Sonendo, Inc.

Item 1A. Risk Factors.

We have described under the heading Risk Factors in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 risks and uncertainties that could cause our actual results of operations and financial condition to vary materially from past, or from anticipated future, results of operations and financial condition. These risks and uncertainties are not the only risks facing us. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also adversely affect our business, financial condition, results of operations or the market price of our common stock. Except as set forth below, there have been no material changes to the risk factors previously described in our 2023 Annual Report on Form 10-K.

Our securities trade on the OTCQX, which could affect our securities market price and liquidity.

On November 22, 2023, the NYSE suspended trading of our common stock and announced its intention to commence proceedings to delist our common stock from the NYSE and our common stock commenced trading on the OTCQX on the same day. We appealed the NYSEs delisting determination, but subsequently withdrew our request for an appeal on April 11, 2024. As a result, on April 11, 2024, our common stock was delisted from the NYSE.

On June 4, 2024, we were notified by the OTC, that our common stock closed below $0.10 for more than 30 consecutive calendar days and no longer meets the Standards for Continued Qualification for the OTCQX. If , Rule 2.1(A). On October 16, 2024, we do not regainfiled an amendment to our Amended and Restated Certificate of Incorporation to implement a 1-for-200 reverse stock split of its issued and outstanding common stock, effective as of October 18, 2024. The reverse stock spliance within tt was announced by FINRA on its OTC Daily List on November 7,2024 and took effect at the allotted comopen of trading on November 8, 2024 on the OTCQX. Upon the effectiveness of the reverse stock spliance period, t, the Company became compliant with OTCQX Rule 2.1(A).

On November 7, 2024, we were notified by the OTC w, that market capitalization has stayed below $5 mill provide notice tion for the past 30 consecutive calendar days and no longer meets the Standards for Continued Qualification for the OTCQX, Rule 2.1(B). We have a cure period of 90 calendar days to regain compliance. The 90-calendar day grace period expires February 7, 2025 and at that time if our commmarket capitalization has not stayed at or above $5 million for ten consecutive trading days then our common stock will be removed from OTCQX and moved to the OTC Pink market. 

We intend to monitor the closing bid price of our common stock our market capitalization and consider our available options to resolve the noncompliance with the bid pricemarket capitalization requirement. There can be no assurance that we will be able to regain compliance with the bid pricemarket capitalization requirement or will otherwise be in compliance with other OTCQX listing criteria. If our common stock is moved to OTC Pink market, it could be more difficult to buy or sell our common stock and to obtain accurate quotations, and the price of our common stock could suffer a material decline. The move to OTC Pink market could also impair the liquidity of our common stock and could harm our ability to raise capital through alternative financing sources on terms acceptable to us, or at all, and may result in potential loss of confidence by investors, employees, and fewer business development opportunities.

While we are evaluating possible alternatives in light of the NYSE delisting and OTC noncompliance notice, including applying to list our common stock under an alternative national securities exchange, we cannot assure you that we will be able to demonstrate compliance required for such listing. We will be required to demonstrate compliance with an applicable exchanges initial listing requirements, which are generally more rigorous than an exchanges continued listing requirements, in order to qualify for listing our securities.

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Additionally, we could face significant material adverse consequences from trading on the OTC platform (as compared to our prior listing on NYSE), including:

a limited availability of market quotations for our common stock;

reduced liquidity for our common stock, including reduced availability of buyers or sellers of our common stock;

thin with sporadic fluctuations in price;

greater volatility and lower trading volumes;

depression the trading price of our common stock and make it more difficult to purchase, dispose of or obtain accurate quotations;

a limited amount of news and analyst coverage; and

a decreased ability to issue additional securities or obtain additional financing in the future.

The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts states from regulating the sale of certain securities, which are referred to as covered securities. Our common stock no longer qualify as covered securities under such statute, due to the delisting from the NYSE. We are therefore subject to regulation in each state in which we offer our common stock, which may negatively impact our ability to consummate any future offering of our common stock.

In addition, our common stock may be defined as a penny stock under Rule 3a51-1 under the Exchange Act. Penny stocks are subject to Rule 15g-9, which imposes additional sales practice requirements on broker-dealers that sell low-priced securities to persons other than established customers and institutional accredited investors. For transactions covered by this rule, a broker-dealer must make a special suitability determination for the purchaser and have received the purchasers written consent to the transaction prior to

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sale. Consequently, the rule may affect the ability of broker-dealers to sell our common stock and affect the ability of holders to sell our common stock in the secondary market. To the extent our common stock is subject to the penny stock regulations, the market liquidity for our common stock will be adversely affected.

The effect of our reverse stock split on the market price and trading of our common stock cannot be predicted with any certainty. 

Although we believe that a higher market price of our common stock may help generate greater or broader investor interest, there can be no assurance that our reverse stock split will result in a share price that will attract new investors, including institutional investors. In addition, there can be no assurance that the market price of our common stock will satisfy the investing requirements of those investors. As a result, the trading liquidity of our common stock may not necessarily improve.

The decline in the per share price of our common stock and the decline in our overall market capitalization may be greater following the reverse stock split than would have occurred in the absence of a reverse stock split. Any reduction in our market capitalization may be magnified as a result of the smaller number of total shares of common stock outstanding following the reverse stock split.

Furthermore, even if the reverse stock split does result in an increased market price per share of our common stock, the market price per share following the reverse stock split may not increase in proportion to the reduction of the number of shares of our common stock outstanding before the implementation of the reverse stock split. Accordingly, even with an increased market price per share, the total market capitalization of shares of our common stock after a reverse stock split could be lower than the total market capitalization before the reverse stock split. Also, even if there is an initial increase in the market price per share of our common stock after a reverse stock split, the market price may not remain at that level.

The sale of securities by us in any equity or debt financing could result in dilution to our existing stockholders. 

Any sale of common stock by us in a future private placement offering could result in dilution to the existing stockholders as a direct result of our issuance of additional shares of our capital stock. In addition, our business strategy may include expansion through internal growth by acquiring complementary businesses, acquiring, or establishing strategic relationships with targeted customers and suppliers. In order to do so, or to finance the cost of our other activities, we may issue additional equity securities that could dilute our stockholders stock ownership. We may also assume additional debt and incur impairment losses related to goodwill and other tangible assets, and this could negatively impact our earnings and results of operations.

We may require additional capital to support growth, and such capital might not be available on terms acceptable to us, if at all. This could hamper our growth and adversely affect our business. 

We intend to continue to make investments to support our business growth and may require additional funds to respond to business challenges, including the need to enhance our products and services, improve our operating infrastructure or acquire complementary businesses and technologies. Accordingly, we may need to engage in public or private equity, equity-linked or debt financing to secure additional funds. If we raise additional funds through future issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock. Any debt financing that we secure in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, including the ability to pay dividends. This may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. We may 

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not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and respond to business challenges could be significantly impaired, and our business could be adversely affected.

Litigation and other legal proceedings may adversely affect our business. 

From time-to-time we may become involved in legal proceedings relating to patent and other intellectual property matters, product liability claims, employee claims, tort or contract claims, federal regulatory investigations, securities class action and other legal proceedings or investigations, which could have an adverse impact on our reputation, business and financial condition and divert the attention of our management from the operation of our business. For example, on January 22, 2024, a former employee, whose position was eliminated in a reduction-in-force, filed a complaint against us alleging various violations of California wage and hour laws, including unpaid meal and rest period premiums. While at this time we believe that a loss is not probable, including due to our affirmative defenses, litigation is inherently unpredictable and can result in excessive or unanticipated verdicts and/or injunctive relief that affect how we operate our business. We could incur judgments or enter into settlements of claims for monetary damages or for agreements to change the way we operate our business, or both. There may be an increase in the scope of these matters or there may be additional lawsuits, claims, proceedings or investigations in the future, which could have a material adverse effect on our business, financial condition and results of operations. Adverse publicity about regulatory or legal action against us could damage our reputation and brand image, undermine clinicians confidence and reduce long-term demand for our GentleWave System, even if the regulatory or legal action is unfounded or not material to our operations. 

In the past, securities class action litigation has often been brought against companies following a decline in the market price of its securities. This risk is especially relevant for us because medical technology companies have experienced significant stock price volatility in recent years. If we face such litigation, it could result in substantial costs and a diversion of managements attention and resources, which could harm our business.