ITEM 1A. RISK FACTORS
Any investment in our securities involves a high degree of risk. You should carefully consider the risks and uncertainties described below and all information contained in this Report, before you decide whether to purchase our securities. If any of the following risks or uncertainties actually occur, our business, financial condition, results of operations and prospects would likely suffer, possibly materially. These disclosures reflect our beliefs and opinions as to factors that could materially and adversely affect us and our securities in the future. References to past events are provided by way of example only and are not intended to be a complete listing or a representation as to whether or not such factors have occurred in the past or their likelihood of occurring in the future. In addition, the trading price of our common stock could decline due to any of these risks or uncertainties, and you may lose part or all of your investment.
Risks Relating to Our Business
We have engaged, and may engage in future acquisitions or strategic partnerships that increase our capital requirements, dilute our stockholders, cause us to incur debt or assume contingent liabilities, and subject us to other risks.
We may evaluate various acquisitions and strategic partnerships, including licensing or acquiring complementary products, intellectual property rights, technologies or businesses. To realize the anticipated benefits of any potential acquisitions, we must successfully integrate those businesses with ours. The integration of any potential acquisition or strategic partnership entails numerous risks, including:
increased operating expenses and cash requirements;
the assumption of indebtedness or contingent liabilities;
dilution of our stockholder’s equity due to the issuance of additional equity securities;
assimilation of operations, intellectual property and products of an acquired company, including difficulties associated with integrating new personnel;
the diversion of our management’s attention from our existing product programs and initiatives in pursuing such a strategic merger or acquisition;
retention of key employees, the loss of key personnel, and uncertainties in our ability to maintain key business relationships; and
our inability to generate revenue from acquired technology and/or products sufficient to meet our objectives in undertaking the acquisition or even to offset the associated acquisition and maintenance costs.
In addition, if we undertake acquisitions, we may issue dilutive securities, assume or incur debt obligations, incur large one-time expenses, and acquire intangible assets that could result in significant future amortization expense. Moreover, we may not be able to locate suitable acquisition opportunities and this inability could impair our ability to grow or obtain access to technology or products that may be important to the development of our business.
Failure to attract and retain management, and develop successors for management, may damage our operations and financial results and cause our stock price to decline.
We depend, to a significant degree, on the skills, experience and efforts of our management team, and other personnel, particularly in the management of our subsidiary PeriShip Global. Our failure to attract, integrate, motivate, and retain existing or additional personnel in a timely fashion, and develop successors with commensurate skills and talents, could disrupt or otherwise harm our operations and financial results. The loss of services of certain of our management team and key employees, or an inability to attract or retain qualified personnel in the future, could delay the development of and negatively impact the operations and profitability of our business.
Our future growth will depend upon the success of our Precision Logistics segment. If we fail to effectively execute our strategy, our competitive position and financial performance could be materially harmed.
Our future growth will depend upon the success of our Precision Logistics segment and future businesses we may acquire. We are currently engaged in efforts to streamline operations, improve profitability, and improve our overall competitiveness. The successful execution of our strategy is subject to significant uncertainties and may require additional capital and operational expenditures. If we fail to execute our strategy effectively, our ability to realize the intended benefits may be compromised. Even if we successfully implement our strategy, we may not see the intended results, diminishing the expected improvements to efficiency or revenue generation. This could materially and adversely affect our competitive position, financial performance, and brand reputation.
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Our Precision Logistics segment relies on our Strategic Partner for shipping services for our customers and as a source for customers representing a substantial percentage of our revenues.
PeriShip Global partners with our Strategic Partner, a major global carrier, for its customers’ shipping needs. Our business is dependent, and we believe that it will continue to depend on our relationship with our Strategic Partner. On August 26, 2025, our prior carrier partner notified providers, including PeriShip Global, that it would be providing preferred shipping services internally and that the providers would no longer be approved preferred shippers effective September 24, 2025. As such, PeriShip Global is no longer a preferred shipper with our prior carrier partner and our Precision Logistics segment ceased providing ProActive services to our prior carrier partner’s customers in September 2025. We continued to provide Premium services to our prior carrier partner until we ceased providing Premium services in February 2026. While we no longer provide ProActive and Premium services to our prior carrier partner we can and continue to provide Direct Premium services to our customers who use our prior carrier partner for their shipping needs.
On September 24, 2025, we began offering ProActive services to customers of our new Strategic Partner. W e are currently establishing the ability to offer our Premium services to our Strategic Partner. We expect to begin broadly offering Premium and Direct Premium services to customers of our new Strategic Partner in the second quarter of 2026.
While we work closely with our Strategic Partner and have transportation services and pricing agreements in place covering the shipping services they provide to our customers, such agreements are subject to termination or modification from time to time. If our Strategic Partner is unwilling or unable to supply to us the shipping services we market and sell on acceptable terms, or at all, or otherwise elects to terminate its business relationship with us, we may not be able to obtain alternative shipping services from other providers on acceptable terms, in a timely manner, or at all, and our business may be materially and adversely impacted. We do not currently have any alternative shipping service suppliers from which we can obtain the shipping services we currently receive from our Strategic Partner. In addition, establishing the necessary information technology infrastructure and business relationship with our Strategic Partner, or with other shipping and carrier services providers, may be costly and time consuming and may ultimately not be successful or cost-effective. Further, any increase in the prices charged by our Strategic Partner or failure to perform by our Strategic Partner could cause our costs to increase or could cause us to experience short-term unavailability of shipping services on which our business relies.
In particular, delays and other shipping disruptions at our Strategic Partner may have a significantly negative impact our business. Our business involves the shipment of time and temperature sensitive goods, so our customers are significantly negatively impacted by delays and other shipping disruptions that cause product loss, spoilage, and reputational harm. An increase in delays and other shipping disruptions on the part of our Strategic Partner could cause our clients to seek shipping solutions from our competitors who use alternative shipping service providers. If these events occur, it may reduce our profitability or may cause us to increase our prices. In addition, any material interruptions in shipping services by this Strategic Partner may result in significant cost increases and reduce sales, which could harm our business, financial condition and results of operations and may have a material adverse impact on our business.
As a result of the change from our prior carrier partner to our Strategic Partner through which we provide our ProActive services, it is likely that our revenues from ProActive services will materially decline in the quarters ended March 31, 2026 and June 30, 2026 as compared to the quarters ended March 31, 2025 and June 30 2025. We expect our ProActive services revenues to substantially recover during 2026 as we transition additional customers and increase our existing and new customer bases however, there can be no assurance that our ProActive service revenue will return to historical levels .
In addition, a material portion of our gross margin has been generated from our prior carrier partner reselling our Premium services to its customers. Our prior carrier partner is no longer reselling these services to its customers. We are now directly selling these services to legacy customers of our prior carrier partner and we are working to establish the ability to offer these services to customers of our Strategic Partner. Premium services accounted for approximately 19% of revenue of our Precision Logistics segment for each of the years ended December 31, 2025, and 2024, respectively. Our prior carrier partner provides its own service offering to its customers that competes with our Premium services, and we expect revenue related to our prior carrier partner will decrease over time as it competes with us for these customers. Our goal is to offset these decreases by offering Premium services associated with our Strategic Partner. If we fail to offset any reduction in business in our Precision Logistics segment through our Premium services or ProActive Services, our business, financial condition and results of operations could be materially adversely affected.
Our business is subject to seasonal trends.
Historically, our operating results in the Precision Logistics segment have been subject to seasonal trends when measured on a quarterly basis. Our first and second quarters have traditionally been the weakest compared to our third and fourth quarters. This trend is dependent on numerous factors including economic conditions, customer demand, and weather. Because revenue is directly related to the available working days of shippers, national holidays, and the number of business days during a given period may also create seasonal impact on our results of operations. After the winter holiday season and during the remaining winter months, our freight volumes are typically lower because some customers reduce shipment levels. In addition, a substantial portion of our revenue is derived from customers in industries whose shipping patterns are tied closely to consumer demand which can sometimes be difficult to predict or are based on just-in-time production schedules. Therefore, our revenue is, to a large degree, affected by factors that are outside of our control. In addition, as a result of the change from our prior carrier partner to our Strategic Partner through which we provide our ProActive services, it is likely that our revenues from ProActive services will materially decline in the quarters ended March 31, 2026 and June 2026 as compared to the quarters ended March 31, 2025 and June 2025. There can be no assurance that our historic operating patterns will continue in future periods as we cannot influence or forecast many of these factors.
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Severe climate conditions and other catastrophic events can have an adverse impact on our business.
Our business involves the shipment of time and temperature sensitive goods, so our customers are significantly negatively impacted by delays and other shipping disruptions that cause product loss, spoilage, and reputational harm. Disasters, severe weather, public health issues, such as pandemics, earthquake, cyber-attack, heightened security measures, actual or threatened terrorist attack, strike, civil unrest, or other catastrophic event may cause shipment delays or an inability to ship, which could prevent, delay or reduce shipment volumes and could have an adverse impact on consumer spending and confidence levels, all of which could result in decreased revenues. In particular, c ertain weather-related conditions such as ice and snow can disrupt the operations of our carrier partners during the peak holiday season, which could have a disproportionately large negative impact on our business and revenues.
We operate in a highly competitive industry and our business may suffer if we are unable to adequately address potential downward pricing pressures and other competitive factors.
The transportation and logistics industry is highly competitive, cyclical, and is expected to remain so for the foreseeable future. We face competition in all geographic markets and each industry sector in which we operate. We have and may face continued competition by strategic partners. Many of these competitors have significantly more resources and are actively pursuing acquisition opportunities and are developing new technologies to gain competitive advantages. The primary competitive factors are price and quality of service. Increased competition or our inability to compete successfully may lead to a reduction in our volume, reduced revenues, reduced profit margins, increased pricing pressure, or a loss of customer relationships, any one of which could affect our business and financial results. Numerous competitive factors could impair our ability to maintain our current profitability, including the following:
our competitors may periodically reduce their prices to gain business, especially during times of weak economic conditions, which may limit our ability to maintain or increase prices or impede our ability to maintain or grow our customer relationships;
our inability to achieve expected customer retention levels or sales growth targets;
we compete with many other transportation and logistics service providers, which has included and may include our strategic partners, some of which have greater capital resources or lower cost structures than us;
our strategic partners may take steps to position their own product offerings as a replacement or competitor to our service offerings;
our inability to compete with existing and new entrants in the market that may offer similar services at lower cost or have greater technological capabilities;
customers may choose to provide for themselves the services that we now provide;
many customers periodically accept proposals from multiple carriers for their shipping needs, and this process may depress rates or result in the loss of some of our business to competitors; and
advances in technology require increased investments to remain competitive, and our customers may not be willing to accept higher prices to cover the cost of these investments; and
we may not have sufficient resources to develop and market our services effectively, or at all.
There can be no assurance that such competitive factors will not increase our cost of delivering our services to our customers, hinder our ability to deliver our services to our customers, entice our existing customers to discontinue using our services, or reduce the number of customers referred to us by strategic partners. Any of these factors could harm our business, financial condition and results of operations and may have a material adverse impact on our business.
The shipping and logistics industry is rapidly evolving. We expect to continue to face significant competition, which could materially adversely affect us.
The shipping and logistics industry is rapidly evolving, including demands for faster deliveries and increased visibility into shipments. We expect to face significant competition on a local, regional, national, and international basis. Competitors include the U. S. and other international postal services, various motor carriers, express companies, freight forwarders, air couriers, large transportation, and e-commerce companies that have made and continue to make significant investments in their own logistics capabilities, some of whom are currently our customers. We also face competition from start-ups and other smaller companies that combine technologies with crowdsourcing to focus on local market needs. Competition may also come from other sources in the future as new technologies are developed. Competitors have cost, operational and organizational structures that differ from ours and may offer services or pricing terms that we are not willing or able to offer. Additionally, to sustain the level of service and value that we deliver to our customers, from time to time we may raise prices and our customers may not be willing to accept these higher prices. If we do not timely and appropriately respond to competitive pressures, including replacing any lost volume or maintaining our profitability, we could be materially adversely affected.
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Our future growth will depend upon the success of our Strategic Partner to integrate our solutions into their service offerings and our ability to continue to provide Direct Premium services to legacy customers of our prior carrier.
Our Precision Logistics segment relies on the integration of our ProActive and Premium services solutions into our Strategic Partner’s service offerings to its customers. We also rely on the ability to continue to provide Direct Premium services to our customers who use our prior carrier partner for their shipping needs. These strategies leave us largely dependent upon the success of our Strategic Partner and prior carrier partner and their policies related to the use of our services in connection with their shipping services. If our Strategic Partner or prior carrier partner cease to do so, or we fail to obtain other partners who will incorporate, embed, integrate, or bundle our technology, or these logistics carriers are unsuccessful in their efforts, expanding deployment of our technology, our business and future growth would be materially and adversely affected.
Damage to our brand image and corporate reputation could materially adversely affect us.
Our success depends on our ability to consistently deliver operational excellence and strong customer service. Our inability to deliver our services and solutions as promised on a consistent basis, or our customers having a negative experience or otherwise becoming dissatisfied, can negatively impact our relationships with new or existing customers and adversely affect our brand and reputation, which could, in turn, adversely affect revenue and earnings growth. Adverse publicity (whether or not justified) relating to activities by our employees, contractors, suppliers, agents, or others with whom we do business, such as customer service mishaps or noncompliance with laws, could tarnish our reputation and reduce the value of our brand. With the increase in the use of social media outlets such as Meta (f/k/a Facebook), YouTube, Instagram, LinkedIn and X (f/k/a 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 have a material adverse effect on us, and could require additional resources to rebuild our reputation and restore the value of our brand.
The Company has significant goodwill and other intangible assets, and future impairment of these assets could have a material adverse impact on the Company's financial results.
As of the date of this Report, the Company has recorded significant goodwill and other identifiable intangible assets on its balance sheet as a result of its acquisition of the PeriShip Global business in 2022. As a result of a long-lived asset and goodwill asset impairment assessment performed in September 2025, an intangible asset impairment charge of $2,788 thousand and a goodwill impairment charge of $1,062 thousand was recorded for the year ended December 31, 2025 relating to the Precision Logistics segment. An intangible asset impairment charge of $964 thousand and a goodwill impairment charge of $1,351 thousand was recorded for the year ended December 31, 2024 relating to Authentication segment. A number of factors may result in future impairments to our remaining goodwill and other intangible assets, including significant negative industry or economic trends, disruptions to our business, increased competition, and significant changes in the use of the assets.
Impairment charges could adversely affect the Company's financial condition or results of operations in the periods recognized.
Our customers’ businesses may be negatively affected by various economic and other factors such as recessions, downturns in the economy, inflation, global uncertainty and instability, the effects of pandemics, changes in United States social, political, and regulatory conditions and/or a disruption of financial markets, which may decrease demand for our services or increase our costs.
Adverse economic and other conditions, both in the United States and internationally, can negatively affect our customers’ business levels, the amount of logistics services they need, their ability to pay for our services and overall freight levels, any of which might impair our profitability. For example, inflation and uncertainty and instability in the global economy and geopolitical events such as a war in Iran and unrest in areas of the world that are dependent upon fuel production can negatively affect transportation costs and further reduce consumer spending leading to fewer goods being transported globally. Many of the products our clients ship are luxury or discretionary products and the demand for such products may decrease in adverse economic times. Further, when adverse economic times arise, customers may select competitors that offer lower rates or choose to ship their goods without logistical support in an attempt to lower their costs. In addition, changes in the United States’ or international trade policy, including tariffs, export controls, quotas, embargoes, or sanctions, could trigger additional retaliatory actions by affected countries, resulting in “trade wars” and further increased costs for goods transported globally, which may negatively impact our customers. These and other economic factors such as recessions could have an adverse effect on our business, financial conditions and results of operations and we might be forced to lower our rates or lose customers.
Overall economic conditions that reduce freight volumes could have a material adverse impact on our operating results and ability to achieve growth.
We are sensitive to changes in overall economic conditions that impact customer shipping volumes. The transportation and logistics industry historically has experienced cyclical fluctuations in financial results due to economic recession, downturns in business cycles of our customers, interest, and currency rate fluctuations, inflation, and other economic factors beyond our control. Changes in U.S. or international trade policy, including tariffs, export controls, quotas, embargoes, or sanctions, could trigger additional retaliatory actions by effected countries, resulting in “trade wars” impacting the volume of economic activity globally and in the United States, and as a result, shipping volumes may be materially reduced. Such a reduction may materially and adversely affect our business.
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Reductions in discretionary consumer spending could have an adverse effect on our business, financial condition, and results of operations.
The services and products we provide are sensitive to reductions from time to time in discretionary consumer spending. For example, demand for high-end perishable items, and subsequently the demand for shipping, brand protection, and other services related to such, can be affected by changes in the economy and consumer tastes, both of which are difficult to predict and beyond our control. Unfavorable changes in general economic conditions, including recessions, economic slowdowns, sustained high levels of unemployment, and rising prices or the perception by consumers of weak or weakening economic conditions, may reduce consumer’s disposable income or result in a decrease in demand for our services and products. As a result, we cannot ensure that demand for our services and products will materialize or remain constant. In response to market conditions and lower demand some carriers have implemented strategies to address a potential global recession.
We have seen a softening in demand for some services related to high-end perishable items which seem to be impacted by reduced discretionary spending by U.S. consumers. While a recession, whether global or more localized to the U.S., may decrease the demand for our services that are more discretionary in nature, we believe that the internal cost cutting measures, if implemented by the major global carrier may benefit out-sourced service providers, including PeriShip Global. Additionally, PeriShip Global is working with this major global carrier to address their small and medium sized business clients, which we believe is an underserved segment and presents considerable growth opportunities for PeriShip Global. However, we can provide no assurances that a decline in discretionary consumer spending will not have a negative impact on our revenues and results of operations. Adverse developments affecting economies throughout the world, including a general tightening of availability of credit, decreased liquidity in certain financial markets, increased interest rates, foreign exchange fluctuations, increased energy costs, acts of war or terrorism, transportation disruptions, natural disasters, declining consumer confidence, sustained high levels of unemployment or significant declines in stock markets, as well as concerns regarding pandemics, epidemics and the spread of contagious diseases, could lead to a further reduction in consumer discretionary spending and have an adverse effect on our business, financial condition, and results or operations.
Global supply-chain delays and shortages may adversely impact our customers or potential customers.
Global supply-chain delays and shortages, which are out of our control, can affect a wide variety of businesses globally including our customers. Supply-chain delays shortages may affect our customers or potential customers which would adversely affect our operations.
We have a history of losses and we may never achieve or maintain profitability .
Since our inception, we have incurred operating losses each year due to costs incurred in connection with research and development activities and general and administrative expenses associated with our operations. In addition, we have made significant expenditures on acquisitions. We expect to continue to incur expenditures to market our services and could continue to incur operating losses and negative operating cash flow. We may encounter unforeseen expenses, difficulties, complications, delays, and other unknown factors that may adversely affect our business. Our ability to generate profits will depend, in part, on our expenses and our ability to generate revenue. Our prior losses and any future losses have had and may continue to have an adverse effect on our working capital. If we fail to generate revenue and become profitable, or if we are unable to fund our continuing losses, our stockholders could lose all or part of their investments.
Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations.
Our net operating loss carryforwards ("NOLs"), and certain other tax attributes could be unavailable to offset future income tax liabilities because of restrictions under U.S. tax law. Under the Tax Cuts and Jobs Act, or the TCJA, federal NOLs generated in tax years ending after December 31, 2017, may be carried forward indefinitely. The carryforwards are limited to 80% of each subsequent year's net income.
In addition, Sections 382 and 383 of the Internal Revenue Code (“IRC”), contain rules that limit the ability of a corporation that undergoes an "ownership change" (generally, any change in ownership of more than 50% of the corporation's stock over a three-year period) to utilize its pre-change NOLs and tax credit carryforwards to offset future taxable income. These rules generally operate by focusing on ownership changes involving stockholders directly or indirectly owning 5% or more of the stock of a corporation and any change in ownership arising from a new issuance of stock by the company. Generally, if an ownership change occurs, the yearly taxable income limitation on the use of NOLs and tax credit carryforwards and certain built-in losses is equal to the product of the applicable long-term, tax-exempt rate and the value of the corporation's stock immediately before the ownership change. The Company completed an IRC Section 382 analysis in 2022 and determined that an ownership change occurred sufficient to impose additional limitations on the use of NOL carryforwards. The Company has not completed an IRC Section 382 analysis in 2023, 2024 or 2025. In the event future ownership changes are determined, we might be unable to offset our taxable income with losses, or our tax liability with credits, before such losses and credits expire, in which event we could incur larger federal and state income tax liabilities than we would have had we not experienced an ownership change. In connection with the Merger Agreement and Merger, we are analyzing whether that potential transaction, combined with other stock ownership changes, could trigger an ownership change pursuant to IRS Section 382. If an ownership change is found as a result of the Merger pursuant to IRS Section 382, the amount of our NOLs we can carryforward each year could be limited or eliminated.
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Because our name and brand could be confused with brands that have similar names, we may be adversely affected by any confusion or negative publicity related to others that use a name similar to VerifyMe in their brand names .
We have trademarked the VerifyMe TM brand in the United States and have pending applications with respect to our brand internationally. However, our name and brand has been and could be in the future confused with brands that have similar names, including but not limited to Verified.Me, a service offered to Canadians by SecureKey Technologies Inc. and www.verifyme.ng, a website offering verification services in Nigeria. We have attempted to contact the operators of the Nigeria website to resolve the confusion caused there but to date have been unsuccessful in our efforts. Further, we have registered certain trademarks and service marks in the United States and foreign jurisdictions. We are aware of names and marks similar to our service marks being used from time to time by other persons. Although we oppose any such infringement, further or unknown unauthorized uses or other misappropriation of our trademarks or service marks may diminish the value of our brands and adversely affect our business.
If our technologies do not work as anticipated once we achieve meaningful sales, we will not be successful .
Our business depends on our ability to market and sell our technology. Without material sales and acceptance from customers with respect to our technologies, we will not be successful. We can provide no assurances that the market will accept our products or that we will achieve any meaningful sales.
If our technology cannot be used successfully to proactively provide analytics logistics management, we may not be able to generate material revenue .
Our proprietary technology is the core of our PeriShip Global operations. The failure of our technology will result in the stoppage of our operation. Due to the fact our business is the monitoring of time sensitive goods movement, any stoppage will result in the financial loss and service liability damage. In order to stay competitive, we need to ensure the continuity and the timeliness of our service, it is essential that the technology platform has redundancy built in, high performing and scalable.
We are not currently expanding our sales, marketing and support organizations and our distribution arrangements, which will limit our ability to increase market acceptance of our products and services .
We are not currently expanding our sales, marketing and support organizations or our distribution arrangements which will limit our ability to increase market acceptance of our products and services. We will continue to evaluate the appropriate use of our sales and marketing strategies and may choose to expand our sales, marketing and support organizations or our distribution arrangements in the future, which may require us to increase our staff, or further outsource our sales process, to generate a greater volume of sales and to support any new customers or the expanding needs of existing customers. The employment market for sales, marketing, customer service, and support personnel in our industry is very competitive, and we may not be able to hire the kind and number of sales, marketing, customer service and support personnel we are targeting. Our inability to hire or outsource qualified sales, marketing, customer service and support personnel may harm our business, operating results, and financial condition. We may not be able to sufficiently build out our distribution network or enter into arrangements with qualified sales personnel on acceptable terms or at all. If we are not able to develop greater distribution capacity, we may not be able to generate sufficient revenue to continue our operations.
If we fail to protect or enforce our intellectual property rights, or if the costs involved in protecting and defending these rights are prohibitively high, our business and operating results may suffer .
We rely on intellectual property in order to maintain a competitive advantage. As such, we strive to protect our intellectual property rights by relying on federal, state, and common law rights, as well as contractual restrictions. We may enter into confidentiality and invention assignment agreements with our employees and confidentiality agreements with parties with whom we conduct business to limit access to, and disclosure and use of, our proprietary information. However, these contractual arrangements and the other steps we have taken to protect our intellectual property may not prevent the misappropriation of our proprietary information or deter independent development of similar technologies by others.
As management deems appropriate, we may pursue the registration of our domain names, trademarks, and service marks in the U.S. and in certain locations outside the U.S. We may seek to protect our trademarks, patents, and domain names in an increasing number of jurisdictions, a process that is expensive and time-consuming and may not be successful or which we may not pursue in every location. It may be expensive and cost prohibitive to file patents worldwide and we may be financially required to file patents in select countries where we see the greatest potential for our technologies. We may, over time, increase our investment in protecting our innovations through increased patent filings that are expensive and time-consuming and may not result in issued patents that can be effectively enforced.
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If we are required to sue third parties who we allege are violating our intellectual property rights, or if we are sued for violating a third party’s patents or other intellectual property rights, we may incur substantial expenses, and we could incur substantial damages, including amounts we cannot afford to pay .
Litigation may be necessary to enforce our intellectual property rights, protect our trade secrets or determine the validity and scope of proprietary rights claimed by others. Patent and intellectual property litigation is extremely expensive and beyond our ability to pay. While third parties do, under certain circumstances, finance litigation for companies that file suit, we cannot assure you that we could find a third party to finance any claim we choose to pursue. Moreover, third parties frequently refuse to finance companies that are sued. Any litigation of this nature, regardless of outcome or merit, could result in substantial costs, adverse publicity or diversion of management and technical resources, any of which could adversely affect our business and operating results. If we fail to maintain, protect and enforce our intellectual property rights, our business and operating results may be harmed.
From time-to-time, we may face allegations that we have infringed the trademarks, copyrights, patents, and other intellectual property rights of third parties, including from our competitors and inactive entities. Patent and other intellectual property litigation may be protracted and expensive, and the results are difficult to predict. As the result of any court judgment or settlement, we may be obligated to cancel the launch of a new feature or product, stop offering certain features or products, pay royalties or significant settlement costs, purchase licenses or modify our products and features.
If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired .
As a public company, we are subject to the reporting requirements of the Exchange Act and the Sarbanes-Oxley Act of 2002 (“SOX”). We expect that the requirements of these rules and regulations will continue to increase our legal, accounting, and financial compliance costs, make some activities more difficult, time-consuming and costly, and place significant strain on our personnel, systems, and resources.
SOX requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. We are continuing to develop and refine our disclosure controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we will file with SEC is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive and financial officers. To maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we have expended, and anticipate that we will continue to expend, significant resources, including accounting-related costs and significant management oversight.
Our management concluded that our disclosure controls and procedures were effective as of December 31, 2025. Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm our results of operations or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods. Any failure to implement and maintain effective internal control over financial reporting could also adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that we will eventually be required to include in our periodic reports that will be filed with the SEC.
Material weaknesses in our disclosure controls and internal control over financial reporting may be identified in the future. Any failure to maintain existing or implement required new or improved controls, or any difficulties we encounter in their implementation, could result in additional material weaknesses, cause us to fail to meet our periodic reporting obligations or result in material misstatements in our financial statements. If we are unable to effectively remediate material weaknesses in a timely manner, investors could lose confidence in the accuracy and completeness of our financial reports, which could have an adverse effect on our stock price.
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Because we do business outside of the United States, we may be exposed to liabilities under the Foreign Corrupt Practices Act, violations of which could have a material adverse effect on our business .
We are subject to the Foreign Corrupt Practice Act, or FCPA, and other laws that prohibit improper payments or offers of payments to foreign governments and their officials and political parties by U.S. persons and issuers as defined by the statute for the purpose of obtaining or retaining business. We have operations and agreements with third parties and make sales in jurisdictions which may be subject to corruption. These activities create the risk of unauthorized payments or offers of payments by one of the employees, consultants or agents of our Company, because these parties are not always subject to our control. It is our policy to implement safeguards to discourage these practices by our employees. However, our existing safeguards and any future improvements may prove to be less than effective, and the employees, consultants, sales agents, or distributors of our company may engage in conduct for which we might be held responsible. Violations of the FCPA may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could negatively affect our business, operating results, and financial condition.
Our business depends on our ability to successfully develop, implement, maintain, upgrade, enhance, protect, and integrate information technology systems.
We rely heavily on the proper functioning and availability of our information technology systems for our operations as well as for providing value-added services to our customers. Our information systems are integral to the efficient operation of our business. We strive to be best in class, and in order to do so, we must correctly interpret and address market trends and enhance the features and functionality of our technology platform in response to these trends, which may lead to significant ongoing software development costs and capital investments in information technology infrastructure. We may be unable to accurately determine the needs of our customers and integrate our technology and services cohesively with our key Strategic Partner, our prior carrier partner, or other logistic carriers, or identify the trends in the transportation services industry, in a timely and cost-effective manner, which could result in decreased demand for our services and a corresponding decrease in our revenues. Despite testing, external and internal risks, such as malware, insecure coding, “Acts of God,” data leakage and human error pose a direct threat to our information technology systems and operations. We may also be subject to cybersecurity attacks and other intentional hacking. Any failure to identify and address such defects or errors or prevent a cyber-attack could result in service interruptions, operational difficulties, loss of revenues or market share, liability to customers or others, diversion of resources, injury to our reputation and increased service and maintenance costs. Addressing such issues could prove to be impossible or very costly and responding to resulting claims or liability could similarly involve substantial cost. We must maintain and enhance the reliability and speed of our information technology systems to remain competitive and effectively handle higher volumes of shipments. If our information technology systems are unable to manage additional volume for our operations as our business grows, or if such systems are not suited to manage the various service modes we offer or businesses we acquire, our service levels and operating efficiency could decline. If we fail to hire and retain qualified personnel to implement, protect and maintain our information technology systems or if we fail to upgrade our systems to meet our customers’ and strategic operating partners’ demands, our business and results of operations could be seriously harmed. This could result in a loss of customers or a decline in the volume of shipments we receive from customers.
Our information technology systems also depend upon the Internet, third-party service providers, global communications providers, satellite-based communications systems, the electric utilities grid, electric utility providers, and telecommunications providers as well as their respective vendors. The services and service providers have all experienced significant system failures and outages at some point in the past. We have minimal control over the operation, quality, or maintenance of these services or whether vendors will improve their services or continue to provide services that are essential to our business. Disruptions due to transitional challenges in upgrading or enhancing our technology systems; failures in the services upon which our information technology platforms rely, including those that may arise from adverse weather conditions or natural calamities, such as floods, hurricanes, earthquakes or tornadoes; illegal acts, including terrorist attacks; human error or systems modernization initiatives; and/or other disruptions, may adversely affect our business, which could increase our costs or result in a loss of customers that could have a material adverse effect on our results of operations and financial position.
Our information technology systems are subject to cyber and other risks some of which are beyond our control. A security breach, failure or disruption of these services could have a material adverse effect on our business, results of operations and financial position.
Our information systems are integral to the efficient operation of our business and handle sensitive customer and shipment data. It is critical that the data processed by these systems remain secure, as it often includes competitive customer information, confidential transaction data, employee records and key financial and operational results and statistics. The sophistication of efforts by hackers, foreign governments, cyber-terrorists, and cyber-criminals, acting individually or in coordinated groups, to launch distributed denial of service attacks, ransomware or other coordinated attacks that may cause service outages, gain inappropriate or block legitimate access to systems or information, or result in other business interruptions has continued to increase in recent years. We utilize third-party service providers who have access to our systems and certain sensitive data, which exposes us to additional security risks, particularly given the complex and evolving laws and regulations regarding privacy and data protection. While we and our third-party service providers have experienced cyber-attacks and attempted breaches of our and their information technology systems and networks or similar events from time to time, no such incidents have been, individually or in the aggregate, material to us. Cyber incidents that impact the security, availability, reliability, speed, accuracy or other proper functioning of our systems, information and measures, including outages, computer viruses, theft or misuse by third parties or insiders, break-ins and similar disruptions, could have a significant adverse impact on our operations.
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It is difficult to fully protect against the possibility of power loss, telecommunications failures, cyber-attacks, ransomware and other cyber incidents in every potential circumstance that may arise. A significant cyber incident, including system failure, security breach, disruption by malware or ransomware, or other damage, could interrupt or delay our operations, damage our reputation and brand, cause a loss of customers, expose us to a risk of loss or litigation, result in regulatory scrutiny, investigations, actions, fines or penalties and/or cause us to incur significant time and expense to remedy such an event, any of which could have a material adverse impact on our results of operations and financial position. Furthermore, any failure to comply with data privacy, biometric privacy, data security or other laws and regulations could result in claims, legal or regulatory proceedings, inquiries or investigations. To comply with this changing landscape, we may be required to further segregate our systems and operations, implement additional controls, or adopt new systems, all of which could increase the cost and complexity of our operations. In addition, our insurance is intended to address costs associated with aspects of cyber incidents, network failures and privacy-related concerns, and may not sufficiently cover all types of losses or claims that may arise.
Evolving regulations concerning data privacy may result in increased regulation and different industry standards, which could prevent us from providing our current products to our users, or require us to modify our products, thereby harming our business.
The regulatory framework for privacy issues worldwide is currently in flux and is likely to remain so for the foreseeable future. Practices regarding the collection, use, storage, transmission and security of personal information by companies operating over the Internet and mobile platforms have recently come under increased public scrutiny, and civil claims alleging liability for the breach of data privacy have been asserted against companies. The U.S. government, including the Federal Trade Commission and the Department of Commerce, has announced that it is reviewing the need for greater regulation for the collection of information concerning consumer behavior on the Internet, including regulation aimed at restricting certain targeted advertising practices.
Many jurisdictions have already taken steps to restrict and penalize companies that collect and utilize information from their users and the general public. For example, in May 2018 the European Union made sweeping reforms to its existing data protection legal framework by enacting the General Data Protection Regulation (the “GDPR”), which resulted in a greater compliance burden for many companies with users in Europe. The GDPR includes operational requirements for companies that receive or process personal data of residents of the European Union that are broader and more stringent than those previously in place in the European Union and in most other jurisdictions around the world. The GDPR also imposes significant penalties for non-compliance, including fines of up to €20 million or 4% of total worldwide revenue.
Additionally, we may be subject to increasingly complex and expansive data privacy regulations within the United States. For example, California enacted the California Consumer Privacy Act (the “CCPA”), which became effective in 2020. The CCPA requires covered companies to provide California consumers with disclosures and expands the rights afforded consumers regarding their data. Fines for noncompliance of the CCPA can be as high as $8 thousand per violation. Since the CCPA was enacted, Nevada and Maine have enacted similar legislation designed to protect the personal information of consumers and penalize companies that fail to comply, and other states have proposed similar legislation. The costs of compliance with, and other burdens imposed by, the GDPR, CCPA, and similar laws may limit the use and adoption of our products and services and/or require us to incur substantial compliance costs, which could have a material adverse impact on our business.
We rely on the services of third-party data center hosting facilities. Interruptions or delays in those services could impair the delivery of our service and harm our business.
We utilize cloud computing technology. It is hosted pursuant to agreements on technology platforms by third-party service providers. We do not control the operation of these providers or their facilities, and the facilities are vulnerable to damage, interruption or misconduct. Unanticipated problems at these facilities could result in lengthy interruptions in our services. If the services of one or more of these providers are terminated, disrupted, interrupted or suspended for any reason, we could experience disruption in our ability to provide our services, which may harm our business and reputation. Further, any damage to, or failure of, the cloud services we use could result in interruptions in our services. Interruptions in our service may damage our reputation, reduce our revenue, cause customers to terminate their agreements and adversely affect our ability to attract new customers. While we believe our strong partnerships reduce our risk, our business would be harmed if our customers and potential customers believe our services are unreliable. Additionally, if our service providers fail to meet their obligations, provide poor, inaccurate or untimely service, or we are unable to make alternative arrangements for these services, we may fail, in turn, to provide our services or to meet our obligations to our users, and our business, financial condition and operating results could be materially and adversely affected.
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Fluctuations in labor costs, changes in the availability of transportation service, or catastrophic events may increase the cost of our products and services.
Increases in labor costs might be difficult to pass on to our customers. We rely on our Strategic Partner, and for certain legacy customers our prior carrier partner, for transportation services. Our ability to meet delivery requirements may be constrained by our Strategic Partner’s and prior carrier partner’s inability to adjust delivery during times of volatile demand. Our inability to fill the needs of our customers regardless of whether they use our Strategic Partner, our prior carrier partner, or another logistic carrier for their shipping needs would jeopardize our ability to fulfill obligations under current contracts or enter new contracts to sell our products, which would, in turn, result in reduced sales and profits, contract penalties or terminations, and damage to customer relationships.
Our ability to become profitable is largely dependent upon our ability to continually improve our platforms and acquiring new customers in increasingly competitive markets.
Our ability to become profitable depends upon a number of factors, including our ability to (i) identify and evolve with emerging technological and broader logistics industry trends, (ii) develop and maintain competitive technologies, (iii) defend our market share against an ever-expanding number of competitors including many new and non-traditional competitors, (iv) enhance our technologies by adding innovative features that differentiate our technologies from those of our competitors and prevent commoditization of our technologies (v) monitor disruptive technologies and business models, (vi) respond to changes in overall trends related to end market demand, (vii) leverage our current and any future strategic partnerships to commercialize existing technologies and (viii) attract, develop and retain individuals with the requisite skill, expertise and understanding of customers’ needs to sell our current technologies. The failure of our technologies to gain market acceptance due to more attractive offerings by our competitors or the failure to address any of the above factors could significantly reduce our revenues and adversely affect our competitive standing and prospects.
Risks Relating to our Common Stock
Upon exercise of our outstanding warrants, conversion of our Series B Convertible Preferred Stock, conversion of our Convertible debt, and vesting of our restricted stock units, we will be obligated to issue a substantial number of additional shares of common stock which will dilute our present stockholders .
We are obligated to issue additional shares of our common stock in connection with our outstanding warrants and shares of our Series B Convertible Preferred Stock. For the year ended December 31, 2025, there were approximately 3,976,000 anti-dilutive shares consisting 1,322,000 unvested performance restricted stock units, 303,000 restricted stock units and restricted stock awards, 1,555,000 shares issuable upon exercise of warrants, 652,000 shares issuable upon conversion of convertible debt, and 144,000 shares issuable upon conversion of preferred stock. The exercise, conversion or exchange of warrants or convertible securities, including for other securities, will cause us to issue additional shares of our common stock and will dilute the percentage ownership of our stockholders. In addition, we have in the past, and may in the future, exchange outstanding securities for other securities on terms that are dilutive to the securities held by other stockholders not participating in such exchange.
Offers or availability for sale of a substantial number of shares of our common stock may cause the price of our common stock to decline .
Sales of large blocks of our common stock could depress the price of our common stock. The existence of these shares and shares of common stock issuable upon conversion of outstanding shares of Series B Convertible Preferred Stock, warrants and options create a circumstance commonly referred to as an “overhang” which can act as a depressant to our common stock price. The existence of an overhang, whether or not sales have occurred or are occurring, also could make our ability to raise additional financing through the sale of equity or equity-linked securities more difficult in the future at a time and price that we deem reasonable or appropriate. If our existing stockholders and investors seek to sell a substantial number of shares of our common stock, such selling efforts may cause significant declines in the market price of our common stock.
Our common stock may be affected by limited trading volume and price fluctuations, which could adversely impact the value of our common stock .
Our common stock has experienced, and is likely to experience, in the future, significant price and volume fluctuations, which could adversely affect the market price of our common stock without regard to our operating performance. In addition, we believe that factors such as quarterly fluctuations in our financial results and changes in the overall economy or the condition of the financial markets could cause the price of our common stock to fluctuate substantially. These fluctuations may also cause short sellers to periodically enter the market in the belief that we will have poor results in the future. We cannot predict the actions of market participants and, therefore, can offer no assurances that the market for our common stock will be stable or appreciate over time.
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Because we may issue preferred stock without the approval of our stockholders and have other anti-takeover defenses, it may be more difficult for a third party to acquire us and could depress our stock price .
In general, our Board of Directors may issue, without a vote of our stockholders, one or more additional series of preferred stock that have more than one vote per share, although the Company’s ability to designate and issue preferred stock is currently restricted by covenants under our agreements with prior investors. Without these restrictions, our Board of Directors could issue preferred stock to investors who support us and our management and give effective control of our business to our management. Additionally, issuance of preferred stock could block an acquisition resulting in both a drop in our stock price and a decline in interest of our common stock. This could make it more difficult for stockholders to sell their common stock. This could also cause the market price of our common stock shares to drop significantly, even if our business is performing well.
Because we have not historically paid cash dividends on our shares of common stock, any returns will be limited to the value of our shares .
We have never declared or paid a cash dividend. Pursuant to the Merger Agreement, we may, but have no obligation to, declare, set aside, and pay on or after the closing date of the Merger a cash dividend to holders of our capital stock insomuch as any dividend does not make us unable to comply with the closing net cash requirement set forth in the Merger Agreement. We cannot be certain what our cash balance will be at the closing of the Merger and whether there will be any amount above the closing net cash requirement set forth in the Merger Agreement available to be issued as a dividend. Even if a dividend can be declared, our Board of Directors has no obligation and is not required to declare a dividend by the Merger Agreement. Our Board of Directors currently anticipates declaring a cash dividend prior to the closing of the Merger. The declaration and payment of dividends is subject to the discretion of our Board of Directors and will depend upon our earnings (if any), our financial condition, and our capital requirements. Nevada law permits a corporation to pay dividends out of earnings or surplus. Any return to stockholders will therefore be limited to the increase, if any, of our share price.
There can be no assurance that we will be able to comply with the continued listing standards of Nasdaq, a failure of which could result in a de-listing of our common stock and certain warrants .
Nasdaq requires that the trading price of its listed stocks remain above one dollar in order for stock to remain listed. If a listed stock trades below one dollar for more than 30 consecutive trading days, then it is subject to delisting from the Nasdaq. In addition, to maintain a listing on Nasdaq, we must satisfy minimum financial and other continued listing requirements and standards, including those regarding director independence and independent committee requirements, minimum stockholders’ equity, and certain corporate governance requirements. If we are unable to satisfy these requirements or standards, we could be subject to delisting, which would have a negative effect on the price of our common stock and warrants and would impair your ability to sell or purchase our common stock or warrants when you wish to do so. In the event of a delisting, we would expect to take actions to restore our compliance with the listing requirements, but we can provide no assurance that any such action taken by us would allow our common stock or warrants to become listed again, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below the minimum bid price requirement, or prevent future non-compliance with the listing requirements.
Provisions of our warrants could discourage an acquisition of us by a third party .
In addition to certain provisions of our amended and restated articles of incorporation, as amended, and our amended and restated by-laws, certain provisions of our outstanding warrants could make it more difficult or expensive for a third party to acquire us. The warrants prohibit us from engaging in certain transactions constituting “fundamental transactions” unless, among other things, the surviving entity assumes our obligations under the warrants. These and other provisions of the warrants could prevent or deter a third party from acquiring us even where the acquisition could be beneficial to you.
Risks Relating to Loan Agreement and our Debt
We are subject to credit risk related to the Loan Agreement and related promissory note with ZenCredit which could lead to unexpected losses.
On August 8, 2025, we entered into the Loan Agreement with ZenCredit, pursuant to which we agreed to loan ZenCredit up to $2 million. Pursuant to the terms of the Loan Agreement, ZenCredit will pay us regular quarterly interest payments at an annual interest rate of 16%. The term of the initial promissory note is nine months at which time all accrued principal and interest is due to us subject to the terms of the Loan Agreement. On August 11, 2025, we loaned ZenCredit $2 million in exchange for a promissory note issued pursuant to the Loan Agreement that matures on May 11, 2026. As of December 31, 2025, we reserved $12 thousand allowance for expected credit loss on the Note.
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We are exposed to the risk that the principal of, or interest on, the Loan Agreement and related promissory note will not be repaid timely or at all. In addition, while ZenCredit has represented to us that it owns assets the present fair value of which are greater than the amount that will be required to pay the probable liabilities of its then existing debts and liabilities as they become due and payable considering all financing alternatives and potential asset sales reasonably available to it; and (ii) has capital that is not unreasonably small in relation to its respective business as presently conducted, the promissory note under the Loan Agreement is not secured by any specific collateral and our remedies should a default occur will be limited and may be insufficient to cover our outstanding exposure. Under the Loan Agreement we are required to attempt to resolve any disputes arising under the Loan Agreement through informal mediation and then arbitration prior to seeking any judicial remedy.
The creditworthiness of ZenCredit may be affected by many factors, including local market conditions and general economic conditions, and ZenCredit may be less able to withstand competitive, economic and financial pressures than other businesses, which could affect its ability to repay amounts outstanding under the Loan Agreement. In addition, our review of ZenCredit prior to issuing the loan may not have adequately assessed and reduced our credit risk, and we may not adequately adapt to changes in economic or any other conditions affecting ZenCredit and the quality of the loan. These factors may result in unexpected losses and adversely affect our business, financial condition, or results of operations.
If we do not timely pay amounts due and comply with the covenants under our debt facilities, our business, financial condition, and results of operations may be adversely impacted.
Our consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. We have a facility with PNC Bank National Association (the “PNC Facility”), which includes a $1 million RLOC. The RLOC has no scheduled payments of principal until maturity and bears interest per annum at a rate equal to the sum of Daily SOFR plus 2.85% with monthly interest payments. The PNC Facility place encumbrances on our assets, and subject us to restrictive covenants that limit our operating flexibility. As of January 21, 2025, the Term Note balance of the PNC Facility was paid in full and no future principal payments are due. As of December 31, 2025, $0 was outstanding on the RLOC.
In the event of a continuing default, our senior secured lenders would have the right to accelerate the then-outstanding amounts under the PNC Facility and to exercise their respective rights and remedies to collect such amounts, which would include foreclosing on collateral constituting substantially all of our assets and the assets of our PeriShip Global subsidiary. Any continuing default on the PNC Facility could result in the outstanding principal balance under the facility becoming immediately due and payable, which could harm our business, financial condition and results of operations and may have a material adverse impact on our business.
On August 25, 2023, the Company entered into a Convertible Note Purchase Agreement with certain investors for the sale of convertible promissory notes for the aggregate principal amount of $1,100 thousand. As of March 13, 2026, $350 thousand was converted to common stock. The notes are subordinated unsecured obligations of the Company and accrue interest at a rate of 8% per year payable semiannually in arrears. The notes will mature on August 25, 2026, unless earlier converted or repurchased at a conversion price of $1.15 per share of common stock. Although we believe the majority of our investors will choose to convert into shares, if this does not occur, this may have a material adverse impact on our cash and as a result, a material adverse impact on our business.
Our cash flows and operating results could be adversely affected by required payments of debt or related interest and other risks of our debt financing.
We are generally subject to risks associated with debt financing. These risks include: (1) our cash flow may not be sufficient to satisfy required payments of principal and interest; (2) we may not be able to refinance existing indebtedness or the terms of any refinancing may be less favorable to us than the terms of existing debt; (3) debt service obligations could reduce funds available for other uses such as growing our business; (4) any default on our indebtedness could result in acceleration of those obligations and possible loss of assets or capital; and (5) the risk that necessary capital expenditures cannot be financed on favorable terms. Any of these risks could place strains on our cash flows, reduce our ability to grow, and adversely affect our results of operations.
Covenants in our debt agreements may restrict our operating activities and adversely affect our financial condition.
Our existing debt agreements contain, and future debt agreements may contain, financial and/or operating covenants including, among other things, certain coverage ratios, as well as limitations on the ability to incur additional secured and unsecured debt, and/or otherwise affect our distribution and operating policies. These covenants may limit our operational flexibility and acquisition and disposition activities. Moreover, if any of the covenants in these debt agreements are breached and not cured within the applicable cure period, we could be required to repay the debt immediately, even in the absence of a payment default. A default under one of our debt agreements could result in a cross-default under other debt agreements, and our lenders could elect to declare outstanding amounts due and payable, terminate their commitments, require the posting of additional collateral, and enforce their respective interests against existing collateral. In the event of a continuing default, our senior secured lenders would have the right to accelerate the then-outstanding amounts under each such facility and to exercise their respective rights and remedies to collect such amounts, which would include foreclosing on collateral constituting substantially all of our assets and the assets of our PeriShip Global subsidiary. As a result, a default under applicable debt covenants could have an adverse effect on our financial condition or results of operations. These covenants may restrict our ability to engage in transactions that we believe would otherwise be in the best interests of our stockholders.
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Risks Relating to the Merger
The Merger is subject to closing conditions and may not be completed, the Merger Agreement may be terminated in accordance with its terms, and we may be required to pay a termination fee upon termination.
The Merger is subject to customary closing conditions that must be satisfied or waived prior to the consummation of the Merger, including, among other things: (i) approval by our stockholders and Open World’s shareholders necessary to consummate the Merger and the contemplated transactions thereunder having been duly obtained; (ii) a registration statement on Form S-4 having been declared effective under the Securities Act and not being subject to any stop order; (iii) our common stock issuable in the Merger having been approved for listing on Nasdaq; (iv) any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”) having expired or been terminated, and all other required regulatory approvals having been obtained; (v) Open World having received written approval of the Merger by the Cayman Islands Trade and Business Licensing Board; (vi) the absence of any order by a governmental authority permanently enjoining or otherwise prohibiting consummation of the Merger; (vii) the accuracy of the respective representations and warranties of each party, subject to certain materiality qualifications; (viii) compliance by the parties with their respective covenants; and (ix) the absence of any material adverse effect with respect to either party.
No assurance can be given that the required stockholder and shareholder approvals will be obtained or that the required conditions to closing will be satisfied or waived, and, if all required approvals are obtained and the conditions are satisfied or waived, no assurance can be given as to the terms, conditions, and timing of such approvals. Any delay in completing the Merger could cause the combined company not to realize, or to be delayed in realizing, some or all of the benefits that the parties expect to achieve if the Merger is successfully completed within the expected time frame.
Additionally, either party may terminate the Merger Agreement under certain circumstances, including, among other reasons, if the Merger is not completed by June 30, 2026, subject to certain conditions. In the event the Merger Agreement is terminated by us under specified circumstances, we may be required to pay Open World a termination fee of $500,000 or an expense reimbursement fee of $400,000, as applicable.
The pendency of the Merger could adversely affect our business and operations and the business operations of Open World.
Prior to closing, the Merger Agreement requires us and Open World to conduct our respective businesses in the ordinary course consistent with past practices. During the pendency of the Merger, we have agreed to refrain from taking certain actions without Open World consent, including making certain acquisitions or dispositions, incurring certain indebtedness, issuing equity securities (subject to limited exceptions), or entering into certain material contracts.
These restrictions may delay or prevent us from pursuing business opportunities that may arise pending the completion of the Merger, which could have a material adverse effect on our , financial condition, and results of operations, regardless of whether the Merger is ultimately consummated. These restrictions could also have a material adverse effect on Open World’s business, which could have a material adverse effect on the combined company’s business, financial condition, and results of operations should the Merger be consummated. The risk, and adverse effect, of such restrictions could be exacerbated by any delay in consummation of the Merger or termination of the Merger Agreement.
The announcement and pendency of the Merger may create uncertainty that could adversely affect our business relationships and the business relationships of Open World.
Parties with which we and Open World do business may experience uncertainty associated with the Merger, including with respect to current or future business relationships with the combined company following the Merger. Customers, suppliers, distributors, and other business partners may delay or defer entering into new business relationships, seek to negotiate changes to existing relationships, or consider entering into relationships with parties other than us or Open World.
In addition, uncertainty about the effect of the Merger on employees may adversely affect the parties’ ability to attract, retain, and motivate key personnel during the pendency of the Merger and for a period of time thereafter. Key employees may depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with the combined company following the Merger, which could have a material adverse effect on the business, financial condition, and results of operations of either party or the combined company.
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Securities class action and derivative lawsuits may be filed challenging the Merger, and an adverse ruling in any such lawsuit may delay or prevent the Closing.
Securities class action lawsuits and derivative lawsuits are often brought against public companies that have entered into merger or business combination agreements. Such lawsuits may be brought against us, Open World, or our respective directors, alleging that the boards of directors breached their fiduciary duties to stockholders or shareholders by entering into the Merger Agreement.
There can be no assurance that such litigation or legal proceedings will not be brought, and if brought, that we or Open World will be successful in defending against them. An adverse outcome in such matters, as well as the costs and efforts of a defense even if successful, could have a material adverse effect on the business, results of operations, or financial position of the parties or the combined company, including through the possible diversion of resources or distraction of key personnel. One of the conditions to the Closing is that no order by any court or governmental authority has been entered that prohibits the Merger, and consequently, if a plaintiff is successful in obtaining such an order, the Merger may be delayed or prevented from being completed.
The Merger may be completed even though a material adverse effect may result from the announcement of the Merger, industry-wide changes, or other causes.
In general, neither we nor Open World are obligated to complete the Merger if there is a material adverse effect affecting the other party between the date of the Merger Agreement and the Closing. However, certain types of changes are excluded from the concept of a “material adverse effect” as defined in the Merger Agreement.
Such exclusions include but are not limited to: changes in general economic, business, financial, regulatory or domestic or international political conditions; natural disasters, pandemics, or other public health events; changes in cryptocurrency or digital asset market conditions, regulatory developments affecting digital assets, or volatility in cryptocurrency valuations; a decline in the market price or trading volume of our common stock; changes resulting from the announcement or pendency of the Merger; changes in applicable laws or GAAP; and actions required by a governmental authority pursuant to Antitrust Laws (as defined in the Merger Agreement). Therefore, if any of these events were to occur affecting either us or Open World, the other party would still be obligated to effect the Closing, and the stock price of the combined company may suffer. This in turn may reduce the value of the Merger to our stockholders or Open World securityholders, or both.
If the Merger is not completed, our stock price may decline significantly, and our business may be adversely affected.
If the Merger is not completed for any reason, including as a result of either party’s stockholders or shareholders failure to approve the applicable proposals, our ongoing business may be adversely affected. Without realizing any of the expected benefits of the Merger, we would be subject to a number of risks, including the following:
We may experience negative reactions from the financial markets, including negative impacts on the price of our common stock.
We may experience negative reactions from our customers, suppliers, business partners, and employees.
We will be required to pay our costs relating to the Merger, such as financial advisory, legal, and accounting fees, whether or not the Merger is completed.
The market price of our common stock could decline to the extent that the current market price reflects a market assumption that the Merger will be completed.
The Exchange Ratio in the Merger is fixed and will not be adjusted to reflect changes in the market price of our common stock or changes in the relative performance of the parties.
Under the Merger Agreement, each ordinary shares of Open World (other than excluded shares and dissenting shares), and certain other Open World securities, as set forth in the Merger Agreement, will be converted or have the right to convert into a number of shares of our common stock equal to the Exchange Ratio. The Exchange Ratio is fixed and will not be adjusted based on changes in the market price of our common stock or the economic performance of either party prior to the Closing.
If the market price of our common stock increases before the Closing, Open World securityholders may receive consideration with a higher dollar value than was negotiated at the time the Merger Agreement was executed. Conversely, if the market price of our common stock decreases before the Closing, Open World securityholders may receive consideration with a lower dollar value. The Merger Agreement does not contain a price-based termination right.
Some of our and Open World officers and directors have interests in the Merger that are different from yours and that may influence them to support or approve the Merger without regard to your interests.
Certain of our and Open World officers and directors participate in arrangements that provide them with interests in the Merger that are different from yours, including, among others, the continued service as an officer or director of the combined company, severance benefits, the acceleration of certain outstanding equity awards, and continued indemnification.
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For example, after the Merger, Scott Greenberg, our current Chairman will continue as a director of the combined company and may receive cash and other compensation from the combined company. Additionally, Adam Stedham, our Chief Executive Officer and President, and Jennifer Cola, our Chief Financial Officer, will continue as officers of the combined company pursuant to written employment agreements. Further, upon the Effective Time of the Merger, the vesting of certain outstanding equity awards held by our directors and officers will accelerate.
These interests, among others, may influence our and Open World’s officers and directors to support or approve the Merger.
The Merger will involve substantial costs, whether or not the Merger is consummated.
We and Open World have incurred and expect to continue to incur substantial non-recurring costs associated with the Merger, including transaction fees and other costs related to completing the transaction. These costs and expenses include fees paid to legal, financial, and accounting advisors, filing fees, printing costs, and other costs and expenses. Portions of these transaction costs are contingent upon the Closing occurring, although some have been and will be incurred regardless of whether the Merger is consummated.
The Merger Agreement limits our and Open World’s ability to pursue alternatives to the Merger and includes the potential obligation to pay a Termination Fee.
Under the Merger Agreement, both we and Open World are subject to customary “no-shop” restrictions that limit our ability to solicit, initiate, or knowingly facilitate or encourage alternative acquisition proposals. From the date of the Merger Agreement until the earlier of the Closing or the termination of the Merger Agreement, each party has agreed not to engage in discussions or negotiations with, or furnish information to, any third party that is seeking to make or has made an acquisition proposal.
However, under certain circumstances, our Board of Directors may engage in negotiations with a third party that makes an unsolicited bona fide written acquisition proposal if our board determines in good faith, after consultation with its financial advisor and outside legal counsel, that such proposal constitutes a superior proposal and that failure to engage in such negotiations would be inconsistent with its fiduciary duties. If our Board of Directors changes its recommendation to stockholders or terminates the Merger Agreement to enter into an alternative transaction, we may be required to pay Open World a termination fee of $500,000.
These provisions could discourage a potential third-party acquirer that might have an interest in acquiring all or a significant portion of VerifyMe from considering or proposing that acquisition, even if it were prepared to pay a higher price than the implied value of the Merger, or might result in a potential third-party acquirer proposing a lower price because of the added expense of the termination fee.
We and Open World must obtain certain regulatory approvals and clearances to consummate the Merger, which, if delayed, not granted, or granted with unacceptable conditions, could prevent, substantially delay, or impair consummation of the Merger.
Completion of the Merger is conditioned upon the expiration or termination of the applicable waiting period under the HSR Act and receipt of all other required regulatory approvals, including any approvals required by state or federal regulators for digital asset or cryptocurrency-related business activities. In addition, Open World is required to receive written approval of the Merger from the Cayman Islands Trade and Business Licensing Board.
Both we and Open World have agreed to make any necessary filings under the HSR Act and other applicable Antitrust Laws as promptly as practicable and to use reasonable best efforts to obtain all necessary regulatory approvals. However, there can be no assurance that the relevant waiting periods will expire, or that regulatory authorizations will be obtained. At any time before or after consummation of the Merger, the Department of Justice, the Federal Trade Commission, any state attorney general, or a governmental authority in another jurisdiction could take action under applicable antitrust laws, including seeking to enjoin completion of the Merger or requiring divestitures or other concessions as a condition to approval.
Any conditions, limitations, or delays in obtaining regulatory approvals could have the effect of delaying or impeding consummation of the Merger or imposing additional costs or limitations on the combined company following completion of the Merger.
Risks Relating to the Combined Company should the Merger be effected
Combining our and Open World’s businesses may be more difficult, costly or time-consuming than expected and the combined company may fail to realize the anticipated synergies and other benefits of the Merger, which may adversely affect the combined company’s business results and negatively affect the value of the combined company’s common stock following the Closing.
The success of the Merger will depend, in part, on the combined company’s ability to realize the anticipated benefits and synergies from integrating our and Open World’s businesses. To realize these anticipated benefits and synergies, the combined company must successfully combine and integrate the operations of both companies. If the combined company is unable to achieve these objectives, the anticipated benefits and synergies of the Merger may not be realized fully, or at all, or may take longer to realize than expected.
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The integration process may involve unforeseen difficulties and may require a disproportionate amount of management and financial resources. Potential difficulties the combined company may encounter in the integration process include:
combining the companies’ operations and corporate functions;
integrating personnel from the two companies;
harmonizing operating practices, employee development and compensation programs, internal controls, and other policies, procedures, and processes;
maintaining existing agreements with customers, suppliers, and vendors and leveraging relationships with such third parties for the benefit of the combined company;
addressing possible differences in business backgrounds, corporate cultures, and management philosophies;
consolidating the companies’ administrative and information technology infrastructure; and
coordinating distribution and marketing efforts.
It is possible that the integration process could result in the loss of key employees, the loss of customers, the disruption of either company’s or both companies’ ongoing businesses, inconsistencies in standards, controls, procedures, and policies, unexpected integration issues, higher than expected integration costs, and an overall post-completion integration process that takes longer than originally anticipated. The actual integration may result in additional and unforeseen expenses. If the combined company is not able to adequately address integration challenges, we may be unable to successfully integrate operations and the anticipated benefits of the integration plan may not be realized.
An inability to realize the full extent of the anticipated benefits of the Merger, as well as any delays encountered in the integration process, could have an adverse effect upon the revenues, level of expenses and operating results of the combined company, which may adversely affect the value of the combined company’s common stock following the consummation of the Merger. Moreover, if the combined company is unable to realize the full strategic and financial benefits currently anticipated from the Merger, our stockholders will have experienced substantial dilution of their ownership interests without receiving any commensurate benefit, or only receiving part of the commensurate benefit to the extent the combined company is able to realize only part of the strategic and financial benefits currently anticipated from the Merger.
The combined company may not be able to retain customers, suppliers, or business partners, or such third parties may seek to modify contractual relationships with the combined company, which could have an adverse effect on the combined company’s business and operations.
Third parties may terminate or alter existing contracts or relationships with the combined company as a result of the Merger. Certain customers, suppliers, or other business partners may seek to terminate or modify contractual obligations following the Closing, whether or not contractual rights are triggered as a result. There can be no guarantee that customers, suppliers, and business partners will remain with or continue to have a relationship with the combined company or do so on the same or similar contractual terms following the Closing. If any customers, suppliers or distributors seek to terminate or modify contractual obligations or discontinue the relationship with the combined company, then the combined company’s business and results of operations may be harmed.
If the combined company’s suppliers or other business partners seek to terminate or modify an arrangement with the combined company, the combined company may be unable to procure necessary services from other providers in a timely and efficient manner and on acceptable and cost-effective terms, or at all. In addition, we and Open World have contracts with third parties that may require consent from these parties in connection with the Merger. If these consents cannot be obtained, the combined company may suffer a loss of potential future revenue, incur costs, and lose rights that may be material to the combined company's business. In addition, third parties with whom we or OpenWorld currently have relationships may terminate or otherwise reduce the scope of their relationship in anticipation of the Closing. Any such disruptions could limit the combined company’s ability to achieve the anticipated benefits of the Merger. The adverse effect of any such disruptions could also be exacerbated by a delay in the Closing or by a termination of the Merger Agreement.
If the combined company fails to attract and retain management and other key personnel, it may be unable to successfully integrate the businesses or execute its business plan.
The combined company’s ability to compete in its industry depends on its ability to attract and retain highly qualified managerial, financial, technical, and other personnel. The combined company will be highly dependent on its management and key employees. Competition for qualified personnel is intense, and there can be no assurance that the combined company will be able to attract and retain the personnel necessary for the development of its business. In particular, the combined company’s success will depend on the continued services of Open World’s Chief Executive Officer, Matthew Shaw, who will continue in such role following the Merger. Mr. Shaw, who brings extensive experience in the finance industry and management of crypto and other digital asset companies, is critical to the combined company’s strategic plan, and the loss of him could significantly disrupt the combined company’s operations.
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The combined company will operate in complex and rapidly evolving segments of the digital assets industry that are not widely understood and that require highly specialized expertise in areas such as blockchain infrastructure design, tokenomics, exchange and market structure, regulatory compliance across multiple jurisdictions, real-world asset tokenization, and post-launch operations. The pool of individuals with the background and experience necessary to provide Open World’s infrastructure and launch services, including senior leaders with financial, crypto and regulatory expertise, is extremely limited. The combined company will face intense competition for qualified personnel from other consulting and advisory firms, crypto-native companies, software and other technology firms, financial institutions, and emerging Web3 projects, many of which have significantly greater resources, brand recognition, or compensation flexibility than the combined company will.
Open World’s executives, including Mr. Shaw, are employed at will and may terminate employment at any time, and Open World does not currently maintain key-person life insurance for its executive officers. The loss of any key personnel, or the inability to attract and retain key personnel, could delay or prevent the achievement of the combined company’s business objectives and could materially and adversely affect the combined company’s business, financial condition, and results of operations.
Following the Merger, our current stockholders will have a significantly reduced ownership and voting interest in the combined company compared to their ownership of VerifyMe prior to the Merger.
After the Closing, our current stockholders will own a significantly smaller percentage of the combined company than their ownership of VerifyMe prior to the Merger. Immediately after the Closing, our stockholders as of immediately prior to the Closing, are expected to own approximately 10% of the outstanding shares of the combined company, and Open World securityholders are expected to own approximately 90% of the outstanding shares of the combined company. The exact equity stake of our stockholders and Open World securityholders in the combined company immediately following the Effective Time will depend on the Fully Diluted Parent Common Stock and Fully Diluted Company Shares (each as defined in the Merger Agreement) determined immediately prior to the Closing.
As a result of this reduced ownership percentage, our current stockholders will be able to exercise significantly less influence over the management and policies of the combined company following the Merger than they currently exercise over VerifyMe. Similarly, Open World securityholders who become our stockholders will own a majority of the outstanding shares of common stock of the combined company.
The market price of the combined company’s common stock after the Merger may be affected by factors different from those currently affecting the shares of our common stock prior to completion of the Merger.
Upon completion of the Merger, Open World securityholders will become our stockholders as stockholders of the combined company. Our business currently differs, and may differ in the future, in certain respects from that of Open World and certain adjustments may be made to our business as a result of the Merger. Accordingly, the results of operations of the combined company and the market price of the combined company’s common stock after the completion of the Merger may be affected by factors different from those currently affecting our results of operations and market price of our common stock prior to completion of the Merger.
The combined company may be unable to obtain the additional capital, equity or debt financing required to fund its operations and growth, which could adversely affect its business, prospects and ability to continue as a going concern.
We and Open World expect the combined company to require substantial additional capital to fund working capital needs and to support its growth initiatives. The combined company’s capital needs may increase due to factors outside its control, including regulatory changes affecting digital assets, volatility in crypto markets that impacts client demand, elongated client sales cycles, delayed collections, or unanticipated operating or legal expenses. The combined company may seek additional funds through dilutive equity offerings, debt financings, strategic investments, joint ventures or other arrangements. However, market conditions, including periods of illiquidity or volatility in broader capital markets or in the digital asset sector, may limit its ability to raise funds in a timely manner, in sufficient quantities, or on terms acceptable to the combined company, if at all.
If the combined company raises additional equity financing, holders of its equity securities may experience dilution, the per share value of its equity securities could decline, and new securities may have rights, preferences or privileges that are senior to those of its existing stockholders. If the combined company incurs indebtedness, the terms of any debt securities or credit facilities may contain restrictive covenants that limit its ability to incur additional debt, pay dividends, repurchase shares, make investments, dispose of assets, or engage in certain business activities, including entering new markets or consummating acquisitions. Debt instruments may also require the combined company to maintain specified financial, liquidity or other ratios, grant security interests in its assets, and could include variable interest rates that increase its cost of capital. In the event of a liquidation or bankruptcy, lenders would be repaid before holders of its equity securities. If the combined company issues convertible or other derivative securities, they may contain anti-dilution or reset provisions that could result in additional dilution to stockholders.
The combined company’s ability to raise capital may also be constrained by its operating performance, the perceived risks of its business model, its limited operating history in public markets, and legal or regulatory developments affecting crypto-related businesses, including restrictions on certain activities, enhanced compliance requirements, or adverse enforcement actions in jurisdictions where the combined company or its clients operate. Additionally, counterparties may require terms that are costly or include governance, information or consent rights that limit its flexibility. If funds are unavailable or insufficient, or are available only on unfavorable terms, the combined company may be forced to delay, scale back or discontinue some or all of its growth plans, reduce headcount or marketing, forgo strategic opportunities, or alter its business model. Any of these outcomes could materially and adversely affect its competitive position, client relationships and reputation, and could harm its business, financial condition, results of operations and prospects. If the combined company cannot obtain sufficient capital to meet its obligations as they come due, the combined company may be unable to continue as a going concern.
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Open World’s management has limited experience in operating a public company and may not successfully or effectively manage the transition to a public company.
The executive officers of Open World have limited experience in the management of a publicly traded company. The Open World management team may not successfully or effectively manage its transition to a public company that will be subject to significant regulatory oversight and reporting obligations under federal securities laws. While members of the management team have extensive experience in the finance and digital asset and token industries, their limited experience in dealing with the increasingly complex laws pertaining to public companies could be a significant disadvantage in that it is likely that an increasing amount of their time may be devoted to these activities, which will result in less time being devoted to the management and growth of the combined company. The combined company may not have adequate personnel with the appropriate level of knowledge, experience, and training in the accounting policies, practices or internal control over financial reporting required of public companies in the United States. The development and implementation of the standards and controls necessary for the combined company to achieve the level of accounting standards required of a public company in the United States may require costs greater than expected. It is possible that the combined company will be required to expand its employee base and hire additional employees to support its operations as a public company, which will increase its operating costs in future periods.
The combined company is expected to be a controlled company as defined under Nasdaq exchange listing rules and should it choose to rely on controlled company exemptions, you would not have the same protections afforded to stockholders of companies that are subject to these corporate governance requirements.
Immediately following this offering, we expect that some Open World securityholders will beneficially own more than 50% of the voting power of the combined company’s outstanding common stock. Under the Nasdaq listing rules, a company of which more than 50% of the voting power is held by an individual, group, or another company is a controlled company and is permitted to elect to rely, and may rely, on certain exemptions from corporate governance requirements, including:
an exemption from the requirement that a majority of its board of directors be independent directors; and
an exemption from the requirement that its compensation committee be comprised entirely of independent directors and have a written charter addressing the committee’s purpose and responsibilities.
If the combined company relies on any such exemptions, our current stockholders who remain stockholders of the combined company and the combined company’s investors would not have the same protections afforded to stockholders of companies that are subject to these corporate governance requirements. The combined company’s status as a controlled company could make the combined company’s common stock less attractive to certain investors, could limit the oversight of management by the combined company’s board of directors, and could adversely affect the trading price or liquidity of the combined company’s common stock. In addition, the Open World securityholders holding more than 50% of the voting power of the combined company, either individually or if applicable as a group, will be able to exert significant influence over the outcome of matters requiring stockholder approval of the combined company, including the election of directors, mergers, acquisitions, dispositions, financing transactions, and other significant corporate actions, which may conflict with the interests of its other stockholders. As a company operating in the crypto infrastructure and token launch services industry, where regulatory expectations and market practices continue to evolve, such concentration of control could also influence its approach to governance, compliance, or risk tolerance in ways that other stockholders may not view as favorable.
Upon and after completion of the Merger, the combined company may be unable to meet the continued listing standards of Nasdaq, which could result in delisting, reduced liquidity, increased volatility, and harm to its ability to raise capital.
Upon completion of the Merger, the combined company will be required to meet the initial and continuing listing requirements to maintain the listing and continued trading of its common stock on Nasdaq. These initial listing requirements are more difficult to achieve than the continued listing requirements. Pursuant to the Merger Agreement, we agreed to take, or cause to be taken, all actions, and to do or cause to be done all things, necessary, proper or advisable under applicable laws and the rules and policies of Nasdaq and the SEC to cause the shares of our common stock being issued in the Merger to be approved for listing on Nasdaq at or prior to the Effective Time. Based on information currently available to us, we anticipate that our common stock will be unable to meet the $4.00 (or, to the extent applicable, $3.00) minimum bid price initial listing requirement at the Closing unless we effect a reverse stock split. Pursuant to the Merger Agreement, upon Open World’s request, our Board of Directors would be required to effect a reverse stock split of our issued and outstanding common stock at a ratio ranging from any whole number between 1-for-2 and 1-for-10, as determined by our Board of Directors in its discretion. At our annual meeting of stockholders held on October 8, 2025, our stockholders authorized our Board of Directors to effect at any time until the one-year anniversary date of the annual meeting , in its discretion, a reverse stock split of our outstanding and treasury shares of common stock at a ratio ranging from 1-for-2 to 1-for 10, to be determined by our Board of Directors, without any corresponding change in the number of authorized shares of our common stock and approved a corresponding amendment to our Amended and Restated Articles of Incorporation, as amended, to effect the reverse stock split. Often times a reverse stock split will not result in a trading price for the affected common stock that is proportional to the ratio of the split. Following the merger, if the combined company is unable to satisfy Nasdaq listing requirements, Nasdaq may notify the combined company that its shares of common stock will not be listed on Nasdaq.
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Upon a potential delisting from Nasdaq, if the common stock of the combined company is not then eligible for quotation on another market or exchange, trading of the shares could be conducted in the over-the-counter market or on an electronic bulletin board established for unlisted securities such as the Pink Sheets or the OTC Bulletin Board. In such event, it is likely that there would be significantly less liquidity in the trading of the common stock of the combined company; decreases in institutional and other investor demand for the shares, coverage by securities analysts, market making activity and information available concerning trading prices and volume; and fewer broker dealers willing to execute trades in the common stock of the combined company. Also, it may be difficult for the combined company to raise additional capital if the combined company’s common stock is not listed on a major exchange. The occurrence of any of these events could result in a further decline in the market price of the common stock of the combined company and could have a material adverse effect on the combined company.
Even if the combined company remains listed, failure to maintain compliance on a consistent basis or to timely cure any deficiency could divert significant management attention and resources, subject it to public warnings or grace periods, and negatively affect the market price and liquidity of its securities. There can be no assurance that the combined company will be able to regain or maintain compliance with the continued listing requirements, that any appeal or plan of compliance would be successful, or that the combined company’s securities will remain listed. Any of the foregoing could materially and adversely affect the value of the combined company’s common stock.
Risks Relating to a Reverse Stock Split
Subject to the Merger Agreement, our Board of Directors currently has discretion to effect a reverse stock split of our common stock at a ratio ranging from 1-for-2 to 1-for 10 without further stockholder approval, which could adversely effect our stockholders and the value of our common stock.
At our annual meeting of stockholders held on October 8, 2025, our stockholders authorized our Board of Directors to effect at any time until the one-year anniversary date of the annual meeting , in its discretion, a reverse stock split of our outstanding and treasury shares of common stock at a ratio ranging from 1-for-2 to 1-for 10, to be determined by our Board of Directors, without any corresponding change in the number of authorized shares of our common stock and approved a corresponding amendment to our Amended and Restated Articles of Incorporation, as amended, to effect the reverse stock split. Pursuant to the Merger Agreement, we have agreed not to effect a reverse stock split unless requested by Open World.
Based on information currently available to us, we anticipate that our common stock will be unable to meet the $4.00 (or, to the extent applicable, $3.00) minimum bid price initial listing requirement at the Closing of the Merger unless we effect a reverse stock split. There is no assurance that if a reverse stock split is implemented it will result in:
a share price that will comply with Nasdaq’s minimum bid price initial listing requirement at the Closing of the Merger;
a share price of the combined company that will comply with Nasdaq’s continued listing standards;
a trading price for our common stock that is proportional to the ratio of the split;
a share price that will attract new investors, including institutional investors, or that the market price of our common stock will satisfy the investing requirements of those investors; or
an improvement in the trading liquidity of our common stock.
Additionally, if a reverse stock split is effected, it may:
adversely effect the liquidity of the shares of our common stock, especially if the market price of our common stock does not increase as a result of the reverse stock split; and
may increase the number of stockholders who own odd lots (less than 100 shares) of our common stock, creating the potential for such stockholders to experience an increase in the cost of selling their shares and greater difficulty effecting such sales.
Any of the foregoing could adversely affect our stockholders and value of our common stock.
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