IGPK Intergrated Cannabis Solutions Inc (PK)

ITEM 1A. RISK FACTORS

RISK FACTORS

The shares of our Common Stock being offered for resale by the Selling Stockholders are highly speculative in nature, involve a high degree of risk and should be purchased only by persons who can afford to lose their entire amount invested in the Common Stock. Accordingly, prospective investors should carefully consider, along with other matters referred to herein, the following risk factors in evaluating our business before purchasing any shares of Common Stocks. If any of the following risks actually occurs, our business, financial condition or operating results could be materially adversely affected. In such case, you may lose all or part of your investment. You should carefully consider the risks described below and the other information in this Prospectus before investing in our Common Stock.

Risks Related to Our Business

Our financial statements disclose that there is substantial doubt regarding our ability to continue as a going concern, in which case you could lose your investment.

We have a working capital deficit, a history of net losses, and are dependent on advances from our officer in order to continue its operations. These factors raise substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon our generating profitable operations in the future and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. Our management intends to finance operating costs with additional advances from related parties, notes payable and/or public issuance of common stock. Although we may be successful in obtaining financing, there are no assurances that such funding will be achieved at a sufficient level or that we will succeed in our future operations.

We expect to incur substantial expenses to meet our reporting obligations as a public company.

We will incur substantial annual costs to maintain the proper management and financial controls for our filings required as a public reporting company, funds that would otherwise be spent for our business operations. Our public reporting costs may increase over time, which will increase our expenses and may decrease our potential profitability.

Our business is highly competitive; competition presents an ongoing threat to the success of our hemp processing business.

We face significant competition from small, medium and large competitors in the hemp processing space, which competitors have greater financial, operational, and personnel resources than we do. Should we fail to develop strategies to overcome our competition, our revenues will be negatively impacted.

Because our Chief Executive Officer/Director owns 990,400 Preferred A Shares convertible into 49,520,000,000 Common Shares, he has 97% of our voting stock through his ownership of Series A Preferred Shares, he can exert significant control over our business and affairs and may have actual or potential interests that may depart from those of investors.

Our Chief Executive Officer/Director, Matthew Dwyer has voting stock equal to 97% of our issued and outstanding shares. Additionally, our Chief Executive Officer/Director, through his ownership of shares of Series A Preferred Stock, beneficially owns over 51% of our outstanding voting stock. The interests of our Chief Executive Officer may differ from the interests of our other stockholders. As a result, our Chief Executive Officer/Director will have significant influence and control over all corporate actions requiring stockholder approval, irrespective of how our other stockholders may vote, including the following actions:

This concentration of ownership by itself may have the effect of impeding a merger, consolidation, takeover or other business consolidation, or discouraging a potential acquirer from making a tender offer for our common stock, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price.

We will need substantial funding to accomplish our Plan of Operations and business objectives

We will need substantial funding of at least $2.1 million to fund our Plan of Operations. We may be unable to raise capital when needed, if at all, which could cause us to have insufficient funds to pursue our operations, or to delay, reduce or eliminate our development of new programs or commercialization efforts. Additionally, we expect additional costs to continue our operations, including SEC reporting costs associated with operating as a public company. We may also encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may increase our capital needs and/or cause us to spend our cash resources faster than we expect. Accordingly, we expect that we will need to obtain substantial additional funding in order to continue our operations, assuming we are successful in completing our Plan of Operations, of which there are no assurances.

To date, we have financed our operations entirely through management and equity investments from investors, and we expect to continue to do so in the foreseeable future. Additional funding from those or other sources may not be available when or in the amounts needed, on acceptable terms, or at all. If we raise capital through the sale of equity, or securities convertible into equity, it will result in dilution to our existing stockholders, which could be significant depending on the price at which we may be able to sell our securities. If we raise additional capital through the incurrence of additional indebtedness, we will likely become subject to further covenants restricting our business activities, and holders of debt instruments may have rights and privileges senior to those of our equity investors. In addition, servicing the interest and principal repayment obligations under debt facilities could divert funds that would otherwise be available to support development of new programs and marketing to current and potential new clients. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or eliminate development of new programs or future marketing efforts. Any of these events could significantly harm our business, financial condition and prospects.

Our financial statements may not be comparable to those of other companies.

Pursuant to Section 107(b) of the JOBS Act, we have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of The JOBS Act. This election allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result, our financial statements may not be comparable to companies that comply with public company effective dates, and our stockholders and potential investors may have difficulty in analyzing our operating results if comparing us to such companies.

We do not have an independent board of directors which could create a conflict of interests and pose a risk from a corporate governance perspective.

Our Board of Directors (the “Board”) of our current executive officer and consultants and we do not have any outside or independent directors. The lack of independent directors:

Because officers serve on our Board of Directors, it will be difficult for the Board to fulfill its traditional role as overseeing management.

We cannot predict when or if we will produce revenues.

We have generated no revenues for the years presented in this prospectus and since our inception. For us to execute upon and complete our Plan of Operations (See Plan of Operations beginning at page 47), we must obtain substantial funding. Our potential revenues are fully contingent upon adequate funding and successful completion of our Plan of Operations. There is no assurance that we will generate revenues sufficient to generate our business. Even if we obtain adequate funding and complete our Plan of Operations, we may be unsuccessful in our business and business strategies, and our results of operations will be negatively impacted, and you will lose your entire investment.

We have an unproven business model, we have not proven our ability to generate revenues or profit, and any investment is high risky.

We have very no meaningful operating history in our planned hemp processing business, so it will be difficult for you to evaluate an investment in our stock and our ability to generate profit. Our entire business is contingent upon adequate funding and successful execution of our Plan of Operations. We have disclosed in our financial statement footnotes the existence of substantial doubt regarding our ability to continue as a going concern. We cannot assure that we will ever generate meaningful revenues or be profitable. Since we have not proven the essential elements of profitable operations, you will be furnishing venture capital to us and will bear the risk of complete loss of your investment in the event we are unsuccessful.

We depend heavily on our Chief Executive Officer.

Our future success depends to a significant degree on the skills, experience and efforts of our CEO, Matthew Dwyer, who has public company experience and experience in the cannabis sector. We have no key man life insurance for our CEO. Should we lose the services of our CEO, we may be unable to hire another CEO with similar and equal skills to direct our operations.

Risks Related to Hemp

Farming is unpredictable, subject to the unpredictability of weather, nature and climate change and other factors, which in turn makes farming unpredictable and may negatively impact our results of operations.

The farmers from which we purchase Hemp Biomass may be subject to material farming risks, as follows:

Should any of the foregoing risks become material to our operations, our results of operations will be negatively impacted.

Due to over speculation and other factors, the Hemp/CBD market has declined and may face further declines.

Following the passage of the 2018 Farm Bill, which legalized the cultivation of hemp, a form of cannabis with low concentrations of THC, the main psychoactive agent in marijuana, there was a glut of farmers and CBD manufacturers entering the hemp farming and CBD processing and manufacturing fields, About 65 percent of U.S. hemp farmers lack a buyer for their crop the 2019 season according to a July 2019 survey by Whitney Economics (Source: http://www.reuters.com/article/us-usa-hemp-farmers/for-many-u-s-farmers-who-planted-hemp-cbd-boom-leaves-bitter-taste-idUSKBN1XD0GE). If this over speculation and over supply of farmers continues when we begin our Hemp processing activities, our operations will be negatively impacted.

If we fail to conduct adequate Hemp related risk assessment, our results of operations will be negatively impacted.

In order to make a sound decision regarding the production of hemp, growers must evaluate the risks associated with the crop. That risk assessment should include a thorough review of the five areas of risk in agriculture: price, production, legal, financial and human risk. Price risk is defined as the fluctuations in prices paid for inputs or received for commodities sold. The major issue for industrial hemp in this risk category is the lack of a price discovery function, as down by the difficulty of r producers to determine if a price offered for a hemp product is a fair price. The lack of price discovery can lead to an unfair advantage when buyers and sellers negotiate prices. Should we and the farmers from which we purchase the Hemp Biomass fail to conduct the foregoing risk assessments, our results of operations will be negatively impacted.

If Hemp farmers fail to obtain Federal Crop Insurance provided for in Title 11 of the 2018 Farm Bill, their results of operations may be negatively impacted, which would further impact our results of operations. A portion of the premium for Federal Crop Insurance is subsidized by the U.S. Department of Agriculture. Although industrial hemp was approved for inclusion in the Federal Crop Insurance program in the 2018 Farm Bill, it may take several years of data collection to develop actuary tables to determine premium rates for yield or revenue policies. Whole Farm Revenue Protection (WFRP) policies may be available in the short term. However, the hemp crop must be produced under contract to qualify. There are additional concerns about the ability of underwriters to offer insurance for hemp being grown for CBD’s due to the high value of the crop and potentially large losses. Finally, WFRP will not cover losses due to the crop testing over the 0.3% THC limit. Should Hemp farmers fail to qualify for Federal Crop Insurance, or the subsidies provided by the Department of Agriculture, Hemp farmers and our results of operations may be negatively impacted.

Hemp related regulatory, financial, and risk management risks may negatively impact our results of operations.

At the present time, there are no quality standards for hemp, unlike most traditional crops such as corn, which is sold worldwide, is marketed as U.S. #2 yellow corn, and the USDA has developed specifications for corn as well as the methods used to determine those specifications. These quality standard or grades allow buyers and sellers from across the globe to trade corn contracts effectively.

The lack of quality standards for hemp makes it difficult to develop production contracts as the buyers and sellers could have vastly different views on what criteria to use to determine a good product from a poor product. Grading standards could be especially important if there is a dispute regarding the quality of the hemp product at delivery that would impact the final price. Another concern in the area of legal risk would be the current status of CBD’s with the Food and Drug Administration (“FDA”). To date, only one CBD has been approved by the FDA to treat a medical condition. On June 25, 2018, the FDA approved the use of Epidiolex for the treatment of two severe pediatric seizure disorders, Lennox-Gastaut and Dravet syndrome. Currently, CBD’s are being promoted as a potential treatment for a wide range of medical conditions, and although future research may show that CBD’s are effective in treating many maladies, that research must prove that CBD’s are effective and safe. The type of research required by the FDA is very costly and time-consuming, and the future growth of the CBD market may be dependent on the approval of additional medical and nutritional uses.

Much of the stress farmers and ranchers are experiencing today can be attributed to financial risk. This fourth category of risk is defined as a condition of not having sufficient cash to meet expected obligations, generating lower than expected profits, and losing equity. One way to combat this type of risk is to produce hemp under a contract. Without a contract, hemp is considered a speculative crop, and producers should not invest more than they can afford to lose.

The final area of risk management is human risk, defined as the uncertainty attributed to the character, health or behavior of the people involved in the business. Low commodity prices have forced many producers to search for alternatives to traditional crop and livestock enterprises. Many of these alternatives provide their own set of challenges, and farmers and ranchers must do a thorough risk assessment as they consider producing industrial hemp.

Our goal is to obtain all necessary permits to conduct our business, however, we cannot guarantee we will be successful in procuring all necessary permits and adhering to all regulations.

The predecessor to the Agriculture Improvement Act of 2018, the Agricultural Act of 2014 created a patchwork of state permitting regimes. These regimes have yet to be fully updated after the 2018 Farm Bill. We will seek permits to process hemp in various strategic locales, however, we cannot guarantee that we will be successful in obtaining all necessary permits to conduct our operations.

Our processing equipment will be new, and our operations will require refinement, and our employees will require learning essential machine mechanics with trained professionals.

As CBD production is a new industry, our management has researched production mechanisms involving various machinery for extraction, winterization, solvent extraction and distillation. Each of our machines will be highly technical and their operators require specific training in their use. We will need to perfect our production processes, which may take some time to achieve optimum results. In addition, machines need to be staffed and we cannot guarantee that we will be able to secure the necessary highly trained personnel to operate the machines. As with any machinery, our machines will need to be maintained, and even with appropriate maintenance, we risk their malfunction. We cannot be certain that we will be able to attract and retain staff with appropriate machinery maintenance skills, and if and when any machine malfunctions, we could lose the batch then being processed and suffer down-time until the malfunction could be identified and rectified, by repair or replacement. In addition, as machinery becomes obsolete or unfit for purpose, it will have to be replaced, requiring, purchase, installation, operator training and the related downtime.

Outsourcing raw hemp material at competitive prices is essential to our business model.

Manufacturing high-quality CBD oil based on CO₂ extraction requires that we purchase large quantities of hemp. While bulk pricing tends to give favorable pricing, the emerging hemp market is making pricing raw material unpredictable in the near future. If we are unable to source our raw material at favorable prices, our business will be negatively affected. While the passage of the 2018 Farm Bill now allows for the transport of hemp across state lines, there is no guarantee that we will be able to secure favorable pricing or be able to produce our own hemp at commercially viable cost.

Our success will be dependent on our ability to sell high quality CBD oil and we have yet to develop our manufacturing process and sales channels.

We will use various highly technical machines that are subject to human error and possible mechanical failure. Once we have perfected our manufacturing process, we will still need to sell our products into competitive markets. There is no guarantee that we will be able to produce a high-quality CBD oil as planned and develop significant sales.

Our industry may become subject to expanded regulation and increased enforcement by the Food and Drug Administration (FDA)

The FDA under the Federal Food, Drug, and Cosmetic Act regulates the formulation, manufacturing, packaging, labeling, and distribution of food, dietary supplements, drugs, cosmetic, medical devices, biologics, and tobacco products. Our CBD or isolate is not to be used or marketed as drugs. Accordingly, we will not be required to obtain FDA approval for our CBD or isolate. Moreover, the regulatory status of hemp-derived CBD products is in a state of flux as FDA attempts to determine the appropriate manner in which to regulate these products. Thus, the regulatory approach is still evolving, and we may be required to seek FDA’s approval to market food and dietary supplements containing hemp-derived CBD. It is also possible that FDA may simply issue a regulation setting forth the conditions in which such products may be marketed, or it may simply prohibit these products. However, because FDA’s regulatory process is in its infancy, we cannot predict the likely outcome. Enforcement actions by FDA may include a seizure of our products, an injunction issued by a federal court preventing us from selling our products, civil monetary penalties, or, in egregious circumstances, criminal prosecution. The potential enforcement actions that may be taken by the FTC include an injunction in a Federal District Court, an Administrative Cease and Desist Order, or civil monetary penalties. Finally, it is possible that FDA may decide to prohibit the use of hemp-derived CBD in foods and/or dietary supplements.

FDA regulations, FDA approval processes, and FDA enforcement actions could increase our cost of business by regulating Food Producers.

Our business model currently depends on the future sale of CBD at wholesale, but we may wish to manufacture direct-to-consumer products. In addition, our wholesale customers who intend to add CBD to food or cosmetic products will be regulated by the FDA. We have not sought or intended to seek FDA approval and therefore may be unable to sell into such markets or limited as to potential purchasers. We have not sought FDA approval for our products, potentially subjecting us to enforcement proceedings. In New York City, for example, the Department of Health recently banned the addition of CBD to food and drink, and other jurisdictions could do the same. We do not think this ban will hold up to court challenges, but it could negatively impact the price we are able to obtain for the sale of our products. If we determine to seek FDA or other approval of our products, we will spend time and expense in doing so, and could obtain an adverse determination. Alternatively, even if we were to prevail in an enforcement proceeding, the defense thereof could be extremely time-consuming and expensive.

We may be subject to compliance actions by the FDA for making unsubstantiated claims as to our products efficacy or intended use. On April 2, 2019, outgoing FDA Commissioner Scott Gotlieb issued a statement on the agency’s website, www.fda.gov, pledging the agency will continue to use its authority to take action against companies and product developers which make unproven claims to treat serious or life-threatening diseases, and “where patients may be misled to forgo otherwise effective, available therapy and opt instead for a product that has no proven value or may cause them serious harm.”

The FDA has issued warning letters, in collaboration with the Federal Trade Commission, to three companies – Advanced Spine and Pain LLC (d/b/a Relievus), Nutra Pure LLC and PotNetwork Holdings Inc. – in response to their making unsubstantiated claims related to more than a dozen different products and spanning multiple product webpages, online stores and social media websites. The FDA deemed that companies “used these online platforms to make unfounded, egregious claims about their products’ ability to limit, treat or cure cancer, neurodegenerative conditions, autoimmune diseases, opioid use disorder, and other serious diseases, without sufficient evidence and the legally required FDA approval.”

The agency has said it may pursue a company making medical claims about products asserting to contain CBD that haven’t been approved by the FDA. The FDA has stated that selling unapproved products with unsubstantiated therapeutic claims can put patients and consumers at risk. The FDA does not believe these products have not been shown to be safe or effective, and deceptive marketing of unproven treatments may keep some patients from accessing appropriate, recognized therapies to treat serious and even fatal diseases. Additionally, because they are not evaluated by the FDA, there may be other ingredients that are not disclosed, which may be harmful.

The FDA has pledged to continue to monitor the marketplace and take enforcement action as needed to protect the public health against companies illegally selling CBD products that claim to prevent, diagnose, treat, or cure serious diseases, such as cancer, Alzheimer’s disease, psychiatric disorders and diabetes; illegally selling cannabis and cannabis-derived products that can put consumers at risk; and marketing and distributing such products in violation of the FDA’s authorities.

Additional regulatory considerations that must be taken into account include the Federal Trade Commission’s regulation of unfair and deceptive product labeling and marketing, as well as state law regulation of food safety. States have the authority to regulate matters related to the health and safety of its own citizens, such that the 2018 Farm Bill and regulation by the USDA will not necessarily preempt state or local laws regulating the manufacture and distribution of cannabis-related products that are not directly in conflict with federal law. States may still choose to enact their own laws that can promote or restrict the sale of cannabis-based products. States such as Indiana and Alabama do not permit the sale of CBD oil on a personal level without a prescription.

Any and all claims of medicinal value must be substantiated with reputable scientific support and may be subject to evaluation by the FDA.

There are limitations to how CBD may be marketed and what potential benefits may be advertised.

Any and all claims of medicinal value must be substantiated with reputable scientific support and may be subject to evaluation by the FDA and we may be unable to effectively market our products without proper scientific documentation.

In April 2019, outgoing FDA Commissioner Scott Gottlieb acknowledged that the FDA is considering whether to use its authority to issue regulations that would permit the marketing of CBD in foods or as dietary supplements. However, until the law changes, it is the FDA’s position that selling unapproved products with unsubstantiated therapeutic claims both violates the law and potentially puts patients at risk. Commissioner Gottlieb also asserted that it continues to be unlawful to market foods containing added CBD or THC or dietary supplements containing CBD or THC, regardless of whether the substances are hemp-derived and regardless of the claims being made. FDA takes this position based on the operation of statutory “exclusionary clauses” in the Food, Drug and Cosmetic Act related to food additives and dietary supplements. Specifically, FDA has determined that both CBD and THC, which are now active ingredients in FDA-approved drugs, were the subject of substantial clinical investigations before they were marketed as foods or dietary supplements, and due to the operation of the exclusionary clauses, FDA concludes that it is currently illegal to introduce CBD or THC into the food supply or to market these ingredients as dietary supplements.

Additional regulatory considerations that must be taken into account include the Federal Trade Commission’s regulation of unfair and deceptive product labeling and marketing, as well as state law regulation of food safety.

Participants in the cannabis or hemp or CBD industry may have difficulty accessing the service of banks, which may make it difficult for us to operate.

Despite recent rules issued by the United States Department of the Treasury mitigating the risk to banks who do business with cannabis, hemp or CBD companies permitted under state law, as well as recent guidance from the United States Department of Justice, banks remain weary to accept funds from businesses in the cannabis industry. Since the use of cannabis remains illegal under Federal law, there remains a compelling argument that banks may be in violation of Federal law when accepting for deposit funds derived from the sale or distribution of cannabis. Consequently, businesses involved in the cannabis industry continue to have trouble establishing banking relationships. An inability to open bank accounts may make it difficult for us, or some of our advertisers, to do business.

Federal enforcement practices could change with respect to services provided to participants in the cannabis and hemp industries, which could adversely impact us; if the Federal government were to expend its resources on enforcement actions against service providers in the cannabis industry under guidance provided by the Sessions Memo, including asset forfeiture actions, such actions could have a material adverse effect on our operations, our customers, or our services.

On January 4, 2018, then U.S. Attorney General Jeff Sessions issued the Sessions Memo stating that the Cole Memo was rescinded effectively immediately. Mr. Sessions stated that “prosecutors should follow the well-established principles that govern all federal prosecutions,” which require “federal prosecutors deciding which cases to prosecute to weigh all relevant considerations, including federal law enforcement priorities set by the Attorney General, the seriousness of the crime, the deterrent effect of criminal prosecution, and the cumulative impact of particular crimes on the community.” Mr. Sessions went on to state in the memorandum that “previous nationwide guidance specific to marijuana is unnecessary and is rescinded, effective immediately.” It is unclear at this time whether the Sessions Memo indicates that the Trump administration will strongly enforce the federal laws applicable to cannabis or what types of activities will be targeted for enforcement. We may be irreparably harmed by a change in enforcement policies of the federal government depending on the nature of such change.

Attorney General Order No. 3946-2018 released by Jeff Sessions on July 19, 2018 shows that he is in favor of law enforcement using civil asset forfeiture as “an effective tool to reduce crime” and that “its use should be encouraged where appropriate.” It is possible that due to the recent Sessions Memo our clients may discontinue the use of our services, our potential source of customers may be reduced, and our revenues may decline. Further, additional government disruption in the cannabis industry could cause potential customers and users to be reluctant to use our services or buy advertising from us. It is possible that due to the recent Sessions Memo our clients may discontinue the use of our services, we or our customers may be subject to asset forfeiture actions, our potential source of customers may be reduced, and our revenues may decline. Further, additional government disruption in the cannabis industry could cause potential customers and users to be reluctant to use advertising services, which would negatively impact our results of operations.

The 2018 Farm Bill officially reclassifies hemp for commercial uses after decades of statutes and legal enforcement conflating hemp and marijuana, the 2018 Farm Bill distinguishes between the two by removing hemp from the Controlled Substances Act. While the two are closely related, hemp lacks the high concentration of THC that is responsible for the “high” from the use of marijuana. This would effectively move Regulation Ad enforcement of the crop from the purview of the Drug Enforcement Agency to the U.S. Department of Agriculture.

Laws and regulations affecting the medical marijuana and the CBD industries are constantly changing, which could detrimentally affect our business, and we cannot predict the impact that future regulations may have on us.

Local, state and federal medical marijuana and hemp laws and regulations are broad in scope and they are subject to evolving interpretations, which could require us to incur substantial costs associated with compliance. In addition, violations of these laws, or allegations of such violations, could disrupt our business and result in a material adverse effect on our revenues, profitability, and financial condition.

In addition, it is possible that regulations may be enacted in the future that will be directly applicable to Hemp. We cannot predict the nature of any future laws, regulations, interpretations or applications, nor can we determine what effect additional governmental regulations or administrative policies and procedures, when and if promulgated, could have on our business. These potential effects could include, however, requirements for the revisions to our products to meet new standards, the recall or discontinuance of certain products, or additional record keeping and reporting requirements. Any or all these requirements could have a material adverse effect on our business, financial condition, and results of operations.

Should we fail to comply with the Hemp related rules and regulations adopted by Wisconsin, Colorado and Florida, we could be subject to fines, license suspensions, license revocation or other sanctions, which will negatively impact our operations and financial condition.

We will be governed by Hemp related regulations administered by state regulations in Wisconsin, Colorado and Florida. Should we fail to comply with these regulations, we may be subject to fines, injunctions, cease and desist orders or other sanctions, which will negatively impact our operations and financial condition.

U.S. Federal and foreign regulation and enforcement may adversely affect the implementation of cannabis and hemp laws and regulations and may negatively impact our revenues, or we may be found to be violating the Controlled Substances Act or other U.S. federal, state, or foreign laws.

In December 2018, the 2018 Farm Bill was signed into law. Under section 10113 of the 2018 Farm Bill, state departments of agriculture must consult with the state’s governor and chief law enforcement officer to devise a plan that must be submitted to the Secretary of USDA. A state’s plan to license and regulate hemp can only commence once the Secretary of USDA approves that state’s plan. In states opting not to devise a hemp regulatory program, USDA will construct a regulatory program under which hemp cultivators in those states must apply for licenses and comply with a federally run program. This system of shared regulatory programming is similar to options states had in other policy areas such as health insurance marketplaces under ACA, or workplace safety plans under OSHA—both of which had federally-run systems for states opting not to set up their own systems. Non-cannabis hemp is a highly regulated crop in the United States for both personal and industrial production.

The law outlines actions that are considered violations of federal hemp law (including such activities as cultivating without a license or producing cannabis with more than 0.3 percent THC). The law details possible punishments for such violations, pathways for violators to become compliant, and even which activities qualify as felonies under the law, such as repeated offenses.

Section 12619 of the 2018 Farm Bill removes hemp-derived products from its Schedule I status under the Controlled Substances Act, but the legislation does not legalize CBD generally. CBD, with some minor exceptions, remains a Schedule I substance under federal law. The 2018 Farm Bill ensures that any cannabinoid—a set of chemical compounds found in the cannabis plant—that is derived from hemp will be legal, if and only if that hemp is produced in a manner consistent with the 2018 Farm Bill, associated federal regulations, association state regulations, and by a licensed grower. All other cannabinoids, produced in any other setting, remain a Schedule I substance under federal law and are thus illegal.

In October 2018, the United States Drug Enforcement Agency (“DEA”) rescheduled drugs approved by the FDA, which contain CBD derived from cannabis and no more than 0.1 percent tetrahydrocannabinols from Schedule I, the highest level of restriction with a high potential for abuse, to Schedule V, the lowest restriction with the lowest potential for abuse under the Controlled Substances Act (“CSA”). This ruling does not apply to Cannabidiol (“CBD”) products such as oils, tinctures, extracts, and other foods because they are not FDA approved.

In October 2018, the FDA was advised by the DEA that removing CBD from the CSA would violate international drug treaties to which the United States is a signatory. Specifically, the DEA explained that the United States would “not be able to keep obligations under the 1961 Single Convention on Narcotic Drugs if CBD were decontrolled under the CSA”.

Consequently, the FDA revised its recommendation and advised the DEA to place CBD in Schedule V—which applies to drugs with demonstrated medical value and deemed unlikely to cause harm, abuse, or addiction—instead. Nonetheless, the FDA declared that “[i]f treaty obligations do not require control of CBD, or the international controls on CBD…are removed at some future time, the above recommendation for Schedule V under the CSA would need to be revisited promptly.”

On May 22, 2018, the DEA released the Internal Directive Regarding the Presence of Cannabinoids in Products and Materials Made from the Cannabis Plant, which states “The mere presence of cannabinoids is not itself dispositive as to whether a substance is within the scope of the CSA; the dispositive question is whether the substance falls within the CSA definition of marijuana.”

Many CBD products are derived from cannabis. Some come from marijuana (“Marijuana-CBD”). Marijuana-CBD remains a Schedule I substance. Marijuana-CBD products may be legal under state law in states like Washington, Oregon, and California but their sale is only permitted through a state-regulated marijuana market in the respective state of legal cultivation. Marijuana-CBD products are only legal in states where they were cultivated and these products are heavily regulated at all stages of production, from seed-to-sale. These products come from licensed producers, are developed by licensed processors or manufacturers, and are sold to the public through licensed retailers or dispensaries. Marijuana-CBD products may also contain significant levels of THC.

On the other hand, CBD derived from industrial hemp (“Hemp-CBD”) can be argued as falling completely outside the CSA because the cultivation of industrial hemp was legalized by Section 7606 of the Agricultural Act of 2014 (the “2014 Farm Bill”). Industrial hemp is defined as the cannabis plant with less than .3% THC. The 2014 Farm Bill also requires that industrial hemp to be cultivated under a state agricultural pilot program. Some states also require a license to cultivate or process industrial hemp into other products like Hemp-CBD.

The distribution of Hemp-CBD products is arguably legal under federal law because the 2014 Farm Bill does not explicitly limit distribution. In oral arguments during HIA v. DEA, the DEA admitted that the 2018 Farm Bill pre-empted the CSA with regards to industrial hemp. The DEA has rarely taken any enforcement action against distributors of Hemp-CBD, in part because Congress has limited the DEA’s ability to use federal funds to do so and because the DEA would have to legally establish that the CSA does in fact cover Hemp-CBD. However, the DEA, FDA, and other federal agencies issued guidance in 2016 stating that the 2014 Farm Bill did not permit the interstate transfer or commercial sale of industrial hemp. Several states like Idaho prohibit the distribution of Hemp-CBD. Other states like Ohio, Michigan, and California significantly restrict the distribution of Hemp-CBD.

Even though Hemp-CBD does not fall within the CSA, Hemp-CBD products have not been approved by the FDA. This is also true of Marijuana-CBD. This means that even cannabis derived Marijuana-CBD and Hemp-CBD products containing less than 0.1% THC are not approved CBD drugs for lack of FDA approval.

There is always some risk of enforcement action against Hemp-CBD distributors, as the budgetary restriction that prevented the DEA from using funds to prosecute industrial hemp distributors expired on September 30, 2018. It is also possible that the FDA could take a more aggressive approach to limit the distribution of CBD products.

Different states and different advertising networks may have their own regulations and restrictions regarding advertising CBD products.

Relevant state and local laws may make it difficult to advertise in various markets. The two largest ad buying platforms -- Facebook and Google -- still do not allow CBD advertising (it is designated as a “dangerous product”) on their platforms, which limits the digital marketing efforts of CBD companies to organic marketing. For new businesses, the inability to promote their brand without paid social and search ads makes it extremely challenging to get the qualified traffic needed to grow their online retail business.

We may be subject to certain tax risks and treatments that could negatively impact our results of operations.

Section 280E of the Internal Revenue Code, as amended, prohibits businesses from deducting certain expenses associated with trafficking-controlled substances (within the meaning of Schedule I and II of the Controlled Substances Act). The IRS has invoked Section 280E in tax audits against various cannabis businesses in the U.S. that are permitted under applicable state laws. Although the IRS issued a clarification allowing the deduction of certain expenses, the scope of such items is interpreted very narrowly, and the bulk of operating costs and general administrative costs are not permitted to be deducted. While there are currently several pending cases before various administrative and federal courts challenging these restrictions, there is no guarantee that these courts will issue an interpretation of Section 280E favorable to cannabis businesses or to hemp that exceeds the applicable THC limitations.

We may be subject to price declines for our future products due to an oversupplied market

Hemp prices are declining due to an oversupplied market (See: PanXchange CEO, Julie Lerner, quoted in an article in Bloomberg [Hemp Prices Plunge as CBD Demand Falls Short: Cannabis Weekly - Bloomberg; Date of publication January 27, 2020). Hemp biomass reached a high of over $40 per pound in July just before the 2019 harvest cane in, in January it was trading at $10 per pound following a quadrupling of supply from 2018 to 2019. Current prices for biomass in 2022 range from $2.00 to $7.00 per pound. Consumer demand is limited as the U.S. Food and Drug Administration continues to prohibit the extract in food or dietary supplements. The overall physical demand for the CBD market is much smaller than the supply. Lerner went on to say only 20,000 acres are needed to service the $4 billion U.S. CBD market, and estimates that there are 115,000 acres harvested in 2019. Going spot prices for CBD Isolate, the price per kilo/liter has continued to drop with the increased supply glut. Pricing continues to slide down in 2022, the spot price ranges from $700 to $3,000 based on the time of year and purity. Should prices of our products be subject to price declines, our results of operations may be adversely affected.

We may be subject to supply chain disruptions

Commentators in the hemp industry have predicted that the hemp industry will experience disruptions along the supply chain (February 26, 2020 in GreenEntrepreneur;

(https://www.greenentrepreneur.com/article/346796). Should we experience disruptions in our supply chain, our results of operations will be negatively impacted.

Risks Related to Anticipated Future Apparel Business

Downturns in the US economy may negatively impact consumer purchases of discretionary items are affected, which could materially harm our revenues and results of operations.

Consolidated’s clothing are largely considered discretionary items for consumers. Factors affecting the level of consumer spending for such discretionary items include general economic conditions, unemployment, the availability of consumer credit and consumer confidence in future economic conditions. Uncertainty in global economic conditions continues, and trends in consumer discretionary spending remain unpredictable. Should disposable income levels decline Consolidated’s results of operations could be negatively impacted.

Consolidated generates little sales via Consolidated’s websites or online presence.

Generally, online sales have experienced exponential growth, yet less than 1% of Consolidated’s sales are generated from online sales. Instead, Consolidated relies upon sales from brick and mortar locations, which generally represent declining sales in the US. Because Consolidated has only a nominal online presence for Consolidated’s products, Consolidated’s results of operations may be negatively impacted.

Consolidated may not successfully execute its long-term strategies, which may negatively impact its results of operations.

Consolidated’s growth in these areas depends on Consolidated’s ability to continue to successfully expand Consolidated’s network of brick and mortar stores in the US and expand into the Caribbean and South America. In addition, Consolidated’s long-term strategy depends on Consolidated’s ability to successfully drive expansion of Consolidated’s gross margins, manage Consolidated’s cost structure and drive return on Consolidated’s investments. If Consolidated cannot effectively execute Consolidated’s long-term growth strategies while managing costs effectively, Consolidated’s business could be negatively impacted and may not achieve Consolidated’s expected results of operations.

If Consolidated are unable to anticipate consumer preferences, successfully develop and introduce new, innovative and updated clothing products or engage Consolidated’s consumers, Consolidated’s net revenues and profitability may be negatively impacted.

Consolidated’s success depends on Consolidated’s ability to identify and originate product trends as well as to anticipate and react to changing consumer demands in a timely manner. All of Consolidated’s products are subject to changing consumer preferences that cannot be predicted with certainty. In addition, long lead times for certain of Consolidated’s products may make it hard for us to quickly respond to changes in consumer demands. Consolidated’s new products may not receive consumer acceptance. As consumer preferences shift to different types of performance or other clothing products, and Consolidated’s future success depends in part on Consolidated’s ability to anticipate and respond to these changes. Consolidated’s failure to anticipate and respond timely to changing consumer preferences or to effectively introduce new products and enter into new product categories that are accepted by consumers could result in a decrease in net revenues and excess inventory levels, which could have a material adverse effect on Consolidated’s financial condition.

Consumer shopping preferences and shifts in distribution channels continue to evolve and could negatively impact Consolidated’s results of operations or Consolidated’s future growth.

Consumer preferences regarding the shopping experience continue to rapidly evolve. Consolidated sell Consolidated’s products through a variety of channels, including through wholesale customers and distribution partners, as well as Consolidated’s own direct to consumer business consisting of Consolidated’s brand and factory house stores and e-commerce platforms. If Consolidated or Consolidated’s wholesale customers do not provide consumers with an attractive in-store experience, Consolidated’s brand image and results of operations could be negatively impacted. In addition, as part of Consolidated’s strategy to grow Consolidated’s e-commerce revenue, Consolidated is investing significantly in enhancing Consolidated’s platform capabilities and implementing systems to drive higher engagement with Consolidated’s consumers. If Consolidated do not successfully execute this strategy or continue to provide an engaging and user-friendly digital commerce platform that attracts consumers, Consolidated’s brand image and results of operations could be negatively impacted as well as Consolidated’s opportunities for future growth.

Consolidated operates in highly competitive markets and the size and resources of some of Consolidated’s competitors may allow them to compete more effectively than Consolidated can, resulting in a loss of Consolidated’s market share and a decrease in Consolidated’s net revenues and gross profit.

The market for performance apparel is highly competitive and includes many new competitors as well as increased competition from established companies expanding their production and marketing of performance products. Consolidated’s larger competitors are able to manufacture and sell products with performance characteristics and fabrications similar to certain of Consolidated’s products. Many of Consolidated’s competitors are large apparel and footwear companies with strong worldwide brand recognition. Due to the fragmented nature of the industry, Consolidated also compete with other manufacturers, including those specializing in products similar to Consolidated’s and private label offerings of certain retailers, including some of Consolidated’s retail customers.

Many of Consolidated’s competitors have significant competitive advantages, including greater financial, distribution, marketing and other resources, longer operating histories, better brand recognition among consumers, more experience in global markets and greater economies of scale. In addition, Consolidated’s competitors have long term relationships with our key retail customers that are potentially more important to those customers because of the significantly larger volume and product mix that Consolidated’s competitors sell to them.

Consolidated’s inability to compete successfully against Consolidated’s competitors and maintain Consolidated’s gross margin could have a material adverse effect on Consolidated’s business, financial condition and results of operations.

Consolidated’s profitability may decline or Consolidated’s growth may be negatively impacted as a result of increasing pressure on pricing.

Consolidated’s industry is subject to significant pricing pressure caused by many factors, including intense competition, consolidation in the retail industry, pressure from retailers to reduce the costs of products and changes in consumer demand. These factors may cause us to reduce Consolidated’s prices to retailers and consumers or engage in more promotional activity than Consolidated anticipates, which could negatively impact Consolidated’s margins and cause Consolidated’s profitability to decline if Consolidated is unable to offset price reductions with comparable reductions in Consolidated’s operating costs. In addition, Consolidated’s ability to achieve short-term growth targets may be negatively impacted if Consolidated is unwilling to engage in promotional activity on a scale similar to that of Consolidated’s competitors and Consolidated is unable to simultaneously offset declining promotional activity with increased sales at premium price points. This could have a material adverse effect on Consolidated’s results of operations and financial condition. In addition, ongoing and sustained promotional activities could negatively impact Consolidated’s brand image.

Fluctuations in the cost of products could negatively affect Consolidated’s operating results.

The fabrics Consolidated uses are made of raw materials including petroleum-based products and cotton. Significant price fluctuations or shortages in petroleum or other raw materials can materially adversely affect Consolidated’s cost of goods sold. The cost of transporting Consolidated’s products for distribution and sale is also subject to fluctuation due in large part to the price of oil. Any of these fluctuations may increase Consolidated’s cost of products and have an adverse effect on Consolidated’s profit margins, results of operations and financial condition.

Consolidated may experience a significant disruption in the supply of fabrics or raw materials from current sources or, in the event of a disruption, Consolidated may be unable to locate alternative materials suppliers of comparable quality at an acceptable price, or at all.

In addition, Consolidated’s unaffiliated manufacturers may not be able to fill Consolidated’s orders in a timely manner. If Consolidated experiences significant increased demand, or Consolidated loses or needs to replace an existing manufacturer or supplier as a result of adverse economic conditions or other reasons, additional supplies of fabrics or raw materials or additional manufacturing capacity may not be available when required on terms that are acceptable to Consolidated, or at all, or suppliers or manufacturers may not be able to allocate sufficient capacity to Consolidated in order to meet Consolidated’s requirements. In addition, even if Consolidated is able to expand existing or find new manufacturing or fabric sources, Consolidated may encounter delays in production and added costs as a result of the time it takes to train Consolidated’s suppliers and manufacturers on Consolidated’s methods, products and quality control standards. Any delays, interruption or increased costs in the supply of fabric or manufacture of Consolidated’s products could have an adverse effect on Consolidated’s ability to meet retail customer and consumer demand for Consolidated’s products and result in lower net revenues and net income both in the short and long term.

Consolidated has occasionally received, and may in the future continue to receive, shipments of product that fail to conform to Consolidated’s quality control standards. In that event, unless Consolidated is able to obtain replacement products in a timely manner, Consolidated risks the loss of net revenues resulting from the inability to sell those products and related increased administrative and shipping costs. In addition, because do not control Consolidated’s manufacturers, products that fail to meet Consolidated’s standards or other unauthorized products could end up in the marketplace without Consolidated’s knowledge, which could harm Consolidated’s brand and Consolidated’s reputation in the marketplace.

Covid-19 Related Risks

Covid-19 travel restrictions have negatively impacted our ability to develop our business and operations

Due to travel related Covid-19 restrictions Consolidated cancelled 1 transaction under contract to purchase 9.5 of raw acres of land in Lancaster, CA. The land was to be used to construct growing and processing facilities and two other transactions to acquire land and or farming rights to plant Hemp in California, Florida, and Tennessee. Additionally, Consolidated was unable to apply for licensing to grow and process hemp because Consolidated was unable to secure the land. The Pandemic had prevented Consolidated from traveling for a period of time due to lock downs, the CDC advised people in high risk not to travel on airplanes and avoid interactions to reduce risk of infection. The cancellation of these transactions has negatively impacted Consolidated’s ability to develop its operations and should Covid-19 continue to have such impact, Consolidated will be unable to secure additional farmland until pandemic risks materially diminish to enable travel, which will negatively impact its results of operations.

The outbreak of the coronavirus may negatively impact sourcing and manufacturing of the products that we sell as well as consumer spending, which could adversely affect our business, results of operations and financial condition.

In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China, which has and is continuing to spread throughout China and other parts of the world, including the United States. On January 30, 2020, the World Health Organization declared the outbreak of the coronavirus disease (COVID-19) a “Public Health Emergency of International Concern.” On January 31, 2020, U.S. Health and Human Services Secretary Alex M. Azar II declared a public health emergency for the United States to aid the U.S. healthcare community in responding to COVID-19, and on March 11, 2020 the World Health Organization characterized the outbreak as a “pandemic”. The significant outbreak of COVID-19 has resulted in a widespread health crisis that could adversely affect the economies and financial markets worldwide, and could adversely affect our business, results of operations and financial condition.

The outbreak of the COVID-19 may adversely affect our supply chain.

The worldwide outbreak of corona virus could adversely affect our business, results of operations and financial condition. The coronavirus outbreak may materially impact sourcing and manufacturing, inability to obtain materials, disruptions in the supply chain and potential disruption of transportation of goods, which could adversely affect our business, results of operations and financial condition.

The outbreak of the COVID-19 may adversely affect our customers.

Further, such risks as described above could also adversely affect our customers’ financial condition, resulting in reduced consumer spending for our products. The ultimate extent of the impact of any epidemic, pandemic or other health crisis on our business, financial condition and results of operations will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of such epidemic, pandemic or other health crisis and actions taken to contain or prevent their further spread, among others. These and other potential impacts of an epidemic, pandemic, or other health crisis, such as COVID-19, could therefore materially and adversely affect our business, financial condition, and results of operations.

Risks Related to Our Securities

An investment in our shares is highly speculative.

The shares of our common stock are highly speculative in nature, involve a high degree of risk and should be purchased only by persons who can afford to lose the entire amount invested in the common stock. Before purchasing any of the shares of common stock, you should carefully consider the risk factors contained herein relating to our business and prospects. If any of the risks presented herein actually occur, our business, financial condition or operating results could be materially adversely affected. In such case, the trading price of our common stock could decline, and you may lose all or part of your investment.

Because we are a shell company there are restrictions imposed upon the transferability of unregistered shares.

We are a shell company as defined in Rule 405, because we are a company with nominal operations and no assets. Accordingly, there will be illiquidity of any future trading market until we are no longer considered a shell company, as well as restrictions imposed upon the transferability of unregistered shares outlined in Rule 144(i). Our investors are not allowed to rely on Rule 144 of the Securities Act for a period of one year from the date that we cease to be a shell company. Because investors may be unable to rely on an exemption for the resale of their shares other than Rule 144, and there is no guarantee that we will cease to be a shell company, they may be unable to re-sell our shares in the future and could lose their entire investment as a result. These restrictions and requirements may have a negative impact on our ability to attract additional capital.

Shareholders who hold unregistered shares of our common stock are subject to resale restrictions pursuant to Rule 144, due to our status as a “Shell Company.”

Pursuant to Rule 144 of the Securities Act, a “shell company” is defined as a company that has no or nominal operations; and, either no or nominal assets; assets consisting solely of cash and cash equivalents; or assets consisting of any amount of cash and cash equivalents and nominal other assets. As such, because we have nominal assets, we are considered a “shell company” pursuant to Rule 144 and as such, sales of our securities pursuant to Rule 144 are not able to be made until we have ceased to be a “shell company” and we are subject to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, and have filed all of our required periodic reports for at least the previous one year period prior to any sale pursuant to Rule 144; and a period of at least twelve months has elapsed from the date “Form 10 information” (i.e., information similar to that which would be found in a Form 10 Registration Statement filing with the SEC) has been filed with the Commission reflecting the Company’s status as a non-”shell company.” Because none of our non-registered securities can be sold pursuant to Rule 144, until one year after filing Form 10 like information with the SEC, any non-registered securities we sell in the future or issue to consultants or employees, in consideration for services rendered or for any other purpose will have no liquidity until and unless such securities are registered with the Commission and/or until 12 months after we cease to be a “shell company” and have complied with the other requirements of Rule 144, as described above. As a result, it may be harder for us to fund our operations and pay our consultants with our securities instead of cash. Furthermore, it will be harder for us to raise funding through the sale of debt or equity securities unless we agree to register such securities with the Commission, which could cause us to expend additional resources in the future. Our status as a “shell company” could prevent us from raising additional funds, engaging consultants, and using our securities to pay for any acquisitions (although none are currently planned), which could cause the value of our securities, if any, to decline in value or become worthless.

Restrictions on the Use of Rule 144 by Shell Companies or Former Shell Companies.

Rule 144 is not available for the resale of securities initially issued by companies that are, or previously were, blank check companies, to their promoters or affiliates despite technical compliance with the requirements of Rule 144. Rule 144 also is not available for resale of securities issued by any shell companies (other than business combination-related shell companies) or any issuer that has been at any time previously a shell company. The SEC has provided an exception to this prohibition, however, if the following conditions are met:

Accordingly, we must meet all of the above conditions for Rule 144 to be available to a shareholder for resale purposes; otherwise, our shareholders will be unable to resell their shares.

There is no active public trading market for our common stock and an active market may never develop.

The public trading market for our common stock on the OTCMARKETS Pink tier, has reflected an uneven and inactive market. Market liquidity will depend on the perception of our operating business and any steps that our management might take to bring us to the awareness of investors. There can be no assurance given that there will be any awareness generated. Consequently, investors may be unable to liquidate their investment or liquidate it at a price that reflects the value of the business. As a result, holders of our securities may not find purchasers for our securities should they to sell securities held by them. Consequently, only investors having no need for liquidity in their investment should purchase our securities and who can hold our securities for an indefinite period.

Our stock is thinly traded, sale of your holding may take a considerable amount of time.

The shares of our Common Stock are thinly traded on the OTCMARKETS Pink tier, meaning that the number of persons interested in purchasing our Common Stock at or near bid prices at any given time may be relatively small or non-existent. Consequently, 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. Due to these conditions, we can give you no assurance that you will be able to sell your shares at or near bid prices or at all if you need money or otherwise desire to liquidate your shares.

We have never paid cash dividends and do not anticipate doing so in the foreseeable future.

We have never declared or paid cash dividends on our common shares. We currently plan to retain any earnings to finance the growth of our business rather than to pay cash dividends. Payments of any cash dividends in the future will depend on our financial condition, results of operations and capital requirements, as well as other factors deemed relevant by our board of directors.

The Nevada Revised Statute (“NRS”) contains provisions that could discourage, delay or prevent a change in control of our company, prevent attempts to replace or remove current management and reduce the market price of our stock.

We are subject to the anti-takeover provisions of the NRS. Depending on the number of residents in the state of Nevada who own our shares, we could be subject to the provisions of Sections 78.378 et seq. of the Nevada Revised Statutes which, unless otherwise provided in the Company’s articles of incorporation or by-laws, restricts the ability of an acquiring person to obtain a controlling interest of 20% or more of our voting shares. Our articles of incorporation and by-laws do not contain any provision which would currently keep the change of control restrictions of Section 78.378 from applying to us.

We are subject to the provisions of Sections 78.411 et seq. of the Nevada Revised Statutes. In general, this statute prohibits a publicly held Nevada corporation from engaging in a “combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the combination or the transaction by which the person became an interested stockholder is approved by the corporation’s board of directors before the person becomes an interested stockholder. After the expiration of the three-year period, the corporation may engage in a combination with an interested stockholder under certain circumstances, including if the combination is approved by the board of directors and/or stockholders in a prescribed manner, or if specified requirements are met regarding consideration. The term “combination” includes mergers, asset sales and other transactions resulting in a financial benefit to the interested stockholder. Subject to certain exceptions, an “interested stockholder” is a person who, together with affiliates and associates, owns, or within three years did own, 10% or more of the corporation’s voting stock. A Nevada corporation may “opt out” from the application of Section 78.411 et seq. through a provision in its articles of incorporation or by-laws. We have not “opted out” from the application of this section.

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:

Cautionary Note

We have sought to identify what we believe to be the most significant risks to our business, but we cannot predict whether, or to what extent, any of such risks may be realized nor can we guarantee that we have identified all possible risks that might arise. Investors should carefully consider all of such risk factors before making an investment decision with respect to our common stock.

The forward-looking statements contained herein report may prove incorrect.

This filing contains certain forward-looking statements, including among others: (i) anticipated trends in our financial condition and results of operations; (ii) our business strategy for expanding our business into various foreign countries; and (iii) our ability to distinguish ourselves from our current and future competitors. These forward-looking statements are based largely on our current expectations and are subject risks and uncertainties. Actual results could differ materially from these forward-looking statements. In addition to the other risks described elsewhere in this Risk Factors discussion, important factors to consider in evaluating such forward-looking statements include: (i) changes to external competitive market factors or in our internal budgeting process which might impact trends in our results of operations; (ii) anticipated working capital or other cash requirements; (iii) changes in our business strategy or an inability to execute our strategy due to unanticipated changes in our business; and (iv) various competitive factors that may prevent us from competing successfully in the marketplace. Considering these risks and uncertainties, many of which are described in greater detail elsewhere in this Risk Factors discussion, there can be no assurance that the events predicted in forward-looking statements contained in this Prospectus will, in fact, transpire.