ITEM 1A. RISK FACTORS

Our operations and financial results are subject to various risks and uncertainties, including those described below, which could adversely affect our business, financial condition, results of operations, cash flows, growth prospects and the trading price of our common stock.

Summary Risk Factors

Our business is subject to a number of risks, including risks that may prevent us from achieving our business objectives or may adversely affect our business, financial conditions, results of operations, cash flows and prospects that you should consider before making a decision to invest in our Common Stock. These risks are discussed more fully in the section titled “Risk Factors” beginning on page 24 of this Annual Report, and include the following:

Risks Relating to our Financial Position

Risks Relating to the Acquisition of the Company by Bioceres

Risks Relating to Our Business and Strategy

Risks Relating to Product Development and Regulatory Matters

Risks Related to Ownership of Our Common Stock

Risks Relating to Our Financial Position

We have incurred significant losses to date and anticipate continuing to incur losses in the future. Unless we significantly increase sales, we may not achieve or maintain profitability and our business may fail.

We have incurred operating losses since our inception in June 2006, we expect to continue to incur operating losses for the foreseeable future and we may never become profitable. As of December 31, 2021, we had an accumulated deficit of $357.4 million, and for the years ended December 31, 2021 and 2020, we had a net loss attributable to common stockholders of $16.6 million and $20.2 million, respectively. Our future success depends on our ability to market and sell in significantly larger volume our legacy Marrone products and our acquired products, and to successfully introduce new products like Pacesetter, Optima, Takla and Ympact.

While we have and plan to continue to invest considerable resources in the sale and launch of our products, various factors have impeded and continue to impede higher growth in sales of these products. For example, we believe adverse conditions globally, including low commodity prices in some regions and for some crops, may have reduced demand for our products. Delays in regulatory approvals of certain of our products in Europe, Latin America and other jurisdictions have and may continue to slow international growth, and any delay in a product launch that causes us to miss a growing season may require us to wait a year to enter that market. Extended drought in some markets such as California and excessive rain in other markets reduced demand for our products as fewer acres are planted, recent changes in weather patterns have resulted in a shortened bloom cycle in different markets in different years and resulted in fewer pesticide and plant health products being used, and certain of our strategic collaborations have not resulted in the significant increases in sales we expected both inside and outside of the Unites States.

Lower than expected sales growth as a result of these and other factors may adversely affect our financial results in several ways, including increases in write-offs and inventory obsolescence, higher proportional operating expense levels and increases in our cost of product revenues and decreases in product margins. Further, if we are unable to achieve our planned operating results and increase sales of our commercialized products, our available cash and ability to raise additional capital will decrease which could cause the market price of our common stock to decline, and our business may fail.

There is uncertainty about our ability to continue as a going concern.

Our historical operating results as of December 31, 2021 indicate substantial doubt exists related to our ability to continue as a going concern for the 12 months from the issuance of the accompanying financial statements. However, we believe that our existing cash and cash equivalents of $19.6 million at December 31, 2021, together with expected revenues, net proceeds from future debt or equity financings, and continued cost management will be sufficient to fund operations as currently planned for at least one year from the date of the issuance of the accompanying financial statements. However, we cannot predict, with certainty, the outcome of actions to grow revenues, obtain financing and/or manage or reduce costs. We have based this belief on assumptions and estimates that may prove to be wrong, and we could spend our available financial resources less or more rapidly than currently expected. We may continue to require additional sources of cash for general corporate purposes, which may include operating expenses, working capital to improve and promote our commercially available products, advance pipeline candidates, expand international presence and commercialization, general capital expenditures and satisfaction of debt obligations. Should we seek additional financing from outside sources, we may not be able to raise such financing on terms acceptable to us or at all. The actions discussed above cannot be considered probable of occurring and mitigating the substantial doubt raised by our historical operating results and satisfying our estimated liquidity needs for 12 months from the issuance of the accompanying financial statements. If we become unable to continue as a going concern, we may have to liquidate our assets, and stockholders may lose all or part of their investment in our common stock.  

We expect to require additional financing in the future to maintain and expand our business, and to service our debt. Such capital raising may be costly, difficult or not possible to obtain and, if obtained, could significantly dilute current stockholders’ equity interests, and we may be unable to repay our secured indebtedness.

We expect to continue to incur significant losses until we are able to significantly increase our revenue. Accordingly, we expect to need significant additional financing to maintain and expand our business, including, for example, working capital associated with increased sales, costs associated with increased headcount, potential capital expenditures to grow capacity at our Bangor manufacturing facility, potential acquisitions of complementary technologies, businesses, and other strategic opportunities as well as to meet the financial covenants of and pay the principal and interest under our debt agreements.

We may also seek additional funds from public or private equity offerings, debt financings, and strategic collaborations involving up-front cash payments or other means. However, additional capital may not be available on terms acceptable to us, or at all. Any additional equity financing we do raise will be significantly dilutive to stockholders or, in some cases, require us to seek stockholder approval for the financing or result in antidilution adjustments to the prices of our outstanding warrants, reducing potential proceeds from their exercise. Any debt financing, if available, may include restrictive covenants and bear high rates of interest. In addition, our existing loan agreements contain certain restrictive covenants that either limit our ability to or require a mandatory prepayment if we incur additional indebtedness and liens and enter into various specified transactions. We therefore may not be able to engage in any of the foregoing transactions unless we obtain the consent of our lenders or prepay the outstanding amounts under the debt agreements, which could require us to pay additional prepayment penalties. In addition, we may incur substantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees and other costs. We also may be required to recognize non-cash expenses in connection with certain securities we issue, such as warrants, which may adversely impact our financial results.

Certain of our debt agreements also contain financial covenants, including maintaining minimum current, debt-to-worth and loan-to-value ratios and provisions providing for an event of default if there is a material adverse change in our financial condition or if we are in default under certain of our other agreements. We are not in compliance with certain of these covenants and have received waivers from our lenders, none whom have previously declared an event of default on our indebtedness. Breach of covenants included in our debt agreements, which could result in the lenders demanding payment of the unpaid principal and interest balances. If we fail to pay any principal or interest under our indebtedness when due, or are otherwise in violation of certain covenants under our debt agreements, this may result in the acceleration of our indebtedness, which would have a material adverse effect upon our business and would likely require us to seek to renegotiate these debt arrangements with the lenders, as we may not have sufficient funds to repay that indebtedness.

Further, the Merger Agreement restricts our ability, prior to the closing of the transactions contemplated by the Merger Agreement, to issue equity securities, incur indebtedness, or materially change our business operations without the consent of Bioceres. These restrictions may make it difficult for us to raise capital and adversely impact our business.

If we cannot raise more money when needed, or are unable to use our future working capital, borrowings or equity financing to repay or refinance the amounts outstanding under our debt agreements or to renegotiate our debt arrangements with lenders, we may have to reduce our capital expenditures, scale-back our development of new products, reduce our workforce or license to others products that we otherwise would seek to commercialize ourselves. Any of these eventualities would likely have a material adverse impact on our value and the value of our equity.

Our ability to use our net operating loss carryforwards to offset future taxable income may be subject to certain limitations.

As of December 31, 2021, we had net operating loss carryforwards of $113.4 million. The net operating loss carryforwards for federal and state purposes were reduced as a result of the effect of an ownership change as defined under Internal Revenue Code (IRC) Section 382, the change related to the February 5, 2018 previously disclosed financing transactions. The federal and state reductions were $176.4 million and $119.1 million, respectively. The federal net operating loss generated after 2017 in the amount of $74.4 million will not expire. In addition, as of December 31, 2021, we had federal research and development tax credit carryforwards of $0.6 million, which begin to expire in 2038, and state research and development tax credit carryforwards of $3.1 million, which have no expiration date. The federal research and development tax credit carryforwards were also reduced by the Section 382 ownership change of $2.3 million. It is possible that we will not generate taxable income to use these loss carryforwards in cases where they are subject to expiration or where they are able to be carried forward indefinitely. Additionally, while we believe that foreign loss carryforwards in connection with our acquisition of Pro Farm have been retained, there can no assurance the initial position will not be reversed in future periods by the foreign taxing authorities.

Risks Relating to the Acquisition of the Company by Bioceres

Uncertainty about the Merger may adversely affect relationships with our distributors, suppliers, business partners, and employees, whether or not the Merger is completed.

On March 16, 2022, we entered into the Merger Agreement. Uncertainty about the Merger and our efforts to complete the Merger could create uncertainty surrounding and significantly disrupt our business. Uncertainty regarding our future could also adversely affect our relationships with existing and potential customers, distributors, suppliers, vendors, strategic partners, employees. For example, clients, distributors, and other counterparties may delay or defer decisions concerning entering into contracts or otherwise working with us, seek to change our existing business relationships or consider doing business with other companies rather than us. Competitors may also target our customers by highlighting potential uncertainties and other risks related to the Merger. The pendency of the Merger may also divert management’s attention and resources towards completing the Merger and preparing for integration activities and away from ongoing business and operations. Uncertainty as to whether the merger will be completed may also affect our ability to recruit prospective employees or to retain and motivate existing employees. Employee retention may be particularly challenging while the Merger is pending because employees may experience uncertainty about their roles following the Merger. These risks and the resulting adverse effects on business, financial condition and results of operations could be exacerbated by any delays in completion of the Merger or termination of the Merger Agreement.

Stockholder litigation could prevent or delay the closing of the Merger or otherwise negatively impact our business, operating results and financial condition.

We may incur additional costs in connection with any future stockholder litigation in connection with the Merger. Such litigation may adversely affect our ability to complete the Merger. We could incur significant costs in connection with any such litigation, including attorneys’ fees and costs associated with the indemnification obligations to our directors.

If the Merger does not occur, it could have a material adverse effect on our business, results of operations, financial condition and stock price.

Upon completion of the Merger, we will become a wholly owned subsidiary of Bioceres and will cease to be publicly owned and traded. There are, however, many contingencies which may cause the Merger not to occur.

Completion of the Merger is subject to the satisfaction of various conditions, including but not limited to, (i) the approval of the Company’s stockholders, (ii) the expiration or termination of all waiting periods under the Hart-Scott Rodino Antitrust Improvements Act of 1976 and receipt of any other specified merger control consents or clearances, (ii) the effectiveness of the registration statement to be filed by Bioceres with the SEC pursuant to the Merger Agreement, (iii) the approval for listing on Nasdaq of Bioceres’ ordinary shares to be issued as Merger Consideration in connection with the Merger, subject to official notice of issuance, (iv) the absence of any judgment or law issued by any governmental entity enjoining or otherwise prohibiting the consummation of the Merger, and (vii) other customary conditions specified in the Merger Agreement. Bioceres’ obligations to complete the Merger are also subject to our compliance with the covenants set forth in the agreement, including (i) covenants relating to conducting our business in the ordinary course consistent with past practice and refraining from taking certain types of actions without Bioceres’ consent, (ii) covenants relating to removing certain inventory from certain jurisdictions and (iii) certain restrictions on the Company’s ability to solicit alternative acquisition proposals from third parties, and/or to provide information to third parties and to engage in discussions with third parties, in each case, in connection with alternative acquisition proposals, subject to certain exceptions. There is no assurance that all of the various conditions will be satisfied, or that the Merger will be completed on the proposed terms, within the expected timeframe, or not at all:

The Merger gives rise to inherent risks that include:

Our combination with Bioceres may be more difficult, costly or time consuming than expected and we may fail to realize the anticipated benefits of the Merger.

The success of the Merger will depend, in part, on the ability to realize the anticipated synergies, operating efficiencies, and cost savings from combining our business with that of Bioceres. To realize the anticipated benefits and cost savings from the Merger, Bioceres must integrate and combine our business in a manner that permits these cost savings to be realized, without adversely affecting current revenues and future growth. If we and Bioceres are not able to successfully achieve these objectives, the anticipated benefits of the Merger may not be realized fully or at all or may take longer to realize than expected. In addition, the actual cost savings of the Merger could be less than anticipated, the costs associated with effecting the Merger may be more than anticipated, and integration may result in additional and unforeseen expenses.

An inability to realize the full extent of the anticipated benefits of the Merger and the other transactions contemplated by the Merger Agreement, as well as any delays encountered in the integration process, could have an adverse effect upon the revenues, levels of expenses and operating results and financial condition of the combined company, which may adversely affect the value of the common stock of Bioceres after the completion of the Merger.

We and Bioceres have operated and, until the completion of the Merger, must continue to operate, independently. It is possible that the integration process could result in the loss of key associates, the disruption of each company’s ongoing businesses or inconsistencies in standards, controls, procedures and policies that adversely affect each company’s ability to maintain relationships with clients, customers and other business parties or to achieve the anticipated benefits and cost savings of the Merger. Integration efforts between the two companies may also divert management attention and resources. These integration matters could have an adverse effect on us and/or Bioceres during this transition period and for an undetermined period after completion of the Merger on the combined company.

Risks Relating to Our Business and Strategy

We will need to continue expanding our sales and marketing infrastructure.

We currently have limited sales and marketing experience and capabilities. As of December 31, 2021, we employed 30 full-time equivalent sales and marketing personnel, 9 of whom focus on technical support and demonstration and conducting field trials and 4 of which focus on marketing. The majority of these sales personnel were hired after 2018 and thereafter. New personnel require significant training to attain a high level of technical expertise and knowledge regarding the capabilities of our biological products compared with conventional chemical pest management products and techniques in order to educate growers and independent distributors on the uses and benefits of our products. We will need to further develop our sales and marketing capabilities and find partners in order to successfully increase sales of our commercially available products and to commercialize other products we are developing, which may involve substantial costs. There can be no assurance that our field development specialists and other members of our sales and marketing team will successfully compete against the sales and marketing teams of our current and future competitors, many of which may have more established relationships with distributors and growers. Our inability to recruit, train and retain sales and marketing personnel, or their inability to effectively market and sell the products we are developing, could impair our ability to gain market acceptance of our products and cause our sales to suffer.

If we are unable to maintain and further establish successful relations with the third-party distributors that are our principal customers, or they do not focus adequate resources on selling our products or are unsuccessful in selling them to end users, sales of our products will be adversely affected.

In the United States, we rely on independent distributors of agrichemicals to distribute and assist us with the marketing and sale of our current product portfolio and other products we are developing. These distributors are our principal customers, and revenue growth will depend in large part on our success in establishing and maintaining this sales and distribution channel. However, there can be no assurance that our distributors will be successful in selling our products to end users, or will focus adequate resources on selling them, and they may not continue to purchase or market our products for a number of reasons.

For example, many distributors lack experience in marketing biological agricultural products, which generally must be used differently than conventional chemical products. In addition, many of our distributors are in the business of distributing and manufacturing other, possibly competing, biological agricultural products, including internally developed and commercialized biological products as well as biological products developed by larger agrichemical companies that negotiate to “bundle” such specialty products with other high demand products. For example, a portion of our sales of Venerate are tied to Albaugh’s promotion, sales and services related to products under its BIOST platform, in addition to the effectiveness of their proprietary blend, which while containing Venerate, is developed by Albaugh and not by us. To the extent our distributors are unsuccessful in selling our products to end users, or in marketing their own products that incorporate our products, they may purchase lower volumes from us, which could have a material adverse effect on our business. In addition, our distributors may earn higher margins by selling competing products or combinations of competing products. If we are unable to establish or maintain successful relationships with independent distributors, we need to further develop our own sales and demand creation capabilities, which would be expensive and time-consuming, the success of which would be uncertain.

We depend on a limited number of distributors.

Our current revenues are derived from a limited number of key customers, each of which serves as a third-party distributor to our products’ end users. For each year ended December 31, 2021 and 2020, our top three distributors accounted for 48% of our total revenues. We expect a limited number of distributors to continue to account for a significant portion of our total revenues for the foreseeable future. This customer concentration increases the risk of quarterly fluctuations in our revenues and operating results. The loss or reduction of business from one or a combination of our significant distributors could materially adversely affect our revenues, financial condition and results of operations.

The high level of competition in the market for biological agricultural products may result in pricing pressure, reduced margins or the inability of our products to achieve market acceptance.

The markets for biological agricultural products are intensely competitive, rapidly changing and undergoing consolidation. We may be unable to compete successfully against our current and future competitors, which may result in price reductions, reduced margins and the inability to achieve market acceptance for our products.

Many entities are engaged in developing biological agricultural products. Our competitors include major multinational agrichemical companies, some of which have developed biological products for our target markets, as well as specialized biological agricultural businesses such as Certis Biologicals (owned by Mitsui & Co), Novozymes and Valent Biosciences (subsidiary of Sumitomo Chemical). Many of these organizations have longer operating histories, significantly greater resources, greater brand recognition and a larger base of customers than we do. As a result, they may be able to devote greater resources to the manufacture, promotion or sale of their products, receive greater resources and support from independent distributors, initiate or withstand substantial price competition or more readily take advantage of acquisition or other opportunities. Further, many of the large agrichemical companies have a more diversified product offering, which may give these companies an advantage in meeting customers’ needs by enabling them to offer a broader range of crop protection, plant nutrition and plant health solutions. In addition, we could face competition in the future from new, well-financed start-up companies.

The product candidates we select for development and commercialization may fail to generate significant revenues.

Our internal development efforts are focused on a number of product candidates including in the near term Reyzox, Zn Foliar, MBI-306, MBI-011, MBI-015 and MBI-007. Simultaneously, we are seeking collaborations with third parties to develop and commercialize early-stage candidates on which we have elected not to expend significant internal resources.

Successful development of product candidates will require significant additional investment, including costs associated with research and development, completing field trials and obtaining regulatory approval, as well as the ability to manufacture our products in large quantities at acceptable costs while also preserving high product quality. Difficulties often encountered in scaling up production include problems involving production yields, quality control and assurance, shortage of qualified personnel, production costs and process controls. In addition, we are subject to inherent risks associated with new products and technologies. These risks include the possibility that any product candidate may:

Our decisions regarding which product candidates to pursue may cause us to fail to capitalize on product candidates that could have given rise to viable commercial products and profitable market opportunities.

Our product sales are subject to weather conditions and other factors beyond our control, which may cause our operating results to fluctuate significantly quarterly and annually.

In recent years, we have increasingly had higher sales during the first half of the year than the second half, and expect this trend to continue. However, the level of seasonality in our business may change due to a number of factors, including our expansion into new geographical territories, the introduction of new products, the timing of introductions of new formulations and products, the addition or changes to distributors or distributor programs and the impact of weather and climate change. It is possible that our business may become more seasonal, or experience seasonality in different periods.

Notwithstanding any such seasonality, we expect substantial fluctuation in sales year over year and quarter over quarter as a result of a number of variables on which sales of our products are dependent. Weather conditions, natural disasters and other factors affect planting and growing seasons and incidence of pests and plant disease, and accordingly affect decisions by our distributors, direct customers and end users about the types and amounts of pest management and plant health products to purchase and the timing of use of such products. In addition, disruptions that cause delays by growers in harvesting or planting can result in the movement of orders to a future quarter, which would negatively affect the quarter and cause fluctuations in our operating results. Customers also may purchase large quantities of our products in a particular quarter to store and use over long periods of time or time their purchases to manage their inventories, which may cause significant fluctuations in our operating results for a particular quarter or year.

Our expense levels are based in part on our expectations regarding future sales. As a result, any shortfall in sales relative to our expectations could cause significant fluctuations in our operating results from quarter to quarter, which could result in uncertainty surrounding our level of earnings and possibly a decrease in our stock price.

Biological crop protection and plant health products are not well understood, which necessitates investment in customer education and makes effectively marketing and selling our products difficult.

The market for biological agricultural products is underdeveloped when compared to conventional products. Customers in the crop production sector are generally cautious in their adoption of new products and technologies. Growers often require on-farm demonstrations of a given crop protection or plant health product. Initial purchases of the product tend to be conservative, with the grower testing on a small portion of their overall crop. As the product is proven, growers incorporate the product into their rotational programs and deploy it on a greater percentage of their operations. As a result, large scale adoption generally takes several growing seasons.

Customers have historically perceived biological agricultural products as more expensive and less effective than conventional products. To succeed, we will need to continue to change that perception. To the extent that the market for biological agricultural products does not further develop or customers elect to continue to purchase and rely on conventional chemical products, our market opportunity will be limited.

If we or our third-party manufacturers are unable to produce our products at a satisfactory quality, in a timely manner, in sufficient quantities or at an acceptable cost, our business could be negatively impacted.

We have transitioned a significant amount of our manufacturing processes in-house to our facility in Bangor, Michigan. If severe weather, a fire or natural disaster occurs, a contaminant grows in our fermentations, or a mechanical or labor problem leads to a reduced capacity or shutdown of our fermenters or other equipment, we may not be successful in producing the amount and quality of product we anticipate in the facility and our results of operations may suffer as a result.

We also continue to rely on third parties to produce or in the process for manufacturing our products and from time to time, including the 12% minority interest in a Russian manufacturing facility and we expect to use third-party manufacturers for supplemental production capacity to meet excess seasonal demand and some packaging. Our reliance on third parties to manufacture our products presents significant risks to us, including the following:

We have not entered into any long-term manufacturing or supply agreements for any of our products, and we may need to enter into additional agreements for the commercial development, manufacturing and sale of our products. There can be no assurance that we can do so on favorable terms, if at all.

Our products have been produced in quantities, and on timelines, sufficient to meet commercial demand and for us to satisfy our delivery schedules. However, our dependence upon others for the production of a portion of our products, or for a portion of the manufacturing process, particularly for drying and for all our production of Venerate, may adversely affect our ability to satisfy demand, support agriculture retailers and distributors operating shifting to “just-in-time” inventory approach and meet delivery obligations, as well as to develop and commercialize new products, on a timely and competitive basis. If manufacturing capacity is reduced or eliminated at one or more of our third-party manufacturers’ facilities, we could have difficulties fulfilling our customer orders, which could adversely affect customer relationships, and our net revenues and results of operations could decline.

We must accurately forecast demand for our products to obtain adequate and cost-effective capacity from our third-party manufacturers and to purchase certain of the raw materials used in our products at cost-effective rates. Our third-party manufacturers are not required to supply us products until we place, and they accept, our purchase orders, which generally occurs approximately three months prior to the anticipated product delivery date to customers based on our own rolling forecasts. Our purchase orders may not be accepted and our third-party manufacturers may not be willing to provide us with additional products on a timely basis if they prioritize orders placed by other companies, many of whom are more established than us and order larger volumes of products. In addition, while raw material orders are generally placed one month in advance of suppliers’ orders, because certain of the raw materials used in our products are in short supply or are subject to capacity demands, we place some raw material orders approximately six months in advance to avoid paying higher prices. Accordingly, if we inaccurately forecast demand for our products, we may be unable to meet our customers’ delivery requirements, or we may accumulate excess inventories of products and raw materials.

Failure to achieve expected manufacturing yields and pesticidal activity or contamination of our production runs could negatively impact our operating results.

We do not know whether a yield problem exists until our products are manufactured. When a yield issue is identified, the product is analyzed and tested to determine the cause. As a result, yield deficiencies may not be identified until well into the production process. We may experience inability to ramp up yields in our own manufacturing facility or third-party manufacturers. In the event that we continue to rely on third-party manufacturers, resolution of yield problems requires cooperation among, and communication between, us and our manufacturers. Third-party manufacturers as well as our own plant in Michigan may contaminate the runs of our products while in process, causing a run failure and causing us to miss sales opportunities or a season. We will not succeed if we cannot maintain or decrease our production costs and effectively scale our technology and manufacturing processes with the desired yields and pesticidal activity and without contaminations.

We rely on a single supplier based in China for a key ingredient of Regalia.

The active ingredient in our Regalia product line is derived from the giant knotweed plant, which we obtain from China. Our single supplier acquires raw knotweed from numerous regional sources and performs an extraction process on this plant, following our specifications, thus creating a dried extract that is shipped to our manufacturing facility in Bangor, Michigan. Although we have identified additional sources of knotweed at competitive prices that appear to be reliable and of appropriate quality, there can be no assurance that we will continue to be able to obtain dried extract from China at a competitive price point, including due to impact of any deterioration in the trade relationship between the United States and China such as tariffs placed on Chinese goods exported to the United States, unusual and significant deterioration status of supplier resources due to the outbreak of COVID-19, changes in the exchange rate between the U.S. Dollar and the Renminbi and potential actions taken by regulators in China. We endeavor to keep at least 6 - 12 months of knotweed extract on hand at any given time.

Any decline in U.S. agricultural production could have a material adverse effect on the market for pesticides and on our results of operations and financial position.

Conditions in the U.S. agricultural industry significantly impact our operating results. The U.S. agricultural industry has contracted in recent periods, and can be affected by a number of factors, including weather patterns and field conditions, current and projected grain inventories and prices, domestic and international demand for U.S. agricultural products and U.S. and foreign policies regarding trade in agricultural products. State and federal governmental policies, including farm subsidies and commodity support programs, as well as the prices of fertilizer products and the prices at which produce may be sold, may also directly or indirectly influence the number of acres planted, the mix of crops planted and the use of pesticides for particular agricultural applications.

We have acquired, and may in the future acquire, other companies, employee teams, products or technologies, which could divert our management’s attention, result in additional dilution to our stockholders, and otherwise disrupt our operations and adversely affect our operating results.

We have acquired, and we may in the future acquire, other companies, employee teams, or technologies to further complement or expand our product portfolio, enhance our technical capabilities, obtain personnel, or otherwise offer growth opportunities. For example, in September 2019, we completed our acquisition of Pro Farm, which added proprietary nutrient and plant health technology and products for seed and foliar treatments to our product portfolio, and also in September 2019, we completed the purchase of substantially all rights and assets related to our Jet products. The pursuit of acquisitions may divert the attention of management and cause us to incur various expenses in identifying, investigating, and pursuing suitable acquisitions, whether or not they are consummated, and if an acquired business fails to meet our expectations, or the costs associated with the acquisition outweigh the benefits, our business, operating results, and financial position may suffer.

We may not be able effectively manage the integration of acquired personnel, operations, and technologies successfully, or effectively manage the combined operations following any acquisition, which may prevent us from achieving anticipated benefits from an acquisition. We also may not achieve the anticipated benefits from an acquisition, including the Pro Farm acquisition, due to a number of other factors, including:

A significant portion of the purchase price of companies or technologies we acquire may be allocated to acquired goodwill and other intangible assets, which must be assessed for impairment at least annually. In the future, if our acquisitions do not yield expected returns, we may be required to take charges to our operating results based on this impairment assessment process, which could adversely affect our operating results. Further, even if integration of acquired businesses is successful, we may be required to expend additional legal, accounting and other administrative costs with respect to managing subsidiaries in multiple international jurisdictions, including compliance with local laws and filing applicable tax returns.

We are subject to risks associated with our international sales and operations.

We expect sales to our international customers to account for an increasing portion of our sales in future fiscal years, including as a result of the Pro Farm acquisition and its formation as a subsidiary of the Company, through which we now sell directly to certain of our customers in Europe and South America. As a result of having global operations, the sudden disruption of sales caused by events outside of our control could impact our results of operations.

Our international operations are subject to inherent risks, and our future results could be adversely affected by a variety of factors, many of which are outside of our control, including:

Because of the importance of international sales, sourcing and manufacturing to our business, our financial condition and results of operations could be significantly harmed if any of the risks described above were to occur or if we are otherwise unsuccessful in managing our increasingly global business.

A variety of risks associated with our subsidiary, manufacturing facilities and operations in Russia and the recent Russian invasion of Ukraine could adversely affect our business. 

In February 2022, Russia escalated its conflict with Ukraine, resulting in wide-ranging sanctions and international protests. In addition to our U.S. operations, we maintain an indirectly wholly owned subsidiary in Russia, Pro Farm Russia, LLC, and own a 12% minority interest in a third-party manufacturing plant in Vyborg, Russia. While our revenues derived from sales to customers in Ukraine and Russia are currently immaterial, products for Pro Farm, our wholly owned subsidiary, are partially sourced by suppliers from the manufacturing plant in Russia, and we have agreed in the Merger Agreement with Bioceres to cause a targeted amount of certain related inventory to be located outside of specified conflict regions by April 30, 2022. We may face risks associated with maintaining our subsidiary in Russia and minority ownership of the manufacturing plant, or with any international operations in Russia, including risks associated with our compliance with evolving international sanctions and potential reputational harm as a result of our operations in Russia. Further, Russia’s president Vladimir Putin has declared that he will seek authorization for the government to seize assets owned by foreign businesses that leave Russia and has taken steps to invalidate intellectual property protections for U.S.-based companies operating in Russia. In addition, should the conflict escalate or be prolonged, supply chain, trade routes and agricultural markets could be adversely affected, which, in turn, could materially, adversely affect our business operations and financial performance. While we have policies and procedures in place designed to ensure compliance with applicable sanctions and trade restrictions, our employees, contractors, and agents may take actions in violation of such policies and applicable law and we could be held ultimately responsible. If we are held responsible for a violation of U.S. sanctions laws, we may be subject to various penalties, any of which could have a material adverse effect on our business, financial condition or results of operations.

Our intellectual property is integral to our business. If we are unable to protect our patents and proprietary rights in the United States and foreign countries, our business could be adversely affected.

Our success depends in part on our ability to obtain and maintain patent and other proprietary rights protection for our technologies and products in the United States and other countries. If we are unable to obtain or maintain these protections, we may not be able to prevent third parties from using our proprietary rights. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. As of December 31, 2021, we had 66 issued U.S. patents and 428 issued foreign patents, 18 pending provisional and non-provisional U.S. patent applications and 97 pending foreign patent applications.

The patent position of biotechnology and biochemical companies generally is highly uncertain, involves complex legal and factual questions and has in recent years been the subject of much litigation. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. Our pending and future patent applications may not result in patents being issued which protect our technology or products, in whole or in part, or which effectively prevent others from commercializing competitive technologies and products. Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow the scope of our patent protection. For example, the U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. In addition, recent changes to the patent laws of the United States provide additional procedures for third parties to challenge the validity of issued patents, some of which allow a lower evidentiary standard to hold a patent claim invalid. The laws of some foreign countries do not protect proprietary rights to the same extent as the laws of the United States, and we may encounter significant problems and costs in protecting our proprietary rights in these foreign countries.

Our patents, and those patents for which we have license rights, may be challenged, narrowed, invalidated or circumvented. In addition, our issued patents may not contain claims sufficiently broad to protect us against third parties with similar technologies or products or provide us with any competitive advantage. We are not certain that our pending patent applications will be issued. Moreover, our competitors could challenge or circumvent our patents or pending patent applications. It is also not possible to patent and protect all knowledge and know-how associated with our products, so there may be areas that are not protected such as certain formulations and manufacturing processes. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position.

On March 6, 2022, Russia issued a decree permitting the use of certain patents without compensation or license for inventions, industrial designs, and utility models originating in unfriendly countries, which include the United States. Currently, we have eight patents issued by the Russian Federation, which following the March 6, 2022 decree may no longer be afforded any intellectual rights protections. If third party individuals, including the majority owners of the third-party manufacturing plant in Vyborg, Russia, utilize our patents and create versions of our products we would likely have limited to no recourse and would not receive any compensation for any unauthorized use.

For certain of our products, we hold co-exclusive licenses to certain of the intellectual property related to these products. Although our products that are derived from intellectual property licensed to us on a co-exclusive basis also include our own proprietary technology, the third parties with whom we share co-exclusive rights may develop products based on the same underlying intellectual property. This could adversely affect the sale of our products.

Significant disruptions of information technology systems or breaches of data security could adversely affect our business.

We are dependent on information technology systems and infrastructure, some which are hosted by third party vendors or suppliers, to operate our business. Despite our security measures, potential vulnerabilities can be exploited from inadvertent or intentional actions of our employees, third-party vendors, business partners, or by malicious third parties. Attacks of this nature are increasing in their frequency, levels of persistence, sophistication and intensity, and are being conducted by sophisticated and organized groups and individuals with a wide range of motives (including, but not limited to, industrial espionage) and expertise, including organized criminal groups, “hacktivists,” nation states and others. In addition to the extraction of sensitive information, such attacks could include the deployment of harmful malware, ransomware, denial-of-service attacks, phishing attacks social engineering and other means to affect service reliability. While we have incurred no material cyber-attacks or security breaches to date, any material cyber-related incident, including unauthorized access, disclosure or other loss of information, could result in legal claims or proceedings, investigations by law enforcement or regulatory bodies, liability under laws that protect the confidentiality of personal information, regulatory penalties, could disrupt our operations, could compromise our ability to protect our intellectual property rights, could damage our reputation, which could adversely affect our business, financial condition, and operating results, and could negatively impact our stock price.

Our business is subject to risks arising from the COVID-19 illness.

The outbreak of COVID-19 and the resulting public health crisis continues to have a widespread impact on our business, our customers, and our business environment, as well as the economic climate in the United States and globally. The initial wave and variants of the COVID-19 outbreak caused disruption to our business activities, as state and local authorities mandated shutdown, which led us to scale down our headquarters and manufacturing facilities. For the safety of our workforce, employees were encouraged to work from home if it was not absolutely essential to complete their responsibilities at the physical workspace. Since the initial shutdown orders, we continued to operate certain aspects of our business at a scaled down level and although generally many geographic locations have reopened with limitations, we cannot determine when our operations will revert to the productivity levels we had in early- and mid- March 2020. For example, while we cannot directly determine the value of the impact, we generally believe that scaling down our operations at our manufacturing plant for safety measures impacted our manufacturing levels and contributed to the higher idle capacity expense recognized for the year ended December 31, 2020 when compared to December 31, 2021. Additionally, the continued spread of COVID-19 and the mitigation measures taken by various governments of countries affected, could disrupt the supply chain for, the manufacture or shipment of, and the demand for our products and adversely impact our business, financial condition or results of operations. The COVID-19 outbreak and mitigation measures may also have an adverse impact on global economic conditions, which could have an adverse effect on our business and financial condition, including by limiting our ability to obtain financing or to rely on our existing financing facilities. Although we presently expect continued revenue growth in 2022 despite the impact of COVID-19, the extent to which the COVID-19 outbreak impacts our results will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact. For example, our commercial efforts may include on-site farmer demonstrations and attendance at trade shows and conferences, some of which were either limited by travel restrictions we imposed on our employees or due to capacity restrictions imposed by governmental agencies, were deferred or cancelled altogether during 2021.

Increases in costs, disruption of supply or shortage of raw materials, as well as reductions in manufacturer capacity, could harm our business.

Due to a variety of factors, including the COVID-19 pandemic, we and the third-party manufacturers we rely on are currently, or may in the future, experience supply chain disruptions, increases in costs or shortages in various raw materials utilized in the manufacturing and delivery our products. These and other factors are also causing plant shutdowns, reductions in capacity, delays and increased costs with our third-party manufacturers. We believe that we have sufficient supplies of raw materials and that our recent investments in our manufacturing plant provide sufficient manufacturing capacity so that we can continue to manufacture our products. However, our operating results may be negatively impacted if there continues to be pressure on global supply chains of raw materials, decreased ability of third-party manufacturers to manufacture and deliver our products and increased manufacturing costs. Substantial increases in the prices of our raw materials or manufacturing costs will increase our operating costs, and could reduce our margins if we cannot recoup the increased costs through increased prices for our products. In addition, in order to recoup the increased costs, we have increased prices for our products, which may reduce customer demand and result in an overall loss of current or historical market share and negatively impact our operating results including anticipated revenues.

We depend on our highly skilled employees to grow and operate our business and if we are unable to hire, retain, manage and motivate our employees, or if our new employees do not perform as anticipated, we may not be able to grow effectively and our business, financial condition and operating results could be materially adversely affected.

Our future success will depend in part on the continued service of our senior management team, key technical employees and other highly skilled employees, and on our ability to continue to identify, hire, develop, motivate and retain talented employees. Our U.S.-based employees, including our senior management team, work for us on an at-will basis and there is no assurance that any such employee will remain with us. For example, Suping (Sue) Cheung, our Chief Financial Officer, resigned on March 9, 2022, and the Board approved the retention of LaDon Johnson as the Interim Chief Financial Officer under an agreement with CFO Systems, LLC, which is a provider of senior financial and accounting executive and support services. We have also had other turnover of our finance team members. Any other changes in our senior management team or our failure to engage in effective succession planning may be disruptive to our business.

We face intense competition for highly skilled employees. To attract and retain top talent, we have offered and we believe we will need to continue to offer competitive compensation and benefits packages. Our ability to offer competitive compensation and benefits packages may be limited by the restrictions on compensation included in the Merger Agreement, which may decrease our ability to attract and retain top talent. Our competitors may be successful in recruiting and hiring members of our management team or other key employees and it may be difficult for us to find suitable replacements on a timely basis, on competitive terms, or at all. If we are unable to attract and retain the necessary employees, particularly in critical areas of our business, we may not achieve our strategic goals. Current job market dynamics, where the number of workers who quit their job in a single month in 2021 has broken multiple all-time U.S. records - referred to as the “Great Resignation” - increases the challenge of employee retention.

Job candidates and existing employees often consider the value of the equity awards they receive in connection with their employment. If the perceived value of our equity awards declines, for example in connection with our anticipated merger with Bioceres, it may adversely affect our ability to attract and retain highly qualified employees. On the other hand, our employees may receive significant proceeds from sales of our equity which may reduce their motivation to continue to work for us. We may need to invest significant amounts of cash and equity to attract and retain new employees and expend significant time and resources to identify, recruit, train and integrate such employees and we may never realize returns on these investments. If we are unable to effectively manage our hiring needs or successfully integrate new hires, our efficiency, ability to meet forecasts and employee morale, productivity and engagement could suffer, which could adversely affect business, financial conditions and operating results.

Risks Relating to Product Development and Regulatory Matters

If our ongoing or future field trials are unsuccessful, we may be unable to obtain regulatory approval of, or commercialize, our products on a timely basis.

The successful completion of multiple field trials in domestic and foreign locations on various crops is critical to the success of our product development and marketing efforts. If our ongoing or future field trials are unsuccessful or produce inconsistent results or unanticipated adverse side effects on crops or on non-target organisms, or if we are unable to collect reliable data, regulatory approval of our products could be delayed, or we may be unable to commercialize our products. In addition, more than one growing or treatment season may be required to collect sufficient data and we may need to collect data from different geographies to prove performance for customer adoption. Although we have conducted successful field trials on a broad range of crops, we cannot be certain that additional field trials conducted on a greater number of acres, or on crops for which we have not yet conducted field trials, will be successful. Moreover, the results of our ongoing and future field trials are subject to a number of conditions beyond our control, including weather-related events such as drought or floods, severe heat or frost, hail, tornadoes and hurricanes, or low or no natural occurrence of the pests intended for testing. Generally, we pay third parties, such as growers, consultants and universities, to conduct field tests on our behalf. Incompatible crop treatment practices or misapplication of our products by these third parties or lack of sufficient occurrence of the identified pests in nature for a particular trial could impair the success of our field trials.

Our inability to obtain regulatory approvals, or to comply with ongoing and changing regulatory requirements, could delay or prevent sales of the products we are developing and commercializing.

The field testing, manufacture, sale and use of crop protection, plant health and plant nutrition products are extensively regulated by the EPA and other state, local and foreign governmental authorities. These regulations substantially increase the time and cost associated with bringing our products to market. If we do not receive the necessary governmental approvals to test, manufacture and market our products, or if regulatory authorities revoke our approvals, do not grant approvals in a timely manner or grant approvals subject to restrictions on their use, we may be unable to sell our products in the United States or other jurisdictions, which could result in a reduction in our future revenues.

As we introduce new formulations of and applications for our products, we may need to seek EPA approval prior to commercial sale. For any such approval, the EPA may require us to fulfill certain conditions within a specified period of time following initial approval. We are also required to obtain regulatory approval from other state and foreign regulatory authorities before we market our products in their jurisdictions, some of which have taken, and may take, longer than anticipated.

Some of these states and foreign countries may apply different criteria than the EPA in their approval processes. Although federal pesticide law preempts separate state and local pesticide registration requirements to some extent, state and local governments retain authority to control pesticide use within their borders.

There can be no assurance that we will be able to obtain regulatory approval for marketing our additional products or new product formulations and applications we are developing. Although the EPA has in place a registration procedure for biopesticides there can be no assurance that all of our products or product extensions will be eligible for this streamlined procedure or that additional requirements will not be mandated by the EPA that could make the procedure more time consuming and costly for our future products.

Additionally, for certain state registration and registration in jurisdictions outside of the United States, all products need to be proven efficacious for each proposed crop-pest combination, which can require costly field trial testing, and a favorable result is not assured. Because many of the products that may be sold by us must be registered with one or more government agencies, the registration process can be time consuming and expensive, and there is no guarantee that the product will obtain all required registrations. We have intentionally obtained registration in some jurisdictions and not in others. California is one of the largest and most important producers of agricultural products in the world. As such, we view California as one of the most natural and attractive markets for our products, but it is also very stringent in its regulations, generally requiring more time and effort, and lacking legally mandated deadlines for its reviews of reduced-risk biopesticides. Therefore, gaining concurrent approvals with the EPA, other states and other countries may not always be achievable. Even if we obtain all necessary regulatory approvals to market and sell our products, they will be subject to continuing review and extensive regulatory requirements, including periodic re-registrations. The EPA, as well as state and foreign regulatory authorities, could withdraw a previously approved product from the market upon receipt of newly discovered information, including an inability to comply with their regulatory requirements or the occurrence of unanticipated problems with our products, or for other reasons.

We use hazardous materials in our business and are subject to potential liability under environmental laws. Any claims relating to improper handling, storage or disposal of hazardous materials could be time consuming and costly to resolve.

We are subject to federal, state and local laws and regulations governing the use, manufacture, storage, handling, disposal and release of hazardous materials and certain waste products. Our research and development and manufacturing activities involve the controlled use of hazardous materials and/or biological waste. Some of these materials may be novel, including bacteria with novel properties and bacteria that produce biologically active compounds. We cannot eliminate the risk of accidental contamination or discharge and any injury resulting from these materials. In addition, although we have not currently identified any environmental liabilities, our manufacturing facility may have existing environmental liabilities associated with it that may also result in successor liabilities for us, and we will be subject to increased exposure to potential environmental liabilities as we manufacture our products on a larger scale. We may also be held liable for hazardous materials brought onto the premises of our manufacturing facility before we acquired title, without regard for fault for, or knowledge of, the presence of such substances, as well as for hazardous materials that may be discovered after we no longer own the property if we sell it in the future. In the event of an accident, or if any hazardous materials are found within our operations or on the premises of our manufacturing facility in violation of the law at any time, we may be liable for all cleanup costs, fines, penalties and other costs. This liability could exceed our resources, and, if significant losses arise from hazardous substance contamination, our financial viability may be substantially and adversely affected.

In addition, we may have to incur significant costs to comply with future environmental laws and regulations. We cannot predict the impact of new governmental regulations that might have an adverse effect on the research, development, production and marketing of our products. We may be required to incur significant costs to comply with current or future laws or regulations. Our business may be harmed by the cost of compliance.

Our collaborators may use hazardous materials in connection with our collaborative efforts. To our knowledge, their work is performed in accordance with applicable biosafety regulations. In the event of a lawsuit or investigation, however, we could be held responsible for any injury caused to persons or property by exposure to, or release of, hazardous materials used by these parties. Further, we may be required to indemnify our collaborators against all damages and other liabilities arising out of our development activities or products produced in connection with these collaborations.

Inability to comply with regulations applicable to our facilities and procedures could delay, limit or prevent our research and development or manufacturing activities.

Our research and development and manufacturing facilities and procedures are subject to continual review and periodic inspection. We must spend funds, time and effort in the areas of production, safety and quality control and assurance to ensure full technical compliance with the regulations applicable to these facilities and procedures. If the EPA or another regulatory body determines that we are not in compliance with these regulations, regulatory approval of our products could be delayed, or we may be required to limit or cease our research and development or manufacturing activities or pay a monetary fine. If we are required to limit or cease our research and development activities, our ability to develop new products would be impaired. In addition, if we are required to limit or cease our manufacturing activities, our ability to produce our products in commercial quantities would be impaired or prohibited, which would harm our business.

Our business is subject to various governmental regulations, and compliance with these regulations may cause us to incur significant expenses. If we fail to maintain compliance with applicable regulations, we may be forced to recall products and cease their manufacture and distribution, which could subject us to civil or criminal penalties.

The complex legal and regulatory environment exposes us to compliance and litigation costs and risks that could materially affect our operations and financial results. These laws and regulations may change, sometimes significantly, as a result of political or economic events. They include environmental laws and regulations, tax laws and regulations, import and export laws and regulations, government contracting laws and regulations, labor and employment laws and regulations, securities and exchange laws and regulations, economic sanctions laws and regulations, and other laws such as the Foreign Corrupt Practices Act. In addition, proposed laws and regulations in these and other areas could affect the cost of our business operations. We face the risk of changes in both domestic and foreign laws regarding trade, potential loss of proprietary information due to piracy, misappropriation or foreign laws that may be less protective of our intellectual property rights. Violations of any of these laws and regulations could subject us to criminal or civil enforcement actions, any of which could have a material adverse effect on our business, financial condition or results of operations.

We may experience disruptions to our business as a result of the relocation of our headquarters and general expansion of our operations.

In December 2021, we relocated our headquarters from Davis, California, to Raleigh, North Carolina and entered into a lease agreement for 2,291 square feet of office space to primarily house our executive team. In connection with the relocation, we could experience unexpected costs or business disruption and diversion of management attention, which could negatively impact our business operations and result in additional costs. Following the relocation, we may experience additional costs associated with operating two large facilities on different coasts. The relocation may have a significant adverse effect on our ability to motivate and retain current employees. Further significant managerial and operational challenges could arise, such as ineffective transfer of institutional knowledge from current employees to newly-hired employees and we could encounter more difficulty than expected in hiring qualified employees to help staff our Raleigh headquarters.

Risks Related to Ownership of Our Common Stock

Our principal stockholders have significant voting power and may take actions that may not be in the best interest of other stockholders.

As of December 31, 2021, our executive officers and directors and their affiliates, including Ospraie Ag Science LLC (“Ospraie”), beneficially owned or controlled (i.e., directly or indirectly and including exercisable warrants), an aggregate of approximately 70.8 million shares, or 38.9% of our common stock. In addition, affiliates of Ardsley Advisory Partners (“Ardsley”) beneficially owns 9.7% of our common stock. These principal stockholders collectively beneficially owned or controlled, directly or indirectly an aggregate of 88.6 million shares or 48.6% of our total common stock outstanding and if all of these security holders act together, or exercise their warrants, they will be able to exert significant control over our management and affairs, which could result in some corporate actions that our other stockholders do not view as beneficial such as failure to approve change of control transactions that could offer holders of our common stock a premium over the market value of our company. For example, Ospraie and Ardsley, who collectively hold voting power over approximately 48.6% of our outstanding common stock, entered into a Transaction Support Agreement, dated March 16, 2022, agreeing to, among other things, vote their shares in favor of the Merger, subject to applicable terms and conditions. As a result, the market price of our common stock could be adversely affected.

Our common stock may experience extreme price and volume fluctuations, and you may not be able to resell shares of our common stock at or above the price you paid.

We have had a history of losses, and our business, financial results and stock price have been adversely affected by operating results. Since shares of our common stock were sold in our initial public offering in August 2013 at a price of $12.00 per share, our stock price has ranged between $0.60 and $20.00 through December 31, 2021. The trading price of our common stock will likely continue to be highly volatile and could be subject to wide fluctuations in price in response to various factors, some of which are beyond our control. These factors include

In addition, the price of our common stock may be adversely affected by the announcement of the Merger. The Merger Agreement provides that, if the Merger closes, each share of our common stock will be exchanged for 0.088 ordinary shares of Bioceres. Due to this, our stock price will be highly influenced by the trading prices of Bioceres and news affecting Bioceres ordinary shares, which will be affected by a variety of factors, including many of those applicable to our common stock described above. The closing price of Bioceres’ ordinary shares has also been volatile since they completed their merger with Union Acquisition Corp., which resulted in them being a publicly listed company, with the closing price for their ordinary shares ranging from a low of $4.10 on May 17, 2019 to a high of $16.00 on November 17, 2021.

Substantial future sales of our common stock, or the perception in the public markets that these sales may occur, may depress our stock price.

Sales of substantial amounts of our common stock in the public market, or the perception that such sales could occur, could adversely affect the market price of our common stock. As of December 31, 2021, we had approximately 182.2 million shares of common stock outstanding, 1.8 million which were held by our directors and officers. Although these shares are subject in some cases to volume and manner of sale restrictions of Rule 144 of the Securities Act, any determination by holders of a substantial number of such shares to sell our stock, or the perception that such sales may occur, could cause our stock price to decline.

In addition, as of December 31, 2021, we had 10.1 million shares of our common stock available to be awarded under our equity incentive plans, 4.0 million shares of our common stock issuable upon the settlement of outstanding restricted stock units, 12.7 million shares of our common stock issuable upon the exercise of outstanding options with a weighted average exercise price of $2.35 per share and 0.2 million shares of our common stock issuable upon the exercise of outstanding warrants with a weighted average exercise price of $3.45 per share. These shares may be sold in the public market upon issuance.

We are a “smaller reporting company” and we cannot be certain if the reduced disclosure requirements applicable to smaller reporting companies will make our common stock less attractive to investors.

We are a “smaller reporting company” as defined by the Securities and Exchange Commission. For as long as we continue to be a smaller reporting company, we may choose to take advantage of certain scaled disclosures from various reporting requirements applicable to other public companies but not to smaller reporting companies, which include, among other things:

We cannot predict if investors will find our common stock less attractive if we rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

We have in the past identified material weaknesses, and if we fail to establish and maintain proper and effective internal controls, our ability to produce accurate financial statements on a timely basis could be impaired, which could adversely affect our consolidated operating results, our ability to operate our business, our stock price and investors’ views of us.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting to ensure that information regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, but in the past, we have identified material weaknesses in these controls. While we believe we have appropriately remediated previous material weaknesses in our internal control over financial reporting, we can provide no assurances that other material weaknesses in our internal control over financial reporting, will not be identified in the future. Remediation of any material weaknesses requires substantial management time and attention, and ensuring that we have adequate internal control over financial reporting and procedures in place to produce accurate financial statements on a timely basis will continue to be a costly and time-consuming effort.

Any failure to implement effective internal control over financial reporting or to complete and maintain the remediation of our identified control deficiencies may result in errors, material misstatements or delays in our financial reporting, failure to meet our financial reporting obligations or failure to avoid or detect fraud in our financial reporting. This in turn would have a material adverse effect on our business and results of operations and could have a substantial adverse impact on the trading price of our common stock and our relationships with customers and suppliers.

Our management does not expect that our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company will have been detected.

Unforeseen problems with the maintenance of our information systems, or failure to design and operate effective internal controls over information systems, could have an adverse effect on our operations and could result in ineffective internal control over our financial reporting.

As we add functionality and increase the use of our enterprise risk planning or other key information systems, we may incur additional costs and problems could arise that we have not foreseen, including interruptions in service, loss of data, or reduced functionality. Such problems could adversely impact our ability to run our business in an efficient and timely manner.

In addition, we do not have extensive experience with implementing controls over our current information systems. While we believe we have designed the appropriate controls around our information systems, if we have not designed controls within or around these systems that are effective at preventing and detecting unreliable data, or if we are unable to design or operate controls within or around these systems to provide effective control around program changes and access to the systems, we may be at risk for future material weaknesses. This in turn would have a material adverse effect on our business and results of operations and could have a substantial adverse impact on the trading price of our common stock and our relationships with customers and suppliers.

Provisions in our charter documents and under Delaware law could discourage a takeover that stockholders may consider favorable.

Provisions in our amended and restated certificate of incorporation and bylaws may have the effect of delaying or preventing a change of control or changes in our management. These provisions include the following:

As a Delaware corporation, we are also subject to certain Delaware anti-takeover provisions. Under Delaware law, a corporation may not engage in a business combination with any holder of 15% or more of its common stock unless the holder has held the stock for three years or, among other things, the board of directors has approved the transaction. Our board of directors could rely on Delaware law to prevent or delay an acquisition of us.

Our stock price does not meet and may in the future fail to meet the continued listing requirements of the Nasdaq Capital Market. Our ability to publicly or privately sell equity securities and the liquidity of our common stock could be adversely affected if we are delisted from the Nasdaq Capital Market.

On November 5, 2021, we received a notification letter from the Listing Qualifications Department of the Nasdaq Capital Market indicating that as of November 5, 2021 we were not in compliance with the $1.00 minimum closing bid price requirement. We have been given a grace period of 180 days from the notification, or until May 4, 2022, to regain compliance, by having the closing bid price of our common stock exceed $1.00 for a minimum of ten (10) consecutive trading days during the grace period. If we do not regain compliance by May 4, 2022, we may be eligible for a second 180 day compliance period, provided that, on such date, we meet the continued listing requirement for market value of publicly held shares and all other applicable initial listing requirements for the Nasdaq Capital Market (other than the minimum closing bid price requirement) and we provide written notice to Nasdaq of our intention to cure the deficiency during the second compliance period, by effecting a reverse stock split, if necessary.

There is no assurance, however, that we will regain compliance during the grace period or be able to maintain compliance with Nasdaq’s listing requirements in the future. If we are not able to regain compliance during the grace period, or any extension of the grace period for which we may be eligible, Nasdaq will notify us that our common stock will be suspended and subject to delisting. If we are subject to delisting, we may appeal Nasdaq’s determination to delist to a hearings panel. During any appeal process, shares of our common stock would continue to trade on Nasdaq. If our common stock were delisted from Nasdaq, among other things, it would likely lead to a number of negative implications, including an adverse effect on the price of our common stock, reduced liquidity in our common stock, the loss of federal preemption of state securities laws with respect to shares issued in future offerings, greater difficulty in obtaining financing, potential loss of confidence by employees, loss of institutional investor interest and fewer business development opportunities. In the event of a delisting, we would take actions to restore our compliance with Nasdaq’s listing requirements, but we can provide no assurance that any such action taken by us would allow our common stock to become listed again, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below the Nasdaq minimum bid price requirement or prevent future non-compliance with Nasdaq’s listing requirements.