MultiSensor AI Holdings (MSAI) risk factors, FY2025 10-K

Risks Related to Our Business and Industry

1. 01We have a history of losses or low income and may continue to incur losses or limited income in the future
2. 02If we fail to successfully manage the expansion of our SaaS capabilities and offerings, our business and financial results could be adversely affected
3. 03We have a limited operating history providing SaaS solutions, which makes it difficult to evaluate our future prospects and the risks and challenges we may encounter
4. 04If our products are not adopted in our targeted end markets, our business will be materially and adversely affected28% rewritten
5. 05Our products also can be used in a wide variety of emerging use cases in the data center market. This is a nascent market, and while this industry is experimenting with condition monitoring and predictive maintenance, our customers may decide that our platform is not a feasible solution
6. 06Since many of the markets in which we compete are new and rapidly evolving, it is difficult to forecast long-term end-customer adoption rates and demand for our products
7. 07Our estimate of TAM is subject to numerous uncertainties. If we have overestimated the size of our TAM or do so in the future, our future growth rate may be limited
8. 08Product liability claims, product recalls and field service actions could have a material adverse effect on our reputation, business, results of operations and financial condition
9. 09Our revenue and margins could be adversely affected if we fail to maintain competitive average selling prices or high sales volumes, or if we fail to reduce product costs40% rewritten
10. 10Our inability to prevent service disruptions and ensure network uptime could lead to significant costs and could harm our business reputation and have a material and adverse effect on our business, financial condition and results of operationsNew
11. 11Service interruptions continue to be a significant risk for us and could materially and adversely impact our business, financial condition and results of operationsNew
12. 12We rely upon third-party providers of cloud-based infrastructure to support our software solutions. Any disruption in the operations of these third-party providers, limitations on capacity, or interference with our use could adversely affect our business, financial condition, and results of operationsNew
13. 13We face risks related to sales through distributors and other third parties which could harm our business
14. 14The period of time from initiating dialogue with potential customers to implementation (sales cycle) is long, and we are subject to the risks of cancellation or postponement of the contract or unsuccessful implementation
15. 15Our manufacturing business model and use of contract manufacturers may not be successful, which could harm our ability to deliver products and recognize revenue65% rewritten
16. 16among contract manufacturers upon which we rely, thereby increasing the risk of disruption of supplies necessary to fulfill our production requirements and meet customer demandsNew
17. 17We operate in a competitive landscape against market participants that may have substantially greater resources than us and against known and unknown market entrants who may disrupt our target markets
18. 18We, our contract manufacturers and our suppliers may rely on complex machinery for production, which involves a significant degree of risk and uncertainty in terms of operational performance and costs
19. 19If we do not maintain the correct level of inventory or if we do not adequately manage our inventory, we could lose sales or incur higher inventory-related expenses, which could negatively affect our operating results
20. 20We maintain cash and cash equivalents at a limited number of financial institutions, and our balances may exceed applicable deposit insurance limits; adverse developments affecting these institutions could impair access to our funds, disrupt our operations, and negatively impact our resultsNew

Risks Related to Our Growth Strategy

1. 21We may need to raise additional capital in the future in order to execute our business plan, which may not be available on terms acceptable to us, or at all
2. 22We create innovative technology by designing and developing unique hardware and software solutions. A failure to achieve scale may affect our ability to sell at competitive prices, limit our customer base or lead to losses
3. 23If we are not able to effectively grow our sales and marketing organization, or maintain or grow an effective network of distributors, our business prospects, results of operations and financial condition could be adversely affected
4. 24If we engage in acquisitions to grow our business, we will incur a variety of costs and may potentially face numerous risks that could adversely affect our business and operations
5. 25We may not optimally manage our lines of business or product lines

Risks Related to Our Customers and Suppliers

1. 26The loss of large customers could result in a material adverse effect to our financial results74% rewritten
2. 27Certain of our commercial contracts with our customers, agreements with suppliers or co-development agreements with partners could be terminated or may not materialize into long-term contract partnership arrangements
3. 28We are exposed to credit risk on our trade accounts receivables, supplier non-trade receivables, prepayments to manufacturers and SaaS subscription agreements, and this risk is heightened during periods when economic conditions worsen22% rewritten
4. 29We may not be able to anticipate changing customer and consumer preferences or respond quickly enough to changes in technology and standards to be able to develop and introduce commercially viable products
5. 30We currently target many customers that are large corporations with substantial negotiating power and exacting product standards
6. 31Our suppliers could raise prices on key components, which may adversely affect our profitability
7. 32Key components in our products come from limited or single source third party suppliers. Interruptions in our relationships with these third parties could adversely impact our business

Risks Related to Our Products

1. 33Components used in our sensors may fail as a result of manufacturing, design or other defects over which we have no control and render our devices permanently inoperable72% rewritten
2. 34Product integration could face complications or unpredictable difficulties, which may adversely impact customer adoption of our products and our financial performance
3. 35The markets in which we compete are characterized by technological change, which requires us to continue to develop new products and product innovations and could adversely affect market adoption of our products
4. 36We may incur significant direct or indirect liabilities in connection with our product warranties which could adversely affect our business and operating results

Risks Related to Our Financial Statements and Accounting

1. 37If we fail to maintain an effective system of internal controls, our ability to produce timely and accurate financial statements or comply with applicable regulations could be adversely affected
2. 38We are exposed to the risk of write-downs on the value of our inventory and other assets, in addition to purchase commitment cancellation risk
3. 39Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited32% rewritten
4. 40Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our financial condition and results of operations

Risks Related to Our Intellectual Property, Information Technology and Cybersecurity

1. 41Claims that we are infringing or misappropriating third-party intellectual property rights, whether successful or not, could subject us to costly and time-consuming litigation or expensive licenses, and adversely affect our business
2. 42Interruption or failure of our information technology and communications systems could impact our ability to effectively provide our services
3. 43Under certain of our agreements, we are required to provide indemnification in the event our technology is alleged to infringe upon the intellectual property rights of third parties
4. 44We utilize third-party licensed software for use in our business, and the inability to maintain these licenses, errors in the software, or the terms of open-source licenses could result in increased costs or reduced service levels, which would adversely affect our business
5. 45We rely on our unpatented proprietary technology, copyrights, trade secrets, proprietary processes and know-how
6. 46We may be subject to damages resulting from claims that we or our employees have wrongfully used or disclosed alleged trade secrets of our employees’ former employers

Risks Related to Our Use of Artificial Intelligence

1. 47Our use of AI poses specific risks related to intellectual property, including uncertainty concerning the degree and extent of protection warranted for intellectual property developed with AI
2. 48We use AI Technologies in our business, and the development, use, and maintenance of these technologies involve technological and legal risk41% rewritten
3. 49We develop products which are powered by AI Technologies, and dependence on and challenges in developing and maintaining such AI Technologies may adversely affect our operations and competitive position
4. 50Our business may be affected by the evolving regulatory framework for AI Technologies
5. 51request that such personal information generated by AI Technologies be deleted or corrected, pursuant to their rights under the CCPA. Such additional regulations may impact our ability to develop, use and commercialize AI Technologies in the future

Risks Related to Our Regulatory Compliance

1. 52If we fail to comply with the laws and regulations relating to the collection of sales tax and payment of income taxes in the various states in which we do business, we could be exposed to unexpected costs, expenses, penalties and fees as a result of our non-compliance, which could harm our business
2. 53Our government contracting activities are subject to government contracting regulations, including increasingly complex regulations on cybersecurity, and our failure to comply with such laws and regulations could harm our operating results and prospects
3. 54Our products are frequently used in applications that are subject to evolving regulations and standards
4. 55We are subject to, and must remain in compliance with, numerous laws and governmental regulations concerning the manufacturing, use, distribution and sale of our products. Some of our customers also require that we comply with their own unique requirements relating to these matters
5. 56We are subject to governmental export and import controls and economic sanctions laws and regulations. Our failure to comply with these laws and regulations could materially adversely affect our business, prospects, reputation, financial condition and results of operations75% rewritten
6. 57Changes to trade policy, tariffs and import/export regulations may have a material adverse effect on our business, financial condition and results of operations40% rewritten
7. 58Failing to comply with increasing environmental regulations, as well as the effects of potential environmental liabilities, could have a material adverse effect on our business, results of operations or financial condition
8. 59regulations, could lead to increased costs, which we may not be able to recover from customers, delays in product shipments and loss of market share to competitors. Regulatory changes or failure by a business to meet applicable requirements could disrupt that business or force a closure or relocation of the business54% rewritten
9. 60Additional Risks Relating to Ownership of Our SecuritiesNew
10. 61On May 15, 2025, we received a letter from the Listing Qualifications Department of Nasdaq (the “Staff”) notifying us that we were no longer in compliance with the Bid Price Requirement, as set forth in Listing Rule 5550(a)(2), for continued listing on The Nasdaq Capital MarketNew
11. 62On November 19, 2025, we were notified that the Staff has determined to grant the Company an extension of an additional 180 calendar days, or until May 11, 2026, to regain compliance with the Bid Price RequirementNew
12. 63of our securities would likely be significantly adversely affected. Delisting of our securities from Nasdaq could also adversely affect our ability to obtain financing for our operations and/or result in a loss of confidence by investors, employees and/or business partnersNew
13. 64We incur significant costs as a result of operating as a public company, and our management devotes and will continue to devote substantial time to new compliance initiativesNew
14. 65The price and trading volume of our securities may fluctuate dramatically
15. 66We may redeem any unexpired SPAC Warrants prior to their exercise at a time that is disadvantageous to you, thereby making your warrants worthless63% rewritten
16. 67A substantial number of warrants are exercisable for our Common Stock, which will increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders45% rewritten
17. 68Our outstanding warrants may not be in the money and they may expire before they are exercised. As a result, we may never receive proceeds from the exercise of our outstanding warrantsNew
18. 69Because there are no current plans to pay cash dividends on our Common Stock for the foreseeable future, you may not receive any return on investment unless you sell our Common Stock for a price greater than that which you paid for it
19. 70The future exercise of registration rights may adversely affect the market price of our Common Stock23% rewritten
20. 71We may issue additional shares of Common Stock or other equity securities without your approval, which would dilute your ownership interests and may depress the market price of our Common Stock
21. 72Anti-takeover provisions in our certificate of incorporation and under Delaware law could make an acquisition of our Company, which may be beneficial to our stockholders, more difficult and may prevent attempts by its stockholders to replace or remove our current management
22. 73We rely on the experience and expertise of our senior management team, other key officers, our engineers, and other highly skilled personnel. Our future success depends, in part, on recruiting and retaining such key personnel and, if we fail to do so, it may be more difficult for us to execute our business strategy75% rewritten
23. 74Adverse conditions in our target markets or the global economy more generally could have adverse effects on our results of operations
24. 75We have been and may in the future become involved in legal and regulatory proceedings and commercial or contractual disputes, which could have a material adverse effect on our profitability and consolidated financial position
25. 76If securities or industry analysts either do not publish research about us or publish inaccurate or unfavorable research about us, our business or our market, or if they change their recommendations regarding our Common Stock adversely, the trading price or trading volume of our Common Stock could decline