Item 1A. Risk Factors.
An investment in our common stock involves a high degree of risk. You should carefully consider the following risk factors in addition to other information in this report before purchasing our common stock. The risks and uncertainties described below are those that we currently deem to be material and that we believe are specific to us, our industry and our stock. In addition to these risks, our business may be subject to risks currently unknown to us. If any of these or other risks actually occurs, our business may be adversely affected, the trading price of our common stock may decline and you may lose all or part of your investment.
Summary Risk Factors
Risks Related to Our Company
We have a history of losses, we can provide no assurance that we will ever become profitable, and the audit report issued by M&K CPAs, PLLC in connection with our audited financial statements as of and for the year ended December 31, 2025 includes an explanatory paragraph stating that there is substantial doubt about our ability to continue as a going concern.
We will need to raise additional capital in the future, which capital may not be available or, if available, may not be available on acceptable terms.
Our growth could strain our personnel and infrastructure resources.
Strategic acquisitions and other transactions that we complete in the future could prove difficult to integrate, disrupt our business, adversely affect our operating results and dilute stockholder value.
We depend upon our executive officers and may not be able to retain or replace these individuals or recruit additional personnel if they leave, which could harm our business.
Our success depends on our SemiCab technology platform attaining market acceptance by transportation providers.
Our failure or inability to enforce our trademarks, trade secrets and other proprietary rights could adversely affect our image, brands and competitive position.
We may not be able to protect our intellectual property rights throughout the world.
Our information technology systems or data, or those of our service providers or customers or users, could be subject to cyber-attacks or other security incidents, which could result in significant liability, reputational damage and other adverse consequences to us.
The failure of our information technology systems could significantly disrupt the operation of our business.
We rely on third parties for most of our management information systems and for other back-office functions.
Failure to protect the integrity and security of personal information of our customers and employees could result in substantial costs, expose us to litigation and damage our reputation.
Issues in the use of AI technologies in our SemiCab business may result in reputational harm or liability to us, and our business, operating results, and financial results may be adversely affected.
Any significant changes in U.S. trade or other policies that block or restrict imports or increase import tariffs could have a material adverse effect on results of operations.
Our business, financial condition and results of operations may be materially adversely affected by any negative impact on the global economy and capital markets resulting from the conflict in Ukraine and the Middle East and other geopolitical tensions.
High inflation and unfavorable economic conditions could negatively affect our business, financial condition and results of operations.
We are exposed to the credit risk of customers who are experiencing financial difficulties and if these customers are unable to pay us, our revenue and results of operations will be adversely impacted.
We may have trouble hiring additional qualified personnel.
The industries in which we operate are subject to international, federal, state and local laws, compliance with which is both complex and costly.
We could be a party to litigation that could adversely affect us by diverting management attention, increasing our expenses and subjecting us to significant monetary damages and other remedies.
Our certificate of incorporation provides limitations on director liability and indemnification of directors and officers and employees.
Our insurance may not provide adequate levels of coverage against claims.
Our inability or failure to recognize, respond to and effectively manage the accelerated impact of social media could materially adversely impact our business.
An impairment in the carrying value of our fixed assets, intangible assets or goodwill could adversely affect our financial condition and results of operations.
We are subject to risks related to the sale of our Singing Machine business.
Significant adverse weather conditions and other disasters could negatively impact our results of operations.
Risks Related to the Streeterville Transaction
The sale of a substantial number of our securities in the public market by Streeterville and/or by our existing security holders could cause the price of our common stock to fall.
Shares of our common stock purchased by Streeterville may be issued at a price significantly below the prevailing market price of our common stock, resulting in substantial dilution of existing stockholders and a decrease in the price of our common stock.
We may be required to make substantial cash payments to Streeterville, which could reduce the amount of cash available to fund our operations.
Risks Related to Ownership of Our Securities
We may raise additional funds in the future through the issuance of equity securities or debt, which funding may be dilutive to stockholders or impose operational restrictions on us.
The market price of our common stock is likely to be highly volatile and subject to wide fluctuations.
Our quarterly and annual operating results may fluctuate due to increases and decreases in sales and other factors.
Our common stock may be affected by price fluctuations, which could adversely impact the value of our common stock.
FINRA sales practice requirements may limit a stockholder’s ability to buy and sell our securities.
An investment in our securities is speculative, and there can be no assurance of any return on any such investment.
We identified material weaknesses in our internal control over financial reporting during the assessment of our internal control that we performed in connection with the preparation of our audited consolidated financial statements included herein.
If we are unable to establish and maintain an effective system of internal control, we may not be able to accurately report our financial results on a timely basis or prevent fraud.
The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members.
If we are not able to comply with the applicable continued listing requirements of the Nasdaq, it could delist us, which may adversely affect the market price and liquidity of our common stock.
New laws, regulations, and standards relating to corporate governance and public disclosure may create uncertainty for public companies, increase legal and financial compliance costs and make some activities more time consuming.
As a “smaller reporting company” under applicable law, we are subject to lessened disclosure requirements, which could leave our stockholders without information or rights available to stockholders of more mature companies.
Applicable SEC rules governing the trading of “penny stocks” may limit the trading and liquidity of our common stock, which may affect the trading price of our common stock.
We have never paid any dividends on our common stock and do not intend to pay any dividends on our common stock in the foreseeable future.
Risks Related to Our Company
We have a history of losses, we can provide no assurance that we will ever become profitable, and the audit report issued by M&K CPAs, PLLC in connection with our audited financial statements as of and for the year ended December 31, 2025 includes an explanatory paragraph stating that there is substantial doubt about our ability to continue as a going concern.
We incurred net losses available to common stockholders of $15,900,000 and $23,257,000 for our fiscal years ended December 31, 2025 and 2024, respectively, and had accumulated deficits of $65,072,000 and $49,172,000 as of December 31, 2025 and 2024, respectively. In addition, net cash used by operating activities was $7,309,000 and $3,985,000 for our fiscal years ended December 31, 2025 and 2024, respectively. Based upon this, our current cash resources and our internally generated cash flow projections, the audit report issued by M&K CPAS, PLLC in connection with our audited financial statements as of and for the year ended December 31, 2025 includes an explanatory paragraph stating that there is substantial doubt about our ability to continue as a going concern. Our future profitability is dependent upon our ability to successfully execute upon our business plan. We can provide no assurance that we will be able to sustain or increase profitability on a quarterly or annual basis. Accordingly, we may continue to generate losses in the future and, in the extreme case, may need to operations.
We will need to raise additional capital in the future, which capital may not be available or, if available, may not be available on acceptable terms.
Our current cash resources will not be sufficient to sustain our current operations for the next 12 months. As a result, we will need to obtain additional capital through external sources of financing. We may attempt to obtain additional capital through the sale of equity securities or the issuance of short- and long-term debt. If we raise additional funds by issuing shares of our common stock, our stockholders will experience dilution. If we raise additional funds by issuing securities exercisable or convertible into shares of our common stock, our stockholders will experience dilution in the event the securities are exercised or converted, as the case may be, into shares of our common stock. Debt financing may involve agreements containing covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, issuing equity securities, making capital expenditures for certain purposes or above a certain amount, or declaring dividends. In addition, any equity or debt securities that we issue may have rights, preferences and privileges senior to those of the securities held by our stockholders.
While we are optimistic about our ability to raise sufficient funds to continue our operations for at least one year after the date of this report, we have not made arrangements to obtain additional capital and can provide no assurance that additional financing will be available in an amount or on terms acceptable to us, if at all. Our ability to obtain additional capital will be subject to a number of factors, including maintenance of our listing on the Nasdaq, market conditions and our operating performance. These factors may make the timing, amount, terms or conditions of any proposed future financing transactions unattractive to us. If we cannot raise additional capital when needed, or if such capital cannot be obtained on acceptable terms, we may not be able to pay our costs and expenses as they are incurred, take advantage of future acquisition opportunities, respond to competitive pressures or unanticipated events, or otherwise execute upon our business plan. This may adversely affect our business, financial condition and results of operations and, in the extreme case, cause us to discontinue operations.
Our growth could strain our personnel and infrastructure resources.
We expect to enter a stage of rapid growth in our operations which could place a significant strain on our management, administrative, operational and financial infrastructure. Our future success will depend in part upon the ability of our management to manage growth effectively. Our existing management systems, financial and management controls, and information and reporting systems and procedures may not be adequate to support our expansion. Our ability to manage our growth effectively will require us to continue to enhance these systems, controls and procedures and to locate, hire, train and retain qualified management and operating personnel. If we fail to successfully manage our growth, we may be unable to execute upon our business plan, which could have an adverse effect on our business, financial condition and results of operations.
Strategic acquisitions and other transactions that we complete in the future could prove difficult to integrate, disrupt our business, adversely affect our operating results and dilute stockholder value.
On July 3, 2024, we completed the acquisition of substantially all of the assets and the assumption of certain liabilities of SemiCab, Inc., which was the owner of the United States component of our AI logistics and distribution business. On May 2, 2025, we and SemiCab Holdings completed the acquisition of substantially all of the issued and outstanding equity shares of SMCB and we purchased the 20% membership interest in SemiCab Holdings then held by SemiCab, Inc. We may continue to expand our business through the acquisition of additional businesses in the future.
To successfully execute any acquisition or development strategy, we need to identify suitable acquisition or development candidates, negotiate acceptable acquisition or development terms, obtain appropriate financing, and successfully integrate any businesses and assets acquired. Any acquisition or development transaction that we pursue, whether or not successfully completed, will subject us to numerous risks and uncertainties, including:
our ability to accurately assess the value, growth potential, strengths, weaknesses, contingent and other liabilities, and potential profitability of the target businesses and assets;
our ability to complete the transaction and integrate the operations, technologies, services and personnel of any businesses or assets acquired;
the costs associated with the completion of the transaction and the integration of the businesses or assets acquired;
our ability to generate sufficient revenue to offset the transaction costs and achieve projected economic and operating synergies;
the diversion of financial and management resources from existing operations and potential loss of key personnel;
the risks associated with entering new domestic markets and conducting operations where we have little or no prior experience;
the possible negative impact of the transaction on our reputation and the reputation of the business that we acquire; and
the effect of any limitations imposed by federal and state tax laws on our ability to use all or a portion of our pre-transaction net operating losses against post-transaction income.
If we fail to properly evaluate and execute any acquisition or development transactions that we are currently pursuing or will pursue in the future, our business, financial condition and results of operations could be seriously harmed. Additionally, we may be limited in our ability to evaluate such acquisitions as a result of incomplete or inaccurate information from the target businesses.
Future acquisitions may provide for additional contingent payments based on the achievement of performance targets or milestones. Management must exercise considerable discretion when estimating the fair value of contingent payments. Although these estimates are based on management’s best knowledge of current events, the estimates could change significantly from period to period. Any changes to the significant unobservable inputs used, including a change in the forecast of net sales for the earn-out periods, may result in a change in the fair value of contingent consideration, and could have a material adverse impact on our results of operations. In addition, actual payments of contingent consideration in the future could be different from the current estimated fair value of the contingent consideration. Further, these arrangements can impact or restrict the integration of acquired businesses and can, and frequently do, result in disputes, including litigation. Any such impact, restrictions or disputes could have a material adverse impact on our business and results of operations.
In addition, acquisition and development transactions could result in us issuing equity securities or short- or long-term debt to finance the transaction. The issuance of additional equity securities would result in dilution to our stockholders. The issuance of securities exercisable or convertible into shares of our common stock would result in dilution to our stockholders in the event the securities are exercised or converted, as the case may be, into shares of our common stock. Debt financing may involve agreements containing covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, issuing equity securities, making capital expenditures for certain purposes or above a certain amount, or declaring dividends. In addition, any equity or debt securities that we issue may have rights, preferences and privileges senior to those of the securities held by our stockholders. Future acquisition and development transactions could also result in us assuming debt obligations and liabilities and incurring impairment charges related to goodwill, investments and other intangible assets.
We depend upon our executive officers and may not be able to retain or replace these individuals or recruit additional personnel if they leave, which could harm our business.
We believe that we have benefited substantially from the leadership and experience of our executive officers, including Gary Atkinson, who is our Chief Executive Officer, and Alex Andre, who is our Chief Financial Officer and General Counsel. Our executive officers may terminate their employment with us at any time without penalty, and we do not maintain key person life insurance policies on any of our executive officers. The loss of the services of any of our executive officers could have a material adverse effect on our business and prospects, as we may not be able to find suitable individuals to replace such personnel on a timely basis. In addition, any such departure could be viewed in a negative light by investors and analysts, which could cause the price of our common stock to decline. As our business expands, our future success will depend greatly on our continued ability to attract and retain highly skilled and qualified executive-level personnel. Our to attract and retain qualified executive officers could our growth and have an effect on our business, financial condition and results of operations.
Our success depends on our SemiCab technology platform attaining market acceptance by transportation providers.
The continued growth in market demand for and market acceptance of our SemiCab technology platform is critical to our continued success. Demand for our SemiCab technology platform is affected by a number of factors, many of which are beyond our control, including the extension of our SemiCab technology platform for new use cases, the timing of development and release of new products, features and functionality introduced by us or our competitors, technological change and the growth or contraction of the market in which we compete. We may be unable to effectively adapt our platform and respond to changes in technology and customer needs. If we are unable to meet customer demand, or if we otherwise fail to achieve more widespread market acceptance of our SemiCab technology platform, our business, results of operations, financial condition and growth prospects may be adversely affected.
Our failure or inability to enforce our trademarks, trade secrets and other proprietary rights could adversely affect our image, brands and competitive position.
We own U.S. registered trademarks for many of the signs, designs and expressions that identify the services that we use in our business, including “SemiCab”. We also have common law trademark rights for certain of our proprietary marks and rely upon trade secrets to protect certain of our rights. We believe that our trademarks, trade secrets and other proprietary rights have significant value and are important to our business and competitive position. We, therefore, devote time and resources to the protection of these rights. Our policy is to pursue registration of our important trademarks whenever feasible and to oppose vigorously any infringement of our trademarks. We protect our trade secrets and proprietary information, in part, by entering into confidentiality agreements with our employees and consultants. We also seek to preserve the integrity and confidentiality of our proprietary information by maintaining physical security of our premises and physical and electronic security of our information technology systems.
We cannot assure you that the protective actions that we have taken will successfully prevent unauthorized use or imitation of our intellectual property and proprietary rights by other parties. In the event third parties unlawfully use or imitate our intellectual property and proprietary rights, we could suffer harm to our image, brands and competitive position. If we commence litigation to enforce our intellectual property and proprietary rights, we will incur significant legal fees and may not be successful in enforcing our rights. Moreover, we cannot assure you that third parties will not claim infringement by us of their intellectual property and proprietary rights in the future. Any such claim, whether or not it has merit, could be time-consuming and distracting for management to defend, result in costly , require us to enter into royalty or licensing agreements, or cause us to change existing menu items or the introduction of new menu items. As a result, any such claim could have a material effect on our business, financial condition and results of operations.
We may not be able to protect our intellectual property rights throughout the world.
Filing, prosecuting, and defending intellectual property rights on our technology in international jurisdictions is prohibitively expensive. Competitors may use our technologies in jurisdictions where we have not obtained intellectual property rights to develop their own technology and, further, may export otherwise infringing technology to territories where we have intellectual property rights, but where enforcement is not as strong as that in the U.S. Their technology may compete with our technology in jurisdictions where we do not have any issued or licensed patents and our patent claims or other intellectual property rights may not be effective or sufficient to prevent them from competing.
Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, which could make it difficult for us to stop the infringement of any patents we may have in the future, or the use of competing technologies in violation of our proprietary rights generally. Proceedings to enforce any patent rights we may have in the future in foreign jurisdictions could result in substantial cost and divert our efforts and attention from other aspects of our business.
Our information technology systems or data, or those of our service providers or customers or users, could be subject to cyber-attacks or other security incidents, which could result in significant liability, reputational damage and other adverse consequences to us.
The ever-evolving threat landscape makes data security and privacy a critical priority. We maintain processes for key risk identification, mitigation efforts, and day-to-day management of risks, including cybersecurity risks. In addition, our third-party vendors have experience and expertise supporting mitigation of the potential cyber-attacks facing our organization and vulnerabilities facing our technology infrastructure and potential cyber-attacks.
Although it is difficult to determine the potential impacts from a cyber-attack or other security incident, we may experience negative impacts such as reputational harm, inability to retain existing customers or attract new customers, exposure to legal claims and government action, among others. In particular, given the interconnected nature of the supply chain and our significant presence in the industry, our AI logistics and distribution business may be an attractive target for such attacks. The impact of a cyber-attack or other security incident may have a material adverse impact on our financial condition, results of operations, availability of our systems, and growth prospects, which makes cybersecurity risk management of critical importance.
We have processes and programs in place to meet our global compliance obligations and work with our employees and teams across the globe to ensure security and data protection principles are integrated into the way we conduct our business. Notwithstanding this, our operations may be subject to successful breaches, employee malfeasance, or human or technological error. Any such acts could result in:
unauthorized access to, disclosure, modification, misuse, loss, or destruction of company, customer, or other third-party data or systems;
theft of sensitive, regulated, or confidential data including personal information and intellectual property;
the loss of access to critical data or systems through ransomware, destructive attacks or other means; and
business delays, service or system disruptions or denials of service.
The occurrence of any of these acts could have a material adverse effect on our business, financial condition and results of operations.
The failure of our information technology systems could significantly disrupt the operation of our business.
We rely on information technology systems and networks as part of our business. As such, we could experience a material disruption to our operations if our internal computer systems and servers fail or suffer security breaches. The secure operation of our information technology, or IT, systems and networks as well as the secure processing and maintenance of information is critical to our operations and business strategy. Our ability to execute our business plan and to comply with regulatory requirements with respect to data control and data integrity depends, in part, on the continued and uninterrupted performance of our IT systems. These systems are vulnerable to damage from a variety of sources, including telecommunications or network failures, malicious human acts and natural disasters. Moreover, despite network security and back-up measures, some of our servers are potentially to physical or electronic -ins, computer viruses and similar . the precautionary measures we have taken to prevent that could affect our IT systems, we may experience electronic -ins, computer viruses, sustained or repeated system , or arising during the upgrade of any of our IT systems that our ability to generate and maintain data. The occurrence of any of the foregoing could have a material effect on our business, financial condition and results of operations.
We rely on third parties for most of our management information systems and for other back-office functions.
We use third-party vendors to provide, support and maintain most of our management information systems. We also outsource certain accounting, payroll and human resource functions to third-party service providers. The parties that we utilize for these services may not be able to handle the volume of activity or perform the quality of service necessary for our operations. The failure of these parties to fulfill their support and maintenance obligations or service obligations could disrupt our operations. Furthermore, the outsourcing of certain of our business processes could negatively impact our internal control processes. Any such effects on our operations or internal controls could have an adverse effect on our business, financial condition and results of operations.
Failure to protect the integrity and security of personal information of our customers and employees could result in substantial costs, expose us to litigation and damage our reputation.
We receive and maintain certain personal information about our customers and employees. The use of this information by us is regulated at the federal and state levels. If our security and information systems are compromised or our franchisees or employees fail to comply with these laws and regulations and this information is obtained by unauthorized persons or used inappropriately, it could adversely affect our reputation and results of operations and could result in litigation against us or the imposition of fines and penalties.
Issues in the use of AI technologies in our SemiCab business may result in reputational harm or liability to us, and our business, operating results, and financial results may be adversely affected.
We actively integrate AI technologies in our SemiCab platform to enhance automation, analytics, customer experience, and operational efficiency. As we expand the use of AI-enabled capabilities, we are exposed to risks inherent in the development and deployment of emerging technologies.
AI systems may generate inaccurate, biased, incomplete, or unintended outputs due to limitations in algorithms, data quality, model design, or oversight. If AI-enabled features fail to perform as intended or are perceived as unreliable, we could experience reputational harm, customer dissatisfaction, competitive disadvantage, or legal exposure.
Certain AI capabilities rely on third party service providers, cloud infrastructure, or external models. Disruptions, security incidents, pricing changes, contractual restrictions, or termination of such services could impair the availability or performance of AI-enhanced features and increase our costs.
The regulatory framework governing AI, data privacy, and automated decision-making is evolving in the United States and internationally. New or expanded legal requirements may require product modifications, increased compliance expenditures, or limitations on certain AI-driven functionality.
Our AI-enabled features process sensitive customer data. Any failure to maintain appropriate safeguards, governance controls, or oversight could result in regulatory scrutiny, litigation, or reputational harm.
We have implemented governance frameworks, human oversight, security controls, and monitoring processes designed to manage risks associated with AI-enabled capabilities. However, these measures may not be sufficient to prevent errors, misuse, security incidents, or regulatory non-compliance. If our risk management efforts are ineffective, our business, financial condition, and results of operations could be adversely affected.
Any significant changes in U.S. trade or other policies that block or restrict imports or increase import tariffs could have a material adverse effect on results of operations.
In recent years, the U.S. government has implemented substantial changes to U.S. trade policies, including import restrictions, increased import tariffs and changes in U.S. participation in multilateral trade agreements, such as the United States-Mexico-Canada Agreement to replace the former North American Free Trade Agreement. The U.S. government has assessed supplemental tariffs and quantitative restrictions on U.S. imports of certain products from numerous countries throughout the world. U.S. trade policy continues to evolve in this regard. Any significant changes in current U.S. trade or other policies that restrict imports or increase import tariffs could have a material adverse effect upon results of our operations.
Our business, financial condition and results of operations may be materially adversely affected by any negative impact on the global economy and capital markets resulting from the conflict in Ukraine and the Middle East and other geopolitical tensions.
U.S. and global markets are experiencing volatility and disruption as a result of the escalation of geopolitical tensions and military conflicts in and around Ukraine, Israel, and other areas of the world. Although the length and impact of any potential or ongoing military conflict is highly unpredictable, such conflicts have led to market disruptions, including significant volatility in credit and capital markets.
For example, Russia’s military interventions in Ukraine have led to sanctions and other penalties being levied by the U.S., European Union and other countries against Russia. Additional potential sanctions and penalties have also been proposed and/or threatened. Russian military actions and the resulting sanctions could adversely affect the global economy and financial markets.
In addition, acts of war, terrorism or political instability in oil producing countries (e.g. the invasion of Ukraine by Russia and conflicts in the Middle East, including the recent escalation involving Iran, and recent U.S. intervention in Venezuela) have resulted in increased volatility in the financial markets and the markets for certain commodities including oil, which may significantly impact the manufacturers that we rely on.
Additionally, the conflict in the Middle East between Israel and the government of Hamas in Gaza, Hezbollah in Lebanon, as well as groups in Syria and Iran, have caused disruptions in shipping lanes in the Red Sea where some major cargo lines have opted to route their vessels away from the region which has increased the time required to reach their destinations as well as increased time for vessels to return to their port of origin with empty containers. Continued shipping line disruptions and delays may impact the availability and cost of shipping containers during peak shipping season.
While we have not experienced any direct impact from the conflicts in and around Ukraine, the Middle East and elsewhere, the extent and duration of the military action, sanctions and resulting market and shipping lane disruptions are impossible to predict but could be substantial and could adversely affect our operating results as they impact the global economy in the future.
High inflation and unfavorable economic conditions could negatively affect our business, financial condition and results of operations.
Unfavorable global or regional economic conditions may be triggered by numerous developments beyond our control, including inflation, geopolitical events, health crises such as the COVID-19 pandemic, and other events that trigger economic volatility on a global or regional basis. In particular, a significant deterioration in economic conditions, including economic slowdowns or recessions, increased unemployment levels, inflationary pressures or disruptions to credit and capital markets, could lead to decreased consumer confidence and consumer spending more generally, thus reducing consumer demand for our services. Such heightened inflationary levels and economic conditions may negatively impact consumer disposable income and discretionary spending, negatively impacting our business, financial condition and results of operations.
We are exposed to the credit risk of customers who are experiencing financial difficulties and if these customers are unable to pay us, our revenue and results of operations will be adversely impacted.
We sell our services primarily to large, fast-moving consumer goods companies. Deterioration in the financial condition of our customers could result in these customers not being able to pay us for our services. This would have a negative impact on our revenue and results of operations.
We may have trouble hiring additional qualified personnel.
As we expand our technology development, service offerings and marketing activities, we will need to hire additional personnel and could experience difficulties attracting and retaining qualified employees. Competition for qualified personnel could be intense due to the limited number of individuals who possess the skills and experience required by such an industry. We may not be able to afford, attract and retain quality personnel on favorable terms, or at all. In addition, to the extent we hire personnel from competitors, we may be subject to allegations that such personnel have been improperly solicited or that they have divulged proprietary or other confidential information, or that their former employers own their technology or service ideas. Any of these events could have a material adverse effect on our business, financial condition and results of operations.
The industries in which we operate are subject to international, federal, state and local laws, compliance with which is both complex and costly.
We are subject to the U.S. Foreign Corrupt Practices Act (the “FCPA”) and other anti-corruption laws of the countries in which we do business. The FCPA and other anti-corruption laws generally prohibit us and our employees and intermediaries from bribing, being bribed or making other prohibited payments to government officials or other persons to obtain or retain business or gain some other business advantage. We and our commercial partners operate in several jurisdictions that pose a high risk of potential FCPA violations and we participate in collaborations and relationships with third parties whose actions could potentially subject us to liability under the FCPA or local anti-corruption laws.
We are also subject to other laws and regulations governing our international operations, including regulations administered in the U.S. and in the EU, including applicable export control regulations, economic sanctions on countries and persons, customs requirements and currency exchange regulations. We cannot predict the nature, scope, or effect of future regulatory requirements to which our international operations might be subject or the manner in which existing laws might be administered or interpreted. If we fail to comply with these laws, we could be subject to civil or criminal penalties, other remedial measures, and legal expenses, which could adversely affect our business, financial condition, and results of operations.
We can provide no assurance that we will be in full compliance with all applicable anticorruption laws, including the FCPA or other legal requirements. Any investigation of potential violations of the FCPA or other laws and regulations by the United States, the European Union or other authorities could have an adverse impact on our reputation, our business, results of operations and financial condition. Furthermore, should we be found not to be in compliance with the FCPA or other laws and regulations, we may be subject to criminal and civil penalties, disgorgement and other sanctions and remedial measures, as well as the accompanying legal expenses, any of which could have a material adverse effect on our business, financial condition and results of operations.
We could be a party to litigation that could adversely affect us by diverting management attention, increasing our expenses and subjecting us to significant monetary damages and other remedies.
We are subject to various claims and legal actions arising in the ordinary course of our business. Such claims may be expensive to defend against and may divert resources away from our operations, regardless of whether they are valid or whether we are ultimately found liable. In the event we are found liable for any such claims, we could be required to pay substantial damages. With respect to insured claims, a judgment for monetary damages in excess of any insurance coverage that we have could result in us being required to pay substantial damages. Any adverse publicity resulting from these claims may also adversely affect our reputation, regardless of whether we are found liable. Any payments of damages or publicity could have a material effect on our business, financial condition and results of operations.
Our certificate of incorporation provides limitations on director liability and indemnification of directors and officers and employees.
Our certificate of incorporation limits the liability of directors to the maximum extent permitted by Delaware law. Delaware law provides that directors of a corporation will not be personally liable for monetary damages for breach of their fiduciary duties as directors, except for liability for any:
breach of their duty of loyalty to us or our stockholders;
act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;
unlawful payment of dividends or unlawful stock repurchases, or redemptions as provided in Section 174 of the Delaware General Corporation Law; or
transaction from which the directors derived an improper personal benefit.
These limitations of liability do not apply to liabilities arising under the federal or state securities laws and do not affect the availability of equitable remedies such as injunctive relief or rescission.
Our certificate of incorporation and bylaws provide that we will indemnify our officers and directors to the fullest extent permitted by law and that we will advance expenses incurred by any such persons in advance of the final disposition of any action or proceeding. We believe that these provisions are necessary to attract and retain qualified persons as officers and directors.
The limitation of liability in our certificate of incorporation and bylaws may discourage stockholders from bringing a lawsuit against our directors for breach of their fiduciary duties. It may also reduce the likelihood of derivative litigation being brought against our officers and directors even though an action, if successful, might provide a benefit to us and our stockholders. Our results of operations and financial condition may be harmed to the extent we pay the costs of settlement and damage awards pursuant to these indemnification provisions.
Our insurance may not provide adequate levels of coverage against claims.
We currently maintain insurance that we believe is appropriate for a business of our size and type. However, there are types of losses we may incur that cannot be insured against or that we believe are not economically reasonable to insure against. Such losses could have a material adverse effect on our business and results of operations. Unanticipated changes in the actuarial assumptions and management estimates underlying our reserves for these losses could result in materially different amounts of expense under these programs, which could have a material adverse effect on our business, financial condition and results of operations.
Our inability or failure to recognize, respond to and effectively manage the accelerated impact of social media could materially adversely impact our business.
There has been a marked increase in the use of social media platforms, including weblogs (blogs), social media websites, and other forms of Internet-based communications that provide individuals with access to a broad audience of consumers and other interested persons. Many of our competitors are expanding their use of social media and new social medial platforms are rapidly being developed, potentially making more traditional social media platforms obsolete. As a result, we need to continuously innovate and develop our social media strategies in order to maintain broad appeal with customers and brand relevance.
Many social media platforms immediately publish the content their subscribers and participants post, often without filters or checks on accuracy of the content posted. Information posted on such platforms may be inaccurate or adverse to our interests, and we may have little or no opportunity to redress or correct the information. The dissemination of such information online, regardless of its accuracy, could harm our business, reputation and brands.
Other risks associated with the use of social media include improper disclosure of proprietary information, personal identifiable information and out-of-date information, as well as fraud, by our customers, employees, franchisees and business partners. The inappropriate use of social media by our customers, employees, franchisees or business partners could increase our costs, lead to litigation or result in negative publicity that could damage our business, reputation and brands.
An impairment in the carrying value of our fixed assets, intangible assets or goodwill could adversely affect our financial condition and results of operations.
We evaluate the useful lives of our fixed assets and intangible assets to determine if they are definite- or indefinite-lived assets. Reaching a determination on useful life requires significant judgments and assumptions regarding the expected life, future effects of obsolescence, demand, competition, the level of required maintenance expenditures and the expected lives of other related groups of assets, as well as other economic factors, such as the stability of the industry, legislative action that results in an uncertain or changing regulatory environment and expected changes in distribution channels. We cannot accurately predict the amount and timing of any impairment of assets. Should the value of fixed assets or intangible assets become impaired, we will have to recognize an impairment charge for the related asset. In the event we recognize any impairment charges in the future, such charges may have a material adverse effect on our business, financial condition and results of operations.
In addition, we may be required to record goodwill in the event we acquire additional assets or businesses in the future. Goodwill represents the excess of cost over the fair value of identified net assets of business acquired. We review any goodwill for impairment annually, or whenever circumstances change in a way which could indicate that impairment may have occurred. Goodwill is tested at the reporting unit level. We identify potential goodwill impairments by comparing the fair value of the reporting unit to its carrying amount, which includes goodwill and other intangible assets. If the carrying amount of the reporting unit exceeds the fair value, this is an indication that impairment may exist. We calculate the amount of the impairment by comparing the fair value of the assets and liabilities to the fair value of the reporting unit. The fair value of the reporting unit in excess of the value of the assets and liabilities is the implied fair value of the goodwill. If this amount is less than the carrying amount of goodwill, impairment is recognized for the difference. A significant amount of judgment is involved in determining if an indication of impairment exists. Factors may include, among others:
a significant decline in our expected future cash flows;
a sustained, significant decline in our stock price and market capitalization
a significant adverse change in legal factors or in the business climate;
unanticipated competition;
the testing for recoverability of a significant asset group within a reporting unit; and
slower growth rates.
We will be required to record a non-cash impairment charge if the testing performed indicates that goodwill has been impaired.
We are subject to risks related to the sale of our Singing Machine business.
On August 1, 2025, we entered into an asset purchase agreement with SMC and Stingray USA pursuant to which Stingray USA purchased substantially all of the assets, and assumed most of the liabilities, associated with our Singing Machine business. The transaction closed on August 1, 2025. Accordingly, we no longer own or operate the Singing Machine business line. In connection with the transaction, we also entered into a transitional services agreement with Stingray USA to provide certain limited services following the closing. The performance of these services by us and other related conditions outside of our control could adversely affect our operations and future financial results.
As a result of the sale of our Singing Machine business, we became a smaller, less diversified company than we were prior to the transaction, which could make us more vulnerable to factors impacting our performance, such as changing market conditions and market volatility. In addition, while it is intended that the transaction be tax-free to our stockholders for U.S. federal income tax purposes, there is no assurance that the transaction will qualify for this treatment. If the sale is ultimately determined to be taxable, we or our stockholders could incur income tax liabilities that could be significant. Any of these factors could have a material adverse effect on our business, financial condition, results of operations, cash flows, and the price of our common stock.
Significant adverse weather conditions and other disasters could negatively impact our results of operations.
Our business could be negatively affected by adverse weather conditions and acts of God, such as regional winter storms, fires, floods, hurricanes, tropical storms and earthquakes, and other disasters, such as pandemics, oil spills and nuclear meltdowns. The occurrence of any such events in the future could cause substantial damage to our business and subject us to substantial repair costs that could have a material adverse effect on our business, financial condition and results of operations.
Risks Related to the Streeterville Transaction
The sale of a substantial number of our securities in the public market by Streeterville and/or by our existing security holders could cause the price of our common stock to fall.
On August 21, 2025, we completed the Streeterville Transaction. As of March 27, 2026, we had completed Pre-Paid Purchases for the aggregate amount of $21,285,000 and had repaid Pre-Paid Purchases in the aggregate amount of $9,845,000 as a result of Streeterville electing to exercise its right to purchase a total of 11,303,264 shares of our common stock under the First Pre-Paid Purchase, Second Pre-Paid Purchase and Third Pre-Paid Purchase. The Second Pre-Paid Purchase and Third Pre-Paid Purchase have been paid off in full. However, we have principal in the amount of approximately $1,085,000 and $10,355,000 outstanding under the First Pre-Paid Purchase and Fourth Pre-Paid Purchase, respectively. In the event Streeterville elects to exercise its right to purchase additional shares of our common stock under the First Pre-Paid Purchase or Fourth Pre-Paid Purchase, we may be required to issue a substantial number of additional shares of our common stock to Streeterville. The sale of a substantial number of our shares of common stock in the public market by Streeterville and/or by our other existing security holders, or the perception that those sales might occur, could result in a significant decline in the public trading price of our common stock.
Shares of our common stock purchased by Streeterville may be issued at a price significantly below the prevailing market price of our common stock, resulting in substantial dilution of existing stockholders and a decrease in the price of our common stock .
Following the funding of each Pre-Paid Purchase, Streeterville has the right, but not the obligation, to purchase from us that number of shares of common stock up to the lesser of: (i) a number of shares of common stock equal in value to the outstanding balance of the funded amount, and (ii) that number of shares of common stock such that Streeterville will not beneficially own greater than 9.99% of our outstanding shares of common stock. The price per share used to calculate the number of shares to be issued to Streeterville is equal to 90% of the lowest daily volume-weighted average price of our common stock during the ten (10) trading days immediately preceding the applicable purchase date, but not less than the floor price, which is the greater of: (i) 20% of the Minimum Price prior to the applicable closing of the Pre-Paid Purchase, and (ii) $0.10. If Streeterville exercises its right to purchase additional shares of our common stock under Pre-Paid Purchases, the shares may be sold by us to Streeterville at a price significantly below the prevailing market price. This could lead to substantial dilution of existing stockholders. This dilution, combined with the potential for downward pressure on our share price if Streeterville promptly sells the shares in the open market, could reduce the market value of our common stock significantly.
We may be required to make substantial cash payments to Streeterville, which could reduce the amount of cash available to fund our operations.
If Streeterville chooses to not exercise its right to purchase shares of common stock from us, we will be required to repay any outstanding Pre-Paid Purchases in cash. We may not have sufficient cash on hand or available resources to meet such a repayment obligation, which could force us to seek emergency financing or other arrangements which may not be available or, if available, may be on unfavorable terms. In the event we do have sufficient funds available, the cash payment obligations, if triggered, could significantly reduce the cash we have available to fund our operations or make necessary investments. This would adversely affect our financial condition, limit our ability to pursue growth opportunities, and adversely affect our business prospects.
In addition, the occurrence of an event of default under the Pre-Paid Purchases or certain change-of-control or other fundamental transactions may accelerate repayment or suspend Streeterville’s funding obligations to us. If an event of default occurs under a Pre-Paid Purchase, the outstanding balance will become immediately due and payable. At any time thereafter, upon written notice given by Streeterville, the outstanding balance will increase by seven-and-a half percent and interest will begin accruing at a rate of the lesser of 18% per annum or the maximum rate permitted under applicable law. If we are involved in a change-of-control or other fundamental transaction, we may be required to repay the Pre-Paid Purchases in cash. We may not have sufficient cash on hand or available resources to meet such a repayment obligation, which could force us to seek emergency financing or other arrangements which may not be available or, if available, may be on unfavorable terms. In the event we do have sufficient funds available, the cash payment obligations, if triggered, could significantly reduce the cash we have available to fund our operations or make necessary investments. This would adversely affect our financial condition, limit our ability to pursue growth , and affect our business prospects.
Risks Related to Ownership of Our Securities
We may raise additional funds in the future through the issuance of equity securities or debt, which funding may be dilutive to stockholders or impose operational restrictions on us.
On December 6, 2024, we completed a public offering of an aggregate of 21,000 shares of our common stock, pre-funded warrants to purchase up to 258,412 shares of common stock, Series A warrants to purchase up to 279,412 shares of common stock, and Series B warrants to purchase up to 279,412 shares of common stock. Immediately prior to the completion of the offering, we had 71,076 shares of our common stock outstanding. Additionally, due to price adjustment provisions contained in the Series A and Series B warrants, the Series A warrants became exercisable into 1,133,652 shares of common stock and the Series B warrants became exercisable into 1,910,975 shares of our common stock. All of the pre-funded warrants and Class B warrants were exercised in their entirety.
On August 21, 2025, we completed the Streeterville Transaction. As of March 27, 2026, we had completed Pre-Paid Purchases for the aggregate amount of $21,285,000 and had repaid Pre-Paid Purchases in the aggregate amount of $9,845,000 as a result of Streeterville electing to exercise its right to purchase a total of 11,303,264 shares of our common stock under the First Pre-Paid Purchase, Second Pre-Paid Purchase and Third Pre-Paid Purchase.
Shareholders who owned shares of our common stock immediately prior to the completion of the December 6, 2024 securities offering experienced immediate and substantial dilution as a result of the issuance of the shares of common stock on December 6, 2024 and the subsequent exercise of the pre-funded warrants and Class B warrants. Additionally, shareholders who owned shares of our common stock immediately prior to the dates Streeterville elected to purchase 11,303,264 shares of our common stock under the First Pre-Paid Purchase, the Second Pre-Paid Purchase and the Third Pre-Paid Purchase experienced immediate and substantial dilution.
We may need to raise additional capital through the sale of equity securities or the issuance of short- and long-term debt during the next 12 months to fund our operations and growth. If we raise additional funds by issuing shares of our common stock, our stockholders will experience dilution. If we raise additional funds by issuing securities exercisable or convertible into shares of our common stock, our stockholders will experience dilution in the event the securities are exercised or converted, as the case may be, into shares of our common stock. Debt financing may involve agreements containing covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, issuing equity securities, making capital expenditures for certain purposes or above a certain amount, or declaring dividends. In addition, any equity securities or debt that we issue may have rights, preferences and privileges senior to those of the securities held by our stockholders.
The market price of our common stock is likely to be highly volatile and subject to wide fluctuations.
The market price of our common stock may fluctuate significantly in response to a number of factors, many of which we cannot control, including:
fluctuations in our annual or quarterly operating results;
changes in capital market conditions or other adverse economic conditions;
upgrades or downgrades by securities analysts following our stock;
changes in estimates of our future financial results by securities analysts following our stock;
our achievement, or our failure to achieve, projected financial results;
future sales of our stock by our officers, directors or significant stockholders;
investors’ perceptions of our business and prospects relative to other investment alternatives;
acquisitions, joint ventures, capital commitments or other significant transactions by us or our competitors;
global economic, legal and regulatory factors unrelated to our performance; and
the other risks and uncertainties set forth herein.
The stock market experiences significant price and volume fluctuations that affect the market price of the stock of many companies and that are often unrelated or disproportionate to the operating performance of these companies. Market fluctuations such as these may seriously harm the price of our common stock. Further, securities Series Action suits have been filed against companies following periods of market volatility in the price of their securities. If such an action is instituted against us, we may incur substantial costs and a diversion of management attention and resources, which would seriously harm our business, financial condition and results of operations. In addition, the initiation of any such action could cause the price of our common stock to decline
Our quarterly and annual operating results may fluctuate due to increases and decreases in sales and other factors.
Our quarterly and annual operating results may fluctuate significantly because of a variety of factors, including:
increases or decreases in sales of our services;
our ability to operate effectively in new markets;
labor availability and costs for management and other personnel;
changes in consumer preferences and competitive conditions;
negative publicity relating to us, our vendors or the services we sell;
disruptions in the availability of trucks needed to complete shipments;
changes consumer confidence and fluctuations in discretionary spending;
changes in labor costs or other variable costs and expenses;
potential distractions or unusual expenses associated with our expansion plans;
the impact of inclement weather, natural disasters, and other calamities; and
economic conditions in the jurisdictions in which we operate and nationally.
As a result of the factors discussed above, as well as the other factors set forth herein, our operating results for one fiscal quarter or year are not necessarily indicative of results to be expected for any other fiscal quarter or year. These fluctuations may cause future operating results to fall below our estimates or the expectations of our stockholders or the investment community in general. If our results of operations do not meet the expectations of our stockholders or the investment community, the price of our common stock may decline.
Our common stock may be affected by price fluctuations, which could adversely impact the value of our common stock.
Our common stock has experienced, and is likely to experience, significant price and volume fluctuations in the future which could adversely affect the market prices of our common stock without regard to our operating performance. In addition, we believe that factors such as quarterly fluctuations in our financial results and changes in the overall economy or the condition of the financial markets could cause the market price of our common stock to fluctuate substantially. These fluctuations may also cause short sellers to periodically enter the market in the belief that we will have poor results in the future. We cannot predict the actions of market participants and, therefore, can offer no assurances that the market for our common stock will be stable or appreciate over time.
FINRA sales practice requirements may limit a stockholder’s ability to buy and sell our securities.
Effective June 30, 2020, the SEC implemented Regulation Best Interest requiring that “A broker, dealer, or a natural person who is an associated person of a broker or dealer, when making a recommendation of any securities transaction or investment strategy involving securities (including account recommendations) to a retail customer, shall act in the best interest of the retail customer at the time the recommendation is made, without placing the financial or other interest of the broker, dealer, or natural person who is an associated person of a broker or dealer making the recommendation ahead of the interest of the retail customer...” This is a significantly higher standard for broker-dealers to recommend securities to retail customers than before under prior suitability rules of the Financial Industry Regulatory Authority, Inc. (“FINRA”). FINRA suitability rules do still apply to institutional investors and require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending securities to their customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information, and, for retail customers, determine that the investment is in the customer’s “best interest,” and meet other SEC requirements. Both SEC Regulation Interest and FINRA’s suitability requirements may make it more for broker-dealers to recommend that their customers buy speculative, low-priced securities and may have the effect of reducing the level of trading activity in our securities. As a result, fewer broker-dealers may be willing to make a market in our common stock.
An investment in our securities is speculative, and there can be no assurance of any return on any such investment.
Investors are cautioned that an investment in our securities is highly speculative and involves a significant degree of risk. The success of our business and the ability to achieve our business goals and objectives, as outlined in this report, are subject to numerous uncertainties, contingencies and risks. As such, there is no assurance that investors will realize a return on their investment or that they will not lose their entire investment. Potential investors should carefully consider whether such a speculative investment is suitable for their financial situation and investment objectives before purchasing securities.
We identified material weaknesses in our internal control over financial reporting during the assessment of our internal control that we performed in connection with the preparation of our audited consolidated financial statements included herein.
Rules adopted by the SEC pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 require management to complete an annual assessment of our internal control over financial reporting. During the preparation of our audited consolidated financial statements for the year ended December 31, 2025, we identified several control deficiencies that have been classified as material weaknesses in our internal control over financial reporting. A material weakness is a control deficiency that results in a more than remote likelihood that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis by our employees in the normal course of their assigned functions. Based on the material weaknesses identified, management concluded that our internal control over financial reporting was not effective as of December 31, 2025.
Our management, in consultation with our independent registered public accounting firm, concluded that the following material weaknesses existed in the following areas as of December 31, 2025:
We lack sufficient resources in our accounting department restricting our ability to review and approve certain material journal entries which increases the likelihood that a material misstatement of interim or annual financial statements might not be prevented. Management evaluated our current process of review and approval of certain material journal entries and concluded this deficiency represented a material weakness.
We lack sufficient resources in our accounting department, which restricts our ability to review certain material reconciliations related to financial reporting in a timely manner. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. Management evaluated the impact of our failure to have proper segregation between the preparation, review and approval of account reconciliations and concluded that this control deficiency represented a material weakness.
Due to resource restrictions, we have not established a three-way match of documents or other controls precise enough to detect a material misstatement in revenue. Management evaluated our current process of determining the occurrence of revenue and concluded this deficiency represented a material weakness.
The standards that must be met for management to assess internal control over financial reporting are complex and require significant documentation, testing and possible remediation. We may encounter problems or delays in completing the activities necessary to make future assessments of our internal control over financial reporting and completing the implementation of any necessary improvements. Future assessments may require us to incur substantial costs and may require a significant amount of time and attention of management, which could seriously harm our business, financial condition and results of operations.
If we are unable to establish and maintain an effective system of internal control, we may not be able to accurately report our financial results on a timely basis or prevent fraud.
Effective internal control is necessary for us to provide reliable financial reports and prevent fraud. If we cannot provide reliable financial reports on a timely basis or prevent fraud, we may not be able to manage our business as effectively as we would if an effective internal control environment existed, and our business and reputation with investors may be harmed. We have not performed an in-depth analysis to determine if undiscovered failures of internal controls exist and may in the future discover areas of our internal control environment that need improvement. If we are unable to establish and maintain an effective system of internal control, we may not be able to report our financial results in an accurate and timely manner or prevent fraud.
We are working on improving and simplifying our internal processes and implement enhanced controls to address the material weaknesses in our internal control over financial reporting discussed above and to remedy the ineffectiveness of our disclosure controls and procedures. We are addressing our accounting resource requirements to help remediate the segregation of duties and plan to implement a concise “three-way” document matching procedure. These material weaknesses will not be considered as remediated until the applicable remediated controls are operating for a sufficient period and management has concluded, through testing, that these controls are operating effectively.
The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members.
We are a public company and subject to the reporting requirements of the Exchange Act, and the Sarbanes-Oxley Act of 2002. The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal controls for financial reporting. Compliance with the Sarbanes-Oxley Act may divert internal resources and will take a significant amount of time and effort to achieve. If we fail to maintain compliance with the Sarbanes-Oxley Act, we could be subject to sanctions or investigations by the Nasdaq, the SEC, or other regulatory authorities. Furthermore, investor perceptions of us may decline as a result.
Any failure of our internal controls could have a material adverse effect on our stated results of operations and harm our reputation. If we are unable to implement necessary changes effectively or efficiently, it could harm our operations, financial reporting or financial results and could result in an adverse opinion on internal controls from our independent auditors. We may need to hire a number of additional employees with public accounting and disclosure experience in order to meet our ongoing obligations as a public company, particularly if we become fully subject to the Sarbanes-Oxley Act and its auditor attestation requirements, which will increase costs. Our management team and other personnel will need to devote a substantial amount of time to new compliance initiatives and to meeting the obligations that are associated with being a public company, which may divert attention from other business concerns and have a material adverse effect on our business, financial condition and results of operations.
If we are not able to comply with the applicable continued listing requirements of the Nasdaq, it could delist us, which may adversely affect the market price and liquidity of our common stock.
Our common stock currently trades on the Nasdaq under the symbol “RIME”. For our common stock to continue trading on the Nasdaq, we must meet continued listing standards mandated by the Nasdaq. These continued listing standards include specifically enumerated criteria, including maintaining a $1.00 minimum closing bid price and maintaining stockholder’s equity of at least $2,500,000. If we fail to meet any of the continued listing standards of the Nasdaq, our common stock could be delisted.
On August 26, 2024, we received a letter from the Nasdaq advising us that we did not meet the minimum $1.00 per share bid price requirement for continued inclusion on the Nasdaq pursuant to Nasdaq Marketplace Listing Rule 5550(a)(2). To demonstrate compliance with this requirement, the closing bid price of our common stock needed to be at least $1.00 per share for a minimum of 10 consecutive business days before February 24, 2025.
On August 26, 2024, we received an additional letter from the Nasdaq indicating that our stockholders’ equity as reported in our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2024, did not satisfy the continued listing requirement under Nasdaq Listing Rule 5550(b)(1), which requires that a listed company’s stockholders’ equity be at least $2,500,000. We reported a stockholders’ deficit of approximately $872,000 on June 30, 2024 in that quarterly report. Pursuant to the listing rule and instructions from Nasdaq, we submitted a plan to regain compliance with the listing rule and were given an extension until November 14, 2024 to evidence compliance through a public filing.
On November 19, 2024, we filed our Quarterly Report on Form 10-Q for our fiscal quarter ended September 30, 2024 with the SEC. Therein, we reported stockholders’ equity of approximately $2,700,000. That same day we filed a Form 8-K with the SEC stating that we believed we had regained compliance with the stockholders’ equity requirement. On November 22, 2024, we received a letter from the Nasdaq indicating that, based on the Form 10-Q that we filed on November 19, 2024, the Nasdaq had determined that we were in compliance with the stockholders’ equity rule. The Nasdaq advised us that it would continue to monitor our ongoing compliance with the stockholders’ equity requirement and, if at the time of our next periodic report, we fail to comply with the requirement, we may be subject to delisting.
On December 30, 2024, we received notice from the Nasdaq indicating that the bid price for our common stock had closed below $0.10 per share for the 13-consecutive trading day period ended December 27, 2024 and, accordingly, we would be subject to the provisions contemplated under Nasdaq Listing Rule 5810(c)(3)(A)(iii) and our securities would be subject to delisting from Nasdaq unless we timely request a hearing before the Nasdaq hearings panel. On February 10, 2025, we implemented a 200-for-1 reverse stock split. On that day, the closing price of our common stock was $2.98 per share and the closing bid of our common stock remained above $1.00 for the next 10 consecutive business days.
On March 25, 2025, we received a letter from the Nasdaq stating that we had regained compliance with the minimum bid price requirement of $1.00 per share for continued listing on the Nasdaq, as set forth in Nasdaq Listing Rule 5550(a)(2). We will be subject to a mandatory panel monitor for a period of one year from March 25, 2025. If, within that one-year monitoring period, the Nasdaq finds that we are again out of compliance with the minimum bid price requirement, notwithstanding Nasdaq Listing Rule 5810(c)(2), then the Nasdaq will issue a delist determination letter and we will have an opportunity to request a new hearing with the initial Nasdaq hearing panel or a newly convened hearing panel if the initial panel is unavailable.
On November 28, 2025, we received an additional letter from the Nasdaq indicating that our stockholders’ equity as reported in our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2025, did not satisfy the continued listing requirement under Nasdaq Listing Rule 5550(b)(1), which requires that a listed company’s stockholders’ equity be at least $2,500,000. We reported a stockholders’ equity of approximately $100,000 on September 30, 2025 in that quarterly report. Pursuant to the listing rule and instructions from Nasdaq, we submitted a plan to regain compliance with the listing rule and were given an extension until May 27, 2026 to evidence compliance through a public filing.
If we were unable to meet the continued listing of the Nasdaq, our common stock could be subject to delisting. If our common stock were to be delisted from the Nasdaq, trading of our common stock most likely will be conducted in the over-the-counter market on an electronic bulletin board established for unlisted securities such as the OTC Markets or in the “pink sheets.” Such a downgrade in our listing market may limit our ability to make a market in our common stock and which may adversely affect the market price and liquidity of our common stock.
New laws, regulations, and standards relating to corporate governance and public disclosure may create uncertainty for public companies, increase legal and financial compliance costs and make some activities more time consuming.
These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, may evolve over time as new guidance is provided by the courts and applicable government agencies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. If our efforts to comply with new laws, regulations, and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us, and our business may be adversely affected.
As a “smaller reporting company” under applicable law, we are subject to lessened disclosure requirements, which could leave our stockholders without information or rights available to stockholders of more mature companies.
We are a “smaller reporting company” as defined in Rule 12b-2 of the Exchange Act. As a smaller reporting company, we are permitted to comply with reduced disclosure obligations in our SEC filings compared to larger public companies. This includes, but is not limited to, simplified executive compensation disclosures, reduced financial statement requirements, and less stringent narrative disclosure obligations. While these scaled disclosure requirements may reduce the burden on us and provide some cost savings, investors should be aware that they may also receive less information about us than they would from a larger public reporting company. The designation as a smaller reporting company and the accompanying reduced disclosure requirements could make it more difficult for investors to fully assess the value and risks of an investment in our securities. Consequently, the designation as a smaller reporting company under the SEC rules increases the risk to investors, as it may limit the amount of publicly available information to assess our performance, prospects, and financial health. Potential investors should consider the implications of these reduced disclosure requirements when making an investment decision.
Applicable SEC rules governing the trading of “penny stocks” may limit the trading and liquidity of our common stock, which may affect the trading price of our common stock.
Our common stock is a “penny stock” as defined under Rule 3a51-1 of the Exchange Act and is accordingly subject to SEC rules and regulations that impose limitations upon the manner in which our common stock can be publicly traded. These regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the associated risks. Under these regulations, certain brokers who recommend penny stocks to persons other than established customers or certain accredited investors must make a special written suitability determination regarding the purchaser and receive the purchaser’s written agreement to participate in the transaction prior to sale. These regulations may have the effect of limiting the trading activity of our common stock and reducing the liquidity of an investment in our common stock.
We have never paid any dividends on our common stock and do not intend to pay any dividends on our common stock in the foreseeable future.
We have never paid any dividends on our common stock and do not intend to pay any dividends on our common stock in the foreseeable future. We intend to use any cash generated from our operations for reinvestment in the growth of our business. Any determination to pay dividends in the future will be made by our board of directors and will depend upon our results of operations, financial condition, contractual restrictions and growth plan, restrictions imposed by applicable law, and other factors deemed relevant by our board of directors. Accordingly, the realization of a gain on stockholders’ investments in our common stock will depend on the appreciation of the price of our common stock. We can provide no assurance that our common stock will appreciate in value or even maintain the price at which stockholders purchased their shares.
