properly insured.

against our clients may have a negative impact on our ability to collect revenues from our clients in the cannabis sector.

Foreign Currency

Exchange Rate Risk

We operate in the US and New Zealand, which exposes

us to market risk associated with foreign currency exchange rate fluctuations.

Our foreign currency exposure primarily relates to intercompany

receivables and payables and third-party receivables and payables that are denominated in currencies other than the functional currency

of our legal entities.

Our largest foreign currency exposure is unsettled intercompany payables and receivables which are reviewed on

a regular basis.

Gains and losses from foreign currency transactions are included in “General and administrative” on our Consolidated

Statements of Operations.

Our foreign subsidiary operates in a currency

other than the United States dollar;

therefore, increases or decreases in the value of the U.S.

dollar against other major currencies

will affect our operating results and the value of our balance sheet items denominated in foreign currencies.

Our most significant exposures

to translation risk relates to functional currency assets and liabilities that are denominated in the New Zealand dollar.

in the net investment of our foreign subsidiary are reflected in "Foreign currency translation adjustments” on our Consolidated

Statements of Comprehensive Loss.

We have not used any exchange rate hedging programs to mitigate the effect of exchange rate fluctuations.

Risks Relating to our Common Stock

Upon exercise of our outstanding options

or warrants, conversion of our Series B Convertible Preferred Stock and vesting of our restricted stock units, we will be obligated to

issue a substantial number of additional shares of common stock which will dilute our present shareholders .

or warrants, conversion of our Series B Convertible Preferred Stock, conversion of our Convertible debt, vesting of our restricted stock

units, and issuance of shares relating to the Trust Codes earnout, we will be obligated to issue a substantial number of additional shares

of common stock which will dilute our present shareholders .

We are obligated to issue additional shares of

our common stock in connection with our outstanding options, warrants and shares of our Series B Convertible Preferred Stock.

As of December

31, 2022, there were options, warrants, shares of Series B Convertible Stock outstanding, and restricted stock units convertible into

and 413,626 shares of common stock, respectively.

The exercise, conversion or exchange of warrants or convertible

securities, including for other securities, will cause us to issue additional shares of our common stock and will dilute the percentage

ownership of our shareholders.

In addition, we have in the past, and may in the future, exchange outstanding securities for other securities

on terms that are dilutive to the securities held by other shareholders not participating in such exchange.

years ended December 31, 2023, there were approximately 8,286,000 anti-dilutive shares consisting 1,439,000 unvested performance restricted

stock units, 816,000 restricted stock units, restricted stock awards and options under the stock purchase plan, 301,000 shares issuable

upon exercise of stock options, 4,629,000 shares issuable upon exercise of warrants, 957,000 shares issuable upon conversion of convertible

debt, and 144,000 shares issuable upon conversion of preferred stock.

As of December 31, 2023, there were no shares issuable related to

the Trust Codes earnout.

The exercise, conversion or exchange of warrants or convertible securities, including for other securities, will

cause us to issue additional shares of our common stock and will dilute the percentage ownership of our shareholders.

In addition, we

have in the past, and may in the future, exchange outstanding securities for other securities on terms that are dilutive to the securities

held by other shareholders not participating in such exchange.

Offers or availability for sale of a substantial

number of shares of our common stock may cause the price of our common stock to decline .

Sales of large blocks

of our common stock over a short time in the spring of 2022 had a significant adverse effect on our common stock price.

Further sales

could depress the price of our common stock.

Sales of large blocks of our common stock could

depress the price of our common stock.

The existence of these shares and shares of common stock issuable upon conversion of outstanding

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trading volume and price fluctuations, which could adversely impact the value of our common stock .

Our common stock

has experienced, and is likely to experience in the future, significant price and volume fluctuations, which could adversely affect the

market price of our common stock without regard to our operating performance.

In addition, we believe that factors such as quarterly fluctuations

in our financial results and changes in the overall economy or the condition of the financial markets could cause the price of our common

stock to fluctuate substantially.

These fluctuations may also cause short sellers to periodically enter the market in the belief that

we will have poor results in the future.

We cannot predict the actions of market participants and, therefore, can offer no assurances

that the market for our common stock will be stable or appreciate over time.

Our common stock has experienced, and is likely

to experience in the future, significant price and volume fluctuations, which could adversely affect the market price of our common stock

without regard to our operating performance.

In addition, we believe that factors such as quarterly fluctuations in our financial results

and changes in the overall economy or the condition of the financial markets could cause the price of our common stock to fluctuate substantially.

These fluctuations may also cause short sellers to periodically enter the market in the belief that we will have poor results in the future.

We cannot predict the actions of market participants and, therefore, can offer no assurances that the market for our common stock will

be stable or appreciate over time.

Because we may issue preferred stock without

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depress our stock price .

In general, our Board of Directors may issue, without a vote of our shareholders, one or

more additional series of preferred stock that have more than one vote per share, although the Company’s ability to designate and

issue preferred stock is currently restricted by covenants under our agreements with prior investors.

Without these restrictions, our

Board of Directors could issue preferred stock to investors who support us and our management and give effective control of our business

to our management.

Additionally, issuance of preferred stock could block an acquisition resulting in both a drop in our stock price and

a decline in interest of our common stock.

This could make it more difficult for shareholders to sell their common stock.

This could also

cause the market price of our common stock shares to drop significantly, even if our business is performing well.

In general, our Board of Directors may issue,

without a vote of our shareholders, one or more additional series of preferred stock that have more than one vote per share, although

the Company’s ability to designate and issue preferred stock is currently restricted by covenants under our agreements with prior

Without these restrictions, our Board of Directors could issue preferred stock to investors who support us and our management

and give effective control of our business to our management.

Additionally, issuance of preferred stock could block an acquisition resulting

in both a drop in our stock price and a decline in interest of our common stock.

This could make it more difficult for shareholders to

sell their common stock.

This could also cause the market price of our common stock shares to drop significantly, even if our business

is performing well.

Because we do not intend to pay cash dividends

on our shares of common stock, any returns will be limited to the value of our shares .

We currently anticipate that we

will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any

cash dividends for the foreseeable future.

Any return to shareholders will therefore be limited to the increase, if any, of our share

We currently anticipate that we will retain future

earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for

the foreseeable future.

Any return to shareholders will therefore be limited to the increase, if any, of our share price.

There can be no assurance that we will be

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common stock and certain warrants .

The Nasdaq Capital Market requires that the trading price of its listed stocks remain

above one dollar in order for the stock to remain listed.

If a listed stock trades below one dollar for more than 30 consecutive trading

days, then it is subject to delisting from the Nasdaq Capital Market.

In addition, to maintain a listing on the Nasdaq Capital Market,

we must satisfy minimum financial and other continued listing requirements and standards, including those regarding director independence

and independent committee requirements, minimum stockholders’ equity, and certain corporate governance requirements.

If we are unable

to satisfy these requirements or standards, we could be subject to delisting, which would have a negative effect on the price of our common

stock and warrants and would impair your ability to sell or purchase our common stock or warrants when you wish to do so.

of a delisting, we would expect to take actions to restore our compliance with the listing requirements, but we can provide no assurance

that any such action taken by us would allow our common stock or warrants to become listed again, stabilize the market price or improve

the liquidity of our common stock, prevent our common stock from dropping below the minimum bid price requirement, or prevent future non-compliance

with the listing requirements.

The Nasdaq Capital Market requires that the trading

price of its listed stocks remain above one dollar in order for the stock to remain listed.

If a listed stock trades below one dollar

for more than 30 consecutive trading days, then it is subject to delisting from the Nasdaq Capital Market.

In addition, to maintain a

listing on the Nasdaq Capital Market, we must satisfy minimum financial and other continued listing requirements and standards, including

those regarding director independence and independent committee requirements, minimum stockholders’ equity, and certain corporate

governance requirements.

If we are unable to satisfy these requirements or standards, we could be subject to delisting, which would have

a negative effect on the price of our common stock and warrants and would impair your ability to sell or purchase our common stock or

warrants when you wish to do so.

In the event of a delisting, we would expect to take actions to restore our compliance with the listing

requirements, but we can provide no assurance that any such action taken by us would allow our common stock or warrants to become listed

again, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below the minimum

bid price requirement, or prevent future non-compliance with the listing requirements.

Provisions of our publicly traded warrants

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of the warrants could prevent or deter a third party from acquiring us even where the acquisition could be beneficial to you.

Risks Related to our Debt

Risks Relating to our Debt

If we do not timely pay amounts due and

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condition and results of operations and may have a material adverse impact on our business.

25, 2023, the Company entered into a Convertible Note Purchase Agreement with certain investors for the sale of convertible promissory

notes for the aggregate principal amount of $1,100 thousand.

The notes are subordinated unsecured obligations of the Company and accrue

interest at a rate of 8% per year payable semiannually in arrears.

The notes will mature on August 25, 2026, unless earlier converted or

repurchased at a conversion price of $1.15 per share of common stock.

Although we believe the majority of our investors will choose to

convert into shares, if this does not occur, this may have a material adverse impact on our cash and as a result, a material adverse impact

on our business.

Our cash flows and operating results could

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believe would otherwise be in the best interests of our stockholders.

STAFF COMMENTS.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors