Item 1A. Risk Factors As a smaller reporting company as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item. However, we are voluntarily providing risk factor updates as described in this Item 1A. For our current risk factors relating to our operations, other than as set forth below, see the section entitled Risk Factors contained in our Annual Report. Our management is currently involved in litigation proceedings with one of our former directors who has brought claims against us for breach of contract and promissory fraud. If we were to receive an adverse ruling, it could materially and adversely affect our reputation, cause us to incur significant judgment or settlement costs in cash or equity securities, and adversely affect our stock price. On March 19, 2026, Mr. David Mandel, a former member of our board of directors, filed a complaint against us, Nicolas Lin, our Chief Executive Officer and Chairman, and certain Doe defendants in the Superior Court of the State of California, County of Los Angeles, Case No. 26STCV08877. On April 24, 2026, we removed the action to the United States District Court for the Central District of California, Case No. 2:26-cv-04423. On June 3, 2026, the District Court remanded the action back to the Superior Court of Los Angeles County. The complaint alleges breach of oral contract and promissory fraud based on allegations that we and Mr. Lin offered Mr. Mandel the position of our Chief Executive Officer for a three-year term at an annual salary of $220,000 and an equity interest equal to 7.5% of our equity, vesting in tranches over a three-year period. Mr. Mandel seeks damages in excess of $11.46 million, punitive damages and such other relief as the court may deem appropriate. We believe the claims are without merit and intend to defend the action vigorously. The action is in the discovery phase. Defending against Mr. Mandels legal action could cause us to incur significant expenses and consume large amounts of our managements time and attention. If Mr. Mandel were to prevail, an adverse ruling on such a claim could materially and adversely affect our reputation, cause us to incur significant judgment or settlement costs in cash or equity securities and could adversely affect our stock price. See the section above entitled Item 1. Legal Proceedings Mandel v. Aether Holdings, Inc., et. al. and the sections in our Annual Report on Form 10-K filed with the SEC on December 17, 2025, entitled Business - Recent Developments - Dispute with Former Director and Business Recent Developments Removal of Director for additional information regarding the legal action, dispute and Mr. Mandels removal. Covenants Our secured indebtedness to Streeterville Capital, LLC, and other the restrictive covenants, redemption provisions and default remedies contained in the related transaction documents, may restrict our business and operations, adversely affect our liquidity and permit Streeterville to foreclose on substantially all of our assets. On May 13, 2026, we entered into a Note Purchase Agreement with Streeterville Capital, LLC LLC, or Streeterville, pursuant to which we issued to Streeterville a Secured Promissory secured promissory note in the original principal amount of $3.24 million, including a $240,000 original issue discount, for a purchase price of $3.0 million, which we refer to as the May Note. On August 5, 2026, we entered into a Note Purchase Agreement with Streeterville, pursuant to which we issued to Streeterville a secured promissory note in the original principal amount of $1.62 million, including a $120,000 original issue discount, for a purchase price of $1.5 million, which we refer to as the August Note and, together with the May Note, the Streeterville Notes. The aggregate original principal amount of the Streeterville Notes is $4.86 million, compared with aggregate purchase prices of $4.5 million, before giving effect to payments, accrued interest, monitoring fees, trigger-event balance increases, default interest and other amounts that may restrict our business become payable under the Streeterville Notes and operations, and if we do not effectively manage the related transaction documents. Certain of our covenants, subsidiaries have guaranteed our financial condition obligations under both Streeterville Notes. Each Streeterville Note bears interest at 8% per annum, compounded daily, and results matures 18 months after its applicable purchase price date. We may prepay either Streeterville Note in full only by paying 110% of operations could be adversely affected. its then-outstanding balance. In addition, if either Streeterville Note remains outstanding on the six-month anniversary of its applicable purchase price date, a one-time monitoring fee will be added to the outstanding balance of that Note, subject to specified forgiveness provisions. Accordingly, the stated interest rates do not reflect the full potential economic cost of the Streeterville Notes, which also includes the original issue discounts, prepayment premiums, potential monitoring fees and any balance increases or default interest that may become payable. Beginning six months after the applicable purchase price date, Streeterville may require us to redeem up to $250,000 of the outstanding balance of the May Note and up to $125,000 of the outstanding balance of the August Note per calendar month. Once the redemption periods for both Streeterville Notes have commenced, Streeterville may therefore require scheduled redemptions of up to $375,000 in the aggregate per calendar month. Each Streeterville Note also permits additional limited redemptions if our common stock trades at or above the price threshold specified in the applicable Note, with the maximum limited-redemption amount determined by reference to trading volume. Under each Streeterville Note, limited redemptions do not reduce the otherwise applicable monthly redemption limit. Redemption amounts under each Streeterville Note, including limited redemptions, are payable in cash within three Trading Days following Streetervilles delivery of the applicable redemption notice. Any redemption paid in cash would reduce the cash available for working capital, acquisitions, product development and other corporate purposes. Our operations may not provide generate sufficient cash to meet make required redemptions, pay monitoring fees or other amounts that may be added to the repayment outstanding balances, repay the Streeterville Notes at maturity or satisfy accelerated payment obligations following an event of our debt incurred default. We may also be unable to refinance the Streeterville Notes on acceptable terms or at all. The payment obligations under the Note Purchase Agreement two Streeterville Notes may overlap, and additional limited redemptions or other balance adjustments could materially increase the Secured Promissory Note. Pursuant to amounts payable during a particular period. Our obligations under the May Note Purchase Agreement, we granted to Streeterville Capital, LLC are secured by a security interest in first-position lien, subject to permitted liens, on substantially all of our assets, including our intellectual property. The August Note is also secured by substantially all of our assets and intellectual property under the applicable security documents. Certain of our subsidiaries have guaranteed our obligations under both Streeterville Notes. If an event of default occurs under the Note Purchase Agreement, occurs, Streeterville Capital, LLC may seek to foreclose on its security interest all or a portion of the collateral or pursue one or more guarantors. Any such action could result in the loss of assets necessary to operate our business and liquidate could adversely affect the liquidity and operations of our subsidiaries and force us to curtail or cease some or all of these assets, which would harm our business, financial condition and results of operations. In the event of a default in connection with our bankruptcy, insolvency, liquidation, liquidation or reorganization, Streeterville Capital, LLC would generally have a prior right secured claims against the collateral, subject to substantially all applicable bankruptcy law, the validity and perfection of its liens, permitted liens and claims entitled to priority under applicable law. The value of our assets may not be sufficient to satisfy the exclusion of amounts owing to Streeterville and our general unsecured other creditors. Only after satisfying the claims As a result, holders of Streeterville Capital, LLC our common stock could receive little or no value in such a proceeding. 18 Each Note Purchase Agreement contains substantially similar affirmative and any unsecured creditors would any amount be available for negative covenants that may restrict our equity holders. The pledge of business and financing activities. Subject to specified exceptions, these assets provisions restrict or require Streetervilles prior consent with respect to our ability, and the ability of our subsidiaries, to, among other restrictions imposed things: incur, issue or guarantee certain additional indebtedness or make certain restricted issuances, including issuances of variable-price or resettable securities; create liens, security interests, guarantees, pledges or other encumbrances; sell, transfer or issue equity interests or voting rights in our subsidiaries; permit our subsidiaries to incur indebtedness other than in the ordinary course of business; enter into or consummate certain mergers, asset sales, changes of control or other fundamental transactions without repaying the applicable Streeterville Note Purchase Agreement may limit or obtaining Streetervilles consent; enter into agreements that restrict our flexibility ability to engage in raising capital for other purposes. Because substantially all variable-rate transactions with Streeterville or issue securities to Streeterville or its affiliates; and terminate our Exchange Act reporting status or fail to maintain the listing or quotation and continued trading of our assets are pledged common stock on an eligible securities exchange. Some of these covenants, including those relating to secure the Note, continued listing and trading of our common stock, may be affected by market, regulatory or other circumstances that are not entirely within our control. The covenants may also limit our ability to incur obtain additional indebtedness financing, negotiate favorable financing terms, conduct acquisitions or to sell or other strategic transactions, capitalize our subsidiaries, dispose of assets or respond to raise capital may be impaired, which could have an adverse effect on changes in our financial flexibility. In addition, if we are unable business and market conditions. A failure to comply with certain covenants a covenant could result in a trigger event or event of default even if we are otherwise able to make scheduled payments under the Streeterville Notes. Each Note Purchase Agreement, Agreement also contains a most-favored-nation provision. If, while the applicable Streeterville Note remains outstanding, we issue a debt security containing an economic term or condition more favorable to the holder, or another holder-favorable term that was not similarly provided to Streeterville, Streeterville may elect to incorporate that term into the applicable Streeterville financing documents. If we fail to provide the required notice and Streeterville subsequently becomes aware of the more favorable term, the incorporation may be limited in retroactive to the date on which the term was granted. This provision could increase our business activities and access obligations to credit Streeterville, make future debt financing more costly or difficult to negotiate, or discourage potential financing sources from providing capital on terms that would trigger the provision. Each Streeterville Note contains broad trigger-event provisions. Following a trigger event, Streeterville may default under increase the outstanding balance of the affected Streeterville Note Purchase Agreement. Provisions by applying a 15% adjustment for each major trigger event or a 5% adjustment for each minor trigger event, subject to the limits set forth in the applicable Note. Trigger events under each Streeterville Note and Note Purchase Agreement impose restrictions include, among other matters, payment defaults, breaches of covenants or require prior approval on our ability, other material obligations, materially false or misleading representations, certain insolvency events, and the ability of our subsidiaries to, among other things: incur additional debt; create liens entry into or encumbrances; engage in consummation of certain fundamental transactions; conduct certain issuances transactions without repayment of equity and debt securities; and sell, transfer certain parts of our business the applicable Streeterville Note or property, including equity interests of our securities. The Streetervilles consent. Each Streeterville Note Purchase Agreement also contains includes trigger events relating to certain reverse stock splits, certain judgments exceeding $500,000 and material breaches by us or our subsidiaries of certain other covenants, which we may not be able to comply with in agreements. Because the future. Our failure to comply with these covenants may definition of other agreements is broad, a breach of an agreement that is not itself a Streeterville financing document could result in an increase in the declaration outstanding balance of an event the applicable Streeterville Note or the exercise of default, which, if other remedies by Streeterville. If a trigger event is not cured or waived, within the applicable cure period, it may become an event of default. Specified insolvency-related trigger events may result in an automatic event of default and acceleration. Following an event of default, the acceleration outstanding balance of our repayment obligations the affected Streeterville Note and other amounts payable under the Note. If the maturity of our indebtedness is accelerated, we applicable financing documents may not have sufficient funds available for repayment or we become immediately due and payable, and default interest may not have the ability to borrow accrue at 15% per annum. Under each Note Purchase Agreement, Streeterville may also seek injunctive relief or obtain sufficient funds to replace specific performance. Following an event of default under the accelerated indebtedness on terms acceptable to applicable Streeterville Note, Streeterville may seek an injunction prohibiting us from issuing common or at all. Our failure preferred stock unless 50% of the gross proceeds from the issuance are simultaneously applied to repay our obligations under that Note. Streeterville may also seek to prevent the consummation of certain fundamental transactions unless the applicable Streeterville Note is repaid in full at closing or Streeterville provides its written consent. The availability or exercise of these remedies could prevent or delay financings or strategic transactions that our board of directors otherwise believes would result be in the best interests of our company and stockholders. If we are unable to comply with the applicable covenants, make required redemptions or other payments, or repay accelerated amounts, Streeterville Capital, LLC foreclosing could exercise its contractual and secured-creditor remedies, including foreclosure on all or a portion of our assets, which the collateral and enforcement of the subsidiary guarantees. Any such actions could materially impair our liquidity, restrict or prevent us from obtaining additional financing, disrupt our business and force us to curtail or cease some or all of our operations.