Item 1A. Risk Factors
Item
1A. Risk Factors.
Risks
Relating to our Business and Industry
We
had a working capital deficit for the years ended December 31, 2024 and 2023, which raises substantial doubt about our ability to continue
as a going concern. Our ability to continue as a going concern depends on our ability to generate positive operating cash flows and raise
additional capital significant enough to result in operating profitability .
We
had a loss of $2,965,000 and $1,688,000 for the years ended December 31, 2024 and 2023, respectively, and had cash used in operations
of $2,485,188 and $265,000 during the years ended December 31, 2024 and 2023, respectively. Further, we had a negative working capital
of $5,667,000 and $2,236,000 as of December 31, 2024 and 2023, respectively, and will require additional capital to operate. Given the
preceding conditions, our auditor has raised substantial doubt about our ability to continue as a going concern. Our ability to continue
as a going concern depends upon our ability to generate positive operating cash flows. To support our working capital needs, we will
rely on our revenue generating customer contracts and equity and/or debt financing. There is no assurance that we will be successful
in generating positive operating cash flows and raising additional capital significant enough to result in operating profitability in
the future.
If
we are unable to generate and raise sufficient positive operating cash flows and additional capital to result in operating profitability
in the future, there may remain substantial doubt about our ability to continue as a going concern, and investors or other financing
sources may be unwilling to provide funding to us on commercially reasonable terms or at all, and we may have to discontinue operations
and liquidate our assets and may be compelled to receive less than the value at which those assets are carried on our audited financial
statements, which would cause our stockholders to lose a part or all of their investment.
Our
business depends on our ability to attract new customers and retain and provide services to existing customers. Any decline in customer
acquisition or retention would harm our business.
Our
business depends upon our ability to attract new customers, and maintain and expand our relationships with our existing customers, including
providing additional services to our existing customers. Our customers engage us to provide support for their events or other corporate
activities. We cannot provide any assurance that customers will extend or renew their engagement with us after the events or corporate
activities for which we have been engaged are completed. Extensions or renewals of customer engagement may decline or fluctuate because
of several factors, such as dissatisfaction with our platform and support, a customer no longer having a need for our platform, or a
belief that a competitor’s service offering is better, more secure, or less expensive than our platform. For example, during the
COVID-19 pandemic, we saw a significant increase in usage of our platform and services. Following the pandemic, some of our customers
reduced their use of our platform, and additional customers may do so in the future. Extensions or renewals of customer engagement are
also impacted by reductions in customers’ information technology spending budgets or decisions by customers to consolidate their
spending budgets on one of our competitor’s platforms, both of which are more likely to occur during periods of high inflation,
recessionary or uncertain economic environments. Finally, any decrease in customer satisfaction with our platform or support would harm
our brand, word-of-mouth referrals, and ability to grow. We need to continually add new customers to grow our business and to replace
customers who choose not to continue to use our platform. If customers terminate or do not renew their business relationships with us,
or renew their service contracts on less favorable terms or for fewer services, and we do not acquire replacement customers or otherwise
grow our customer base, our business and results of operations may be materially and adversely affected.
11
Any
decline in demand for our services or platform could harm our business .
We
derive, and expect to continue to derive, a significant portion of our revenue and cash flows from producing virtual and hybrid events.
Widespread adoption and use of live engagement technologies, webinars and event software in general, and our platform in particular,
are critical to our future growth and success. If this market fails to grow or grows more slowly than we currently anticipate, demand
for our platform could be negatively affected.
Demand
for our platform is affected by a number of factors, many of which are beyond our control. Some of these potential factors include:
●
availability
of products and services that compete, directly or indirectly, with ours;
●
awareness
and adoption of live engagement technologies, generally, as a substitute for in-person events;
●
ease
of adoption and use of the relevant technologies;
●
features
and platform experience;
●
reliability
of our platform, including frequency of outages;
●
performance
and user support;
●
our
brand and reputation;
●
security
and privacy;
●
our
pricing and our competitors’ pricing; and
●
new
modes of live engagement that may be developed in the future.
If
we fail to successfully predict and address these factors, meet customer demands or achieve more widespread market adoption of our platform,
our business would be harmed.
The
experience of our customers depends upon the interoperability of our platform across technologies that we do not control, and if we are
not able to maintain and expand our relationships with third parties in order to integrate our platform with their products, our business
may be harmed.
Our
platform, Xyvid Pro Platform, has broad interoperability and is able to integrate and deliver event content to various devices, including
Windows, Mac, iOS, and Android. See “Item 1. Business—Our Services—Virtual and Hybrid Events.” We depend on the
accessibility of our platform across these devices that we do not control. Some of our competitors may have inherent advantages by being
able to develop products and services internally that more closely integrate with their own software platforms or those of their business
partners.
We
may not be able to modify our platform and services to maintain their continued compatibility with that of third parties’ products
and services that are constantly evolving. In addition, some of our competitors may be able to disrupt the ability of our platform to
operate with their products or services, or they could exert strong business influence on our ability to, and the terms on which we,
operate and provide access to our platform and services. Should any of these third parties modify their products or services in a manner
that degrades the functionality of our platform or services, or that gives preferential treatment to their own or competitive products
or services, whether to enhance their competitive position or for any other reason, the interoperability of our platform and services
with these third-party products and services could decrease and our business could be harmed.
12
We
may not be able to respond to rapid technological changes, extend our platform or develop new features.
The
markets in which we compete are characterized by rapid technological changes and the frequent introduction of new products and services.
Our ability to attract new customers and retain and expand the usage of existing customers depends on our ability to enhance and improve
our platform, and to introduce new features and services. Our customers may require features and capabilities that our current platform
does not have. We are focused on improving the quality and range of our service offerings and are committed to investing in research
and development. See “Item 1. Business—Research and Development.” Our enhancements to our platform, features or capabilities
may not be compelling to our existing or potential customers and may not gain market acceptance. If our research and development investments
do not accurately anticipate customer demand, or if we fail to develop our platform in a manner that satisfies customer preferences in
a timely and cost-effective manner, we may fail to retain our existing customers or increase demand for our platform.
The
introduction of competing services or the development of entirely new technologies to replace existing offerings could make our platform
obsolete or adversely affect our business, results of operations and financial condition. We may experience difficulties with software
development, design or marketing that could delay or prevent our development, introduction, or implementation of new services, features,
or capabilities. New services, features or capabilities may not be released according to schedule. Any delays could result in adverse
publicity, loss of revenue or market acceptance, or claims by customers brought against us, all of which could harm our business. If
customers do not widely adopt our new services, features and capabilities, we may not be able to realize a return on our investment.
If we are unable to develop, license or acquire new features and capabilities to our platform on a timely and cost-effective basis, or
if such enhancements do not achieve market acceptance, our business would be harmed.
We
plan to incorporate AI technologies into some of our products and services, which may present operational and reputational risks.
As
of the date of this annual report, we utilize artificial intelligence, or AI, to empower the multi-language captioning and transcription
features of our Xyvid Pro Platform, and we plan to implement additional features driven by artificial intelligence in the future. The
initial AI-driven enhancements are expected to be available in the second quarter of 2025. See “Item 1. Business—Growth Strategies—Enhancing
Technology and Innovation.” As with many innovations, there are associated risks involved in utilizing AI technology. There can
be no assurance that our use of AI will eventually produce the intended results. Even if it could produce the intended results, we cannot
guarantee that such AI will not produce errors going forward. AI, particularly generative AI, has been known to produce false or “hallucinatory”
inferences or outputs. AI can also present ethical issues and may subject us to new or heightened legal, regulatory, ethical, or other
challenges. Inappropriate or controversial data practices by developers and end-users, or other factors adversely affecting public opinion
concerning AI, could impair the acceptance of AI solutions, including those incorporated in our services. If the AI tools that we use
are deficient, inaccurate, or controversial, we could incur operational inefficiencies, competitive harm, legal liability, brand or reputational
harm, or other adverse impacts on our business and financial results.
In
addition, regulation of AI is rapidly evolving worldwide, as legislators and regulators are increasingly focused on these powerful emerging
technologies. The technologies underlying AI and its uses are subject to a variety of laws and regulations, including intellectual property,
data privacy and security, customer protection, competition, and equal opportunity laws, and are expected to be subject to increased
regulation and new laws or new applications of existing laws and regulations. For example, In the United States, President Biden issued
the Executive Order on Safe, Secure and Trustworthy Artificial Intelligence in October 2023, with the goal of promoting the “safe,
secure, and trustworthy development and use of artificial intelligence in the United States.” The Executive Order has established
certain new standards for the training, testing and cybersecurity of sophisticated AI models. It has also instructed other federal agencies
to promulgate additional regulations within certain timeframes from the date of the Executive Order. Federal artificial intelligence
legislation has also been introduced in the U.S. Senate. Since these regulatory frameworks rapidly evolve, we may become subject to new
laws and regulations, which may affect the legality, profitability, or sustainability of our business, and we may be unable to predict
all the legal, operational, or technological risks that may arise relating to the use of AI. The failure to comply with the relevant
regulatory frameworks may also negatively affect our reputation. Because AI technology itself is highly complex and rapidly developing,
it is not possible to predict all the legal, operational, or technological risks that may arise relating to the use of AI. Failure to
appropriately respond to this evolving landscape may result in legal liability, regulatory action, or brand and reputational harm. As
of the date of this annual report, the Company does not intend to utilize open-source AI.
13
Interruptions
in our services caused by undetected errors, failures, or bugs in our platform or services could harm our reputation and result in significant
costs to us.
Our
platform and services may have errors or defects that customers identify after they begin using them that could result in unanticipated
interruptions of service. Internet-based services frequently contain undetected errors and bugs when first introduced or when new versions
or enhancements are released. The use of our services in complicated, large-scale network environments may increase our exposure to undetected
errors, failures, or bugs in our services. We use monitoring software to detect errors or bugs in our platform and we subject new codes
to stringent testing before their release. As of the date of this annual report, we have not experienced significant interruptions in
our services as a result of such errors or defects, but we may experience future interruptions of service if we fail to detect and correct
these errors and defects. As our business expands, the costs incurred in correcting defects, bugs or errors may be substantial and could
harm our results of operations.
In
addition, we rely on hardware and software of third parties to offer our services. Any defects in, or unavailability of, our or third-party
software or hardware that cause interruptions of our services could, among other things:
●
cause
a reduction in revenues or a delay in market acceptance of our services;
●
require
us to pay penalties or issue refunds to our customers or partners, or expose us to claims for damages;
●
cause
us to lose existing customers and make it more difficult to attract new customers;
●
divert
our development resources or require us to make extensive changes to our software, which would increase our expenses and slow innovation;
●
increase
our technical support costs; and
●
harm
our reputation and brand.
Competition
in our markets is intense, and if we do not compete effectively, our operating results could be harmed.
The
webcasting market is competitive and rapidly changing, and existing and new market entrants, particularly established companies with
greater resources than we have, that provide technologies to improve communication and engagement technologies or platforms, such as
artificial intelligence and machine learning, could also increase the level of competition in the market. We face competition from many
large and small companies, which include, but are not limited to, Zoom, ON24, GlobalMeet, Cvent, Bizzabo, and Meeting Tomorrow. See “Item
1. Business—Our Industry.”
Our
competitors vary in size and in the breadth and scope of the products and services they offer. Many of our actual and potential competitors
benefit from competitive advantages over us, such as greater name recognition; longer operating histories; more varied products and services;
larger marketing budgets; more established marketing relationships; more third-party integration; greater accessibility across devices
or applications; greater access to larger user bases; and greater financial, technical, and other resources. Some of our competitors
may make acquisitions or strategic investments or enter into strategic relationships to offer a broader range of products and services
than we do, which may prevent us from using such third parties’ technology or offering such products or services. These combinations
may make it more difficult for us to compete effectively. We expect these trends to continue as competitors attempt to strengthen or
maintain their market positions. As we introduce new services, and with the introduction of new technologies and market entrants, we
expect competition to intensify in the future.
Demand
for our platform is price sensitive. Many factors, including our pricing and marketing strategies, customer acquisition, and technology
costs, as well as the pricing and marketing strategies of our competitors, can significantly affect our pricing strategies. Certain competitors
offer, or may in the future offer, lower-priced or free products or services that compete with our platform or certain aspects of our
platform, and they may offer a broader range of products and services than we do. Even if such competing products do not include all
of the features and functionality that we provide, we could face pricing pressure to the extent that customers find such alternative
products to be sufficient to meet their needs. Similarly, certain competitors or potential competitors may use marketing strategies that
enable them to acquire customers at a lower cost than we can. Moreover, our major customers may demand substantial price concessions.
As a result, we may be required to provide our major customers with pricing below our targets in the future. As a result, we could lose
market share to our competitors or be forced to engage in price-cutting initiatives or other discounts to attract and retain customers,
each of which could harm our business, results of operations and financial condition.
14
The
failure to effectively develop and expand our marketing and sales capabilities could harm our ability to increase our customer base and
achieve broader market acceptance of our platform.
Our
ability to increase our customer base and achieve broader market acceptance of our services will depend to a significant extent on our
ability to expand our marketing and sales operations. We plan to continue expanding our sales and marketing capabilities, including through
additional investment in digital marketing and sales team expansion. See “Item 1. Business—Growth Strategies.” If we
are unable to expand our sales and marketing operations, our future revenue growth and business could be adversely impacted.
Identifying
and recruiting qualified sales representatives and training them is time consuming and resource intensive, and they may not be fully
trained and productive for a significant amount of time. We also plan to dedicate resources to sales and marketing programs, including
internet and other online advertising. All of these efforts will require us to invest significant financial and other resources, as the
cost to acquire customers through these efforts is high. Our business will be harmed if our efforts do not generate a correspondingly
significant increase in revenue.
Our
largest customer generates a significant portion of our revenue, and interruption in operations of such significant customer may have
an adverse effect on our business, financial condition, and results of operations.
For
the years ended December 31, 2024 and 2023, the same single customer independently accounted for more than 10% of our total revenue;
accounting for approximately 64.6% and 51.1% of our total revenue, respectively. See “Item 1. Business—Our Customers.”
We believe that, in the foreseeable future, we may continue to derive a significant portion of our revenue from such significant customer.
If such customer fails to make payments, or experiences a downturn in business, our revenue and results of operations may be materially
and adversely affected. We may lose our significant customer due to a variety of factors, including our capacity to deliver reliable
services, service efficiency, as well as our competitiveness in pricing strategies. We cannot guarantee that we will continue to maintain
the business relationship with our significant customer at the same level, or at all. If our significant customer terminates its relationship
with us, we cannot assure you that we will be able to secure an alternative arrangement with a comparable customer in a timely manner,
or at all. Losing our significant customer could adversely affect our revenue and profitability. In the short term, losing our significant
customer may lead to a substantial loss of revenue and potentially disrupt cash flow. In the long term, it could impact market perception
and our ability to attract new customers.
We
may be dependent on a limited number of suppliers and any disruption to the relationships with the major suppliers may have material
adverse effects on our business.
For
the year ended December 31, 2024, one supplier independently accounted for more than 10% of our total purchases, accounting for approximately
17.9% of our total purchases. For the year ended December 31, 2023, one supplier independently accounted for more than 10% of our total
purchases, accounting for approximately 27.2% of our total purchases. See “Item 1. Business—Our Suppliers.” Such third-party
suppliers are subject to their own unique operational and financial risks, which are beyond our control. If such significant suppliers
breach or terminate their contracts with us, or experience significant disruptions to their operations, we will be required to find and
enter into arrangements with one or more replacement suppliers. Finding alternative suppliers could involve significant delays and other
costs and these suppliers may not be available to us on reasonable terms, or at all. As a result, this could harm our business and financial
results and result in lost or deferred revenue.
We
depend on our controlling stockholder, V-Cube, Inc., for financing and other resources.
V-Cube,
Inc. owns the majority of our equity interest as of the date of this annual report. We do not expect any material changes to our relationship
with V-Cube, Inc. in the foreseeable future. We have relied on and expect to continue to rely on V-Cube, Inc. for financing and other
resources. V-Cube, Inc. has made verbal pledges to provide financial support and other resources to our Company. However, such pledges
have not been formalized by any contractual arrangements and there is no assurance that such financial support will be available as and
when needed or in sufficient amounts. If there are any changes to our relationship with V-Cube, Inc., and/or if V-Cube, Inc. suspends
or terminates its provision of financing and other resources to us, for a variety of reasons beyond our control, such as any changes
to the Japan-United States relations, any business interruptions or financial distress of V-Cube, Inc., or any legal changes that affect
international money transfers, it could have material adverse effects on our business and financial results.
15
Our
results of operations are subject to seasonal fluctuations.
We
experience seasonality in our business. We usually generate more revenue in the last month of each calendar quarter. See “Item
1. Business—Seasonality.” We may experience capacity and resource shortages in our platform and services during the period
of such seasonal surge in our business. As a result of seasonality, our financial condition and results of operations may continue to
fluctuate, and the trading price of our common stock may fluctuate from time to time.
Our
business and results of operations may be harmed by the misconduct of authorized employees that have access to important assets of our
Company such as bank accounts and confidential information.
During
the course of our business operations, some of our employees have access to certain valuable assets of our Company, such as bank accounts
and confidential information. In the event of misconduct by such authorized employees, our Company could suffer significant losses. Employee
misconduct may include misappropriating bank accounts, falsifying bank records, improper use or disclosure of confidential information
to the public or our competitors, and failure to comply with our internal policies or with federal or state laws or regulations regarding
the use and safeguarding of classified or other protected information, and any other applicable laws or regulations. Although we have
implemented policies, procedures, and controls to regulate employee conduct, these precautions may not prevent all intentional or negligent
misconduct, and as a result, we could face unknown risks or losses. Furthermore, such unethical, unprofessional, or even criminal behavior
by employees could damage our reputation, result in fines, penalties, restitution, or other damages, and lead to the loss of current
and future customers, all of which would adversely affect our business, financial condition, and results.
We
may be the subject of detrimental conduct by third parties, which could have a negative impact on our reputation.
We
may be the target of anti-competitive, harassing, or other detrimental conduct by third parties including our competitors. Such conduct
may include complaints, anonymous or otherwise, to regulatory agencies regarding our operations, accounting, business relationships,
business prospects, and business ethics. Additionally, anyone may post false allegations online against us on an anonymous basis. We
may be subject to government or regulatory investigation as a result of such third-party conduct and may be required to expend significant
time and incur substantial costs to address such third-party conduct, and there can be no assurance that each of the allegations will
be refuted conclusively within a reasonable period of time, or at all. Our business may also be materially negatively affected as a result
of such public dissemination of anonymous allegations or malicious statements.
Interruptions,
delays or outages in service from the data centers we use for our technology or infrastructure could impair the delivery and the functionality
of our services, which may harm our business.
Our
ability to attract and retain customers depends on our ability to provide our customers and their users with a highly reliable platform.
We currently use data centers in the United States. Our platform may not be fully available to customers in the event of catastrophic
failure at one of those data centers. We also do not control the operation of the data centers we use, and they are vulnerable to damage
or interruption from human error, intentional bad acts, natural disasters, war, terrorist attacks, cyber-attacks and other cybersecurity
incidents, power losses, hardware failures, systems failures, telecommunications failures and similar events, any of which could disrupt
our services. In the event of significant physical damage to one of these data centers, it may take a significant period of time to achieve
full resumption of our platform, and our disaster recovery planning may not account for all eventualities. As of the date of this annual
report, we have experienced service disruptions, outages and other performance problems, due to the introduction of new functionality,
human error, and capacity constraints, and we may in the future experience further service disruptions, outages and other performance
problems due to a variety of other factors, including infrastructure changes, software errors, zero-day vulnerabilities, and denial-of-service
attacks, ransomware attacks and other cybersecurity incidents by malicious actors. In some instances, we may not be able to rectify these
performance issues within an acceptable time-frame.
In
addition, we depend on the expertise and efforts of members of our operations and technology teams for the continued performance of our
platform. Our ability to retain, attract, hire and train staff in these groups may prove to be a challenge for a variety of factors and
could have an adverse impact on the platform.
If
our platform is unavailable or if our customers and their users are unable to access our platform within a reasonable amount of time,
or at all, our business, results of operations and financial condition would be adversely affected. Additionally, if the data centers
we use are unable to keep up with our increasing need for capacity, our customers may experience delays as we seek to obtain additional
capacity, which could harm our business.
16
Cybersecurity
incidents could disrupt our business operations, result in the loss of critical and confidential information, adversely impact our reputation,
and harm our business.
Cybersecurity
threats and incidents directed at us could range from uncoordinated individual attempts to gain unauthorized access to information technology
systems to sophisticated and targeted measures aimed at disrupting business or gathering data of customers. We rely on our platform to
deliver virtual and hybrid events to our customers and we use the Azure SQL Database to process, organize and store our business data.
The secure processing, maintenance, and transmission of information in these systems are critical to our operations.
Nonetheless,
our technology operations are vulnerable to security breaches and attacks against our system and network. While we employ measures designed
to prevent, detect, address, and mitigate these threats (including using third-party cybersecurity technology), and we have not experienced
any material cybersecurity incidents as of the date of this annual report, cybersecurity incidents, depending on their nature and scope,
could potentially result in the misappropriation, destruction, corruption, or unavailability of critical data and confidential or proprietary
information (our own or that of third parties, including potentially sensitive information of our customers) and the disruption of business
operations. Any such compromises to our security could cause harm to our reputation, which could cause customers to lose trust and confidence
in us or could cause agents to stop working for us. In addition, we may incur significant costs for remediation that may include liability
for stolen assets or information, repair of system damage, and compensation to customers and business partners. We may also be subject
to legal claims, government investigation, and additional state and federal statutory requirements. Although we have purchased cybersecurity
insurance, there is no assurance that such insurance will be sufficient to cover any damages resulting from cybersecurity claims.
The
potential consequences of a material cybersecurity incident include regulatory violations of applicable U.S. privacy and other laws,
reputational damage, loss of market value, litigation with third parties (which could result in our exposure to material civil or criminal
liability), diminution in the value of the services we provide to our customers, and increased cybersecurity protection and remediation
costs (that may include liability for stolen assets or information), which in turn could have a material adverse effect on our competitiveness
and results of operations.
If
we fail to manage our growth or execute our strategies and future plans effectively, we may not be able to take advantage of market opportunities
or meet the demand of our customers.
We
expect our business to grow in terms of scale and diversity of operations. In addition, we plan to improve the features of our platform
and incorporate more emerging technologies to enhance our platform. This will enable us to diversify and expand our service offerings.
See “Item 1. Business—Growth Strategies.” Such expansions will increase the complexity of our operations and may cause
strain on our managerial, operational, and financial resources. We must continue to hire, train, and effectively manage new employees.
The expansion of our services will also require us to maintain consistency in the quality of our services so that our market reputation
is not damaged by any deviations in quality, whether actual or perceived.
Our
future results of operations also depend largely on our ability to execute our future plans successfully. In particular, our continued
growth may subject us to the following additional challenges and constraints:
●
we
face challenges in responding to evolving industry standards and government regulation that impact our business and the webcasting
industry in general;
●
the
technological or operational challenges may arise from the new services;
●
the
execution of our future plans will be subject to the availability of funds to support the relevant capital investment and expenditures;
and
●
the
successful execution of our strategies is subject to factors beyond our control, such as general market conditions, and economic
and political developments in the United States and globally.
All
of these endeavors involve risks and will require significant management, financial, and human resources. We cannot assure you that we
will be able to effectively manage our growth or to implement our strategies successfully. There is no assurance that the investment
to be made by our Company as contemplated under our future plans will be successful and generate the expected return. If we are not able
to manage our growth or execute our strategies effectively, or at all, our business, results of operations, and prospects may be materially
and adversely affected.
If
we fail to attract, recruit, or retain our key personnel, including our executive officers, senior management, and key employees, our
ongoing operations and growth could be affected.
Our
success depends, to a large extent, on the efforts of our key personnel, including our executive officers, senior management, and other
key employees who have valuable experience, knowledge, and connections in the webcasting industry. There is no assurance that these key
personnel will not voluntarily terminate their employment with us. We do not carry any key person insurance on any of our senior management
team. The loss of any of our key personnel could be detrimental to our ongoing operations. Our success will also depend on our ability
to attract and retain qualified personnel to manage our existing operations as well as our future growth. We may not be able to successfully
attract, recruit, or retain key personnel, and this could adversely impact our financial condition, operating results, and business prospects.
17
We
may not maintain adequate insurance, which could expose us to significant costs and business disruption.
We
maintain certain insurance policies to safeguard against risks and unexpected events. See “Item 1. Business—Insurance.”
However, there can be no assurance that such insurance coverage will always be available or will always be sufficient to cover any damages
resulting from any kind of claims. In addition, there are certain types of risks that may not be covered by our insurance policies, such
as war, force majeure events, or certain business interruptions. Claims that are not covered by the policies or the failure to renew
the insurance policies may materially adversely affect our business, financial condition, and results of operations.
We
may expand through acquisitions of, investments in, or strategic partnerships or other strategic transactions with, other companies,
each of which may divert our management’s attention, result in additional dilution to our stockholders, increase expenses, disrupt
our operations, and harm our results of operations.
Our
business strategy may, from time to time, include acquiring or investing in new or complementary services, technologies or businesses,
strategic investments and partnerships, or other strategic transactions. We plan to identify, invest in, partner with, and acquire appropriate
businesses that offer complementary advantages to our business, thereby improving overall competitiveness and sustaining growth. See
“Item 1. Business—Growth Strategies.” We cannot assure you that we will successfully identify suitable acquisition
candidates or transaction counterparties, securely or effectively integrate or manage disparate technologies, lines of business, personnel
and corporate cultures, realize our business strategy or the expected return on our investment, or manage a geographically dispersed
company. Any such acquisition, investment, strategic partnership, or other strategic transaction could materially and adversely affect
our results of operations. The process of negotiating, effecting, and realizing the benefits from acquisitions, investments, strategic
partnerships, and strategic transactions is complex, expensive and time-consuming, and may cause an interruption of, or loss of momentum
in, development and sales activities and operations of both companies, and we may incur substantial cost and expense, as well as divert
the attention of management. We may issue equity securities which could dilute current stockholders’ ownership, incur debt, assume
contingent or other liabilities and expend cash in acquisitions, investments, strategic partnerships, and other strategic transactions
which could negatively impact our financial position, stockholder equity, and stock price.
Acquisitions,
investments, strategic partnerships, and other strategic transactions involve significant risks and uncertainties, including:
●
the
potential failure to achieve the expected benefits of the acquisition, investment, strategic partnership, or other strategic transaction,
including recoupment or write-down of our investments in the partnership;
●
unanticipated
costs and liabilities;
●
the
potential of disputes with our partners, including arbitration or litigation resulting from a breach or alleged breach of either
party’s contractual obligation, which may result in cost, distraction and potential liabilities and reputational damage;
●
difficulties
in integrating new services and subscriptions, software, businesses, operations, and technology infrastructure in an efficient and
effective manner;
●
difficulties
in maintaining customer relations;
●
the
potential loss of key employees of any acquired businesses;
●
the
diversion of the attention of our senior management from the operation of our daily business;
●
the
potential adverse effect on our cash position to the extent that we use cash for the transaction consideration;
●
the
potential significant increase of our interest expense, leverage, and debt service requirements if we incur additional debt to pay
for an acquisition, investment, strategic partnership, or other strategic transaction;
●
the
potential issuance of securities that would dilute our stockholders’ percentage ownership;
●
the
potential to incur large and immediate write-offs and restructuring and other related expenses;
●
the
inability to maintain uniform standards, controls, policies, and procedures; and
●
the
inability to set up the necessary processes and systems to efficiently operate the partnerships.
Any
acquisition, investment, strategic partnership, or other strategic transaction could expose us to unknown liabilities. Moreover, we cannot
assure you that we will realize the anticipated benefits of any acquisition, investment, strategic partnership, or other strategic transaction.
In addition, our inability to successfully operate and integrate newly acquired businesses or newly formed strategic partnerships appropriately,
effectively, and in a timely manner could impair our ability to take advantage of future growth opportunities and other advances in technology,
as well as our revenues and gross margins.
18
Our
previous performance may not be sustainable or indicative of our future financial outcomes, and there is no assurance that we will be
able to achieve the same level of financial performance in the future.
For
the years ended December 31, 2024 and 2023, we had total revenue of approximately $3.5 million and $3.7 million, respectively, and net
loss of approximately $3.0 million and $1.7 million, respectively. Our financial results in the past may not be indicative of future
results, and we cannot assure you that we will achieve or maintain profitability on a consistent basis. Our revenue growth may slow,
or our revenue may decline for a number of reasons, including reduced demand for our products and services, increased competition, industry
trend, or our failure to capitalize on growth opportunities. Meanwhile, we expect our overall operating expenses to continue to increase
in the foreseeable future, as we will incur additional expenses in connection with the expansion of our business operations and as a
newly public company. These efforts and additional expenses may be more costly than we currently expect, and there is no assurance that
we will be able to maintain sufficient operating revenue to offset our operating expenses. Any failure to increase revenue or to manage
our costs as we continue to grow and invest in our business would prevent us from achieving or maintaining profitability or maintaining
positive operating cash flow at all, or on a consistent basis, which would cause our business, financial condition, and results of operations
to suffer.
Adverse
or weakened general economic and market conditions may cause a reduction in customer demand, which could harm our revenue, results of
operations, and cash flows.
Our
revenue, results of operations, and cash flows depend on the overall demand for and use of our platform and services, which depends in
part on the amount of spending allocated by our customers or potential customers on the relevant services. This spending depends on worldwide
economic and geopolitical conditions. The United States and other key international economies have experienced cyclical downturns from
time to time in which economic activity was impacted by falling demand for a variety of goods and services, inflation (including wage
inflation), labor market constraints, restricted credit, poor liquidity, reduced corporate profitability, volatility in credit, equity,
and foreign exchange markets, bankruptcies, and overall economic uncertainty. These economic conditions can arise suddenly, including
the recent rise in inflation and overall macroeconomic environment, which may negatively impact our customers’ budgets. In addition,
geopolitical developments, such as potential trade wars, and actions or inactions of the United States or other major national governments,
can increase levels of political and economic unpredictability globally and increase the volatility of global financial markets.
Market
volatility, decreased consumer confidence, and diminished growth expectations in the United States economy and abroad as a result of
the foregoing events could adversely affect our customers’ ability or willingness to purchase our services, delay prospective customers’
purchasing decisions, reduce the value or duration of their contracts, or affect attrition rates, all of which could adversely affect
our future sales and operating results. Some of our customers may view the usage of our platform as a discretionary purchase, and our
customers may reduce their discretionary spending on our platform during an economic downturn. In addition, weak economic conditions,
including during times of high inflation and tightening budgets, can result in customers seeking to utilize lower-cost solutions that
are available from alternative sources. Prolonged economic slowdowns may result in requests to renegotiate existing contracts on less
advantageous terms to us than those currently in place, payment defaults on existing contracts, or non-renewal at the end of a contract
term.
19
Our
business could be disrupted by catastrophic events.
Occurrence
of any catastrophic event, including pandemics such as COVID-19, earthquakes, fires, floods, tsunamis or other weather event, power loss,
telecommunications failure, software or hardware malfunctions, cyberattacks, war or terrorist attacks, could result in lengthy interruptions
in our services. In particular, our corporate headquarters are located in Pennsylvania, a region known for flooding, and our insurance
coverage may not sufficiently compensate us for losses that may occur in the event of a severe flooding event or other significant natural
disaster. In addition, acts of terrorism could cause disruptions to the internet, the electric grid or the economy as a whole. If our
systems were to fail or be negatively impacted as a result of a natural disaster or other catastrophic event, our ability to deliver
our products and services to our customers would be impaired or we could lose critical data. If we are unable to develop adequate plans
to ensure that our business functions continue to operate during and after a disaster and to execute successfully on those plans in the
event of a disaster or emergency, our business could be harmed.
Risks
Relating to Laws and Regulations
The
actual or perceived failure by us, our customers, partners or vendors to comply with stringent and evolving laws and regulations, industry
standards, policies, and contractual obligations relating to privacy, data protection, information security, and other matters could
harm our reputation and business and subject us to significant fines and liability.
In
the ordinary course of business, we collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure,
dispose of, transmit, and share confidential, proprietary, and sensitive information, including customer and user content, business data,
trade secrets, intellectual property, third-party data, business plans, transactions, financial information. Our data processing activities
subject us to numerous privacy, data protection, and information security obligations, such as various laws, regulations, guidance, industry
standards, external and internal privacy and security policies, and contractual requirements.
In
the United States, federal, state, and local governments have enacted numerous privacy, data protection, and information security laws,
including data breach notification laws, consumer protection laws, and other similar laws. See “Item 1. Business—Regulations.”
While as of the date of this annual report, we have not been subject to any legal or administrative penalties or received any notifications
from regulatory authorities for privacy, data protection, or information security concerns, the developments or changes to the applicable
laws and regulations may complicate compliance efforts and increase legal risk and compliance costs for us and the third parties upon
whom we rely. If we fail to comply with stringent and evolving laws and regulations, industry standards, policies, and contractual obligations
relating to privacy, data protection, information security, and other matters, it could harm our reputation and business and subject
us to significant fines and liability.
We
are subject to a variety of U.S. and international laws and regulations, compliance with which could impair our ability to compete and
non-compliance with which may result in claims, fines, penalties, and other consequences, all of which could adversely impact our operations,
business, or performance.
As
a service provider, we do not regularly monitor our platform to evaluate the legality of content shared on it by our customers. While
as of the date of this annual report, we have not been subject to legal or administrative actions as a result of the content shared on
our platform, the laws in this area are evolving and vary widely between jurisdictions. Accordingly, it may be possible that in the future
we and our business partners may be subject to legal actions involving our customers’ content or use of our platform.
Our
platform depends on the ability of our customers and their users to access the internet. If we fail to anticipate developments in the
law, or we fail for any reason to comply with relevant law, our platform could be blocked or restricted, and we could be exposed to significant
liability that could harm our business.
We
are subject to a variety of U.S. laws and regulations, such as the Americans with Disabilities Act (ADA) which requires virtual events
to be accessible to individuals with disabilities, and various laws and regulations of states where we conduct business activities or
where digital content is distributed, livestreamed, or made available through our platform or services. We are also subject to various
international regulations on information security, copyrights and intellectual properties. See “Item 1. Business—Regulations.”
To the extent we expand our market presence, our exposure for violating these laws and regulations will likely increase. If we fail to
comply with the legal standards and requirements, we may face substantial civil and criminal fines, penalties, profit disgorgement, reputational
harm, loss of access to certain markets, disbarment from government business, the loss of export privileges, tax reassessments, breach
of contract, fraud and other litigation, reputational harm, and other foreseeable or unforeseen collateral consequences that could harm
our business.
20
Non-compliance
with laws and regulations on the part of any third parties with which we conduct business could expose us to legal expenses, compensation
to third parties, penalties, and disruptions of our business, which may adversely affect our results of operations and financial performance.
Third-party
customers with which we conduct business, including healthcare organizations, as well as marketing and advertising agencies, may be subject
to regulatory penalties or punishments because of their regulatory compliance failures or infringement upon other parties’ legal
rights, which may, directly or indirectly, disrupt our business. We cannot be certain whether such third parties have violated any regulatory
requirements or infringed or will infringe any other parties’ legal rights, which could expose us to legal expenses or compensation
to third parties, or both.
We,
therefore, cannot rule out the possibility of incurring liabilities or suffering losses due to any non-compliance by third parties. There
is no assurance that we will be able to identify irregularities or non-compliance in the business practices of third parties with which
we conduct business, or that such irregularities or non-compliance will be corrected in a prompt and proper manner. Any legal liabilities
and regulatory actions affecting third parties involved in our business may affect our business activities and reputation, and may in
turn affect our business, results of operations, and financial performance.
Moreover,
regulatory penalties or punishments against our business stakeholders such as third-party service providers, whether or not resulting
in any legal or regulatory implications upon us, may nonetheless cause business interruptions or even suspension of these business stakeholders,
which could in turn disrupt our usual course of business and result in material negative impact on our business operations, results of
operation and financial condition.
Failure
to protect intellectual property rights could adversely affect our business.
We
regard our domain names and other intellectual property we may develop or acquire as critical to our success. See “Item 1. Business—Intellectual
Property.” We have taken measures to protect our intellectual property, but these measures might not be sufficient or effective.
We may bring lawsuits to protect against the potential infringement of our intellectual property rights. Policing unauthorized use of
our proprietary technology and other intellectual property is difficult and expensive, and litigation may be necessary in the future
to enforce their intellectual property rights. Future litigation could result in substantial costs and diversion of our resources and
could disrupt our business, as well as materially adversely affect our financial condition and results of operations. Further, despite
the potentially substantial costs, we cannot assure you that we will prevail in such litigation. In addition, our trade secrets may be
leaked or otherwise become available to, or be independently discovered by, our competitors. Any failure in protecting or enforcing our
intellectual property rights could have a material adverse effect on our business, financial condition, and results of operations.
Third
parties may claim that we infringe their proprietary intellectual property rights, which could cause us to incur significant legal expenses
and prevent us from promoting our services.
We
cannot be certain that our operations or any aspects of our business do not or will not infringe upon or otherwise violate trademarks,
copyrights, patents, or other intellectual property rights held by third parties. We may from time to time in the future be subject to
legal proceedings and claims relating to the intellectual property rights of others. For instance, we may face claims of trademark or
copyright infringement for the use of images, pictures, or materials used on our website, in promotional materials, such as brochures
or videos, or in the distribution and storage of digital content. There could also be existing intellectual property of which we are
not aware that our services may inadvertently infringe. If any third-party infringement claims are brought against us, we may be forced
to divert management’s time and other resources from our business and operations to defend against these claims, regardless of
their merits. Additionally, the application and interpretation of intellectual property right laws and the procedures and standards for
granting trademarks, copyrights, or other intellectual property rights are evolving and may be uncertain, and we cannot assure you that
courts or regulatory authorities would agree with our analysis. Such claims, even if they do not result in liability, may harm our reputation.
If we were found to have violated the intellectual property rights of others, we may be subject to liability for our infringement activities
or may be prohibited from using such intellectual property, and we may incur licensing fees or be forced to develop alternatives of our
own. As a result, our business and financial performance may be materially and adversely affected.
We
may from time to time be subject to claims, controversies, lawsuits, and legal proceedings, which could adversely affect our business,
prospects, results of operations, and financial condition.
From
time to time, we may be involved in various claims, controversies, lawsuits, legal proceedings, or regulatory inquiries that arise in
the ordinary course of business involving labor and employment, wage and hour, intellectual property, data breach and other matters.
See “Item 1. Business—Legal Proceedings.” We expect that the number and significance of these potential disputes or
claims may increase as our business expands and our company grows larger. Contractual provisions and insurance coverage may not cover
potential claims and may not be adequate to indemnify us for all liabilities we may face. Any claims against us, whether meritorious
or not, could be time consuming, result in costly litigation, require significant amounts of management time, and result in the diversion
of significant operational resources. Litigation is inherently unpredictable, and the results of any claims may have a material adverse
effect on our business, financial condition, results of operations, and prospects. In addition, negative publicity regarding claims or
judgments made against our Company may damage our reputation and may result in a material adverse impact on us.
21
We
are subject to various U.S. anti-corruption laws, and any failure to comply with such laws, and any laws to which we may become subject,
whether in existence now or hereafter, could harm our business, financial condition, and results of operations.
We
are subject to various U.S. anti-corruption laws, such as the U.S. Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”),
as well as other similar anti-bribery and anti-kickback laws and regulations. These laws and regulations generally prohibit companies
and their employees and intermediaries, from directly or indirectly authorizing, offering, or providing improper payments or benefits
to government officials and other recipients for improper purposes. The FCPA also requires public companies to make and keep books and
records that accurately and fairly reflect the transactions of the corporation and to devise and maintain an adequate system of internal
accounting controls. We anticipate that our exposure for violating these laws will increase as we continue to expand our presence, and
any failure to comply with such laws could harm our business, financial condition, and results of operations.
Risks
Relating to Our Capital Stock and Trading
The
price of our common stock could be subject to rapid and substantial volatility.
There
have been instances of extreme stock price run-ups followed by rapid price declines and strong stock price volatility with recent initial
public offerings, especially among those with relatively smaller public floats. As a relatively small-capitalization company with a relatively
small public float, we may experience greater stock price volatility, extreme price run-ups, lower trading volume, and less liquidity
than large-capitalization companies. In particular, our common stock may be subject to rapid and substantial price volatility, low volumes
of trades, and large spreads in bid and ask prices. Such volatility, including any stock run-ups, may be unrelated to our actual or expected
operating performance and financial condition or prospects, making it difficult for prospective investors to assess the rapidly changing
value of our common stock.
In
addition, if the trading volumes of our common stock are low, persons buying or selling in relatively small quantities may easily influence
the price of our common stock. This low volume of trades could also cause the price of our common stock to fluctuate greatly, with large
percentage changes in price occurring in any trading day session. Holders of our common stock may also not be able to readily liquidate
their investment or may be forced to sell at depressed prices due to low volume trading. Broad market fluctuations and general economic
and political conditions may also adversely affect the market price of our common stock. As a result of this volatility, investors may
experience losses on their investment in our common stock. A decline in the market price of our common stock also could adversely affect
our ability to issue additional shares of common stock or other of our securities and our ability to obtain additional financing in the
future. No assurance can be given that an active market in our common stock will develop or be sustained. If an active market does not
develop, holders of our common stock may be unable to readily sell the shares of common stock they hold or may not be able to sell at
all.
By
issuing preferred stock, we may be able to delay, defer or prevent a change of control.
Our
certificate of incorporation permits us to issue, without approval from our stockholders, a total of 1,000,000 shares of preferred stock,
none of which are outstanding. Our board of directors can determine the designations, powers, preferences and voting and other rights,
and the qualifications, limitations and restrictions granted to, or imposed upon, the shares of preferred stock and to fix the number
of shares constituting any series and the designation of such series. It is possible that our board of directors, in determining the
rights, preferences and privileges to be granted when the preferred stock is issued, may include provisions that have the effect of delaying,
deferring or preventing a change in control, discouraging bids for our common stock at a premium over the market price, or that adversely
affect the market price of and the voting and other rights of the holders of our common stock.
Anti-takeover
provisions in our articles of incorporation and bylaws and under Nevada law could prevent or delay an acquisition of us, which may be
beneficial to our stockholders, and may prevent attempts by our stockholders to replace or remove our current management.
Provisions
of the Nevada Revised Statutes, our articles of incorporation, as amended, and our bylaws, as amended, could make it more difficult to
acquire us by means of a tender offer, a proxy contest or otherwise, or to remove incumbent officers and directors. These provisions,
which are summarized below, may have the effect of discouraging takeover bids.
●
require
super-majority voting to amend some provisions in our articles of incorporation and bylaws;
22
●
authorize
the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights
plan;
●
eliminate
the ability of our stockholders to call special meetings of stockholders;
●
prohibit
cumulative voting; and
●
establish
advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon
by stockholders at stockholder meetings.
In
addition, Nevada Revised Statutes imposes certain restrictions on business combinations and certain changes or potential changes in control
of a Nevada corporation. Anti-takeover provisions in our articles of incorporation and bylaws and under Nevada law could prevent or delay
an acquisition of us, which may be beneficial to our stockholders, and may prevent attempts by our stockholders to replace or remove
our current management.
Our
articles of incorporation designate the Supreme Court of the State of Nevada as the exclusive forum for certain types of actions and
proceedings, which could limit a stockholder’s ability to choose the judicial forum for disputes with the Company or its directors,
officers or employees.
Our
articles of incorporation provide that, to the fullest extent permitted by law, the Supreme Court of the State of Nevada will be the
exclusive forum for any derivative action or proceeding brought on our behalf; any action asserting a breach of fiduciary duty; any action
asserting a claim arising pursuant to the Nevada Revised Statutes, our articles of incorporation or our bylaws; or any action asserting
a claim governed by the internal affairs doctrine.
There
is uncertainty as to whether a court will enforce these forum selection clauses. The choice of forum provision may limit a stockholder’s
ability to bring a claim in a judicial forum that it finds favorable for disputes, which may discourage such lawsuits. We interpret the
forum selection clauses in our articles of incorporation to be limited to the specified actions and not to apply to actions arising under
the Exchange Act or the Securities Act. Section 27 of the Exchange Act provides that United States federal courts shall have jurisdiction
over all suits and any action brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder
and Section 22 of the Securities Act provides that United States federal and state courts shall have concurrent jurisdiction over all
suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder.
If
a court were to find the choice of forum provision contained in our articles of incorporation to be inapplicable or unenforceable in
an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could have a material adverse
effect on our business, financial condition, and results of operations.
If
we fail to implement and maintain an effective system of internal controls, we may fail to meet our reporting obligations or be unable
to accurately report our results of operations or prevent fraud, and investor confidence and the market price of our common stock may
be materially and adversely affected.
Our
failure to implement and maintain an effective system of internal controls could result in inaccuracies in our financial statements and
could also impair our ability to comply with applicable financial reporting requirements and related regulatory filings on a timely basis.
As a result, our business, financial condition, results of operations, and prospects, as well as the trading price of our common stock,
may be materially and adversely affected. Moreover, ineffective internal control over financial reporting significantly hinders our ability
to prevent fraud.
We
are a public company in the United States subject to the Sarbanes-Oxley Act of 2002. Section 404 of the Sarbanes-Oxley Act of 2002 will
require that we include a report of management on our internal control over financial reporting in our annual report on 10-K beginning
with our annual report for the fiscal year ending December 31, 2025. In addition, once we cease to be an “emerging growth company,”
as such term is defined in the JOBS Act, our independent registered public accounting firm must attest to and report on the effectiveness
of our internal control over financial reporting. Our management may conclude that our internal control over financial reporting is not
effective. Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent
registered public accounting firm, after conducting its own independent testing, may issue a report that is qualified, if it is not satisfied
with our internal controls or the level at which our controls are documented, designed, operated, or reviewed, or if it interprets the
relevant requirements differently from us. In addition, after we become a public company, our reporting obligations may place a significant
strain on our management, operational, and financial resources and systems for the foreseeable future. We may be unable to complete our
evaluation testing and any required remediation in a timely manner.
23
We
bear substantial increased costs as a result of being a public company.
We
completed our initial offering in 2025 and have started bearing significant legal, accounting, and other expenses as a public company
that we did not incur as a private company since then. These additional costs could negatively affect our financial results. The Sarbanes-Oxley
Act of 2002, as well as rules subsequently implemented by the SEC and Nasdaq, impose various requirements on the corporate governance
practices of public companies.
Compliance
with these laws, rules, and regulations increases our legal and financial compliance costs and makes some corporate activities more time-consuming
and costlier. These laws, regulations, and standards are subject to varying interpretations and, as a result, their application in practice
may evolve over time as new guidance is provided by regulatory and governing bodies. We intend to invest resources to comply with evolving
laws, regulations, and standards, and this investment may result in increased general and administrative expenses and a diversion of
management’s time and attention from revenue-generating activities to compliance activities. In addition, we will incur additional
costs associated with our public company reporting requirements. It may also be more difficult for us to find qualified persons to serve
on our board of directors or as executive officers.
We
are an “emerging growth company,” as defined in the JOBS Act and will remain an emerging growth company until the earlier
of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of our initial public offering, (b) in which
we have total annual gross revenue of at least $1.235 billion, or (c) in which we are a large accelerated filer, which means the market
value of our common stock that is held by non-affiliates exceeds $700 million as of the prior December 31, and (2) the date on which
we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. An emerging growth company may take
advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions
include exemption from the auditor attestation requirement under Section 404 in the assessment of the emerging growth company’s
internal control over financial reporting and permission to delay adopting new or revised accounting standards until such time as those
standards apply to private companies.
After
we are no longer an “emerging growth company,” or until five years following the completion of our initial public offering,
whichever is earlier, we expect to incur significant additional expenses and devote substantial management effort toward ensuring compliance
with the requirements of Section 404 and the other rules and regulations of the SEC. For example, as a public company, we have been required
to increase the number of independent directors and adopt policies regarding internal controls and disclosure controls and procedures.
We
are currently evaluating and monitoring developments with respect to these rules and regulations, and we cannot predict or estimate with
any degree of certainty the amount of additional costs we may incur or the timing of such costs.
We
may not be able to maintain the listing of our common stock on Nasdaq.
There
can be no assurance that we will be able to maintain the listing standards of Nasdaq, the exchange on which our common stock is traded,
which includes requirements that we maintain our stockholders’ equity, total value of shares of common stock held by unaffiliated
stockholders, minimum bid price, and market capitalization above certain specified levels.
If
we fail to conform to the Nasdaq listing requirements on an ongoing basis, our common stock might cease to trade on Nasdaq, and may move
to the OTCQB or OTC Pink Markets operated by OTC Markets Group, Inc. These quotation services are generally considered to be markets
that are less efficient and that provide less liquidity in the shares of common stock than Nasdaq.
Future
equity offerings or other equity issuances of us could further dilute common stock.
We
may in the future issue additional shares of our common stock or other securities convertible into or exchangeable for shares of our
common stock. These issuances may occur at times or on terms that could be disadvantageous to our existing stockholders. Our stockholders’
percentage ownership and voting power may be diluted, and they may experience a reduction in the value of their investment. Additionally,
such issuances, if substantial, could negatively affect the market price of our common stock.
If
securities or industry analysts do not publish research or reports about our business, or if they publish a negative report regarding
our common stock, the price of our common stock and trading volume could decline.
Any
trading market for our common stock may depend in part on the research and reports that industry or securities analysts publish about
us or our business. We do not have any control over these analysts. If one or more of the analysts who cover us downgrade us, the price
of our common stock would likely decline. If one or more of these analysts cease coverage of our Company or fail to regularly publish
reports on us, we could lose visibility in the financial markets, which could cause the price of our common stock and the trading volume
to decline.
24
We
will be a “controlled company” within the meaning of the Nasdaq listing rules, and will follow certain exemptions from certain
corporate governance requirements that could adversely affect our public stockholders.
As
of the date of this annual report, our largest stockholder, V-Cube, Inc., directly and indirectly own more than a majority of the voting
power of our outstanding common stock and will be able to determine all matters requiring approval by our stockholders. V-Cube, Inc.
is a Japanese company listed on the Tokyo Stock Exchange and its chief executive officer, Naoaki Mashita, has served as our Director
since February 2024 and is our minority stockholder. Under the Nasdaq listing rules, a company of which more than 50% of the voting power
is held by an individual, group, or another company is a “controlled company” and is permitted to phase in its compliance
with the independent committee requirements. We intend to rely on the “controlled company” exemptions under the Nasdaq listing
rules. Specifically, we will not form the nominating and corporate governance and compensation committees, and a majority of our board
of directors will not consist of independent directors, as permitted by the “controlled company” exemptions under the Nasdaq
listing rules. We have formed an audit committee that will consist of three independent directors and we intend to phase in our compliance
with the relevant audit committee composition requirements by having two independent directors at the time of our listing, and three
independent directors within one year of our listing. During the period we remain a controlled company and during any transition period
following a time when we are no longer a controlled company, you will not have the same protections afforded to stockholders of companies
that are subject to all of the corporate governance requirements of Nasdaq.
We
are an “emerging growth company” and a “smaller reporting company” under the JOBS Act, and we cannot be certain
if the reduced disclosure requirements applicable to emerging growth companies and smaller reporting companies will make our common stock
less attractive to investors.
We
are an “emerging growth company” and a “smaller reporting company” as defined in the JOBS Act, and we may take
advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging
growth companies” and “smaller reporting companies” including, but not limited to, not being required to comply with
the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation
in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive
compensation and stockholder approval of any golden parachute payments not previously approved.
In
addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended
transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other
words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise
apply to private companies. We have elected to take advantage of the extended transition period for complying with new or revised accounting
standards.
We
will remain an “emerging growth company” until the last day of the fiscal year following the fifth anniversary of the date
of the first sale of our common stock pursuant to an effective registration statement under the Securities Act, although we will lose
that status sooner if our revenue exceeds $1.235 billion, if we issue more than $1 billion in non-convertible debt in a three-year period,
or if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last day of our most recently
completed second fiscal quarter.
We
may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain
of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for
so long as (i) the market value of our common stock held by non-affiliates is equal to or less than $250 million as of the last business
day of the most recently completed second fiscal quarter, or (ii) our annual revenue is equal to or less than $100 million during the
most recently completed fiscal year and the market value of our common stock held by non-affiliates is equal to or less than $700 million
as of the last business day of the most recently completed second fiscal quarter.
We
cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find
our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may
be more volatile. In addition, taking advantage of reduced disclosure obligations may make comparison of our financial statements with
other public companies difficult or impossible. If investors are unable to compare our business with other companies in our industry,
we may not be able to raise additional capital as and when we need it, which may materially and adversely affect our financial condition
and results of operations.
25