What changed in this filing

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Item 1A. Risk Factors

2025-03-20 compared with 2024-03-28 · 61 added, 106 removed, 280 unchanged (37% of the section changed)

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We have incurred significant losses and negative cash flows from operations since inception and expect to incur additional losses until such time that we can generate significant revenue and profit in our tobacco business, which casts substantial doubt regarding our ability to continue as a going concern.

As of March 25, 2024, we had cash and cash equivalents of approximately $2.2 million.

Doubts about our ability to continue as a going concern have and could continue to negatively impact our relationships with our commercial partners and our ability, as part of our cost-cutting measures, to obtain, maintain, restructure and/or terminate agreements with them, or negatively impact our negotiating leverage with such parties, which could have a material adverse effect on our business, financial condition and results of operations or result in litigation.

Furthermore, any loss of key personnel, employee attrition or material erosion of employee morale arising out of doubts about our ability to operate as a going concern could have a material adverse effect on our ability to effectively conduct our business, and could impair our ability to execute our business plan, thereby having a material adverse effect on our business, financial condition and results of operations.

We need additional funding to execute our business plan and to continue operations even with the proceeds from recent warrant inducement and exchange concluded in February 2024.

As of March 17, 2025, we had cash and cash equivalents of approximately $1.7 million and outstanding indebtedness under the Convertible Senior Secured Credit Facility of $4.6 million.

Doubts about our ability to continue as a going concern have and could continue to negatively impact our relationships with our commercial partners and our employees.

We need additional funding to execute our business plan and to continue operations and service our outstanding obligations.

We continue to seek and evaluate opportunities to raise additional funds through the issuance of our securities, asset sales, and through arrangements with strategic partners.

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Without additional capital, we will be unable to continue our operations in the future.

We may be unable to comply with the covenants in our senior secured debentures.

Our senior secured debentures contain customary representations, warranties and covenants including among other things and subject to certain exceptions, covenants that restrict us from incurring additional indebtedness, creating or permitting liens on assets, making or holding any investments, repaying outstanding indebtedness, paying dividends or distributions and entering into transactions with affiliates.

We may be unable to comply with the covenants in our convertible senior secured debentures.

We have $4.6 million in outstanding convertible senior secured debentures as of March 17, 2025, that contain customary representations, warranties and covenants including among other things and subject to certain exceptions, covenants that restrict us from incurring additional indebtedness, creating or permitting liens on assets, making or holding any investments, repaying outstanding indebtedness, paying dividends or distributions and entering into transactions with affiliates.

We are also required to maintain certain quarterly revenue targets.

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Furthermore, our failure to comply with the covenants could result in a default under such agreements, which could permit the debt holders to accelerate our obligation to repay the debt.

Although we recently received a waiver with respect to our compliance with such covenants, there is no assurance that we will be able to secure a similar waiver for the failure to comply with any future covenants.

Although we have in the past received a waiver with respect to our compliance with such covenants, there is no assurance that we will be able to secure a similar waiver for the failure to comply with any future covenants.

If any of our debt is accelerated, we likely would not have sufficient funds available to repay it.

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If such debt is accelerated, we could be required to liquidate our inventory, cease or curtail operations, or seek protection under applicable bankruptcy laws or similar state proceedings.

Additionally, the senior secured debentures may be converted into shares of the Company’s common stock on the earlier of (i) June 30, 2024 and (ii) the public announcement of a Fundamental Transaction (as defined in the senior secured debentures).

Additionally, the senior secured debentures may be converted into shares of the Company’s common.

If the senior secured debentures are converted into common stock in whole or in part, the existing stockholders could incur significant dilution in their relative percentage ownership.

The prospect of this possible dilution may also impact the price of our common stock.

We could continue to incur restructuring and impairment charges as we continue to pursue a cost cutting initiative and pursue strategic alternatives.

We continue to evaluate opportunities to optimize the cost structure of our operations in order to implement a cost savings initiative.

The actions driven from these opportunities could result in significant charges which could adversely affect our financial condition and results of operations.

Future actions could result in restructuring and related charges, including but not limited to impairments and employee termination costs and costs associated with terminating contracts that could be significant.

We have incurred significant impairment charges for long-lived assets, including goodwill and intangible assets, which are subject to periodic impairment analysis and review, and remain subject to the potential for additional charges.

Identifying and assessing whether impairment indicators exist, or if events or changes in circumstances have occurred, including market conditions, operating results, competition and general economic conditions, requires significant judgment.

Any of the above future actions could result in charges that could have an adverse effect on our financial condition and results of operations.

The cost-cutting initiatives have led, and may continue to lead, to legal claims by service providers and other third-parties.

Any resulting litigation could be costly and time consuming and an unfavorable outcome could have a significant adverse effect on our business.

Our competitors generally have, and any future competitors may have, greater financial resources and name recognition than we do, and they may therefore develop products or other technologies similar or superior to ours, or otherwise compete more successfully than we do.

We are competing with large tobacco companies and large pharmaceutical companies that have greater resources that us.

The tobacco industry consists of major domestic and international companies, most of which have existing relationships in the markets in which we plan to sell, as well as financial, technical, research and development, marketing, sales, manufacturing, scaling capacity, distribution, lobbying and other resources and name recognition substantially greater than ours.

In addition, we expect new competitors will enter the markets for similar tobacco products in the future and the nature and extent of this market entrance cannot be quantified at this time.

Potential customers may choose to do business with more established competitors because of their perception that our competitors are more stable, can scale operations more quickly, have greater manufacturing capacity, have robust marketing and sale programs and lend greater credibility to governmental regulators and others.

The prospect of this possible dilution may also negatively impact the price of our common stock.

Our competitors generally have greater financial resources and name recognition than we do, and they may therefore develop products or other technologies similar or superior to ours, or otherwise compete more successfully than we do.

We are competing with large tobacco companies and large pharmaceutical companies that have greater resources than us.

The tobacco industry consists of major domestic and international companies, most of which have existing commercial relationships, as well as financial, technical, research and development, marketing, sales, manufacturing, scaling capacity, distribution, lobbying and other resources and name recognition substantially greater than ours.

In addition, we expect new competitors will enter the markets for similar or novel tobacco products in the future and the nature and extent of this market entrance cannot be quantified at this time.

Potential customers and other business partners may choose to do business with more established competitors because of their perception that our competitors are more stable, can scale operations more quickly, have greater manufacturing capacity, have robust marketing and sale programs and lend greater credibility to governmental regulators and others.

In addition, large companies have the ability to provide entry-level pricing for premium products in order make us less competitive.

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Currently, there are numerous companies developing products for which they may submit MRTPAs, working to develop low nicotine tobacco and other tobacco alternative products to provide products that are potentially safer for human consumption or to otherwise assist consumers to cease or begin to switch from smoking.

If one of such competitors develops a cigarette that is safe for human consumption, a safer alternative for nicotine that is widely accepted, superior low nicotine tobacco or

otherwise develops a superior quitting method, it could render our RNC tobacco and cigarettes obsolete, which would have a material adverse impact on our business and operations and our ability to achieve profitability.

If one of such competitors develops a cigarette that is safe for human consumption, a safer alternative for nicotine that is widely accepted, superior low nicotine tobacco or otherwise develops a superior quitting method, it could render our RNC tobacco and cigarettes obsolete, which would have a material adverse impact on our business and operations and our ability to achieve profitability.

Our competitors may render our technologies obsolete by advances in existing technological approaches or the development of new or different approaches, potentially eliminating the advantages that we believe we derive from our research approach and proprietary technologies.

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Any such delays or the inability to effectively develop new products in a cost-effective manner, or at all, would have a material adverse effect on our business and a loss of our financial resources.

We have in the past invested in other companies and may do so in the future, which may divert our management’s attention, result in additional dilution to our stockholders, and consume resources that are necessary to sustain our business or result in losses.

We may acquire or invest in complementary solutions, services, technologies, or businesses in the future.

We may also enter into relationships with other businesses to expand our intellectual property portfolio, which could involve preferred or exclusive licenses or investments in other companies.

Negotiating these transactions can be time-consuming, difficult and expensive, and our ability to complete these transactions may often be subject to conditions or approvals that are beyond our control.

Consequently, these transactions, even if undertaken and announced, may not close or may not yield the benefits that we expect.

Many of our acquisitions in the past have not yielded the results or synergies that we anticipated.

In addition, we may only be able to conduct limited due diligence on an acquired company’s operations.

Following an acquisition, we may be subject to liabilities arising from an acquired company’s past or present operations and these liabilities may be greater than the warranty and indemnity limitations that we negotiate.

Any liability that is greater than these warranty and indemnity limitations could have a negative impact on our financial condition.

Acquisitions may also disrupt our business, divert our resources, and require significant management attention that would otherwise be available for the development of our business.

Moreover, the anticipated benefits of any acquisition, investment, or business relationship may not be realized or we may be exposed to unknown liabilities, including litigation against the companies that we may acquire.

The failure of our information systems to function as intended or their penetration by outside parties with the intent to corrupt them could result in business disruption, litigation and regulatory action, and loss of revenue, assets, or personal or confidential data (cybersecurity).

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Other global incidents could have a similar effect of disrupting our business to the extent they reach and impact the areas in which we operate, the availability of inventory we need, the customers we serve, the partners on whom we rely for products or services or the employees who operate our businesses.

For example, another pandemic or comparable heath concern could disrupt our supply chain for tobacco, as well as negatively impact employee productivity, including affecting the availability of employees reporting for work.

For example, another pandemic or

comparable heath concern could disrupt our supply chain for tobacco, as well as negatively impact employee productivity, including affecting the availability of employees reporting for work.

Any business interruption caused by such unforeseen events could have a material adverse impact on our business and operations.

Our prior operations in the hemp/cannabis space could have a material adverse effect on our business, financial condition, and results of operations.

We previously operated in the cannabis space.

The hemp plant and the marijuana plant are both part of the same cannabis genus of plant, except that hemp, by definition, has not more than 0.3% THC content and is legal under the federal 2018 Farm Bill and certain state laws, but the same plant with a higher THC content is defined as marijuana, which is legal under certain state laws, is not legal under federal law.

The similarities between these plants can cause confusion, and our previous activities with legal hemp may be incorrectly perceived as us having been involved in federally illegal marijuana.

Also, despite growing support for the marijuana industry and legalization of marijuana in certain U.S.

states, many individuals and businesses remain opposed to the marijuana industry.

Any negativity resulting from our prior cannabis operations could result in a loss of current or future business.

It could also adversely affect the public’s perception of us and lead to reluctance by new parties to do business with us or to own our common stock.

We cannot assure you that additional business partners, including but not limited to financial institutions, banking institutions and customers, will not attempt to end or curtail their relationships with us.

Any such negative press or cessation of business could have a material adverse effect on our business, financial condition, and results of operations.

Risks Related to the Tobacco Industry

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While the FDA issued an exposure modification order in connection with our MRTPA and we have been commercializing our VLN ® cigarettes in select markets across the United States, there are no guarantees regarding the commercial viability of our RNC tobacco cigarettes.

To date, there has never been a comparable product sold in the marketplace and we have only commercialized the cigarettes on a limited basis.

To date, we have only commercialized the cigarettes on a limited basis.

We have obtained an exposure modification order for our VLN ® cigarettes, which enables us to make certain claims regarding the reduction of nicotine within these products.

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● successfully create consumer awareness of such products;

● achieve the necessary rate of sale to keep products within distribution at retail;

● market the product with the phrase “ Helps You Smoke Less ” and any other required warnings or statements;

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● effectively sell our products into established markets where there is substantial market dominance by large tobacco enterprises.

If we are unsuccessful in commercializing our RNC tobacco cigarettes, or such commercialization takes longer or costs more than we currently expect, our financial results, business and future prospects would be materially adversely effected.

If we are unsuccessful in commercializing our RNC tobacco cigarettes, our financial results, business and future prospects would be materially adversely effected.

We may be unable to renew our MRTP Application for our VLN ® cigarettes.

The FDA has broad authority over the regulation of tobacco products.

The FDA could, among other things, force us to remove from the U.S.

market our RNC tobacco cigarettes even after the FDA authorization on December 17, 2019 of our PMTA for us to market our RNC tobacco cigarettes, or the authorization of our MRTP application on December 23, 2021, to enable us to use certain modified exposure claims with respect to our VLN ® cigarettes.

In addition, the exposure modification order that enables us to market our VLN ® cigarettes as MRTPs was granted for a period of five years, which is the maximum duration for a marketing granted order for such products under the Family Smoking Prevention & Tobacco Control Act (PUBLIC LAW 111–31—JUNE 22, 2009).

Consequently, we will need to reapply to the FDA under a new MRTP application to extend the FDA’s exposure modification order beyond December 23, 2026.

The MRTP authorization process is a complex, substantial and lengthy regulatory undertaking.

The FDA may or may not grant continued authorization of these product claims, including based on FDA's assessment of whether the product application(s) satisfy the statutory requirements for such an order, and whether we have adequately complied with the conditions imposed on us in connection with the FDA’s exposure modification order, such as requirements relating to recordkeeping, reporting and post-market studies.

Any action by the FDA to remove our products from the U.S.

market, including the termination or non-renewal of the exposure modification orders for our VLN ® cigarettes would have a material adverse impact on our business.

We have limited experience marketing and selling Modified Exposure Cigarettes and our working capital and inventory estimates based on demand expectations may be incorrect, which could harm our operating results and financial condition.

While members of management and our board of directors are experienced in the selling of conventional cigarette and other consumer products, we have limited experience in introducing a new low nicotine category for selling our VLN cigarettes pursuant to an exposure modification order.

We have limited experience in introducing a new low nicotine category for selling our VLN ® cigarettes pursuant to an exposure modification order.

As we work to commercialize one or more of our products for sale, including our VLN ® cigarettes, we base our working capital and inventory decisions on management’s estimates of future demand.

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Since our RNC tobacco is not widely available and must be grown specifically for our potential products, any shortage in such tobacco could prevent us from increasing sales to meet demand and any surplus could result in inventory obsolescence and become a total loss.

Our inability to incorrectly estimate demand for future products could negatively harm our operating results and financial condition.

Our inability to correctly estimate demand for future products could negatively harm our operating results and financial condition.

The manufacturing and sale of tobacco products subjects us to significant governmental regulation and the failure to comply with such regulations could have a material adverse effect on our business and subject us to substantial fines or other regulatory actions.

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The manufacture of products is subject to strict quality control, testing and record-keeping requirements, and continuing obligations regarding the submission of safety reports and other post-market information.

The Tobacco Control Act also authorizes the FDA to promulgate regulations requiring that the methods used in, and the facilities and controls used for, the manufacture, preproduction design validation, packing, and storage of a tobacco product conform to current good manufacturing practice (“CGMP”).

On March 8, 2023, the FDA issued a proposed rule to promulgate such CGMP regulations.

On March 8, 2023, the FDA issued a proposed rule to promulgate such TRMP regulations.

The proposed rule, if finalized, would establish requirements for manufacturers of finished and bulk tobacco products on the methods used in, and the facilities and controls used for, the manufacture, pre-production design validation, packing, and storage of tobacco product.

We cannot guarantee that our current manufacturing facility or any other manufacturing will successfully complete FDA inspections and/or similar inspections in foreign, or that future CGMP regulations will not also negatively affect the cost or sustainability of our manufacturing facility.

We cannot guarantee that our current manufacturing facility or any other manufacturing will successfully complete FDA and/or similar inspections, or that future TPMP regulations will not also negatively affect the cost or sustainability of our manufacturing facility.

Our failure to comply with applicable manufacturing regulations could result in sanctions being imposed on us, including fines, injunctions, civil penalties, delays, suspension or withdrawal of marketing orders, seizures or recalls, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect our financial position.

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We also cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad.

require the recall or other removal of tobacco products from the marketplace, impose additional manufacturing, labeling or packing requirements, interrupt manufacturing or otherwise significantly increase the cost of doing business.

Actions by the FDA and other foreign, federal, state or local governments or agencies may impact the adult tobacco consumer acceptability of or access to tobacco products (for example, through product standards proposed by the FDA for nicotine and flavors including menthol), delay or prevent the launch of new or modified tobacco products or products with reduced exposure claims, require the recall or other removal of tobacco products from the marketplace, impose additional manufacturing, labeling or packing requirements, interrupt manufacturing or otherwise significantly increase the cost of doing business.

Any one or more of these actions may have a material adverse impact on us or the business of our customers for whom we make tobacco products, which could have a negative impact on our results of operations.

For example, the Tobacco Control Act requires the FDA to issue new cigarette health warnings that would include a color graphic component depicting the negative health consequences of smoking.

In March 2020, the FDA published a final rule fulfilling this statutory requirement.

The final rule, entitled “Required Warnings for Cigarette Packages and Advertisements,” specifies the 11 new textual warning label statements and accompanying color graphics that manufacturers would have to include with cigarette packaging and advertisements.

On December 7, 2022, the U.S.

District Court for the Eastern District of Texas vacated the final rule, and the case is currently pending before the U.S.

Court of Appeals for the Fifth Circuit.

It is possible that significant regulatory developments will take place over the next few years across global markets, driven principally by the World Health Organization’s Framework Convention on Tobacco Control (“FCTC”).

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As with other agricultural commodities, the price of tobacco leaf can be influenced by imbalances in supply and demand, and crop quality can be influenced by variations in weather patterns, diseases, and pests.

This risk is greater for us, as there would be no alternative supply of RNC tobacco in the event that one of our growers experiences a material adverse event with respect to a particular RNC tobacco crop or the quantity or quality was not as we anticipated, and we would not be able to supply leaf for our VLN ® cigarettes.

This risk is greater for us, as there would be no alternative supply of RNC tobacco in the event that one of our growers experiences a material adverse event, such as a natural disaster, with respect to a particular RNC tobacco crop or the quantity or quality was not as we anticipated, and we would not be able to supply leaf for our VLN ® cigarettes.

We must also compete with other tobacco companies for contract production with independent tobacco farmers.

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Any significant change in tobacco leaf prices or taxes, quality and quantity could affect our profitability and our business.

We distribute and sell our products outside of the U.S., which subjects us to other regulatory risks.

In addition to the authorization to market and sell our RNC tobacco cigarettes using modified risk claims in the U.S., we continue to seek governmental authorizations required to market our RNC tobacco cigarettes and our other products in other countries.

We may distribute and sell our products outside of the U.S., which subjects us to other regulatory risks.

We may seek governmental authorizations required to market our RNC tobacco cigarettes and our other products in other countries.

Marketing of our products is not permitted in certain countries until we have obtained required authorizations or exemptions in these individual countries.

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Tobacco companies are often subject to investigations, including allegations of contraband shipments of cigarettes, allegations of unlawful pricing activities within certain markets, allegations of underpayment of custom duties and/or excise taxes, and allegations of false and misleading usage of descriptors such as “lights” and “ultra-lights.” We cannot predict the outcome of any investigations to which we may become subject, but we may be materially affected by an unfavorable outcome of potential future investigations.

Our business model inherently loses customers.

Our VLN ® cigarette is designed to help people smoke less and eventually quit smoking completely.

If our product is successful, we will lose customers as a result.

A significant loss in VLN ® customers, or our inability to add new VLN ® customers faster than we lose customers, could prevent our VLN ® business from growing and have a material negative impact on the results of our operations.

We may be unsuccessful in anticipating changes in adult consumer preferences, responding to changes in consumer purchase behavior or managing through difficult competitive and economic conditions, which could have an adverse effect on business.

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A pandemic (including COVID-19), natural or man-made disaster or other disruption that affects the manufacturing operations, the operations of any key supplier, distributor or distribution chain service provider or any other disruption in the supply or distribution of goods or services (including a key supplier’s inability to comply with government regulations or unwillingness to supply goods or services to a tobacco company) could have a material adverse effect on our business.

The FDA could force the removal of our products from the U.S.

The FDA has broad authority over the regulation of tobacco products.

The FDA could, among other things, force us to remove from the U.S.

In addition, the exposure modification order that enables us to market our VLN® cigarettes as MRTPs was granted for a period of five years, which is the maximum duration for a marketing granted order for such products under the Family Smoking Prevention & Tobacco Control Act (PUBLIC LAW 111–31—JUNE 22, 2009).

Consequently, we will need to reapply to FDA under a new MRTP application to extend the FDA’s exposure modification order beyond December 23, 2026.

The MRTP authorization process is a complex, substantial and lengthy regulatory undertaking.

Any action by the FDA to remove our products from the U.S.

market, including the termination or non-renewal of the exposure modification orders for our VLN ® cigarettes would have a material adverse impact on our business.

A ban on menthol or flavored tobacco products could have a material adverse impact on our business.

On April 27, 2022, the FDA proposed new rules to prohibit menthol as a characterizing flavor in cigarettes and prohibit all characterizing flavors (other than tobacco) in cigars.

There has been increasing activity on the state and local levels with respect to scrutiny of menthol and flavored tobacco products, including a recent law passed by the State of California prohibiting tobacco retailers from selling most flavored and menthol tobacco products, including VLN ® Menthol King.

If these proposed rules are finalized and implemented, if new rules are proposed or if additional states or governments pass laws similar to the State of California, we could be negatively impacted through decreased sales, a requirement to remove non-compliant tobacco products from the marketplace, associated interruptions in manufacturing or business disruptions.

In addition, although we believe that our VLN® Menthol King reduced nicotine cigarettes will be exempted from FDA’s menthol ban on cigarettes, there is no guarantee that they will be exempted by the FDA or any other state or local government.

Accordingly, the implementation of these proposed or new laws or rules may have a material adverse impact on our results of operations.

Risks Related to Intellectual Property

Certain of our proprietary rights have expired or may expire or may not otherwise adequately protect our intellectual property, products and potential products, and if we cannot obtain adequate protection of our intellectual property, products and potential products, we may not be able to successfully market our products and potential products.

We may be unable to adequately protect our intellectual property, products and potential products, and if we cannot obtain adequate protection of our intellectual property.

Our commercial success will depend, in part, on obtaining and maintaining intellectual property protection for our technologies, products, and potential products.

We will only be able to protect our technologies, products, and potential products from unauthorized use by third parties to the extent that valid and enforceable patents cover them, or to the extent that other market exclusionary rights apply.

The patent positions of life sciences companies, like ours, can be highly uncertain and involve complex legal and factual questions for which important legal principles remain unresolved.

No consistent policy regarding the breadth of claims allowed in such companies’ patents has emerged to date in the United States.

The general patent environment outside the United States also involves significant uncertainty.

Patent positions can be highly uncertain and involve complex legal and factual questions for which important legal principles remain unresolved.

Accordingly, we cannot predict the breadth of claims that may be allowed or that the scope of these patent rights could provide a sufficient degree of future protection that could permit us to gain or keep our competitive advantage with respect to these products and technology.

Additionally, life science companies like ours are often dependent on creating a pipeline of products.

Additionally, companies like ours are often dependent on creating a pipeline of products.

We may not be able to develop additional potential products or proprietary technologies that produce commercially viable products or that are themselves patentable.

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If we were to prosecute a claim that a third party had illegally obtained and was using our trade secrets, it could be expensive and time consuming and the outcome could be unpredictable.

In addition, courts outside the United States are sometimes less willing to protect trade secrets than courts in the United States.

In addition, courts outside the United States are sometimes less willing to protect trade secrets

than courts in the United States.

Moreover, if our competitors independently develop equivalent knowledge, we would lack any contractual claim to this information, and our business could be harmed.

The ability to commercialize our existing and potential products will depend on our ability to sell such products without infringing the patent or proprietary rights of third parties.

If we are sued for infringing intellectual property rights of third parties, such litigation could be costly and time consuming and an unfavorable outcome could have a significant adverse effect on our business.

The ability to commercialize our potential products will depend on our ability to sell such products without infringing the patents or other proprietary rights of third parties.

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● a decreased ability to issue additional common stock or obtain additional financing in the future.

On November 7, 2023, the Company received a deficiency letter from the Nasdaq Listing Qualifications Department notifying the Company that, for the last 30 consecutive business days, the closing bid price for the Company’s common stock has been below the minimum $1.00 per share required for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (“Rule 5550(a)(2)”).

In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company has been given 180 calendar days, or until May 5, 2024, to regain compliance with Rule 5550(a)(2).

If the Company does not regain compliance with Rule 5550(a)(2) by May 5, 2024, the Company may be afforded a second 180 calendar day period to regain compliance.

To qualify, the Company would be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for the Nasdaq Capital Market, except for the minimum bid price requirement.

In addition, the Company would be required to provide written notice to Nasdaq of its intent to cure the deficiency during the second compliance period.

The Company intends to monitor the closing bid price of its common stock and may, if appropriate, consider implementing available options to regain compliance with the Minimum Bid Price Requirement under the Nasdaq Listing Rules such as a reverse stock split.

On January 24, 2024, the stockholders approved a proposal to amend the Company’s Articles of Incorporation to effect a reverse stock split of the Company’s outstanding common stock at a ratio between 1-for-2 and 1-for-16, to be determined at the discretion of the Board of Directors, for the purpose of complying with the Nasdaq Listing Rules, subject to the Board or Directors’ discretion to abandon such amendment.

The Company has not implemented the reverse stock split as of March 25, 2024.

Recently, the Company received deficiency letters from the Nasdaq Listing Qualifications Department notifying the Company not been in compliance with certain Nasdaq trading rules.

Although such deficiencies have been addressed and remedied, there can be no assurance of our ability to comply with such rules in the future.

An active trading market for our common stock may not be sustained and you may not be able to resell your shares at or above the price at which you purchased them.

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Our stock price may be highly volatile and could decline in value.

Our common stock is currently traded on the NASDAQ and the market price for our common stock has been volatile.

The market price for our common stock has been volatile.

Further, the market prices for securities in general have been highly volatile and may continue to be highly volatile in the future.

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● general economic conditions, including adverse changes in the global financial markets;

● equity sales by us of our common stock or securities convertible into common stock to fund our operations.

● actual and anticipated fluctuations in our quarterly financial and operating results;

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● sales of our common stock by our executive officers, directors, or significant stockholders;

● equity sales by us of our common stock or securities convertible into common stock to fund our operations.

These and other external factors may cause the market price and demand for our common stock to fluctuate substantially, which may limit or prevent investors from readily selling their shares of common stock and may otherwise negatively affect the liquidity of our common stock.

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Such lawsuits and any future related lawsuits could cause us to incur substantial costs defending the lawsuit and can also divert the time and attention of our management, which would have a negative adverse impact on our business.

See the risk factor below entitled:

“We are named defendant in certain litigation matters, including federal securities class action lawsuits and derivative complaints;

if we are unable to resolve these matters favorably, then our business, operating results and financial condition may be adversely affected.”

We are named defendant in certain litigation matters, including federal securities class action lawsuits and derivative complaints;

We are named defendant in certain litigation matters;

if we are unable to resolve these matters favorably, then our business, operating results and financial condition may be adversely affected.

We are currently involved in certain litigation matters, including securities class action and derivative litigation.

We are currently involved in certain litigation matters.

See "Item 3 – Legal Proceedings" included in this Annual Report on Form 10-K.

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Sales of a substantial number of shares of our common stock in the public market may depress the prevailing market price for our common stock and could impair our ability to raise capital through the future sale of our equity securities.

Additionally, if any of the holders of outstanding options or warrants exercise or convert those shares, as applicable, our common stockholders will incur dilution in their relative percentage ownership.

Additionally, as of March 17, 2025, we have outstanding 24,391,163 warrants to purchase an equal number of shares of common stock and $4.6 million in convertible promissory notes (convertible into 754,554 shares).

If any of the holders of outstanding warrants or notes exercise or convert them, as applicable, our common stockholders will incur dilution in their relative percentage ownership.

The prospect of this possible dilution may also impact the price of our common stock.

We have a significant number of outstanding warrants with anti-dilution price protection.

We have approximately 24,387,570 outstanding warrants with anti-dilution price protection.

The exercise price on these warrants will have the exercise price reduced in the event of any future offerings of securities at a lower price than the current exercise price (subject to limited exceptions) of $4.3021.

Such warrants may deter future investors and can result in further dilution to our investors.

We do not expect to declare any dividends on our common stock in the foreseeable future.

We have not paid cash dividends to date on our common stock.

We currently intend to retain our future earnings, if any, to fund the development and growth of our business, and we do not anticipate paying any cash dividends on our common stock for the foreseeable future.

We currently intend to retain our future earnings, if any, to fund the development and growth of our business, reduce our outstanding debt obligations, and we do not anticipate paying any cash dividends on our common stock for the foreseeable future.

Additionally, the terms of any future debt facilities may preclude us from paying dividends on the common stock.

As a result, capital appreciation, if any, of our common stock could be the sole source of gain for the foreseeable future.

Our common stock may become the target of a “ short squeeze.

In recent years, the securities of several companies have increasingly experienced significant and extreme volatility in stock price due to short sellers of common stock and buy-and-hold decisions of longer investors, resulting in what is sometimes described as a “short squeeze.” Short squeezes have caused extreme volatility in those companies and in the market and have led to the price per share of those companies to trade at a significantly inflated rate that is disconnected from the underlying value of the company.

Sharp rises in a company’s stock price may force traders in a short position to buy the shares to avoid even greater losses.

Many investors who have purchased shares in those companies at an inflated rate face the risk of losing a significant portion of their original investment as the price per share has declined steadily as interest in those shares have abated.

We may be a target of a short squeeze, and investors may lose a significant portion or all of their investment if they purchase our shares at a rate that is significantly disconnected from our underlying value.

Anti-takeover provisions contained in our articles of incorporation and bylaws, as well as provisions of Nevada law, could impair a takeover attempt.

12 unchanged sentences

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