Business Risks and Challenges - The company has not yet entered into any commercial arrangements for licensing its technology, which could adversely affect future business and financial condition [56]. - The company estimates a three-to-five-year period from initial contact with a B2B company to signing a licensing agreement, with no agreements signed as of March 19, 2025 [56]. - The company faces significant risks related to the competitive nature of the consumer electronics industry, which may hinder market acceptance of its technology and products [54]. - The company has a limited operating history and may never achieve sufficient revenue or profitability [53]. - The company relies on a limited number of suppliers and contract manufacturers, which poses risks to its production capabilities [43]. - The wearable computing market is still in early growth stages, and if it does not grow as expected, the company's business could be harmed [50]. - The company may need to raise additional capital to grow its business, which could result in dilution for existing shareholders [50]. - The company has not yet mass-produced any product planned for global consumers, which raises concerns about its ability to manufacture at competitive costs [53]. - The company’s products may experience quality problems that could lead to adverse publicity, product recalls, and warranty claims, negatively impacting revenue and brand reputation [66]. - The company’s ability to develop and introduce new gesture input functions is critical for future success, and delays could adversely affect its financial condition [62]. - The development cycles for new products with consumer electronics customers may take approximately 1 to 3 years after an initial agreement, impacting revenue realization [69]. - The company is subject to risks related to supply chain disruptions due to reliance on a limited number of suppliers and contract manufacturers, which could adversely affect revenue and operating results [73]. - Key components in products come from limited or sole sources, making the company susceptible to supply shortages and long lead times, potentially harming product delivery and relationships with channel partners [75]. - Increased competition for highly skilled personnel in Israel may lead to significant costs and challenges in attracting and retaining qualified employees, impacting future growth [79]. - The company may struggle to accurately forecast consumer demand, leading to inventory management challenges that could negatively impact revenue [124]. - The company has incurred accumulated losses of approximately 29.1millionasofDecember31,2024,raisingsubstantialdoubtaboutitsabilitytocontinueasagoingconcern[117].−Thecompanyexpectscompetitionintheinputmethodsandperipheraldevicesmarkettointensify,withsignificantcompetitorsincludingApple,Meta,andGoogle[109].−Economicdownturnsmayadverselyaffectconsumerdiscretionaryspending,impactingdemandforthecompany′sproductsandservices[110].−Thecompanymayfacechallengesinsustainingrevenuegrowthratesduetoincreasingcompetitionandpotentialslowingdemandforitsproductsandservices[127].−Thecompanymaynotbeabletosustainitsrecentrevenuegrowth,andfutureperformancemaynotbeindicativeofpastresults[127].−Thecompanyfacesrisksfromnaturaldisastersandmanmadeproblems,whichcoulddisruptoperationsandadverselyaffectfinancialcondition[114].−Thecompanyhasneverpaidcashdividendsanddoesnotanticipatedoingsointheforeseeablefuture,relyingonfutureoperationalresultsandcashflowforanypotentialdistributions[132].RegulatoryandComplianceIssues−Thecompanycollectsandprocessessensitivepersonalinformation,whichsubjectsittoregulatoryscrutinyandpotentialliabilitiesrelatedtoprivacyanddataprotection[80].−Non−compliancewithdataprotectionregulationslikeGDPRcouldresultinfinesupto421 million), adversely affecting business operations [82]. - The California Consumer Privacy Act (CCPA) imposes additional compliance costs and potential liabilities, which may increase operational challenges for the company [81]. - The company’s reliance on third-party service providers for data management increases the risk of data breaches, which could harm brand reputation and lead to litigation [80]. - Future changes in privacy laws and regulations may increase compliance costs and restrict the company's ability to operate in certain jurisdictions, impacting overall business strategy [84]. - The company faces significant challenges in complying with complex international data privacy and cybersecurity laws, which are costly and resource-intensive [86]. - Compliance with the Sarbanes-Oxley Act is critical, and failure to maintain effective internal controls could adversely affect investor confidence and market price [202]. - The company is required to document and evaluate internal controls to comply with Section 404 of the Sarbanes-Oxley Act, which may involve additional costs and resources [203]. - A material weakness in internal control over financial reporting could lead to regulatory sanctions and a decline in the price of the company's securities [204]. Financial Performance and Capital Needs - The company has commenced shipment of the Mudra Band, its first B2C consumer product, starting in December 2023, and plans to launch the Mudra Link in September 2024, with shipments beginning in Q1 2025 [216]. - In 2024, the company reported revenues of 522thousand,asignificantincreasefrom82 thousand in 2023, while comprehensive and net losses were 7.9millionand7.8 million, respectively [221]. - The company may need to raise additional capital to fund growth, which could result in dilution for existing shareholders [118]. - The company has broad discretion in the allocation of net proceeds from the exercise of Warrants and its recent public offering, which closed on January 30, 2025 [133]. - The company received a notification from Nasdaq on October 24, 2023, regarding non-compliance with the Minimum Bid Price Requirement, with a closing bid price below 1.00for30consecutivebusinessdays[136].−OnJanuary16,2025,thecompanywasnotifiedofnon−compliancewiththeminimumstockholders′equityrequirement,reportingapproximately1,695,000 in stockholders' equity as of June 30, 2024, below the required 2,500,000[137].−Thecompanyincurssignificantcostsasapublicentity,includingcompliancewithSECandNasdaqrequirements,whichincreaseslegalandfinancialexpenses[190].−Futuremergerandacquisitionactivitiesmayrequiresubstantialmanagementattentionandcouldleadtoincreasedcapitalrequirementsanddilutionofshareholders[191].MarketandProductDevelopment−Thecompanyaimstocommercializeitstechnologybylicensingitforintegrationintothehardwareandsoftwareofpartnercompanies′products,estimatingathree−to−five−yearperiodfromintroductiontolicensingagreement[222].−TheTotalAddressableMarket(TAM)includeswearablecomputers,facecomputers(AR/VR),andhomedigitaldevices,positioningMudraasauniversalinputinterfaceforalldigitaldevices[230].−TheMudratechnologyutilizesproprietarysensorsandAIalgorithmstoenablecontrolofdigitaldevicesthroughsubtlefingermovementsandhandgestureswithoutphysicalcontact[219].−Thecompanyhasexpandeditsbrandtoincludeneurotechandbrain−computerinterfacesensors,targetingadditionalverticalssuchasIndustry4.0anddigitalhealth[223].−TheMudraplatformisdesignedtotrackneuralsignalsonthewrist,allowingfornaturalgesture−basedcontrolofdigitaldevices[224].−ThecompanyhasbeenrecognizedatCES2024andCES2025foritsinnovativeproducts,withtheMudraBandbeingincludedinthe"BestofCES2024"listandtheMudraLinkwinningaCES2025HonoreeAward[220].−Thecompanyoperatesunderthe"Push−Pull"strategy,engagingbothB2BandB2Cmarketstocreatedemandforitsproducts[229].−ThecompanyhasdevelopedaproprietaryMudraSNCsensorforgesturecontrolandmonitoringneuralactivity,enhancinguserinteractionwithdigitaldevices[232].−Thecompanyisfocusedonhuman−centereddesign,utilizingconsumerfeedbacktocontinuouslyimproveproductofferingsanduserexperience[232].−Alargedatabaseofhandandfingergesturesisbeingbuiltthroughanonymizeddata,providinginsightsintousertrendsandbehaviors[232].−Thecompanyaimstoredefineuserinterfacesforwearablecomputingasthemarketshiftstowardsdeviceswornonthebodyratherthantraditionaldesktopcomputers[233].−Theevolutionofinputdeviceshastransitionedfrompunch−cardsinthe1950stoadvancedgesturerecognitiontechnologiesinthe2000s,indicatingasignificanttechnologicaladvancementinuserinteraction[234].−Thecompanyiscommittedtoleveragingdatatoenhancecustomerexperiencebyunderstandinguserinteractionswithplatformfeatures[232].−Theplatformsupportsflexiblegesturedevelopmenttailoredtouserneeds,whichiscrucialfortheadoptionofwearablecomputingsolutions[232].−Thecompany’sengineeringandproductteamsarededicatedtointegratingmachinelearningandAItoimproveproductfunctionalityanduserengagement[232].IntellectualPropertyandLegalRisks−Thecompanyfacesrisksinprotectingitsintellectualpropertyrightsglobally,whichcouldadverselyaffectitsbusinessandfinancialcondition[151].−Legalsystemsincertaincountriesmaynotfavortheenforcementofpatentsandtradesecrets,makingitdifficulttostopcompetitorsfrommarketinginfringingproducts[153].−Thecostsassociatedwithfiling,prosecuting,anddefendingpatentscanbeprohibitivelyexpensive,potentiallyimpactingthecompany′sabilitytoprotectitsintellectualproperty[152].−Thecompanymaybesubjecttolitigationfromthirdpartiesclaiminginfringementoftheirintellectualpropertyrights,whichcouldresultinsignificantliabilityandoperationaldisruptions[156].−Changesinpatentlawsortheirinterpretationcouldincreaseuncertaintiesandcostssurroundingtheprosecutionofpatentapplicationsandenforcementofissuedpatents[160].−Thecompanymayfaceclaimschallengingtheinventorshipofitsintellectualproperty,whichcouldresultinsubstantialcostsandlossofvaluablerightsifnotsuccessfullydefended[161].GeopoliticalandOperationalRisks−TheongoingconflictinIsraelhasledtoheightenedsecurityconcernsandpotentialdisruptionstobusinessoperations,withsignificantuncertaintyregardingitsdurationandescalation[163].−Asoftoday,theconflicthashadnomaterialimpactonthecompany′soperations,anditsofficesarefunctioningasusual[168].−Thecompanycurrentlyhassufficientsupplyofmaterialsforregularoperations,withnoanticipatedmaterialdelays[170].−Thecompanyhasaccruedapproximately2.4 million in grants from the Israeli Innovation Authority for research and development activities, with royalty obligations of 3.0%-3.5% on sales from products developed under these programs [178]. - The company may face increased royalty payments if it manufactures outside of Israel, which could increase its liability to the Israeli Innovation Authority to between 100% and 150% of the grants received [179]. - The company is required to comply with the Israeli Research Law regarding past grants, which restricts the transfer of know-how and manufacturing rights outside of Israel without prior approval [180]. - The company may not be able to enforce non-competition agreements under Israeli law, potentially leading to increased competition [182]. - Israeli corporate law may impede mergers or acquisitions, requiring special approvals and lengthy processes for such transactions [183]. - Israeli tax law may impede potential mergers or acquisitions due to tax deferral conditions and restrictions on share dispositions [184]. - The company faces risks associated with global operations, including currency exchange fluctuations and compliance with various international laws [192]. - Operating margins may decline due to rising product costs driven by competition, labor costs, and inflationary pressures [195]. - Sales of a significant number of shares could depress the market price of Ordinary Shares, impacting the company's ability to raise capital [196]. - The market price of Ordinary Shares and Warrants is likely to be volatile, influenced by various external factors beyond the company's control [197].
