ITEM 1A. RISK FACTORS.
An investment in our securities involves a high degree of risk. You should carefully read and consider all of the risks described below, together with all of the other information contained or referred to in this report, before making an investment decision with respect to our securities. If any of the following events occur, our financial condition, business and results of operations (including cash flows) may be materially adversely affected. In that event, the market price of our shares could decline, and you could lose all or part of your investment.
Operational and Industry Risks
Director designation rights may allow certain stockholders to influence our board and corporate actions, and their interests may differ from those of other stockholders.
Pursuant to the three share purchase agreements entered into by the Company with three investors and Hok C. Chan, our Chief Executive Officer, as the seller, dated December 3, 2025, December 19, 2025, and January 27, 2026, each investor has the right to designate one director to our six-member board of directors, and the buyers have designated three directors who currently serve on our board. See “Item 1. Business—Recent Developments.” As a result, each such investor may be able to influence our board’s deliberations and decisions through its director designee. The interests of these investors and their director designees may differ from or conflict with the interests of our other stockholders, which could affect our corporate governance and our decisions regarding financings, strategic transactions and other corporate actions. We cannot predict whether, or the extent to which, these investors will coordinate their actions, if at all.
Our obligations to offer participation rights in future issuances could limit our financing flexibility and adversely affect our ability to raise capital.
Pursuant to the three share purchase agreements entered into by the Company with three investors and Hok C. Chan, our Chief Executive Officer, as the seller, dated December 3, 2025, December 19, 2025, and January 27, 2026, we have granted three investors participation rights that entitle each investor to purchase up to its pro rata portion of any “New Securities” that we may, from time to time, propose to issue or sell. See “Item 1. Business—Recent Developments.” The maximum number of New Securities that may be purchased by each investor is generally based on such investor’s ownership percentage immediately prior to the issuance (i.e., the number of shares owned by the investor (or its designee) divided by the total number of shares of our common stock outstanding, in each case immediately prior to the issuance, multiplied by the total number of New Securities proposed to be issued). These participation rights could reduce the pool of securities available to new investors, complicate or delay financing transactions, increase transaction costs, or require us to structure financings in ways that are less advantageous to us or our stockholders. If we need to raise additional capital, there can be no assurance that we will be able to do so on acceptable terms, or at all, and any inability to raise capital when needed could materially and affect our business, financial condition and results of operations.
A substantial portion of our capital was loaned to a third-party borrower, and if that borrower delays repayment or defaults, our liquidity, financial condition and results of operations could be materially adversely affected.
On January 27, 2025, we entered into a loan receivable agreement with Golden Bridge Capital Management Limited (“Golden”), pursuant to which we loaned Golden $6.0 million as a temporary debt investment. The loan was later amended to provide for minimum principal repayments of $1.0 million by January 2026, $2.0 million by January 2027 and $3.0 million by January 2028, together with accrued interest at an annual rate of 7%. During the year ended December 31, 2025, we received aggregate principal repayments of $1.0 million and recognized interest income of $365,779, but as of December 31, 2025, $5.0 million remained outstanding. If the debt is not repaid in accordance with the foregoing schedule, an additional penalty interest of 5% per annum will apply to any overdue amounts. Golden is not a credit rated lender.
As a result, we are exposed to counterparty credit risk with respect to this investment. Golden’s ability to repay the loan, including principal and interest, depends on its financial condition, liquidity, cash flows and ongoing compliance with the loan terms. If Golden experiences financial difficulty, delays repayment, fails to make required payments, or otherwise defaults on its obligations, we may not receive timely payments or recover the full value of the investment. Because a substantial amount of our capital remains tied up in this receivable, any delay or nonpayment could reduce our liquidity, limit our flexibility to fund operations, expansion initiatives, equipment purchases or other business needs, and materially and adversely affect our business, financial condition and results of operations.
Changes in trade policies, tariffs, global sourcing patterns and commodity flows, caused by the changing U.S. and geopolitical environments or otherwise, may materially adversely affect customer demand for our services, shipment volumes and operating results.
The United States has recently enacted and/or proposed to enact significant new tariffs on goods imported from numerous countries, including China, Mexico and Canada. Additionally, President Trump has directed various federal agencies to further evaluate key aspects of U.S. trade policy and there has been ongoing discussion and commentary regarding potential significant changes to U.S. trade policies, treaties and tariffs. There continues to exist significant uncertainty about the future relationship between the U.S. and other countries with respect to such trade policies, treaties and tariffs.
Our business is significantly influenced by global trade dynamics, including U.S. and foreign trade policies, tariffs, duties, sanctions, geopolitical tensions, international sourcing patterns and demand for export and import commodities. These factors can affect the volume, timing and destination of cargo flows, alter customer shipping behavior, and create significant volatility in the markets we serve.
Our revenue are derived from truckload services supporting the recycling export supply chain and related import activities, including shipments of waste paper, scrap metal, logs and import freight. Demand in these markets can fluctuate significantly based on changes in export demand, domestic consumption, commodity pricing, trade restrictions and customer inventory decisions. For example, in 2025, demand for waste paper shipments declined, while import and scrap metal shipment volumes increased, reflecting changes in trade conditions, customer demand and commodity flows. There can be no assurance that favorable conditions in any commodity segment will continue or that growth in one segment will offset weakness in another.
Changes in trade regulations, tariffs or other policies may cause supply chain disruptions, reduce import or export activity, increase volatility in shipping volumes, negatively affect our customers’ businesses and shipping needs, and could further escalate input costs for our suppliers and equipment manufacturers, raising the cost of revenue equipment used by us and our owner-operators. Similarly, trade-related disruptions or geopolitical tensions may contribute to increased fuel prices. While we may attempt to pass these increased costs through to our customers via rate adjustments or fuel surcharges, there is no assurance that we will be able to do so fully or in a timely manner. Our customers may reduce their orders from us, which could negatively affect our business, profitability and operating results. We are closely monitoring these developments and evaluating strategies to mitigate potential impacts.
Furthermore, if trade-policy developments, geopolitical events, or shifts in domestic or international demand reduce shipping volumes, change commodity flows away from the ports and markets we serve, compress pricing, or otherwise disrupt our customers’ businesses, there may be greater restrictions and economic disincentives on international trade in general. The new tariffs and other changes in U.S. trade policy could trigger retaliatory actions by affected countries, and foreign governments have instituted or are considering imposing trade sanctions on U.S. goods. Such changes have the potential to adversely impact the U.S. economy or sectors thereof, our industry and the demand for our transport services, and as a result, could have a negative impact on our business, financial condition and results of operations.
We operate in the highly competitive and fragmented truckload and transportation industry, and our failure to stay competitive could impair our ability to improve our profitability and materially adversely affect our results of operations.
Our business competes with many truckload carriers, logistics, brokerage and other transportation companies. The North American surface transportation market is highly competitive and fragmented. Some of our competitors may have greater access to equipment, a larger fleet, a wider range of services, preferential dedicated customer contracts, greater capital resources or other competitive advantages. Numerous competitive factors could impair our ability to maintain or improve our profitability. These factors include the following:
the continuing trend toward consolidation in the trucking industry may result in more large carriers with greater financial resources and other competitive advantages, with which we may have difficulty competing;
competition from freight brokerage companies may materially adversely affect our customer relationships and freight rates;
our competitors may have better safety records than us or a perception of better safety records;
our competitors may reduce their freight rates to gain business, especially during times of reduced growth in the economy, which may limit our ability to maintain or increase freight rates or to maintain or expand our business or may require us to reduce our freight rates in order to maintain business and keep our equipment productive;
customers may solicit bids from multiple carriers for their shipping needs, which may depress freight rates or result in a loss of business to our competitors;
higher fuel prices and higher fuel surcharges to our customers may cause some of our customers to reduce freight volumes;
advancements in technology may necessitate that we increase investments in order to remain competitive, and our customers may not be willing to accept higher freight rates to cover the cost of these investments; and
we may have difficulty recruiting and retaining drivers if our competitors offer better compensation or working conditions.
Our business is subject to general economic, business and regulatory factors affecting the truckload industry that are largely beyond our control, any of which could have a material adverse effect on our results of operations.
The truckload industry is highly cyclical, and our business is dependent on a number of factors that may have a negative impact on our results of operations, many of which are beyond our control. We believe that some of the most significant of these factors are economic changes that affect supply and demand in transportation markets, such as:
general economic conditions, such as economic recession, disruption to the global supply chain, labor shortage, etc.;
domestic and global demand for recycled materials;
recessionary economic cycles, such as the period from 2007 through 2009;
changes in customers’ inventory levels and practices, including shrinking product/package sizes, and in the availability of funding for their working capital;
excess truck capacity in comparison with shipping demand;
driver shortages and increases in drivers’ compensation;
industry compliance with ongoing regulatory requirements;
fluctuations in foreign exchange rates; and
downturns in customers’ business cycles, including as a result of declines in consumer spending.
Several of the above factors were evident during the COVID-19 pandemic in the freight environment, which led to labor shortages, inflationary pricing, and severe disruption to the global supply chain. Similar conditions in the future could have a material adverse effect on our business, financial condition and results of operations.
Additionally, economic conditions that decrease shipping demand or increase the supply of available trucks and other equipment can exert downward pressure on rates and equipment utilization, thereby decreasing productivity. The risks associated with these factors are heightened when the U.S. economy is weakened. Some of the principal risks during such times are as follows:
we may experience low overall freight levels, which may impair the asset utilization of our owner operators;
certain of our customers may face credit issues and cash flow problems that may lead to payment delays, increased credit risk, bankruptcies and other financial hardships that could result in even lower freight demand and may require us to increase our allowance for doubtful accounts;
freight patterns may change as supply chains are redesigned, resulting in an imbalance between our capacity and our customers’ freight demand;
customers may bid out freight or select competitors that offer lower rates in an attempt to lower their costs, and we might be forced to lower our rates or lose freight;
we may be forced to accept more loads from freight brokers, where freight rates are typically lower, or may be forced to incur more non-revenue generating miles to obtain loads; and
we may need access to sources of credit or capital to meet cash requirements in operations, which would subject us to indebtedness and reduce our profitability.
We are also subject to cost increases outside our control that could materially reduce our profitability if we are unable to increase our rates sufficiently. Such cost increases include, but are not limited to, increases in fuel prices, driver and office employee wages, purchased transportation costs, interest rates, taxes, tolls, license and registration fees, insurance, revenue equipment and related maintenance, and healthcare and other benefits for our employees. Further, we may not be able to appropriately adjust our costs to changing market demands. In order to maintain high variability in our business model, it is necessary to adjust staffing levels to changing market demands. In periods of rapid change, it is more difficult to match our staffing level to our business needs.
In addition, events outside our control, such as deterioration of U.S. transportation infrastructure and reduced investment in such infrastructure, strikes or other work stoppages at our facilities or at customer, port, border or other shipping locations, or actual or threatened armed conflicts or terrorist attacks, efforts to combat terrorism, military action against a foreign state or group located in a foreign state or heightened security requirements could lead to wear, tear and damage to our equipment, driver dissatisfaction, reduced economic demand, reduced availability of credit, increased prices for fuel or temporary closing of the shipping locations or U.S. borders. Such events or enhanced security measures in connection with such events could impair our operating efficiency and productivity and result in higher operating costs.
On October 1, 2024, dockworkers across ports from Maine to Texas on the East and Gulf Coasts initiated a strike, citing concerns over wages and the need for protections against increased automation. This strike was temporarily resolved on October 3, 2024, after the union and U.S. Maritime Alliance reached a tentative deal on wages and agreed to extend the existing master contract until January 15, 2025 to allow for further negotiations on unresolved issues. On January 8, 2025, the parties reached a tentative agreement for a six-year contract. However, should the strike resume, it could pose a major disruption to the flow of goods, materially restricting both imports and exports through these key Eastern and Gulf ports, particularly if the strike extends for weeks or even longer. Such an extended disruption to supply chains, if happens, could have significant ripple effects on the U.S. economy, and our operations could be materially adversely affected if our customers suspend exporting waste paper, scrap metal and other commodities we transport to ports for an extended period. At this stage, we cannot be certain whether the strike will resume, how long it might last, or the extent of the impact it may have on our business.
Additionally, changing impacts of regulatory measures could impair our operating efficiency and productivity, decrease our revenues and profitability and result in higher operating costs. In addition, declines in the resale value of revenue equipment may affect the cash flows of our owner operators who own and operate the trucks that we draw on to fulfill customer shipping orders. From time to time, various U.S. federal, state or local taxes are also increased, including taxes on fuel. We cannot predict whether, or in what form, any such tax increase applicable to us will be enacted, but such an increase could materially adversely affect our profitability.
We may not be successful in managing our growth or implementing our business strategies.
Many of our business strategies require time, significant management and financial resources, and successful implementation. Consequently, we may be unable to effectively and successfully implement our business strategies. We also cannot ensure that our operating results, including our operating margins, will not be materially adversely affected by future changes in and expansion of our business, including the expected geographic expansion of our services in the United States and overseas, or by changes in economic conditions. Our results of operations may be materially adversely affected by a failure to further penetrate our existing customer base, cross-sell our services, secure new customer opportunities and manage the operations and expenses of new or growing services. For example, in 2025 our revenues increased modestly, while our cost of revenue and general and administrative expenses increased substantially, and our gross margin declined. There is no assurance that we will be successful in achieving any of our business strategies. Even if we are in executing our business strategies, we still may not our goals.
A substantial portion of our business and revenue derive from our brokerage model, where we support owner-operators to grow their fleets within our umbrella. Such a business model and the use of owner-operators expose us to different risks that a traditional fleet ownership and management business may not experience.
We are in the process of developing a scalable brokerage model, specializing in converting drivers into owner-operators by means of training and capturing market share. These owner-operators are encouraged and supported by us in order to grow their fleets within our umbrella. We assist with staffing their vehicles and ensuring DOT compliance for all members of our team. For more information on our relationship with owner-operators and our contractual rights to the use of trucks in our fleet, see also “ Item 1. Business—Employees and Human Capital—Owner-Operators ,” and “ Item 1. Business—Equipment We Use. ”
We believe we contract with more owner-operators and use more owner-operator trucks than some of our competitors. We are therefore more dependent on owner-operator trucks than some of our competitors. Failure to maintain owner-operator business and relationships and increased industry competition for owner-operators could have a materially adverse effect on our operating results.
During times of increased economic activity, we face heightened competition for owner-operators from other carriers. To the extent our turnover increases, we may be required to increase owner-operator compensation or take other measures to remain an attractive option for owner-operators. If we cannot attract sufficient owner-operators, or it becomes economically difficult for owner-operators to survive, we may not be able to maintain our fleet provided by owner-operators or maintain our delivery schedules.
The owner-operators that we utilize are subject to certain regulation requirements, such as the electronic on-board recording and driver Hours of Service, or HOS, requirements that apply to larger carriers, which may have a more significant impact on their operations, causing them to exit the transportation industry. Aside from when these third parties may use our trailing equipment to fulfill loads, we do not own the vehicles. The inability to obtain and maintain reliable third-party owner-operators will have a material adverse effect on our operating results and business growth.
If our independent contractor drivers are deemed by regulators or judicial process to be employees, our business, financial condition and results of operations could be materially adversely affected.
We rely in part on independent contractor drivers in our operations, and our cost of revenue includes costs associated with independent contractor drivers. Federal and state agencies, legislatures and courts have in recent years increased their scrutiny of worker classification practices, including in the trucking industry. The legal and regulatory standards applicable to the classification of workers as employees or independent contractors continue to evolve and may vary significantly by jurisdiction and by the facts and circumstances of each relationship. As a result, we cannot assure you that our independent contractor relationships will not be challenged or recharacterized in the future.
On January 12, 2024, two drivers, Rainey Mejia Rodriguez and Frank Santana Rodriguez (the “plaintiffs”), filed a class action lawsuit against the Company’s subsidiary, Toppoint Inc, and certain other parties, including Hok C. Chan, in the Superior Court of New Jersey, Essex County, alleging misclassification of truck drivers as independent contractors rather than employees. The plaintiffs seek to represent a class of similarly situated individuals who provided services in New Jersey from January 2018 through the date of the complaint. The complaint asserts violations of the New Jersey Wage Payment Law and the New Jersey Wage and Hour Law, including claims of unlawful wage deductions and failure to pay overtime. The plaintiffs sought compensatory damages, treble and/or , attorneys’ fees, and injunctive relief, without specifying a dollar amount of . On July 27, 2024, August 26, 2024, and November 22, 2024, the Court issued multiple orders the case for of . Upon a motion to reinstate the case filed on January 15, 2025 by the , the Court reinstated the case on January 31, 2025. On May 1, 2025, Toppoint Inc filed a motion to the amended , and a motion hearing was held on July 3, 2025. On June 6, 2025, the court the case without Mr. Hok C. Chan for of . Although we believe the are without merit and intend to continue to vigorously them, we cannot predict the outcome of this matter or similar . An outcome in this or in any future could materially and affect our business, financial condition and results of operations.
If the independent contractors with whom we or our owner-operators contract are determined to be employees, we would incur more employee-related expenses, and we and/or our owner-operators would incur additional exposure under federal and state employer tax, workers’ compensation, unemployment benefits, labor, employment and tort laws, including for prior periods, as well as potential liability for employee benefits and tax withholdings, and our business, financial condition and results of operations could be materially adversely affected.
Fluctuations in the price or availability of fuel and surcharge collection may increase our costs of operation, which could materially and adversely affect our margins.
In recent years, various factors such as the geopolitical instability in Ukraine and Gaza and the COVID-19 pandemic caused great financial instability in the global economy, which resulted in, among other things, the diesel fuel price to surge to record high in the United States. The cost of diesel fuel represents a significant expense for our owner-operators which we draw on to provide trucking services and solutions to our clients. Diesel fuel prices fluctuate greatly due to factors beyond our control, such as political events, terrorist activities, armed conflicts, depreciation of the dollar against other currencies and weather, such as hurricanes, and other natural or man-made disasters, each of which may lead to an increase in the cost of fuel. Fuel prices also are affected by the rising demand in developing countries, and could be adversely impacted by diminished drilling activity and by the use of crude oil and oil reserves for other purposes. Such events may lead not only to increases in fuel prices, but also to fuel and in the fuel supply chain. Because our operations are dependent upon diesel fuel, significant diesel fuel cost increases, or supply could materially and affect our operating results and financial condition.
Increases in fuel costs, to the extent not offset by rate per mile increases or fuel surcharges, have an adverse effect on our operations and profitability. While a portion of our owner-operators’ fuel costs are covered by fuel surcharge fees, increases in fuel costs could still affect our profitability because we need to compensate owner-operators more for such fuel cost increases. We constantly monitor fuel price changes by tracking fuel futures and other market information and we usually are able to implement fuel surcharge recovery no later than changes in fuel prices. However, our owner-operators may not be able to pass all the increased costs in fuel on to our customers, if prices rise more than what we forecast. Further, during periods of low freight volumes, shippers may use their negotiating leverage to depress fuel surcharge fees and reduce recoverability for fuel price increases. In addition, such fuel surcharges may not be maintained indefinitely or may not be sufficiently effective. Any of the above mentioned factors could adversely affect our profitability.
Difficulty in obtaining materials, equipment, goods and services from suppliers could adversely affect our business.
We and our owner-operators are dependent upon suppliers for certain products and materials, including trucks and chassis, and our owner-operators rely on suppliers of trucks, chassis and components to maintain the age of trucks in our vendor pool. If we and our owner-operators fail to maintain favorable relationships with such suppliers, or if such suppliers are unable to provide the products and materials we or our owner-operators need or undergo financial hardship, we and our owner-operators could experience difficulty in obtaining needed goods and services because of production interruptions, limited material availability or other reasons, or we and our owner-operators may not be able to obtain favorable pricing or other terms. As a result, our business and operations could be adversely affected.
Increased prices for and decreased availability of revenue equipment could materially adversely affect our business, financial condition, results of operations and profitability.
We are subject to risk with respect to higher prices for used tractors. We have experienced an increase in prices for both new and used trucks over the past few years. Prices have increased and may continue to increase, due, in part, to government regulations applicable to newly manufactured tractors and diesel engines, due to the pricing discretion of equipment manufacturers in periods of high demand. More restrictive U.S. Environmental Protection Agency (the “EPA”) and state emissions standards have required vendors to introduce new engines. Compliance with such regulations has increased the cost of new tractors and could impair equipment productivity and result in lower fuel mileage. Although our owner-operators primarily purchase used trucks, the used equipment market is closely related to the new equipment market. Used equipment prices are subject to substantial fluctuations based on freight demand, supply of used tractors, availability of financing, the presence of buyers for export to foreign countries and commodity prices for scrap metal. However, generally when the price of new trucks is high, it can create demand for used trucks as a more affordable alternative. Also, with higher fuel mileage, used trucks currently are in great demand. A decrease in the availability of used trucks and other equipment may materially adversely affect our owner-operators’ ability to purchase a quantity of revenue equipment that is sufficient to sustain our growth rate and could have a material effect on our business, financial condition and results of operations.
We are dependent on systems, networks and other information technology assets (and the data contained therein) and a failure in the foregoing, including those caused by cybersecurity breaches, could cause a significant disruption to our business.
Our business depends on the efficient and uninterrupted operation of our systems, networks and other information technology assets (and the data contained therein). Our information and electronic data interchange systems are used for receiving and planning loads, dispatching drivers and other capacity providers, billing customers and load tracking and storing the data related to the foregoing activities. We also maintain information security policies to protect our systems, networks and other information technology assets (and the data contained therein) from cybersecurity breaches and threats, such as hackers, malware and viruses; however, such policies cannot ensure the protection of our systems, networks and other information technology assets (and the data contained therein). Recently, more jurisdictions are enacting data privacy legislation that place higher standards for compliance, such as the GDPR, CCPA, etc. If we are unable to prevent system violations or other unauthorized access to our systems, networks and other information technology assets (and the data contained therein), we could be subject to significant fines and lawsuits and our reputation could be damaged, or our business operations could be , any of which could have a material effect on our financial performance and business operations.
Our operations, and those of our technology and communications service providers are vulnerable to interruption by fire, natural disasters, power loss, telecommunications failure, network disruptions, cyber-attacks, terrorist attacks, Internet failures, malicious intrusions, computer viruses and other events that may be beyond our control. Although we attempt to reduce the risk of disruption to our business operations through, among other things, using cloud servers to store and manage data, email safe scans to prevent phishing and malware attacks and other anti-virus software, there can be no assurance that such measures will be effective. If any of our critical information technology assets fail or become otherwise unavailable, whether as a result of a cybersecurity breach, upgrade project or otherwise, we would have to perform certain functions manually, which could temporarily impact our ability to manage our fleet , respond to customers’ requests effectively, maintain billing and other records reliably, and bill for services and prepare financial statements accurately or in a timely manner. Any significant system , upgrade , security or other system could or our operations, our reputation, cause us to customers or impact our ability to manage our operations and report our financial performance, any of which could have a material effect on our business, financial condition and results of operations.
A significant portion of our revenue is concentrated in a small number of large customers. Any loss or significant reduction of business with, one or more of them could have a material adverse effect on our business, financial condition and results of operations.
A significant portion of our revenue is generated from a small number of major customers, the loss of, or significant reduction of business with, one or more of which could have a material adverse effect on our business. For the fiscal years ended December 31, 2025 and 2024, our top ten customers, based on revenue, accounted for approximately 59% and 58% of our total revenue, respectively. The majority portion of our freight is from customers in the waste paper products industry. Others include scrap metal export and general freight import clients. As such, our volumes are largely dependent on a well-functioning supply chain, export demand and inbound ship volume. In the event of a reduction in or termination of our services by one or more of our major customers, we could be required to replace the volumes elsewhere at uncertain rates and volumes, suffer reduced equipment utilization or lose our owner-operators. Failure to retain our existing customers, or enter into relationships with new customers, each on acceptable terms, could materially impact our business, financial condition, results of operations and ability to meet our current and long-term financial forecasts.
Economic conditions and capital markets may materially adversely affect our customers and their ability to remain solvent. Our customers’ financial difficulties can negatively impact our results of operations and financial condition, especially if they were to delay or default on payments to us. As of December 31, 2025, we had accounts receivable, net of $1.40 million, and we maintain an allowance for expected credit losses based on management’s assessment of collectability. Generally, we do not have contractual relationships that guarantee any minimum volumes with our customers, and we cannot assure you that our customer relationships will continue as presently in effect. There is no assurance any of our customers will continue to utilize our services, renew our existing contracts, if any, or continue at the same volume levels.
In addition, the size and market concentration of some of our customers may allow them to exert increased pressure on the prices, margins and non-monetary terms in our arrangements with them.
We have engaged in, and may continue to engage in, transactions with related parties, and such transactions present conflicts of interest that could have an adverse effect on our business and results of operations.
We have entered into, and may continue to enter into, transactions with our directors, executive officers, principal stockholders and their affiliates or family members. These transactions have included, among other things, office leases with related parties, payments to a family member of our Chief Executive Officer for dispatch-related services, equipment-related arrangements with such related party, and related-party financing. For detailed information, see “ Item 13. Certain Relationships and Related Transactions, and Director Independence. ” Although we believe the terms obtained or consideration that we paid or received, as applicable, in connection with these transactions were comparable to terms available or the amounts that would be paid or received, as applicable, in arm’s-length transactions, we cannot assure you that this is the case, or that future related-party transactions will be on terms as favorable to us as those that we could obtain from unaffiliated third parties.
We may in the future enter into additional transactions in which any of our directors, officers or principal shareholders, or any members of their immediate family, have a direct or indirect material interest. Such transactions present potential for conflicts of interest, as the interests of these persons may not align with the interests of the Company and our unaffiliated shareholders with respect to the negotiation of, and certain other matters related to, our services to, leases and other transactions with such entities. Conflicts of interest may also arise in connection with the exercise of contractual remedies under these transactions, such as for events of default.
Our Audit Committee is responsible for reviewing and approving all material related party transactions. Nevertheless, we may have achieved more favorable terms if such transactions had not been entered into with related parties. These transactions, individually or in aggregate, may have an adverse effect on our business and results of operations.
The Company has incurred indebtedness and may incur other debt in the future, which could adversely affect its financial condition and future financial results.
The Company borrows funds from commercial banks, financial institutions and affiliates from time to time to support its working capital needs and other general corporate purposes. As of December 31, 2025, we had outstanding loans payable consisting of, among other things, a truck loan, an Economic Injury Disaster Loan and a term loan with M&T Bank. Existing debt, and any debt that we may incur in the future, may adversely affect our financial condition and future financial results by, among other things:
increasing our vulnerability to downturns in our business, to competitive pressures and to adverse economic and industry conditions;
requiring the dedication of a portion of our expected cash from operations to service our indebtedness, thereby reducing the amount of expected cash flow available for other purposes, including capital expenditures; and
limiting our flexibility in planning for, or reacting to, changes in our businesses and our industries.
In addition, certain of our borrowings are secured by specific assets. For example, our truck loan is secured by certain chassis, and our M&T Bank term loan is collateralized by our equipment. If we default on these or other obligations, the applicable lenders may have the right to accelerate the indebtedness, foreclose on the collateral, or otherwise exercise remedies against us, which could disrupt our operations and adversely affect our financial condition.
If we are unable to generate sufficient cash flow from operations in the future to service our debt, we may be required, among other things, to seek additional financing in the debt or equity markets, refinance or restructure all or a portion of our indebtedness, sell selected assets or reduce or delay planned capital, operating or investment expenditures. Such measures may not be sufficient to enable us to service our debt.
Insurance and claims expenses could significantly reduce our earnings.
Our future insurance and claims expenses might exceed historical levels, which could reduce our earnings. As a trucking company, we are subject to risk of accidents that can lead to property damage, bodily injury, cargo loss or damage, workers’ compensation claims and regulatory fines and penalties. It is essential for companies like us to have adequate insurance coverage and risk management strategies in place to mitigate these risks.
We maintain insurance with licensed insurance carriers and our independent contractor drivers are covered by our insurance. See “Item 1. Business – Insurance.” However, we self-insure or maintain a high deductible for a portion of our claims exposure resulting from workers’ compensation, auto liability, general liability, cargo and property damage claims.
Although we believe our aggregate insurance limits should be sufficient to cover reasonably expected claims, it is possible that the amount of one or more claims could exceed our aggregate coverage limits. If any claim were to exceed our coverage, we would bear the excess, in addition to our other self-insured amounts. Insurance carriers have raised premiums for many businesses, including transportation companies. As a result, our insurance and claims expense could increase, or we could raise our self-insured retention or deductible when our policies are renewed or replaced. Our operating results and financial condition could be materially and adversely affected if (i) cost per claim, premiums, or the number of claims significantly exceeds our estimates, (ii) we experience a claim in excess of our coverage limits, (iii) our insurance carriers fail to pay on our insurance claims or (iv) we experience a claim for which coverage is not provided.
Our profitability may be materially and adversely impacted if our capital investments do not match customer demand for invested resources or if there is a decline in the availability of funding sources for these investments.
Our operations require significant investments. The amount and timing of capital investments depend on various factors, including anticipated volume levels and the price and availability of assets. If anticipated demand differs materially from actual usage, we may have too much, too little or too advanced capacity with respect to rented premises, IT infrastructure or other aspects of our business that we intend to invest in. Moreover, our ability to properly select freight and adapt to changes in customer transportation requirements is important to efficiently deploy resources and make capital investments in equipment or obtain qualified third-party capacity at a reasonable price. Our customers’ financial failures or loss of customer business may also affect us.
Our inability to generate sufficient cash from operations or obtain financing on favorable terms could impair our liquidity and ability to execute our business strategy.
Our business requires sufficient cash to fund operations, working capital, capital expenditures, strategic investments and our growth initiatives. Although we have financed our operations primarily through cash generated from operations and equity financing from completed IPO during 2025, we incurred a net loss and used cash in operating activities. We also used substantial cash in investing activities during 2025, including for a note receivable and other investment-related expenditures. As a result, if we were unable to generate sufficient cash from operations, manage our expenditures, or recover amounts deployed in investments in a timely manner, our liquidity could be adversely affected. We would need to seek alternative sources of capital, including equity or debt financing, to meet our capital requirements, and maintain our ability to execute our business strategies. In the event that we are unable to generate sufficient cash from operations or obtain financing on favorable terms in the future, our ability to support our owner-operators’ growth and retain such owner-operators may reduce, and our ability to execute our business strategies may be curtailed, any of which could have a materially adverse effect on our business and .
Our business depends on our strong reputation and the value of the Toppoint brand.
We believe that the Toppoint brand name symbolizes high-quality service, reliability and efficiency, and is one of our most important and valuable assets. The Toppoint brand name and our corporate reputation are significant sales and marketing tools, and we devote substantial resources to promoting and protecting them. Adverse publicity (whether or not justified) relating to activities by our staff, contractors or agents, such as accidents, customer service mishaps or noncompliance with laws, could tarnish our reputation and reduce the value of our brand. With the increased use of social media outlets such as Instagram, YouTube, Facebook and Twitter, adverse publicity can be disseminated quickly and broadly, making it increasingly difficult for us to effectively respond. Damage to our reputation and loss of brand equity could reduce demand for our services and thus have an adverse effect on our financial condition, liquidity and results of operations, as well as require additional resources to rebuild our reputation and restore the value of our brand.
Seasonality and the impact of weather and other catastrophic events affect our operations and profitability.
Our tractor productivity decreases during holiday seasons because drivers go on vacation and major holidays in Asian countries like the lunar new year slow down ports in Asia as well as shipping demand.
In addition, our revenue may be adversely affected by inclement weather as inclement weather may prevent trucks from crossing bridges and otherwise impede driving. During such times, operating expenses could increase as fuel efficiency declines because of engine idling and harsh weather creating higher accident frequency, increased claims and higher equipment repair expenditures. We also may suffer from weather-related or other unforeseen events such as tornadoes, hurricanes, blizzards, ice storms, floods, fires, earthquakes and explosions. These events may disrupt fuel supplies, increase fuel costs, disrupt freight shipments or routes, affect regional economies, damage or destroy our equipment or adversely affect the business or financial condition of our customers, any of which could materially affect our results of operations or make our results of operations more .
From time to time, we contract with third-party carriers where we do not own or control the transportation assets that deliver our customers’ freight, and we do not employ the providers directly involved in delivering the freight. If we are unable to secure the services of these third parties to serve our customers on competitive terms, our relationships with our customers may be materially adversely affected.
We engage services of third-party truckload carriers when we do not have sufficient capacity to meet shipping demand. In such arrangements, we do not own or control the transportation assets that deliver our customers’ freight, and we do not employ the providers directly involved in delivering the freight. These third-party providers may seek other freight opportunities and/or require increased compensation in times of improved freight demand or tight truckload capacity. If we are unable to secure the services of these third parties or if we become subject to increases in the prices we must pay to secure such services, our business, financial condition and results of operations may be materially adversely affected, and we may be unable to serve our customers on competitive terms. In addition, our ability to secure sufficient equipment or other transportation services may be affected by many risks beyond our control, including equipment shortages in the transportation industry, particularly among contracted truckload carriers, interruptions in service due to labor disputes, driver shortage, changes in regulations impacting transportation and changes in transportation rates.
If we are unable to recruit, develop and retain our key employees, our business, financial condition and operating results could be adversely affected.
We are highly dependent upon the services of certain key employees, including our executive officers. The loss of any of their services could negatively impact our operations and future profitability. Inadequate succession planning or the unexpected departure of key executive officers could cause substantial disruption to our business operations, deplete our institutional knowledge base and erode our competitive advantage. Additionally, we must continue to recruit, develop and retain skilled and experienced personnel if we are to realize our goal of expanding our operations and continuing our growth, including internationally. Failure to recruit, develop and retain a core group of operational personnel could have a materially adverse effect on our business.
Efforts by labor unions could divert management’s attention and could have a materially adverse effect on our operating results.
We face the risk that Congress or one or more states will approve legislation significantly affecting our business and our relationship with our independent contractor drivers, such as the proposed federal legislation referred to as the Protecting the Right to Organize Act of 2021, which would substantially liberalize the procedures for union organization. We also face the risk that our independent contractor drivers may attempt to organize. Currently, our independent contractor drivers are not unionized. Any attempt to organize by such independent contractor drivers could result in increased legal and other associated costs. In addition, if we were to enter into a collective bargaining agreement, the terms could negatively affect our costs, efficiency and ability to generate acceptable returns on the affected operations. Moreover, any labor disputes or work stoppages, whether or not our other personnel unionize, could disrupt our operations and reduce our revenues.
Historically we have not made a significant number of acquisitions and we may not make acquisitions in the future, or if we do, we may not be successful in integrating the acquired company, either of which could have a materially adverse effect on our business.
Historically, acquisitions have not been a significant part of our growth strategy. From inception to date, we have not completed any significant acquisitions. We may not be successful in identifying, negotiating or consummating any future acquisitions. If we decide to acquire other companies to stay competitive, we may not successfully integrate these businesses or achieve the synergies and operating results anticipated in connection with these acquisitions. The continuing trend toward consolidation in the trucking industry may result in the acquisitions of smaller carriers by large carriers that gain market share and other competitive advantages through such acquisitions. If we fail to make or successfully execute future acquisitions, our growth rate could be materially and adversely affected.
In addition, any acquisitions we undertake could involve numerous risks that could have a materially adverse effect on our business and operating results, including:
difficulties in integrating the acquired company’s operations and in realizing anticipated economic, operational and other benefits in a timely manner that could result in substantial costs and delays or other operational, technical or financial problems;
challenges in achieving anticipated revenue, earnings or cash flows;
assumption of liabilities that may exceed our estimates or what was disclosed to us;
the diversion of our management’s attention from other business concerns;
the potential loss of customers, key associates and drivers of the acquired company;
difficulties operating in markets in which we have had no or only limited direct experience;
the incurrence of additional indebtedness; and
the issuance of additional shares of our common stock, which would dilute your ownership in the company.
Our planned expansions outside the United States subject us to risks inherent in international operations that can harm our business, results of operations, and financial condition.
A key element of our growth strategy is to increase the wallet shares of our existing customers and serve additional domestic and international markets of theirs. Operating internationally requires significant resources and management attention. We cannot be certain that the investment and additional resources required to operate internationally will produce desired levels of revenue or profitability. Further, operating internationally subjects us to various risks, including:
increased management, travel, infrastructure and legal compliance costs associated with having operations in multiple countries;
increased financial accounting and reporting burdens and complexities;
variations in adoption and acceptance of our services in different countries, requirements or preferences for domestic service offerings, and difficulties in replacing services offered by more established or known regional competitors;
new and different sources of competition;
laws and business practices favoring local competitors;
differing technical standards, existing or future regulatory and certification requirements;
communication and integration problems related to entering and serving new markets with different languages, cultures, and political systems;
compliance with foreign privacy and security laws and regulations, including data privacy laws that require personal data to be stored and processed in a designated territory, and the risks and costs of non-compliance;
compliance with laws and regulations for foreign operations, including anti-bribery laws (such as the U.S. Foreign Corrupt Practices Act), import and export control laws, tax laws, tariffs, trade barriers, economic sanctions, and other regulatory or contractual limitations on our ability to sell our services in certain foreign markets, and the risks and costs of non-compliance;
compliance with foreign laws, regulations and orders related to health and safety;
fluctuations in currency exchange rates and related effects on our results of operations;
difficulties in repatriating or transferring funds from or converting currencies in certain countries;
different pricing environments, longer sales cycles, and longer accounts receivable payment cycles and collections issues;
political and economic conditions and uncertainty in the countries or regions in which we operate and around the world;
difficulties in recruiting, managing and retaining local partners to support our operations and sales;
differing labor standards, including restrictions related to, and the increased cost of, terminating employees or independent contractors in some countries;
difficulties in recruiting, hiring and retaining employees and independent contractors in certain countries;
difficulties in managing an international workforce and maintaining our corporate culture internationally;
the preference for localized software and licensing programs;
compliance with the laws of numerous foreign taxing jurisdictions, including withholding obligations, and overlapping of different tax regimes;
compliance challenges related to the complexity of multiple, conflicting and changing governmental laws and regulations, including employment, tax, privacy, and data protection laws and regulations; and
global pandemics such as the COVID-19 pandemic and travel restrictions and other measures undertaken by governments in response to such pandemics.
Any of the above risks could adversely affect our planned international operations, including reducing revenue from customers outside of the U.S. or increasing operating costs, each of which could adversely affect our business, results of operations, financial condition, and growth prospects. Even if we are able to successfully manage the risks of international operations, our business may be adversely affected if our business partners are not able to successfully manage these risks.
If we fail to implement and maintain an effective system of internal controls to remediate our material weaknesses in financial reporting, our ability to report our results of operations and financial condition could be adversely affected.
Prior to the initial public offering completed in January 2025, we were a private company with limited accounting personnel and other resources with which to address our internal control over financial reporting. In connection with the audit of our consolidated financial statements included in this report, we and our independent registered public accounting firm identified material weaknesses in our internal control over financial reporting. As a result, our internal control over financial reporting was not effective as of December 31, 2025.
The material weaknesses that have been identified relate to (i) we do not have internal audit function in place to monitor the control execution which may lead a material audit adjustments to the financial statements; (ii) lack of assessment and implementation of internal control over financial reporting in accordance with the requirement of COSO 2013 framework. Our independent registered public accounting firm didn’t undertake a comprehensive assessment of our internal control for purposes of identifying and reporting material weaknesses and other deficiencies in our internal control over financial reporting. Had our independent registered public accounting firm performed an audit of our internal control over financial reporting, additional deficiencies may have been identified.
We have engaged external financial consultant with U.S. GAAP experience to help our management in financial reporting processes and are in the process of developing and implementing a comprehensive set of processes and internal controls to timely and appropriately (i) identify transactions that may be subject to complex U.S. GAAP accounting treatment, (ii) analyze the transactions in accordance with the relevant U.S. GAAP, and (iii) review the accounting technical analysis. However, the implementation of these measures may not fully address the material weaknesses in our internal control over financial reporting. Our failure to correct the material weaknesses or our failure to discover and address any other deficiencies could result in inaccuracies in our financial statements and impair our ability to comply with applicable financial reporting requirements and related regulatory filings on a timely basis. Moreover, ineffective internal control over financial reporting could significantly hinder our ability to prevent fraud.
As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002 and the rules and regulations of NYSE American. Section 404 of the Sarbanes-Oxley Act, or Section 404, requires us to include a report from management on the effectiveness of our internal control over financial reporting in our annual reports on Form 10-K. In addition, once we cease to be an “emerging growth company” as such term is defined in the JOBS Act, our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting unless we qualify as a “non-accelerated filer.” Our management may conclude that our internal control over financial reporting is not effective. Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting its own independent testing, may issue a report that is qualified, if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated, or reviewed, or if it interprets the relevant requirements differently from us. In addition, our public company reporting obligations may place a significant strain on our management, operational, and financial resources and systems for the foreseeable future. We may be to complete our evaluation testing and any required remediation in a timely manner.
Legal and Compliance Risks
We operate in a highly regulated industry and increased costs of compliance with, or liability for violation of, existing or future federal or state regulations could have a materially adverse effect on our business.
We are subject to regulation at the federal level and at the state level. We may incur additional expenses associated with state wage, driver meal and rest break regulations. In addition, we operate in the United States pursuant to federal operating authority granted by the DOT. Our owner-operators and other independent contractor drivers also must comply with the safety and fitness regulations of the DOT, implemented through the FMCSA, including those relating to CSA safety performance and measurements, drug and alcohol testing and Hours of Service. Weight and equipment dimensions also are subject to government regulations. We also may become subject to new or more restrictive regulations relating to exhaust emissions, drivers’ Hours of Service, ergonomics, collective bargaining, security at ports and other matters affecting safety or operating methods. We, as well as our owner-operators and other independent contractor drivers, must comply with enacted governmental regulations regarding safety, equipment, environmental protection and operating methods. Examples include regulation of equipment weight, equipment dimensions, fuel emissions, driver Hours of Service, driver eligibility requirements, on-board reporting of operations and ergonomics. We may also become subject to new or more restrictive regulations related to safety or operating methods, which could adversely affect our owner-operators’ fleets and operations in those jurisdictions.
Changes in U.S. tax laws and regulations may impact our effective tax rate and may adversely affect our business, financial condition and operating results.
Significant reform of the U.S. tax laws, including significant changes related to federal tax rates and the taxation of business entities, could adversely affect us. Recent U.S. tax legislation may materially affect our financial condition, results of operations, and cash flows.
The Tax Cuts and Jobs Act (the “Tax Act”) has significantly changed the U.S. federal income taxation of U.S. businesses, including by reducing the U.S. corporate income tax rate, limiting interest deductions, permitting immediate expensing of certain capital expenditures, modifying, or repealing many business deductions and credits.
The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) modifies certain provisions of the Tax Act, including increasing the amount of interest expense that may be deducted.
The Tax Act as modified by the CARES Act is unclear in many respects and could be subject to potential amendments and technical corrections, as well as interpretations and implementing regulations by the Treasury Department and IRS, any of which could lessen or increase certain adverse impacts of the legislation. In addition, it is unclear how these U.S. federal income tax changes will affect state and local taxation, which often uses federal taxable income as a starting point for computing state and local tax liabilities. Our analysis and interpretation of this legislation is preliminary and ongoing and there may be material adverse effects resulting from the legislation that we have not yet identified. While some of the changes made by the tax legislation may adversely affect us, other changes may be beneficial. We continue to work with our tax advisors and auditors to determine the full impact that the recent tax legislation will have on us. We urge our investors to consult with their legal and tax advisors with respect to such legislation and its potential effect on an investment in our common stock.
Our operations are subject to various environmental laws and regulations, the violation of which could result in substantial fines or penalties.
We and our owner-operators are subject to various environmental laws and regulations dealing with waste transport, air emissions from vehicles, engine idling and discharge and retention of storm water. Our operations involve the risks of fuel spillage or seepage, environmental damage and waste disposal, among others. If we are involved in a spill or other accidents, and if soil or groundwater contamination is found at our facilities or results from our operations, or if we are found to be in violation of applicable environmental laws or regulations, we could owe cleanup costs and incur related liabilities, including substantial fines or penalties or civil and criminal liability, any of which could have a materially adverse effect on our business and operating results.
Litigation against us could be costly and time-consuming to defend and could materially and adversely affect our business, financial condition, and results of operations.
We may be from time to time involved in various claims, litigation matters and regulatory proceedings incidental to our business, including claims for damages arising out of the use of our services. The defense of these lawsuits could divert our management’s attention, and we could incur significant expenses in defending these lawsuits. In addition, we could be required to pay damage awards or settlements or become subject to unfavorable equitable remedies. Moreover, any insurance or indemnification rights that we could have may be insufficient or unavailable to protect us against potential loss exposures.
Risks Related to Ownership of Our Common Stock
The market price of our common stock may fluctuate, and you could lose all or part of your investment.
The market price for our common stock may fluctuate significantly in response to several factors, most of which we cannot control, including:
actual or anticipated variations in our periodic operating results;
increases in market interest rates that lead investors of our common stock to demand a higher investment return;
changes in earnings estimates;
changes in market valuations of similar companies;
actions or announcements by our competitors;
adverse market reaction to any increased indebtedness we may incur in the future;
additions or departures of key personnel;
actions by shareholders;
speculation in the media, online forums, or investment community; and
our intentions and ability to maintain the listing of our common stock on NYSE American.
In the past, shareholders have filed securities class litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business, and adversely affect our business.
We may experience extreme stock price volatility unrelated to our actual or expected operating performance, financial condition or prospects, making it difficult for prospective investors to assess the rapidly changing value of our common stock.
The US stock market has witnessed instances of extreme stock price run-ups followed by rapid price declines in 2022 and such stock price volatility seemed unrelated to the issuers’ performance subsequent to their initial public offerings, especially among companies with smaller public floats. As a relatively small-capitalized company with a small public float, the price of our common stock may experience extreme volatility, lower trading volume and less liquidity than large-capitalized companies. Although the specific cause of such volatility is unclear, our anticipated small public float may amplify the impact that the actions taken by a few shareholders have on the price of our common stock, which may cause our stock price to deviate, potentially significantly, from a price that better reflects the underlying performance of our business. The potential extreme volatility may confuse public investors regarding the value of our securities, distort the market perception of our stock price and our company’s financial performance and public image, and affect the long-term liquidity of our common stock, regardless of our actual or expected operating performance. Should our common stock experience run-ups and that are seemingly unrelated to our actual or expected operating performance and financial condition or prospects, prospective investors may have assessing the rapidly changing value of our common stock and our ability to access the capital market may be materially affected. In addition, if the trading volumes of our common stock are low, holders of our common stock may also not be to readily their investment or may be to sell at prices due to low volume trading. As a result of this , investors may experience on their investment in our common stock.
We may not be able to maintain a listing of our common stock on the NYSE American.
Once our common stock is listed on the NYSE American, we must meet certain financial and liquidity criteria to maintain such listing. If we violate NYSE American’s listing requirements, or if we fail to meet any of NYSE American’s listing standards, our common stock may be delisted. In addition, our board of directors may determine that the cost of maintaining our listing on a national securities exchange outweighs the benefits of such listing. A delisting of our common stock from NYSE American may materially impair our shareholders’ ability to buy and sell our common stock and could have an adverse effect on the market price of, and the efficiency of the trading market for, our common stock. The delisting of our common stock could significantly impair our ability to raise capital and the value of your investment.
We have considerable discretion as to the use of the net proceeds from the initial public offering and we may use these proceeds in ways with which you may not agree.
We have broad discretion over the use of the net proceeds from this initial public offering, and our actual expenditures may differ significantly from our current plans. While we intend to allocate these funds for geographic expansion, investments in physical and IT infrastructure, sales and marketing efforts, general working capital, and other corporate purposes, various factors may influence how we ultimately deploy these resources. For example, we have loaned a substantial portion of the proceeds from the initial public offering ($6 million) to a third-party borrower as a temporary debt investment. See “Item 1A Risk Factors - Operational and Industry Risks - A substantial portion of our capital was loaned to a third-party borrower, and if that borrower delays repayment or defaults, our liquidity, financial condition and results of operations could be materially adversely affected.” Shareholders will not have the ability to evaluate or influence these decisions and must rely on our management’s judgment. There is a risk that the proceeds may be used in ways that do not align with shareholder expectations, do not enhance profitability, or do not increase our share price. Additionally, we may invest or allocate these funds in ways that do not generate income or that may result in losses.
We do not expect to declare or pay dividends in the foreseeable future.
We do not expect to declare or pay dividends in the foreseeable future, as we anticipate that we will invest future earnings in the development and growth of our business. Therefore, holders of our common stock will not receive any return on their investment unless they sell their securities, and holders may be unable to sell their securities on favorable terms or at all.
If securities industry analysts do not publish research reports on us, or publish unfavorable reports on us, then the market price and market trading volume of our securities could be negatively affected.
Any trading market for our common stock may be influenced in part by any research reports that securities industry analysts publish about us. We may never obtain research coverage by securities industry analysts. If no securities industry analysts commence coverage of us, the market price and market trading volume of our securities could be negatively affected. In the event we are covered by analysts, and one or more of such analysts downgrade our securities, or otherwise report on us unfavorably, or discontinue coverage of us, the market price and market trading volume of our securities could be negatively affected.
Future issuances of our common stock or securities convertible into, or exercisable or exchangeable for, our common stock, or the expiration of lock-up agreements that restrict the issuance of new common stock or the trading of outstanding common stock, could cause the market price of our securities to decline and would result in the dilution of your holdings.
Future issuances of our common stock or securities convertible into, or exercisable or exchangeable for, our common stock, or the expiration of lock-up agreements that restrict the issuance of new common stock or the trading of outstanding common stock, could cause the market price of our common stock to decline. We cannot predict the effect, if any, of future issuances of our securities, or the future expirations of lock-up agreements, on the price of our securities. In all events, future issuances of our securities would result in the dilution of your holdings. In addition, the perception that new issuances of our securities could occur, or the perception that locked-up parties will sell their securities when the lock-ups expire, could adversely affect the market price of our securities. In connection with our initial public offering, we have entered into a lock-up agreement that prevents us, subject to certain exceptions, from offering additional shares of capital stock for up to six (6) months after the closing of the offering. That lock-up period has expired as of the date of this annual report. As a result, we may be able to offer additional shares, and our securityholders may be able to sell shares, in each case subject to applicable law, which could increase the supply of shares available in the market and affect the market price of our common stock.
We may need to obtain additional financing which may not be available or, if it is available, may result in a reduction in the percentage ownership of our then-existing shareholders.
We may need to raise additional funds in order to:
finance unanticipated working capital requirements;
develop or enhance our technological infrastructure and our existing services;
fund strategic relationships;
respond to competitive pressures; and
acquire complementary businesses, technologies, products or services.
Additional financing may not be available on terms favorable to us, or at all. If adequate funds are not available or are not available on acceptable terms, our ability to fund our expansion strategy, take advantage of unanticipated opportunities, develop or enhance technology or services or otherwise respond to competitive pressures could be significantly limited. If we raise additional funds by issuing equity or convertible debt securities, the percentage ownership of our then-existing shareholders may be reduced, and holders of these securities may have rights, preferences or privileges senior to those of our then-existing shareholders.
Future issuances of debt securities, which rank senior to our common stock upon our bankruptcy or liquidation, and future issuances of preferred stock, which could rank senior to our common stock for the purposes of dividends and liquidating distributions, may adversely affect the level of return you may be able to achieve from an investment in our securities.
In the future, we may attempt to increase our capital resources by offering debt securities. Upon bankruptcy or liquidation, holders of our debt securities, and lenders with respect to other borrowings we may make, would receive distributions of our available assets prior to any distributions being made to holders of our common stock. Moreover, if we issue preferred stock, the holders of such preferred stock could be entitled to preferences over holders of common stock in respect of the payment of dividends and the payment of liquidating distributions. Because our decision to issue debt or preferred stock in any future offering, or borrow money from lenders, will depend in part on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of any such future offerings or borrowings. Holders of our common stock must bear the risk that any future offerings we conduct or borrowings we make may adversely affect the level of return, if any, they may be able to achieve from an investment in our common stock.
We are authorized to issue “blank check” preferred stock without stockholder approval, which could adversely impact the rights of holders of our securities.
Our articles of incorporation authorize us to issue up to 50,000,000 shares of blank check preferred stock. Any preferred stock that we issue in the future may rank ahead of our securities in terms of dividend priority or liquidation premiums and may have greater voting rights than our securities. In addition, such preferred stock may contain provisions allowing those shares to be converted into shares of common stock, which could dilute the value of our common stock to current stockholders and could adversely affect the market price, if any, of our common stock. In addition, the preferred stock could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of our company. Although we have no present intention to issue any shares of authorized preferred stock, there can be no assurance that we will not do so in the future.
If our securities become subject to the penny stock rules, it would become more difficult to trade our shares.
The Securities and Exchange Commission, or the SEC, has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or authorized for quotation on certain automated quotation systems, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. If we do not retain a listing on NYSE American or another national securities exchange and if the price of our securities is less than $5.00, our securities could be deemed a penny stock. The penny stock rules require a broker-dealer, before a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document containing specified information. In addition, the penny stock rules require that before effecting any transaction in a penny stock not otherwise exempt from those rules, a broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive (i) the purchaser’s written acknowledgment of the receipt of a risk disclosure statement; (ii) a written agreement to transactions involving penny stocks; and (iii) a signed and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our securities, and therefore shareholders may have difficulty selling their securities.
As a public company, we incur increased costs as a result of complying with various regulatory and reporting requirements. Such requirements may strain our resources and distract our management, which could make it difficult to manage our business.
As a public company, we are required to comply with various regulatory and reporting requirements, including those required by the SEC. Complying with these reporting and other regulatory requirements may be time-consuming and result in increased costs to us and could have a negative effect on our business, financial condition and operating results. In 2025, our general and administrative expenses increased significantly, primarily due to professional fees associated with being a public company, travel and business development expenses, depreciation expense and the recognition of stock-based compensation. We expect to continue to incur significant costs associated with operating as a public company, including costs related to financial reporting, internal controls, corporate governance, legal compliance and audit activities. These increased costs may continue to materially affect our operating results.
As a public company, we are subject to the reporting requirements of the Exchange Act, and the requirements of the Sarbanes-Oxley Act. These requirements may place a strain on our systems and resources. The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal controls over financial reporting. To maintain and improve the effectiveness of our disclosure controls and procedures, we may need to commit significant resources, hire additional staff and provide additional management oversight. We may need to implement additional procedures and processes for the purpose of addressing the standards and requirements applicable to public companies. Sustaining our growth also requires us to commit additional management, operational and financial resources to identify new professionals to join the Company and to maintain appropriate operational and financial systems to adequately support expansion. These activities may divert management’s attention from other business concerns, which could have a material adverse effect on our business, financial condition and operating results.
We are subject to ongoing public reporting requirements that are less rigorous than Exchange Act rules for companies that are not emerging growth companies, and our shareholders could receive less information than they might expect to receive from more mature public companies.
We are required to publicly report on an ongoing basis as an “emerging growth company” (as defined in the JOBS Act) under the reporting rules set forth under the Exchange Act. For so long as we remain an emerging growth company, we may take advantage of certain exemptions from various reporting requirements that are applicable to other Exchange Act reporting companies that are not emerging growth companies, including but not limited to:
not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act;
being permitted to comply with reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements; and
being exempt from the requirement to hold a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.
We expect to take advantage of these reporting exemptions until we are no longer an emerging growth company. We would remain an emerging growth company for up to five years, although if the market value of our securities that are held by non-affiliates exceeds $700 million as of any June 30 before that time, we would cease to be an emerging growth company as of the following December 31.
Since we are subject to ongoing public reporting requirements that are less rigorous than Exchange Act rules for companies that are not emerging growth companies, our shareholders could receive less information than they might expect to receive from more mature public companies. We cannot predict if investors will find our securities less attractive if we elect to rely on these exemptions, or if taking advantage of these exemptions would result in less active trading or more volatility in the price of our securities.
We qualify as a smaller reporting company and are exempt from certain disclosure requirements, which could make our common stock less attractive to potential investors.
Rule 12b-2 of the Exchange Act defines a “smaller reporting company” as an issuer that is not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent that is not a smaller reporting company and that:
had a public float of less than $250 million as of the last business day of its most recently completed second fiscal quarter, computed by multiplying the aggregate worldwide number of shares of its voting and non-voting common equity held by non-affiliates by the price at which the common equity was last sold, or the average of the bid and asked prices of common equity, in the principal market for the common equity; or
in the case of an initial registration statement under the Securities Act or the Exchange Act for shares of its common equity, had a public float of less than $250 million as of a date within 30 days of the date of the filing of the registration statement, computed by multiplying the aggregate worldwide number of such shares held by non-affiliates before the registration plus, in the case of a Securities Act registration statement, the number of such shares included in the registration statement by the estimated public offering price of the shares; or
in the case of an issuer whose public float as calculated under paragraph (1) or (2) of this definition was zero or whose public float was less than $700 million, had annual revenues of less than $100 million during the most recently completed fiscal year for which audited financial statements are available.
If a company determines that it does not qualify for smaller reporting company status because it exceeded one or more of the above thresholds, it will remain unqualified unless when making its annual determination it meets certain alternative threshold requirements which will be lower than the above thresholds if its prior public float or prior annual revenues exceed certain thresholds.
As a smaller reporting company, we are not required to include a Compensation Discussion and Analysis section in our proxy statements; we must provide only two years of financial statements; and we need not provide the table of selected financial data. We are also subject to other “scaled” disclosure requirements that are less comprehensive than those of issuers that are not smaller reporting companies which could make our common stock less attractive to potential investors, which could make it more difficult for our stockholders to sell their shares.
As a “smaller reporting company,” we may choose to exempt our company from certain corporate governance requirements that could have an adverse effect on our public stockholders .
Under NYSE American rules, a “smaller reporting company,” as defined in Rule 12b-2 under the Exchange Act, is not subject to certain corporate governance requirements otherwise applicable to companies listed on NYSE American. For example, a smaller reporting company is exempt from the requirement of having a compensation committee composed solely of directors meeting certain enhanced independence standards, as long as the compensation committee has at least two members who do meet such standards. Although we do not avail ourselves of this or other exemptions from NYSE American requirements that are or may be afforded to smaller reporting companies, we may elect to rely on any or all of them in the future. By electing to utilize any such exemptions, our company may be subject to greater risks of poor corporate governance, and poorer financial performance from problems in our corporate organization.
Provisions in Nevada law may have an anti-takeover effect.
Nevada corporate statutes contain provisions designed to protect Nevada corporations and employees from the adverse effects of hostile corporate takeovers. These statutory provisions reduce the possibility that a third party could effect a change in control without the support of our incumbent directors and may also strengthen the position of current management by restricting the ability of shareholders to change the composition of the Board, to affect its policies generally and to benefit from actions that are opposed by the Board.
Section 8.10 of our bylaws provides that the Eighth Judicial District Court of Clark County, Nevada shall, to the fullest extent permitted by law, be the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Section 8.10 of our bylaws provides that the Eighth Judicial District Court of Clark County, Nevada shall, to the fullest extent permitted by law, be the sole and exclusive forum for state law claims with respect to the following types of actions or proceedings:
any derivative action or proceeding brought in the name or right of the Company or on its behalf;
any action asserting a claim for breach of any fiduciary duty owed by any director, officer, employee or agent of the Company to the Company or the Company’s stockholders;
any action arising or asserting a claim arising pursuant to any provision of the Nevada Revised Statutes Chapters 78 or 92A or any provision of the Company’s articles of incorporation or bylaws; or
any action asserting a claim governed by the internal affairs doctrine, including, without limitation, any action to interpret, apply, enforce or determine the validity of the Company’s articles of incorporation or bylaws.
Notwithstanding the foregoing, the exclusive forum provisions will not apply to suits brought to enforce any liability or duty created by the Securities Act, the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction.
Nevada Revised Statutes §78.046 allows Nevada corporations to include a provision in their articles of incorporation or bylaws that requires, to the extent not inconsistent with any applicable federal laws, internal actions be brought solely or exclusively in court(s) specified therein, and such specified courts must include at least one court in the State of Nevada. If a stockholder of the Company may nevertheless seek to bring a claim in a venue other than the Eighth Judicial District Court of Clark County, Nevada as designated in the exclusive forum provision of our bylaws, we would expect to vigorously assert the validity and enforceability of such exclusive forum provision. This may require significant additional costs associated with resolving such actions in other jurisdictions and there can be no assurance that this exclusive forum provision will be enforced by a court in those other jurisdictions.
This exclusive 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 lawsuits against us and our directors, officers and other employees. If a court were to find the exclusive forum provision in our bylaws to be inapplicable or unenforceable in an action, we may incur further significant additional costs associated with resolving the dispute in other jurisdictions, all of which could harm our business. Any person purchasing or otherwise acquiring any interest in shares of capital stock of the Company shall be deemed to have notice of and consented to Section 8.10 of our bylaws.
General Risk Factors
We are currently operating in a period of economic uncertainty and capital markets disruption, which has been impacted by geopolitical instability due to the military conflict between Russia and Ukraine and armed conflicts between Israel and Hamas. Our business, financial condition and results of operations may be materially and adversely affected by any negative impact on the global economy and capital markets resulting from the conflict in Ukraine, the Gaza Strip or any other geopolitical tensions.
Global markets have experienced volatility and disruption following the escalation of geopolitical tensions, including the military conflict between Russia and Ukraine and armed conflicts between Israel and Hamas. Although the length and impact of the ongoing military conflict are highly unpredictable, such conflicts could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions. We are continuing to monitor the situation in Ukraine, the Gaza Strip and globally and assessing its potential impact on our business. In addition, sanctions on Russia and hostilities involving Israel could adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets, potentially making it more for us to obtain additional funds.
Any of the above mentioned factors could affect our business, prospects, financial condition, and operating results. The extent and duration of the military actions, sanctions and resulting market disruptions are impossible to predict, but could be substantial. Any such disruptions may also magnify the impact of other risks described herein.
