ITEM 1A.
RISK FACTORS
Investing
in our securities involves a high degree of risk. Before making an investment decision, you should carefully consider the risks and uncertainties
described below, together with all of the other information in this Annual Report on Form 10-K, including the section titled “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related
notes thereto included elsewhere in this Annual Report on Form 10-K. Our business, financial condition, results of operations or prospects
could also be harmed by risks and uncertainties not currently known to us or that we currently do not believe are material. If any of
the risks actually occur, our business, financial condition, results of operations and prospects could be adversely affected. In that
event, the market price of our securities could decline, and you could lose part or all of your investment.
Risks
Related to Solidion’s Business and Operations
Risks
Related to Development and Commercialization
If
our batteries fail to perform as expected, our ability to develop, market and sell our batteries would be adversely affected.
Our
batteries may contain defects in design and manufacture that may cause them to not perform as expected or that may require repairs, recalls
and design changes. Our batteries are inherently complex and incorporate technology and components that have not been used for certain
applications and that may contain defects and errors, particularly when first introduced to such applications. Although our batteries
undergo quality control testing prior to release for shipment, there can be no assurance that we will be able to detect and fix all defects
prior to shipment, and nonconformances, defects or errors could occur or be present in batteries that we release for shipment to customers.
If our batteries fail to perform as expected, our customers may delay deliveries, our customer may terminate orders or we may initiate
product recalls, each of which could adversely affect our sales and brand and could adversely affect our business, financial condition,
prospects and results of operations.
Our
battery architecture is different from our peers’ and may behave differently in customer use applications, certain applications
of which we have not yet evaluated. This could limit our ability to deliver to certain applications. In addition, our historical data
on the performance and reliability of our batteries is limited, and therefore our batteries could fail unexpectedly in the field resulting
in significant warranty costs or brand damage in the market. Further, the structure of our battery is different from traditional lithium-ion
batteries and therefore our batteries could be susceptible to different and unknown failure modes leading our batteries to fail and cause
a safety event in the field. Such an event could result in the failure of our end customers’ product as well as the loss of life
or property, resulting in severe financial penalties for us, including the loss of revenue, cancelation of supply contracts and the inability
to win new business due to reputational damage in the market. In addition, consistent with industry norms, we would anticipate that when
we enter into agreements to supply our battery products to end product manufacturers, that the terms of these agreements may require
us to bear certain costs relating to recalls and replacements of end products when such recalls and replacements are due to defects of
our battery products that are incorporated in such end products.
OEMs
may elect to pursue other battery cell technologies, which likely would impair our revenue generating ability.
OEMs
are motivated to develop and commercialize improved battery cell technologies. To that end, OEMs partners have invested, and are likely
to continue to invest in the future, in their own development efforts and, in certain cases, in joint development agreements with our
current and future competitors. If other technology is developed more rapidly than our high-capacity anode and high-energy solid-state
battery technology, or if such competing technologies are determined to be more efficient or effective than our high-capacity anode
and high-energy solid-state battery technology, our partners may elect to adopt and install a competitor’s technology or products
over ours, which could materially impact our business, financial results, and prospects.
We
have only conducted preliminary safety testing on our high-capacity anode and high-energy solid-state battery technology, and our technology
will require additional and extensive safety testing prior to being installed in electric vehicles.
To
achieve acceptance by automotive OEMs, our anticipated commercial-sized our high-capacity anode and high-energy solid-state
battery technology will have to undergo extensive safety testing. We cannot assure you such tests will be successful, and we may identify
different or new safety issues in our development or the commercial cells that have not been present in our prototype cells. If we have
to make design changes to address any safety issues, we may have to delay or suspend commercialization, which could materially damage
our business, prospects, financial condition, operating results and brand.
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We
rely on complex equipment for our operations, and production involves a significant degree of risk and uncertainty in terms of operational
performance and costs.
We
rely heavily on complex equipment for our operations and the production of our high-capacity anode and high-energy solid-state battery
technology. The work required to integrate this equipment into the production of our high-capacity anode and high-energy solid-state
battery technology is time intensive and requires us to work closely with the equipment providers to ensure that it works properly with
our proprietary technology. This integration involves a degree of uncertainty and risk and may result in the delay in the scaling up
of production or result in additional cost to our high-capacity anode and high-energy solid-state battery technology.
Our
current manufacturing facilities require large-scale machinery and equipment.
Such machinery and equipment may unexpectedly malfunction and require repairs and spare parts to resume operations, which may not be
available when needed. In addition, because this equipment has historically not been used to build our high-capacity anode
and high-energy solid-state batteries, the operational performance and costs associated with this equipment is difficult to predict and
may be influenced by factors outside of our control, such as, but not limited to, failures by suppliers to deliver necessary components
of our products in a timely manner and at prices and volumes acceptable to us, environmental hazards and associated costs of remediation,
difficulty or delays in obtaining governmental permits, damages or defects in systems, industrial accidents, fires, seismic activity
and other natural disasters.
Problems
with our manufacturing equipment could result in the personal injury to or death of workers, the loss of production equipment, damage
to manufacturing facilities, monetary losses, delays and unanticipated fluctuations in production. In addition, in some cases operational
problems may result in environmental damage, administrative fines, increased insurance costs and potential legal liabilities. Any of
these operational problems, or a combination of them could have a material adverse effect on our business, results of operations, cash
flows, financial condition or prospects.
We
may obtain licenses on technology that has not been commercialized or has been commercialized only to a limited extent, and the success
of our business may be adversely affected if such technology does not perform as expected.
From
time to time, we may license from third parties technologies that have not been commercialized or which have been commercialized only
to a limited extent. These technologies may not perform as expected within our high-capacity anode and high-energy solid-state batteries
and related products. If the cost, performance characteristics, manufacturing process or other specifications of these licensed technologies
fall short of our targets, our projected sales, costs, time to market, competitive advantage, future product pricing and potential operating
margins may be adversely affected.
Substantial
increases in the prices for our raw materials and components, some of which are obtained from a limited number of sources where demand
may exceed supply, could materially and adversely affect our business.
We
rely on third-party suppliers for components and equipment necessary to develop our high-capacity anode and high-energy solid-state
battery technology. We face risks relating to the availability of these materials and components, including that we will be subject to
demand shortages and supply chain challenges and generally may not have sufficient purchasing power to eliminate the risk of price increases
for the raw materials and tools we need. To the extent that we are unable to enter into commercial agreements with our current suppliers
or our replacement suppliers on favorable terms, or these suppliers experience difficulties meeting our requirements, the development
and commercial progression of our high-capacity anode and high-energy solid-state battery technology and related technologies may
be delayed.
Separately,
we may become subject to various supply chain requirements regarding, among other things, conflict minerals and labor practices. We may
be required to incur substantial costs to comply with these requirements, which may include locating new suppliers if certain issues
are discovered. We may not be able to find any new suppliers for certain raw materials or components required for our operations, or
such suppliers may be unwilling or unable to provide us with products.
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Any
disruption in the supply of components, equipment or materials could temporarily disrupt research and development activities or production
of our high-capacity anode and high-energy solid-state battery technology until an alternative supplier is able to supply the required
material. Changes in business conditions, unforeseen circumstances, governmental changes, and other factors beyond our control or which
we do not presently anticipate, could also affect our suppliers’ ability to deliver components or equipment to us on a timely basis.
Any of the foregoing could materially and adversely affect our results of operations, financial condition and prospects.
Currency
fluctuations, trade barriers, tariffs or shortages and other general economic or political conditions may limit our ability to obtain
key components or equipment for our high-capacity anode and high-energy solid-state battery technology or significantly increase
freight charges, raw material costs and other expenses associated with our business, which could further materially and adversely affect
our results of operations, financial condition and prospects.
We
may be unable to adequately control the costs associated with our operations and the components necessary to build our high-capacity
anode and high-energy solid-state batteries, and, if we are unable to control these costs and achieve cost advantages in our production
of our high-capacity anode and high-energy solid-state batteries at scale, our business will be adversely affected.
We
require significant capital to develop our high-capacity anode and high-energy solid-state battery technology and expect to incur
significant expenses, including those relating to research and development, raw material procurement, leases, sales and distribution
as we build our brand and market our technologies, and general and administrative costs as we scale our operations. Our ability to become
profitable in the future will not only depend on our ability to successfully develop and market our high-capacity anode and high-energy
solid-state battery technology, but also to control our costs. If we are unable to efficiently design, appropriately price, sell and
distribute our high-capacity anode and high-energy solid-state battery technology, our anticipated margins, profitability and prospects
would be materially and adversely affected.
If
we are unable to attract and retain key employees and qualified personnel, our ability to compete could be harmed.
Our
success depends on our ability to attract and retain our executive officers, key employees and other qualified personnel, and our operations
may be severely disrupted if we lost their services. As we build our brand and become more well known, there is increased risk that competitors
or other companies will seek to hire our personnel. Our success also depends on our continuing ability to identify, hire, attract, train
and develop other highly qualified personnel. Competition for these employees can be intense, and our ability to hire, attract and retain
them depends on our ability to provide competitive compensation. We may not be able to attract, assimilate, develop or retain qualified
personnel in the future, and our failure to do so could seriously harm our business and prospects.
In addition, we are highly dependent on the services of our senior
technical and management personnel, including our executive officers, who would be difficult to replace. Further, our Executive Chairman
and Chief Science Officer continues to be employed by G3 following the closing of the business combination, and his time and attention
may be diverted from Solidion’s business, which may have an impact on our business. If we do not succeed in attracting, hiring,
and integrating excellent personnel, or retaining and motivating existing personnel, we may be unable to grow effectively and our business,
financial condition, results of operations and prospects could be adversely affected.
Our
insurance coverage may not be adequate to protect us from all business risks.
We
may be subject, in the ordinary course of business, to losses resulting from products liability, accidents, acts of God, and other claims
against us, for which we may have no insurance coverage. As a general matter, the policies that we do have may include significant deductibles,
and we cannot be certain that our insurance coverage will be sufficient to cover all future losses or claims against us. A loss that
is uninsured or which exceeds policy limits may require us to pay substantial amounts, which could adversely affect our financial condition
and operating results. Furthermore, although we plan to obtain and maintain insurance for damage to our property and the disruption of
our business, this insurance may be challenging to obtain and maintain on terms acceptable to us and may not be sufficient to cover all
of our potential losses.
Our
facilities or operations could be damaged or adversely affected as a result of natural disasters and other catastrophic events, including
fire and explosions.
We
currently conduct our operations in two facilities in Dayton, Ohio. Our current and future development and manufacturing facilities or
operations could be adversely affected by events outside of our control, such as natural disasters, wars, health pandemics and epidemics
such as potential virus pandemics, and other calamities. We cannot assure you that any backup systems will be adequate
to protect us from the effects of fire, explosions, floods, cyber-attacks (including ransomware attacks), typhoons, earthquakes, power
loss, telecommunications failures, break-ins, war, riots, terrorist attacks or similar events. Any of the foregoing events
may give rise to interruptions, breakdowns, system failures, technology platform failures or internet failures, which could cause the
loss or corruption of data or malfunctions of software or hardware as well as adversely affect our ability to conduct our research and
development activities as and on the timeline currently contemplated.
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Risks
Related to Industry and Market Trends
The
battery cell market continues to evolve and is highly competitive, and we may not be successful in competing in this market or establishing
and maintaining confidence in our long-term business prospects among current and future partners and customers.
The
battery cell market in which we compete continues to evolve and is highly competitive. To date, we have focused our efforts on our high-capacity
anode and high-energy solid-state battery technology, a promising alternative to conventional lithium-ion battery cell technology.
However, lithium-ion battery cell technology has been widely adopted and our current competitors have, and future competitors
may have, greater resources than we do and may also be able to devote greater resources to the development of their current and future
technologies. These competitors also may have greater access to customers and may be able to establish cooperative or strategic relationships
amongst themselves or with third parties that may further enhance their resources and competitive positioning. In addition, traditional lithium-ion battery
cell manufacturers may continue to reduce cost and expand supply of conventional batteries and, therefore, reduce the prospects for our
business or negatively impact the ability for us to sell our products at a market-competitive price and yet at sufficient margins.
Many
automotive OEMs are researching and investing in solid-state battery cell efforts and, in some cases, in battery cell development and
production. We do not have exclusive relationships with any OEM to provide their future battery cell technologies, and it is possible
that the investments made by these OEMs might result in technological advances earlier than, or superior in certain respect to, the high-capacity
anode and high-energy solid-state battery technology we are developing. There are a number of companies seeking to develop alternative
approaches to high-capacity anodes and solid-state battery cells. We expect competition in battery cell technology and electric vehicles
to intensify due to increased demand for these vehicles and a regulatory push for electric vehicles, continuing globalization, and consolidation
in the worldwide automotive industry. As new companies and larger, existing vehicle and battery cell manufacturers enter the high-capacity
anode and solid-state battery cell space, we may lose any perceived or actual technological advantage we may have in the marketplace
and suffer a decline in our position in the market.
Furthermore,
the battery cell industry also competes with other emerging or evolving technologies, such as natural gas, advanced diesel and hydrogen-based
fuel cell powered vehicles. Developments in alternative technologies or improvements in batteries technology made by competitors may
materially adversely affect the sales, pricing and gross margins of our products. As technologies change, we will attempt to upgrade
or adapt our products to continue to provide products with the latest technology. However, our products may become obsolete, or our research
and development efforts may not be sufficient to adapt to changes in or to create the necessary technology to effectively compete. If
we are unable to keep up with competitive developments, including if such technologies achieve lower prices or enjoy greater policy support
than the lithium-ion battery cell industry, our competitive position and growth prospects may be harmed. Similarly, if we fail
to accurately predict and ensure that our high-capacity anode and high-energy solid-state battery technology can address customers’
changing needs or emerging technological trends, or if our customers fail to achieve the benefits expected from our high-capacity
anode and high-energy solid-state battery technology, our business will be harmed.
We
must continue to commit significant resources to develop our high-capacity anode and high-energy solid-state battery technology
in order to establish a competitive position, and these commitments must be made without knowing whether our investments will result
in products potential customers will accept. There is no assurance we will successfully identify new customer requirements, develop and
bring our high-capacity anode and high-energy solid-state battery technology to market on a timely basis, or that products and technologies
developed by others will not render our high-capacity anode and high-energy solid-state battery technology obsolete or noncompetitive,
any of which would adversely affect our business and operating results.
We expect that automotive OEMs and top tier battery cell suppliers
will be less likely to license our high-capacity anode and high-energy solid-state battery technology if they are not convinced that
our business will succeed 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 in the long term. Accordingly,
in order to build and maintain our business, we must instill and maintain confidence among current and future partners, customers, suppliers,
analysts, ratings agencies 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;
● market unfamiliarity with our products;
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● competition and uncertainty regarding the future of electric vehicles;
Our
future growth and success are dependent upon consumers’ willingness to adopt electric vehicles.
Our
growth and future demand for our products is highly dependent upon the adoption by consumers of alternative fuel vehicles in general
and electric vehicles in particular. The market for new energy vehicles is still rapidly evolving, characterized by rapidly changing
technologies, competitive pricing and factors, evolving government regulation and industry standards, and changing consumer demands and
behaviors. If the market for electric vehicles in general does not develop as expected, or develops more slowly than expected, our business,
prospects, financial condition and operating results could be harmed.
The unavailability, reduction or elimination of, or uncertainty
regarding, government and economic incentives or subsidies available to us, end-users or OEMs could have a material adverse effect on
our business, financial condition, operating results and prospects.
The availability of government incentives and subsidies available to
end-users and OEMs is an important factor considered by customers when purchasing EVs, and growth in the battery market will depend in
part on the availability and amounts of these subsidies and incentives for EVs. Currently, government programs, including in China and
Europe, favor the purchase of EVs, including through disincentives that discourage the use of gasoline-powered vehicles. In the United
States, the Inflation Reduction Act provides tax credits for the purchase of electric vehicles, and many U.S. states have banned the sale
of new gas-powered vehicles by 2035. Other states may follow. Given the current political climate in the United States, the future of
these incentives and subsidies for end-users and OEMs remains uncertain, including with respect to federal programs. Since taking office,
President Trump and certain Republican members of Congress have criticized the Inflation Reduction Act and clean energy initiatives, and
President Trump has stated that he supports revising current federal agency rules that incentivize the EV market and ending state emissions
waivers that limit gas-powered vehicle sales. If government laws or programs incentivizing the growth of the EV market are reduced or
eliminated, or the available benefits are exhausted earlier than anticipated, demand for EVs may decrease and our anticipated sales of
EV battery products could be adversely affected, which may adversely affect our business, financial condition, operating results and prospects.
Any reduction or elimination of government and economic incentives or subsidies may result in the diminished competitiveness of the alternative
fuel vehicle industry generally.
We
may not succeed in attracting customers during the development stage or for high volume commercial production, and our future growth
and success depend on our ability to attract customers.
We
may not succeed in attracting customers during our development stage or for high volume commercial production. Customers may be wary
of unproven products or not be inclined to work with less established businesses. In addition, if we are unable to attract new customers
in need of high-volume commercial production of our products, our business will be harmed.
Automotive
OEMs are often large enterprises. Therefore, our future success will depend on our or our partners’ ability to effectively sell
our products to such large customers. Sales to these end-customers involve risks that may not be present (or that are present
to a lesser extent) with sales to smaller customers. These risks include, but are not limited to, (i) increased purchasing power
and leverage held by large customers in negotiating contractual arrangements with us and (ii) longer sales cycles and the associated
risk that substantial time and resources may be spent on a potential end-customer that elects not to purchase our products.
Automotive
OEMs that are large organizations often undertake a significant evaluation process that results in a lengthy sales cycle. In addition,
product purchases by large organizations are frequently subject to budget constraints, multiple approvals and unanticipated administrative,
processing and other delays. Finally, large organizations typically have longer implementation cycles, require greater product functionality
and scalability, require a broader range of services, demand that vendors take on a larger share of risks, require acceptance provisions
that can lead to a delay in revenue recognition and expect greater payment flexibility. All of these factors can add further risk to
business conducted with these potential customers.
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We
may not be able to accurately estimate the future supply and demand for our high-capacity anode and high-energy solid-state battery
technology, which could result in a variety of inefficiencies in our business and hinder our ability to generate revenue. If we fail
to accurately predict our manufacturing requirements, we could incur additional costs or experience delays.
It
is difficult to predict our future revenues and appropriately budget for our expenses, and we may have limited insight into trends that
may emerge and affect our business. We anticipate being required to provide forecasts of our demand to our current and future suppliers
prior to the scheduled delivery of products to potential customers. Currently, there is no historical basis for making judgments on the
demand for our high-capacity anode and high-energy solid-state battery technology or our ability to develop, manufacture, and deliver
such products, or our profitability in the future. If we overestimate our requirements, our suppliers may have excess inventory, which
indirectly would increase our costs. If we underestimate our requirements, our suppliers may have inadequate inventory, which could interrupt
manufacturing of our products and result in delays in shipments and revenues. In addition, lead times for materials and components that
our suppliers order may vary significantly and depend on factors such as the specific supplier, contract terms and demand for each component
at a given time. If we fail to order sufficient quantities of product components in a timely manner, the delivery of our high-capacity
anode and high-energy solid-state battery technology to our potential customers could be delayed, which would harm our business, financial
condition and operating results.
Risks
Related to Limited Operating History
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, harm our reputation and could result in substantial liabilities that exceed our resources.
Investors should be aware of the difficulties normally
encountered by a new enterprise, many of which are beyond our control, including substantial risks and expenses in the course of establishing
or entering new markets, organizing operations 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, nothing
at this time upon which to base an assumption 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 scaling up our infrastructure and headcount, and may encounter unforeseen expenses, difficulties
or delays in connection with our growth. In addition, as a result of the capital requirements 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.
It
is difficult to predict our future revenues and appropriately budget for our expenses, and we have limited insight into trends that may
emerge and affect our business. In the event that actual results differ from our estimates or we adjust our estimates in future periods,
our operating results, prospects and financial position could be materially affected. The projected financial information appearing elsewhere
in these materials was prepared by management and reflects current estimates of future performance. The projected results depend on the
successful implementation of management’s growth strategies and are based on assumptions and events over which we have only partial
or no control. The assumptions underlying such projected information require the exercise of judgment and may not occur, and the projections
are subject to uncertainty due to the effects of economic, business, competitive, regulatory, legislative, and political or other changes.
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We
are an early-stage company with a history of financial losses and expect to incur significant expenses and continuing losses for the
foreseeable future.
We incurred a net loss of approximately $32.4 million for the year
ended December 31, 2024 and approximately $41.0 million for the year ended December 31, 2025. We believe that we will continue to incur
operating and net losses each quarter until the time significant production of our high-capacity anode and high-energy solid-state
battery technology begins.
We
expect the rate at which we will incur losses to be significantly higher in future periods as we, among other things, continue to incur
significant expenses in connection with the design, development and manufacturing of our high-capacity anode and high-energy solid-state
battery technology; expand our research and development activities; invest in additional research and development and manufacturing capabilities;
build up inventories of raw materials and other components; commence sales and marketing activities; develop our distribution infrastructure;
and increase our general and administrative functions to support our growing operations. We may find that these efforts are more expensive
than we currently anticipate or that these efforts may not result in revenues, which would further increase our losses.
Our
history of recurring losses and anticipated expenditures raise substantial doubts about our ability to continue as a going concern. Our
ability to continue as a going concern requires that we obtain sufficient funding to finance our operations.
We
have incurred operating losses to-date and it is possible we will never generate profit. Our ability to continue as a going concern depends
on generating cash from operations, and the potential of obtaining additional debt or equity financing. There can be no assurance that
we will be successful in these efforts. The financial statements include in this Annual Report do not include any adjustments relating
to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result
from the outcome of these uncertainties related to our ability to operate on a going concern basis.
If
we are unable to raise sufficient capital when needed, our business, financial condition and results of operations will be materially
and adversely affected, and we will need to significantly modify our operational plans to continue as a going concern. If we are unable
to continue as a going concern, we might have to liquidate our assets and the values we receive for our assets in liquidation or dissolution
could be significantly lower than the values reflected in our financial statements. Our lack of cash resources and our potential inability
to continue as a going concern may materially adversely affect our share price and our ability to raise new capital or to enter into
critical contractual relations with third parties due to concerns about our ability to meet our contractual obligations.
We
may require additional capital to support business growth, and this capital might not be available on commercially reasonable terms or
at all. There is substantial doubt as to our ability to continue as a going concern.
We
may need additional capital before we commence generating revenues, and it may not be available on acceptable terms, if at all. For example,
our capital budget assumes, among other things, that our development timeline progresses as planned and our corresponding expenditures
are consistent with current expectations, both of which are subject to various risks and uncertainties, including those described herein.
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In
addition, as discussed above, we have experienced recurring losses from operations and negative cash flows from operations that raise
substantial doubt about our ability to continue as a going concern, which has also been cited in our independent auditors’ reports.
Our ability to continue as a going concern depends on generating cash from operations, and the potential of obtaining additional debt
or equity financing; however, there can be no assurance we will be successful in these efforts.
More
specifically, we expect our capital expenditures and working capital requirements to increase materially in the near future, as we accelerate
our research and development efforts and scale up production operations with our partners. As we approach commercialization, we expect
our operating expenses will increase substantially on account of increased headcount and other general and administrative expenses necessary
to support a rapidly growing company.
As
a result, we may need to access the debt and equity capital markets to obtain additional financing in the future. However, these sources
of financing may not be available on acceptable terms, or at all. Our ability to obtain additional financing will be subject to a number
of factors, including:
● market conditions;
● our operating performance;
● investor sentiment; and
These
factors may make the timing, amount, terms or conditions of additional financings unattractive to us. If we raise additional funds by
issuing equity, equity-linked or debt securities, those securities may have rights, references or privileges senior to the rights of
our currently issued and outstanding equity or debt, and our existing stockholders may experience dilution. If we are unable to generate
sufficient funds from operations or raise additional capital, we may be forced to take actions to reduce our capital or operating expenditures,
including by not seeking potential acquisition opportunities, eliminating redundancies, or reducing or delaying our production facility
expansions, which may adversely affect our business, operating results, financial condition and prospects.
We
may have potential business conflicts of interest with G3 with respect to our past and ongoing relationships. We may not be able to resolve
any potential conflicts, and, even if we do so, the resolution may be less favorable to us than if we were dealing with an unaffiliated
party.
Conflicts
of interest may arise with G3 in a number of areas relating to our past and ongoing relationships, including labor, tax, employee benefit,
indemnification and other matters arising from the Restructuring; intellectual property matters, including the Patent Assignment (as
defined above); and employee recruiting and retention, including matters related to the dual employment arrangement of our Executive
Chairman and Chief Science Officer with Solidion and G3. In addition, certain of our directors and employees may have actual or potential
conflicts of interest because of their financial interests in G3. Because of their current or former positions with G3, certain of our
executive officers and directors, including our Executive Chairman and Chief Science Officer, own equity interests in G3. Continuing
ownership of equity interests in G3 could create, or appear to create, potential conflicts of interest if Solidion and G3 face decisions
that could have implications for both Solidion and G3.
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If
we fail to effectively manage our future growth, we may not be able to market and license the technology and know-how to manufacture
or sell our high-capacity anode and high-energy solid-state battery technology successfully.
We intend
to expand our operations significantly, with a view toward accelerating our research and development activities and positioning our Company
for potential commercialization of our technologies. In connection with these efforts, we anticipate hiring, retaining and training personnel,
acquiring and installing equipment to support the commercialization process of our products, and implementing administrative infrastructure,
systems and processes. That said, our management team will have considerable discretion in the application of the funds available to
us following completion of the business combination. We may use these funds for purposes that do not yield a significant return or any
return at all for our stockholders. In addition, pending their use, we may invest the cash held at closing of the business combination
in a manner that does not produce income or that loses value. If we cannot manage our growth effectively, including by controlling our
expenditures for these initiatives to the greatest extent possible, our business could be harmed.
Most
of our management does not have experience in operating a public company.
Most
of our executive officers do not have experience in the management of a publicly traded company. Our management team may not successfully
or effectively manage our transition to a public company that will be subject to significant regulatory oversight and reporting obligations
under federal securities laws. We may not have adequate personnel with the appropriate level of knowledge, experience, and training in
the policies, practices or internal controls over financial reporting required of public companies in the United States. As a result,
we may be required to pay higher outside legal, accounting or consulting costs than our competitors, and our management team members
may have to devote a higher proportion of their time to issues relating to compliance with the laws applicable to public companies, both
of which might put us at a disadvantage relative to competitors.
We
may not succeed in establishing, maintaining and strengthening our brand, which would materially and adversely affect customer acceptance
of our technologies and our business, revenues and prospects.
Our
business and prospects depend on our ability to develop, maintain and strengthen our brand. If we are not able to establish, maintain
and strengthen our brand, we may lose the opportunity to build a critical mass of customers. The automobile industry is intensely competitive,
and we may not be successful in building, maintaining and strengthening our brand. Our current and potential competitors, including many
battery cell manufacturers and automotive OEMs around the world, have greater name recognition, broader customer relationships and substantially
greater marketing resources than we do. If we do not develop and maintain a strong brand, our business, prospects, financial condition
and operating results will be materially and adversely impacted.
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Risks
Related to Intellectual Property
We
rely heavily on owned intellectual property, which includes patent rights, trade secrets, copyright, trademarks, and know-how. If
we are unable to protect and maintain access to these intellectual property rights, our business and competitive position would be harmed.
We
may not be able to prevent unauthorized use of our owned intellectual property, which could harm our business and competitive position.
We rely on a combination of the intellectual property protections afforded by patent, copyright, trademark and trade secret laws in the
United States and other jurisdictions, as well as contractual protections, to establish, maintain and enforce rights and competitive
advantage in our proprietary technologies. Despite our efforts to protect our proprietary rights, third parties, including our business
partners, may attempt to copy or otherwise obtain and use our intellectual property without our consent or may decline to license necessary
intellectual property rights from us on terms favorable to our business. Monitoring unauthorized use of our intellectual property is
difficult and costly, and the steps we have taken or will take to prevent misappropriation may not be sufficient. Any enforcement efforts
we undertake, including litigation, could require involvement of the licensor, be time-consuming and expensive, and could divert management’s
attention, all of which could harm our business, results of operations and financial condition. In addition, existing intellectual property
laws and contractual remedies may afford less protection than needed to safeguard our proprietary technologies.
Patent,
copyright, trademark and trade secret laws vary significantly throughout the world. A number of foreign countries do not protect intellectual
property rights to the same extent as the United States. Therefore, our intellectual property rights may not be as strong or as
easily enforced outside of the United States and efforts to protect against the unauthorized use of our intellectual property rights,
technology and other proprietary rights may be impossible outside of the United States. Failure to adequately protect our owned
intellectual property rights could result in our competitors using our intellectual property to offer products, potentially resulting
in the loss of some of our competitive advantage, a decrease in our revenue and reputational harm caused by inferior products offered
by third parties, which would adversely affect our business, prospects, financial condition and operating results.
Our
patent applications may not result in issued patents, which would result in the disclosures in those applications being available to
the public. Also, our patent rights may be contested, circumvented, invalidated or limited in scope, any of which could have a material
adverse effect on our ability to prevent others from interfering with commercialization of our products.
Our
patent portfolio includes many patent applications. Our patent applications may not result in issued patents, which may have a material
adverse effect on our ability to prevent others from commercially exploiting products similar to our products to our disadvantage. The
status of patents involves complex legal and factual questions and the breadth of claims allowed is uncertain. As a result, we cannot
be certain that the patent applications that we file will result in patents being issued, or that our patents and any patents that may
be issued to us will afford protection against competitors with similar technology. Numerous patents and pending patent applications
owned by others exist in the fields in which we have developed and are developing our technology, any number of which could be considered
prior art and prevent us from obtaining a patent. Any of our future or existing patents or pending patent applications may also be challenged
by others on the basis that they are otherwise invalid or unenforceable. Furthermore, patent applications filed in foreign countries
may be subject to laws, rules and procedures that differ from those of the United States, and thus we cannot be certain that foreign
patent applications related to issued U.S. patents will be issued.
We
have not performed exhaustive searches or analyses of the intellectual property landscape of the battery industry; therefore, we are
unable to guarantee that our technology, or its ultimate integration into electric vehicle battery packs, does not infringe intellectual
property rights of third parties. We may need to defend ourselves against intellectual property infringement claims, which may be time-consuming
and could cause us to incur substantial costs.
Companies,
organizations or individuals, including our current and future competitors, may hold or obtain patents, trademarks or other proprietary
rights that would prevent, limit or interfere with our ability to make, use, develop, sell, license, lease or market our products or
technologies, which could make it more difficult for us to operate our business. From time to time, we may receive inquiries from third
parties relating to whether we are infringing their intellectual property rights and/or seek court declarations that they do not infringe
upon our intellectual property rights. Companies holding patents or other intellectual property rights relating to batteries may bring
suits alleging infringement of such rights or otherwise asserting their rights and seeking licenses. In addition, if we are determined
to have infringed upon a third party’s intellectual property rights, we may be required to do one or more of the following:
● pay substantial damages;
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● redesign our battery cells at significant expense.
In
the event of a successful claim of infringement against us and our failure or inability to obtain a license to continue to use the technology
on reasonable terms, our business, prospects, operating results and financial condition could be materially adversely affected. In addition,
any litigation or claims, whether or not well-founded, could result in substantial costs, negative publicity, reputational harm and diversion
of resources and management’s attention.
Risks
Related to Finance and Accounting
Our
expectations and targets regarding the times when we will achieve various technical, pre-production and production-level performance
objectives depend in large part upon assumptions, estimates, measurements, testing, analyses and data developed and performed by us,
which if incorrect or flawed, could have a material adverse effect on our actual operating results and performance.
Our
expectations and targets regarding the times when we will achieve various technical, pre-production and production objectives
reflect our current expectations and estimates. Whether we will achieve these objectives when we expect depends on a number of factors,
many of which are outside our control, including, but not limited to:
● unanticipated technical or manufacturing challenges or delays;
● our ability to manage our growth;
● the overall strength and stability of domestic and international economies.
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Unfavorable
changes in any of these or other factors, most of which are beyond our control, could materially and adversely affect our ability to
achieve our objectives when planned and our business, results of operations and financial results.
Incorrect
estimates or assumptions by management in connection with the preparation of our financial statements could adversely affect our reported
assets, liabilities, income, revenue or expenses.
The
preparation of our consolidated financial statements requires management to make critical accounting estimates and assumptions that affect
the reported amounts of assets, liabilities, income, revenue or expenses during the reporting periods. Incorrect estimates and assumptions
by management could adversely affect our reported amounts of assets, liabilities, income, revenue and expenses during the reporting periods.
If we make incorrect assumptions or estimates, our reported financial results may be over or understated, which could materially and
adversely affect our business, financial condition and results of operations.
Our
disclosure controls and procedures may not prevent or detect all errors or acts of fraud.
We
are subject to certain reporting requirements of the Exchange Act. Our disclosure controls and procedures are designed to reasonably
assure that information required to be disclosed by us in reports we file or submit under the Exchange Act is accumulated and communicated
to management, recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. We
believe that any disclosure controls and procedures or internal controls and procedures, no matter how well conceived and operated, can
provide only reasonable, not absolute, assurance that the objectives of the control system are met. These inherent limitations include
the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally,
controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override
of the controls. Accordingly, because of the inherent limitations in our control system, misstatements or insufficient disclosures due
to error or fraud may occur and not be detected.
We have identified material weaknesses
in our internal control over financial reporting. If our remediation of these material weaknesses is not effective, or if we experience
additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls in the future, we
may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect investor confidence
in us and, as a result, the value of our common stock.
Prior to the Closing of our business combination, we were a private
company with limited accounting personnel and other resources with which to address our internal control over financial reporting. In
connection with the audits of our consolidated financial statements as of December 31, 2024 and 2025, and for the years ended December
31, 2024 and 2025, we identified material weaknesses in our internal control over financial reporting: control environment, risk
assessment, control activities, information and communication and monitoring. For more information, see “Item 9A. Controls and Procedures—Management’s
Report on Internal Control Over Financial Reporting—Material Weaknesses.”
We cannot assure you that additional significant deficiencies or material
weaknesses in our internal control over financial reporting will not be identified in the future. Any failure to maintain or implement
required new or improved controls, or to implement our remediation plans or any difficulties we encounter in our implementation thereof,
could result in additional significant deficiencies or material weaknesses or result in material misstatements in our financial statements.
If we are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting
firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, lenders and investors may
lose confidence in the accuracy and completeness of our financial reports and we may face restricted access to various sources of financing
in the future.
These material weaknesses, if not remediated, could result in misstatements
of accounts or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that
would not be prevented or detected.
Our management anticipates that our internal control over financial
reporting will not be effective until the above material weaknesses are remediated. If our remediation of these material weaknesses is
not effective, or we experience additional material weaknesses in the future or otherwise fail to maintain an effective system of internal
control over financial reporting in the future, the accuracy and timing of our financial reporting may be adversely affected, we may be
unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to the Nasdaq listing
requirements, investors may lose confidence in our financial reporting, and the price of our common stock may decline as a result. As
further discussed in “Item 9A, Controls and Procedures—Remediation Plans and Status,” we have implemented a remediation
plan and, while progress has been made to remediate the material weaknesses, they will not be considered remediated until the applicable
remedial processes and procedures have been in place for a sufficient period of time and management has concluded, through testing, that
associated controls are effective. Therefore, there is no guarantee that our remediation plan will be successful or that our remediation
efforts will be completed in future periods.
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We have incurred and will incur significant increased expenses
and administrative burdens as a public company, which could have an adverse effect on our business, financial condition and results of
operations.
We face increased legal, accounting, administrative and other costs and expenses as a public company that we did not incur as a private
company prior to our merger with Nubia. The Sarbanes-Oxley Act, including the requirements of Section 404, as well as rules and
regulations subsequently implemented by the SEC, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and
the rules and regulations promulgated and to be promulgated thereunder, the Public Company Accounting Oversight Board (United States)
(“PCAOB”) and the securities exchanges, impose additional reporting and other obligations on public companies. The development
and implementation of the standards and controls necessary for us to achieve the level of accounting standards required of a public company
in the United States may require costs greater than expected. It is possible that we will be required to expand our employee base
and hire additional employees to support our operations as a public company, which will increase our operating costs in future periods.
Compliance
with public company requirements has increased and will continue to increase costs and make certain activities more time-consuming.
A number of those requirements require us to carry out activities we have not done previously. For example, we have created new
Board committees and adopted new internal controls and disclosure controls and procedures. In addition, we have incurred and will
incur expenses associated with SEC reporting requirements. Furthermore, if any issues in complying with those requirements are
identified (for example, if the auditors identify additional material weaknesses or significant deficiencies in the internal control
over financial reporting), we could incur additional costs rectifying those issues, and the existence of those issues could
adversely affect our reputation or investor perceptions of it. It will also be more expensive to obtain director and officer
liability insurance. The additional reporting and other obligations imposed by these rules and regulations have increased and will
increase legal and financial compliance costs and the costs of related legal, accounting and administrative activities. These
increased costs have required us and will require us to spend money that could otherwise be used on our research and development
programs and to achieve strategic objectives. Advocacy efforts by stockholders and third parties may also prompt additional changes
in governance and reporting requirements, which could further increase costs.
The
unavailability, reduction or elimination of government and economic incentives could have a material adverse effect on our business,
prospects, financial condition and operating results.
We
currently, and expect to continue to, benefit from certain government subsidies and economic incentives including tax credits, rebates
and other incentives that support the development and adoption of clean energy technology. We cannot assure you that these subsidies
and incentive programs will be available to us at the same or comparable levels in the future. Any reduction, elimination or discriminatory
application of government subsidies and economic incentives because of policy changes, or the reduced need for such subsidies and incentives
due to the perceived success of clean and renewable energy products or other reasons, may require us to seek additional financing, which
may not be obtainable on commercially attractive terms or at all, and may result in the diminished competitiveness of the battery cell
industry generally or our high-capacity anode and high-energy solid-state battery technology in particular. Any change in the level
of subsidies and incentives from which we benefit could materially and adversely affect our business, prospects, financial condition
and operating results.
Risks
Related to Legal and Regulatory Compliance
We
are subject to regulations regarding the storage and handling of various products. We may become subject to product liability claims,
which could harm our financial condition and liquidity if we are not able to successfully defend or insure against such claims.
We
may become subject to product liability claims which could harm our business, prospects, operating results, and financial condition.
We face inherent risk of exposure to claims in the event our high-capacity anode and high-energy solid-state battery technology
does not perform as expected or malfunction resulting in personal injury or death. Our risks in this area are particularly pronounced
given our high-capacity anode and high-energy solid-state battery technology is still in the development stage and have not yet
been commercially tested or mass produced. A successful product liability claim against us could require us to pay a substantial monetary
award. Moreover, a product liability claim could generate substantial negative publicity about our technology and business and inhibit
or prevent commercialization of our high-capacity anode and high-energy solid-state battery technology and future product candidates,
which would have a material adverse effect on our brand, business, prospects and operating results. Any insurance coverage might not
be sufficient to cover all potential product liability claims. Any lawsuit seeking significant monetary damages either in excess of our
coverage, or outside of our coverage, may have a material adverse effect on our reputation, business and financial condition. We may