ITEM 1. BUSINESS
Business Development
We were incorporated in the State of Colorado on May 9, 1996, with an authorized capital of 55,000,000 shares, comprised of 50,000,000 shares of common stock, and 5,000,000 shares of non-voting preferred stock, both with no par value per share. We were formed for the primary purpose of engaging in the business of marine transportation and to provide ocean going shipping of goods internationally.
In May of 1996, we issued restricted securities (common stock) at our inception, and conducted an offering under Rule 504 of Regulation D of the Securities and Exchange Commission (the SEC). This offering was also conducted in accordance with Section 11-51-308(1)(p) of the Colorado Revised Statutes that allowed public solicitation of accredited investors.
Our proposed business operations were unsuccessful, and we have had no material business operations from March 7, 1997 through December 31, 2018.
Copies of our Articles of Incorporation and our By-Laws were attached to our 10-SB Registration Statement that was filed with the SEC on June 7, 2006, and were attached to our 10-K Annual Report for the period ended December 31, 2013. See Part IV, Item 15.
We voluntarily filed our 10-SB Registration Statement so that we could become a reporting issuer under the Securities Exchange Act of 1934, as amended (the Exchange Act).
On November 7, 2017, we, along with our newly formed wholly-owned subsidiary, Gulf Acquisition, and our President, entered into an Agreement and Plan or Merger (the Merger Agreement) with US 3D Printing, Inc., a Utah corporation (US 3D), and certain of its principals and majority shareholders. Additional information about the Merger Agreement is contained in the Companys 8-K Current Report dated November 7, 2017, and filed with the SEC on November 9, 2017, and which, together with a copy of the Merger Agreement, is incorporated therein.
Pursuant to the terms of the Merger Agreement the parties had until December 15, 2017, to complete the Merger Agreement (the Termination Date), and could terminate the Merger Agreement if the conditions precedent to the Closing had not been satisfied on or before such date. Further, the Company could terminate the Merger Agreement if the conditions provided in Article 5 thereof had not been satisfied by the Termination Date; and similarly, US 3D could terminate the Merger Agreement if the conditions provided in Article 5 thereof had not been satisfied by the Termination Date. The conditions of the Merger Agreement were not satisfied by the Termination Date, and therefore the Merger Agreement has been terminated.
On December 31, 2018 (the Closing Date or Closing), we 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 we acquired 100% of the issued and outstanding shares of common stock of High Sierra (the Share Exchange or Acquisition). The Acquisition of High Sierra was consummated on the same date, and High Sierra is now a wholly-owned subsidiary of the Company. The names of the shareholders of High Sierra are listed in the Agreement, a copy of which is attached to our Form 8-K Current Report filed with the SEC on January 2, 2019 as Exhibit 2.1. As consideration for the Share Exchange, we issued a total of 15,433,025 shares of our common stock to the High Sierra shareholders.
The Share Exchange has been treated as a recapitalization of the Company for financial accounting purposes. High Sierra is considered the acquirer for accounting purposes, and our historical financial statements before the Share Exchange will be replaced with the historical financial statements of High Sierra.
The issuance of shares of the Companys 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.
In connection with the Acquisition of High Sierra, we also issued 1,087,525 shares of its common stock to Michael Vardakis, the former President and a current director of the Company, for a cash payment of $21,750, 120,000 shares of its common stock to Melissa Ladakis, the former Secretary and director of the Company, 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
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corporation (Biored). Biored loaned the Company $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 our shares of 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.
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 our 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.
Melissa Ladakis served as a director, Secretary and Treasurer of the Company beginning in June 1996. Michael Vardakis began serving as a director and as President of the Company beginning in March 2003.
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.
On March 25, 2019 a Special Meeting of the Companys Stockholders was held at which the stockholders voted to change the Companys name to High Sierra Technologies, Inc., and to approve certain other changes in the Companys Articles of Incorporation which are described in the Companys Definitive Proxy Statement. These changes became effective on April 1, 2019. A copy of our Amended and Restated Articles of Incorporation is attached to this Annual Report as Exhibit 3.2.
On March 25, 2019 following the shareholder meeting, Michael Vardakis resigned as a director of the Company. On March 26, 2019, Vincent C. Lombardi, as the only remaining director of the Company, appointed Gregg W. Koechlein as a director of the Company to fill the vacancy left by Mr. Vardakis resignation.
Description of Business
The Companys business is now focused on the business of its wholly-owned subsidiary, High Sierra Technologies, Inc. (High Sierra). 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.
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 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
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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. As used herein, the term cannabis
includes industrial hemp which is defined as the plant
Cannabis sativa L
. having a
Δ
9-tetrahydrocannabinol (THC) concentration of not more than 0.3 percent on a dry weight basis (
hemp
).
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.
High Sierra has engaged the law firm of Oliff PLC to prosecute its patent Applications. In January 2019, the two provisional patent Applications were combined into one broad utility patent Application which was filed with the United States Patent and Trademark Office, the Canadian Intellectual Property Office and under the provisions of the Patent Cooperation Treaty (PCT) which will afford High Sierra additional temporary protection in an additional 152 other countries.
High Sierras current Intellectual 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 converted into full Utility Patents in due course in both the United States and Canada. During the time allowed under the provisions of the PCT, High Sierra intends to determine in which foreign countries it will be appropriate to file additional utility patent applications.
Marketing Plans to License the Intellectual Property
High Sierra is now marketing the licensing of its technology in 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.
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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.
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 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.
Possible Industrial Hemp Farming Business
The Company has been negotiating with a third party to obtain a five year lease on a 200 acre parcel of undeveloped land located in McDermitt, Nevada. The Company is proposing to grow industrial hemp on the property if the lease is finalized. The Company has also been in discussions with a third party to manage the farming project, and it is anticipated that a consulting agreement will be entered into with the third party if, and when, the lease is signed.
If the farming project is commenced, the Company believes that it would be beneficial to build a processing plant in McDermitt, Nevada to process the industrial hemp. However, the Company would first need to successfully raise substantial equity funds before undertaking such a construction project. The Company can offer no assurance that it will be able to successfully raise such funds.
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 be consumed via combustion and subsequent inhalation and/or
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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 Drug Enforcement Administration thus providing High Sierra an opportunity in a new marketplace that is not subject to the same level of Federal regulation as is the marijuana form of 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.
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.
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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 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.
Effect of Existing or Probable Governmental Regulations on our Business
We are subject to the following regulations of the SEC and applicable securities laws, rules and regulations:
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 applicable to larger companies.
Sarbanes/Oxley Act
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 strengthen 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; auditor attestation to managements conclusions about 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. Matters submitted to stockholders at special or annual meetings thereof or pursuant to a written consent will require us to provide our stockholders with the information outlined in Schedules 14A or 14C of Regulation 14; 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 stockholders.
We are also required to file Annual Reports on SEC Form 10-K and Quarterly Reports on SEC 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 SEC Form 8-K.
Emerging Growth Company
We are 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 Securities and Exchange Commission filings; no requirements to include risk factors in Exchange Act filings; no requirement to include certain selected financial data and supplementary financial
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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.
Cost and Effects of Compliance with Environmental Laws
Our current business operations are not subject to any material environmental laws, rules or regulations that would have an adverse material effect on our business operations or financial condition or result in a material compliance cost.