Risk
Factor Summary
Our
business is subject to numerous risks and uncertainties, including those described in “Risk Factors” in this Prospectus,
any of which could materially and adversely impact our business and operations, adversely impact our growth prospects, cause us to incur
additional costs or liabilities and/or cause the price of our common stock to decline. You should carefully consider these risks and
uncertainties when investing in our common stock. Some of the principal risks and uncertainties include the following:
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We will require additional funds in the future to achieve
our current business strategy; |
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Technology is constantly changing and evolving and
the continued viability of our products and services requires that we keep up with an ever-changing technological landscape; |
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We face intense competition in our market, especially
from larger, well-established companies; |
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We are dependent on the continued services and performance
of our founder and Chief Executive Officer; |
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We may be unable to attract new customers and/or expand
sales to existing customers; |
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We may be unable to maintain successful relationships
with our channel partners; |
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We may be subject to breaches in our security, cyberattacks
or other cyber risks; |
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We may be unable to protect our proprietary technology
and intellectual property rights; |
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We may be subject to real or perceived errors, failures,
or bugs in our technology; |
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We are subject to federal, state and industry privacy
and data security regulations; |
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Our business is susceptible to risks associated with
international operations; |
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Our business is subject to the risks of pandemic, fire,
power outages, floods, earthquakes, and other catastrophic events, and to interruption by manmade problems such as terrorism and
war; |
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Our operations may continue to increase in complexity
as we grow, which will add additional challenges to the management of our business in the future; |
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We may be unable to secure necessary financing on acceptable
terms and in a timely manner; |
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There is no assurance that future financing from Mr.
Remillard will be available or, if available, that it will be on terms that are satisfactory to us; |
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We may not be able to identify suitable acquisition
candidates or consummate acquisitions on acceptable terms, or we may be unable to successfully integrate acquisitions; |
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The JOBS Act allows us to postpone the date by which
we must comply with certain laws and regulations intended to protect investors and to reduce the amount of information we provide
in reports filed with the SEC; |
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Failure to implement proper and effective internal
controls or to remediate weakness in internal accounting controls could result in material misstatements in our financial statements. |
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We have secured debt, which could have adverse consequences
to you; |
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We may not be able to attract the attention of research
analysts at major brokerage firms; |
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In the event of a bankruptcy, liquidation or winding
up of our assets, our common stock will rank junior to all of our liabilities to third party creditors, and to any class or series
of our capital stock created after this offering that, by its terms, ranks senior to our common stock; |
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Future issuances of debt securities and preferred stock
may adversely affect the return of your investment; |
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Our common stock is subject to the SEC’s penny
stock rules; |
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Our common stock has historically experienced low trading
volume on the OTC Pink, and therefore the price may not accurately reflect our value and there can be no assurance that an active
market for our common stock will develop, either now or in the future; |
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We have had a history of losses and may incur future
losses, which may prevent us from attaining profitability; |
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There is substantial doubt about our ability to continue
as a going concern; |
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We currently have outstanding shares of preferred stock
that have special rights that could limit our ability to undertake corporate transactions, inhibit potential changes of control and
reduce the proceeds available to our common stockholders in the event of a change in control; |
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Our Chief Executive Officer has the ability to control
all matters submitted to stockholders for approval; |
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We will continue to incur substantial costs as a result
of operating as a public reporting company, and our management will be required to devote substantial time to compliance initiatives; |
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We may issue additional shares of our common stock,
which may dilute current stockholders; |
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Our management will have broad discretion in the use
of the net proceeds from this offering; |
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Adverse or uncertain macroeconomic or geopolitical
conditions or reduced IT spending may adversely impact our business, revenues, and profitability; and |
Prolonged
economic uncertainties or downturns could materially adversely affect our business.
Risks
Related to Our Business and Industry
We
will require additional funds in the future to achieve our current business strategy and an inability to obtain funding could cause our
business to fail.
We
will need to raise additional funds through public or private debt or equity financings in order to fund our future operations and fulfill
our future contractual obligations. These financings may not be available when needed. Even if these financings are available, they may
be on terms that we deem unacceptable or that are materially adverse to your interests with respect to dilution of book value, dividend
preferences, liquidation preferences, or other terms. Our inability to obtain financing could have an adverse effect on our ability to
implement our business plan and develop our products, and as a result, could diminish our sales or require us to suspend our operations
and possibly cease our existence.
Even
if we are successful in raising capital in the future, we will likely need to raise additional capital to continue and/or expand our
operations. If we do not raise the additional capital, the value of any investment in us may become worthless.
If
we do raise additional capital but from other than conventional sources, we may need to scale back or otherwise adjust our growth strategy
which may prevent us from fully implementing our business plan.
Technology
is constantly changing and evolving and the continued viability of our products and services requires that we keep up with an ever-changing
technological landscape.
Our
industry is categorized by rapid technological progression, ever-increasing innovation, changes in customer requirements, and frequent
new product introductions, and we may be subject to legal and regulatory compliance mandates as the relevant law develops in the fields
in which are products are used. As a result, we must continually change and improve our products in response to such changes, and our
products must also successfully interface with products from other vendors, which are also subject to constant change. While we believe
we have the competency to aid our customers in all aspects of data privacy and security, we will need to constantly improve our current
assets and offerings to keep up with technological advances that are expected to occur.
We
cannot guarantee that we will be able to anticipate future market needs and opportunities or be able to develop new products and services
or expand the functionality of our current products and services in a timely manner or at all. Even if we are able to anticipate, develop,
and introduce new products and expand the functionality of our current products, there can be no assurance that enhancements or new products
will achieve widespread market acceptance: If they do not, our business may be adversely affected and we may have to cease operations
altogether.
We
face intense competition in our market, especially from larger, well-established companies, and we may lack sufficient financial and
other resources to maintain and improve our competitive position.
The
market for data privacy and security and other data governance solutions is intensely competitive and is characterized by constant change
and innovation. We face competition from both traditional, larger software vendors offering enterprise-wide software frameworks and services
and smaller companies offering point solutions for specific identification and data governance issues. We also compete with IT equipment
vendors and systems management solution providers whose products and services address data identification and classification and data
governance requirements. Our principal competitors vary depending on the product. Many of our existing competitors have achieved, and
some of our potential competitors could achieve, substantial competitive advantages due to:
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greater name recognition and longer operating histories; |
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more comprehensive and varied products and services; |
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broader market focus; |
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greater resources to develop technologies or make acquisitions; |
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intellectual property portfolios that may limit our
ability to market or sell products and services in the United States or markets outside the United States; |
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broader distribution capabilities and established relationships
with distribution partners and customers; |
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greater customer support resources; and |
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substantially greater financial, technical, and other
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Our
competitors may be able to compete and respond more effectively than we can to new or changing opportunities, technologies, standards,
or customer requirements. Our competitors may also seek to extend or supplement their existing products and services to provide data
security and data governance solutions that more closely compete with our products and services offerings. Potential customers may also
prefer to purchase, or incrementally add solutions, from their existing suppliers rather than to onboard with us as a new or additional
supplier regardless of whether our products offer better performance or more features.
In
addition, with the recent increase in large merger and acquisition transactions in the technology industry, particularly transactions
involving cloud-based technologies, there is a greater likelihood that we will compete with other large technology companies in the future.
Some
of our competitors have made acquisitions or entered into strategic relationships to offer more comprehensive product offerings in combination
than they were previously able to offer alone. Companies resulting from these possible consolidations and partnerships may be able to
offer more attractive pricing, making them more compelling to customers and more difficult for us to compete with effectively. In addition,
continued industry consolidation may adversely impact customer perceptions of the viability of small- and medium-sized technology companies
and consequently their willingness to purchase from those companies. Conditions in our market could change rapidly and significantly
as a result of technological advancements, partnering among our competitors, or continuing market consolidation. These competitive pressures
in our market or our potential inability to compete effectively may result in price reductions, fewer orders, reduced revenue and gross
margins, increased net losses, and loss of market share. Any failure to meet and address these factors could adversely affect our business,
financial condition, and operating results.
We
are dependent on the continued services and performance of our founder and Chief Executive Officer, Jason Remillard, the loss of whom
could adversely affect our business.
Our
future performance depends in large part on the continued services and continuing contributions of our founder, Chief Executive Officer
and president, Jason Remillard, to successfully manage the Company, to execute on our business plan, and to identify and pursue new opportunities
and deliver product innovations. The loss of Mr. Remillard’s services could significantly delay or prevent us from achieving our
development and strategic objectives and adversely affect our business.
If
we are unable to attract new customers and/or expand sales to existing customers, both domestically and internationally, our growth could
be slower than we expect, and our business may be harmed.
Our
future growth depends in part upon increasing our customer base. Our ability to achieve significant growth in revenues in the future
will depend upon the effectiveness of our sales and marketing efforts, both domestically and internationally, and our ability to attract
new customers. If we fail to attract new customers, our revenues may grow more slowly than expected, and our business may be harmed.
Our
future growth also depends upon expanding sales of our products and services to existing customers and their organizations. If our customers
do not purchase additional licenses or our other offerings related to complementary products and services , our revenues may grow more
slowly than expected, may not grow at all, or may decline. There can be no assurance that our efforts will result in increased sales
to existing customers and additional revenues. If our efforts are not successful, our business may suffer.
If
we are unable to maintain successful relationships with our channel partners, our business could be adversely affected.
We
intend to rely to some extent on channel partners, such as distribution partners and resellers, to sell licenses for our products and
to sell our technical support and maintenance services. Our ability to achieve revenue growth in the future may depend in part on our
success in maintaining successful relationships with our channel partners. Agreements with channel partners tend to be non-exclusive,
meaning our channel partners may offer customers the products of several different companies. If our channel partners do not effectively
market and sell our products and services, choose to use greater efforts to market and sell their own products or those of others, or
fail to meet the needs of our customers, our ability to grow our business may be adversely affected. Furthermore, agreements with channel
partners generally allow them to terminate their agreements for any reason upon 30 days’ notice. If we are unable to maintain our
relationships with these channel partners, our business, results of operations, financial condition, or cash flows could be adversely
affected.
Breaches
in our security, cyberattacks, or other cyber risks could expose us to significant liability and cause our business and reputation to
suffer.
Our
operations may involve transmitting and processing the confidential, proprietary, and sensitive information of our customers. We have
legal and contractual obligations to protect the confidentiality of and to appropriately use customer data. Despite our security measures,
our information technology and infrastructure may be vulnerable to attacks as a result of third-party action, employee error, or misconduct.
Security risks, including, but not limited to, unauthorized use or disclosure of customer data, theft of proprietary information, loss
or corruption of customer data, and computer hacking attacks or other cyberattacks, could expose us to substantial litigation expenses
and damages, indemnity and other contractual obligations, government fines and penalties, mitigation expenses and other liabilities.
We have been subject to attempted cyberattacks in the past and expect to be subject to such attacks in the future. We continuously work
to improve our information technology systems, and to create security boundaries around our critical and sensitive assets. We perform
activities to mitigate the risk of attacks and to increase our capabilities to responsibly handle any security violation or attack. However,
because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until
successfully launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures.
If an actual or perceived breach of our security occurs, the market perception of the effectiveness of our security measures and our
products could be harmed, we could lose potential sales and existing customers, our ability to operate our business could be impaired,
and we may incur significant liabilities.
Failure
to protect our proprietary technology and intellectual property rights could substantially harm our business.
The
success of our business depends on our ability to obtain, protect, and enforce our trade secrets, patents, and other intellectual property
rights such as copyrights and trademarks. We attempt to protect our intellectual property under trade secret, patent, copyright, and
trademark laws, and through a combination of confidentiality procedures, contractual provisions and other methods, all of which offer
only limited protection. The process of obtaining patent protection is expensive and time consuming, and we may choose not to seek patent
protection for certain innovations and may choose not to pursue patent protection in certain jurisdictions in which we do or plan to
do business. Not seeking patent protection may limit our options to exclude competitors from using those innovations altogether or in
those jurisdictions.
Our
policy is to require our employees to execute written agreements in which they assign to us their rights in potential inventions and
other intellectual property created within the scope of their employment. We also require any consultants we engage to provide services
that may result in intellectual property that would benefit us to contractually agree to assign their rights to their inventions or creations
to us, in connection with the engagement. However, we cannot assure you that we have adequately protected our rights in every such agreement
or that we have executed an agreement with every such party. Finally, in order to benefit from intellectual property protection, we must
monitor, detect, and pursue infringement claims in certain circumstances in relevant jurisdictions, all of which is costly and time-consuming.
As a result, we may not be able to adequately protect our intellectual property rights.
The
data security, cybersecurity, data retention, and data governance industries are characterized by the existence of a large number of
relevant patents and frequent claims and related litigation regarding patent and other intellectual property rights. From time to time,
third parties have asserted and may assert their patent, copyright, trademark and other intellectual property rights against us, our
channel partners, or our customers. Successful claims of infringement or misappropriation by a third party could prevent us from distributing
certain products or performing certain services or could require us to pay substantial damages (including, for example, treble damages
if we are found to have willfully infringed patents and increased statutory damages if we are found to have willfully infringed copyrights),
royalties or other fees. Such claims also could require us to cease making, licensing or using solutions that are alleged to infringe
or misappropriate the intellectual property of others or to expend additional development resources to attempt to redesign our products
or services or otherwise to develop non-infringing technology. Even if third parties may offer a license to their technology, the terms
of any offered license may not be acceptable, and the failure to obtain a license or the costs associated with any license could cause
our business, results of operations or financial condition to be materially and adversely affected. In some cases, we indemnify our channel
partners and customers against claims that our products infringe the intellectual property of third parties. Defending against claims
of infringement or being deemed to be infringing the intellectual property rights of others could impair our ability to innovate, develop,
distribute, and sell our current and planned products and services. If we are unable to protect our intellectual property rights and
ensure that we are not violating the intellectual property rights of others, we may find ourselves at a competitive disadvantage to others
who need not incur the additional expense, time, and effort required to create the innovative products that have enabled us to be successful
to date.
Real
or perceived errors, failures, or bugs in our technology could adversely affect our growth prospects.
Because
we develop, use, and provide complex technology, undetected errors, failures, or bugs may occur. Our technology is often installed and
used in a variety of computing environments with different operating system management software, equipment, and networking configurations,
which may cause errors or failures of our technology or other aspects of the computing environment into which it is deployed. In addition,
deployment of our technology into computing environments may expose undetected errors, compatibility issues, failures, or bugs in our
technology. Despite testing by us, errors, failures, or bugs may not be found until our technology is released to our customers. Moreover,
our customers could incorrectly implement or inadvertently misuse our technology, which could result in customer dissatisfaction and
adversely impact the perceived utility of our products. Any of these real or perceived errors, compatibility issues, failures, or bugs
could result in negative publicity, reputational harm, loss of or delay in market acceptance, loss of competitive position, or claims
by customers for losses sustained by them. In such an event, we may be required, or may choose, for customer relations or other reasons,
to expend additional resources in order to help correct the problem.
We
are subject to federal, state and industry privacy and data security regulations, which could result in additional costs and liabilities
to us or inhibit sales of our software.
The
regulatory framework for privacy issues worldwide is rapidly evolving and is likely to remain fluid and unpredictable for the foreseeable
future. Many federal, state, and foreign government bodies and agencies have adopted or are considering adopting privacy and data security
laws and regulations. In addition, privacy advocates and industry groups may propose new and different self-regulatory standards. We
also may determine that certain requirements or standards are best practices for us to implement. Because the interpretation and application
of privacy and data protection laws can be uncertain, it is possible that these laws may be interpreted and applied in a manner that
is inconsistent with our existing data security practices. If so, in addition to the possibility of fines, lawsuits and other claims,
we could be required to fundamentally change our business activities and practices or modify our technology, which could have an adverse
effect on our business. Any inability to adequately address privacy concerns, even if unfounded, or comply with applicable privacy or
data protection laws, regulations and policies, could result in additional cost and liability to us, damage our reputation, inhibit sales
and adversely affect our business.
Because
our long-term success depends, in part, on our ability to expand the sales and marketing of our technology and solutions to customers
located outside of the United States, our business is susceptible to risks associated with international operations.
We
intend to expand our international sales and marketing operations. Conducting international operations subjects us to risks that we may
not face in the United States or may prove more challenging to address. These risks include:
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pandemics, political instability, war, armed conflict,
or terrorist activities; |
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challenges developing, marketing, selling, and implementing
our technology and solutions caused by language, cultural and ethical differences, and the competitive environment; |
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heightened risks of unethical, unfair, or corrupt business
practices, actual or claimed, in certain geographies and of improper or fraudulent sales arrangements that may impact financial results
and necessitate restatements of or result in irregularities in financial statements; |
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competition from bigger and stronger companies in the
new markets; |
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laws imposing heightened restrictions on data use and
increased penalties for failure to comply with applicable laws, particularly in countries within the European Union (EU); |
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currency fluctuations; |
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management communication and integration problems resulting
from cultural differences and geographic dispersion; |
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potentially adverse tax consequences, including multiple
and possibly overlapping tax structures, the complexities of foreign value-added tax (VAT) systems, restrictions on the repatriation
of earnings and changes in tax rates; and |
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lack of familiarity with local laws, customs and practices,
and laws and business practices favoring local competitors or commercial parties. |
The
occurrence of any one of these risks could harm our international business and, consequently, our operating results. Additionally, operating
in international markets requires significant management attention and financial resources. We cannot be certain that the investment
and additional resources required to operate in other countries will produce desired levels of revenue or net income.
Changes
in financial accounting standards may cause adverse and unexpected revenue fluctuations and impact our results of operations.
A
change in accounting standards or practices could harm our operating results and may even affect our reporting of transactions completed
before the change is effective. New accounting pronouncements have occurred and may occur in the future. Changes to existing rules or
the questioning of current practices may harm our operating results or the way we conduct our business. Additionally, the adoption of
new or revised accounting principles may require that we make significant changes to our systems process and controls, which could be
time consuming and costly.
Our
business is subject to the risks of pandemic, fire, power outages, floods, earthquakes, and other catastrophic events, and to interruption
by manmade problems such as terrorism and war.
A
pandemic, significant natural disaster, such as a fire, flood or an earthquake, or a significant power outage could have a material adverse
impact on our business, results of operations and financial condition. In the event our customers’ information technology systems
or our channel partners’ selling or distribution abilities are hindered by any of these events, we may miss financial targets,
such as revenues and sales targets, for a particular quarter. Furthermore, if a natural disaster occurs in a region from which we derive
a significant portion of our revenue, customers in that region may delay or forego purchases of our products, which may materially and
adversely impact our results of operations for a particular period. In addition, acts of terrorism or war could cause disruptions in
our business or the business of channel partners, customers, or the economy as a whole. All of the aforementioned risks may be exacerbated
if the disaster recovery plans for us and our channel partners prove to be inadequate. To the extent that any of the above results in
delays or cancellations of customer orders, or delays in producing, deploying or shipping our products or delivering our services, our
business, financial condition and results of operations would be adversely affected.
We
anticipate that our operations will continue to increase in complexity as we grow, which will add additional challenges to the management
of our business in the future.
We
expect that our business will grow as we execute on our business plan, and that as we grow our operations will increase in complexity.
To effectively manage this growth, we have made and continue to make substantial investments to improve our operational, financial and
management controls as well as our reporting systems and procedures. Further, as our customer base grows, we will need to expand our
professional services and other personnel. We also will need to effectively manage our direct and indirect sales processes as the number
and type of our sales personnel and channel partners grows and becomes more complex, and as we expand into foreign markets. If we are
unable to effectively manage the increasing complexity of our business and operations, the quality of our technology and customer service
could suffer, and we may not be able to adequately address competitive challenges. These factors could all negatively impact our business,
operations, operating results, and financial condition.
We
require additional financing to sustain our operations and execute our business plan. If we fail to secure the required additional financing
on acceptable terms and in a timely manner, our ability to implement our business plan will be compromised and we may be unable to sustain
our operations.
We
have limited capital resources and operations. To date, our operations have been funded largely from the proceeds of debt and equity
financings. We will require substantial additional capital in the near future to operate our business. We may be unable to obtain additional
financing on terms acceptable to us, or at all. Even if we obtain financing for our near-term operations, we expect that we will require
additional capital thereafter. Our capital needs will depend on numerous factors including but not limited to (i) the scale of our marketing
and sales activities , (ii) other expenditures of resources to maintain or increase revenue and (iii) the amount of our capital expenditures,
including acquisitions. We cannot assure you that we will be able to obtain capital in the future to meet our needs. If we raise additional
funds through the issuance of equity or convertible debt securities, the percentage ownership held by our existing shareholders will
be reduced and our shareholders may experience significant dilution. In addition, new securities may contain rights, preferences, or
privileges that are senior to those of our common stock. If we raise additional capital by incurring debt, this will result in increased
interest expense. If we raise additional funds through the issuance of securities, market fluctuations in the price of our shares of
common stock could limit our ability to obtain equity financing. We cannot give any assurance that any additional financing will be available
to us, or if available, will be on terms favorable to us. If we are unable to raise capital when needed, our business, financial condition,
and results of operations would be materially adversely affected, and we could be forced to reduce or discontinue our operations.
We
have relied on funding from Jason Remillard for working capital to fund operations in the past, and there is no assurance that future
financing from Mr. Remillard will be available or, if available, that it will be on terms that are satisfactory to us.
For
the past several years, we have depended on our Chief Executive Officer, Jason Remillard, for working capital to fund our operations
and to execute our business plan. In addition, we have in the past been and in the future be dependent upon Mr. Remillard to provide
continued funding and capital resources. However, no assurance can be given that future financing from Mr. Remillard will be available
or, if available, that it will be on terms that are satisfactory to us. In the absence of financing from other sources, the inability
to obtain additional financing from Mr. Remillard could result in the scaling back or discontinuance of our operations or our inability
to successfully implement our plan of operations.
We
have made and expect to continue to make acquisitions as a primary component of our growth strategy. We may not be able to identify suitable
acquisition candidates or consummate acquisitions on acceptable terms, or we may be unable to successfully integrate acquisitions, which
could disrupt our operations and adversely impact our business and operating results.
A
primary component of our growth strategy is to acquire complementary businesses. We intend to continue to pursue acquisitions of complementary
technologies, products, and businesses as a primary component of our growth strategy to enhance the features and functionality of our
offerings, to expand our customer base and access to new markets, and to increase benefits of scale. Acquisitions involve certain known
and unknown risks that could cause our actual growth or operating results to differ from our expectations. For example:
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we may not be able to identify
suitable acquisition candidates or to consummate acquisitions on acceptable terms; |
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we may pursue international
acquisitions, which inherently pose more risks than domestic acquisitions; |
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we compete with others
to acquire complementary products, technologies, and businesses, which may result in decreased availability of, or increased price
for, suitable acquisition candidates; |
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we may not be able to obtain
the necessary financing on favorable terms or at all, to finance our potential acquisitions; |
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we may ultimately fail
to consummate an acquisition even if we announce that we plan to acquire a technology, product, or business; and |
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acquired technologies,
products, or businesses may not perform as we expect and we may fail to realize anticipated revenue and profits. |
In
addition, our acquisition strategy may divert management’s attention away from our existing business, resulting in the loss of
key customers or employees, and expose us to unanticipated problems or legal liabilities, including responsibility as a successor for
undisclosed or contingent liabilities of acquired businesses or assets.
If
we fail to conduct due diligence on our potential targets effectively, we may, for example, not identify problems at target companies
or fail to recognize incompatibilities or other obstacles to successful integration. Our inability to successfully integrate future acquisitions
could impede us from realizing all of the benefits of those acquisitions and could severely weaken our business operations. The integration
process may disrupt our business and, if new technologies, products, or businesses are not implemented effectively, may preclude the
realization of the full benefits expected by us and could harm our results of operations. In addition, the overall integration of new
technologies, products, or businesses may result in unanticipated problems, expenses, liabilities, and competitive responses.
In
addition, even if the operations of an acquisition are integrated successfully, we may not realize the full benefits of the acquisition,
including the synergies, cost savings, or growth opportunities that we expect. The benefits we do realize may not be achieved within
the anticipated time frame.
The
JOBS Act allows us to postpone the date by which we must comply with certain laws and regulations intended to protect investors and to
reduce the amount of information we provide in reports filed with the SEC.
The
JOBS Act is intended to reduce the regulatory burden on “emerging growth companies.” We meet the definition of an emerging
growth company and so long as we qualify as an emerging growth company, we are, among other things:
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not required to comply with the auditor attestation
requirements of the Sarbanes-Oxley Act, which include having an independent registered public accounting firm provide an attestation
report on the effectiveness of our internal control over financial reporting; |
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subject to reduced disclosure obligations regarding
executive compensation in our periodic reports and proxy statements and exempt from the requirement to hold a nonbinding advisory
vote on executive compensation and stockholder approval of any “golden parachute” payments not previously approved; |
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permitted to present only two years of audited financial
statements and only two years of management’s discussion and analysis of financial condition and results of operations disclosure
in this Prospectus; and |
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not required to comply with any rules that may be adopted
by the PCAOB requiring mandatory audit firm rotation or a supplement to the auditor’s report on our financial statements. |
We
may choose to take advantage of some or all of these reduced burdens while we qualify as an emerging growth company. We have taken advantage
of all of these reduced burdens in this Prospectus, and currently intend to do so in future filings. As a result, the information we
provide stockholders may be different than information you might receive from other public companies in which you hold equity. In addition,
the JOBS Act provides that an emerging growth company can delay adopting new or revised accounting standards until those standards apply
to private companies. We have elected to avail ourselves of this exemption. We will remain an emerging growth company until the earliest
to occur of the last day of the fiscal year in which we have more than $1.07 billion in annual revenue; the last day of the fiscal year
in which we qualify as a “large accelerated filer”, the date on which we have, during the previous three-year period, issued
more than $1 billion in non-convertible debt securities; and the last day of the fiscal year in which the fifth anniversary of this offering
occurs.
We
are also currently a “smaller reporting company,” meaning that the market value of our stock held by non-affiliates plus
the proposed aggregate amount of gross proceeds to us as a result of this offering is less than $700 million and our annual revenue was
less than $100 million during the most recently completed fiscal year. We are not an investment company, an asset-backed issuer, or a
majority-owned subsidiary of a parent company that is not a smaller reporting company. We may continue to be a smaller reporting company
after this offering if either (i) the market value of our stock held by non-affiliates is less than $250 million as of the last business
day of the second fiscal quarter or (ii) our annual revenue is less than $100 million during the most recently completed fiscal year
and the market value of our stock held by non-affiliates is less than $700 million as of the last business day of the second fiscal quarter.
In the event that we are still considered a smaller reporting company, at the time we cease being an emerging growth company, we may
continue to rely on exemptions from certain disclosure requirements that area available to smaller reporting companies. Specifically,
as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our
Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations
regarding executive compensation.
Decreased
disclosures in our SEC filings due to our status as an emerging growth company or smaller reporting company may make it harder for investors
to analyze our results of operations and financial prospects.
Failure
to remediate weakness in internal accounting controls could result in material misstatements in our financial statements and may result
in a lack of certain protections typically afforded to investors.
As
a reporting company we are required, pursuant to the Sarbanes-Oxley Act, to include in our annual report our assessment of the effectiveness
of our internal control over financial reporting. Our assessment must include disclosure of any material weaknesses identified by our
management in our internal control over financial reporting, and when we cease to be an emerging growth company, we will need to provide
a statement that our independent registered public accounting firm has issued an opinion on the effectiveness of our internal control
over financial reporting.
A
material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is
a reasonable possibility that a material misstatement of our consolidated financial statements will not be prevented or detected on a
timely basis. Our management has identified a material weakness in our internal control over financial reporting related to lack of segregation
of duties resulting from our limited personnel and has concluded that, due to such weakness, our disclosure controls and procedures were
not effective as of December 31, 2021. We do not have a sufficient number of employees to segregate responsibilities and may be unable
to afford increasing our staff or engaging outside consultants or professionals to overcome our lack of employees, and we do not expect
to be able to remediate this weakness until after the offering. If not remediated, or if we identify further weaknesses in our internal
controls, our failure to establish and maintain effective disclosure controls and procedures and internal control over financial reporting
could result in material misstatements in our financial statements and a failure to meet our reporting and financial obligations, each
of which could have a material adverse effect on our financial condition and the trading price of our common stock.
We
do not have a majority of independent directors on our board of directors, and we have not voluntarily implemented various corporate
governance measures, in the absence of which stockholders may have more limited protections against interested director transactions,
conflicts of interest and similar matters.
Federal
legislation, including the Sarbanes-Oxley Act, has resulted in the adoption of various corporate governance measures designed to promote
the integrity of the corporate management and the securities markets. Some of these measures have been adopted in response to legal requirements.
Others have been adopted by companies in response to the requirements of national securities exchanges, such as the NYSE or the NASDAQ
Stock Market, on which their securities are listed. Among the corporate governance measures that are required under the rules of national
securities exchanges are those that address the board of directors’ independence, audit committee oversight, and the adoption of
a code of ethics. Although we plan to adopt these corporate governance measures upon our listing on The Nasdaq Capital Market, we have
not yet adopted any of these other corporate governance measures and since our securities are not yet listed on a national securities
exchange, we are not required to do so.
Our
Board of Directors is comprised of one individual, who is also our executive officer. As a result, we do not have independent directors
on our Board of Directors. Upon our listing on The Nasdaq Capital Market, we plan to establish audit and compensation committees comprised
only of independent directors. However, until that date, our current sole director has the ability, among other things, to determine
his own level of compensation and to unilaterally make certain other governance decisions. and the prior absence of such standards of
corporate governance may leave our stockholders without protections against interested-director transactions, conflicts of interest,
and similar matters.
We
have secured debt, which could have adverse consequences to you.
The
terms of the secured debt we have incurred could result in adverse consequences, including but not limited to the following:
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limiting our ability to obtain additional financing
for working capital, capital expenditures, acquisitions, and other general corporate requirements; |
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limiting our flexibility in planning for or reacting
to changes in our business and the industry in which we operate; and |
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placing us at a competitive disadvantage compared to
competitors that may have proportionately less debt and greater financial resources. |
If
our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital
expenditures, sell material assets or operations, obtain additional capital, or restructure our debt. In the event that we are required
to dispose of material assets or operations to service our debt and to meet our other obligations, the value realized on such assets
or operations will depend on market conditions and the availability of buyers. Accordingly, any such sale may not, among other things,
be for a sufficient dollar amount. Certain of our obligations are secured by a security interest in all of our assets. The foregoing
encumbrances may limit our ability to dispose of material assets or operations. We also may not be able to restructure our indebtedness
on favorable economic terms, if at all.
Risks
Related to Ownership of Our Securities
Because
we became a reporting company under the Exchange Act by means other than a traditional underwritten initial public offering, we may not
be able to attract the attention of research analysts at major brokerage firms.
Because
we did not become a reporting company by conducting an underwritten initial public offering, or IPO, of our common stock on a national
securities exchange, and our stock trades on OTC Pink rather than being listed on a national securities
exchange, research analysts of brokerage firms may not provide coverage of our Company. In addition, investment banks may be less likely
to agree to underwrite secondary offerings on our behalf than they might if we had become a public reporting company by means of an IPO
because they may be less familiar with our Company as a result of more limited coverage by analysts and the media, and because we became
public at an early stage in our development.
Common Stock
Our
common stock will rank junior to all our liabilities to third party creditors, and to any class or series of our capital stock created
after this offering specifically ranking by its terms senior to the common stock, in the event of a bankruptcy, liquidation or winding
up of our assets.
In
the event of bankruptcy, liquidation or winding up, our assets will be available to pay obligations on our common stock only after
all our liabilities have been paid. Our common stock will effectively rank junior to all existing and future liabilities held by
third party creditors. The terms of our common stock do not restrict our ability to raise additional capital in the future through
the issuance of debt or senior series of preferred stock. Our common stock will also rank junior to our existing Series A Preferred
Stock and any Series B Preferred Stock we may issue, as well as any class or series of our capital stock created after this offering
specifically ranking by its terms senior to the common stock. In the event of bankruptcy, liquidation or winding up, there may not
be sufficient assets remaining, after paying our liabilities, to pay amounts due on any or all of our common stock then
outstanding common stock.
Future
issuances of debt securities, which would rank senior to our common stock upon our bankruptcy or liquidation, and future issuances of
preferred stock, which could rank senior to our common stock for the purposes of dividends and liquidating distributions, may adversely
affect the level of return you may be able to achieve from an investment in our common stock.
In
the future, we may attempt to increase our capital resources by offering debt securities. Upon bankruptcy or liquidation, holders of
our debt securities, and lenders with respect to other borrowings we may make, would receive distributions of our available assets prior
to any distributions being made to holders of our common stock. Moreover, if we issue preferred stock, the holders of such preferred
stock could be entitled to preferences over holders of common stock in respect of the payment of dividends and the payment of liquidating
distributions. Because our decision to issue debt or preferred stock in any future offering, or borrow money from lenders, will depend
in part on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing, or nature of any
such future offerings or borrowings. Holders of our common stock must bear the risk that any future offerings we conduct or borrowings
we make may adversely affect the level of return, if any, they may be able to achieve from an investment in our common stock.
Our
common stock is subject to the SEC’s penny stock rules, which may make it difficult for broker-dealers to complete customer transactions
and could adversely affect trading activity in our securities.
The
SEC has adopted regulations which generally define “penny stock” to be an equity security that has a market price of less
than $5.00 per share, subject to specific exemptions. The market price of our common stock may be less than $5.00 per share for some
period of time and therefore would be a penny stock according to SEC rules, unless we are listed on a national securities exchange. Under the SEC penny stock rules, broker-dealers who recommend such securities
to persons other than institutional accredited investors must:
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make a special written suitability determination for
the purchaser; |
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receive the purchaser’s prior written agreement
to the transaction; |
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provide the purchaser with risk disclosure documents
which identify certain risks associated with investing in penny stocks and which describe the market for these penny stocks as well
as a purchaser’s legal remedies; and |
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obtain a signed and dated acknowledgment from the purchaser
demonstrating that the purchaser has actually received the required risk disclosure document before a transaction in a penny stock
can be completed. |
When complying with these rules, broker-dealers may find it difficult to effectuate customer transactions and trading activity in
our securities may be adversely affected.
Our
common stock has historically experienced low trading volume on the OTC Pink, and therefore the price may not accurately reflect our
value. There can be no assurance that an active market for our common stock will develop, either now or in the future.
Our
shares of common stock have been thinly traded on the OTC Pink. Only a small percentage of our common stock is available to be traded
and is held by a small number of holders and the price, if traded, may not reflect our actual or perceived value. There can be no assurance
that there will be an active market for our shares of common stock either now or in the future. The market liquidity will be dependent
on the perception of our operating business, among other things. We will take certain steps that may include any or all of investor awareness
campaigns, press releases, road shows and conferences to increase awareness of our business and any steps that we might take to bring
us to the awareness of investors may require that we compensate consultants with cash and/or stock.
In addition, the trading volume of stocks quoted on the OTC Pink is often low and is often characterized by wide fluctuations in trading
prices due to many factors that may have little to do with a company’s operations or business prospects. Because our common stock
is only quoted on the OTC Pink, trading is only possible through broker-dealers, and the trading volume of our common stock has been low.
Because we are quoted on the OTC Pink and were not a privately-held company, you may experience difficulty liquidating your investment
in our common stock or liquidating it at a price that reflects the value of our business. As a result, holders of our securities may not
find purchasers for our securities should they desire to sell them. Accordingly, our securities should be purchased only by investors
having no need for liquidity in their investment and who can hold our securities for an indefinite period of time.
We
have had a history of losses and may incur future losses, which may prevent us from attaining profitability.
We
have had a history of operating losses since our inception and, as of September 30, 2022, we had an accumulated deficit of $47,560,912. We
may incur operating losses in the future, and these losses could be substantial and impact our ability to attain profitability. If we
cannot increase revenue growth, we will not achieve or sustain profitability or positive operating cash flows. Even if we achieve profitability
and positive operating cash flows, we may not be able to sustain or increase profitability or positive operating cash flows on a quarterly
or annual basis.
There
is substantial doubt about our ability to continue as a going concern.
Our
independent registered public accounting firm has included an explanatory paragraph in their report in our audited financial statements
for the fiscal year ended December 31, 2021 to the effect that our losses from operations and our negative cash flows from operations
raise substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments that
might be necessary should we be unable to continue as a going concern within one year after the date that the financial statements are
issued. We may be required to cease operations which could result in our stockholders losing all or almost all of their investment. As
of September 30, 2022, we had cash balance of $228,985 and our principal sources of liquidity were trade accounts receivable
of $4,261 and prepaid, advance payment for acquisition of $2,726,188 and other current assets of $45,630, as compared to cash of $1,204,933,
trade accounts receivable of $21,569 and prepaid and other current assets of $70,802 as of December 31, 2021.
The
market price of our common stock may be volatile and may fluctuate in a way that is disproportionate to our operating performance.
Our
stock price may experience substantial volatility as a result of a number of factors, including:
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sales or potential sales of substantial amounts of
our common stock; |
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the success of competitive products or technologies; |
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announcements about us or about our competitors, including
new product introductions and commercial results; |
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the recruitment or departure of key personnel; |
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litigation and other developments; |
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actual or anticipated changes in estimates as to financial
results, development timelines or recommendations by securities analysts; |
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variations in our financial results or those of companies
that are perceived to be similar to us; and |
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general economic, industry and market conditions. |
Many
of these factors are beyond our control. The stock markets in general, and the market for companies whose shares are quoted on the OTC
Pink in particular have historically experienced extreme price and volume fluctuations. These fluctuations often have been unrelated
or disproportionate to the operating performance of these companies. Broad market and industry factors could reduce the market price
of our common stock, regardless of our actual operating performance.
We
currently have outstanding shares of preferred stock that have special rights that could limit our ability to undertake corporate transactions,
inhibit potential changes of control and reduce the proceeds available to our common stockholders in the event of a change in control.
We
currently have common stock and preferred stock outstanding. Our preferred stockholders have special rights that holders of our common
stock do not have. Currently, we have two types of preferred stock: Series A Preferred Stock and Series B Preferred Stock. An example
of special rights that holders of our Series A Preferred Stock have is the ability to vote on all matters submitted to holders of common
stock with 15,000 votes for each share of Series A Preferred Stock. Examples of the special rights that holders of our Series B Preferred
Stock have are that each share of Series B Preferred Stock has (i) a stated value of $10.00 per share; (ii) is convertible into common
stock at a price per share equal to 61% of the lowest price for the Company’s common stock during the 20 days of trading preceding
the date of the conversion; (iii) earns dividends at the rate of 9% per annum; but (iv) has no voting rights. Our Series A Preferred
Stock and Series B Preferred Stock ranks senior to holders of our common stock as to dividend rights and liquidation preference. We currently
have shares of Series A Preferred Stock.
As
a result of the rights our preferred stockholders have, we may not be able to undertake certain corporate transactions, including equity
or debt transactions necessary to raise sufficient capital to run our business, change of control transactions or other transactions
that may be beneficial to our businesses. The holdings of the preferred stockholders may discourage, delay, or prevent a merger, acquisition,
or other change in control of us that stockholders may consider favorable, including transactions in which our common stockholders might
otherwise receive a premium for their shares. The market price of our common stock could be adversely affected by the rights of our preferred
stockholders.
We
have never paid and do not currently intend to pay cash dividends.
We
have never paid cash dividends on any of our common stock and we currently intend to retain future earnings, if any, to fund the development
and growth of our business. As a result, capital appreciation, if any, of our common stock will be our common stockholders’ sole
source of gain for the foreseeable future. Under the terms of our existing Articles of Incorporation, we cannot declare, pay, or set
aside any dividends on shares of any class or series of our capital stock, other than dividends on shares of common stock payable in
shares of common stock, unless we pay dividends to the holders of our preferred stock. Additionally, without special stockholder and
Board of Directors approvals, we cannot currently pay or declare dividends and will be limited in our ability to do so until such time,
if ever, that we are listed on a stock exchange.
Our
Chief Executive Officer has the ability to control all matters submitted to stockholders for approval, which limits stockholders’
ability to influence corporate affairs.
Our
Chief Executive Officer, Jason Remillard, holds 149,892 shares of our Series A Preferred Stock (each share votes as the equivalent of
15,000 shares of common stock on all matters submitted for a vote by the common stockholders), and as such, Mr. Remillard would be able
to control all matters submitted to our stockholders for approval, as well as our management and affairs. For example, Mr. Remillard
would control the election of directors and approval of any merger, consolidation, or sale of all or substantially all of our assets.
This
concentration of voting power could delay or prevent a change of control of our Company on terms that other stockholders may desire,
which could deprive our stockholders from receiving a premium for their common stock. Concentrated ownership and control by Mr. Remillard
could adversely affect the price of our common stock. Any material sales of common stock by Mr. Remillard, for example, could adversely
affect the price of our common stock.
The
interests of Mr. Remillard and his affiliates may differ from the interests of other stockholders with respect to the issuance of shares,
business transactions with and/or sales to other companies, selection of officers and directors, and other business decisions. The non-controlling
stockholders are severely limited in their ability to override the decisions of Mr. Remillard.
Provisions
in our articles of incorporation and bylaws and under Nevada law could make an acquisition of us, which may be beneficial to our stockholders,
more difficult and may prevent attempts by our stockholders to replace or remove our current management.
Provisions
in our articles of incorporation and bylaws, respectively, may discourage, delay or prevent a merger, acquisition or other change in
control of us that stockholders may consider favorable, including transactions in which our common stockholders might otherwise receive
a premium price for their shares. These provisions could also limit the price that investors might be willing to pay in the future for
shares of our common stock, thereby depressing the market price of our common stock. In addition, because our Board of Directors is responsible
for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace
or remove our current management by making it more difficult for stockholders to replace members of our Board of Directors.
We
will continue to incur substantial costs as a result of operating as a public reporting company, and our management will be required
to devote substantial time to compliance initiatives.
As
a public reporting company, we incur significant legal, accounting, and other expenses that
are not incurred by private companies. In addition, the Sarbanes-Oxley Act and rules
subsequently implemented by the SEC have imposed various requirements on public companies, including to establish and maintain effective
disclosure and financial controls and corporate governance practices. Complying with these laws and regulations will require the time
and attention of our Board of Directors and management and will increase our expenses. We estimate that we will incur approximately $350,000
to $600,000 in 2022 to comply with public company compliance requirements with many of those costs recurring annually thereafter.
Among
other things, we will be required to:
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maintain and evaluate a system of internal controls
over financial reporting in compliance with the requirements of the Sarbanes-Oxley Act and the related rules and regulations of the
SEC and the Public Company Accounting Oversight Board; |
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maintain adequate insurance coverage to attract and
retain directors and officers; |
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provide adequate compensation to attract qualified
directors; |
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maintain policies relating to disclosure controls and
procedures; |
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prepare and distribute periodic reports in compliance
with our obligations under federal securities laws; |
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institute a more comprehensive compliance function,
including corporate governance; and |
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involve, to a greater degree, our outside legal counsel
and accountants in the above activities. |
The
costs of preparing and filing annual and quarterly reports, proxy statements and other information with the SEC and furnishing audited
reports to stockholders are significant and much greater for a publicly-held company than for a privately-held
company, and compliance with these rules and regulations may require us
to hire additional financial reporting, internal controls and other finance personnel, and will involve a material increase in regulatory,
legal and accounting expenses, and the attention of management. There can be no assurance that we will be able to comply with the applicable
regulations in a timely manner, if at all. In addition, being a public company may make it more expensive
for us to obtain director and officer liability insurance. In the future, we may be required to accept reduced coverage or incur substantially
higher costs to obtain this coverage.
We
currently have outstanding, and we may in the future issue, instruments which are convertible into shares of common stock, which will
result in additional dilution to you.
We
currently have outstanding instruments which are convertible into shares of common stock, and we may need to issue similar instruments
in the future. If these convertible instruments are converted into shares of common stock, or if we issue other convertible or exchangeable
securities, you could experience additional dilution. Furthermore, we cannot assure you that we will be able to issue shares or other
securities in any other offering at a price per share that is equal to or greater than the price per share you pay or the then-current
market price.
We
may, in the future, issue additional shares of our common stock, which may have a dilutive effect on our current stockholders.
Our
articles of incorporation authorize the issuance of 125,000,000 shares of common stock, of which 1,170,879 shares were issued and outstanding
as of November 14, 2022. The future issuance of shares of our common stock may result in substantial dilution in the percentage
of our common stock held by our then- existing stockholders. We may value any common stock issued in the future on an arbitrary basis.
The issuance of common stock for future services or acquisitions or other corporate actions may have the effect of diluting the value
of the shares held by our investors and might have an adverse effect on any trading market for our common stock.
An
investment in our common stock is speculative and there can be no assurance of any return on any such investment.
An
investment in our common stock is speculative and there is no assurance that investors will obtain any return on their investment. Investors
will be subject to substantial risks involved in an investment in us, including the risk of losing their entire investment.
If
we fail to establish and maintain an effective system of internal controls, we may not be able to report our financial results accurately
or prevent fraud. Any inability to report and file our financial results accurately and on a timely basis could harm our reputation and
adversely impact the trading price of our common stock.
Effective
internal control is necessary for us to provide reliable financial reports and prevent fraud. If we cannot provide reliable financial
reports or prevent fraud, we may not be able to manage our business as effectively as we would if an effective control environment existed,
and our business and reputation with investors may be harmed. As a result, our small size and any current internal control deficiencies
may adversely affect our financial condition, results of operation, and access to capital. We have not performed an in-depth analysis
to determine if historical undiscovered failures of internal controls exist, and we may in the future discover areas of our internal
control that need improvement.
We
must ensure that we have adequate internal financial and accounting controls and procedures in place to produce accurate financial statements
on a timely basis. We have tested our internal controls and identified a weakness and may find additional areas for improvement in the
future. Remediating this weakness will require us to hire and train additional personnel. Implementing any future changes to our internal
controls may require compliance training of our directors, officers, and employees, entail substantial costs to modify our accounting
systems and take a significant period of time to complete. Such changes may not, however, be effective in establishing the adequacy of
our internal control over financial reporting, and our failure to produce accurate financial statements on a timely basis could increase
our operating costs and could materially impair our ability to operate our business. In addition, investor perception that our internal
control over financial reporting is inadequate or that we are unable to produce accurate financial statements may materially adversely
affect our stock price.
Offers
or availability for sale of a substantial number of shares of our common stock may cause the price of our common stock to decline.
If
our stockholders sell substantial amounts of our common stock in the public market, or upon the expiration of any statutory holding period
under Rule 144 or upon the exercise of outstanding options or warrants, such sale could create a circumstance commonly referred to as
an “overhang”. In anticipation of an overhang, the market price of our common stock could decline. The existence of an overhang,
whether or not sales have occurred or are occurring, also could make more difficult our ability to raise additional funds through the
sale of equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate.
Our
management has broad discretion in the use of the net proceeds from any offerings or other financing activities and may invest or spend the proceeds in ways
with which you do not agree and in ways that may not yield a return.
Our
management will have broad discretion in the application of the net proceeds from any offering of shares of our common stock or warrants or from other financing activities,
such as convertible debt and you will not have the opportunity
as part of any investment decision to assess whether the net proceeds are being used appropriately. The failure by our management to apply these funds effectively could harm our business.
Common Stock
Our
common stock may not attract new investors, including institutional investors, and may not satisfy the investing requirements of those
investors. Consequently, the liquidity of our common stock may not improve.
Although
we believe that a higher market price of our common stock may help generate greater or broader investor interest, there can be no
assurance that our share price will rise to a price that will attract new investors, including institutional investors. In addition,
there can be no assurance that the market price of our common stock will satisfy the investing requirements of those
investors.
Adverse
or uncertain macroeconomic or geopolitical conditions or reduced IT spending may adversely impact our business, revenues, and profitability.
Our
business, operations and performance are dependent in part on worldwide economic conditions and events that may be outside of our control,
such as political and social unrest, terrorist attacks, hostilities, malicious human acts, climate change, natural disasters (including
extreme weather), pandemics or other major public health concerns and other similar events, and the impact these conditions and events
have on the overall demand for enterprise computing infrastructure solutions and on the economic health and general willingness of our
current and prospective end customers to purchase our solutions and to continue spending on IT in general. The global macroeconomic environment
has been, and may continue to be, inconsistent, challenging and unpredictable due to international trade disputes, tariffs, including
those recently imposed by the U.S. government on Chinese imports to the U.S., restrictions on sales and technology transfers, uncertainties
related to changes in public policies such as domestic and international regulations, taxes, or international trade agreements, elections,
geopolitical turmoil and civil unrests, instability in the global credit markets, uncertainties regarding the effects of the United Kingdom’s
separation from the European Union, commonly known as “Brexit”, actual or potential government shutdowns, and other disruptions
to global and regional economies and markets. Specifically, COVID-19 (collectively with any future mutations or related strains thereof,
“COVID-19”) has caused and may continue to cause travel bans or disruptions, supply chain delays and disruptions,
and additional macroeconomic uncertainty. The impact of COVID-19 is fluid and uncertain, but it has caused and may continue to cause
various negative effects, including an inability to meet with actual or potential customers, our customers deciding to delay or abandon
their planned purchases, us deciding to delay, cancel, or withdraw from user and industry conferences and other marketing events, and
delays or disruptions in our or our partners’ supply chains, including delays or disruptions in procuring and shipping the hardware
appliances on which our software solutions run. As a result, we may experience extended sales cycles, our ability to close transactions
with new and existing customers and partners may be negatively impacted, potentially significantly, our ability to recognize revenue
from software transactions we do close may be negatively impacted, potentially significantly, our demand generation activities, and the
efficiency and effect of those activities, may be negatively affected, our ability to provide 24x7 worldwide support to our customers
may be effected, and it may continue to be more difficult for us to forecast our operating results. These macroeconomic challenges and
uncertainties, including COVID-19, have, and may continue to, put pressure on global economic conditions and overall IT spending and
may cause our customers to modify spending priorities or delay or abandon purchasing decisions, thereby lengthening sales cycles and
potentially lowering prices for our solutions and product and services offerings, and may make it difficult for us to forecast our sales
and operating results and to make decisions about future investments, any of which could materially harm our business, operating results
and financial condition.
Public
health threats or outbreaks of communicable diseases could have a material adverse effect on our operations and overall financial performance.
We
may face risks related to public health threats or outbreaks of communicable diseases. A global health crisis, such as COVID-19, could
adversely affect the United States and global economies and limit the ability of enterprises to conduct business for an indefinite period. COVID-19 has negatively impacted the global economy, disrupted financial markets, and international trade, resulted in increased
unemployment levels and significantly impacted global supply chains, all of which have the potential to impact our business.
In
addition, government authorities have implemented various mitigation measures, including travel restrictions, limitations on business
operations, stay-at-home orders, and social distancing protocols. The economic impact of the aforementioned actions may impair our ability
to sustain sufficient financial liquidity and impact our financial results. Specifically, the continued existence and/or spread of COVID-19
and efforts to contain the virus could: (i) result in an increase in costs related to delayed payments from customers and uncollectable
accounts, (ii) cause a reduction in revenue related to late fees and other charges related to governmental regulations, (iii) cause delays
and disruptions in the supply chain related to obtaining necessary materials for our network infrastructure or customer equipment, (iv)
cause workforce disruptions, including the availability of qualified personnel; and (v) cause other unpredictable events.
As
we cannot predict the duration or scope of the global health crisis, the anticipated negative financial impact to our operating results
cannot be reasonably estimated but could be material and last for an extended period of time.
Prolonged
economic uncertainties or downturns could materially adversely affect our business.
Our
business depends on our current and prospective customers’ ability and willingness to invest money in IT services, and more importantly
cybersecurity projects, which in turn is dependent upon their overall economic health. Negative conditions in the general economy both
in the United States and abroad, including conditions resulting from COVID-19 and numerous other factors beyond our control, could cause
a decrease in business investments, including corporate spending on enterprise software in general, and could negatively affect the rate
of growth of our business. Uncertainty in the global economy makes it difficult for our customers and us to forecast and plan future
business activities accurately. This could cause our customers to reevaluate decisions to purchase our product or to delay their purchasing
decisions, which could lengthen our sales cycles.
A
significant number of our customers have been and continue to be impacted by the economic turmoil caused by the COVID-19 pandemic. Our
customers may reduce their spending on IT; delay or cancel IT projects; focus on in-house development efforts; or seek to lower their
costs by renegotiating maintenance and support agreements. To the extent purchases of licenses for our software and services are perceived
by customers and potential customers to be discretionary, our revenues may be disproportionately affected by delays or reductions in
general IT spending. If the economic conditions of the general economy or industries in which we operate worsen from present levels,
our business, results of operations and financial condition could be adversely affected.
In
addition, should we have a significant number of our employees contract the COVID-19 virus it could have a negative impact on our ability
to serve customers in a timely fashion.