Item 1A. Risk Factors
Risks Related to Our Technology, Business,
and Industry
Autonomous driving is an emerging technology
and involves significant risks and uncertainties.
We develop and deploy a suite
of autonomous driving software products that are compatible with existing sensors and hardware to enable autonomous driving on industrial
vehicle platforms manufactured and designed by OEMs and other third-party industrial vehicle suppliers. Our autonomous driving technology
is highly dependent on internally developed software, as well as on partnerships with third parties such as industrial OEMs and other
suppliers.
We partner with OEMs that
are seeking to manufacture purpose-built industrial vehicles capable of incorporating our autonomous driving technology. Collaborative
partnerships are established through mutually beneficial, non-binding memorandums of understanding or partnership agreements for the purpose
of joint go-to-market efforts. In addition to OEMs, we depend on other third parties to produce hardware components, and, in some cases
adjacent software solutions, that support our core suite of autonomous driving software products and tools. The timely development and
performance of our autonomous driving programs is dependent on the materials, cooperation, and quality delivered by these partners. Further,
we do not control the initial design of the industrial vehicles we work with and therefore have limited influence over the production
and design of systems for braking, gear shifting, and steering. There can be no assurance that these systems and supporting technologies
can be developed and validated at the high reliability standard required for deployment of autonomous industrial vehicles using our technology
in a cost-effective and timely manner. Our dependence on these relationships exposes us to the risk that components manufactured by OEMs
or other suppliers could contain defects that would cause our autonomous driving technology not to operate as intended.
Our autonomous driving technology
is available for production release and is currently being licensed to customers. We plan to continue our scaled commercialization throughout
2025 and beyond. Although we believe that our algorithms, data analysis and processing, and artificial intelligence technology are promising,
we cannot assure you that our technology will achieve the necessary reliability for scaled commercialization of autonomous industrial
vehicles. For example, we are still improving our technology in terms of handling edge cases, unique environments, and discrete objects.
There can be no assurance that our data analytics and artificial intelligence could predict every single potential issue that may arise
during the operation of an autonomous industrial vehicle utilizing our autonomous vehicle technology. Furthermore, the release and adoption
of EAS and our other technologies and products may not be successful and may take longer than anticipated. If the development of EAS and
our other technologies and products is delayed or customers do not adopt and buy our solutions to the extent we anticipate, our business
and operating results will be adversely impacted.
We have a limited operating history in a new market and face
significant challenges as our industry is rapidly evolving.
You should consider our business
and prospects in light of the risks and challenges we face as a new entrant into a novel industry, including, among other things, with
respect to our ability to:
● navigate an evolving and complex regulatory environment;
● improve and enhance our software and autonomous technology;
● establish and expand our customer base;
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● properly price our products and services;
● improve and maintain our operational efficiency;
● attract, retain, and motivate talented employees;
● build a well-recognized and respected brand.
If we fail to address any
or all of these risks and challenges, our business may be materially and adversely affected. There are also a number of additional challenges
to the execution and adoption of autonomous vehicle technology in industrial markets, many of which are not within our control, including
market acceptance of autonomous driving, governmental licensing requirements, concerns regarding data security and privacy, actual and
threatened litigation (whether or not a judgment is rendered against us), and the general perception that an autonomous vehicle is not
safe because there is no human driver. There can be no assurance that the market will accept our technology, in which case our future
business, results of operations and financial condition could be adversely affected.
The autonomous industrial
vehicle industry is in its early stages and is rapidly evolving. Our autonomous driving technology has not yet been commercialized at
scale. We cannot assure you that we will be able to adjust to changing market or regulatory conditions quickly or cost-effectively. If
we fail to do so, our business, results of operations, and financial condition will be adversely affected.
Our business model has yet to be tested
and any failure to commercialize our strategic plans would have an adverse effect on our operating results and business.
Investors should be aware
of the difficulties normally encountered by a relatively new enterprise that is beginning to scale its business, many of which are beyond
our control, including unknown future challenges and opportunities, substantial risks and expenses in the course of entering new markets
and undertaking marketing activities. The likelihood of our success must be considered in light of these risks, expenses, complications,
delays, and the competitive environment in which we operate. There is, therefore, substantial uncertainty that our business plan will
prove successful, and we may not be able to generate significant revenue, raise additional capital, or operate profitably. We will continue
to encounter risks and difficulties frequently experienced by early commercial stage companies, including securing market acceptance for
our product and service offerings, scaling up our infrastructure and headcount. We may encounter unforeseen expenses, difficulties, or
delays in connection with our growth. In addition, as a result of the capital-intensive nature of our business, we can be expected to
continue to sustain substantial operating expenses without generating sufficient revenue to cover expenditures. Any investment in our
company is therefore highly speculative and could result in the loss of your entire investment.
Our future business depends
in large part on our ability to continue to develop and successfully commercialize our suite of software products and tools. Our ability
to develop, deliver, and commercialize at scale our technology to support or perform autonomous operation of industrial vehicles is still
unproven.
Our technology suite is currently
available on tuggers for production release. However, this technology will need to be continually developed and enhanced for further scaled
commercialization. Continued enhancement of our autonomous driving technology is and will be subject to risks, including with respect
to:
● our ability to continue to enhance our data analytics and software technology;
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● our ability to attract and retain customers;
● our ability to pay for research and development costs;
● our ability to attract, recruit, hire, and train skilled employees;
We operate in a highly competitive market
and will face competition from both established competitors and new market entrants.
The market for autonomous
industrial vehicles and industrial automation solutions is highly competitive. Many companies are seeking to develop autonomous driving
and delivery solutions. Competition in these markets is based primarily on technology, innovation, quality, safety, reputation, and price.
Our future success will depend on our ability to further develop and protect our technology in a timely manner and to stay ahead of existing
and new competitors. Our competitors in this market are working towards commercializing autonomous driving technology and may have substantial
financial, marketing, research and development, and other resources.
In addition, we also face
competition from traditional industrial vehicle and solution companies. Traditional vehicle and solution providers operating with human
drivers are still the predominant operators in the market. Because of the long history of such traditional companies serving our potential
customers and industries, there may be many constituencies in the market that would resist a shift towards autonomous industrial vehicles,
which could include lobbying and marketing campaigns, particularly because our technology will displace machine operators and drivers.
In addition, the market leaders
in our target industries, such as Industrial Material Handling, may start, or have already started, pursuing large scale deployment of
autonomous industrial vehicle technology on their own. These companies may have more operational and financial resources than we do. We
cannot guarantee that we will be able to effectively compete with them.
We may also face competition
from component suppliers and other technology and industrial solution companies if they decide to expand vertically and develop their
own autonomous industrial vehicles, some of whom have significantly greater resources than we do. We do not know how close these competitors
are to commercializing autonomous driving systems.
Many established and new market
participants have entered or have announced plans to enter the autonomous industrial vehicle market. Most of these participants have significantly
greater financial, manufacturing, marketing, and other resources than we do and may be able to devote greater resources to the design,
development, manufacturing, distribution, promotion, sale, and support of their products. If existing competitors or new entrants commercialize
earlier than expected, our competitive advantage could be adversely affected.
Business collaboration with third parties
is subject to risks and these relationships may not lead to significant revenue.
Strategic business relationships
are and will continue to be an important factor in the growth and success of our business. We have alliances and partnerships, through
mutually beneficial non-binding memoranda of understanding or partnering arrangements with other companies in the industrial equipment,
automation and automotive industries to help us in our efforts to continue to enhance our technology, commercialize our solutions, and
drive market acceptance.
Collaboration with these third
parties is subject to risks, some of which are outside our control. For example, certain agreements with our partners grant our partner
or us the right to terminate such agreements for cause or without cause. If any of our collaborations with third parties are terminated,
it may delay or prevent our efforts to deploy our software products and tools on purpose-built autonomous industrial vehicles at scale.
In addition, such agreements may contain certain exclusivity provisions which, if triggered, could preclude us from working with other
businesses with superior technology or with whom we may prefer to partner with for other reasons. We could experience delays to the extent
our partners do not meet agreed upon timelines or experience capacity constraints. We could also experience disagreement in budget or
funding for joint development projects. There is also a risk of other potential disputes with partners in the future, including with respect
to intellectual property rights. Our ability to successfully commercialize could also be adversely affected by perceptions about the quality
of our or our partners’ vehicles or products.
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Risks Related to Our Financial Position and
Need for Additional Capital
Losses for the foreseeable future.
We incurred net losses of
$23.5 million and $33.3 million for the years ended December 31, 2025, and 2024, respectively. We have not recognized a substantial amount
of revenue to date, and we had an accumulated deficit of $216.8 million and $193.4 million as of December 31, 2025 and December 31, 2024,
respectively. We have developed and tested our autonomous driving technology but there can be no assurance that it will be commercially
successful at scale. Our potential profitability is dependent upon a number of factors, many of which are beyond our control. If we are
unable to achieve and sustain profitability, the value of our business and common stock may significantly decrease.
We expect the rate at which
we will incur losses to be significantly higher in future periods as we:
● expand our design, development, maintenance, and repair capabilities;
● increase our sales and marketing activities; and
Because we will incur the
costs and expenses from these efforts before we receive any substantial revenue, our losses in future periods will be significant. In
addition, we may find that these efforts are more expensive than we currently anticipate or that these efforts may not result in revenue,
which would further increase our losses. In particular, we expect to incur substantial and potentially increasing research and development
(“R&D”) costs as we continue to develop and enhance EAS and other technology and products for commercialization. While
our R&D costs were $12.5 million and $11.3 million during the years ended December 31, 2025 and 2024, respectively, and are likely
to grow in the future, we have minimal recurring revenues. Further, because we account for R&D as an operating expense, these expenditures
will adversely affect our results of operations in the future. Our R&D program may not produce successful results, and our new products
may not achieve market acceptance, create additional revenue, or become profitable.
We have a limited operating history, which
makes it difficult to forecast our future results of operations.
We were founded in 2013. As
a result of our limited operating history, our ability to accurately forecast our future results of operations is limited and subject
to a number of uncertainties, including our ability to plan for and model future growth. Our historical performance should not be considered
indicative of our future performance. Further, in future periods, our revenue growth could fluctuate for a number of reasons, including
shifts in our offering and revenue mix, slowing demand for our offering, increasing competition, decreased effectiveness of our sales
and marketing organization, and our sales and marketing efforts to acquire new customers, failure to retain existing customers, changing
technology, a decrease in the growth of our overall market, or our failure, for any reason, to continue to take advantage of growth opportunities.
We anticipate that we will encounter risks and uncertainties frequently experienced by growing companies in rapidly changing industries,
such as the risks and uncertainties described in this Annual Report.
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If our assumptions regarding
these risks and uncertainties and our future revenue growth are incorrect or change, or if we do not address these risks successfully,
our operating and financial results could differ materially from our expectations, and our business could suffer.
We expect fluctuations in our financial
results making it difficult to project future results.
Our results of operations
may fluctuate in the future due to a variety of factors, many of which are outside of our control. As a result, our past results may not
be indicative of our future performance. In addition to the other risks described herein, factors that may affect our results of operations
include the following:
● changes in our revenue mix and related changes in revenue recognition;
● fluctuations in demand for or pricing of our product offerings;
● our ability to attract new customers;
● our ability to retain our existing customers, particularly large customers;
● investments in new offerings, features, and functionality;
● our ability to control costs;
● the effects of acquisitions and their integration;
● the impact of new accounting pronouncements;
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● the impact of global events, including the outbreak of war or conflicts
● health epidemics or pandemics, such as the COVID-19 pandemic;
Any of these and other factors,
or the cumulative effect of some of these factors, may cause our results of operations to vary significantly. If our quarterly results
of operations fall below the expectations of investors and securities analysts who follow our stock, the price of our common stock could
decline substantially, and we could face costly lawsuits, including securities class action suits.
We may need to raise additional funds and
these funds may not be available to us on attractive terms when we need them, or at all.
The commercialization of autonomous
vehicles is capital intensive. This includes autonomous industrial vehicles outfitted with our technology and purpose-built autonomous
industrial vehicles manufactured by OEMs we intend to partner with. To date, we have financed our operations primarily through the issuance
of equity securities in private and public placements. We may need to raise additional capital to continue to fund our commercialization
activities, sales and marketing efforts, enhancement of our technology and to improve our liquidity position. Our ability to obtain the
necessary financing to carry out our business plan is subject to a number of factors, including general market volatility, investor acceptance
of our business plan, regulatory requirements and the successful development of our autonomous technology. These factors may make the
timing, amount, terms, and conditions of such financing unattractive or unavailable to us.
We may raise these additional
funds through the issuance of equity, equity related, or debt securities. To the extent that we raise additional financing by issuing
equity securities or convertible debt securities, our stockholders may experience substantial dilution, and to the extent we engage in
debt financing, we may become subject to restrictive covenants that could limit our flexibility in conducting future business activities.
Financial institutions may request credit enhancement such as third-party guarantee and pledge of equity interest in order to extend loans
to us. We cannot be certain that additional funds will be available to us on attractive terms when required, or at all. If we cannot raise
additional funds when we need them, our financial condition, results of operations, business, and prospects could be materially adversely
affected.
We have incurred significant losses and continue to manage our
cash resources to support our ongoing operations.
The Company incurred net losses
of approximately $23.5 million and $33.3 million for the years ended December 31, 2025, and 2024, respectively. In addition, the Company
had accumulated deficits of approximately $216.8 million and $193.4 million as of December 31, 2025 and December 31, 2024, respectively,
and net cash used in operating activities was approximately $23.6 million and $19.2 million for the year ended December 31, 2025 and 2024,
respectively. As of December 31, 2025, the Company’s cash and cash equivalents balance was approximately $1.0 million and the short-term
investments balance was $33.7 million. As of December 31, 2024, the Company’s unrestricted cash and cash equivalents balance was
$23.6 million and no short-terms investments. Based on cash flow projections from operating, investing and financing activities and the
existing balance of cash and short-term investments, management is of the opinion that the Company has sufficient funds for sustainable
operations, and it will be able to meet its payment obligations from operations and related commitments for the 12 months following the
date these consolidated financial statements were issued.
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We may be subject to risks associated with
potential future acquisitions.
Although we have no current
acquisition plans, if appropriate opportunities arise, we may acquire additional assets, products, technology or businesses that are complementary
to our existing business. Any future acquisitions and the subsequent integration of new assets and businesses would require significant
attention from our management and could result in a diversion of resources from our existing business, which in turn could have an adverse
effect on our operations, and consequently our results of operations and financial condition. Acquired assets or businesses may not generate
the financial results we expect. Acquisitions could result in the use of substantial amounts of cash, potentially dilutive issuances of
equity securities, significant goodwill impairment charges, amortization expenses for other intangible assets and exposure to potential
unknown liabilities of the acquired business. Moreover, the costs of identifying and consummating acquisitions may be significant.
Risks Related to Our Business Operations
Our success depends largely on the continued
services of our senior management team, technical engineers, and certain key employees.
We rely on our executive officers
and key employees in the areas of business strategy, research and development, marketing, sales, services, and general and administrative
functions. From time to time, there may be changes in our executive management team or key employees resulting from the hiring or departure
of executives or key employees, which could disrupt our business. We do not maintain key-man insurance for any member of our senior management
team or any other employee. None of the employment agreements and offer letters with our executive officers or other key personnel require
them to continue to work for us for any specified period and, therefore, they could terminate their employment with us at any time. The
loss of one or more of our executive officers or key employees could have a serious adverse effect on our business.
To execute our growth plan,
we must attract and retain highly qualified personnel. Competition for these personnel is intense in the technology industry, especially
for engineers with high levels of experience in artificial intelligence and designing and developing autonomous driving related algorithms.
Furthermore, it can be difficult to recruit personnel from other geographies to relocate to our California location. We may also need
to recruit highly qualified technical engineers internationally and therefore subject us to the compliance of relevant immigration laws
and regulations. We have, from time to time, experienced, and we expect to continue to experience, difficulty in hiring and retaining
employees with appropriate qualifications. Many of the companies with which we compete for experienced personnel have greater resources
than we have and can offer more attractive compensation packages for new employees. If we hire employees from competitors or other companies,
their former employers may attempt to assert that these employees or our company have breached their legal obligations, resulting in a
diversion of our time and resources and potentially in litigation. In addition, job candidates and existing employees often consider the
value of the share incentive awards they receive in connection with their employment. If the perceived value of our share awards declines,
it may adversely affect our ability to recruit and retain highly skilled employees. If we fail to attract new personnel on a timely basis
or fail to retain and motivate our current personnel, we may not be able to commercialize and then expand our solutions and services in
a timely manner and our business and future growth prospects could be adversely affected.
If we fail to manage our growth effectively,
we may be unable to execute our business plan, maintain high levels of service, or adequately address competitive challenges.
We expect to invest in our
growth for the foreseeable future. Any growth in our business is expected to place a significant strain on not only our managerial, administrative,
operational, and financial resources, but also our infrastructure. We plan to continue to expand our operations in the future. Our success
will depend in part on our ability to manage this growth effectively and execute our business plan. To manage the expected growth of our
operations and personnel, we will need to continue to improve our operational, financial, and management controls and our reporting systems
and procedures.
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We rely heavily on information
technology (“IT”) systems to manage critical business functions. To manage our growth effectively, we must continue to improve
and expand our infrastructure, including our IT, financial, and administrative systems and controls. In particular, we may need to significantly
expand our IT infrastructure as the amount of data we store and transmit increases over time, which will require that we both utilize
existing IT products and adopt new technology. If we are not able to scale our IT infrastructure in a cost-effective and secure manner,
our ability to offer competitive solutions will be harmed and our business, financial condition, and operating results may suffer.
We must also continue to manage
our employees, operations, finances, research and development, and capital investments efficiently. Our productivity and the quality of
our solutions may be adversely affected if we do not integrate and train our new employees quickly and effectively or if we fail to appropriately
coordinate across our executive, research and development, technology, service development, analytics, finance, human resources, marketing,
sales, operations, and customer support teams. As we continue to grow, we will incur additional expenses, and our growth may continue
to place a strain on our resources, infrastructure, and ability to maintain the quality of our solutions. If we do not adapt to meet these
evolving challenges, or if the current and future members of our management team do not effectively manage our growth, the quality of
our solutions may suffer and our corporate culture may be harmed. Failure to manage our future growth effectively could cause our business
to suffer, which, in turn, could have an adverse impact on our business, financial condition, and operating results.
We may be subject to product liability or
warranty claims that could result in significant direct or indirect costs, including reputational harm, increased insurance premiums or
the need to self-insure, which could adversely affect our business and operating results.
Our technology is used for
autonomous driving, which presents the risk of significant injury, including fatalities. We may be subject to claims if one of our or
a customer’s industrial vehicles is involved in an accident and persons are injured or purport to be injured or if property is damaged.
Any insurance that we carry may not be sufficient or it may not apply to all situations. If we experience such an event or multiple events,
our insurance premiums could increase significantly or insurance may not be available to us at all. Further, if insurance is not available
on commercially reasonable terms, or at all, we might need to self-insure. In addition, lawmakers or governmental agencies could pass
laws or adopt regulations that limit the use of autonomous driving or industrial automation technology or increase liability associated
with its use. Any of these events could adversely affect our brand, relationships with users, operating results, or financial condition.
If our autonomous driving software fails
to perform as expected our ability to market, sell or lease our autonomous driving software could be harmed.
Our autonomous industrial
vehicle software products and tools as well as the vehicles, sensors, and hardware they utilize and are deployed on may contain defects
in design and manufacture that may cause them not to perform as expected or require repair. For example, our autonomous vehicle software
will require modification and updates over the life of the vehicle it is deployed on. Software products are inherently complex and often
contain defects and errors when first introduced. There can be no assurance that we will be able to detect and fix any defects in the
industrial vehicles’ hardware or software prior to commencing user sales or during the life of the vehicle. Autonomous industrial
vehicles utilizing our suite of products and tools may not perform consistent with users’ expectations or consistent with other
vehicles that may become available. Any product defects or any other failure of our software, supportive hardware, or deployment vehicle
platform or to perform as expected could harm our reputation, result in adverse publicity, lost revenue, delivery delays, product recalls,
product liability claims, and significant warranty and other expenses, and could have a material adverse impact on our business, financial
condition, operating results, and prospects.
If we are unable to establish and maintain
confidence in our long-term business prospects among users, securities and industry analysts, and within our industries, or are subject
to negative publicity, then our financial condition, operating results, business prospects, and access to capital may suffer materially.
Users may be less likely to
purchase or use our technology and the industrial vehicles it is deployed on if they are not convinced that our business will succeed
or that our service and support and other operations will continue in the long term. Similarly, suppliers and other third parties will
be less likely to invest time and resources in developing business relationships with us if they are not convinced that our business will
succeed. Accordingly, in order to build and maintain our business, we must maintain confidence among users, suppliers, securities and
industry analysts, and other parties in our long-term financial viability and business prospects. Maintaining such confidence may be particularly
complicated by certain factors including those that are largely outside of our control, such as our limited operating history at scale,
user unfamiliarity with our solutions, any delays in scaling manufacturing, delivery, and service operations to meet demand, competition
and uncertainty regarding the future of autonomous vehicles, and our performance compared with market expectations.
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Natural disasters, outbreaks of infectious
diseases, terrorist attacks, wars and threats of war may negatively impact our operations, revenue, costs, and stock price.
Natural disasters such as
earthquakes, floods, severe weather conditions, outbreaks of infectious diseases in addition to COVID-19 or other catastrophic events
may severely affect our operations or those of our suppliers and customers. Acts of terrorism, as well as events occurring in response
or connection to them, including potential future terrorist attacks, rumors or threats of war, actual military conflicts or trade disruptions
impacting our domestic or foreign customers or suppliers, may negatively impact our operations by causing, among other things, delays,
or losses in the delivery of supplies or finished goods and decreased sales of our products. More generally, any of these events could
cause consumer confidence and spending to decrease and/or result in increased volatility in the worldwide financial markets and economy.
They also could result in economic recession either globally or in the markets in which we operate. Any of these occurrences could have
a significant adverse impact on our business.
International trade policies, including
tariffs, sanctions and trade barriers, may adversely affect our business, financial condition, results of operations and prospects.
Beginning in our fiscal year
2025, significant new and expanded tariffs, reciprocal tariffs and other trade restrictions have been imposed with selective tariff exemptions
impacting global trade.
Current or future tariffs
or other restrictive trade measures may raise the costs of raw materials, components or finished goods, which may adversely impact both
our product offerings and our operational expenses. Such cost increases may reduce our margins and require us to increase prices, which
could harm our competitive position, reduce customer demand and damage customer relationships.
Trade disputes, trade restrictions,
tariffs and other political tensions between the U.S. and other countries may also exacerbate unfavorable macroeconomic conditions including
inflationary pressures, foreign exchange volatility, financial market instability, and economic recessions or downturns, which may also
negatively impact customer demand for our products or services, delay purchases or renewals, limit expansion opportunities with customers,
limit our access to capital, or otherwise negatively impact our business and operations. Ongoing tariff policies, trade restrictions and
macroeconomic uncertainty have and may continue to contribute to volatility in the price of our common stock.
Ongoing uncertainty regarding
trade policies may also complicate our short- and long-term strategic planning, and that of our partners and customers, including decisions
regarding hiring, product strategy, capital investment, supply chain design and geographic expansion. While we continue to monitor trade
developments, the ultimate impact of these risks remains uncertain and any prolonged economic downturn, escalation in trade tensions,
or deterioration in international perception of U.S.-based companies could materially and adversely affect our business, results of operations,
financial condition and prospects.
We have a material weakness in our internal
control over financial reporting, and our inability to remediate this weakness or otherwise implement and maintain effective internal
control over financial reporting, or the inability of our independent registered public accounting firm to provide an unqualified report
thereon, could have a material adverse effect on us.
If we fail to maintain
an effective system of internal controls, we may not be able to accurately report our financial results. As a result, our
stakeholders could lose confidence in our financial reporting, which could adversely affect the results of our business and our
enterprise value. In connection with our assessment of internal control over financial reporting, we identified two material
weaknesses in our internal control over financial reporting as of December 31, 2025 (see Item 9A. Controls and Procedures for
additional detail). The deficiencies above led to two misstatements, one of which was corrected prior to the issuance of the prior
year’s financial statements, and the other lead to the restatement of the Affected Periods. These material weaknesses create a
reasonable possibility that material misstatements to our consolidated financial statements may not be prevented or detected in a
timely manner. Accordingly, management concluded that the Company’s internal control over financial reporting was not
effective as of December 31, 2025. The disclosure of these material weaknesses, even if quickly remediated, could reduce the
market’s confidence in our financial statements and harm our enterprise value.
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Risks Related to Our Intellectual Property,
Information Technology and Data Privacy
We may become subject to litigation brought
by third parties claiming infringement, misappropriation or other violation by us of their intellectual property rights.
The industry in which our
business operates is characterized by a large number of patents, some of which may be of questionable scope, validity or enforceability,
and some of which may appear to overlap with other issued patents. As a result, there is a significant amount of uncertainty in the industry
regarding patent protection and infringement. In recent years, there has been significant litigation globally involving patents and other
intellectual property rights. Third parties may in the future assert, that we have infringed, misappropriated or otherwise violated their
intellectual property rights. As we face increasing competition and as a public company, the possibility of intellectual property rights
claims against us grows. Such claims and litigation may involve one or more of our competitors focused on using their patents and other
intellectual property to obtain competitive advantage, or patent holding companies or other adverse intellectual property rights holders
who have no relevant product revenue, and therefore our own pending patents and other intellectual property rights may provide little
or no deterrence to these rights holders in bringing intellectual property rights claims against us. There may be intellectual property
rights held by others, including issued or pending patents and trademarks, that cover significant aspects of our technologies or business
methods, and we cannot assure that we are not infringing or violating, and have not infringed or violated, any third-party intellectual
property rights or that we will not be held to have done so or be accused of doing so in the future. In addition, because patent applications
can take many years until the patents issue, there may be applications now pending of which we are unaware, which may later result in
issued patents that our products may infringe. We expect that in the future we may receive notices that claim we or our collaborators
have misappropriated or misused other parties’ intellectual property rights, particularly as the number of competitors in our market
grows.
To defend ourselves against
any intellectual property claims brought by third parties, whether with or without merits, can be time-consuming and could result in substantial
costs and a diversion of our resources. These claims and any resulting lawsuits, if resolved adversely to us, could subject us to significant
liability for damages, impose temporary or permanent injunctions against our products, technologies or business operations, or invalidate
or render unenforceable our intellectual property.
If our technology is determined
to infringe a valid and enforceable patent, or if we wish to avoid potential intellectual property litigation on any alleged infringement,
misappropriation or other violation of third party intellectual property rights, we may be required to do one or more of the following:
(i) cease development, sales, or use of our products that incorporate or use the asserted intellectual property right; (ii) obtain a license
from the owner of the asserted intellectual property right, which may be unavailable on commercially reasonable terms, or at all, or which
may be non-exclusive, thereby giving our competitors and other third parties access to the same technologies licensed to us; (iii) pay
substantial royalties or other damages; or (iv) redesign our technology or one or more aspects or systems of our autonomous industrial
vehicles to avoid any infringement or allegations thereof. The aforementioned options sometimes may not be commercially feasible. Additionally,
in our ordinary course of business, we agree to indemnify our customers, partners, and other commercial counterparties for any infringement
arising out of their use of our intellectual property, along with providing standard indemnification provisions, so we may face liability
to our users, business partners or third parties for indemnification or other remedies in the event that they are sued for infringement.
We may also in the future
license third party technology or other intellectual property, and we may face claims that our use of such in-licensed technology or other
intellectual property infringes, misappropriates or otherwise violates the intellectual property rights of others. In such cases, we will
seek indemnification from our licensors. However, our rights to indemnification may be unavailable or insufficient to cover our costs
and losses.
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We also may not be successful
in any attempt to redesign our technology to avoid any alleged infringement. A successful claim of infringement against us, or our failure
or inability to develop and implement non-infringing technology, or license the infringed technology on acceptable terms and on a timely
basis, could materially adversely affect our business and results of operations. Furthermore, such lawsuits, regardless of their success,
would likely be time-consuming and expensive to resolve and would divert management’s time and attention from our business, which
could seriously harm our business. Also, such lawsuits, regardless of their success, could seriously harm our reputation with users and
in the industry at large.
Our business may be adversely affected if
we are unable to adequately establish, maintain, protect, and enforce our intellectual property and proprietary rights or prevent third
parties from making unauthorized use of our technology and other intellectual property rights.
Our intellectual property
is an essential asset of our business. Failure to adequately protect our intellectual property rights could result in our competitors
offering similar products, potentially resulting in the loss of our competitive advantage, and a decrease in our revenue which would adversely
affect our business prospects, financial condition, and operating results. Our success depends, at least in part, on our ability to protect
our core technology and intellectual property. We rely on a combination of intellectual property rights, such as patents, trademarks,
copyrights, and trade secrets (including know-how), in addition to employee and third-party nondisclosure agreements, intellectual property
licenses, and other contractual rights, to establish, maintain, protect, and enforce our rights in our technology, proprietary information,
and processes. Intellectual property laws and our procedures and restrictions provide only limited protection and any of our intellectual
property rights may be challenged, invalidated, circumvented, infringed or misappropriated. If we fail to protect our intellectual property
rights adequately, we may lose an important advantage in the markets in which we compete. While we take measures to protect our intellectual
property, such efforts may be insufficient or ineffective, and any of our intellectual property rights may be challenged, which could
result in them being narrowed in scope or declared invalid or unenforceable. Other parties may also independently develop technologies
that are substantially similar or superior to ours. We also may be forced to bring claims against third parties, or defend claims that
they may bring against us, to determine the ownership of what we regard as our intellectual property. However, the measures we take to
protect our intellectual property from unauthorized use by others may not be effective and there can be no assurance that our intellectual
property rights will be sufficient to protect against others offering products, services, or technologies that are substantially similar
or superior to ours and that compete with our business.
Litigation may be necessary
in the future to enforce our intellectual property rights and to protect our trade secrets. Our efforts to enforce our intellectual property
rights may be met with defenses, counterclaims, and countersuits attacking the validity and enforceability of our intellectual property.
Any litigation initiated by us concerning the violation by third parties of our intellectual property rights is likely to be expensive
and time-consuming and could lead to the invalidation of, or render unenforceable, our intellectual property, or could otherwise have
negative consequences for us. Furthermore, it could result in a court or governmental agency invalidating or rendering unenforceable our
patents or other intellectual property rights upon which the suit is based. We will not be able to protect our intellectual property if
we are unable to enforce our rights or if we do not detect unauthorized use of our intellectual property. Our inability to protect our
proprietary technology against unauthorized copying or use, as well as any costly litigation or diversion of our management’s attention
and resources, could delay the introduction and implementation of new technologies, result in our substituting inferior or more costly
technologies into our products or injure our reputation. Moreover, policing unauthorized use of our technologies, trade secrets, and intellectual
property may be difficult, expensive, and time-consuming, particularly in foreign countries where the laws may not be as protective of
intellectual property rights as those in the United States and where mechanisms for enforcement of intellectual property rights may be
weak. If we fail to meaningfully establish, maintain, protect, and enforce our intellectual property and proprietary rights, our business,
operating results, and financial condition could be adversely affected.
Changes in U.S. patent law could diminish
the value of patents in general, thereby impairing our ability to protect our products.
Changes in U.S. Patent law
may have a significant impact on our ability to protect our technology and enforce our intellectual property rights. For example, the
Leahy-Smith America Invents Act (the “AIA”) enacted in September 2011, resulted in significant changes in patent legislation.
An important change introduced by the AIA is that, as of March 16, 2013, the United States transitioned from a “first-to-invent”
to a “first-to-file” system for deciding which party should be granted a patent when two or more patent applications are filed
by different parties claiming the same invention. Under a “first-to-file” system, assuming the other requirements for patentability
are met, the first inventor to file a patent application generally will be entitled to a patent on the invention regardless of whether
another inventor had made the invention earlier. A third party that files a patent application in the United States Patent and Trademark
Office (“USPTO”) after that date but before us could therefore be awarded a patent covering an invention of ours even if we
made the invention before it was made by the third party. Circumstances could prevent us from promptly filing patent applications on our
inventions.
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The AIA also includes a number
of significant changes that affect the way patent applications will be prosecuted and also may affect patent litigation. These include
allowing third party submission of prior art to the USPTO during patent prosecution and additional procedures to attack the validity of
a patent by USPTO administered post-grant proceedings, including post-grant review, inter partes review, and derivation proceedings.
Because of a lower evidentiary standard in USPTO proceedings compared to the evidentiary standard in United States federal courts necessary
to invalidate a patent claim, a third party could potentially provide evidence in a USPTO proceeding sufficient for the USPTO to hold
a claim invalid even though the same evidence would be insufficient to invalidate the claim if first presented in a district court action.
Accordingly, a third party may attempt to use the USPTO procedures to invalidate our patent claims that would not have been invalidated
if first challenged by the third party as a defendant in a district court action. The AIA and its implementation could increase the uncertainties
and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could
have a material adverse effect on our business, financial condition, results of operations, and prospects.
Further, the standards applied
by the USPTO and foreign patent offices in granting patents are not always applied uniformly or predictably. For example, there is no
uniform worldwide policy regarding patentable subject matter or the scope of claims allowable for business methods. As such, we do not
know the degree of future protection that we will have on our technologies, products, and services. While we will endeavor to try to protect
our technologies, products, and services with intellectual property rights such as patents, as appropriate, the process of obtaining patents
is time-consuming, expensive, and sometimes unpredictable.
Additionally, the U.S. Supreme
Court has ruled on several patent cases in recent years, such as Impression Products, Inc. v. Lexmark International, Inc., Association
for Molecular Pathology v. Myriad Genetics, Inc., Mayo Collaborative Services v. Prometheus Laboratories, Inc. and Alice Corporation Pty.
Ltd. v. CLS Bank International, either narrowing the scope of patent protection available in certain circumstances or weakening the rights
of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future,
this combination of events has created uncertainty with respect to the value of patents, once obtained.
Depending on decisions by
the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that
could weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future.
Our patent applications may not issue as
patents, which may have a material adverse effect on our ability to prevent others from commercially exploiting products similar to ours.
We cannot be certain that
we are the first inventor of the subject matter to which we have filed a particular patent application, or if we are the first party to
file such a patent application. If another party has filed a patent application to the same subject matter as we have, we may not be entitled
to the protection sought by the patent application. Further, the scope of protection of issued patent claims is often difficult to determine.
As a result, we cannot be certain that the patent applications that we file will issue, or that our issued patents will be broad enough
to protect our proprietary rights or otherwise afford protection against competitors with similar technology. In addition, the issuance
of a patent is not conclusive as to its inventorship, scope, validity or enforceability. Our competitors may challenge or seek to invalidate
our issued patents, or design around our issued patents, which may adversely affect our business, prospects, financial condition or operating
results. Also, the costs associated with enforcing patents, confidentiality and invention agreements, or other intellectual property rights
may make aggressive enforcement impracticable.
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We may not be able to protect our intellectual
property rights throughout the world.
Filing, prosecuting, maintaining,
defending, and enforcing patents and other intellectual property rights on our product candidates in all countries throughout the world
would be prohibitively expensive, and our intellectual property rights in some countries outside the United States can be less extensive
than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same
extent as federal and state laws in the United States. Consequently, we may not be able to prevent third parties from practicing our inventions
in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States
or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection or other intellectual
property rights to develop their own products and may export otherwise infringing, misappropriating, or violating products to territories
where we have patent or other intellectual property protection, but enforcement rights are not as strong as those in the United States.
These products may compete with our product candidates, and our patents or other intellectual property rights may not be effective or
sufficient to prevent them from competing.
Many companies have encountered
significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of some countries
do not favor the enforcement of patents and other intellectual property rights, which could make it difficult for us to stop the infringement,
misappropriation, or other violation of our intellectual property rights generally. Proceedings to enforce our intellectual property rights
in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could
put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing, and could provoke
third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded,
if any, may not be commercially meaningful.
Many countries, including
European Union countries, India, Japan, and China, have compulsory licensing laws under which a patent owner may be compelled under specified
circumstances to grant licenses to third parties. In addition, many countries limit the enforceability of patents against government agencies
or government contractors. In those countries, we may have limited remedies if patents are infringed or if we are compelled to grant a
license to a third party, which could materially diminish the value of those patents. This could limit our potential revenue opportunities.
Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial
advantage from the intellectual property that we develop or license, which could adversely affect our business, financial condition, results
of operations, and prospects.
In addition to patented technology, we rely
on our unpatented proprietary technology, trade secrets, processes, and know-how.
We rely on proprietary information
(such as trade secrets, know-how, and confidential information) to protect intellectual property that may not be patentable, or that we
believe is best protected by means that do not require public disclosure. We generally seek to protect this proprietary information by
entering into confidentiality agreements, or consulting, services, or employment agreements that contain non-disclosure and non-use provisions
with our employees, consultants, contractors, scientific advisors, and third parties. However, we cannot guarantee that we have entered
into such agreements with each party that has or may have had access to our trade secrets or proprietary information and, even if entered
into, these agreements may be breached or may otherwise fail to prevent disclosure, third-party infringement or misappropriation of our
proprietary information, may be limited as to their term and may not provide an adequate remedy in the event of unauthorized disclosure
or use of proprietary information. We have limited control over the protection of trade secrets used by our third-party manufacturers
and suppliers and could lose future trade secret protection if any unauthorized disclosure of such information occurs. In addition, our
proprietary information may otherwise become known or be independently developed by our competitors or other third parties. To the extent
that our employees, consultants, contractors, and other third parties use intellectual property owned by others in their work for us,
disputes may arise as to the rights in related or resulting know-how and inventions. Costly and time-consuming litigation could be necessary
to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain protection for our proprietary information
could adversely affect our competitive business position. Furthermore, laws regarding trade secret rights in certain markets where we
operate may afford little or no protection to our trade secrets. If any of our trade secrets were to be lawfully obtained or independently
developed by a competitor or other third party, we would have no right to prevent them from using that trade secret to compete with us.
If any of our trade secrets were to be disclosed (whether lawfully or otherwise) to or independently developed by a competitor or other
third party, it could have a material adverse effect on our business, operating results, and financial condition.
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We also rely on physical and
electronic security measures to protect our proprietary information, but we cannot guarantee that these security measures provide adequate
protection for such proprietary information or will never be breached. There is a risk that third parties may obtain unauthorized access
to and improperly utilize or disclose our proprietary information, which would harm our competitive advantages. We may not be able to
detect or prevent the unauthorized access to or use of our information by third parties, and we may not be able to take appropriate and
timely steps to mitigate the damages (or the damages may not be capable of being mitigated or remedied).
We utilize open-source software, which may
pose particular risks to our proprietary software, technologies, products, and services in a manner that could harm our business.
We use open-source software
in our products and services and anticipate using open-source software in the future. We utilize a distribution of the open-source Linux
system, and tools such as ROS (open-source publish-subscribe tool) in the technical stack. Professional open-source license scanning systems
such as WhiteSource and ScanCode are used in both places. Both Continuous Integration and Continuous Deployment (“CI/CD”)
level open-source scan and overall system opensource scan is performed to protect the systems and our intellectual property. In the event
that our scanning and open-source check protocols fail, the Company could be negatively affected Some open-source software licenses require
those who distribute open-source software as part of their own software products to publicly disclose all or part of the source code to
such software product or to make available any modifications or derivative works of the open-source code on unfavorable terms or at no
cost. This could result in our proprietary software being made available in the source code form and/or licensed to others under open-source
licenses, which could allow our competitors or other third parties to use our proprietary software freely without spending the development
effort, and which could lead to a loss of the competitive advantage of our proprietary technologies and, as a result, sales of our products
and services. The terms of many open-source licenses to which we are subject have not been interpreted by U.S. or foreign courts, and
there is a risk that open-source software licenses could be construed in a manner that imposes unanticipated conditions or restrictions
on our ability to provide or distribute our products or services or retain our ownership of our proprietary intellectual property. Additionally,
we could face claims from third parties claiming ownership of, or demanding release of, the open-source software or derivative works that
we developed using such software, which could include our proprietary source code, or otherwise seeking to enforce the terms of, or alleging
breach of, the applicable open-source license. These claims could result in litigation and could require us to make our proprietary software
source code freely available, purchase a costly license, or cease offering the implicated products or services unless and until we can
re-engineer them to avoid breach of the applicable open-source software licenses or potential infringement. This re-engineering process
could require us to expend significant additional research and development resources, and we cannot guarantee that we will be successful.
Additionally, the use of certain
open-source software can lead to greater risks than use of third-party commercial software, as open-source licensors generally do not
provide warranties or controls on the origin of software. There is typically no support available for open-source software, and we cannot
ensure that the authors of such open-source software will implement or push updates to address security risks or will not abandon further
development and maintenance. Many of the risks associated with the use of open-source software, such as the lack of warranties or assurances
of title, non-infringement, or performance, cannot be eliminated, and could, if not properly addressed, negatively affect our business.
We have processes to help alleviate these risks, including a review process for screening requests from our developers for the use of
open-source software, but we cannot be sure that all open-source software is identified or submitted for approval prior to use in our
products and services. Any of these risks could be difficult to eliminate or manage, and, if not addressed, could adversely affect our
ownership of proprietary intellectual property, the security of our vehicles, or our business, results of operations, and financial condition.
Unauthorized control or manipulation of
systems in autonomous industrial vehicles may cause them to operate improperly or not at all, or compromise their safety and data security,
which could result in loss of confidence in us and our products, cancellation of contracts with future OEM or supplier partners.
There have been reports of
vehicles of certain automotive OEMs being “hacked” to grant access to and operation of the vehicles to unauthorized persons.
Our autonomous vehicle software products and tools as well as the vehicles they are deployed on contain or will contain complex IT systems
and are designed with built-in data connectivity. We are in the process of and will continue implementing security measures intended to
prevent unauthorized access to our information technology networks and systems. However, hackers may attempt to gain unauthorized access
to modify, alter, and use such networks and systems to gain control of, or to change the functionality of the autonomous industrial vehicles’
running our software, user interface and performance characteristics, or to gain access to data stored in or generated by our products.
As techniques used to obtain unauthorized access to or sabotage systems change frequently and may not be known until launched against
us or our third-party service providers, there can be no assurance that we will be able to anticipate, or implement adequate measures
to protect against, these attacks. Any such security incidents could result in unexpected control of or changes to the vehicles’
functionality and safe operation and could result in legal claims or proceedings and negative publicity, which would negatively affect
our brand and harm our business, prospects, financial condition, and operating results.
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