ITEM 5.06
CHANGE IN SHELL COMPANY STATUS
As a result of closing the Share Exchange Agreement, the Company is no longer a shell corporation as that term is defined in Rule 405 of the Securities Act and Rule 12b-2 of the Exchange Act.
FORM 10 DISCLOSURE
As disclosed elsewhere in this Report, we completed a Share Exchange Agreement with Stevva Ltd. Item 2.01(f) and 5.01(a)(8) of Form 8-K states that if the registrant was a shell company, as we were, immediately before the transaction disclosed under Item 2.01, then the registrant must disclose the information that would be required if the registrant were filing a general form for registration of securities on Form 10 under the Exchange Act.
The financial information included in the Company’s Form 10-K for the year ended June 30, 2016, as filed with the SEC on July 31, 2017, and the Company’s Form 10-Q for the period ended March 31, 2017, as filed with the SEC on July 31, 2017 is hereby incorporated by this reference.
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FORM 10 DISCLOSURE
ITEM 1.
BUSINESS
Our Corporate History and Background
Homie Recipes, Inc. was incorporated in the State of Nevada as a for-profit company on June 22, 2012 and established June 30 as its fiscal year end. Homie was founded with the intent to stream videos and written recipes through a website. Our goal was to stream free recipes for ‘special’ homemade cuisines and food items. We intend to have recipes that are personal and have special meaning, on our website. We planned on having an introductory segment for our videos, where a person will tell their story behind the recipe, explaining why they love it so much. As of the date hereof, we had been unable to raise additional funds to implement our operations. As a result of the current difficult economic environment and our lack of funding to implement our business plan, we have continuously analyzed strategic alternatives available to our Company to continue as a going concern.
Jose Mari C. Chin has been the Company’s sole officer and director from inception through the Closing of the Share Exchange Agreement with STVV. He has acted as the Company’s President, Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer and Director.
On August 14, 2017, Homie Recipes, Inc., Inc., a Nevada corporation (the “Company” or “HOMR”) entered into a Share Exchange Agreement (the “Share Exchange Agreement”) with Stevva Ltd., a company duly formed under the laws of Greece (Corp#: 800867003) (“STVV”), and the sole-shareholder of STVV (the “STVV Shareholder”). Pursuant to the Share Exchange Agreement, the Company will acquire 100% of the issued and outstanding equity of STVV, from the STVV shareholder (the “STVV Shares”) and in exchange, the Company shall issue to STVV, upon Closing of the Share Exchange Agreement, an aggregate of Forty-Five Million (45,000,000) shares of Company stock (“HOMR SHARES”), and as result of the Share Exchange Agreement, STVV became a wholly-owned subsidiary of the Company.
Stevva Ltd. Acquisition
We believe that the acquisition of Stevva Ltd. will allow the Company to take a large step forward in an exciting new industry. Even though Stevva Ltd., is a newly formed business venture with no historical operations, the Company believes that this venture, being born out of years of experience and through diligent planning, gives the existing HOMR shareholders an opportunity to realize the initial goals and ambitions of the of the Company.
Stevva Ltd. is the owner of approximately 6 acres (or 23,928 square meters) of prime farmlands in Pella Giannitsa, Greece and the Company’s new business direction is grow and cultivate “Stevia” on these parcels.
Stevia is a low-carbohydrate, low-sugar food and beverage ingredient. The Stevia is of high quality and grown in ideal crop conditions in Giannitsa, Greece. Stevia seedlings and dried leaves of Stevia to refineries. Stevia has zero-calories and is 300 times sweeter than sugar. Diabetics and dieters ingest Stevia to reduce their sugar intake because of its zero-calorie content and because it is not metabolized by the body. The global market for non-sugar sweeteners is expected to reach $10 billion by the end of 2017.
As an initial step, the Company will focus on providing plants and education to nearby farmers who would like to grow stevia. The Company will initially assist them through the whole process and we will eventually assist them in selling the final plant/product to the companies mainly abroad. We intend to offer them our help, knowledge and experience to do so. Then, we will harvest it and sell it for those farmers and intend to sell the harvested product mainly abroad.
The full legal description of the owned parcels is as follows: (i) Field Number 115 located in the SAAK PENTAPLATANOU with a total area of 14,000 square meters; (ii) Field Number 117 located in the SAAK PENTAPLATANOU with a total area of 9,928 square meters. The total independent appraisal for the combined parcels is approximately $62,200.00. The Farm Land Purchase Agreement and the Independent Valuation of the parcels are attached to this Current Report as 10.02 and 10.03 respectively.
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Products – Stevia
Stevia leaf extracts are 300 times sweeter than sugar and one of the fastest growing food ingredients worldwide. Stevia is the only commercially viable, naturally derived, no calorie sweetener for global food and beverage applications. Stevia is currently considered as "green gold", a natural sweetener used to reduce sugar and synthetic sweeteners as aspartame or sucralose. Stevia is a calorie and carbohydrate free, natural sugar substitute with a zero-glycemic index. Made from the extract of the leaves from the plant species Stevia Rebaudiana, Stevia is a herb that is native to Central and South America where, it can be found growing in the wild as a small shrub. Stevia has been used as a natural sugar substitute and flavoring for hundreds of years.
The glycoside compounds that give Stevia its sweet taste, stevioside and rebaudioside, are up to 300 times as sweet assucrose.
Uses of Stevia
Stevia is widely a sweetener ingredient and additive in food and beverages worldwide. Some of its uses are:
Zero Calorie Sugar Substitute.
Sweetener in Beverage Production.
Sweetener as a Food and Confection Additive.
Preservative.
Health and Dietary Supplement.
Medicine.
Pharmaceutical Products.
Greece Advantages
Some strategic advantages of locating the Company in Greece are:
Excellent soil conditions for growing Stevia.
Stevia can be grown better in valleys, such as those in Pella.
Abundant and skilled labor in agricultural techniques.
Cost efficiencies due to labor and infrastructure.
Possibility to expand in other part of Greece.
Low cost access in Europe.
Unique Investment Opportunity.
The Strategic Location (Within Europe, borders with Eastern Countries etc.)
No minimum stay requirement.
Expand Use of Stevia in Greek gastronomy the past years.
2017 is a safer and steadier economic environment in Greece.
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Stevia Market Size
Stevia has high sweetness and zero calories making it a desirable sweetener with a global demand. According to WHO estimates, Stevia has the potential to replace 20-30% of all dietary sweeteners in the coming years. According to the Global Markets for Non-Sugar Sweeteners, BBC Research, September 2015:
The global market for non-sugar sweeteners is expected to rise at a compound annual growth rate of 1.1% and reach nearly $10 billion by 2016.
The North American market is 60% of the global market and estimated to reach nearly $6 billion in 2016.
The European market represents the second largest market category with the expected sale of nearly $2 billion in 2016.
Both the food processing industry and consumers are looking for a viable sweetening option such as Stevia. Although sugar (sucrose) has dominated the sweetening market, its importance is getting reduced due to the soaring rates of and consumer demand for healthier alternatives to sugar. The United States and Japan are the leading economies of world with a 60% share in global Stevia consumption. China is the world leader in production and extraction of Stevia leaves with an 80% share. Stevia made a large impact within the $8 billion high intensity sweetener category, overtaking Aspartame within its first year of launch. The potential market for Stevia has expanded to the entire sweetener market and across all food & beverage categories. Stevia is gradually replacing artificial sweeteners.
Business Model
We intend to work closely with an R&D team to ensure that the cultivation process and our product set new benchmarks in the Stevia market. The Company will grow the Stevia seedlings into mature plants when they are harvested, dried and packaged to be sent to a major refinery. Although, we do not have any material contract with a refinery, discussions are under way and we expect such a deal to be finalized shortly. We have done extensive research in various forms so as to achieve the best performance based on weather conditions in Greece. After 5 years of continuous efforts we have achieved the optimal results of production and plant quality that exists today.
Stevia Plantation
Stevva’s mission is the introduction of a new agricultural production in Greece with the highest quality of plants at farming areas eager to adapt new plants for a higher performance yield and with a secured future sale of their production.
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Executive Management
Mr. Theodore Kerasidis
- Kerasidis has a Bachelor of Business Administration and prior to starting Stevva Ltd., was President of Agricultural Cooperative Stevia. As President he was responsible for the organization which was founded to promote stevia adoption by Greek and EU farmers. Kerasidis is a pioneer in EU stevia growing having founded one of the first ever commercial stevia plantations in Europe. Mr. Kerasidis is a seasoned agricultural executive, with over a decade of stevia and other perennial crop experience in the agricultural region of Greece as well as Eastern Africa; including;
1. March 2012 - present - President of Agricultural Association Stevia Pellas (description above);
2. October 2010 – September 2011 - Director of Advertising – MpeskaiEsy an online shopping outlet;
3. January 2007 – October 2010 - Agriculture Technician - Kerasidis Farms; is a small organization in the vegetables and
melons farms industry.
Non-Executive Management
Mr. Bruce Irambona
- Mr Bruce Irambona has a 10-year experience of agricultural management in East Africa and has managed Stevia operations since 2011, Graduate of the National University of Rwanda Engineering degree in agriculture economics and agribusiness.
Mr. Chris Kalenderis
- Mr. Chris Kalenderis .Highly skilled in practical farm operations including plowing, planting, Irrigating and fertilizing .Experience in using service equipment such as tractors and milking machines. Over five years of dedicated experience working in a farmhouse.
Ms. Rachel Kerasidou
- Ms. Rachel Kerasidou is a well-rounded professional who has solid background and experience in the field of research and development pertaining to crop growth and the factors that affect that dictate their mortality and development rate such as climate conditions, soil, temperature, humidity, etc. ; an expert in the study of forest conservation and emission avoidance, reduction, and mitigation. She has received a bachelor degree in Agricultural sciences from the University of Kalamata.
Mr. Panos Basileiadis
– Mr. Basileisdis is senior executive with a high degree of commercial insight and business acumen. Extensive multi-industry global experience gained with a number of world-class multinationals. Ability to deliver in a challenging operational environment.
Mr. Gregory Mazetsis –
Mr.
Mazetsis
A highly efficient, hardworking and talented design engineer with a comprehensive understanding of 12 design processes and also manufacturing and construction methods. Experienced in all the design stages of a product, including research, development and manufacture right through installation and final commissioning.
Environmental Profile
The Company will follow the environmental lead provided by major worldwide distributors with the mission to lower the carbon footprint of Stevia cultivation. All farming done by Stevva is at the highest standards of sustainability.
What is Stevia?
In its natural form, Stevia Rebaudiana is a leafy green plant found in Paraguay and Brazil. The glycosides in its leaves, including up to 10% Stevioside, account for its incredible sweetness, making it unique among the nearly 300 species of Stevia plants. It has been used in those regions for hundreds of years as a sweetener and also as a treatment for burns, colic and stomach problems. Stevia is intensely sweet, has zero calories and has a glycemic index value of 0 which makes it ideal for diabetics compared to other mainstream sweeteners such as sugar that has a Glycemic index value of 80. The Stevia plant contains several sweet-tasting compounds known as steviol glycosides, which have been estimated to be 300 times as sweet as sugar.
The Stevia plant (Stevia Rebaudiana), belongs to the Compositae (sunflower family of plants) and is one of only two of the approximately 300 members of the genus Stevia producing sweet steviol glycosides. Originating in the South American wild, it could be found growing in semi-arid habitat ranging from grassland to scrub forest to mountain terrain. The plant made its way to Pacific Rim countries where in recent decades it became cultivated domestically, used in its raw leaf form and now is commercially processed into sweetener.
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Stevia has a long history of use as a sweetener, due to the presence of sweet crystalline glycosides called Stevioside and Rebaudioside A which are 300 times sweeter than sucrose. Stevioside and Rebaudioside A are non-caloric, non-fermentable, non-discoloring, heat stable at 95°C and have a lengthy shelf life. The product can be added to cooked/baked goods or processed foods and beverages. In the Pacific Rim countries, Korea, Japan and China, Stevia is regularly used in preparation of food and pharmaceutical products.
Cultivation Methods
The Company grows Stevia in Giannitsa, Greece. The climate and soil conditions in this area are perfect for cultivating this sweet plant. Stevia is grown best in environments with long days of sunshine. It is native to semi-humid, sub-tropical climates where temperatures typically range from -6°C to 43°C. While tolerant of mild frost, hard frosts will kill the roots of the plant. It is a perennial plant that can be harvested several times a year if grown in an optimal environment such as Rwanda.
Stevia producers use conventional breeding techniques to increase the sweet compounds found in the leaves of the plant. Stevia plants are not genetically modified organisms (non-GMO). Stevia farming provides a profitable crop for thousands of independent farmers of varying scales in Asia, South America, and Africa. Stevia is not replacing food crops, but is being cultivated as a cash crop on smaller plots of farmlands in addition to food crops for added income.
Time of harvesting depends on variety and the growing season. Generally, harvesting occurs twice, in mid to late October when plants are 40-60 cm in height and in July. Optimum yield (biomass), and stevioside quality and quantity are best just prior to flowering.
Irrigation is to be considered as complementary to rain. Since rainfall can't be guaranteed, irrigation is needed in the critical periods such as the implantation period, after harvest and during high temperature peaks. The three most common types of irrigation are: (i) by pivots, if you have plenty of water; (ii) with sprinklers, in a relatively small area; or (ii) by dripping, if water quantity is a problem. An adequate water supply will avoid stress in the plants, which will result in less diseases and better biomass production.
The geographical location will determine the months of the year in which the seedlings can be brought to the field. There are two alternatives for planting the seedling: with bare root or coming from a tray with the corresponding root ball. If done with a machine, 3 – 4 people are needed to achieve 1 hectare per day. Drying of the woody stems and soft green leaf material is completed immediately after harvesting utilizing a drying wagon or a kiln. Depending on weather conditions and density of loading, it generally takes 24 to 48 hours to dry Stevia at 40°C to 50°C. An estimated 21,500 kg/ha of green weight is dried down to 6,000 kg/ha of dry weight.
Packaging
Dry leaves are stored in plastic lined cardboard boxes, sealed, strapped and labeled for further processing. Once Stevia leaves are picked, separated from their stems and dried on the farm, they are shipped to a refinery. After being refined, the final product is distributed to major food and beverage companies.
Greece Overview
The municipal unit Giannitsa has an area of 208.105 km2. Its population is 31,983 people (2011 census). It includes a few outlying villages (Mesiano, Melissi, Pentaplatanos, Archontiko, Ampelies and Damiano). The municipality Pella as a whole includes many villages and has 63,122 inhabitants. The city is located in the center of Macedonia between Mount Paiko and the plain of Giannitsa, and is the economic, commercial and industrial center of the Pella regional unit. European route E86 (Greek National Road 2) runs along the south of the city. The former shallow, swampy, and variable-sized Giannitsa Lake or Loudias Lake, fed by the Loudias River and south of the city, was drained in 1928-1932 by the New York Foundation Company. Greece, as member of European Union, can take advantage of the free trade policy by which the European Economic Area (EEA) and Turkey, have the right to export and import goods freely. This means that governments may not limit quantities of imports/exports nor restrict trade in any other way.
Future Plans and Projects
In addition to increasing its production of Stevia, the Company plans to broaden its scope and market reach by introducing other crops that are in high demand for additional profit growth and risk mitigation purposes such as quinoa and chia seeds. Furthermore, we would ideally like to make a training center for the cultivation and production of stevia for the farmers who want to know how it is done. Such seminars do not exist in Greece. And further in future we would like to be those who will convert the dry leaves into the final product that can be directly sold to major worldwide companies for use.
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Stevia Market
According to WHO estimates, Stevia has the potential to replace 20-30% of all dietary sweeteners in the coming years.
Source: Zenith International
The United States and Japan are the leading economies of world with 60% share in global Stevia consumption while China with 80% share is the world leader in production and extraction of Stevia leaves. The rise in global Stevia products crossed the 150% mark in the beginning of this decade and is going to expand with recent EU clearings on low-sugar products. Stevia is gradually replacing sweetening agents in the Food & Beverage Industry. The widespread rollout of products containing Stevia resulted in a massive 400% increase in launches globally between 2008-2012 and 158% between 2011-12. As rising levels of obesity and diabetes continue to generate headlines, there has never been so much emphasis on reducing caloric intake as well as consuming healthier foods and beverages.
While people in Japan and South America have used Stevia as a sweetener for decades, Zenith International pointed to 2008 as a turning point for Stevia’s increase in global use. That year the U.S. Food and Drug Administration said it had no objection to the Generally Recognized as Safe (GRAS) status of Rebaudioside A, a steviol glycoside within the Stevia leaf, as an ingredient in foods and beverages. Regulatory approval in other parts of the world followed, including the European Union in 2011.
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Marketing Plan
The Company intends to sell its production yield large manufactures of Stevia, who in turn sell to major name brand clients. Once we secure a contract with a major buyer whereby they will purchases our entire crop, there is little need for the expense of a strenuous marketing plan. However, the Company will set up basic marketing materials in order to inform its stakeholders and industry participants of the ongoing progress and activities of the Company.
Marketing Objective
The Company plans to undertake a scaled down marketing strategy and develop a website for the dissemination of Company news and reports of the results of its activities and other information to stakeholders and industry participants.
Strategy
We intend to become a dedicated business to business product provider. The Company’s core strategy is to provide Stevia to distributors, wholesalers, and refiners in the food and beverage ingredient industry. The Company will highlight the following:
Quality.
Price.
Availability.
Working with the community in Greece/ providing employment in Greece.
Working for the economic development of Greece.
Trade Shows
In order to broaden market reach and industry contacts, management will attend key industry trade shows in North America and Europe. It is estimated that the company will attend at least 4 events annually.
Industry Associations
– The Company plans to join business associations focused on the Stevia industry including:
Global Stevia Institute (GSI)
- GSI was launched in June 2010, as an educational resource for scientists, health professionals, food and beverage manufacturers, public affairs leaders, and consumers. Since then, the GSI has worked internationally to educate about Stevia. The GSI provides information in multiple languages, including Spanish, French, German, Portuguese and Chinese. The GSI also organizes educational events for scientists, health professionals, and other influencers at international, regional and national forums.
International Stevia Council
- The International Stevia Council is a global trade association representing the interests of companies that process, manufacture and/or market Stevia sweetener products. The International Stevia Council is a 501(c)(6) not-for-profit organization incorporated under the law of the State of Delaware in the United States (US). The Council has been created in July 2010 by eleven founding members.
Employees
We currently have 7 full-time employees.
ITEM 1A.
RISK FACTORS
You should carefully consider each of the risks and uncertainties described below and elsewhere in this Current Report on Form 8-K, as well as any amendments or updates reflected in subsequent filings with the SEC. We believe these risks and uncertainties, individually or in the aggregate, could cause our actual results to differ materially from expected and historical results and could materially and adversely affect our business operations, results of operations, financial condition and liquidity. Further, additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our results and business operations.
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Risks Associated with Our Business
We face intense competition which could prohibit us from developing a customer base and generating revenue.
The industries within which we compete, including the sweetener industry is highly competitive with companies that have greater capital resources, facilities and diversity of product lines. Additionally, if demand for stevia continues to grow, we expect many new competitors to enter the market as there are no significant barriers to stevia production. More established agricultural companies with much greater financial resources which do not currently compete with us may be able to easily adapt their existing operations to production of stevia. Due to this competition, there is no assurance that we will not encounter difficulties in obtaining revenues and market share or in the positioning of our services or that competition in the industry will not lead to reduced prices for the stevia leaf. Our competitors may also introduce new non-stevia based low-calorie sweeteners or be successful in developing a fermentation-derived stevia ingredient or other alternative production method which could also increase competition and decrease demand for stevia-based products.
We will produce products for consumption by consumers that may expose us to litigation based on consumer claims and product liability.
The stevia produced at our farms will be integrated into stevia-based products which will be consumed by the general public. Additionally, we may manufacture and sell private label stevia-based food products. Even though we intend to grow and sell products that are safe, we have potential product risk from the consuming public. We could be party to litigation based on consumer claims, product liability or otherwise that could result in significant liability for us and adversely affect our financial condition and operations.
If our services do not gain acceptance among stevia growers our future growth and development may suffer.
Our business model relies on the assumption that we will be able to develop methods and protocols, secure valuable plant strains for stevia farming that will be attractive to both stevia growers and manufacturers. If our methods and protocols do not gain acceptance among growers or manufacturers our business will suffer. A number of factors may affect the market acceptance of our products and services, including, among others, the perception by growers of the effectiveness of our methods and protocols, the perception among manufacturers of the quality of stevia produced and our ability to fund marketing efforts, and the effectiveness of such marketing efforts. If such products and services do not gain acceptance by growers and/or manufacturers, we may not be able to fund future operations, including the expansion of our own farming projects and development and/or acquisition of additional intellectual property, which inability would have a material adverse effect on our business, financial condition and operating results.
Any failure to adequately establish a network of growers and manufacturers will impede our growth.
We expect to be substantially dependent on manufacturers to purchase the stevia produced both at our own farms and at those of our customers. The relationship with this manufacturer and its perception of the stevia produced using our farm management services will determine its willingness to enter into purchase contracts with us and our customers on attractive terms. Our ability to secure such contracts will influence our attractiveness to growers who are potentially interested in partnering with us. Achieving significant growth in revenue will depend, in large part, on our success in establishing this production network. If we are unable to develop an efficient production network, it will make our growth more difficult and our business could suffer.
If we are unable to deliver a consistent, high quality stevia leaf at sufficient volumes, our relationship with our manufacturers may suffer and our operating results will be adversely affected.
Manufacturers will expect us to be able to consistently deliver stevia at sufficient volumes, while meeting their established quality standards. If we are unable to consistently deliver such volumes either from our own farms, or those of our grower partners, our relationship with these manufacturers could be adversely affected which could have a negative impact on our operating results.
Changes in consumer preferences or negative publicity or rumors may reduce demand for our products.
Recent data suggests consumers are adopting stevia as a sweetener in many products. However, stevia is a relatively new ingredient in consumer products and many consumers are not familiar with it. Therefore, any negative reports or rumors regarding either the taste or perceived health effects of stevia, whether true or not, could have a severe impact on the demand for stevia-based products. Manufacturers may decide to rely on alternative sweeteners which have a more established history with consumers. Primarily operating at the grower level, we will have little opportunity to influence these perceptions and there can be no assurance that the increased adoption of stevia in consumer food and beverage products will continue. Additionally, new sweeteners with similar characteristics to stevia may emerge which could be cheaper to produce or be perceived to have other qualities superior to stevia. Any of these factors could adversely affect our ability to produce revenues and our business, financial condition and results of operations would suffer.
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If we fail to attract and retain key personnel, our business may suffer.
Given the nature of which our business is based, our future success is dependent, in large part, upon our ability to attract and retain highly qualified managerial, technical and sales personnel. If we lose the services of either of our executive officers, our financial condition and results of operations could be materially and adversely affected. Our success also depends upon our ability to identify, hire and retain other highly skilled technical, managerial, editorial, sales, marketing and other professionals. Competition for such personnel is intense. We cannot be certain of our ability to identify, hire and retain adequately qualified personnel. Failure to identify, hire and retain necessary key personnel could have a material adverse effect on our business and results of operations.
Our directors and named executive officers are also our principal stockholders, as such they will be able to exert significant influence over matters submitted to stockholders for approval, which could delay or prevent a change in corporate control or result in the entrenchment of management or the Board of Directors, possibly conflicting with the interests of other stockholders.
Our directors and named executive officers are also our principal stockholders as such they exert significant influence in determining the outcome of corporate actions requiring stockholder approval and otherwise control of our business. This control could have the effect of delaying or preventing a change in control or entrenching management or the Board of Directors, which could conflict with the interests of our other stockholders and, consequently, could adversely affect the market price of our common stock.
Business disruptions could affect our operating results
A significant portion of our development activities and certain other critical business operations are concentrated in a few geographic areas. A major earthquake, fire or other catastrophic event that results in the destruction or disruption of any of our critical facilities could severely affect our ability to conduct normal business operations and, as a result, our future financial results could be materially and adversely affected.
We have a “going concern” opinion from our auditors, indicating the possibility that we may not be able to continue to operate
.
Our independent registered public accountants have expressed substantial doubt about our ability to continue as a going concern. The “going concern” opinion could materially limit our ability to raise additional funds by issuing new debt or equity securities or otherwise. If we fail to raise sufficient capital, our ability to continue our operations will be significantly impaired. As a result we may have to liquidate our business and investors may lose their investments. Investors should consider our independent registered public accountant’s comments when deciding whether to invest in the Company.
Risks Relating to Ownership of Our Securities
Our stock price may be volatile, which may result in losses to our shareholders.
The stock markets have experienced significant price and trading volume fluctuations, and the market prices of companies listed on the OTCMarkets quotation system in which shares of our common stock are listed, have been volatile in the past and have experienced sharp share price and trading volume changes. The trading price of our common stock is likely to be volatile and could fluctuate widely in response to many factors, including the following, some of which are beyond our control:
variations in our operating results;
changes in expectations of our future financial performance, including financial estimates by securities analysts and investors;
changes in operating and stock price performance of other companies in our industry;
additions or departures of key personnel; and
future sales of our common stock.
Domestic and international stock markets often experience significant price and volume fluctuations. These fluctuations, as well as general economic and political conditions unrelated to our performance, may adversely affect the price of our common stock.
Our common shares may become thinly traded and you may be unable to sell at or near ask prices, or at all.
We cannot predict the extent to which an active public market for trading our common stock will be sustained. Although the trading price of our common shares increased significantly recently, it has historically been sporadically or “thinly-traded” meaning that the number of persons interested in purchasing our common shares at or near bid prices at certain given time may be relatively small or non-existent.
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This situation is attributable to a number of factors, including the fact that we are a small company which is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community who generate or influence sales volume. Even if we came to the attention of such persons, those persons tend to be risk-averse and may be reluctant to follow, purchase, or recommend the purchase of shares of an unproven company such as ours until such time as we become more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. We cannot give you any assurance that a broader or more active public trading market for our common stock will develop or be sustained, or that current trading levels will be sustained.
The market price for our common stock is particularly volatile given our status as a relatively small company, which could lead to wide fluctuations in our share price. You may be unable to sell your common stock at or above your purchase price if at all, which may result in substantial losses to you.
Shareholders should be aware that, according to SEC Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include (1) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (2) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (3) boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (4) excessive and undisclosed bid-ask differential and markups by selling broker-dealers; and (5) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequent investor losses. Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our securities. The occurrence of these patterns or practices could increase the volatility of our share price.
We do not anticipate paying any cash dividends to our common shareholders.
We presently do not anticipate that we will pay dividends on any of our common stock in the foreseeable future. If payment of dividends does occur at some point in the future, it would be contingent upon our revenues and earnings, if any, capital requirements, and general financial condition. The payment of any common stock dividends will be within the discretion of our Board of Directors. We presently intend to retain all earnings after paying the interest for the preferred stock, if any, to implement our business plan; accordingly, we do not anticipate the declaration of any dividends for common stock in the foreseeable future.
Volatility in our common share price may subject us to securities litigation.
The market for our common stock is characterized by significant price volatility as compared to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. In the past, plaintiffs have often initiated securities class action litigation against a company following periods of volatility in the market price of its securities. We may, in the future, be the target of similar litigation. Securities litigation could result in substantial costs and liabilities and could divert management’s attention and resources.
The elimination of monetary liability against our directors, officers and employees under Nevada law and the existence of indemnification rights of our directors, officers and employees may result in substantial expenditures by our company and may discourage lawsuits against our directors, officers and employees.
Our Articles of Incorporation contains a specific provision that eliminates the liability of our directors and officers for monetary damages to our company and shareholders. Further, we are prepared to give such indemnification to our directors and officers to the extent provided for by Nevada law. We may also have contractual indemnification obligations under our employment agreements with our officers. The foregoing indemnification obligations could result in our company incurring substantial expenditures to cover the cost of settlement or damage awards against directors and officers, which we may be unable to recoup. These provisions and resultant costs may also discourage our company from bringing a lawsuit against directors and officers for breaches of their fiduciary duties, and may similarly discourage the filing of derivative litigation by our shareholders against our directors and officers even though such actions, if successful, might otherwise benefit our company and shareholders.
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Our business is subject to changing regulations related to corporate governance and public disclosure that have increased both our costs and the risk of noncompliance.
Because our common stock is publicly traded, we are subject to certain rules and regulations of federal, state and financial market exchange entities charged with the protection of investors and the oversight of companies whose securities are publicly traded. These entities, including the Public Company Accounting Oversight Board, the SEC and FINRA, have issued requirements and regulations and continue to develop additional regulations and requirements in response to corporate scandals and laws enacted by Congress, most notably the Sarbanes-Oxley Act of 2002. Our efforts to comply with these regulations have resulted in, and are likely to continue resulting in, increased general and administrative expenses and diversion of management time and attention from revenue-generating activities to compliance activities. Because new and modified laws, regulations and standards are subject to varying interpretations in many cases due to their lack of specificity, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This evolution may result in continuing uncertainty regarding compliance matters and additional costs necessitated by ongoing revisions to our disclosure and governance practices.