Item 2.01 Completion of Acquisition or Disposition of Assets
THE SHARE EXCHANGE AND RELATED TRANSACTIONS
The Share Exchange
On December 31, 2018 (the Closing Date or Closing), Gulf & Orient Steamship Company, Ltd., a Colorado corporation (Gulf & Orient) entered into a Share Exchange Agreement (the Agreement) with High Sierra Technologies, Inc., a Nevada corporation (High Sierra) and all of the shareholders of High Sierra, pursuant to which Gulf & Orient acquired 100% of the issued and outstanding shares of common stock of High Sierra (the Share Exchange or
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Acquisition). The Acquisition of High Sierra was consummated on the same date, and High Sierra is now a wholly-owned subsidiary of Gulf & Orient. The names of the shareholders of High Sierra are listed in the Agreement, a copy of which is attached hereto as Exhibit 2.1. As consideration for the Share Exchange, Gulf & Orient issued a total of 15,433,025 shares of the common stock of Gulf & Orient to the High Sierra shareholders.
The Share Exchange will be treated as a recapitalization of the Company for financial accounting purposes. High Sierra will be considered the acquirer for accounting purposes, and the historical financial statements of Gulf & Orient, before the Share Exchange will be replaced with the historical financial statements of High Sierra before the Share Exchange in all future filings with the SEC.
The parties have taken all actions necessary to ensure that the Share Exchange is treated as a tax-free exchange under Section 351 of the Internal Revenue Code of 1986, as amended.
The issuance of shares of our common stock to holders of High Sierras capital stock in connection with the Share Exchange was not registered under the Securities Act, in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act, which exempts transactions by an issuer not involving any public offering, and Regulation D and/or Regulation S promulgated by the SEC under that section. These securities may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirement.
Related Stock Issuances
In connection with the Acquisition of High Sierra, Gulf & Orient also issued 1,087,525 shares of its common stock to Michael Vardakis, the former President and a current director of Gulf & Orient, for a cash payment of $21,750.50, 120,000 shares of its common stock to Melissa Ladakis, the former Secretary of Gulf & Orient, for services rendered which were valued at $0.02 per share, 30,000 shares of its common stock to Lynette Kelch, for services rendered which were valued at $0.02 per share; and 1,800,000 shares of its common stock to Biored, N.V., a Belgian corporation (Biored). Biored loaned Gulf & Orient $500,000 in early June 2018 at five percent (5.0%) interest per annum. Biored converted the principal amount of its loan ($500,000) and accrued interest of approximately $14,500 to the 1,800,000 shares of our common stock which it received, at a conversion price of approximately $0.2858 per share.
Similarly, the issuance of shares of our common stock to Biored, Mr. Vardakis, Ms. Ladakis and Ms. Kelch was not registered under the Securities Act, in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act, which exempts transactions by an issuer not involving any public offering, and Regulation D and/or Regulation S promulgated by the SEC under that section. These securities may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirement.
Post-Acquisition Shares Outstanding; Limited Float
Gulf & Orient now has a total of 20,189,642 shares of its common stock issued and outstanding following the Acquisition of High Sierra and the issuance of the other shares described above.
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Prior to the Acquisition of High Sierra, Gulf & Orient has been a shell company, with a limited public float of approximately 190,000 shares. There has been no active market in the shares of common stock of the Company for many years.
Change of Control
Under the terms of the Agreement, as consideration for the Acquisition, the shareholders of High Sierra who collectively owned 15,433,025 shares of common stock of High Sierra, received one (1) share of Gulf & Orients common stock for each one (1) share of High Sierra common stock exchanged in the transaction. As a result, the High Sierra shareholders, as a group, received 15,433,025 shares of our common stock in the exchange, which represent approximately 76.44% of the 20,189,642 issued and outstanding shares of our common stock immediately following the Acquisition.
The Agreement provided that at the Closing the Company would cause its Board of Directors to elect Vincent C. Lombardi to the Companys Board of Directors to serve together with Michael Vardakis, that the pre-Closing officers of the Company (Michael Vardakis and Melissa Ladakis) would resign, and that the Board of Directors would appoint Vincent C. Lombardi as Chief Executive Officer and President, and Gregg W. Koechlein as the Chief Financial Officer, Secretary and Treasurer of the Company. Mr. Koechlein was also appointed as the Chief Operating Officer. This all occurred on the Closing Date.
Accounting Treatment; Change of Control
The Share Exchange is being accounted for as a reverse acquisition, and High Sierra is deemed to be the acquirer in the reverse acquisition. Consequently, the assets and liabilities and the historical operations that will be reflected in the financial statements prior to the Share Exchange will be those of High Sierra and will be recorded at the historical cost basis of High Sierra, and the consolidated financial statements after completion of the Share Exchange will include the assets and liabilities of High Sierra, historical operations of High Sierra and operations of the Company and its subsidiaries from the Closing Date of the Share Exchange. As a result of the issuance of the shares of our common stock pursuant to the Share Exchange, a change in control of the Company occurred as of the date of consummation of the Share Exchange. Except as described in this Current Report, no arrangements or understandings exist among present or former controlling stockholders with respect to the election of members of our Board of Directors and, to our knowledge, no other arrangements exist that might result in a change of control of the Company.
Related Party Transaction
The Acquisition is a related party transaction since Vincent C. Lombardi, the President and largest shareholder of High Sierra prior to the Acquisition, also owned 766,975 shares of our common stock prior to the Acquisition, which represented approximately 44.62% of our issued and outstanding shares prior to the Acquisition. The terms of the Acquisition as described in the Agreement were negotiated principally between Mr. Lombardi, and Michael Vardakis who then served as the President and sole director of Gulf & Orient. Mr. Vardakis believes the terms of
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the transaction to be fair to the shareholders of Gulf & Orient, although no fairness opinion was sought or obtained by either company.
On December 31, 2018, Michael Vardakis, as our sole director, approved the execution of the Agreement and the actions anticipated thereby. The Acquisition was consummated on the same date.
Customary Representations, Warranties and Covenants
The Agreement contained customary representations and warranties, covenants of each party and customary Closing conditions. In addition, the successful Closing of the Acquisition was subject to various conditions described in the Agreement, including the delivery of all outstanding shares of High Sierra common stock, all required corporate approvals, the conversion of the Biored loan, the issuance of shares described above to Biored, Mr. Vardakis, Ms. Ladakis and Ms. Kelch, and delivery of financial statements and other items specified in the Agreement. A copy of the Agreement has been attached as Exhibit 2.1 to this Current Report on Form 8-K. It can be accessed through the SECs EDGAR database at www.sec.gov.
DESCRIPTION OF BUSINESS
Immediately following the Share Exchange, the business of High Sierra became our business.
High Sierras History
High Sierra was incorporated in the State of Nevada in August of 2018. It was formed with the intention that it would become the assignee, owner and licensor of certain Intellectual Property that was, prior to assignment, the property of Vincent C. Lombardi, Ph.D. (the Intellectual Property) who is an officer, director and co-founder of High Sierra. High Sierra was further formed with the goal that it would continue to develop and expand its intellectual property portfolio with an emphasis on the recreational cannabis industry as well as the industrial hemp industry.
Summary of Business
The current Intellectual Property portfolio consists of all of the rights, title and interest that Dr. Lombardi had in certain two Provisional Patent Applications (collectively, the Applications). Assignments of both of these applications, which assign their ownership to High Sierra, have been filed with the United States Patent & Trademark Office.
The Applications are based on the premise that cannabis (also known as marijuana) which is a preparation of the cannabis plant that encompasses at least three genera of flowering plant in the family of Cannabaceae including
Cannabis sativa
,
Cannabis indica
and
Cannabis ruderalis
has a distinct odor and flavor, primarily as a result of several volatile small molecules known as terpenes. These terpenes are also present in the genus of the flowering plant commonly known as hemp. Although the odor and flavor that results from the presence of these terpenes is desirable to many users of cannabis and/or hemp, the strong and pungent odor, as well as the distinctive flavor, is undesirable by others especially due to the fact that the odor lingers after use of
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cannabis and/or hemp. Additionally, the characteristic odor makes it obvious that a given individual has recently used cannabis and/or hemp. Since a user of hemp is doing so for solely medicinal purposes, High Sierra believes this negative characteristic is of even greater importance to a user of a hemp-based product. Furthermore, the strong and pervasive odor, as well as the distinctive flavor, that results from the presence of these terpenes represents an obstacle for creating a flavored form of cannabis and/or hemp which High Sierra believes to be desirable.
The Intellectual Property
High Sierra now owns two provisional patent applications which it acquired from Dr. Lombardi.
The first Application describes a new and novel cannabis product that is produced by removing or significantly reducing the naturally occurring compliment of volatile organic molecules from cannabis, which primarily consist of terpenes, and are collectively known as the essential oils. This new and novel cannabis product embodies any product produced from any of the of flowering plants of the genus
Cannabis
, using any convenient method for removing or significantly reducing the naturally occurring compliment of essential oils, and, which at the same time, generally preserves the naturally occurring compliment of cannabinoids in a product that retains the naturally occurring physical structure of cannabis plant material that is normally consumed by way of smoking (combustion and subsequent inhalation) and also leaves the modified harvested cannabis plant material undamaged and still in a condition that it can be smoked in the same manner as before it was modified by the process and/or processes described herein.
The second Application describes a new and novel cannabis product that is produced by further modifying a cannabis product based on the first Application containing cannabis plant material that has been previously modified by removing or significantly reducing the naturally occurring compliment of volatile organic molecules, which primarily consist of terpenes, and are collectively known as the essential oils, so as to create a low, or no, odor and reduced flavor form of cannabis product. The previously modified cannabis product is then subjected to additional modification, or modifications, consisting of the addition of volatile organic molecules, either naturally occurring or synthetically produced, including, but not limited to, essential oils, flavorings or terpenes and terpenoids so as to cause it to have new and unique odors and flavors.
By using the techniques and processes covered by the two Applications, High Sierra can create a low, or no, odor and reduced flavor form of cannabis, which can be used in that state or modified to have new and unique odors and flavors.
High Sierras Intellectual Property encompasses the dried cannabis plant material, or flower, that is intended to be smoked, as well as any dried cannabis plant material that is intended to be smoked and to which flavoring is added. It should be noted that this technology is also applicable to the use of hemp-based products that are to be smoked both in non-flavored and flavored forms.
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High Sierra has engaged the law firm of Oliff PLC to prosecute the two provisional patent Applications, and to eventually convert them to utility patents. High Sierra then intends to simultaneously file patent applications in Canada based on the provisional patent Applications. During the course of this process, High Sierra intends that Oliff PLC will also file for protection based on the Patent Cooperation Treaty which will afford High Sierra additional temporary protection in an additional 152 other countries. High Sierra expects all of this to be accomplished prior to the end of January 2019. High Sierra believes that this will allow it sufficient additional time to ascertain where it believes that individual foreign patent applications may be needed.
High Sierras current Iintellectual Property Applications are specific to the dried cannabis plant material where the characteristic odor and flavor have been removed or significantly reduced as well as products that utilizes the first product. High Sierra believes that its intellectual property may be able to be expanded to include other opportunities in the cannabis and industrial hemp markets. High Sierra is currently attempting to develop such products, independently, and through joint venture arrangements. However, the Company can offer no assurance that High Sierra will be successful in this effort.
High Sierra believes that it is likely that its Provisional Patent Applications will be granted, and that they will be converted into full Utility Patents in due course.
Marketing Plans to License the Intellectual Property
High Sierra is now aggressively marketing the licensing of its technology in all states in the U.S. where cannabis and/or hemp has been legalized both for medicinal and/or recreational use. It also plans to use a similar marketing strategy in all provinces in Canada which has legalized both the medicinal and recreational uses of cannabis as of October 17, 2018. Hemp has long been legal in Canada. High Sierra is targeting entities that are licensed to produce, process and/or manufacture cannabis and/or hemp related products. High Sierra also believes that its technology will be of interest to tobacco companies in the United States, Canada and other places if those companies choose to enter the cannabis and/or hemp marketplaces as the legalization of cannabis and/or hemp progresses.
High Sierra considers every manufacturer of cannabis and/or hemp products a potential customer. Because each is registered with its respective State and are of public record, High Sierra has begun to identify each manufacturer for a direct marketing campaign. High Sierra plans to aggressively exploit what it believes to be niche areas of the cannabis and/or hemp markets that are not currently being addressed.
Presently, manufacturers of cannabis and/or hemp products are limited to selling low-odor cannabis and/or hemp for smoking, as an extract, and are limited to selling flavored product either as an extract for smoking or edibles. While it is possible to produce a flavored dried plant form without first removing the natural complement of terpenes, High Sierra believes that the strong natural smell and flavor makes it impractical to add additional flavoring other than additional terpenes.
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Because low odor or no odor cannabis and/or hemp plant material products for smoking are novel and currently do not exist, it is High Sierras goal to create a market for such products by demonstrating their utility and desirability. Low-odor cannabis and/or hemp plant material allows one to smoke cannabis and/or hemp without its use being apparent due to the residual smell on the user. It also allows the user the convenience of smoking cannabis and/or hemp in the form of a rolled cigarette or a pipe. Because low-odor and flavored cannabis and/or hemp plant material can be conveniently made into cigarettes, it is High Sierras belief that as cannabis and/or hemp gain acceptance according to local and Federal laws, that the large tobacco companies will want to enter the cannabis and/or hemp market spaces and will rely on their present business model of selling cigarettes that are pre-packaged. These companies are all potential clients to license High Sierras technology.
As of the date of this Current Report, High Sierra has entered into negotiations for the licensing of its technologies with a number of companies in three Western States that have legalized both the medicinal and recreational uses of cannabis as well as having legalized the growing of hemp for medicinal uses. High Sierra has entered into Non-Disclosure Agreements and non-binding Letters of Intent with two of these companies and is in negotiations with other companies. High Sierra has also entered into a Non-Disclosure Agreement and Letter of Intent with another company to patent and develop farm equipment specifically designed to increase the efficacy of the planting and production of both cannabis and hemp crops.
General Information Concerning Cannabis and Hemp and Related Regulatory Laws
Currently, cannabis is consumed in three forms. The dried plant material that is smoked, extracts of cannabis that are smoked using devices such as e-cigarettes, and cannabis consumables. Hemp based products may also be consumed by these same three methods as well as being used as a topical application to the skin. High Sierras Intellectual Property is currently specific for dried cannabis plant material, including hemp, which is intended to be consumed by smoking which High Sierra believes to be the largest segment of the cannabis related market.
After the recent national and local elections in November of 2018, recreational cannabis is now currently legal in ten states and the District of Columbia and medicinal cannabis is now legal in 33 states, the District of Columbia, Guam and Puerto Rico. Thirteen states and the U.S. Virgin Islands have passed laws decriminalizing cannabis in some form. In addition, Canada has legalized both medicinal and recreational cannabis in all provinces as of October 17, 2018. Hemp, which is defined as cannabis, with a tetrahydrocannabinol (THC) content of less than 0.3%, has long been legalized in Canada. It should be noted that cannabis continues to be illegal at the Federal level in the United States. It should be further noted that, with the Presidents signature on the 2018 US Farm Bill that was passed overwhelmingly by Congress, the non-psychoactive components of cannabis, such as cannabidiol will become legal in all states and will cease to be controlled substances that come under the authority of the Food and Drug Administration.
With the enactment on December 20, 2018 of the 2018 U.S. Farm Bill, hemp and/or cannabidiol based products are no longer classified as controlled substances. High Sierra believes that its technology will also be readily applicable to hemp and/or cannabidiol based products that may
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be consumed via combustion and subsequent inhalation and/or ingestion in various forms. Because there are currently known uses of hemp and/or cannabidiol products that use combustion and subsequent inhalation as a method of consumption, High Sierra believes that such producers and users of these products will see a similar advantage to the use of High Sierras technologies as do the producers and users of medical and recreational cannabis products that are consumed via combustion and subsequent inhalation and/or ingestion in various forms.
Because High Sierras business model is based on the licensing of its technology, it is not necessary for High Sierra to handle, sell or distribute cannabis in order to benefit from the rapidly expanding cannabis market. Accordingly, High Sierra is not directly subject to the limitations imposed by these existing Federal laws in the United States as they may relate to cannabis. With the enactment on December 20, 2018 of the 2018 U.S. Farm Bill, hemp-based products have ceased to be controlled substances that come under the authority of the Food and Drug Administration thus providing High Sierra an opportunity in a new marketplace that is not subject to the same level of Federal regulation as is cannabis. This puts High Sierra in a unique position to benefit from the rapidly expanding cannabis and hemp industries, while at the same time, not being directly subject to the Federal controlled substance laws of the United States.
Market Place Overview
According to a report by the Brightfield Group,
the global cannabis market is currently estimated to be worth $7.7 billion and will likely experience a compound annual growth rate of 60 percent as other countries liberalize their marijuana laws. It should also be noted that Wall Street analysts have projected that the change in the laws related to cannabis in Canada could create as much as $5 billion in additional sales. The international market for cannabis is projected to hit $31.4 billion by 2021, according to a report from the Brightfield Group. Cowen & Co. has estimated that U.S. cannabis sales could reach $75 billion by 2030. Furthermore, a report by the European investment bank Bryan, Garnier & Co., projects legal global cannabis market will grow by more than 1,000% over the next decade and could reach $140 billion by 2027.
According to 2016 statistics reported by the State of Washington, sales of cannabis flower represented 61% of total cannabis product sales. Because of the new and novel nature of High Sierras product, its difficult to estimate the potential market; however, if one assumes that cigarette sales statistics are a reflection of potential cannabis sales, methanol cigarette sales are estimated to represent 30% of total tobacco sales (Lorillard, Inc. 2012 Form 10-K, p. 40. U.S. Securities and Exchange Commission). High Sierra believes that cannabis products that employ its technology (with respect to utilizing unflavored product as the starting material to make a flavored product) will create a significant addition to the existing cannabis markets. High Sierra further believes that it is reasonable to project a similar percentage of flavored cannabis sales as opposed to non-flavored cannabis sales. If trends for tobacco cigarettes are an indication of future cannabis cigarette sales, flavored cannabis cigarettes could represent a market of $1.4 billion (based on $7.7 billion total 2016 cannabis sales, 61% cannabis flower sales, and 30% flavored cannabis sales). High Sierra believes that it may earn significant licensing revenue from licensing its existing technology, based on its proposed 10% licensing fee. If large tobacco companies enter the cannabis marketplace, they are likely to represent a new and highly significant licensing revenue source for High Sierra.
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Of the five Western states that have legalized cannabis, the first-year sales for each state were significant. Nevada had first year sales of approximately $425 million (based on only 6 months of sales in 2017), Colorado had first year sales of approximately $303 Million, Washington had first year sales of approximately $259 million and Oregon had first year sales of approximately $241 million. According to BDS Analytics, it is projected that California will have sales in excess of $3.7 billion it its first year of legalization (2018). Additionally, Colorado reported 2017 sales of approximately $1.5 billion, Washington reported 2017 sales of approximately $1.3 billion and Oregon reported 2017 sales of approximately $500 million (based on recreational dispensary sales only. According to projections by BDS Analytics and Acrview Market Research, the market for cannabis-based products approached nearly $10 billion in 2017 which represents a 33% increase over 2016. Both companies indicate that this percentage of annual increase will continue to grow based on more states legalizing cannabis for recreational use and the recent change in the laws in Canada that went into effect on October 17, 2018.
Currently, companies such as Canopy Growth, Cronos Group and Tilray which are based in Canada have begun to be traded both on the NASDAQ and the New York Stock Exchange. Constellation Brands has recently invested $4 billion in Canopy Growth based on its belief in the strong future for the market place for cannabis.
It should be noted that none of these statistics or projections include products based on the non-psychoactive components of cannabis, such as hemp and/or cannabidiol. These are markets that Statista has estimated will grow from $108 million in 2014 to $1.5 billion in 2022. In 2016, Forbes predicted that these markets are likely to grow 700% by 2020. High Sierra believes that its opportunities will be increased with its proposed entrance into the non-psychoactive components of cannabis, such as hemp and/or cannabidiol marketplaces.
Competition
High Sierra is not aware of any other companies that are working on similar technology that can be applied to cannabis and/or hemp flower products to remove or significantly reduce the odor and flavor of such products which are consumed by smoking and/or ingestion. However, High Sierra believes that eventually there may be competitors. High Sierra believes that it will have an early competitive advantage being the first to enter this line of business, and it believes that its Provisional Patent Applications, if granted, will give High Sierra some significant protection from competing companies.
High Sierra believes that its only significant competition at the present time is those companies or individuals who sell cannabis and/or hemp extracts and/or cannabis and/or hemp-based consumables with low or no odor or flavor.
Employees
As of the date of this Current Report, we have only one part-time employee who is Gregg W. Koechlein and no full time employees. We have no written employment agreements. We have never experienced a work stoppage and believe our relationship with our employee is good.
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Exchange Act
We are subject to the following regulations of the Securities and Exchange Act of 1934, as amended (the Exchange Act), and applicable securities laws, rules and regulations promulgated under the Exchange Act by the SEC. Compliance with these requirements of the Exchange Act increases our legal and accounting costs.
Smaller Reporting Company
We are subject to the reporting requirements of Section 13 of the Exchange Act, and subject to the disclosure requirements of Regulation S-K of the SEC, as a smaller reporting company. That designation will relieve us of some of the informational requirements of Regulation S-K.
Emerging Growth Company
We are also an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012, or JOBS Act. As long as we remain an emerging growth company, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not an emerging growth company, like those applicable to a smaller reporting company, including, but not limited to, a scaled down description of our business in SEC filings; no requirements to include risk factors in Exchange Act filings; no requirement to include certain selected financial data and supplementary financial information in SEC filings; not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act; reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements that we file under the Exchange Act; no requirement for Sarbanes-Oxley Act Section 404(b) auditor attestations of internal control over financial reporting; and exemptions from the requirements of holding an annual nonbinding advisory vote on executive compensation and seeking nonbinding stockholder approval of any golden parachute payments not previously approved. We are also only required to file audited financial statements for the previous two fiscal years when filing registration statements, together with reviewed financial statements of any applicable subsequent quarter.
We may take advantage of these reporting exemptions until we are no longer an emerging growth company. We can remain an emerging growth company for up to five years. We would cease to be an emerging growth company prior to such time if we have total annual gross revenues of $1 billion or more and when we become a larger accelerated filer, have a public float of $700 million or more or we issue more than $1 billion of non-convertible debt over a three-year period.
Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.
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Sarbanes/Oxley Act
Except for the limitations excluded by the JOBS Act discussed under the preceding heading Emerging Growth Company, we are also subject to the Sarbanes-Oxley Act of 2002. The Sarbanes/Oxley Act created a strong and independent accounting oversight board to oversee the conduct of auditors of public companies and strengthens auditor independence. It also requires steps to enhance the direct responsibility of senior members of management for financial reporting and for the quality of financial disclosures made by public companies; establishes clear statutory rules to limit, and to expose to public view, possible conflicts of interest affecting securities analysts; creates guidelines for audit committee members appointment, compensation and oversight of the work of public companies auditors; management assessment of our internal controls; prohibits certain insider trading during pension fund blackout periods; requires companies and auditors to evaluate internal controls and procedures; and establishes a federal crime of securities fraud, among other provisions. Compliance with the requirements of the Sarbanes/Oxley Act will substantially increase our legal and accounting costs
Exchange Act Reporting Requirements
Section 14(a) of the Exchange Act requires all companies with securities registered pursuant to Section 12(g) of the Exchange Act to comply with the rules and regulations of the SEC regarding proxy solicitations, as outlined in Regulation 14A. The Company is subject to those rules and regulations. Matters submitted to shareholders at a special or annual meeting thereof or pursuant to a written consent will require us to provide our shareholders with the information outlined in Schedules 14A (where proxies are solicited) or 14C (where consents in writing to the action have already been received or anticipated to be received) of Regulation 14, as applicable; and preliminary copies of this information must be submitted to the SEC at least 10 days prior to the date that definitive copies of this information are forwarded to our shareholders.
We are also required to file annual reports on Form 10-K and quarterly reports on Form 10-Q with the SEC on a regular basis, and will be required to timely disclose certain material events (e.g., changes in corporate control; acquisitions or dispositions of a significant amount of assets other than in the ordinary course of business; and bankruptcy) in a Current Report on Form 8-K.
Reports to Security Holders
You may read and copy any materials that we file with the SEC at the SECs Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may also find all of the reports that we have filed electronically with the SEC at their Internet site www.sec.gov.
RISK FACTORS
An investment in our securities involves a high degree of risk. You should not invest in our securities if you cannot afford to lose your entire investment. In deciding whether you should invest in our securities, you should carefully consider the following information together with all of the other information contained in this Current Report. Any of the following risk factors can
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cause our business, prospects, financial condition or results of operations to suffer and you to lose all or part of your investment.
General Risks Relating to our Business, Operations and Financial Condition
We are newly formed, and our auditors have added a going concern qualification to their Independent Auditors Report issued for our financial statements.
Our Independent Auditors Report expresses a going concern reservation in connection with the audited financial statements of High Sierra for the period from inception to the period ended September 30, 2018. Note 2 of the audited financial statements states that the Company [High Sierra] sustained operating losses in the current and prior years and may not achieve the level of profitable operations to sustain its activities. These factors raise substantial doubt as to its ability to achieve profitable operations in order to continue as a going concern.
We have a limited operating history and are subject to the risks encountered by early-stage companies.
High Sierra was organized in the State of Nevada in August 2018. Because our operating company has a limited operating history, you should consider and evaluate our operating prospects in light of the risks and uncertainties frequently encountered by early-stage companies in rapidly evolving markets. For us, these risks include:
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risks that we may not have sufficient capital to achieve our growth strategy;
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risks that we may not develop our product offerings in a manner that enables us to be
profitable and meet our customers
requirements;
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risks that our growth strategy may not be successful; and
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risks that fluctuations in our operating results will be significant relative to our
revenues.
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These risks are described in more detail below. Our future growth will depend substantially on our ability to address these and the other risks described in this section. If we do not successfully address these risks, our business would be significantly harmed.
We have a history of net losses, may incur substantial net losses in the future and may not achieve profitability.
We have not yet started to generate any revenues. We have incurred significant losses since inception. We expect to incur increased costs to implement our business plan and generate revenues, such as legal and accounting expenses to remain a public company, travel expenses, and legal expenses for protecting our intellectual property. If our revenues do not increase to offset these additional expenses or if we experience unexpected increases in operating expenses, we will continue to incur significant losses and will not become profitable. If we are not able to generate sufficient revenues, we will likely not be able to achieve profitability in the future.
Our operating losses raise substantial doubt about our ability to continue as a going concern. If we do not continue as a going concern, investors could lose their entire investment.
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Our operating losses raise substantial doubt about our ability to continue as a going concern. If we do not generate revenues, do not achieve profitability and do not have other sources of financing for our business, we may have to curtail or cease our development plans and operations, which could cause investors to lose the entire amount of their investment.
Our management has little experience in our chosen industry of operations and must initially rely on outside consultants or others in this industry to make informed business decisions; and potential conflicts of interest involving those parties who are relied upon could adversely affect the value of our life insurance products.
Members of our management are new to the industry. The Companys Intellectual Property is new and is now just being exposed to the industry. Our management may need to engage consultants in the industry to advise management on certain decisions that management will need to make. Many of these consultants or servicers represent or provide services to others in this industry, and no assurance can be given that we, as a new, developmental stage company and a small competitor which may compete with larger competitors in this industry, will not be treated less favorably by these consultants than our competitors. Even as management accumulates expertise in this industry, we may still rely on the expertise of outside consultants for advice.
If we are unable to manage our anticipated growth effectively, our business could be adversely affected.
We anticipate that a significant expansion of our operations will be required in all areas of our operations in order to implement our business plan. Our future operating results depend to a large extent on our ability to manage this growth successfully. For us to manage such growth, we must put in place legal and accounting systems, and implement human resource management and other tools. We have taken preliminary steps to put this structure in place. However, there is no assurance that we will be able to successfully manage this anticipated growth. A failure to manage our growth effectively could materially and adversely affect our ability to market our intellectual property.
The implementation of laws, rules and regulations could negatively affect our business.
As explained above under Description of Business - General Information Concerning Cannabis and Hemp and Related Regulatory Laws recent legislative changes in certain states in the U.S. and in Canada have been to liberalize laws permitting the use of cannabis and hemp products for medicinal uses and even recreational uses. However, Federal law in the U.S. still prohibits the use of cannabis. If the federal government chooses to enforce existing federal laws strictly, this would have a negative impact on the Companys business. Changes in local state laws where the use of cannabis is now permitted, could negatively affect our operations. Such changes could result in our having to change our business model, which could negatively impact future revenues.
The laws, regulations and guidelines generally applicable to the medical cannabis industry domestically are changing and may change in ways currently unforeseen by us.
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The companies that engage in selling cannabis and cannabis products are subject to various laws, regulations and guidelines relating to the marketing, acquisition, manufacture, packaging/labeling, management, transportation, storage, sale and disposal of medical and recreational cannabis and also including laws and regulations relating to health and safety, the conduct of operations and the protection of the environment. If any changes to such laws, regulations and guidelines occur (in the U.S., its states and in Canada the laws and regulations are currently changing at a rapid pace), which are matters beyond our control, we may incur significant costs in complying with such changes or we may be unable to comply therewith, which in turn may result in a material adverse effect on our business, financial condition and results of operations.
Changes in the regulations governing medical cannabis may adversely impact our business.
Our growth strategy with respect to international operations continues to evolve as regulations governing the medical cannabis industry in the jurisdictions in which we intend to operate become more fully developed. Interpretation of these laws, rules and regulations and their application to our operations is ongoing. Although, to our knowledge, we are currently in material compliance with all applicable laws, regulations and guidelines in such jurisdictions, no assurance can be given that new laws, regulations and guidelines will not be enacted or that existing laws, regulations and guidelines will not be interpreted or applied in a manner which could limit or curtail our operations in such jurisdictions. Amendments to current laws, regulations and guidelines, more stringent implementation or enforcement thereof or other unanticipated events, including changes in political regimes and attitudes toward cannabis, are beyond our control and could require extensive changes to our operations, which in turn may result in a material adverse effect on our business, financial condition and results of operations.
Furthermore, additional countries and/or states continue to pass laws that allow for the production and distribution of cannabis for medical and recreational purposes in some form or another. Increased competition and limitations placed on us (or on third parties that sell cannabis products) by regulations might lower the demand for our Intellectual Property on a global scale.
Future clinical research studies on the effects of medical cannabis may lead to conclusions that dispute or conflict with our understanding and belief regarding the medical benefits, viability, safety, efficacy, dosing and social acceptance of cannabis.
Research in Canada, the United States and internationally regarding the medical benefits, viability, safety, efficacy, dosing and social acceptance of cannabis or isolated cannabinoids (such as CBD and THC) remains in early stages. There have been relatively few clinical trials on the benefits of cannabis or isolated cannabinoids (such as CBD and THC). Some research has concluded that there are medical benefits associated with the use of cannabis. Future research and clinical trials may contradict such conclusions, or prove such statements to be incorrect, or could raise concerns regarding, and perceptions relating to, cannabis.
If future research studies and clinical trials reach negative conclusions regarding the medical benefits, viability, safety, efficacy, dosing, social acceptance or other facts and perceptions
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related to medical cannabis, then that could have a material adverse effect on the demand for cannabis and for our Intellectual Property with the potential to lead to a material adverse effect on our business, financial condition and results of operations.
The medical cannabis industry and markets are relatively new in Canada, certain states in the U.S. and in other jurisdictions, and this industry and market may not continue to exist or grow as anticipated or we may ultimately be unable to succeed in this industry and market.
We are operating our business in a relatively new cannabis industry and market. In addition to being subject to general business risks, a business involving an agricultural product and a regulated consumer product, we need to build brand awareness in this industry and market through investments in our strategy and compliance with regulations. These activities may not promote our brand and products as effectively as intended, or at all. Competitive conditions, consumer tastes, patient requirements and spending patterns in this new industry and market are relatively unknown and may have unique circumstances that differ from existing industries and markets.
Accordingly, there are no assurances that this industry and market will continue to exist or grow as currently estimated or anticipated, or function and evolve in a manner consistent with management's expectations and assumptions. Any event or circumstance that affects the medical and recreational cannabis industry and market could have a material adverse effect on our business, financial condition and results of operations.
We may be subject to product liability claims.
As the licensor of Intellectual Property to be used to modify products designed to be ingested by humans, we face an inherent risk of exposure to product liability claims, regulatory action and litigation if the products are alleged to have caused significant loss or injury. In addition, the modification of cannabis products involves the risk of injury to consumers due to tampering by unauthorized third parties or product contamination. Previously unknown adverse reactions resulting from human consumption of cannabis products alone or in combination with other medications or substances could occur. We may be subject to various product liability claims, including, among others, that the modified products caused injury or illness, include inadequate instructions for use or include inadequate warnings concerning possible side effects or interactions with other substances. A product liability claim or regulatory action against us could result in increased costs, could adversely affect our reputation with our clients and consumers generally, and could have a material adverse effect on our business, financial condition and results of operations.
There can be no assurances that we will be able to obtain or maintain product liability insurance on acceptable terms or with adequate coverage against potential liabilities. Such insurance is expensive and may not be available in the future on acceptable terms, or at all. The inability to obtain sufficient insurance coverage on reasonable terms or to otherwise protect against potential product liability claims could prevent or inhibit the commercialization of modified cannabis products.
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The technologies, process and formulations we use may face competition or become obsolete.
Rapidly changing markets, technology, emerging industry standards and frequent introduction of new products characterize the cannabis business. The introduction of new products embodying new technologies, including new manufacturing processes or formulations, and the emergence of new industry standards may render our Intellectual Property obsolete, less competitive or less marketable. The process of developing our Intellectual Property is complex and requires significant continuing costs, development efforts and third party commitments, including licensees, researchers, collaborators and possibly lenders. Our failure to develop new technologies and products and the obsolescence of existing technologies or processes could adversely affect our business, financial condition and results of operations. We may be unable to anticipate changes in our potential customer requirements that could make our existing technology, processes or formulations obsolete. Our success will depend in part, on our ability to continue to enhance our existing technologies, develop new technology that addresses the increasing sophistication and varied news of the market, and respond to technological advances and emerging industry standards and practices on a timely and cost-effective basis. The development of our proprietary technology, processes and formulations entails significant technical and business risks. We may not be successful in using our new technologies or exploiting our niche markets effectively or adapting our business to evolving customer or medical requirements or preference or emerging industry standards.
If we are not able to comply with all safety, health and environmental regulations applicable to our operations and industry, we may be held liable for any breaches thereof.
Our operations are subject to environmental and safety laws and regulations concerning, among other things, emissions and discharges to water, air and land, the handling and disposal of hazardous and non-hazardous materials and wastes, and employee health and safety. We will incur ongoing costs and obligations related to compliance with environmental and employee health and safety matters. Failure to comply with environmental and employee health and safety laws and regulations may result in additional costs for corrective measures, penalties or in restrictions on our operations. In addition, changes in environmental, employee health and safety or other laws, more vigorous enforcement thereof or other unanticipated events could require extensive changes to our operations or give rise to material liabilities, which could have a material adverse effect on our business, financial condition and results of operations.
Increasing competition within our emerging industry could have an impact on our business prospects.
Our business is an emerging industry where new competitors may enter the market.
These competing companies may have significantly greater financial and other resources than we have. Increasing competition may have a negative impact on any profit margins that we are able to attain.
If we lose the services of our founders or other members of our senior management team, we may not be able to execute our business strategy.
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Our success depends in a large part upon the continued service of our senior management team. In particular, the continued service of our founders, Vincent C. Lombardi and Gregg W. Koechlein, is critical to our vision, strategic direction, culture, products and technology. We do not maintain key-man insurance for any of our founders or other members of our senior management team. The loss of any of our founders, even temporarily, or any other member of senior management could harm our business.
We may not be able to adequately protect our proprietary technology, and our competitors may be able to offer similar products and services, which would harm our competitive position.
Our success depends in part upon our proprietary technology. We intend to rely primarily on trademark, patent, trade secret laws, confidentiality procedures, license agreements and contractual provisions to establish and protect our proprietary rights. Despite these precautions, third parties could copy or otherwise obtain and use our technology without authorization or develop similar technology independently. We cannot assure you that the protection of our proprietary rights will be adequate or that our competitors will not independently develop similar technology, duplicate our products and services or design around any intellectual property rights we hold.
If third parties claim that we infringe their intellectual property, it may result in costly litigation.
We cannot assure you that third parties will not claim our current technology and future products infringe their intellectual property rights. Any such claims, with or without merit, could cause costly litigation that could consume significant management time. Such claims also might require us to enter into royalty or license agreements. If required, we may not be able to obtain such royalty or license agreements or obtain them on terms acceptable to us.
We may need additional financing. Any limitation on our ability to obtain such additional financing could have a material adverse effect on our business, financial condition and results of operations.
Although we expect that the remaining proceeds we received from the conversion of the Biored loan at the Closing will be sufficient to enable us to obtain licensing revenue and implement our business plan, there can be no assurance that we will not require additional capital. The raising of additional capital could result in dilution to our stockholders. In addition, there is no assurance that we will be able to obtain additional capital if we need it, or that if available, it will be available to us on favorable or reasonable terms. Any limitation on our ability to obtain additional capital as and when needed could have a material adverse effect on our business, financial condition and results of operations.
If we fail to maintain proper and effective internal controls, our ability to produce accurate and timely financial statements could be impaired, which could harm our operating results, our ability to operate our business and investors views of us.
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Ensuring that we have adequate internal financial and accounting controls and procedures in place so that we can produce accurate financial statements on a timely basis is a costly and time-consuming effort that will need to be evaluated frequently. Section 404 of the Sarbanes-Oxley Act requires public companies to conduct an annual review and evaluation of their internal controls. Our failure to maintain the effectiveness of our internal controls in accordance with the requirements of the Sarbanes-Oxley Act could have a material adverse effect on our business. We could lose investor confidence in the accuracy and completeness of our financial reports, which could have an adverse effect on the price of our common stock. In addition, if our efforts to comply with new or changed laws, regulations, and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against us, and our business may be harmed.
Risks Relating to our Securities
The shares of Common Stock issued in the Share Exchange are restricted securities and, as such, may not be sold except in limited circumstances.
The Shares of Common Stock issued in the Share Exchange have not been registered under the Securities Act of 1933, as amended (the Securities Act) or any state securities law. As a result, the shares are restricted securities under the Securities Act and they may not be sold, transferred, pledged or otherwise disposed of unless they are registered under the Securities Act and applicable state securities laws, except in a transaction which, to our satisfaction and that of our counsel, is exempt from such registration requirements.
In addition, Rule 144 promulgated under the Securities Act, which permits the resale of the shares of Common Stock, subject to various terms and conditions, will generally not apply to our common stock until one year after we cease to be a shell company under SEC regulations and all Form 10 required information has been filed with the SEC. We believe that we exited shell company status as of the Closing of the Share Exchange and we have filed the required Form 10 information in this Current Report. The one year waiting period before Rule 144 will become available should begin as of the filing of this Current Report. As a result, your ability to sell your shares may be limited.
Our Management members own approximately 67.86% of our outstanding common stock and could elect all of our directors who in turn elect all of our officers.
This percentage of stock ownership is significant in that it could carry any vote on any matter requiring stockholder approval, including the subsequent election of directors, who in turn elect all officers. As a result, these persons effectively control the Company, regardless of the vote of other stockholders. As a result, other stockholders may not have an effective voice in our affairs. See the caption Security Ownership of Certain Beneficial Owners and Management in this Item 2.01 below.
Because the Share Exchange will result in a deemed a reverse Acquisition, we may not be able to attract the attention of major brokerage firms, which may limit the liquidity of our Common Stock and may make it more difficult for us to raise additional capital in the future.
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Additional risks may exist because the Share Exchange will be considered a reverse Acquisition under accounting and securities regulations. Certain SEC rules are more restrictive when applied to reverse Acquisition companies, such as the ability of stockholders to resell their shares of Common Stock pursuant to Rule 144. In addition, securities analysts of major brokerage firms may not provide coverage of our Common Stock following the Share Exchange because there may be little incentive for brokerage firms to recommend the purchase of our Common Stock. As a result, our Common Stock may have limited liquidity and investors may have difficulty selling it. In addition, we cannot assure you that brokerage firms will want to conduct any secondary offerings on our behalf if we seek to raise additional capital in the future. Our inability to raise additional capital may have a material adverse effect on our business.
There is not now, and there may not ever be, an active market for the Companys Common Stock.
There currently is no public market for our Common Stock. Further, although our Common Stock is currently quoted on the OTC Bulletin Board (the OTCBB), trading of our Common Stock has not yet commenced. When our stock does begin to trade, such trading may be extremely sporadic. For example, several days may pass before any shares may be traded. As a result, an investor may find it difficult to dispose of, or to obtain accurate quotations of the price of, our Common Stock. Accordingly, investors must assume they may have to bear the economic risk of an investment in our Common Stock for an indefinite period of time. There can be no assurance that a more active market for the Common Stock will develop, or if one should develop, there is no assurance that it will be sustained. This severely limits the liquidity of our Common Stock and would likely have a material adverse effect on the market price of our Common Stock and on our ability to raise additional capital.
We cannot assure you that the Common Stock will become liquid or that it will be listed on a securities exchange.
Until our Common Stock is listed on a national securities exchange such as the New York Stock Exchange or the Nasdaq Stock Market, we expect our Common Stock to remain eligible for quotation on the OTCBB. In those venues, however, an investor may find it difficult to obtain accurate quotations as to the market value of our Common Stock. In addition, if we fail to meet the criteria set forth in SEC regulations, various requirements would be imposed by law on broker-dealers who sell our securities to persons other than established customers and accredited investors. Consequently, such regulations may deter broker-dealers from recommending or selling our Common Stock, which may further affect the liquidity of the Common Stock. This would also make it more difficult for us to raise capital.
Our Common Stock is subject to the penny stock rules of the SEC and the trading market in the securities is limited, which makes transactions in the stock cumbersome and may reduce the value of an investment in the stock.
The SEC has adopted Rule 15g-9 which establishes the definition of a penny stock, for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share
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or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require:
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·
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that a broker or dealer approve a person
s account for transactions in penny stocks; and
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·
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the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.
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In order to approve a person
s account for transactions in penny stocks, the broker or dealer must:
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·
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obtain financial information and investment experience objectives of the person; and
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·
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make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
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The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form sets forth:
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·
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the basis on which the broker or dealer made the suitability determination; and
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·
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that the broker or dealer received a signed, written agreement from the investor prior to the transaction.
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Generally, brokers may be less willing to execute transactions in securities subject to the penny stock rules. This may make it more difficult for investors to dispose of common stock and cause a decline in the market value of stock.
Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.
The price of our Common Stock may become volatile, which could lead to losses by investors and costly securities litigation.
The trading price of our Common Stock is likely to be highly volatile and could fluctuate in response to factors such as:
·
actual or anticipated variations in our operating results;
·
announcements of developments by us or our competitors;
·
announcements by us or our competitors of significant Acquisitions, strategic partnerships, joint ventures or capital commitments;
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·
adoption of new accounting standards affecting our Company
s industry;
·
additions or departures of key personnel;
·
sales of our Common Stock or other securities in the open market; and
·
other events or factors, many of which are beyond our control.
The stock market is subject to significant price and volume fluctuations. In the past, following periods of volatility in the market price of a companys securities, securities class action litigation has often been initiated against the company. Litigation initiated against us, whether or not successful, could result in substantial costs and diversion of our managements attention and resources, which could harm our business and financial condition.
We do not anticipate dividends to be paid on our Common Stock, and investors may lose the entire amount of their investment.
Cash dividends have never been declared or paid on the Common Stock, and we do not anticipate such a declaration or payment for the foreseeable future. We expect to use future earnings, if any, to fund business growth. Therefore, stockholders will not receive any funds absent a sale of their shares. We cannot assure stockholders of a positive return on their investment when they sell their shares, nor can we assure that stockholders will not lose the entire amount of their investment.
If securities analysts do not initiate coverage or continue to cover our Common Stock or publish unfavorable research or reports about our business, this may have a negative impact on the market price of our common stock.
The trading market for the Common Stock will depend on the research and reports that securities analysts publish about our business and the Company. We do not have any control over these analysts. There is no guarantee that securities analysts will cover the Common Stock. If securities analysts do not cover the Common Stock, the lack of research coverage may adversely affect its market price. If we are covered by securities analysts, and our stock is the subject of an unfavorable report, our stock price and trading volume would likely decline. If one or more of these analysts ceases to cover the Company or fails to publish regular reports on the Company, we could lose visibility in the financial markets, which could cause our stock price or trading volume to decline.
You may experience dilution of your ownership interests because of the future issuance of additional shares of the Common Stock.
In the future, we may issue our authorized but previously unissued equity securities, resulting in the dilution of the ownership interests of our present stockholders. We are currently authorized to issue an aggregate of 55,000,000
shares of capital stock consisting of
50,000,000 shares of Common Stock and 5,000,000 shares of preferred stock with preferences and rights to be determined by our Board of Directors. As of the Closing of the Share Exchange, there are
20,189,642 shares of our Common Stock and no shares of our preferred stock outstanding. We may also issue additional shares of our Common Stock or other securities that are convertible into or exercisable for our Common Stock in connection with hiring or retaining employees,
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future Acquisitions, future sales of its securities for capital raising purposes, or for other business purposes. The future issuance of any such additional shares of our Common Stock may create downward pressure on the trading price of the Common Stock. There can be no assurance that we will not be required to issue additional shares, warrants or other convertible securities in the future in conjunction with any capital raising efforts, including at a price (or exercise prices) below the price at which shares of the Common Stock will be quoted on the OTCBB.
PROPERTIES
We have no real property or separate business location at the present time. Our principal executive office address and telephone number are the office address and telephone number of Gregg W. Koechlein, who is a stockholder, our CFO, COO, Secretary and Treasurer, and are provided at no cost.
MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
There is no established trading market for our shares of common stock. Our shares of common stock are listed on the OTC Bulletin Board of the Financial Industry Regulatory Authority, Inc. (FINRA) under the symbol GLFO; however, management does not expect any established trading market to develop in our shares of common stock unless and until we have material operations. In any event, no assurance can be given that any market for our common stock will develop or be maintained. If a public market ever develops in the future, the sale of shares of our common stock that are deemed to be restricted securities pursuant to Rule 144 of the SEC by members of management or others may have a substantial adverse impact on any such market. See the heading Rule 144 below for requirements of resales of shares of our common stock under Rule 144.
We have a limited public float of approximately 189,642 shares of our outstanding common stock, and there has been no established trading market in our common stock for many years. These factors may result in uncertainty and volatility in the trading price of our common stock that may not have any relation to our current or future prospects.
Set forth below are the high and low Closing bid prices for our common stock for each quarter of 2016, 2017 and the first three quarters of 2018. These bid prices were obtained from OTC Markets, Inc. All prices listed herein reflect inter-dealer prices, without retail mark-up, mark-down or commissions and may not represent actual transactions:
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Period
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High
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Low
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January 1, 2018 through March 31, 2018
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$1.25
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$1.25
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April 1, 2018 through June 30, 2018
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$1.25
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$1.25
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July 1, 2018 through September 30, 2018
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$1.25
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$1.25
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January 1, 2017 through March 31, 2017
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$1.25
|
$1.25
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April 1, 2017 through June 30, 2017
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$1.25
|
$1.25
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July 1, 2017 through September 30, 2017
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$1.25
|
$1.25
|
October 1, 2017 through December 31, 2017
|
$1.25
|
$1.25
|
January 1, 2016 through March 31, 2016
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$1.25
|
$1.25
|
April 1, 2016 through June 30, 2016
|
$1.25
|
$1.25
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July 1, 2016 through September 30, 2016
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$1.25
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$1.25
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October 1, 2016 through December 31, 2016
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$1.25
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$1.25
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Rule 144
The following is a summary of the current requirements of Rule 144:
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Affiliate or Person Selling on Behalf of an Affiliate
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Non-Affiliate (and has not been an Affiliate During the Prior Three Months)
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Restricted Securities of Reporting Issuers
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During six-month holding period
no resales under Rule 144 Permitted.
After Six-month holding period
may resell in accordance with all Rule 144 requirements including:
·
Current public information,
·
Volume limitations,
·
Manner of sale requirements for equity securities, and
·
Filing of Form 144.
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During six- month holding period
no resales under Rule 144 permitted.
After six-month holding period but before one year
unlimited public resales under Rule 144 except that the current public information requirement still applies.
After one-year holding period
unlimited public resales under Rule 144; need not comply with any other Rule 144 requirements.
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Restricted Securities of Non-Reporting Issuers
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During one-year holding period
no resales under Rule 144 permitted.
After one-year holding period
may resell in accordance with all Rule 144 requirements including:
·
Current public information,
·
Volume limitations,
·
Manner of sale requirements for equity securities, and
·
Filing of Form 144.
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During one-year holding period
no resales under Rule 144 permitted.
After one-year holding period
unlimited public resales under Rule 144; need not comply with any other Rule 144 requirements.
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Shell Companies
The following is an excerpt from Rule 144(i) regarding resales of securities of shell companies:
(i)
Unavailability to securities of issuers with no or nominal operations and no or nominal non-cash assets
.
(1)
This section is not available for the resale of securities initially issued by an issuer defined below:
(i)
An issuer, other than a business combination related shell company, as defined in §230.405, or an asset-backed issuer, as defined in Item 1101(b) of Regulation AB (§229.1101(b) of this chapter), that has:
(A)
No or nominal operations; and
(B)
Either:
(1)
No or nominal assets;
(2)
Assets consisting solely of cash and cash equivalents; or
(3)
Assets consisting of any amount of cash and cash equivalents and nominal other assets; or
(ii)
An issuer that has been at any time previously an issuer described in paragraph (i)(1)(i).
(2)
Notwithstanding paragraph (i)(1), if the issuer of the securities previously had been an issuer described in paragraph (i)(1)(i) but has ceased to be an issuer described in paragraph (i)(1)(i); is subject to the reporting requirements of section 13 or 15(d) of the Exchange Act; has filed all reports and other materials required to be filed by section 13 or 15(d) of the Exchange Act, as applicable, during the preceding 12 months (or for such shorter period that the issuer was required to file such reports and materials), other than Form 8-K reports (§249.308 of this chapter); and has filed current Form 10 information with the SEC reflecting its status as an entity that is no longer an issuer described in paragraph (i)(1)(i), then those securities may be sold subject to the requirements of this section after 12 months have elapsed from the date that the issuer filed Form 10 information with the SEC.
(3)
The term Form 10 information means the information that is required by Form 10 or Form 20-F (§249.220f of this chapter), as applicable to the issuer of the securities, to register under the Exchange Act each class of securities being sold under this rule. The issuer may provide the Form 10 information in any filing of the issuer with the SEC. The Form 10 information is deemed filed when the initial filing is made with the SEC.
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Securities of a shell company cannot be publicly sold under Rule 144 in the absence of compliance with this subparagraph. We believe that we are no longer a shell company following the Closing of the Share Exchange, and that Rule 144 will become available one (1) year following the filing of this Current Report.
Holders
We currently have approximately 55 stockholders, not including an indeterminate number who may hold shares in street name.
Dividends
We have not declared any cash dividends with respect to our common stock, and do not intend to declare dividends in the foreseeable future. Our future dividend policy cannot be ascertained with any certainty, and if and until we determine to engage in any business or we complete any Acquisition, reorganization or merger, no such policy will be formulated. There are no material restrictions limiting, or that are likely to limit, our ability to pay dividends on our securities.
Securities Authorized for Issuance under Equity Compensation Plans