Item 1. Business
History and Organization
We were incorporated on December 27,
2010 as ATVRockN, as a Nevada corporation. We consider ourselves to be an emerging growth company under applicable federal securities
laws and will be subject to reduced public company reporting requirements. (See “Implications of Being an ‘Emerging
Growth Company’ ” below in this Section. Under our original business plan, it was our intention to
market a "housing
molding" product to place audio equipment and lighting on
4-wheel drive vehicles such as
All Terrain Vehicles (“ATV”) and Utility Terrain Vehicles (“UTV”).
We did not manufacturer any units, we utilized the services of a contract manufacturer to make the unit for us. We had no material
agreement with our contract manufacturer other than we paid them to produce product for us based on our needs. As we are undercapitalized,
we were unable to produce the required housing molding(s) we believe would best sell in the ATV/UTV aftermarket.
Implications of Being an “Emerging
Growth Company
As a public reporting company with less
than $1.0 billion in revenue during our last fiscal year, we qualify as an “emerging growth company” under the Jumpstart
our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of certain reduced reporting
requirements and is relieved of certain other significant requirements that are otherwise generally applicable to public companies.
In particular, as an emerging growth company we:
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are not required to obtain an attestation report from our auditors on our management’s assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002;
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are not required to provide a detailed narrative disclosure discussing our compensation principles, objectives and elements and analyzing how those elements fit with our principles and objectives (commonly referred to as “compensation discussion and analysis);
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are not required to obtain a non-binding advisory vote from our stockholders on executive compensation or golden parachute arrangements (commonly referred to as the “say-on-pay,” “say-on-frequency” and “say-on-golden-parachute” votes);
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are exempt from certain executive compensation disclosure provisions requiring a pay-for-performance graph and CEO pay ratio disclosure;
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may present only two years of audited
financial statements and only two years of related Management’s Discussion & Analysis of Financial Condition and Results
of Operations, or MD&A;
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are eligible to claim longer phase-in periods for the adoption of new or revised financial accounting standards under §107 of the JOBS Act; and
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are exempt from any PCAOB rules relating to mandatory audit firm rotation and any requirement to include an auditor discussion and analysis narrative in our audit report.
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We intend to take advantage of all of
these reduced reporting requirements and exemptions, including the longer phase-in periods for the adoption of new or revised financial
accounting standards under §107 of the JOBS Act. Our election to use the phase-in periods may make it difficult to compare
our financial statements to those of non-emerging growth companies and other emerging growth companies that have opted out of the
phase-in periods under §107 of the JOBS Act.
Certain of these reduced reporting requirements
and exemptions were already available to us due to the fact that we also qualify as a “smaller reporting company” under
SEC rules. For instance, smaller reporting companies are not required to obtain an auditor attestation report regarding management’s
assessment of internal control over financial reporting; are not required to provide a compensation discussion and analysis; are
not required to a pay-for-performance graph or CEO pay ratio disclosure; and may present only two years of audited financial statements
and related MD&A disclosure.
Under the JOBS Act, we may take advantage
of these reduced reporting requirements and exemptions for up to five years after our initial sale of common equity pursuant to
a registration statement declared effective under the Securities Act of 1933, or such earlier time that we no longer meet the definition
of an emerging growth company. In this regard, the JOBS Act provides that we would cease to be an “emerging growth company”
if we have more than $1.0 billion in annual revenues, have more than $700 million in market value of our common stock held by non-affiliates,
or issue more than $1.0 billion of non-convertible debt over a three-year period. Furthermore, under current SEC rules we will
continue to qualify as a “smaller reporting company” for so long as we (1) have a public float (i.e., the market value
of common equity held by non-affiliates) of less than $75 million as of the last business day of our most recently completed second
fiscal quarter; or (2) for so long as we have a public float of zero, have annual revenues of less than $50 million during our
most recently completed fiscal year.
Investors should be aware that we will
be subject to the "Penny Stock" rules adopted by the Securities and Exchange Commission, which regulate broker-dealer
practices in connection with transactions in Penny Stocks. These regulations may have the effect of reducing the level of trading
activity, if any, in the secondary market for our stock, and investors in our common stock may find it difficult to sell their
shares.
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Business of Issuer
Management is currently seeking new
business opportunities referred by various sources, including its officer/director, professional advisors, venture capitalists,
members of the financial community, and others who may present unsolicited proposals.
Selection of a Business
ATVRockN anticipates that businesses for possible acquisition
will be referred by various sources, including its officer/director, professional advisors, securities broker-dealers, venture
capitalists, members of the financial community, and others who may present unsolicited proposals. ATVRockN will seek businesses
from all known sources, but will rely principally on personal contacts of the officer/director and his affiliates, as well as indirect
associations between him and other business and professional people. While it is not presently anticipated that ATVRockN will engage
unaffiliated professional firms specializing in business acquisitions or reorganizations, such firms may be retained if management
deems it in the best interest of the Company.
Process of Selection
ATVRockN will not restrict its search
to any particular business, industry, or geographical location, and management reserves the right to evaluate and enter into any
type of business in any location. It may participate in a newly organized business venture. On the other hand, it may select a
more established company entering a new phase of growth or in need of additional capital to overcome existing financial problems.
In seeking a business venture, the decision
of management will not be controlled by an attempt to take advantage of any anticipated or perceived appeal of a specific industry,
management group, product, or industry, but will be based on the business objective of seeking long-term capital appreciation in
the real value of ATVRockN.
Time Frame of the Selection Process
The period within which we may participate
in a business acquisition cannot be predicted and will depend on circumstances beyond our control, including the availability of
businesses, the time required to complete our investigation and analysis of prospective businesses, the time required to prepare
appropriate documents and agreements providing for our participation, and other circumstances. It is anticipated that the analysis
of specific proposals and the selection of a business will take several months.
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Acquisition of a Business
In implementing a structure for a particular
business acquisition, the Company may become a party to a merger, consolidation, or other reorganization with another corporation
or entity; joint venture; license; purchase and sale of assets; or purchase and sale of stock, the exact nature of which cannot
now be predicted. On the consummation of a transaction, it is likely that ATVRockN's present management and shareholder will not
be in control of the company. In addition, ATVRockN 's sole director may, as part of the terms of the acquisition transaction,
resign and his vacancy under Nevada law, NRS 78.335(5) be replaced by new director without vote of our shareholders.
While the actual terms of a transaction
to which we may be a party cannot be predicted, it may be expected that the parties to the business transaction will find it desirable
to structure the acquisition as a so-called "tax-free" event under sections 351 or 368(a) of the Internal Revenue Code
of 1986. In order to obtain tax-free treatment under section 351 of the Code, it would be necessary for the owners of the acquired
business to own 80% or more of the stock of the surviving entity. In that case, ATVRockN's shareholders, including investors in
this offering, would retain less than 20% of the issued and outstanding shares of the surviving entity. Section 368(a)(1) of the
Code provides for tax-free treatment of certain business reorganization between corporate entities where one corporation is merged
with or acquires the securities or assets of another.
Generally, we will be the acquiring
corporation in such a business reorganization, and the tax-free status of the transaction will not depend on the issuing of any
specific amount of stock of the surviving entity. Consequently, there is a substantial possibility that the shareholders of ATVRockN,
immediately prior to the transaction, would retain less than 50% of the issued and outstanding shares of the surviving entity.
Therefore, regardless of the form of the business acquisition, it may be anticipated that the investors will experience a significant
reduction in their percentage of ownership in the company.
Notwithstanding the fact that the Company
is technically the acquiring entity in these circumstances, generally accepted accounting principles will ordinarily require that
such a transaction be accounted for as if the Company had been acquired by the other entity owning the business and, therefore,
will not permit a write-up in the carrying value of the assets of the other company.
The manner in which we participate in
a business will depend on the nature of the business, our needs and desires and those of the other parties involved in the negotiations,
the management of the business, and the relative negotiating strengths of ATVRockN and the other management team.
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We will participate in a business only after the negotiation
and execution of appropriate written agreements. Although the exact terms of these agreements cannot be predicted, generally they
will:
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require specific representations and warranties by all of the parties involved,
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specify certain events of default,
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detail the terms of closing and the conditions which must be satisfied by each of the parties
prior to it,
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outline the manner of bearing costs if the transaction is not closed,
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set forth remedies on default, and
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include miscellaneous other terms.
Evaluation Criteria
Despite his non-experience as a professional
business analyst, ATVRockN's sole officer/director, Hal B. Heyer, M.D. will carefully examine businesses for acquisition.
Management anticipates the selection
of an acquired business will be complex and risky because of the competition for such business opportunities among all segments
of the financial community. The nature of the Company's search for the acquisition of a business requires maximum flexibility since
the Company will be required to consider various factors and divergent circumstances which may preclude meaningful direct comparison
among the various business enterprises, product or services investigated. The management of the Company will have virtually unrestricted
flexibility in identifying and selecting a prospective acquired business. Besides determining its fair market value, management
will consider the following:
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the acquired business' net worth;
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the acquired business' total assets;
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the acquired business' cash flow;
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costs associated with effecting the business combination;
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equity interest and possible management participation in the acquired business;
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earnings and financial condition of the acquired business;
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growth potential of the acquired business and the industry in which it operates;
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experience and skill of management and availability of additional personnel of the acquired
business;
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capital requirements of the acquired business;
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competitive position of the acquired business;
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stage development of the product, process or service of the acquired business;
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degree of current or potential market acceptance of the product, process or service of the
acquired business; and
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regulatory environment of the industry in which the acquired business operates.
These criteria are not intended to be
exhaustive. As the Company’s sole officer/director searches through the candidates for acquisition, other factors he considers
relevant may apply.
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The time and costs required to select
and evaluate an acquired business candidate, including conducting a due diligence review, and to structure and consummate the business
combination, including negotiating relevant agreements and preparing requisite documents for filing in keeping with applicable
securities laws and state corporate laws, cannot presently be stated with certainty.
Leverage
ATVRockN may be able to participate
in a business involving the use of leverage. Leveraging a transaction involves the acquisition of a business through incurring
indebtedness for a portion of the purchase price of that business, which is secured by the assets of the business acquired.
One method by which leverage may be
used is to locate an operating business available for sale and arrange for the financing necessary to purchase it. Acquisition
of a business in this fashion would enable us to participate in a larger venture than our limited funds would otherwise permit,
or use less of our funds to acquire a business and thus commit our remaining funds to the operations of the business acquired.
The likelihood that we could obtain
a conventional bank loan for a leveraged transaction would depend largely on the business being acquired and its perceived ability
to generate sufficient revenues to repay the debt. Generally, businesses suitable for leveraging are limited to those with income-producing
assets that are either in operation or can be placed in operation relatively quickly. We cannot predict whether it will be able
to locate any such business. As a general matter it may be expected that ATVRockN will have few, if any, opportunities to examine
businesses where leveraging would be appropriate, or to acquire financing with acceptable terms.
Tax Considerations
As a general rule, Federal and state
tax laws and regulations have a significant impact upon the structuring of business combinations. ATVRockN will evaluate the possible
tax consequences of any prospective business combination and will endeavor to structure the business combination so as to achieve
the most favorable tax treatment to itself, the acquired business, and our respective stockholders. The IRS or other appropriate
state tax authorities may, however, attempt to re-characterize the tax treatment of a particular business combination.
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Form and Structure of Acquisition
Of the various methods and forms by
which we may structure a transaction to acquire another business, management is likely to use, without limitation, one of the following
forms:
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a leveraged buyout transaction in which most of the purchase price is provided by borrowings
from one or more lenders or from the sellers in the form of a deferred purchase price;
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a merger or consolidation of the acquired corporation into or with the Company;
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a merger or consolidation of the acquired business corporation into or with a subsidiary of
the company organized to facilitate the acquisition (a "subsidiary merger"), or a merger or consolidation of such a subsidiary
into or with the acquired corporation (a "reverse subsidiary merger");
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an acquisition of all or a controlling amount of the stock of the acquired corporation followed
by a merger of the acquired business into us;
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an acquisition of the assets of a business by us or a subsidiary organized for such a purpose;
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a merger or consolidation of the Company with or into the acquired business or such a subsidiary;
or
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a combination of any of the above.
The actual form and structure for a
business combination may also be dependent upon numerous other factors pertaining to the acquired business and its stockholders,
as well as potential tax accounting treatments afforded the business combination.
As part of an acquisition, we may choose
to issue additional securities that could add numerous complications depending on whether or not these would need to be registered.
Dilution, change of management, additional costs, time delays or depressed prices for our stock could result.
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Daily Operations
We expect to use attorneys and accountants
as necessary, and do not anticipate a need to engage any full-time employees during the phase devoted to seeking and evaluating
business opportunities. The need for employees and their availability will be addressed along with the decisions specific to acquiring
or participating in a specific business opportunity.
Until an active business is commenced
or acquired, we will have only one employee, our sole officer/director for day-to-day operations. We are unable to make any estimate
as to the future number of employees, which may be necessary. If an existing business is acquired it is possible that we would
hire its existing staff.
Competition
We will be involved in intense competition with other business
entities, many of which will have a competitive edge over us by virtue of their more substantial financial resources and prior
experience in business. We also face numerous other smaller companies at the same stage of development as we are.
Patents, Trademarks and Licenses
We do not have any trademarks, patents,
or other intellectual property.
Based on the nature of our business,
we do not expect to file any trademarks or patents.
Employees
ATVRockN
currently has one employee, its sole officer/director.
ATVRockN
plans
to utilize independent contractors on a part-time/as needed basis to assist in its development activities, marketing, and financial
and accounting support.
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Item 1A. Risk Factors
RISK FACTORS RELATING TO OUR FINANCIAL
CONDITION
1
. WE HAVE NO OPERATING HISTORY AND
LIMITED HISTORICAL FINANCIAL INFORMATION UPON WHICH YOU MAY EVALUATE OUR PERFORMANCE.
We have no operating history and we
are subject to all risks inherent in a developing business enterprise. Our likelihood of success must be considered in light of
the problems, expenses, difficulties, complications, and delays frequently encountered developing a business enterprise and the
competitive environment in which we operate. You should consider, among other factors, our prospects for success in light of the
risks and uncertainties encountered by companies that, like us, are in their early stages of research and business development.
We may not be able to successfully address these risks and uncertainties or successfully implement our operating and acquisition
strategies. If we fail to do so, it could materially harm our business to the point of having to cease operations and could impair
the value of our preferred and common stock to the point that the investors may lose their entire investment. Even if we accomplish
these objectives, we may not be able to generate positive cash flows or profits that we anticipate in the future.
2.
Our
auditors have made reference to the substantial doubt as to our ability to continue as a going concern,
THERE IS NO ASSURANCE
THAT WE WILL BE ABLE TO CONTINUE AS A GOING CONCERN.
Our financial statements included with
this Annual Report for the year ended May 31, 2016 have been prepared assuming that we will continue as a going concern. Our auditors
have made reference to the substantial doubt as to our ability to continue as a going concern in their audit report on our audited
financial statements for the year ended May 31, 2016. Because the Company has been issued an opinion by our auditors that substantial
doubt exists as to whether the Company can continue as a going concern, it may be more difficult for the Company to attract investors.
Since our auditors have raised a substantial doubt about our ability to continue as a going concern, this typically results greater
difficulty to obtain loans than businesses that do not have a qualified auditors opinion. Additionally, any loans we might obtain
may be on less advantageous terms. Our future is dependent upon our ability to obtain financing and upon future profitable operations
from our business. We plan to seek additional funds through private placements of our preferred and common stock. You may be investing
in a company that will not have the funds necessary to continue to deploy its business strategies. If we are not able to achieve
sufficient revenues or find financing to cover our expenses, then we likely will be forced to cease operations and investors will
likely lose their entire investment.
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3. WE MAY NOT BE ABLE TO ATTAIN PROFITABILITY WITHOUT
ADDITIONAL FUNDING, WHICH MAY BE UNAVAILABLE.
For the period from inception (December
27, 2010) through the year end for May 31, 2016, we experienced a cumulative net loss of $(458,214). Our ability to continue to
operate as a going concern is fully dependent upon the Company obtaining sufficient financing to continue its development and operational
activities. The ability to achieve profitable operations is in direct correlation to our ability to generate revenues or raise
sufficient financing. It is important to note that even if the appropriate financing is received, there is no guarantee that we
will ever be able to operate profitably or derive any significant revenues from its operation. If we are unable to obtain additional
funding, we may be forced to cease operations.
COMPANY RISK FACTORS
4.
We are in a highly competitive market WITH a small number of business opportunities. there is a risk that we would be an insignificant
participant among other companies with larger financial resources.
The Company is and will continue to
be an insignificant participant in the business of seeking mergers with, joint ventures with and acquisitions of small private
and public entities. A large number of established and well-financed entities, including venture capital firms, are active in mergers
and acquisitions of companies that may be desirable target candidates for us.
Nearly all these entities have significantly
greater financial resources, technical expertise and managerial capabilities than we do and, consequently, we will be at a competitive
disadvantage in identifying possible business opportunities and successfully completing a business combination. Moreover, we will
also compete in seeking merger or acquisition candidates with numerous other small public companies
5.
The issuance of additional stock to consummate a business combination will reduce your percentage of ownership in the Company,
and reduce the value of your shares.
Our primary plan of operation is based
upon a business combination with a private company that, in all likelihood, would result in the issuance of our securities to the
shareholders of the private company. The issuance of previously authorized and unissued common stock would result in reduction
in percentage of shares owned by present and prospective shareholders of the Company and may result in a change in control or management.
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6. There
is a risk, we will not be able to identify any suitable business combinations.
We have no arrangement, agreement or
understanding with respect to engaging in a merger with, joint venture with or acquisition of, a private or public entity. No assurances
can be given that we will successfully identify and evaluate suitable business opportunities or that we will conclude a business
combination. Management has not identified any particular industry or specific business within an industry for evaluation. We cannot
guarantee that we will be able to negotiate a business combination on favorable terms.
7.
Since we have not conducted any market research, there is a risk that merger or acquisition opportunities do not exist as this
time.
We have neither conducted, nor have
others made available to us, results of market research indicating that market demand exists for the transactions we contemplate.
Moreover, we do not have, and do not plan to establish, a marketing organization. Even if demand is identified for a merger or
acquisition, we cannot assure you that we will be successful in completing a business combination.
8.
There can be no assurance of profitability, even once the acquisition has been accomplished.
We have not established a specific length
of operating history or a specified level of earnings, assets, net worth or other criteria that we will require a target business
opportunity to have achieved. Accordingly, we may enter into a business combination with a business opportunity having no significant
operating history, losses, limited or no potential for earnings, limited assets, negative net worth or other characteristics that
are indicative of development stage companies.
9.
The requirement of audited financial statements may disqualify potential business opportunities.
Management believes that any potential
business opportunity must provide audited financial statements for review for the protection of all parties to the business combination.
One or more attractive business opportunities may choose to forego the possibility of a business combination with us, rather than
incur the expenses associated with preparing audited financial statements.
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10. The nature
of our operations IS highly speculative.
The success of our plan of operation
will depend to a great extent on the operations, financial condition and management of the identified business opportunity. While
management intends to seek business combination(s) with entities having established operating histories, we cannot assure you that
we will be successful in locating candidates meeting that criteria. In the event we complete a business combination, the success
of our operations may be dependent upon management of the successor firm and numerous other factors beyond our control.
11. THERE MAY BE A POSSIBLE INABILITY
TO FIND SUITABLE EMPLOYEES.
In order to implement our business plan,
management recognizes that additional staff will be required. No assurances can be given that we will be able to find suitable
employees that can support our needs or that these employees can be hired on favorable terms. We do not plan to hire any additional
employees until our cash flows can justify the expense.
12. OUR MANAGEMENT AND PREFERRED
SHAREHOLDER CONTROLS A LARGE BLOCK OF OUR COMMON STOCK THAT WILL ALLOW THEM TO CONTROL THE COMPANY.
As of February 10, 2017, our sole officer/director
owns 21.74% of our currently issued and outstanding common stock. Additionally, our registered preferred stock Series A shareholder
owns 122,500 of Series A preferred shares that can be converted into 12,250,000 common shares or 64% of the outstanding shares
upon conversion.
As a result, our sole officer/director
and Series A preferred shareholder will have the ability to control substantially all matters submitted to our stockholders for
approval including:
a)
election of our board of directors;
b)
removal of any of our directors;
c)
amendment of our Articles of Incorporation or bylaws; and
d)
adoption of measures that could delay or prevent a change in control or impede a merger, takeover
or other business combination involving us.
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As a result of their ownership and positions,
these two individuals have the ability to influence all matters requiring shareholder approval, including the election of directors
and approval of significant corporate transactions. In addition, the future prospect of sales of significant amounts of shares
held by our director and executive officer could affect the market price of our preferred and common stock if the marketplace does
not orderly adjust to the increase in shares in the market and the value of your investment in the Company may decrease. Management's
stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us,
which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price.
Investors will own a minority percentage
of the Company's common stock and will have minority voting rights. Investors will not have the ability to control either the vote
of the Company's Shareholders or Board of Directors.
13. WE WILL INCUR INCREMENTAL COSTS
AS A RESULT OF OPERATING AS A PUBLIC COMPANY.
Since we are a full reporting
company with the U. S. Securities and Exchange Commission, we will incur additional legal, accounting and other expenses. Moreover,
the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"), as well as new rules subsequently implemented by the SEC,
have imposed various new requirements on public companies, including requiring changes in corporate governance practices. There
may be further increases if and when we are no longer an "emerging growth company." Moreover, these rules and regulations
will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. We project
that the total incremental operating expenses of being a public company will be approximately $45,000 for 2017. The incremental
costs are estimates, and actual incremental expenses could be materially different from these estimates. Unless we can generate
sufficient revenues and profits, we
may not be able to absorb the costs of being a
public
company.
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14.
As a result of operating as a public company, and our management will be required to devote substantial time to new compliance
initiatives.
As a public company, we will incur significant
legal, accounting and other expenses that we would not incur as a private company. There may be further increases if and when we
are no longer an "emerging growth company". The Sarbanes-Oxley Act of 2002, the Dodd-Frank Act of 2010, and rules subsequently
implemented and yet to be implemented by the U. S. Securities and Exchange Commission have imposed and will impose various new
requirements on public companies. Our management and other personnel will need to devote a substantial amount of time to these
new compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will
make some activities more time-consuming and costly, particularly after we are no longer an "emerging growth company."
For example, we expect these new rules and regulations to make it more difficult and more expensive for us to obtain director and
officer liability insurance, and we may be required to incur substantial costs to maintain the same or similar coverage.
In addition, the Sarbanes-Oxley Act
requires, among other things, that we maintain effective internal control over financial reporting and disclosure controls and
procedures. In particular, we must perform system and process evaluation and testing of our internal control over financial reporting
to allow management, as required by Section 404 of the Sarbanes-Oxley Act. Compliance will require us to increase our general and
administrative expense in order to pay added compliance personnel, outside legal counsel and consultants to assist us in, among
other things, external reporting, instituting and monitoring a more comprehensive compliance function and board governance function,
establishing and maintaining internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act,
and preparing and distributing periodic public reports in compliance with our obligations under the U.S. federal securities laws.
We currently do not have an internal audit group, and we will evaluate the need to hire additional accounting and financial staff
with appropriate public company experience and technical accounting knowledge. Moreover, if we are not able to comply with the
requirements of Section 404 in a timely manner, the market price of our stock could decline.
However, for as long as we remain an
"emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012, we may take advantage of certain
exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth
companies" including, but not limited to, not being required to comply with the auditor attestation requirements of Section
404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy
statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder
approval of any golden parachute payments not previously approved. We will remain an emerging growth company until the earliest
of (a) the last day of our fiscal year during which we have total annual gross revenues of at least $1.0 billion; (b) the last
day of our fiscal year ending after the fifth anniversary of the first sale of our common equity securities under an effective
registration statement; (c) the date on which we have, during the previous three-year period, issued more than $1.0 billion in
non-convertible debt; or (d) the date on which we are deemed to be a "large accelerated filer" under the Exchange Act.
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15.
We are an “emerging growth company” and our election to delay adoption of new or revised accounting standards applicable
to public companies may result in our financial statements not being comparable to those of some other public companies. As a result
of this and other reduced disclosure requirements applicable to emerging growth companies, our securities may be less attractive
to investors.
We are an “emerging growth company,”
as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and we intend to take advantage of exemptions from
certain reporting requirements available to “emerging growth companies” under that Act, including but not limited to
not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002 (relating
to the effectiveness of our internal control over financial reporting), reduced disclosure obligations regarding executive compensation
in our periodic reports and any proxy statements we may be required to file, and exemptions from the requirements of holding a
non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
In addition, Section 107 of the JOBS Act provides that an “emerging growth company” can delay the adoption of certain
accounting standards until those standards would apply to private companies.
We are electing to delay such adoption
of new or revised accounting standards and, as a result, we may not comply with new or revised accounting standards on the relevant
dates on which adoption of such standards is required for other public companies that are not “emerging growth companies.”
Consequently, our financial statements may not be comparable to the financial statements of other public companies. We may take
advantage of these reporting exemptions until we are no longer an “emerging growth company.” In this regard, we will
remain an “emerging growth company” for up to five years after the first sale of our common equity securities under
an effective registration statement, although if the market value of our common stock that is held by non-affiliates exceeds $700
million as of any November 30 before that time, we would cease to be an “emerging growth company” as of the next following
May 31.
We cannot predict if investors will
find our securities less attractive due to our reliance on these exemptions. If investors were to find our securities less attractive
as a result of our election, we may have difficulty raising funds in future offerings
16. WE DO NOT HAVE INSURANCE AND,
THEREFORE, LIABILITY WE INCUR COULD HAVE SUBSTANTIAL IMPACT ON OUR ABILITY TO CONTINUE AS A GOING CONCERN.
We have limited capital and, therefore,
we do not currently have a policy of insurance against liabilities arising out of the negligence of our officer and director and/or
arising from deficiencies in any of our business operations. Even assuming we obtained insurance, there is no assurance that such
insurance coverage would be adequate to satisfy any potential claims made against us, our officers and directors, or our business
operations or assets. Any such liability which might arise could be substantial and would likely exceed our total assets. However,
our Articles of Incorporation and Bylaws provide for indemnification of officers and directors to the fullest extent permitted
under Nevada law. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors,
officer and controlling persons, it is the opinion of the U. S. Securities and Exchange Commission that such indemnification is
against public policy, as expressed in the Act, and is therefore, unenforceable.
17. WE ARE CURRENTLY REPORTING AS
A NON-SHELL REGISTRANT AS DEFINED in RULE 12B-2 OF THE SECURITIES AND EXCHANGE ACT DESPITE HAVING LIMITED REVENUE SINCE INCEPTION.
The Company received a favorable legal
opinion supporting our position as a non-shell company from outside legal counsel and continue to believe we qualify as a non-shell
company as defined through the Jumpstart our Business Startup Act of 2012. However, since we have generated limited revenue since
inception and no revenue since the fiscal year ending May 31, 2012 and we continue to search for a viable business candidate; the
Securities and Exchange Commission may challenge our non-shell status at some point in the future. We can provide no assurance
as to a favorable outcome upon a regulatory review or the potential impact on certain shareholders’ ability to freely trade
their common stock and the effect it may have on our stock price.
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RISK FACTORS RELATING TO OUR PREFERRED AND COMMON STOCK.
18. OUR PREFERRED STOCK DOES NOT
PAY ANY DIVIDENDS AND CAN BE CONSIDERED ILLIQUID.
We have one Series of Preferred Shares
issued and outstanding as of May 31, 2016. Our registered preferred stock, par value $0.001, shall not be entitled to receive any
dividends, shall not have any liquidation rights and shall not be entitled to (a) any voting rights or (b) notice of any meeting
of the shareholders of the corporation. The registered preferred stock can be converted at the ratio of one hundred (100) shares
of Common Stock for every one (1) share of the registered preferred stock converted; however, the conversion is limited whereby
the beneficial owner cannot beneficially own in excess of 4.9% of the shares of the Common Stock outstanding immediately after
giving effect to such conversion or exercise.
Management has no intention
to
apply to have any Series of the Company’s preferred stock listed
or quoted on any exchange or inter-dealer quotation
system. This will make ownership of our preferred shares very illiquid.
19.
We
have authorized and
unissued shares Series A,
B and C Preferred stock
that may be issued in the future, which would dilute your ownership in the Company.
We have 5,000,000 preferred shares authorized
for each of our Series A, B and C preferred stock. We currently have 122,500 shares of the registered Series A preferred stock
issued and outstanding; no Series B preferred stock issued and outstanding and no Series C stock issued and outstanding. The Series
C stock is undesignated at this time. Therefore, if each Series has 5,000,000 authorized, this gives the Board of Directors a great
deal of discretion, in the future, to issue more shares in each Series, without shareholder approval. The issuance of more shares
of any Series would dilute your ownership in the Company, which would mean your percent of ownership in the Company would decrease.
20. WE HAVE NEVER DECLARED DIVIDENDS
ON OUR COMMON STOCK AND DO NOT PLAN TO DO SO IN THE FORESEEABLE FUTURE.
We intend to retain any future earnings
to finance the operation and expansion of its business and do not anticipate paying any cash dividends in the foreseeable future.
As a result, stockholders will need to sell shares of common stock in order to realize a return on their investment, if any. You
should not rely on an investment in our Company if you require dividend income. The only possibility of any income to investors
would come from any rise in the market price of your stock, which is uncertain and unpredictable.
A holder of common stock will be entitled
to receive dividends only when, as, and if declared by the Board of Directors out of funds legally available therefore. We have
never issued dividends on our common stock. Our Board of Directors will determine future dividend policy based upon our results
of operations, financial condition, capital requirements, and other circumstances.
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21. HOLDERS OF OUR PREFERRED AND
COMMON STOCK HAVE A RISK OF POTENTIAL DILUTION IF WE ISSUE ADDITIONAL SHARES OF PREFERRED AND/OR COMMON STOCK IN THE FUTURE.
Although our Board of Directors intends
to utilize its reasonable business judgment to fulfill its fiduciary obligations to our then existing stockholders in connection
with any future issuance of our common stock, the future issuance of additional shares of our preferred and common stock would
cause immediate, and potentially substantial, dilution to the net tangible book value of those shares of preferred and common stock
that are issued and outstanding immediately prior to such transaction. Any future decrease in the net tangible book value of our
issued and outstanding shares could have a material effect on the market value of the shares.
22. IF WE FAIL TO MAINTAIN
AN EFFECTIVE SYSTEM OF INTERNAL CONTROLS, WE MAY NOT BE ABLE TO ACCURATELY REPORT OUR FINANCIAL RESULTS OR PREVENT FRAUD AND AS
A RESULT, INVESTORS MAY BE MISLED AND LOSE CONFIDENCE IN OUR FINANCIAL REPORTING AND DISCLOSURES, AND THE PRICE OF OUR PREFERRED
AND COMMON STOCK MAY BE NEGATIVELY AFFECTED.
The Sarbanes-Oxley Act of 2002 requires
that we report annually on the effectiveness of our internal control over financial reporting. A "significant deficiency"
means a deficiency or a combination of deficiencies, in internal control over financial reporting that is less severe than a material
weakness yet important enough to merit attention by those responsible for oversight of the Company's financial reporting. A "material
weakness" is a deficiency or a combination of deficiencies in internal control over financial reporting, such that there is
a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected
on a timely basis.
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As of May 31, 2016 management assessed
the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial
reporting. The matters involving internal controls and procedures that our management considered to be material weaknesses under
the standards of the Public Company Accounting Oversight Board were: (1) lack of a functioning audit committee due to a lack of
a majority of independent members and a lack of a majority of outside directors on our board of directors, resulting in ineffective
oversight in the establishment and monitoring of required internal controls and procedures; and (2) inadequate segregation of duties
consistent with control objectives.
In addition, in connection with our
on-going assessment of the effectiveness of our internal control over financial reporting, we may discover "material weaknesses"
in our internal controls as defined in standards established by the Public Company Accounting Oversight Board, or the PCAOB. A
material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood
that a material misstatement of the annual or interim financial statements will not be prevented or detected.
Failure to provide effective internal
controls may cause investors to lose confidence in our financial reporting and may negatively affect the price of our preferred
and common stock. Moreover, effective internal controls are necessary to produce accurate, reliable financial reports and to prevent
fraud. If we have deficiencies in our internal controls over financial reporting, these deficiencies may negatively impact our
business and operations.
23. LOW-PRICED STOCKS MAY AFFECT
THE RESELL OF OUR SHARES.
Penny Stock Regulation Broker-dealer
practices in connection with transactions in "Penny Stocks" are regulated by certain penny stock rules adopted by the
Securities and Exchange Commission. Penny stocks generally are equity securities with a price of less than $5.00 (other than securities
registered on certain national securities exchanges or quoted on the NASDAQ system). The penny stock rules require a broker-dealer,
prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document
that provides information about penny stocks and the risk associated with the penny stock market. The broker-dealer must also provide
the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson
in the transaction, and monthly account statements showing the market value of each penny stock held in the customer's account.
In addition, the penny stock rules generally require that prior to a transaction in a penny stock; the broker-dealer must make
a written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement
to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary
market for a stock that is subject to the penny stock rules.
24. THE MARKET PRICE OF OUR COMMON
STOCK MAY BE HIGHLY VOLATILE, AND YOU COULD LOSE ALL OR PART OF YOU INVESTMENT.
The trading price of our common stock
is likely to be volatile. This volatility may prevent you from being able to sell your shares at or above the price you paid for
your shares. Our stock price could be subject to wide fluctuations in response to a variety of factors, which include:
·
actual or anticipated fluctuations in our quarterly or annual financial results;
·
additional needs for financing;
·
announcements by us or our competitors of significant acquisitions, strategic partners,
joint ventures or capital commitments;
·
sales of our commons stock or other securities in the open market;
·
additions or departures of key personnel;
·
failure of any of our initiatives;
·
regulatory or political developments;
·
changes in accounting principles or methodologies;
·
litigation or governmental investigations;
·
negative publicity about us in the media and online;
·
general financial market conditions or events; and
·
other events or factors, many of which are beyond our control.
Additionally, in recent years the stock
market in general, and the penny stock markets in particular, have experienced extreme price and volume fluctuations. In some cases,
these fluctuations are unrelated or disproportionate to the operating performance of the underlying company. These market and industry
factors may materially and adversely affect our stock price, regardless of our operating performance. In the past, class action
litigation often has been brought against companies following periods of volatility in the market price of those companies common
stock. If we become involved in this type of litigation in the future, it could result in substantial costs and diversion of management
attention and resources, which could have a further negative effect on shareholders’ investments in our stock.
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