RISK FACTORS SUMMARY
We are subject to numerous risks and uncertainties, including those further described below in Part II, Item IA. “Risk Factors” in this Annual Report on Form 10-K, which represent challenges that we face in connection with the successful implementation of our strategy and the growth of our business. In particular, the following are principal factors that may offset our competitive strengths or have a negative effect on our business strategy, which could materially adversely affect our business, financial conditions, results of operations, future growth prospects, or cause a decline in the price of our Common stock:
• Our history of losses and negative cash flows from operations and the need for substantial capital raise substantial doubt about our ability to continue as a going concern.
• We have a history of net losses and may not be able to achieve or maintain profitability in the future.
• Our failure to meet the continued listing requirements of Nasdaq could result in a delisting of our Common stock.
• Our operating results may fluctuate significantly because of a variety of factors, including, but not limited to, end market demand, timing of regulatory actions and variation in manufacturing costs, many of which are outside of its control.
• We may incur significant expenses and capital expenditures in the future to execute our business plan and we may be unable to adequately control our expenses or raise additional capital on favorable terms, if at all.
• We may not be able to generate sufficient cash to service all our debt obligations and may be forced to take other actions to satisfy our obligations under our debt obligations, which may not be successful.
• We are subject to several restrictive debt covenants under the Ginkgo Note Purchase Agreement.
• Our revenue is primarily generated from sales of our b-silk and xl-silk products, and we are therefore highly dependent on the success of these products.
• B-silk, xl-silk and future biomaterial product candidates may not achieve market success, and, if our products do not achieve market success, we may be unable to generate significant revenues.
• We currently rely on a single manufacturing partner and manufacturing facility for the production of b-silk and xl-silk in the future intend to rely on a small number of manufacturing partners and manufacturing facilities both in the U.S. and internationally.
• Pricing and availability for b-silk, xl-silk and our future products may be impacted by factors out of our control, including, but not limited to, end market demand, variation in manufacturing costs, and supplier availability.
• If our costs of producing b-silk or xl-silk materially increase, we would have to raise our prices, which could negatively impact our ability to gain new customers and keep existing customers.
• We have limited experience in marketing and selling b-silk and xl-silk, and if we are unable to gain market acceptance from consumer product companies and others, our business may be adversely affected.
• A limited number of customers, distributors and collaboration partners account for a material portion of our revenue, and they may continue to do so for the foreseeable future. The loss of major customers, distributors or collaboration partners could harm our operating results.
• We may face challenges selling b-silk, xl-silk and future biomaterial products at commercial scale and at commercially viable cost, and we may not be able to commercialize b-silk or future biomaterial products to the extent necessary to make a profit or sustain and grow our current business.
• Certain contracts granting exclusivity rights to customers may limit our ability to sell products in certain markets.
• We may face substantial competition from incumbent materials as well as other new entrants, and if we are unable to continue developing innovative products and technologies and/or scale our production of Vegan Silk Technology Platform products, we may fail to gain, or may lose, market share to our competitors.
• If we are unable to coordinate with our current manufacturing partner and any future manufacturing partners to successfully commence, scale up or sustain production of our Vegan Silk Technology Platform products at
existing and planned manufacturing facilities, our customer relationships, business and results of operations may be adversely affected.
• We have identified material weaknesses in our internal control over financial reporting. If we are unable to remediate these material weaknesses, or if we identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect investor confidence in, and the value of, our Common stock.
• As a remote-first company, we are subject to heightened operational and cybersecurity risks.
• We may not be able to protect adequately our patents and other intellectual property assets, which could adversely affect our competitive position and reduce the value of our products, and litigation to protect our patents and intellectual property assets may be costly.
• Third parties may claim that we infringe on their proprietary rights and may prevent us from commercializing and selling our products.
• We rely in part on trade secrets to protect our technology, and our failure to obtain or maintain trade secret protection could limit our ability to compete.
• If we experience a significant disruption in our information technology systems, including security breaches, or if we fail to implement new systems and software successfully, our business operations and financial condition could be adversely affected.
• Government regulations and private party actions relating to the marketing and advertising of cosmetic products that include b-silk, xl-silk or other products we develop may restrict, inhibit or delay our ability to sell such products and harm our business.
• If our products are not manufactured in compliance with applicable legal requirements, do not meet quality and cosmetic constituent standards, or otherwise result in adverse health effects in consumers, it could result in reputational harm, remedial costs, or governmental authority enforcement.
• If our products are found to be defective or unsafe, we may be subject to various product liability claims, which could harm our reputation and business.
• The market price of shares of our Common stock has been and may be in the future volatile or may decline regardless of our operating performance. You may lose some or all your investment.
• Future litigation or similar legal proceedings could have a material adverse effect on our business and results of operations.
SELECTED DEFINITIONS
In this document:
• “Bolt” means Bolt Projects Holdings, Inc., a Delaware corporation, which was formerly known as Golden Arrow Merger Corp. prior to the Closing.
• “Bolt common stock” means the common stock of Bolt, par value $0.0001.
• “Bolt Threads” means Bolt Threads, Inc., a Delaware corporation, and, if the context requires, its consolidated subsidiaries.
• “Bolt Threads common stock” means the common stock of Bolt Threads, par value $0.0001 per share. Each one share of Bolt Threads common stock was converted into approximately 0.2949 shares of common stock in connection with the Closing.
• “Bolt Threads RSU Awards” means the outstanding awards of restricted stock units relating to a share of Bolt Threads common stock. Each Bolt Threads RSU Award was converted into an award of restricted stock units covering approximately 0.2949 shares of Bolt common stock.
• “Bridge Warrants” means the Convertible Notes issued to the PIPE Subscribers in an aggregate principal amount of $27.2 million (excluding the $2.4 million in additional Convertible Notes the Sponsor committed to purchase before the Sponsor Note Deadline), which accrued interest at a rate of 8% per annum, compounded quarterly, along with warrants to purchase Bolt Threads common stock at an exercise price of $0.001 per share.
• “Business Combination” means the transactions contemplated by the Business Combination Agreement, including the Merger.
• “Closing” means the consummation of the Business Combination.
• “Closing Date” means August 13, 2024 when the Business Combination was consummated.
• “Common stock” means the common stock of Bolt, par value $0.0001 per share.
• “Effective Time” means the effective time of the Merger.
• “Exchange Ratio” means 0.2949, the ratio used to determine the number of shares of Bolt’s common stock that the designated Bolt Threads common stock and the outstanding shares of Bolt Threads’ preferred stock, consisting of Bolt Threads Series A Preferred Stock, Bolt Threads Series B Preferred Stock, Bolt Threads Series C Preferred Stock, Bolt Threads Series D Preferred Stock and Bolt Threads Series E Preferred Stock, will be converted into, as contemplated by the Business Combination Agreement.
• “Founder Shares” means the shares of GAMC Class B common stock initially purchased by the Sponsor in a private placement in January 2021, 7,047,500 of which the Sponsor voluntarily converted to shares of GAMC Class A common stock in March 2023 but which, unlike the shares of GAMC Class A common stock issued as part of the units sold in the GAMC IPO, are not subject to redemption.
• “GAMC” means Golden Arrow Merger Corp., which was renamed to Bolt Projects Holdings, Inc. in connection with the Closing.
• “GAMC Class A common stock” means GAMC’s Class A common stock, par value $0.0001 per share.
• “GAMC Class B common stock” means GAMC’s Class B common stock, par value $0.0001 per share.
• “GAMC IPO” means the initial public offering of Golden Arrow Merger Corp., consummated on March 19, 2021.
• “Merger” means the merger of Merger Sub with and into Bolt Threads, with Bolt Threads surviving as a wholly-owned subsidiary of GAMC, which was renamed to Bolt Projects Holdings, Inc. at the Closing.
• “Merger Agreement” means the Business Combination Agreement, dated as of October 4, 2023, as amended by Amendment No. 1, dated June 10, 2024, by and among Golden Arrow Merger Corp, Merger Sub and Bolt Threads.
• “Merger Sub” means Beam Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of GAMC.
• “Nasdaq” means the Nasdaq Stock Market LLC.
• “PIPE Shares” means the 470,120 shares of GAMC Class A common stock issued and sold to the PIPE Subscribers in the PIPE Transaction, which were converted to common stock in connection with the Closing.
• “PIPE Subscribers” means the purchasers of the PIPE Shares.
• “PIPE Transaction” means the sale of the PIPE Shares to the PIPE Subscribers, for a purchase price of $10.00 per share, in a private placement.
• “Registration Rights and Lock-up Agreement” means that certain registration rights and lock-up agreement entered into upon the consummation of the Business Combination, by and among the Sponsor, former GAMC directors and officers, Bolt Threads directors and officers, and certain Bolt Threads stockholders.
• “Sponsor” means Golden Arrow Sponsor, LLC, a Delaware limited liability company.
• “Sponsor Note Deadline” mean the earliest of (i) five business days after the date of this proxy statement/prospectus, (ii) August 1, 2024 and (iii) the date on which the Business Combination Agreement is terminated, and represents the last day by which the Sponsor may purchase additional Convertible Notes, with any such amount of additional Convertible Notes purchased by the Sponsor reducing on a dollar-for-dollar basis the amount the Sponsor is committed to invest pursuant to its Subscription Agreement.
• “Original PIPE Subscription Agreements” means the PIPE subscription agreements, as amended.
• “U.S. GAAP” means accounting principles generally accepted in the United States of America.
• “Public Warrants” means the warrants included in the units sold in the GAMC IPO, each of which is exercisable for one share of common stock, in accordance with its terms.
• “Public Warrant Agreement” means the existing Warrant Agreement, dated March 16, 2021, between Continental Stock Transfer & Trust Company, as warrant agent, and Bolt, pursuant to which the Warrants were issued.
• “Sponsor Warrants” means the 5,000,000 warrants to purchase shares of common stock issued to the Sponsor in connection with an exchange for their 5,000,000 private placement warrants to purchase shares of common stock issued to the Sponsor simultaneously with the closing of the GAMC IPO.
• “Triton Warrants” means the warrants we issued to Triton Funds LP (“Triton”) in February 2025.
• “Vegan Silk Technology Platform” means the vegan silk biomaterial products we research, develop, market and sell .
• “Vegan Silk Technology Platform products” means the products included in our Vegan Silk Technology Platform, b-silk and xl-silk.
• “Warrants” means the Public Warrants, the Sponsor Warrants and the Triton Warrants.
PART I
ITEM 1. BUSINESS
Mission
Bolt Threads was created out of a strong passion and purpose: to pioneer sustainable materials and lead the way to a brighter future, benefiting both humanity and the planet we call home.
It started with two visionary synthetic biology PhDs, driven by a deep fascination with nature’s billions of years of invention, especially the intricate world of spider webs. They believed in the potential to replace harmful materials within the consumer goods industry with sustainable alternatives — one material at a time.
Drawing on 3.8 billion years of life on earth, we established a company rooted in the power of biology - and therefore biotechnology - to discover multiple new biomaterials, addressing pressing challenges for both our customers and the world.
Our aspiration is to transform the global consumer goods industry, starting in beauty and personal care with ingredients that are better for the environment while improving product performance.
In short: way better materials, for a way better world.
Overview
Bolt harnesses biotechnology to build biomaterials that aims to disrupt and transform high-volume consumer goods industries. We are a pioneer in the consumer biomaterials space. Our first offering, the Vegan Silk Technology Platform currently includes b-silk and xl-silk, which are fully biodegradable, film-forming, versatile and functional ingredient for the beauty industry. Our first output from this platform, b-silk, has been on the market since 2019. This platform is backed by a patent portfolio that boasts 68 granted patents and 166 pending patent applications. Further, we have developed substantial trade secrets and expertise over more than 13 years of development and more than $300 million invested in research and product development.
In early 2023, we made a strategic decision to discontinue the development of our other product candidates and focus 100% on the Vegan Silk Technology Platform, reinforcing our commitment to high-impact, scalable innovation. By discontinuing the development of all other product candidates, and concentrating our resources and expertise, we are accelerating the commercialization of biotechnology ingredients for the beauty and personal care industry, unlocking new applications and long-term value for our investors, partners, and customers.
We have a history of net losses, including a net loss of $65.4 million and $57.7 million for the years ended December 31, 2024 and December 31, 2023, respectively. As of December 31, 2024, our accumulated deficit was $461.8 million.
Moving forward, we are committed to developing the Vegan Silk Technology Platform as our foundation for a high-value, scalable business with attractive costs and margins. Over time, we believe this would enable us to reinvest in our broader portfolio, expanding our Vegan Silk Technology Platform to include additional sustainable materials that support our mission of building biomaterial platforms for high-volume consumer goods brands.
Introduction to the Vegan Silk Technology Platform
Inspired by nature and engineered in the lab, we make our vegan silk from materials such as yeast, sugar and water, drawing from the structure of many intrinsic silks sequence from nature. We believe these proprietary polypeptides not only have the potential to replace silicone elastomers in a variety of formulations as a fully biodegradable and non-toxic film former alternative, but as a functional ingredient with extended claims for hair, skin and color cosmetics.
The Beauty and Personal Care Market
The overall market Bolt serves is expected to grow at a compound annual rate of 7.7% to reach $973 billion by 2030 according to Grandview Research. This market is undergoing a transformation, driven by regulatory changes and
consumer demand for more sustainable solutions, moving away from pervasive synthetic materials and naturally derived ingredients that are no longer environmentally viable. Within this market, Bolt's biotechnology approach offers innovative, high performance biomaterials t hat leverage the platform capabilities to provide sustainable replacements for these undesirable materials in formulations.
The Silicone Elastomer Market
The global silicone market within the beauty and personal care market has grown exponentially amid changes in regulatory environments around the world. According to Global Market Insights, the global silicone market is estimated to be between $16.7 billion and $19.9 billion, with the silicone elastomers subsector representing a $6.3 billion to $10.0 billion global market. Furthermore, according to Grandview Research and Global Market Insights, the silicone market is poised to register around a 6% compound annual growth rate from 2022 to 2030. In the personal care products and consumer products segment, the Global Silicone Council estimates that a total of 390,000 tons of silicone products are sold annually.
One of the many uses for products made from Bolt's Vegan Silk Technology Platform is to capitalize on this opportunity. Bolt not only has the ability to displace silicone elastomers, but to do so while offering a wider range of potential claims as a functional cosmetic ingredient. We believe even limited penetration of this market opportunity offers substantial revenue potential, as many target customers have committed to reducing or eliminating their use of silicone elastomers or may be required to do so in response to regulatory pressures.
The Challenges of Silicone Elastomers
Silicone elastomers leave behind a persistent film even after being washed off. Just as this chemistry can clog pores on human skin, the same microscopic plastics can clog drains and accrete in the water system. Silicone elastomers washed down drains add to the accumulating masses of non-biodegradable materials flushed into our environment. This concern has driven manufacturers to search for alternatives and has created political pressure for regulations limiting the use of silicone elastomers. In the face of this, the industry has struggled to find substitute ingredients that perform comparably, leaving manufacturers to continue relying on silicone elastomers. The Global Silicone Council has indicated that a total of 390,000 tons of silicone products are sold each year in the personal care and consumer products sector.
The Vegan Silk Technology Platform Solution
We believe the products made with the Vegan Silk Technology Platform have the potential to substantially replace silicone elastomers with a more sustainable alternative, while outperforming them on several key attributes and providing multiple additional active benefits.
However, each output from the Vegan Silk Technology Platform matches or outperforms silicone elastomers across various metrics in blind trials even at reduced loading levels. Loading levels refer to the percentage of a specific ingredient within a complete formula.
We believe this is an attractive combination of features for manufacturers and that offerings like b-silk have the ability to replace the problematic, bio-persistent chemistry of silicone elastomers. Because offerings like b-silk are made with a few simple biological ingredients, they are highly biodegradable.
In addition, we believe consumer product formulators find products like b-silk easy to work with as a stable, robust ingredient that does not react negatively with other common ingredients. Finally, formulators’ feedback to us has confirmed the versatility of the material in a variety of formulas, whether hair, skin or color, and the ease of mixing it with existing chemical combinations, which unleashes 20+ active benefits for a broader range of products.
The key to the Vegan Silk Technology Platform’s active benefits is its affinity for water; it is a hydrophilic molecule. When it touches water, it creates pillow-shaped droplets that can coat skin and hair. This has the potential to allow formulators to enhance the sensory benefits of their products by creating a lightweight but firm film upon application. This film has the potential to provide several benefits including helping create the appearance of firmer and more elastic skin and hair, potentially mitigating signs of aging, contributing to more persistent curls and enabling a silk-like soft feel after washing. Relatively lightweight formulations could have the ability to maintain these effects while minimizing build-up and allowing for even spreadability and quick absorption.
Our product has been used in formulations sold to consumers since 2019. Since that time, we have substantially reduced the cost of manufacturing b-silk through process optimization.
Vegan Silk Technology Platform Customer Landscape
We believe we can support the world’s largest beauty and cosmetic manufacturers, which sell billions of dollars of products each year, with our Vegan Silk Technology Platform. As mentioned, these products support lower loading levels compared to silicone elastomers. Ingredients that are efficacious at lower loading levels can help formulators lower their costs of goods without affecting product performance. We believe formulators’ consistent focus on cost efficiencies will encourage expansion of the use of these products. To support further adoption of our Vegan Silk Technology Platform into the mass market, we will continue our efforts to reduce our cost of goods, driven by process development improvements and economies of scale. Additionally, we intend to introduce new vegan silk products from our platform and production strains to offer further lower cost options (under R&D work).
Production Strategy
While discovering the Vegan Silk Technology Platform was a complex and challenging endeavor, we aim to reduce complexity and use of capital with our go-to-market strategy. We focus on research, development, scaling, technical transfers, branding and commercialization, while leaving manufacturing to a network of third-party fermentation specialists. We believe that this strategy will eventually help to facilitate a higher margin financial profile while limiting total required capital investment and that it will provide capacity flexibility and supply chain agility to respond to market fluctuations.
Research and Development
We have spent over a decade researching, testing and developing materials that can replace the status quo of ingredients and processes found in the manufacturing of high-volume consumer goods. Our research and development process begins with researching and sourcing organisms and exemplar materials that are readily available within nature. From there, we narrow species and genotype, identifies genetics and engineers microorganisms for future production. We then begin product prototyping, material testing and product application development with customers for new products within existing industries. Finally, we engineer biological processes and chemistry to be compatible with contract manufacturing at commercial scale.
We developed b-silk through extensive and deep R&D. We comprehensively studied silk and other structural proteins to arrive at this material made from natural peptides. b-silk alone is protected by 40 granted patents and four trademarks that cover areas from the DNA sequence through manufacturing and product applications. We have expertise in the team and protected trade secrets accrued in developing and manufacturing the product. We have taken steps to protect the intellectual property behind the Vegan Silk Technology Platform because we believe it could replace a critical part of the beauty and personal care industry’s supply chain.
Go-to-Market Strategy
As currently formulated, we believe offerings from the Vegan Silk Technology Platform enjoy a large, multi-billion market opportunity in skincare, haircare, color cosmetics and a number of adjacent markets. We intend to focus our initial efforts on selling our product to the prestige and massive market segments. We believe further efforts to reduce cost of goods and the development of new products have the potential to expand the platform into mass markets and to unlock both the household care and healthcare market segments. We believe this can drive substantial unit volume growth over time. As we build volume, we anticipate our strategy of cost of goods optimization will be accelerated by economies of scale.
Beyond the Vegan Silk Technology Platform
Our long-term goal is to become a leader in synthetic biomaterials. We have developed significant intellectual property over the past thirteen years. We have developed additional offerings from the Vegan Silk Technology Platform, including xl-silk. These new offerings are modifications of existing molecules in response to needs and requests of current or prospective customers, including for enhanced water solubility and oil solubility and improved hair and skin binding. Additionally, we have several other potential products in our pipeline.
Manufacturing and Supply
We are in the process of diversifying and strengthening our manufacturing network to bolster the production capacity of the Vegan Silk Technology Platform and enhance supply chain resilience, since at this time we rely on just one strategic partner for manufacturing our products, Laurus Bio Private Limited (“Laurus Bio”). The Laurus Bio services agreement was renewed in October 2024. The terms governing price and quantity are set by each purchase order. We believe that utilizing a third-party manufacturing partner enables us to focus on our core competencies and maintain a capital efficient business model while leveraging this third party’s state of the art facilities, up-to-date and certified compliance with regulatory entities and economies of scale. We have not experienced any significant difficulty obtaining the quantities of our products necessary to meet demand. During 2024 we sold over 1,700 kilograms produced by Laurus Bio. Furthermore, Laurus Bio is undergoing capacity expansion by building a third facility, which is expected to add substantial capacity to its current capacity by the second half of 2026.
As demand for our products increase, we expect to validate multiple alternative sources to ensure agile response to changes in demand. Currently, we are in the process of validating a second supplier, and evaluating a third supplier. For a discussion of risks related to third-party contract manufacturers and suppliers, some of which are single source, see “Risk Factors — Risks Related to Products and Operations — We currently rely on a single manufacturing partner and manufacturing facility for the production of our Vegan Silk Technology Platform products and in the future intend to rely on a small number of manufacturing partners and manufacturing facilities both in the U.S. and internationally.”
Our products require raw materials that are neither rare or scarce, such as urea, dextrose, orthophosphoric acid and sodium hydroxide. We rely on our strategic partners to procure materials for the manufacturing process. We have not historically encountered any supply chain challenges, supplier disputes, regulatory restrictions, or inflationary pressures. See “Risk Factors — Risks Related to Products and Operations — If our costs of producing products from our Vegan Silk Technology Platform materially increase, we would have to raise our prices, which could negatively impact on our ability to gain new customers and keep existing customers."
Seasonality
Our business is not considered to be seasonal. Various factors, however, can affect the distribution of our sales between accounting periods, including the timing of customer orders, acquisition of new customers, customer launches, and new product introductions.
Intellectual Property
Our success depends in large part upon our ability to obtain and maintain proprietary protection for our products and technologies and to operate without infringing on the proprietary rights of others. Our policy is to protect our proprietary position by, among other methods, filing for patent applications on inventions that are important to the development and conduct of its business with the U.S. Patent and Trademark Office and its foreign counterparts. We seek to avoid infringement by monitoring patents and publications in our product areas and technologies to be aware of developments that may affect our business, and to the extent we identify such developments, evaluate and take appropriate courses of action.
As of December 31, 2024, we had 68 granted U.S. and foreign patents, which relate largely to b-silk and its method of manufacture and use, mycelium materials and methods of production, and resilin compositions and methods of use, and 166 pending U.S. and foreign patent applications. In particular, b-silk is protected by a total of 40 granted U.S. and foreign patents, including by patents relating to the composition of b-silk itself, as well as materials and methods relating to the production of b-silk and its end product uses, and 90 pending U.S. and foreign patent applications. Our current patents have expiration dates ranging from 2034 to 2042 and any patents resulting from pending patent applications are expected to expire between 2034 and 2044. In addition to the United States, we have issued patents in 19 countries and pending patent applications in 15 countries. The actual protection afforded by patents, which can vary from country to country, depends on the type of patent, the scope of its coverage and the availability of legal remedies in the country. The table below sets out summary information for each patent that we consider to be material to our business, all of which are U.S. utility patents relating to b-silk and each of which is owned by us.
Title
Scheduled Date of Expiration
METHODS AND COMPOSITIONS FOR SYNTHESIZING IMPROVED SILK FIBERS
METHODS AND COMPOSITIONS FOR SYNTHESIZING IMPROVED SILK FIBERS
METHODS AND COMPOSITIONS FOR SYNTHESIZING IMPROVED SILK FIBERS
METHODS AND COMPOSITIONS FOR SYNTHESIZING IMPROVED SILK FIBERS
METHODS AND COMPOSITIONS FOR SYNTHESIZING IMPROVED SILK FIBERS
LONG UNIFORM RECOMBINANT PROTEIN FIBERS
ELASTOMERIC PROTEINS
ELASTOMERIC PROTEINS
COMPOSITIONS AND METHODS FOR PRODUCING HIGH SECRETED YIELDS OF RECOMBINANT PROTEINS
COMPOSITIONS AND METHODS FOR PRODUCING HIGH SECRETED YIELDS OF RECOMBINANT PROTEINS
COMPOSITIONS AND METHODS FOR PRODUCING HIGH SECRETED YIELDS OF RECOMBINANT PROTEINS
COMPOSITIONS AND METHODS FOR PRODUCING HIGH SECRETED YIELDS OF RECOMBINANT PROTEINS
COMPOSITIONS AND METHODS FOR PRODUCING HIGH SECRETED YIELDS OF RECOMBINANT PROTEINS
MODIFIED STRAINS FOR THE PRODUCTION OF RECOMBINANT SILK
MODIFIED STRAINS FOR THE PRODUCTION OF RECOMBINANT SILK
METHODS OF GENERATING HIGHLY-CRYSTALLINE RECOMBINANT SPIDER SILK PROTEIN FIBERS
SEC MODIFIED STRAINS FOR IMPROVED SECRETION OF RECOMBINANT PROTEINS
COMPOSITE MATERIAL, AND METHODS FOR PRODUCTION THEREOF
COMPOSITE MATERIAL, AND METHODS FOR PRODUCTION THEREOF
RESILIN MATERIAL FOOTWEAR AND FABRICATION METHODS
CUSTOM SIZING SYSTEM AND METHODS FOR A KNITTED GARMENT HAVING RADIAL SYMMETRY
SYSTEM AND METHOD FOR MANUFACTURING CUSTOM-SIZED GARMENTS
We also use other forms of protection (such as trademark and trade secret) to protect our intellectual property, particularly where we do not believe patent protection is appropriate or obtainable. We aim to take advantage of all of the intellectual property rights that are available to us and believe that this comprehensive approach provides us with a strong proprietary position.
We further protect its proprietary information by requiring our employees, consultants, contractors, and other advisers to execute nondisclosure and assignment of invention agreements upon commencement of its respective employment or engagement. Agreements with our employees also prevent them from bringing the proprietary rights of third parties to us. We also require confidentiality or material transfer agreements from third parties that receive our confidential data or materials.
Competition
We develop and sell offerings from our Vegan Silk Technology Platform such as b-silk and xl-silk. They are all silicone elastomer replacements for consumer products in the beauty & personal care market. The silicone elastomer and specialty ingredients space within the beauty & personal care market is competitive. Competition is based on several key criteria, including product performance and quality, product price, product availability and security of supply, responsiveness of product development in cooperation with customers, customer service, industry knowledge, technical capability, as well as a newer critical element: sustainability.
The largest cosmetics companies in the world include L’Oréal, Estee Lauder and Unilever, among others. Multinational cosmetics companies are significantly larger than us and have greater financial resources, leading to greater operating and financial flexibility. While we believe that the market is shifting towards the replacement of silicone elastomers with a sustainable ingredient and products from our Vegan Silk Technology Platform are positioned to capture this market shift, silicone elastomer is expected to remain the primary ingredient for the foreseeable future. We expect that our products will compete with products produced from traditional silicone elastomer producers as well as from alternative production methods that established enterprises and new companies have developed and commercialized and are seeking to develop and commercialize. We view our main competition to be from silicone elastomers produced by traditional chemistries or derived from non-sustainable sources that we are working to replace with our products.
Other competitors that have developed products with similarities to our products include Givaudan Active Beauty, which develops Silkgel, a vegan and sustainable biomimetic silk; Spiber Inc., which develops Brewed Protein, a material for apparel made from plant-based ingredients; Seevix Material Sciences, which develops SVX, a vegan, spider silk-inspired biopolymer material; Evolved by Nature, which develops Activated Silk, a bioactive peptide solution; and hydrolyzed silk, an animal-derived byproduct. To our knowledge, Silkgel and Activated Silk are the only commercially available ingredients, whereas the others, based on publicly available information, remain under development. However, to our knowledge, none of these materials are currently being used or marketed as alternatives to silicone elastomers.
Government Regulation
Our products and operations, and those of our customers, are subject to various federal, state and international laws and regulations, including regulation in the United States by the Food and Drug Administration (“FDA”), the Federal Trade Commission (the “FTC”), and comparable regulators in other jurisdictions in which it operates. These laws and regulations principally relate to the advertising, promotion, product manufacturing, testing, storage, handling, distribution and disposal of its products. In particular, we supply certain ingredients to customers for use in their cosmetic products. In the United States, the Federal Food, Drug and Cosmetic Act (the “FDCA”), defines cosmetics as articles or components of articles intended for application to the human body to cleanse, beautify, promote attractiveness, or alter the appearance, with the exception of soap. The labeling of cosmetic products is subject to the requirements of the FDCA, the Fair Packaging and Labeling Act, the Poison Prevention Packaging Act and other laws and regulations, including regulations of the FDA. Cosmetics are not subject to pre-market approval by the FDA. However, certain ingredients, such as color additives, must be pre-approved for the specific intended use of the product and are subject to certain restrictions on their use. The FDA may, by regulation, require warning statements on certain cosmetic products for specified hazards associated with such products. FDA regulations also prohibit or otherwise restrict the use of certain ingredients in cosmetic products. B-silk is not subject to pre-approval by the FDA and we believe is in material compliance with applicable regulations.
In addition, the FDA requires that cosmetic labeling and claims be truthful and not misleading. Moreover, cosmetics may not be marketed or labeled for their use in treating, preventing, mitigating, or curing disease or other conditions, or in affecting the structure or function of the body, as such claims would render the products to be a drug and subject to regulation as a drug. The FDA has issued warning letters to cosmetic companies alleging improper drug claims regarding their cosmetic products. In addition to FDA requirements, the FTC as well as state consumer protection laws and regulations can subject a cosmetics company to a range of requirements and theories of liability, including similar standards regarding false and misleading product claims, under which FTC or state enforcement or class-action lawsuits may be brought.
Manufacturing of cosmetics is also subject FDA requirements. In the United States, the FDCA prohibits the introduction, or delivery for introduction, into interstate commerce of cosmetics that are adulterated or misbranded. The FDA has historically recommended (but not required) certain voluntary good manufacturing practices (“GMPs”) designed to reduce the risk of violating this prohibition. However, recent legislation expanded the FDA’s authority to regulate cosmetics, including their manufacturing. Specifically, the Modernization of Cosmetics Regulation Act of 2022 (“MoCRA”), signed into law in December 2022, established, among other things, expanded FDA authority over cosmetic products, including requirements to register manufacturing facilities and list cosmetic products and ingredients, report serious adverse events, substantiate safety of the cosmetic, label cosmetics with certain information, and maintain certain records. The FDA now also has authority to enforce, and is required to issue, regulations governing GMPs for cosmetics. Although MoCRA required the FDA to issue a proposed rule for cosmetic GMPs in 2024 and to publish a final rule establishing cosmetic GMPs by December 2025, the FDA has yet to propose any rules or update its existing guidance documents with respect to such GMPs. Accordingly, the FDA’s draft guidance on cosmetic GMPs, last updated in June 2013, continues to provide the FDA's most recent recommendations related to, among other things process documentation, recordkeeping, building and facility design, equipment maintenance and personnel. Many of MoCRA’s provisions apply directly to finished cosmetics manufacturing, but these requirements may be applied via contract to ingredient suppliers.
In addition, the FDA monitors compliance of cosmetic products through market surveillance and inspection of cosmetic manufacturers and distributors to ensure that the products are not manufactured under unsanitary conditions, or labeled in a false or misleading manner. Inspections also may arise from consumer or competitor complaints filed with the FDA. In the event the FDA identifies unsanitary conditions, false or misleading labeling, or any other violation of the FDA’s laws or regulations, the FDA may request or require, or a manufacturer may independently decide, to conduct a recall or market withdrawal of cosmetic products. Failures to comply with applicable FDA regulations also may lead to, among other things, customer complaints, adverse events, warning letters, untitled letters, product seizures or detentions, and other criminal and civil and .
Employees and Human Capital Resources
As of December 31, 2024, we had 13 full-time employees in the United States, one full-time employee in Canada and seven consultants in the United States and one consultant in the Netherlands. None of our employees are subject to a collective bargaining agreement and we believe we have a good relationship with its employees and consultants. We are a remote-only company, meaning that our team members work remotely. Due to this, we do not currently have a headquarters.
Our human capital objectives are focused on attracting, developing, and retaining talent. Cash compensation and bonus plans, benefits and, both before and after the Business Combination, equity grants are designed to attract, retain and to motivate employees, directors, and select consultants to achieve our corporate objectives.
Corporate Information
The registrant was incorporated under the laws of the State of Delaware as Golden Arrow Merger Corp (“GAMC”) on December 31, 2020. On August 13, 2024, we closed the Business Combination with Bolt Threads, Inc. (“Bolt Threads”) and Beam Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of GAMC. As a result of the Business Combination, Bolt Threads became a wholly-owned subsidiary of ours, and we changed our name to Bolt Projects Holdings, Inc. We do not currently have a headquarters. We maintain a mailing address at 2261 Market Street, Suite 5447, San Francisco, California 94114. Our telephone number is (415) 325-5912.
Available Information and Website Disclosure
We are required to file annual, quarterly and current reports, proxy statements and other information with the SEC. Our filings with the SEC are also available to the public through the SEC’s website at www.sec.gov. You also can find more information about us online at our investor relations website located at www.boltprojectsholdings.com. Filings we make with the SEC and any amendments to those reports are available free of charge on our website as soon as reasonably practicable after we electronically file such material with the SEC. The information posted on or accessible through our website is not incorporated into this Annual Report on Form 10-K.
Investors and others should note that we announce material financial and operational information to our investors using press releases, SEC filings and public conference calls and call webcasts, and by postings on our investor relations site at www.boltprojectsholdings.com. We may also use our website as a distribution channel of material information. In addition, you may automatically receive email alerts and other information about us when you enroll your email address by subscribing under the “Investor Email Alerts” section of our website.
ITEM 1A. RISK FACTORS
Our future operating results could differ materially from the results described in this Annual Report on Form 10-K due to the risks and uncertainties described below. You should consider carefully the following information about risks below in evaluating our business. If any of the following risks actually occur, our business, financial conditions, results of operations and future growth prospects would likely be materially and adversely affected. In these circumstances, the market price of our Common stock would likely decline. In addition, we cannot assure investors that our assumptions and expectations will prove to be correct. Important factors could cause our actual results to differ materially from those indicated or implied by forward-looking statements. See “Forward-Looking Statements” for a discussion of some of the forward-looking statements that are qualified by these risk factors. Factors that could cause or contribute to such differences include those factors discussed below.
Our history of losses and negative cash flows from operations and the need for substantial capital raise substantial doubt about our ability to continue as a going concern.
In Note 2 to our consolidated financial statements included in this Annual Report on Form 10-K, we disclose that there is substantial doubt about our ability to continue as a going concern. We will need additional capital to support our planned product development and operations. Based upon our current operating plan, we estimate that our cash and cash equivalents as of the issuance date of the consolidated financial statements included in this Annual Report on Form 10-K are insufficient for us to fund operating, investing, and financing cash flow needs for the twelve months subsequent to the issuance date of these consolidated financial statements. To obtain the capital necessary to fund our operations, we may seek to obtain funds through public or private equity offerings, debt financing transactions, refinancing or restructuring its current debt obligations, or any other means. If we are unable to obtain sufficient funding, we could be forced to delay, reduce or eliminate all of our sales efforts, our research and development programs, future research and development efforts, and our financial condition and results of operations will be materially and affected, and we may be to continue as a going . Future financial statements may substantial about our ability to continue as a going . If we seek additional financing to fund our business activities in the future and there remains substantial about our ability to continue as a going , investors or other financing sources may be to provide additional funding to us on commercially reasonable terms or at all. Additionally, even if we raise sufficient capital through additional equity or debt financings, strategic alternatives or otherwise, there can be no assurance that the revenue or capital infusion will be sufficient to us to develop our business to a level where it will be or generate cash flow. Any equity securities issued may provide rights, preferences or privileges senior to those of our current holders of Common stock. If we raise funds by issuing debt securities, these debt securities would have rights, preferences and privileges senior to those of holders of Common stock and a substantial portion of our operating cash flow may be dedicated to the payment of principal and interest on such indebtedness, thus limiting funds available for our business activities. The terms of any debt securities issued could also impose significant restrictions on our operations.
We may not be able to generate sufficient cash to service all our debt obligations and may be forced to take other actions to satisfy our obligations under our debt obligations, which may not be successful.
Our ability to make scheduled payments on or to refinance our debt service obligations and other obligations depends on our ability to generate cash in the future and our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond our control. We cannot assure you that we will maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our debt. As of December 31, 2024, we have estimated principal and interest payments on debt due in the next twelve months of zero and $1.1 million , respectively.
If our cash flows and capital resources are insufficient to fund our debt service and other obligations, we may be forced to reduce or delay investments and capital expenditures, or to sell assets, or to seek additional capital or restructure or refinance our debt. These alternative measures may not be successful and may not permit us to meet our scheduled debt obligations. If our operating results and available cash are insufficient to meet our debt service and other obligations, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations. We may not be able to consummate those dispositions or to obtain the proceeds sought from them, and these proceeds may not be adequate to meet any debt service or other obligations then due. Further, we may need to refinance all or a portion of our debt on or before maturity, and we cannot assure you that we will be to refinance any of our debt on commercially reasonable terms or at all.
We have a history of net losses and may not be able to achieve or maintain profitability in the future.
In the years ended December 31, 2024, and 2023, we incurred net losses of $65.4 million and $57.7 million, respectively. As of December 31, 2024, our accumulated deficit was $461.8 million. Since our inception, we have been engaged primarily in research and development and early-stage commercial activities. Because we have a limited history of commercial operations and we operate in a rapidly evolving industry, we cannot be certain that we will generate sufficient revenue to achieve or maintain profitability.
Our ability to generate revenue in the near-term is highly dependent on the successful commercialization of our current and future biomaterials products, including our Vegan Silk Technology Platform products, b-silk and xl-silk, and the decrease in costs of producing such products, both of which are subject to many risks and uncertainties as described below. We expect that it will take time for production of our products to ramp up to a more economical scale thereby
decreasing our cost of production. As a result, we may have significant losses and negative cash flow as we work to expand our market share for at least the next few years, as we incur additional costs and expenses for the continued development and expansion of our business, including the costs of establishing capacity with our current manufacturing partner and any future manufacturing partners and ongoing expenses of research, product development, and commercialization. The amount we spend will impact on our ability to become profitable and this will depend, in part, on the number of new products that we attempt to develop and the costs of further commercializing our existing products. We may not achieve any or all of these goals and, thus, we cannot provide assurances that we will ever be profitable. Even if we can successfully produce and sell our Vegan Silk Technology Platform products, whether we will be able to generate a profit on any of these products is highly uncertain and depends on several factors including the cost of production, the price we are able to charge for these products, further market adoption of our products, and the emergence of competing products.
Our operating results may fluctuate significantly because of a variety of factors, including, but not limited to, end market demand, timing of regulatory actions and variation in manufacturing costs, many of which are outside of its control.
We are subject to, among other things, the following factors that may negatively affect our operating results:
• The announcement or introduction of new products by our competitors.
• Fluctuating prices of biomaterials due to availability of raw materials, skepticism of silicone elastomer substitutes, and uncertain rise and fall of current market demands.
• Changing availability of and prices from contract manufacturers, as well as potential modest capital expenditures depending on the infrastructure of various contract manufacturers.
• Our ability to upgrade and develop our systems and infrastructure to accommodate growth.
• Our ability to secure adequate fermentation capacity with our manufacturing partner and any future manufacturing partners.
• Our ability to secure production of our Vegan Silk Technology Platform products, and any future biomaterial products at scale.
• Our ability to attract and retain key personnel in a timely and cost-effective manner.
• Our ability to attract new customers, retain existing customers, and maintain or increase order volume from existing customers.
• Technical difficulties.
• The amount and timing of operating costs and capital expenditures relating to the expansion of our business, operations and infrastructure.
• Our ability to identify and enter into relationships with appropriate and qualified third-party providers of necessary testing and manufacturing services.
• Regulation by federal, state or local governments; and
• General economic conditions, as well as economic conditions specific to the cosmetics and personal care industry.
As a result of our limited operating history and the nature of the markets in which we compete, it is difficult for us to forecast our revenues or earnings accurately. We have based our anticipated future expense levels largely on our investment plans and estimates of future events, although certain of our expense levels will largely become fixed. As a strategic response to changes in the competitive environment, we may from time to time make certain decisions concerning expenditures, pricing, service or marketing that could have a material and adverse effect on our business, results of operations and financial condition, either for several periods or more generally.
We may incur significant expenses and capital expenditures in the future to execute our business plan and we may be unable to adequately control our expenses or raise additional capital on favorable terms, if at all.
Subject to the availability of the capital, we plan to make capital expenditures and may incur significant capital expenditures in the future as we expand our research and business. In addition, cash requirements relate primarily to working capital needed to operate and grow our business, including funding operating expenses, growth in working capital requirements to support increased revenue, continued expansion of our markets, continued development and expansion of our products, expanding fermentation capacity with our manufacturing partner and any future manufacturing partners, and the possible repayment or refinancing of any long-term debt that may be incurred. Our ability to meet future liquidity needs and capital requirements will depend upon numerous factors, including the timing and quantity of product orders and shipments; attaining and expanding positive gross margins for our Vegan Silk Technology Platform products and future biomaterial products; the timing and amount of our operating expenses; the timing and costs of working capital needs; the timing and costs of expanding our research and development teams; the ability of our customers to continue to order products from us; our ability to obtain financing arrangements to support our operations, including financing arrangements to repay or refinance any long-term debt that may be incurred, and the terms of such agreements that may require us to pledge or restrict substantial amounts of our cash to support these financing arrangements; the timing and costs of hiring and training necessary personnel; the extent to which our products more market acceptance; the timing and costs of product development and introductions; the extent of our ongoing and new research and development initiatives; and changes in our strategy or our planned activities. In addition, if we are to fund our operations with the cash flows from operations and cannot obtain external financing on terms or at all, we may not be to sustain future operations which could cause us to , reduce or operations and could have a material effect on our business, results of operations and financial condition.
We may be able to incur more debt in the future, which could further exacerbate the risks of leverage, including the ability to service our indebtedness.
We may need to incur additional debt in the future to further our research and development into products, marketing, or working capital. Although the covenants contained in our current indebtedness instruments may impose some limits on our ability to incur new debt, these agreements may permit the occurrence of significant additional debt if we satisfy certain conditions, or such debt instruments may be amended in the future to do so. If we incur new debt, the risks related to being in a highly leveraged company that we now face could intensify, including our ability to service such indebtedness.
We are subject to several restrictive debt covenants under the Ginkgo Note Purchase Agreement.
In April 2024, we entered into a second amendment to our note purchase agreement, dated October 14, 2022 (the “Ginkgo Note Purchase Agreement”) with Ginkgo Bioworks, Inc. (“Ginkgo”) to modify our outstanding senior secured notes (the “Senior Secured Notes”) held by Ginkgo. As amended, the Ginkgo Note Purchase Agreement contains customary affirmative covenants and also contains restrictive covenants, including, among others, limitations on: the occurrence of additional debt, liens or other encumbrances on property, acquisitions and investments, loans and guarantees, mergers, consolidations, liquidations and dissolution, asset sales, dividends and other payments in respect of our capital stock, prepayments of certain debt, transactions with affiliates and changes to our type of business, management of the business, control of the business or business locations. Additionally, the Ginkgo Note Purchase Agreement contains subjective acceleration clauses to accelerate the maturity date of the Senior Secured Notes if a material adverse change has occurred within the business, operations, or financial condition of the Company.
Our ability to generate sufficient cash from operations to meet our debt obligations will depend upon our future operating performance, which will be affected by general economic, financial, competitive, business and other factors beyond our control. A breach of any of these covenants or restrictions, as applicable, or any inability to pay interest on, or principal of, our outstanding debt as it becomes due could result in an event of default. Upon an event of default, if not waived by our lenders, our lenders may declare all amounts outstanding as due and payable. Such an acceleration of the maturity of our indebtedness may, among other things, prevent or limit us from engaging in transactions that benefit us, including responding to changing business and economic conditions and taking advantage of attractive business opportunities.
Our ability to use net operating losses to offset future taxable income will be subject to certain limitations as a result of the Business Combination and related transactions.
As of December 31, 2024, the Company had federal and state NOL carryforwards of $ 359.5 million and $ 222.8 million (post apportionment), respectively, as reported on its tax returns available to reduce future taxable income, if any. If not utilized, these federal and state NOL carryforwards will begin to expire in the year ending December 31, 2030; with the federal NOLs generated after the year ended December 31, 2017 carried forward indefinitely. The Tax Reform Act of 1986 and similar California legislation impose substantial restrictions on the utilization of net operating losses and tax credits in the event of an “ownership change” of a corporation. Accordingly, the Company’s ability to utilize net operating losses and credit carryforwards may be limited as the result of such an “ownership change.” The Company conducted a Section 382 analysis on its NOLs up to 2023. As a result of the 382 analysis, while the Company experienced various ownership changes triggering the application of Section 382, the Company does not expect any of its tax attributes to expire before utilization based on the applicable Section 382 limitation.
Risks Related to Our Products and Operations
Our revenue is primarily generated from sales of our Vegan Silk Technology Platform, and we are therefore highly dependent on the success of these products.
To date, substantially all our revenue has been derived, and we expect it to continue to be substantially derived, from sales of b-silk and xl-silk, two products from our Vegan Silk Technology Platform. We began commercializing b-silk in direct-to-consumer products in 2018 and in business-to-business products in 2020, but our commercialization of b-silk to date has still been limited. Customer awareness of, and experience with, b-silk has been and is currently limited. As a result, b-silk has limited product and brand recognition within the beauty and personal care market as a substitute for silicone elastomers. We do not have a long history operating as a commercial company, and the novelty of b-silk, together with our limited commercialization experience, makes it difficult to evaluate our current business and predict our prospects with precision. These factors also make it difficult for us to forecast our financial performance and future growth, and such forecasts are subject to several uncertainties, including those outside of our control.
Future products from the Vegan Silk Technology Platform may not achieve market success. If our products do not achieve market success, we may be unable to generate significant revenues.
We currently have limited customer commitments for commercial quantities of our Vegan Silk Technology Platform products. Some prospective customers are currently evaluating and testing of our products prior to making large-scale purchase decisions. In addition, commitments under existing agreements may not be representative of future demand. The successful commercialization of our products is also dependent on additional customers’ ability to commercialize the end-products that they make from our Vegan Silk Technology Platform products and future biomaterial products, which may never gain market acceptance.
Market acceptance of our Vegan Silk Technology Platform products and future biomaterial product candidates will depend on numerous factors, many of which are outside of our control, including among others:
• Public acceptance of our Vegan Silk Technology Platform products and future biomaterial product candidates.
• Our ability to produce our Vegan Silk Technology products and future biomaterial product candidates with consistent quality that offers functionality comparable or superior to existing or new silicone elastomers or silicone elastomer alternatives.
• Our ability to produce our Vegan Silk Technology Platform products and future biomaterial product candidates to fit their intended purposes.
• Our ability to demonstrate the benefits of b-silk in terms of safety and efficacy, as well as meet “clean beauty” standards such as biodegradability and environmental friendliness.
• Our ability to maintain and obtain further necessary regulatory approvals for our Vegan Silk Technology Platform products.
• The speed at which potential customers qualify our Vegan Silk Technology Platform products and future biomaterial product candidates for use in their products, including any required third-party testing.
• Our ability to produce new products or customizations of existing products to match changes in public demand.
• The time it takes for our commercial-scale volume to be established.
• The pricing of our Vegan Silk Technology Platform products and future biomaterial product candidates compared to competitive products, including silicone-based elastomers.
• The effectiveness of our market strategy.
• Ease of administration of our products.
• The strategic reaction of companies that market competitive products.
• Our reliance on third party manufacturing partners to produce our Vegan Silk Technology Platform products and future biomaterial product candidates.
• Our reliance on third parties who support or control distribution channels; and
• General market conditions include fluctuating demand for our Vegan Silk Technology Platform products and our future biomaterial product candidates.
We may be unable to manage rapid growth effectively, and our ability to successfully implement our business plan will depend on a number of factors outside of our control.
Any failure by us to manage growth effectively could have a material and adverse effect on our business, results of operations and financial condition. We anticipate that a period of significant expansion will be required to address potential growth, including expanding the production of our Vegan Silk Technology Platform products and research activities. This expansion will place a significant strain on our management, operational and financial resources. To manage the expected growth of our operations and personnel, we must establish appropriate and scalable operational and financial systems, procedures and controls and must establish a qualified finance, administrative and operations staff. Our management may be unable to hire, train, retain and manage the necessary personnel or to identify, manage and exploit potential strategic relationships and market opportunities.
We currently rely on a single manufacturing partner and manufacturing facility for the production of our Vegan Silk Technology Platform products and in the future intend to rely on a small number of manufacturing partners and manufacturing facilities both in the U.S. and internationally.
We may not be successful in our efforts to enter into manufacturing agreements with multiple manufacturers to increase the supply of our Vegan Silk Technology Platform products and limit our reliance on any one manufacturing partner. We currently rely on a single manufacturing partner, Laurus Bio, and a single manufacturing facility of Laurus Bio (the “Laurus Bio Facility”) to produce our products. The Laurus Bio services agreement was renewed in October 2024. Additionally, adverse changes or developments affecting our relationship with Laurus Bio or the Laurus Bio Facility could impair our ability to produce our products. Any shutdown or period of reduced production at the Laurus Bio Facility or the manufacturing facilities of future manufacturing partners, which may be caused by regulatory noncompliance or other issues, as well as other factors beyond our control, such as severe weather conditions, natural disaster, fire, power interruption, work stoppage, disease outbreaks or pandemics, acts of war, political unrest, equipment , in supply delivery, or of material, equipment, decreased fermentation capacity, or labor, would significantly our ability to produce our products in a timely manner, meet our contractual obligations and operate our business. The Laurus Bio Facility is in Bangalore, India, which may increase the magnitude of from any of the foregoing events, or impact our customers’ or prospective customers’ confidence in the of our supply chain. Performance guarantees may not be sufficient to cover or , or the guarantors under such guarantees may not have the ability to pay. Any insurance coverage we have may not cover or be sufficient to fully cover all our potential and may not continue to be available to us on acceptable terms, or at all.
Additionally, because our operations depend on an international manufacturing partner, we are subject to risks that are inherent in operating globally, including:
• Changes in laws and regulations or imposition of currency restrictions and other restraints in various jurisdictions.
• Limitation of ownership rights, including expropriation of assets by a local government, and limitation on the ability to repatriate earnings.
• Sovereign debt crises and currency instability in developed and developing countries.
• Imposition of burdensome tariffs and quotas.
• National and international conflict, including war, civil disturbances and terrorist acts; and
• Economic downturns and social and political instability.
The U.S. government has communicated its intention to change U.S. trade policy, including renegotiating or terminating existing trade agreements and leveraging tariffs in various regions such as China, Canada and Mexico. These additional tariffs or any future tariffs in regions from which we import or export, as well as a government’s adoption of “buy national” policies or retaliation by another government against such tariffs or policies have introduced significant uncertainty into the market and could have a negative impact on the Company’s results of operations. These risks could increase our cost of doing business internationally, increase our counterparty risk, disrupt our operations, disrupt the ability of suppliers and customers to fulfill their obligations and limit our ability to sell our product in certain markets.
Pricing and availability for our Vegan Silk Technology Platform Products and our future products may be impacted by factors out of our control, including, but not limited to, end market demand, variation in manufacturing costs, and supplier availability.
Pricing and availability of our Vegan Silk Technology Platform products can be volatile due to numerous factors beyond our control, including general, domestic and international economic conditions, labor costs, production levels, competition for fermentation capacity and consumer demand. This volatility could significantly affect the availability and cost of our products for us, and may therefore have a material adverse effect on our business, results of operations and financial condition. We believe pricing and availability of any of our future biomaterial products may be similarly volatile.
We currently outsource the production of our products to a single third-party manufacturing partner. Our contract manufacturing partner secures all of the necessary raw materials. Due to the high rate of growth in the silicone elastomer replacement market, the demand for raw materials used in our products may outpace supply, which could result in price increases and deficits in the supply necessary to meet customer demand. If we are unable to secure the required quantities of third-party raw materials, we may not be able to fulfil customer demand or any forecasts or guidance we provide to the public.
If our costs of producing products from our Vegan Silk Technology Platform materially increase, we would have to raise our prices, which could negatively impact on our ability to gain new customers and keep existing customers.
We currently rely on a single manufacturing partner to produce offerings from our Vegan Silk Technology Platform, including b-silk and xl-silk. The price we pay our contract manufacturing partner for our products has depended in part on the fluctuating cost of the raw materials used in the manufacturing processes, particularly urea costs. While we have negotiated fixed prices for upcoming production runs, we may not be able to secure such agreements in the future. We have faced, and could continue to face, resistance from some customers in accepting any increase in our prices as a result of market acceptance and the cost of producing our products. Some multi-year contracts and non-contractual pricing arrangements with customers may permit limited price adjustments to reflect increased costs. However, such adjustments may not occur quickly enough, or be sufficient, to prevent a materially adverse effect on net income and cash flow. Furthermore, any price adjustments may not cover all input costs, and these adjustments are not present in many of our customer contracts. In the event we experience increased costs for our Vegan Silk Technology Platform products, we may have to raise our prices, which could affect our ability to gain new customers or retain existing customers. Further, our inability to raise our prices to mitigate the effects of these increased input costs could have a material effect on our financial results.
We may also experience material increases in customer cancellations or reductions in the future on account of the macroeconomic environment, especially in the event of a prolonged recession or a worsening of current conditions as a
result of many factors, including inflation. As a result, we may have to make changes to our pricing model to address these dynamics, any of which could adversely affect our business, results of operations and financial condition.
There can be no assurance our manufacturing suppliers will provide the quality needed by us in the quantities requested or at a reasonable price. Because we do not control the actual production of our products, we are also subject to delays caused by interruption in production including but not limited to those resulting from conditions outside of our control, such as pandemics, weather, transportation interruptions, labor shortages, strikes, terrorism, natural disasters, and other catastrophic events.
We have limited experience in marketing and selling products from our Vegan Silk Technology Platform, and if we are unable to gain market acceptance from consumer product companies and others, our business may be adversely affected.
We sell our Vegan Silk Technology Platform products, including b-silk and xl-silk, through our own direct sales force, and we have limited experience in marketing and selling these offerings. Our future sales will depend in large part on our ability to increase our marketing efforts and adequately address our customers’ needs. The beauty and personal care market is a large and diverse market, and competition for sales and marketing personnel is intense. We may not be able to attract and retain sufficient personnel to maintain an effective sales and marketing force. In addition, if we choose in the future to use distribution partners, we will likely have less control over the sales and marketing personnel of our distribution partners. The personnel at such distribution partners may therefore not be adequately trained with respect to our products or may not be sufficiently incentivized to sell these products. If we are unable to successfully market our products and adequately address our customers’ needs, it could negatively impact sales and market acceptance of our products and we may never generate sufficient revenue to or sustain .
A limited number of customers, distributors and collaboration partners account for a material portion of our revenue and they may continue to do so for the foreseeable future. The loss of major customers, distributors or collaboration partners could harm our operating results.
Our revenues have varied materially from quarter to quarter and are dependent on sales to, and collaborations with, a limited number of customers, distributors and/or collaboration partners. For example, for the year ended December 31, 2024, one customer accounted for approximately 88% of our revenue. Our agreement with this customer, which operates primarily in the United States, includes minimum purchase requirements for 2024 and 2025 of $1.2 million and $4.0 million, respectively, and will terminate on October 24, 2027 or earlier by mutual written agreement of the parties or for any reason upon 180 days’ written notice. The minimum purchase requirements stipulate minimum amounts of b-silk that the customer is required to purchase from us during the specified years, and the maximum prices at which we can sell those amounts of b-silk to the customer during those years, as well as an annual priority fee that the customer is obligated to pay us, which is several hundred thousand dollars annually.
We believe our revenue concentration for 2024 was primarily attributable to our limited history of commercial operations and limited revenue, which we expect will dissipate as additional customers and potential customers progress through their own testing, validation and development cycles with our Vegan Silk Technology Platform products and transition to using our products in their commercial products, which will lead to increased demand for our products from additional customers. However, until we can achieve broader market acceptance of our Vegan Silk Technology Platform offerings, we may face risks associated with concentrated customer base. There are risks whenever a significant percentage of revenue is concentrated with a limited number of customers. For example, revenue from these customers may fluctuate from time to time based on these customers’ business needs or financial condition, the timing of which may be affected by market conditions or other facts outside of our control. These customers could also potentially pressure us to reduce the prices we charge for our product, which could have an adverse effect on our margins and financial position and could negatively affect our revenue and results of operations. If any of our largest customers terminates its relationship with us, such termination could affect our revenues and results of operations.
We cannot be certain that customers, distributors and/or collaboration partners that have accounted for material revenues in past periods, individually or as a group, will continue to generate similar revenues in any future period. If we fail to renew with, or if we lose a major customer, distributor or collaboration partner, our revenues could decline if we are unable to replace the lost revenues with revenues from other sources. Furthermore, if we lose one or more of our distributors and cannot replace the distributor in a timely manner or at all, our business, results of operation and financial condition may be materially adversely affected.
Our estimated contracted revenues vary from purchase orders on an “as needed” basis to contracts with minimum purchase obligations, and the failure of our customers to continue placing orders or to abide by their contracts could have a material adverse effect on our operations and financial results.
For the years ended December 31, 2024 and 2023, 12% and 1% of our product revenue was derived from purchase orders made by customers on an as-needed basis, and 88% and 99% of orders occurred under specified multi-year minimum contractual purchase obligations, respectively. Going forward, we expect to encounter a mixture of multi-year contractual purchase commitments and as-needed purchase orders. As a result, our manufacturing volume will continue to be based on estimates and forecasts that can be incorrect. Additionally, customers issuing purchase orders can cancel purchase orders or reduce or delay orders at any time. Incorrect estimates and projections or the cancellation, delay, or reduction of customer purchase orders, or customers’ failure to fulfill their minimum purchase obligations could result in reduced sales, excess inventory, unabsorbed overhead, and reduced income from operations.
We often schedule internal production levels and place orders for our Vegan Silk Technology Platform Products with our manufacturing partner before receiving firm orders from our customers. Therefore, if we fail to accurately forecast customer demand, we may experience excess inventory levels or a shortage of products to deliver to our customers. Factors that could affect our ability to accurately forecast demand for our products include the following:
• An increase or decrease in consumer demand for our Vegan Silk Technology Platform products or for the products of our competitors.
• Our failure to accurately forecast consumer acceptance of new product candidates.
• Delays in the production of Vegan Silk Technology Platform products, or the unsatisfactory performance of our manufacturing partner.
• Delays in the ability of our Vegan Silk Technology Platform products to meet certain customer performance requirements and other specifications.
• New product introductions by us or our competitors.
• Changes in our relationships with our customers.
• Changes in general market conditions or other factors that may result in cancellations of orders or a reduction or increase in the rate of reorders placed by retailers.
• Changes in laws and regulations applicable to our products or the way we sell our Vegan Silk Technology Platform products; and
• Weak economic conditions or consumer confidence, which could reduce demand for our Vegan Silk Technology Platform products.
Inventory levels higher than consumer demand may result in inventory write-downs and the sale of excess inventory at discounted prices, which could have an adverse effect on our business, results of operations and financial condition. Any overestimation of the demand for our Vegan Silk Technology Platform products will result in a decline in forecasted revenue. Additionally, if we underestimate or are otherwise unable to produce enough of our Vegan Silk Technology Platform products from our manufacturing partner or any future manufacturing partners to meet the demand for our products, we may not be able to meet customer demand, resulting in delays in the shipment of products and lost revenue, and damage to our reputation and customer and consumer relationships. We may not be able to manage inventory levels successfully to meet future order and reorder requirements.
We may face challenges selling products from Vegan Silk Technology Platform at commercial scale and at commercially viable cost, and we may not be able to commercialize these products to the extent necessary to make a profit or sustain and grow our current business.
To commercialize products from our Vegan Silk Technology Platform products, including b-silk and xl-silk and future biomaterial products, we must be successfully producing at commercial scale or at a commercially viable cost. If we cannot achieve commercially viable production economics with our manufacturing partner or any future manufacturing
partners for enough offerings from the Vegan Silk Technology Platform to support our business plan, including through establishing and maintaining sufficient production scale and volume, we will be unable to achieve a sustainable products business. Our production costs depend on many factors that could have a negative effect on our ability to offer our planned products at competitive prices, including our ability to establish and maintain sufficient production scale and volume, exchange rates and contract manufacturing costs.
To reduce per-unit production costs to be able to reliably sell our products with positive margins, we must increase the amount of our products that we purchase from our manufacturing partner or future manufacturing partners to achieve economies of scale and optimize the manufacturing process to make the manufacturing process more efficient. However, if we do not sell production output in a timely manner or in sufficient volumes, our investment in production will lead to higher working capital costs, which harms our cash position and could generate losses. Additionally, we may incur added storage costs as well as supply chain delays and disruptions, all of which can adversely affect the value of such products. Since achieving competitive product prices generally requires increased production volumes and cash flows from sales are in their early stages, we have had to produce and sell b-silk at a loss in the past, and we may continue to do so as we build our business. If we are to adequate revenues from our product sales and other sources such as future biomaterial products, we may not be to invest in production and we may not be to pursue our business plans.
Certain contracts granting exclusivity rights to customers may limit our ability to sell products in certain markets.
We may enter into certain agreements with customers, which, subject to the terms therein, grant these customers the exclusive right with respect to certain limited applications to purchase certain products from us for a contractually specified period of time. These arrangements could prevent us from selling products to certain prospective customers, which could have a material and adverse impact on our potential revenues and our ability more generally to expand our customer base and product lines.
We may face substantial competition from incumbent materials as well as other new entrants, and if we are unable to continue developing innovative products and technologies and/or scale our production of our Vegan Silk Technology Platform products, we may fail to gain, or may lose, market share to our competitors.
We face and will face substantial competition from a variety of companies in the cosmetic ingredients segment. Some competitors’ products are suitable for a range of uses at a price that may be lower than our product offerings. Many of these companies have longer operating histories, greater name recognition, larger customer bases, and significantly greater financial, sales and marketing, manufacturing, technical, and other resources than us. Our competitors may be able to adapt more quickly to new or emerging technologies, changes in customer requirements and changes in laws and regulations. In addition, current and potential competitors have established or may establish financial or strategic relationships among themselves or with existing or potential customers or other third parties. Accordingly, new competitors or alliances among competitors could emerge and rapidly acquire a significant market share. There can be no assurance that we can develop products that are more effective or achieve greater market acceptance than competitive products, or that our competitors will not succeed in developing products and technologies that are more than those being developed by us and that would therefore render our products and technologies less competitive or even . We cannot you that we will be to compete current or new competitors. We believe our ability to compete in designing, engineering, and manufacturing our products at significantly reduced cost to customers does and will depend on a number of factors, which may change in the future due to increased competition, our ability to develop new technologies and to meet our customers’ needs and the availability of our offerings. If we are to compete , our business, results of operations and financial condition would be affected.
If we are unable to coordinate with our current manufacturing partner and any future manufacturing partners to successfully commence, scale up or sustain production of our Vegan Silk Technology Platform products at existing and planned manufacturing facilities, our customer relationships, business and results of operations may be adversely affected.
A substantial component of our planned production capacity in the near and long-term depends on successful operations at our existing and potential large-scale manufacturing partners. We may partner with additional manufacturing facilities which we expect will allow us to increase production capacity. However, there can be no assurances that we will be able to commence operations or contract additional production capacity on our expected timeline, if at all. Delays or problems in the start-up or operation of facilities could cause delays in our ramp-up of production and hamper our ability to
reduce our production and logistics costs. Delays could occur due to a variety of factors, including regulatory requirements and our ability to fund commissioning costs.
Once each production, purification, and downstream processing source is secured, they must perform as we expect. If our suppliers encounter significant delays in financing, cost overruns, engineering issues, contamination problems, equipment or raw material supply constraints, unexpected equipment maintenance requirements, safety issues, work stoppages or other serious challenges in making these facilities operational ready for our products and operating them at commercial scale, we may be unable to supply our renewable products in the time frame and at the cost we have planned. It is difficult to predict the effects of scaling up production of industrial fermentation to commercial scale, as it involves various risks to the quality and consistency of our molecules. In addition, in order to produce molecules at existing and potential future plants, suppliers have been and may in the future be required to perform thorough transition activities and modify the design of plants. Any modifications to the manufacturing facility could cause complications in the operations of the plant, which could result in or in production. If we are to contract additional manufacturing capacity necessary to meet existing and potential customer demand, we may need to continue to use, or increase our use of, existing contract manufacturing sources, which may not be available on terms acceptable to us, if at all, and generally entail cost to us and would therefore reduce our anticipated gross margins. Further, if our efforts to increase (or commence, as the case may be) contracted production are not , our existing partners may decide not to work with us to develop additional production capacity, demand more terms or their commitment to invest capital in our production. If we are to increase and sustain manufacturing capacity and operations sufficient to the existing and potential demand of our customers and partners, our business and results of operations may be affected.
Our financial results could vary materially from quarter to quarter and are difficult to predict.
Our revenues and results of operations could vary materially from quarter to quarter because of a variety of factors, many of which are outside of our control. As a result, comparing our results of operations on a period-to-period basis may not be meaningful. Factors that could cause our quarterly results of operations to fluctuate include:
• achievement, or failure, with respect to technology, product development or manufacturing milestones needed to allow us to enter identified markets on a cost-effective basis or obtain milestone-related payments from collaboration partners;
• delays or greater than anticipated expenses associated with the use of new manufacturing partners;
• the cost of conducting research and development activities to optimize b-silk, xl-silk and future biomaterial products;
• impairment of assets based on shifting business priorities and working capital limitations;
• disruptions in the production process at any manufacturing facility, including disruptions due to outbreak of disease, contamination, safety or other technical difficulties, or scheduled downtime as a result of transitioning equipment to the production of our Vegan Silk Technology Platform products;
• losses of, or the inability to secure new customers, collaboration partners, contract manufacturers, suppliers or distributors;
• losses associated with producing our products as we ramp to commercial production levels;
• the timing and size of sales of our Vegan Silk Technology Platform products to customers;
• increases in price or decreases in availability of our Vegan Silk Technology Platform products;
• the unavailability of contract manufacturing capacity altogether or at reasonable cost;
• exit costs associated with terminating contract manufacturing relationships;
• fluctuations in foreign currency exchange rates;
• change in the fair value of debt and derivative instruments;
• fluctuations in the price of and demand for silicone elastomers and other products for which our Vegan Silk Technology Platform products are an alternative;
• competitive pricing pressures, including decreases in average selling prices of our Vegan Silk Technology Platform products;
• unanticipated expenses or delays associated with changes in governmental regulations and environmental, health, labor and safety requirements;
• departure of executives or other key management employees resulting in transition and severance costs;
• our ability to use our NOL carryforwards to offset future taxable income;
• business interruptions such as pandemics or natural disasters like earthquakes and tsunamis;
• our ability to integrate businesses that we may acquire in the future;
• risks associated with the international aspects of our business; and
• changes in general economic, industry and market conditions, both domestically and in our foreign markets, including rising interest rates, taxes and inflation.
Due to the factors described above, among others, the results of any quarterly or annual period may not meet our expectations or the expectations of our investors and may not be meaningful indications of our future performance.
We depend on key personnel.
We depend greatly on our executive officers and other employees. Our success will depend, in part, upon our ability to attract and retain additional skilled personnel. There can be no assurance that we will be able to find, attract and retain additional qualified employees, directors, and advisors having the skills necessary to operate, develop and grow our business. Our inability to hire qualified personnel, the loss of services of any of our executive officers, or the loss of services of other key employees, or advisors that may be hired in the future, may have a material and adverse effect on our business.
Our management has limited experience in operating a public company.
Our executive officers have limited experience managing a publicly traded company, interacting with public company investors, and complying with the increasingly complex laws pertaining to public companies. Our management team may not successfully or efficiently manage their new roles and responsibilities. The transition to being a public company subjects us to significant regulatory oversight and reporting obligations under the federal securities laws and the continuous scrutiny of securities analysts and investors. These new obligations and constituents will require significant attention from our senior management and could divert their attention away from the day-to-day management of our business, which could adversely affect our business, results of operations and financial condition.
An increase in our shipping and freight costs could have a material adverse effect on our financial results because we may not be able to pass through all of these increased costs to our customers.
We currently rely upon third-party transportation providers for a significant portion of our product shipments. Our utilization of delivery services for shipments is subject to risks, including increases in fuel prices and container costs, which would increase our shipping costs, increased labor costs and employee strikes, disease outbreaks or pandemics, and inclement weather, which may impact the ability of providers to provide delivery services that adequately meet our shipping needs, if at all. In the past, we have seen our shipping and freight costs fluctuate substantially, particularly during COVID-19. We may not always be able to secure terms that allow us to transfer all shipping and freight costs to customers, and we will continue to have shipping and freight costs associated with our business development activities. To the extent we are not able to transfer an increase in freight and shipping costs to our customers, it may have a negative impact on our profitability.
We have identified material weaknesses in our internal control over financial reporting. If we are unable to remediate these material weaknesses, or if we identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect investor confidence in, and the value of, our Common stock.
As a public company, our management is required to establish and maintain internal control over financial reporting required by Section 404(a) of the Sarbanes-Oxley Act. If we are unable to establish or maintain appropriate internal control over financial reporting or implement these additional requirements in a timely manner or with adequate compliance, it could result in material misstatements in our consolidated financial statements, failure to meet our reporting obligations on a timely basis, increases in compliance costs, and subject us to adverse regulatory consequences, all of which may adversely affect investor confidence in, and the value of, our Common stock.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, that company’s principal executive and principal financial officers, or persons performing similar functions, and influenced by that company’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. GAAP. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses in our internal control over financial reporting exist as of December 31, 2024:
• We did not maintain a sufficient complement of personnel possessing the appropriate technical accounting competency, training, and experience to address, review, and record financial reporting transactions under U.S. GAAP or maintain appropriate segregation of duties.
• We did not design and maintain formal accounting policies, procedures and controls to achieve complete, accurate and timely financial accounting, reporting and disclosures, including controls over the preparation and review of account reconciliations and journal entries.
• We did not design and maintain formal and effective controls over information technology general controls for IT systems that are relevant to the preparation of the financial statements.
• We did not maintain formalized minutes for meetings of the Board of Directors throughout the entire year.
We have begun the process of, and are focused on, designing and implementing effective internal controls measures to improve our internal control over financial reporting and remediate these material weaknesses. Our efforts include several actions:
• We have engaged consultants to provide additional depth and breadth in our technical accounting and financial reporting capabilities.
• We have engaged consultants to assist with the financial statement closing process and segregating duties among accounting personnel to enable adequate review controls.
• We have implemented a process for maintaining and formalizing minutes for meetings of the Board of Directors.
• We have hired key finance roles (i.e., VP Finance, and Controller).
Although our management intends to complete these remediation efforts as quickly as practicable, it cannot at this time estimate how long it will take. The primary costs associated with these remediation efforts are corresponding recruiting and additional salary and consulting costs, which are difficult to estimate at this time, but which may be
significant. These additional resources and procedures are intended to enable us to broaden the scope and quality of our internal review of underlying information related to financial reporting and to formalize and enhance our internal control procedures. However, while we are designing and implementing measures to remediate our existing material weaknesses, we cannot predict the success of such measures or the outcome of our assessment of these measures at this time. Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business, personnel, IT systems and applications, or other factors. If we fail to remediate our existing material weaknesses or identify new material weaknesses in our internal controls over financial reporting, if we are unable to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, if we are unable to conclude that our internal controls over financial reporting are , or if our independent registered public accounting firm is to express an opinion as to the effectiveness of our internal controls over financial reporting when required to do so, it is possible that a material of our financial statements would not be prevented or detected on a timely basis, investors may confidence in the accuracy and completeness of our financial reports, and the market price of the Common stock could be affected.
Attention to sustainability matters may impact our business, financial results and operating model.
In recent years, certain investors, customers, consumers, regulators, employees, and other stakeholders have focused on sustainability matters. From time to time, we announce certain initiatives, goals and commitments regarding sustainability. For example, one of our guiding principles is for sustainability to be based on sustainable sourcing, near-term and long-term sustainability goals, exclusion of highly hazardous chemistries, and responsible management of supply chains, among other things. We could fail, or be perceived to fail, in our achievement of such initiatives or in accurately reporting our progress on such initiatives. Such failures can be due to changes in our business (e.g., shifts in business among distribution channels or acquisitions). Moreover, the standards by which sustainability efforts and related matters are measured are developing and evolving, and certain areas are subject to assumptions that could change over time. In addition, we could be criticized for the scope of our initiatives or goals or perceived as not acting responsibly in connection with these matters. Any such matters could have a material adverse effect on our business and operating model.
Furthermore, governments and private parties are also increasingly filing suits or initiating regulatory action based on allegations that certain public statements regarding sustainability matters by companies are false and misleading “greenwashing” campaigns that violate deceptive trade practices and consumer protection statutes. Although we are not currently a party to any such litigation, unfavorable rulings against us or our industry could significantly impact our operations and have an adverse impact on our financial condition.
Risks Related to Intellectual Property and Information Technology
We may not be able to protect adequately our patents and other intellectual property assets, which could adversely affect our competitive position and reduce the value of our products, and litigation to protect our patents and intellectual property assets may be costly.
Our commercial success may depend in part on our ability to obtain patent protection for technologies and products we develop, to preserve trade secrets and to operate without infringing or misappropriating the intellectual property rights of others. There can be no assurance that any patents or patent applications that we own, obtain or file or are able to obtain or license from third parties will afford any competitive advantages or will not be challenged or circumvented by third parties. Furthermore, there can be no assurance that others will not independently develop similar technologies or duplicate any technology developed by us. Because of the extensive time required for development, testing and regulatory review of a potential product, it is possible that before any of our potential products can be commercialized, any related patents may expire or may have only a brief remaining life span following commercialization, thus reducing any advantage of the patents.
If we are not able to obtain patent coverage or defend the patent protection for our technologies, then we will not be able to exclude competitors from developing or marketing competing technologies, and we may not generate enough revenue from product sales to justify the cost of development of our technologies and to achieve or maintain profitability. The patents currently in the portfolio have expiration dates ranging from 2034 to 2040 and any patents resulting from pending patent applications are expected to have durations that will expire between 2034 and 2044.
Our patent position involves complex legal and factual questions. Accordingly, we cannot predict the breadth of claims that may be allowed or enforced in our patents or in third-party patents. Patents may not be issued for any pending or future pending patent applications owned by or licensed to us, and claims allowed under any issued patent or future
issued patent owned or licensed by us may not be valid or sufficiently broad to protect our technologies. Moreover, we may be unable to protect certain of our intellectual property in the United States or in foreign countries. Foreign jurisdictions may not afford the same protections as U.S. law, and we cannot ensure that foreign patent applications will have the same scope as the U.S. patents. There will be many countries in which we will choose not to file or maintain patents because of the costs involved. Competitors may also design around our technology or develop competing technologies.
Additionally, any issued patents owned by or licensed to us now or in the future may be challenged, invalidated or circumvented. To the extent competitors or other third parties develop and market products or procedures that we believe infringe our patents and proprietary rights, we may be compelled to initiate lawsuits to protect and enforce our intellectual property rights. Such litigation is typically expensive, time-consuming and uncertain as to outcome, and may involve opponents who have much more extensive financial resources than we do. An unfavorable outcome of any such litigation could have a material adverse effect on our business and results of operations.
Third parties may claim that we infringe, misappropriate, or violate their intellectual proprietary rights, which could prevent us from commercializing and selling our products.
We may be required to defend against challenges to the validity of our patents and against claims relating to the alleged infringement of patent or proprietary rights of third parties.
Litigation initiated by a third-party claiming patent invalidity or patent infringement could:
• require us to incur substantial litigation expense, even if we are successful in the litigation;
• require us to divert significant time and effort of our management;
• result in the loss of our rights to develop, manufacture or market our products; and
• require us to pay substantial monetary damages or royalties in order to license proprietary rights from third parties or to satisfy judgments or to settle actual or threatened litigation.
Although patent and intellectual property disputes may be settled through licensing or similar arrangements, costs associated with these arrangements may be substantial and could include the long-term payment of royalties. Furthermore, the required licenses may not be made available to us on acceptable terms. Accordingly, an adverse determination in a judicial or administrative proceeding or a failure to obtain necessary licenses could prevent us from manufacturing and selling our products or increase our costs to market our products.
Any potential dispute involving patents or other intellectual property could affect our customers, which could trigger our indemnification obligations to them and result in substantial expense to us.
In any potential dispute involving patents or other intellectual property, our customers could also become the target of litigation. Our agreements with customers generally include indemnification or other provisions under which we agree to indemnify or otherwise be liable to them for losses suffered or incurred as a result of third-party claims of intellectual property infringement. Large indemnity payments could harm our business, results of operations and financial condition. From time to time, customers require us to indemnify or otherwise be liable to them for breach of confidentiality or failure to implement adequate security measures with respect to their intellectual property and trade secrets. Although we normally contractually limit our liability with respect to such obligations, certain of our customer agreements may not include maximum loss clauses, which may result in substantial liability. Any litigation against our customers could trigger indemnification obligations under some of our agreements, which could result in substantial expense to us, and which could materially and affect our financial results.
We rely in part on trade secrets to protect our technology, and our failure to obtain or maintain trade secret protection could limit our ability to compete.
We rely on trade secrets to protect some of our technology and proprietary information, especially where we believe patent protection is not appropriate or obtainable. However, trade secrets are difficult to protect. Litigating a claim that a third party had illegally obtained and was using our trade secrets could be expensive and time-consuming, and the outcome would be unpredictable. Moreover, if our competitors independently develop similar knowledge, methods and expertise, it will be difficult for us to enforce our rights, and our business could be harmed.
If we or our third-party providers fail to protect Confidential Information and/or experience a significant disruption in our IT Systems, including security breaches, or if we fail to implement new systems and software successfully, there may be damage to our brand and reputation, material financial penalties, and legal liability, and our business operations and financial condition could be adversely affected.
We depend on computer systems, hardware, software, technology infrastructure and online sites and networks for both internal and external operations that are critical to our business (collectively “IT Systems”) to, among other functions, process orders and bills, collect and make payments, interact with customers and suppliers, manage inventory, coordinate research and development, store scientific and regulatory data, facilitate communication and project management internally and with partners, and otherwise conduct business. We also depend on these IT Systems to respond to customer inquiries, contribute to our overall internal control processes, maintain records of our property, plant and equipment and record and pay amounts due to vendors and other creditors. We own and manage some of these IT Systems but also rely on third parties for a range of IT Systems and related products and services. We and certain of our third-party providers collect, maintain and process data about customers, employees, business partners and others, including information about individuals, as well as proprietary information belonging to our business such as trade secrets (collectively, “Confidential Information”).
The failure of our IT Systems to perform as we anticipate could disrupt our business and could result in transaction errors, processing inefficiencies and the loss of sales and customers. As we upgrade or change systems, we may also experience interruptions in service, loss of data or reduced functionality and other unforeseen material issues which could adversely impact our ability to provide quotes, take customer orders and otherwise run our business in a timely manner. In addition, if our new systems fail to provide accurate and increased visibility into pricing and cost structures, it may be difficult to improve or maximize our profit margins. As a result, our results of operations could be adversely affected.
In addition, cyber-attacks or security breaches could compromise the confidentiality, integrity, and availability of our Confidential Information or our IT Systems. Our IT Systems are subject to potential disruptions, including, but not limited to, significant network or power outages, cyberattacks (including ransomware), computer viruses, other malicious code and/or unauthorized access attempts, any of which, if successful, could compromise our Confidential Information and IT Systems, including disrupting our operations. There can be no assurance that any controls and procedures that we have in place will be sufficient to protect us from these risks. Further, as cyber threats are continually evolving, our controls and procedures may become inadequate, and we may be required to devote additional resources to modify or enhance our systems in the future.
We and certain of our third-party providers have experienced cyberattacks and other incidents, and we expect such attacks and incidents to continue in varying degrees. While to date no incidents have had a material impact on our operations or financial results, we cannot guarantee that material incidents will not occur in the future. Any adverse impact to the availability, integrity or confidentiality of our IT Systems or Confidential Information could require us to expend resources to remediate cyber-related incidents or to enhance and strengthen our cyber security. Additionally, such incidents could result in violations of privacy and other laws, litigation, regulatory investigations, enforcement actions, , publicity, sales or business , any of which could have a material effect on our business, financial condition or results of operations. Finally, we cannot guarantee that any costs and liabilities incurred in relation to an attack or will be covered by our existing insurance policies or that applicable insurance will be available to us in the future on economically reasonable terms or at all.
As a remote-first company, we are subject to heightened operational and cybersecurity risks.
As a remote-first company, we are subject to heightened operational and cybersecurity risks. We are a remote-first company, meaning that for all existing roles many of our employees work from their homes or other non-company dwellings. For example, technologies in our employees’ and service providers’ homes and shared office spaces may not be as robust and could cause the networks, information systems, applications, and other tools available to employees and service providers to be more limited or less reliable. Further, the security systems in place at our employees’ and service providers’ homes and shared office spaces may be less secure than those used in corporate offices, and while we have implemented technical and administrative safeguards to help protect our systems as our employees and service providers work from home, we may be subject to increased cybersecurity risk which could expose us to risks of data or financial loss, and could disrupt our business operations. There is no guarantee that the data security and privacy safeguards we have put in place will be completely effective or that we will not encounter risks associated with employees and service providers
accessing company data and systems remotely. We also face challenges due to the need to operate with a remote workforce and are addressing so to minimize the impact on our ability to operate.
Risks Related to Government Regulation
Government regulations and private party actions relating to the marketing and advertising of cosmetic products that include the Vegan Silk Technology Platform we develop may restrict, inhibit or delay our ability to sell such products and harm our business.
A variety of federal, state, and foreign government authorities regulate the advertising and promotion of cosmetic products, including the marketing claims that can be made regarding their properties and benefits. In the United States, the Food and Drug Administration (“FDA”) regulates the marketing of cosmetic products. While cosmetic products and labeling do not require pre-market approval and the FDA does not have a list of approved or accepted claims, cosmetic labeling and claims must be truthful and not misleading. In addition, a cosmetic product may not be marketed with claims regarding the treatment or prevention of diseases or conditions or an effect on the structure or function of the body, which would cause such products to meet the definition of a drug and be subject to the requirements applicable to drug products. The FDA has issued warning letters to companies marketing their cosmetic products or ingredients for improper drug claims, including, for example, product claims regarding anti-aging properties and defense to protect the skin.
In addition, consumer protection laws and regulations governing our business continue to expand. In some states such as California, class-action lawsuits may be based on similar standards regarding false and misleading advertising and other increasingly novel theories of liability. There is a degree of subjectivity in determining whether a labeling or marketing claim is appropriate under these standards. While we believe our product claims are truthful, not misleading, and would not cause our products to be regulated as drugs, there is always a risk that the FDA may determine otherwise, issue us a warning letter or untitled letter, require us to modify our product claims or take other enforcement action, or that we may be subject to consumer protection litigation. In addition, plaintiffs’ lawyers have filed class action or false advertising lawsuits against cosmetic companies based on their marketing claims. Federal and state consumer protection agencies are expected to continue their active enforcement of applicable laws and regulations. Any into the regulatory status of our products and any related in the marketing and sale of these products could our reputation and image in the marketplace.
Other regulatory authorities, such as the U.S. Federal Trade Commission (“FTC”), typically require adequate and reliable scientific substantiation to support marketing claims. This standard for substantiation can vary widely from market to market and there is no assurance that the research and development efforts that we undertake to support our claims will be deemed adequate for any particular product or claim. The FTC also has issued Guides Concerning the Use of Endorsements and Testimonials in Advertising (“Guides”), under which product testimonials must come from “bona fide” users of a product and otherwise reflect the honest opinions, beliefs, or experience of the endorser. Additionally, companies must disclose material connections between themselves and their endorsers and are subject to liability for false or unsubstantiated statements regarding its products made by endorsers including, for example, marketing atypical results of using a product. The FTC actively investigates online product reviews and may bring enforcement actions against a company for failure to comply with applicable requirements for testimonials. If we fail to comply with the Guides or make product , the FTC could bring an enforcement action us, and we could be and/or to alter our marketing materials.
If our products are not manufactured in compliance with applicable legal requirements, do not meet quality and cosmetic constituent standards, or otherwise result in adverse health effects in consumers, it could result in reputational harm, remedial costs, or governmental authority enforcement.
In the United States, the Federal Food, Drug and Cosmetic Act, administered and enforced by the FDA, prohibits the introduction, or delivery for introduction, into interstate commerce of cosmetics that are adulterated or misbranded. The FDA has historically recommended (but not required) certain voluntary good manufacturing practices (“GMPs”) designed to reduce the risk of violating this prohibition. However, recent legislation expanded the FDA’s authority to regulate cosmetics, including their manufacturing. Specifically, the Modernization of Cosmetics Regulation Act of 2022, signed into law in December 2022 (“MoCRA”), established, among other things, new FDA authority over cosmetics, including requirements to register manufacturing facilities and list cosmetic products and ingredients, report serious adverse events, substantiate safety of the cosmetic, label cosmetics with certain information, and maintain certain records. The FDA now also has authority to enforce, and is required to issue, regulations governing GMPs for cosmetics, though the FDA has yet to propose GMP regulations, despite the requirement under MoCRA that the FDA propose a cosmetics GMP rule by December 2024.
While many of MoCRA’s provisions apply directly to the entities whose name appears on the label of the finished cosmetic, and we do not produce any finished cosmetics, our customers will be required to comply with MoCRA, and may contractually impose certain of these requirements on us. Until cosmetic GMPs are promulgated, adherence to recommended GMPs can reduce the risk that the FDA finds such products have been rendered adulterated or misbranded in violation of applicable law. The FDA’s draft guidance on cosmetic GMPs, most recently updated in June 2013, provides recommendations related to process documentation, recordkeeping, building and facility design, equipment maintenance and personnel. The FDA also recommends that manufacturers maintain product complaint and recall files and voluntarily report adverse events to the agency. In addition, FDA regulations prohibit or otherwise restrict the use of certain ingredients in cosmetic products. If our third-party suppliers fail to manufacture our products in compliance with voluntary GMPs, or mandatory GMPs when promulgated and if imposed, we or our customers could be subject to regulatory enforcement action, and we could be deemed in of our contractual arrangements with our customers, which could have a material impact on our business. Such could also lead to customer , events, product withdrawal or , or increase the likelihood that our products are rendered or , any of which could result in publicity, remedial costs, or regulatory enforcement that could impact our ability to continue selling certain products.
If our products are found to be defective or unsafe, we may be subject to various product liability claims, which could harm our reputation and business.
Our success depends, in part, on the quality and safety of our products. If our products are found to be defective, unsafe, or otherwise fail to meet our customers’ expectations or if our product claims are found to be unfair or deceptive, our relationships with customers could suffer, the appeal of one or more of our products could be diminished and we could lose sales, any of which could result in an adverse effect on our business.
We may be subject to product liability claims, including that our products fail to meet quality or manufacturing specifications, contain contaminants, include inadequate instructions as to their proper use, include inadequate warnings concerning side effects and interactions with other substances, or cause adverse reactions or side effects. Product liability claims could increase our costs, and adversely affect our business and financial results.
Changes in government regulation may require us to modify our operations, including formulations that we utilize in our products.
Several intergovernmental organizations, countries and other political subdivisions of countries have enacted, or are considering enacting, laws and regulations designed to encourage or mandate the increased use of sustainable alternatives to plastics, or to dictate how much water, power, or other inputs may be used to manufacture products. These laws and regulations could require us to modify our manufacturing operations and processes, product designs, and/or product formulations to comply with these laws and regulations. Our inability or failure to comply with these laws and regulations could negatively affect our ability to manufacture and supply products, and/or the demand for, and marketability of, our products, which would have an adverse impact on our financial results.
Any actual or perceived failure to comply with new or existing laws, regulations and other requirements relating to the privacy, security and processing of Personal Information could adversely affect our business, results of operations, or financial condition.
In connection with running our business, we receive, store, use and otherwise process information that relates to individuals and/or constitutes “personal data,” “personal information,” “personally identifiable information,” or similar terms under applicable data privacy laws (collectively, “Personal Information”), including from and about actual and prospective customers, as well as our employees and business contacts. We may therefore be subject to a variety of federal, state and foreign laws, regulations and other requirements relating to the privacy, security and handling of Personal Information.
The application and interpretation of such requirements are constantly evolving and are subject to change, creating a complex compliance environment. In some cases, these requirements may be either unclear in their interpretation and application or they may have inconsistent or conflicting requirements with each other. Further, there has been a substantial increase in legislative activity and regulatory focus on data privacy and security globally, including in relation to cybersecurity incidents.
It is possible that new laws, regulations and other requirements, or amendments to or changes in interpretations of existing laws, regulations and other requirements, may require us to incur significant costs, implement new processes, or change our handling of information and business operations. In addition, any failure or perceived failure by us to comply with laws, regulations and other requirements relating to the privacy, security and handling of information could result in legal claims or proceedings (including class actions), regulatory investigations or enforcement actions. We could incur significant costs in investigating and defending such claims and, if found liable, pay significant damages or fines or be required to make changes to our business. These proceedings and any subsequent adverse outcomes may subject us to significant negative publicity and an erosion of trust. If any of these events were to occur, our business, results of operations, and financial condition could be materially affected.
Risks Related to our Warrants
Our Warrants are exercisable for our Common stock, which would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders.
As of February 28, 2025 there were 9,583,265 Public Warrants, 5,000,000 Sponsor Warrants, and 3,000,000 Triton Warrants outstanding that are exercisable for shares of our Common stock at an exercise price of $11.50, $0.50, and $0.50 per share of Common stock, respectively.
To the extent such Warrants are exercised, additional shares of Common stock will be issued, which will result in dilution to the then existing holders of Common stock and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market or the fact that such Warrants may be exercised could adversely affect the market price of Common stock. However, there is no guarantee that the Warrants will ever be in the money prior to their expiration, and as such, the Warrants may expire worthless.
We may amend the terms of the Public Warrants in a manner that may be adverse to holders with the approval by the holders of at least 50% of the then outstanding Public Warrants.
The Public Warrants were issued in registered form under the Public Warrant Agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us. The Public Warrant Agreement provides that the terms of the Public Warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision but requires the approval by the holders of at least 50% of the then outstanding Public Warrants to make any change that adversely affects the interests of the registered holders. Accordingly, we may amend the terms of the Public Warrants in a manner adverse to a holder if holders of at least 50% of the then outstanding Public Warrants approve of such amendment. Although our ability to amend the terms of the Public Warrants with the consent of at least 50% of the then outstanding Public Warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the Public Warrants, convert the Public Warrants into stock or cash, shorten the exercise period or decrease the number of warrant shares issuable upon exercise of a Public Warrant.
We may redeem your unexpired Public Warrants prior to their exercise at a time that is disadvantageous to you, thereby making your Public Warrants worthless.
We have the ability to redeem outstanding Public Warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per Public Warrant, provided that the last reported sales price of Common stock equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date we give notice of redemption. If and when the Public Warrants become redeemable by us, then we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws. Redemption of the outstanding Public Warrants could force you (i) to exercise your Public Warrants and pay the exercise price therefor at a time when it may be disadvantageous for you to do so, (ii) to sell your Public Warrants at the then-current market price when you might otherwise wish to hold your Public Warrants or (iii) to accept the nominal redemption price which, at the time the outstanding Public Warrants are called for redemption, is likely to be substantially less than the market value of your Public Warrants. Recent trading prices for a share of our Common stock have not exceeded the $18.00 per share threshold at which the Public Warrants would become redeemable.
In addition, we have the ability to redeem the outstanding Public Warrants prior to their expiration, at a price of $0.10 per warrant if, among other things, the last reported sale price of our Common stock for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which we send the notice of redemption to the warrant holders equals or exceeds $10.00 per share (as adjusted for share splits, share dividends, rights issuances,
subdivisions, reorganizations, recapitalization and the like). In such a case, the holders will be able to exercise their warrants prior to redemption for several shares of Common stock determined based on the redemption date and the fair market value of our Common stock. The value received upon exercise of the Public Warrants (i) may be less than the value the holders would have received if they had exercised their warrants at a later time where the underlying share price is higher and (ii) may not compensate the holders for the value of the Public Warrants, including because the number of shares received is capped at 0.361 shares of Common stock per Public Warrants (subject to adjustment) irrespective of the remaining life of the warrants.
We may only call the Public Warrants for redemption upon a minimum of 30 days’ prior written notice of redemption to each holder.
In the event we determine to redeem the Public Warrants, holders of redeemable warrants would be notified of such redemption as described in the Warrant Agreement. Specifically, if we elect to redeem all of the redeemable warrants as described above, we will fix a date for the redemption (the “Redemption Date”). Notice of redemption will be mailed by first class mail, postage prepaid, by us not less than 30 days prior to the Redemption Date to the registered holders of the redeemable warrants to be redeemed at their last addresses as they appear on the registration books. Any notice mailed in the manner provided in the Public Warrant Agreement will be conclusively presumed to have been duly given whether the registered holder received such notice. Accordingly, if a holder fails to receive the notice of or otherwise fails to respond on a timely basis, it could lose the benefit of being a holder of a Public Warrant. In addition, beneficial owners of the redeemable warrants will be notified of such redemption via us posting of the redemption notice to DTC.
Risks Related to Our Common Stock
Global economic and financial market conditions, including severe market disruptions and the potential for a significant and prolonged global economic downturn, could impact our business operations in a number of ways, including, but not limited to, reduced demand in key customer end-markets, such as cosmetics and personal care products.
The global economy can be negatively impacted by a variety of factors such as the spread or fear of spread of contagious diseases in locations where end-products utilizing our Vegan Silk Technology Platform products or any of our other future biomaterial products are sold, man-made or natural disasters, actual or threatened war, terrorist activity, political unrest, civil strife and other geopolitical uncertainty. Such adverse and uncertain economic conditions may impact retail, specifically cosmetics and personal care products, and other customer and consumer demand for our products. In addition, our ability to manage normal commercial relationships with our suppliers, current manufacturing partner and any future manufacturing partners, customers, consumers and creditors may suffer. Our results of operations depend upon, among other things, the financial health and strength of our customers as well as our suppliers, current manufacturing partner and any future manufacturing partners, or other third parties on which we rely, our ability to maintain and increase sales volume with our existing customers, our ability to attract new customers, and our ability to provide products that fulfill our customers’ needs at the right price. Decreases in demand for our products without a corresponding decrease in costs would put pressure on margins and would impact our financial results. economic conditions or uncertainty may have an effect on our sales and .
Changes in the U.S. and global social, political, regulatory and economic conditions or in laws and policies governing foreign trade such as new tariffs, manufacturing, development and investment could also adversely affect our business. If global economic conditions remain volatile for a prolonged period or experience further disruptions, our business, results of operations and financial condition could be adversely affected.
The market price of shares of our Common stock has been and may be in the future volatile or may decline regardless of our operating performance. You may lose some or all your investment.
The trading price of our Common stock has been volatile in the past, and may continue to be volatile in the future. The stock market recently has experienced extreme volatility. This volatility often has been unrelated or disproportionate to the operating performance of particular companies. You may not be able to resell your shares at an attractive price due to a number of factors such as those listed in this section and the following:
• Our operating and financial performance and prospects.
• Our quarterly or annual earnings or those of other companies in our industry compared to market expectations.
• Conditions that impact demand for our Vegan Silk Technology Platform products or our future biomaterial products.
• Future announcements concerning our business, our clients’ businesses or our competitors’ businesses.
• The public’s reaction to our press releases, other public announcements and filings with the SEC.
• The market’s reaction to our reduced disclosure and other requirements as a result of being an “emerging growth company” under the Jumpstart Our Business Startups Act (the “JOBS Act”).
• The size of our public float.
• Coverage by or changes in financial estimates by securities analysts or failure to meet their expectations.
• Market and industry perception of our success, or lack thereof, in pursuing our growth strategy.
• Strategic actions by us or our competitors, such as acquisitions or restructurings.
• Changes in laws or regulations which adversely affect our industry or us.
• Privacy and data protection laws, privacy or data breaches, or the loss of data.
• Changes in accounting standards, policies, guidance, interpretations or principles.
• Changes in senior management or key personnel.
• Issuances, exchanges or sales, or expected issuances, exchanges or sales of our capital stock.
• Changes in our dividend policy.
• Adverse resolution of new or pending litigation against us; and
• Changes in general market, economic and political conditions in the United States and global economies or financial markets, including those resulting from natural disasters, terrorist attacks, acts of war and responses to such events.
These broad market and industry factors may materially reduce the market price of our Common stock, regardless of our operating performance. In addition, price volatility may be greater if the public float and trading volume of our Common stock is low. As a result, you may suffer a loss on your investment.
In the past, following periods of market volatility, stockholders have instituted securities class action litigation. If we were involved in securities litigation, it could have a substantial cost and divert resources and the attention of management from our business regardless of the outcome of such litigation.
We may acquire or invest in companies, which may divert our management’s attention and result in additional dilution to our stockholders. We may be unable to integrate acquired businesses and technologies successfully or achieve the expected benefits of such acquisitions.
We may evaluate and consider potential strategic transactions, including acquisitions of, or investments in, businesses, technologies, services, products, and other assets in the future. An acquisition, investment or business relationship may result in unforeseen operating difficulties and expenditures. In particular, we may encounter difficulties assimilating or integrating the businesses, technologies, products, personnel, or operations of the acquired companies. Key personnel of the acquired companies may choose not to work for us, their software may not be easily adapted to work with ours, or we may have difficulty retaining the customers of any acquired business due to changes in ownership, management, or otherwise. We may also experience difficulties integrating personnel of the acquired company into our
business and culture. Acquisitions may also disrupt our business, divert our resources and require significant management attention that would otherwise be available for development of our existing business. The anticipated benefits of any acquisition, investment, or business relationship may not be realized or we may be exposed to unknown risks or liabilities.
Negotiating these transactions can be time-consuming, difficult, and expensive, and our ability to close these transactions may often be subject to approvals that are beyond our control. Consequently, these transactions, even if undertaken and announced, may not close. For one or more of those transactions, we may:
• Issue additional equity securities that would dilute our stockholders.
• Use cash that we may need in the future to operate our business.
• Incur debt on terms unfavorable to us or that we are unable to repay.
• Incur large charges or substantial liabilities.
• Encounter difficulties retaining key employees of the acquired company or integrating diverse software codes or business cultures; and
• Become subject to adverse tax consequences, substantial depreciation, or deferred compensation charges.
Future litigation or similar legal proceedings could have a material adverse effect on our business and results of operations.
Lawsuits and other administrative or legal proceedings may arise in the course of our operations. We may also face heightened regulatory or other public scrutiny as a result of going public via a transaction with a special purpose acquisition company. These sorts of lawsuits or proceedings can involve substantial costs, including the costs associated with investigation, litigation and possible settlement, judgment, penalty or fines. In addition, lawsuits and other legal proceedings may be time-consuming and may require a commitment of management and personnel resources that will be diverted from our normal business operations. Although we generally maintain insurance to mitigate certain costs, there can be no assurance that costs associated with lawsuits or other legal proceedings will not exceed the limits of insurance policies. Moreover, we may be unable to continue to maintain our existing insurance at a reasonable cost, if at all, or to secure additional coverage, which may result in costs associated with lawsuits and other legal proceedings being uninsured. Our business, financial condition, and results of operations could be affected if a judgment, or fine is not fully covered by insurance.
Concentration of ownership among our existing directors, executive officers and principal stockholders may prevent new investors from influencing significant corporate decisions.
Our directors and executive officers and their affiliates and holders of greater than 5% of the Common stock, in the aggregat e, beneficially own approximately 70% of our outstanding stock. T hough we are not considered a “controlled company” for purposes of the Nasdaq Stock Market, subject to any fiduciary duties owed to our other stockholders under Delaware law, these stockholders may still be able to exercise significant influence over matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, and will have some control over our management and policies. Some of these persons or entities may have interests that are different from yours. For example, these stockholders may support proposals and actions with which you may disagree or which are not in your best interests. The concentration of ownership could delay or prevent a change in control of us, or otherwise discourage a potential acquirer from attempting to obtain control of us, which in turn could reduce the price of our stock.
In addition, these stockholders could use their voting influence to maintain our existing management and directors in office or support or reject other management and Board of Directors proposals that are subject to stockholder approval, such as amendments to our employee stock plans and approvals of significant financing transactions.
Sales of a substantial number of our securities in the public market by the registered holders or by our other existing security holders could cause the price of our Common stock and Warrants to fall.
The sale of shares of our Common stock in the public market, or the perception that such sales could occur, could harm the prevailing market price of shares of our Common stock. These sales, or the possibility that these sales may occur,
also might make it more difficult for us to sell equity securities in the future at a time and at a price that it deems appropriate.
We have filed a registration statement covering the resale of up to 28,319,770 shares of Common stock by the registered holders named therein. In particular, the securities registered include a significant portion of our total shares of Common stock outstanding. The registered holders include a number of beneficial owners of more than 5% of our Common stock, and they will be able to sell all of their registered shares (subject to contractual lockups and, in the case of our directors, executive officers and employees, compliance with our insider trading compliance policy) for so long as the registration statement to which the subject prospectus forms a part (the “resale prospectus”) is available for use. Approximately 70% of the shares of Common stock outstanding as of February 10, 2025 are held by 5% beneficial owners that have shares registered for resale pursuant to the resale prospectus.
Sales of a substantial number of our shares of Common stock or Warrants in the pu blic market by the registered holders or by our other existing security holders, or the perception that those sales might occur, could depress the market price of our Common stock and Public Warrants and could impair our ability to raise capital through the sale of additional equity securities. We are unable to predict the effect that such sales may have on the prevailing market price of our Common stock and Public Warrants. The sale of all the securities being offered under the resale prospectus could result in a significant decline in the public trading price of our securities. Despite such a decline in the public trading price, some of the registered holders may still experience a positive rate of return on the securities they purchased due to the differences in the purchase prices described in the resale prospectus and may still have incentive to sell their securities even at such depressed public trading prices. Other security holders may not be able to experience rates of return on securities they purchase due to the lower price at which our shares of Common stock are then trading.
We do not intend to pay dividends for the foreseeable future.
We currently intend to retain any future earnings to finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future. Moreover, the terms of our Ginkgo Note Purchase Agreement may restrict our ability to pay dividends, and any additional debt we may incur in the future may include similar restrictions. As a result, stockholders must rely on sales of their Common stock after price appreciation as the only way to realize any future gains on their investment.
If securities or industry analysts do not publish or cease publishing research or reports about our business, or our market, or if they change their recommendations regarding our securities adversely, the price and trading volume of our securities could decline.
The trading market for our securities is influenced by the research and reports that industry or securities analysts may publish about our business, market or competitors. If no securities or industry analysts commence coverage of our business, our share price and trading volume would likely be negatively impacted. If any of the analysts who may cover our business change their recommendation regarding our shares of Common stock adversely, or provide more favorable relative recommendations about our competitors, the price of our shares of Common stock would likely decline. If any analyst who may cover our business were to cease coverage of us or fail to regularly publish reports on it, we could lose visibility in the financial markets, which in turn could cause its share price or trading volume to decline.
The requirements of being a public company, including compliance with the reporting requirements of the Exchange Act, the requirements of the Sarbanes-Oxley Act and the requirements of Nasdaq, may strain our resources, increase our costs and distract management, and we may be unable to comply with these requirements in a timely or cost-effective manner.
As a public company, we are subject to laws, regulations and requirements, certain corporate governance provisions of the Sarbanes-Oxley Act, related regulations of the SEC and the requirements of Nasdaq. As a newly public company, complying with these statutes, regulations and requirements occupies a significant amount of time for our Board of Directors and management and significantly increases our costs and expenses. For example, we have had to institute a more comprehensive compliance function, comply with rules promulgated by Nasdaq, prepare and distribute periodic public reports in compliance with our obligations under the federal securities laws, establish new internal policies, such as those relating to insider trading. We have also had to retain and rely on outside counsel and accountants to a greater degree in these activities. In addition, being subject to these rules and regulations has made it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur
substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our Board of Directors or as executive officer.
Claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money available to us.
Our certificate of incorporation and bylaws fully provide indemnification and advancement of expenses for our directors and officers permitted by Section 145 of the DGCL. Additionally, we entered into indemnification agreements with our directors and officers that make indemnification rights and obligations mandatory in most respects, which may result in us incurring indemnification or advancement expenses that would not otherwise be required under the DGCL. While have secured an insurance policy intended to reimburse us for most or all of our indemnification and advancement expenses, we do not know if we will be able to maintain insurance with adequate levels of coverage. Any significant uninsured liability may require us to pay substantial amounts, which would have an adverse effect on our financial condition and results of operations.
If we are not able to maintain a listing on the national exchange for our securities, the trading market for our securities will be adversely affected.
If we are not able to maintain a listing for our Common stock on the Nasdaq for any reason, an active trading market for our securities may fail to develop or not be sustained. In the absence of an active trading market for our Common stock, you may not be able to sell your shares when desired or at or above the prices at which you acquired them. An inactive market may also impair our ability to raise capital by selling shares and may impair our ability to acquire other businesses or technologies using our shares as consideration, which, in turn, could materially and adversely affect our business.
Our failure to meet the continued listing requirements of Nasdaq could result in a delisting of our Common stock.
On November 6, 2024, we received a letter from Nasdaq stating that the closing bid price for our Common stock over the prior 30 days was below the minimum required share price for continued listing on Nasdaq (the "Minimum Bid Price Requirement").
In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have been provided a period of 180 calendar days, or until May 5, 2025, to regain compliance with the Minimum Bid Price Requirement. If, at any time during this 180-day period, the closing bid price of the Company’s Common stock is at least $1.00 for a minimum of 10 consecutive business days, Nasdaq staff will provide written notification that the Company has achieved compliance with the Minimum Bid Price Requirement.
Additionally, On February 10, 2025, we received a letter from Nasdaq notifying the Company that, for the last 30 consecutive business days, the Minimum Value of Listed Securities, as defined by Nasdaq (“MVLS”), of the Company’s Common stock, has been below the minimum $50 million requirement for continued listing on Nasdaq under Nasdaq Listing Rule 5450(b)(2)(A) (the “Minimum Market Value of Listed Securities Requirement”). On the same day, the Company also received a letter from Nasdaq notifying the Company that, for the last 30 consecutive business days, the Company’s minimum Market Value of Publicly Held Shares, as defined by Nasdaq (“MVPHS”), of the Company’s Common stock has been below the minimum $15 million requirement for continued listing on Nasdaq under Nasdaq Listing Rule 5450(b)(2)(C) (the “Minimum Market Value of Publicly Held Shares Requirement”). In accordance with Nasdaq Listing Rule 5810(c)(3)(A) and 5810(c)(3)(D), the Company has been provided a compliance period of 180 calendar days from receipt of letters, or until August 11, 2025 to regain compliance with the Minimum Market Value of Listed Securities Requirement and Minimum Market Value of Publicly Held Shares Requirement. To regain compliance with the Minimum Market Value of Listed Securities Requirement, the Company’s MVLS must close at $50 million or more for a minimum of 10 consecutive business days during the compliance period. To regain compliance with the Minimum Market Value of Publicly Held Shares Requirement, the Company’s MVPHS must be $15 million or more for a minimum of 10 consecutive business days during the compliance period.
These notices have had no immediate impact on the listing of our Common stock, which will continue to be listed and traded on Nasdaq during the period allowed to regain compliance, subject to our compliance with other listing standards. However, In the event we do not regain compliance with these Nasdaq requirements within the applicable compliance period, Nasdaq could commence proceedings to delist our Common stock, following which our Common Stock would trade on the over-the-counter market for so long as we remain eligible to trade on such market.
A delisting of our Common stock from Nasdaq may make it more difficult for us to raise capital on favorable terms in the future. Such a delisting would likely have a negative effect on the price of our Common stock and would impair your ability to sell or purchase our Common stock when you wish to do so. Further, if we were to be delisted from Nasdaq, our Common stock would cease to be recognized as covered securities, and we would be subject to regulation in each state in which we offer our securities. Moreover, there is no assurance that any actions that we would take to restore our compliance, if needed, would stabilize the market price, MVLS, MVPHS or improve the liquidity of our Common stock, prevent our Common stock from falling below the minimum requirements for continued listing again, or prevent future non-compliance with Nasdaq’s rules. There is also no assurance that we will maintain compliance with the other listing standards of Nasdaq.
We qualify as an “emerging growth company” and a “smaller reporting company” and the reduced public company reporting requirements applicable to emerging growth companies and smaller reporting companies may make our securities less attractive to investors.
We qualify as an “emerging growth company,” as defined in the JOBS Act. For so long as we remain an emerging growth company, we are permitted and plan to rely on exemptions from certain disclosure requirements that are applicable to public companies that are not emerging growth companies. These provisions include, but are not limited to: an exemption from compliance with the auditor attestation requirement in the assessment of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act; reduced disclosure obligations regarding executive compensation arrangements in our periodic reports, registration statements 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, the JOBS Act permits emerging growth companies to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We take advantage of the exemptions discussed above. As a result, the information we provide will be different than the information that is available with respect to other public companies that are not emerging growth companies or that are not taking advantage of such exemptions.
We will remain an emerging growth company until the earliest of (i) December 31, 2026, the end of the fiscal year following the fifth anniversary of the closing of the Golden Arrow Merger Corp. (“GAMC”) IPO, (ii) the first fiscal year after our annual gross revenue exceeds $1.235 billion, (iii) the date on which we have, during the immediately preceding three-year period, issued more than $1.00 billion in non-convertible debt securities, or (iv) the end of any fiscal year in which the market value of our Common stock held by non-affiliates exceeds $700.0 million as of the end of the second quarter of that fiscal year.
We are also a “smaller reporting company” as defined in the Exchange Act. 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) our voting and non-voting common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter or (ii) our annual revenue is less than $100.0 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.
We cannot predict whether investors will find our Common stock less attractive if we 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 securities, and the market price of our securities may be more volatile.
Our certificate of incorporation contains anti-takeover provisions that could adversely affect the rights of our stockholders.
Our certificate of incorporation contains provisions to limit the ability of others to acquire control of us or cause it to engage in change-of-control transactions, including, among other things:
• Provisions that authorize our Board of Directors, without action by its stockholders, to issue additional shares of or Common stock and preferred stock with preferential rights determined by our Board of Directors.
• Provisions that permit only a majority of our Board of Directors, the chairperson of the Board of Directors or the chief executive officer to call stockholder meetings and therefore do not permit stockholders to call special meetings of the stockholders.
• Provisions limiting stockholders’ ability to act by written consent; and
• A staggered board whereby our directors are divided into three classes, with each class subject to retirement and re-election once every three years on a rotating basis.
These provisions could have the effect of depriving our stockholders of an opportunity to sell their shares of Common stock at a premium over prevailing market prices by discouraging third parties from seeking to obtain control of us in a tender offer or similar transaction. With our staggered Board of Directors, at least two annual or special meetings of stockholders will generally be required in order to effect a change in a majority of our directors. Our staggered Board of Directors can discourage proxy contests for the election of our directors and purchases of substantial blocks of our shares by making it more difficult for a potential acquirer to gain control of our Board of Directors in a relatively short period of time.
Our certificate of incorporation provides, subject to limited exceptions, that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for certain stockholder litigation matters, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or stockholders.
Our certificate of incorporation requires, to the fullest extent permitted by law, that (i) derivative actions brought in our name, (ii) asserting a claim of breach of fiduciary duty owed by any of our directors, officers or stockholders, (iii) actions asserting a claim pursuant to the DGCL, our certificate of incorporation and our bylaws, or (iv) any actions asserting claims governed by the internal affairs doctrine, may be brought only in the Court of Chancery in the State of Delaware (or, in the event that the Chancery Court does not have jurisdiction, the federal district court for the District of Delaware or other state courts of the State of Delaware). Subject to the preceding sentence, the federal district courts of the United States of America will be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. However, such forum selection provisions will not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal courts of the United States have exclusive jurisdiction.
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 with us or our directors, officers, or other employees, which may discourage such lawsuits against us and our directors, officers, and other employees and result in increased costs for investors to bring a claim. Alternatively, if a court were to find the choice of forum provision contained in our certificate 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 harm our business, results of operations, and financial condition.
Additionally, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. As noted above, our certificate of incorporation provides that the federal district courts of the United States of America will have jurisdiction over any action arising under the Securities Act. Accordingly, there is uncertainty as to whether a court would enforce such provision. Our stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder.
Any person or entity purchasing or otherwise acquiring any interest in shares of Common stock or our capital stock shall be deemed to have notice of and consented to the forum provisions in our certificate of incorporation.
