RTSL Rapid Therapeutic Science Laboratories Inc (PK)

ITEM 1A. RISK FACTORS

Summary Risk Factors

Our business is subject to numerous risks and uncertainties, including those described in this “Risk Factors” section below. These risks include, but are not limited to, the following:

•We have a history of operating losses, and we may not be able to achieve or sustain profitability; we have recently shifted to an entirely new business and may not be successful in this new business; 

•We are not currently manufacturing any products or generating any revenues; 

•We are subject to risks in connection with FDA Regulations; 

•Our planned FDA Investigative New Drug Application (IND) is subject to risks; 

•Final approval by regulatory authorities of our products for commercial use may be delayed, limited or prevented, any of which would adversely affect our ability to generate operating revenues; 

•The FDA may determine that our drug candidates have undesirable side effects that could delay or prevent their regulatory approval or commercialization; 

•We have a limited operating history and our business is in a relatively new consumer product segment, which is difficult to forecast; 

•We require additional financing, and we may not be able to raise funds on favorable terms or at all; 

•Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern; 

•Because our business is dependent upon continued market acceptance by consumers, any negative trends will adversely affect our business operations; 

•We may not succeed in restarting or growing our sales and creating a viable market for our products, and our failure to do so would have a material adverse effect on our business, prospects, financial condition and operating results; 

•Changes in public opinion and perception could negatively affect our business operations; 

•The current continued outbreak of the novel coronavirus, or COVID-19, has caused severe disruptions in the global economy and may have an adverse impact on our performance and results of operations; 

•The long-term health impacts associated with use of hemp derivative products are unknown; 

•Our products may be subject to recalls for a variety of reasons; 

•We are subject to product liability regarding our products, which could result in costly litigation and settlements; 

•The hemp industry faces strong opposition; 

•The results of future clinical research may negatively impact our business ; 

•The lack of reliable data on the hemp industry may negatively impact our results of operations; 

•Hemp companies are subject to recent SEC investor fraud alerts and have been under greater scrutiny by the SEC than companies in other industries; 

•We may be unable to obtain our cleanroom ISO levels, which may lead to contamination of our product; 

•We are dependent upon our current management, who may have conflicts of interest; 

•We could be subject to hackers or ransomware attacks; 

•We have identified material weaknesses in our disclosure controls and procedures and internal control over financial reporting; 

•We operate in highly regulated industries where the regulatory environments are rapidly developing and we may not always succeed in complying fully with applicable regulatory requirements in all jurisdictions where we carry on business; 

•We are constrained by law in our ability to market and advertise our products; 

•The license we have to use and commercialize the ‘Desirick Procedure’ is only exclusive in four states, and even in those states, is subject to licenses which were existing as of February 9, 2021; 

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•Each State and other jurisdiction has its own licensing requirements and regulations when it comes to the sale of cannabinoid products; 

•The FDA has not approved any of the Company’s products; 

•The propellants we use in our products contain greenhouse gases and may be subject to future restrictions or limitations on use; 

•Because we plan to manufacture and sell CBD products, it is possible that, in the future, we may have difficulty accessing the service of banks; 

•The FDA limits our ability to discuss the potential medical benefits of CBD; 

•If we are unable to protect our intellectual property, our business may be adversely affected; 

•If we are unable to obtain or defend our pending patents, our business could be materially adversely affected; 

•We operate in an industry with the risk of intellectual property litigation. Claims of infringement against us may hurt our business; 

•Our common stock has in the past been a “penny stock” under SEC rules, and may be subject to the “penny stock” rules in the future; 

•Your ownership may be diluted if additional capital stock is issued to raise capital, to finance acquisitions or in connection with strategic transactions; 

•Shares issuable upon the conversion of convertible notes may substantially increase the number of shares available for sale in the public market and depress the price of our common stock; 

•Certain of our outstanding convertible notes and the Debentures include restrictions on future activities; 

•The issuance of common stock upon conversion of the Debentures and upon exercise of outstanding warrants will cause immediate and substantial dilution; 

•We currently owe a significant amount of money under our outstanding Debenture; 

•Certain warrants we have granted include anti-dilutive rights which will be triggered in connection with an offering; 

•The concentration of our common stock ownership by our current management will limit your ability to influence corporate matters; 

•There may not be sufficient liquidity in the market for our securities in order for investors to sell their shares. The market price of our comment stock may be volatile; 

•Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock, if issued, and the shares of common stock issuable upon conversion thereof, will cause significant dilution to existing stockholders; 

•There is a limited public market for our securities and you could lose all or part of your investment; 

•We will continue to incur increased costs as a result of being a reporting company, and given our limited capital resources, such additional costs may have an adverse impact on our profitability; 

•We may not be able to compete successfully against present or future competitors; 

•Our ability to grow and compete in the future will be adversely affected if adequate capital is not available; 

•We may be subject to claims that we violated intellectual property rights of others, which are extremely costly to defend and could require us to pay significant damages and limit our ability to operate; 

•Failure to adequately manage our planned aggressive growth strategy may harm our business or increase our risk of failure; 

•If we make any acquisitions, they may disrupt or have a negative impact on our business; 

•Our business, including our costs and supply chain, is subject to risks associated with raw material costs, inflation and energy; 

•Our Amended and Restated Articles of Incorporation, as amended, provides for the indemnification of officers and directors at our expense and limits their liability, which may result in a major cost to us and hurt the interests of our stockholders; 

•Stockholders may be diluted significantly through our efforts to obtain financing and satisfy obligations through the issuance of additional shares of our common stock; 

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•Our common stock may continue to be followed by only a limited number of analysts and there may continue to be a limited number of institutions acting as market makers for our common stock; and 

•Other risks disclosed below. 

The following risks and uncertainties should be carefully considered in addition to the other information included in this Report. If any of the following occurs, our business, financial condition or operating results could be materially harmed. An investment in our securities is speculative in nature, involves a high degree of risk and should not be made by an investor who cannot bear the economic risk of its investment for an indefinite period of time and who cannot afford the loss of its entire investment.

Risks Relating to Our Business

Our business, financial condition and results of operations are subject to various risks and uncertainties, including those described below and elsewhere in this report. This section discusses factors that, individually or in the aggregate, we think could cause our actual results to differ materially from expected and historical results, and consequently, could cause the value of our securities (including our common stock) to decline in value. Our business, financial condition or results of operations could be materially adversely affected by any of these risks. It is not possible to predict or identify all such factors. Consequently, the following description of Risk Factors is not a complete discussion of all potential risks or uncertainties applicable to our business.

We have a history of operating losses, and we may not be able to achieve or sustain profitability; we have recently shifted to an entirely new business and may not be successful in this new business.

We are not profitable and have incurred an accumulated deficit of $10,316,149 since our inception. We had no sales for the year ended December 30, 2022.  Our revenues from sales on a trial basis for the year ended December 31, 2021 and the nine month transition period ended December 31, 2020, were $534 and $130,916, respectively, consisting mostly of two large wholesale orders, in the nine months ended December 31, 2020. Sales to the public of MDIs are not anticipated in 2022 or 2023 because of anticipated FDA testing in connection with the Company’s planned IND filing with the FDA, as discussed below. Notwithstanding that, the Company plans to explore selling pharmaceutical isolates of CBD, CBG and CBN, after the construction of the isolate manufacturing facility is complete and the Company is approved for GMP. At that time the Company plans to also consider white labeling non-MDI aerosol products such as oral, nasal or topical sprays. We expect to continue to incur losses for the foreseeable future, and these losses could increase as we continue to work to develop our business. We were previously engaged in pursuing the business of bitcoin mining and digital currency and were not successful in that business. In November 2019, we adopted a new business strategy focused on developing potential commercial opportunities involving the rapid application of therapeutics using inhaler technology that the Company has licensed for its use. We have yet to commence profitable operations in that business and have generated only minimal revenues in connection with such new business strategy; therefore, the Company is continuing to incur operating losses. We may not generate significant revenues in the future, may not be able to sustain our operations with the revenue that we generate in the future, and even if we achieve profitability, we may not be able to sustain profitability in subsequent periods.

We are not currently manufacturing any products or generating any revenues.

The Company commenced limited sales of its inhaler products to customers, while still in a product development mode, on a trial basis beginning in January 2020; however, due to the subsequent impact of the COVID-19 pandemic, as well as other contributing factors, the Company has currently suspended such sales. Sales to the public of MDIs are not anticipated in 2022 or 2023 because of anticipated FDA testing in connection with the Company’s planned IND filing with the FDA. Notwithstanding that, the Company will explore selling pharmaceutical isolates of CBD, CBG and CBN, after the construction of the isolate manufacturing facility is complete and the Company is approved for GMP. At that time the Company will also consider white labeling non-MDI aerosol products such as oral, nasal or topical sprays. The Company is not currently manufacturing or selling any products, and has generated only nominal revenues since January 1, 2021. Moving forward, funding permitting, and upon obtaining any necessary governmental and/or third party approvals, the Company plans to build out its 8,566 square feet of leased commercial office building space located in Addison, Texas, with the intention of utilizing it as its corporate office as well as its aerosol filling laboratories and isolate manufacturing facility, beginning in the fourth quarter of 2023, and hopes to begin re-manufacturing and selling metered dose inhalers (MDI) and other products to deliver NPCs to customers for testing purposes in the first quarter of 2024, of which there can be no assurance. Because we are not currently generating any revenues, and future revenues will be subject to the filing and approval of the IND as well as other FDA approvals, discussed below, all expenses are currently being paid by borrowings and/or equity sales and

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such expenses will continue in the future until such time, if ever, as we can generate significant revenues. We may not be able to restart our manufacturing in the future, we may never sell any products, and we may not be able to generate sufficient revenue in the future to support our operations. We may not generate significant revenues in the future, may not be able to sustain our operations with the revenue that we generate in the future, and even if we achieve profitability, we may not be able to sustain profitability in subsequent periods.

We are subject to risks in connection with FDA Regulations.

Our MDI parts and CBD will be regulated by the FDA. Prior to the removal of our MDI from the marketplace to pursue FDA approval for our MDI containing CBD, we sold our products to the public under what is commonly termed “safe harbor” provisions. These provisions essentially state that although CBD is a regulated drug under FDA rules, companies can sell to the public if they do not make any therapeutic claims and do not sell an adulterated or toxic product. We plan to continue to sell future CBD products into the marketplace under this safe harbor provision; however, we will not sell a metered dose product to deliver CBD to the lungs as we are seeking FDA approval to sell this product only on an OTC or prescription bases. Regardless, at any time, the FDA could change its position and seek to remove all CBD products from the US marketplace for all manufacturers. Based upon the stated legislative intent of the 2018 Farm Bill, our lobbyist’ advise, pending legislation in the US Congress, and on statements posted by the FDA on www.fda.gov, the Company does not expect this to happen.

Our planned FDA Investigative New Drug Application (IND) is subject to risks.

The Company has made the decision to seek approval from the FDA under what is known as an Investigative New Drug Application for its MDI containing only CBD. Although the Company is making best efforts to achieve success of an FDA approval, the IND application has not been filed to date, nor has the Company met with the FDA regarding such planned IND, and there are no assurances the FDA will ever approve any new drug application including our MDI containing CBD. The IND application is a process to seek FDA approval of a drug for treatment of newly discovered therapeutic applications. This is a time-consuming expensive process. There is no firm timeline for how long this may take and there is no guarantee the Company will be able to meet the long-term cost of yet unknown FDA requirements. Further, there is no guarantee that at any time in the IND process the FDA will refuse to approve the application for any purpose or even allow further testing on humans. In short, the FDA could order us to stop testing at any time and to never sell the product to the public again.

Final approval by regulatory authorities of our products for commercial use may be delayed, limited or prevented, any of which would adversely affect our ability to generate operating revenues.

We do not anticipate generating any significant operating revenue until we obtain FDA approval for our MDI products and planned IND. We will need to successfully complete certain clinical studies and obtain regulatory approval before we begin commercial sales. We may experience unforeseen events during product development that may substantially delay or prevent product approval. The pre-clinical and clinical development, manufacturing, labeling, packaging, storage, recordkeeping, export, marketing and distribution, and other possible activities relating to our products will be subject to extensive regulation by the FDA and other regulatory agencies. Failure to comply with applicable regulatory requirements may, either before or after product approval, subject us to administrative or judicially imposed sanctions that may negatively impact the approval of one or more of our products or otherwise negatively impact our business.

Specific pre-clinical data, chemistry, manufacturing and controls data, a proposed clinical trial protocol and other information must be submitted to the FDA as part of our planned IND application, and clinical trials may commence only after the IND application becomes effective. To market a new drug in the United States, we must submit to the FDA and obtain FDA approval of a New Drug Application (“NDA”). An NDA must be supported by extensive clinical and pre-clinical data, as well as extensive information regarding chemistry, manufacturing and controls to demonstrate the safety and effectiveness of the drug candidate.

Obtaining approval of an NDA can be a lengthy, expensive and uncertain process. Regulatory approval of an NDA is not guaranteed. The number and types of pre-clinical studies and clinical trials that will be required for FDA approval varies depending on the drug candidate, the disease or condition that the drug candidate is designed to target and the regulations applicable to any particular drug candidate. Despite the time and expense exerted in pre-clinical and clinical studies, failure can occur at any stage, and we could encounter problems that delay our product candidate development or that cause us to abandon clinical trials or to repeat or perform additional pre-clinical studies and clinical trials. The FDA can delay, limit or deny approval of a drug candidate for many reasons, and product candidate

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development programs may be delayed or may not be successful for many reasons including but not limited to, the following:

•the FDA or  Institutional Review Boards (“IRBs”) may not authorize us to commence, amend, or continue clinical studies; 

•we may be required to amend our clinical studies in such a way that it compromises the study data or makes the ongoing conduct of the study is impracticable; 

•there may be deviations from the clinical study protocol that may result in the need to drop patients from the study, increase the study enrollment size or duration, or that may compromise the reliability of the study and the resulting data; 

•we may not be able to enroll a sufficient number of qualified patients for clinical trials in a timely manner or at all, patients may drop out of our clinical trials or be lost to follow-up at a higher rate than we anticipate, patients may not follow the clinical trial procedures, or the number of patients required for clinical trials may be larger than we anticipate; 

•we may have delays in adding new investigators or clinical trial sites, or we may experience a withdrawal of clinical trial sites; 

•the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may be insufficient or inadequate; 

•a drug candidate may not be deemed adequately safe or effective for an intended use; 

•the FDA may not find the data from pre-clinical studies and clinical trials sufficient; 

•we may not be able to demonstrate that a product candidate provides an advantage over current standards of care or current or future competitive therapies in development; 

•to the extent that we are developing drug candidates for use in combination with other products, clinical trials may be more complex, resulting data may be more difficult to interpret, we may not be able to demonstrate that clinical trial results are attributable to our drug candidate, or developments with respect to the other product or standard of care may impact our ability to obtain product approval for our drug candidate or to successfully market our drug candidate; 

•the FDA or comparable foreign regulatory authorities may not accept data from studies with clinical trial sites in foreign countries; 

•the FDA may require that we conduct additional pre-clinical or clinical studies, change our manufacturing process, or gather additional manufacturing information above what we currently have planned for; 

•the FDA’s interpretation and our interpretation of data from pre-clinical studies and clinical trials may differ significantly; 

•the FDA may not agree with our intended indications, the design of our clinical or pre-clinical studies, or there may be a flaw in the design that does not become apparent until the studies are well advanced; 

•we may not be able to establish agreements with contractors or collaborators, including clinical trial sites and clinical contract research organizations (“CROs”), or they or we may fail to comply with applicable FDA, protocol, and other regulatory requirements, including those identified in other risk factors; 

•the FDA may not approve the manufacturing processes or facilities; 

•the FDA may change its approval policies or adopt new laws or regulations and our development program may not meet newly imposed requirements; 

•the cost of clinical trials of our product candidates may be greater than we anticipate or we may have insufficient funds for a clinical trial or to pay the substantial user fees required by the FDA upon the filing of a marketing application; or 

•the FDA may not accept an NDA or other submission due to, among other reasons, the content or formatting of the submission. 

Our pre-clinical and clinical data, other information and procedures relating to a drug candidate may not be sufficient to support approval by the FDA or any other U.S. or foreign regulatory authority, or regulatory interpretation of these data and procedures may be unfavorable. If approved, FDA will require post-marketing studies to verify

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clinical benefit. Failure to conduct required post-approval studies, or confirm a clinical benefit, will allow the FDA to withdraw the drug from the market on an expedited basis.

Our business and reputation may be harmed by any failure or significant delay in receiving regulatory approval for the sale of any drugs resulting from our drug candidates. As a result, we cannot predict when or whether regulatory approval will be obtained for any drug we develop. Additionally, other factors may serve to delay, limit or prevent the final approval by regulatory authorities of our drug candidates for commercial use, including, but not limited to:

•our MDIs are in various stages of development, and we will need to conduct significant clinical testing and development work to demonstrate the quality, safety, and efficacy of these drug candidates before applications for marketing can be filed with the FDA, or with the regulatory authorities of other countries; 

•development and testing of product formulation, including identification of suitable excipients, or chemical additives intended to facilitate delivery of our drug candidates; 

•it may take us many years to complete the testing of our drug candidates, and failure can occur at any stage of this process; and 

•negative or inconclusive results, statistically or clinically insignificant results, or adverse medical events during a clinical trial could cause us to delay or terminate our development efforts. 

Significant delays relating to any preclinical or clinical trials also could shorten any periods during which we may have the exclusive right to commercialize our product candidates or allow our competitors to bring products to market before we do. This may prevent us from receiving marketing approvals and impair our ability to successfully commercialize our product candidates and may harm our business and results of operations. If we experience delays in obtaining approval, if we fail to obtain approval of a product candidate or if the label for a product candidate does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate, the commercial prospects for such product candidate may be harmed and our ability to generate revenues from that product candidate will be materially impaired. Accordingly, the successful development of any of our drug candidates is uncertain and, accordingly, we may never commercialize any of these drug candidates or generate significant revenue.

The FDA may determine that our drug candidates have undesirable side effects that could delay or prevent their regulatory approval or commercialization.

Undesirable side effects caused by our drug candidates could cause us, IRBs, and other reviewing entities or regulatory authorities to interrupt, delay, or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign authorities. Undesirable side effects may also result in requirements for costly post-marketing testing and surveillance, or other requirements, including risk evaluation and mitigation strategies (REMS), to monitor the safety or efficacy of the products. These could prevent us from commercializing and generating revenues from the sale of our drug candidates.

We have a limited operating history and our business is in a relatively new consumer product segment, which is difficult to forecast.

The Company has a limited operating history, which can make it difficult for investors to evaluate our operations and prospects and may increase the risks associated with investment into the Company. Our business plan is subject to all business risks associated with new business enterprises, including the absence of any significant operating history upon which to evaluate an investment. The likelihood of our success must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with the formation of a new business, the development of new strategy and the competitive environment in which the Company will operate.  It is possible that the Company will incur losses in the future.  There is no guarantee that the Company will be profitable.

Additionally, our industry segment is relatively new, and is constantly evolving.  As a result, there is a lack of available information with which to forecast industry trends or patterns.  There is no assurance that sustainable industry trends or preferences will develop that will lead to predictable growth or earnings forecasts for individual companies or the industry segment as a whole.  We are also unable to determine what impact future governmental regulation may have on trends and preferences or patterns within our industry segment.

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We require additional financing, and we may not be able to raise funds on favorable terms or at all.

We are not currently generating any revenues and do not anticipate generating any significant revenues until late 2023 or 2024, at the earliest, pending FDA approval of our product candidates, which may not be received on a timely basis, if at all. We anticipate requiring further funds in the future to grow our operations and produce additional product lines. The sources of additional capital are expected to be from sales of our securities including equity, equity linked and convertible debt and potentially notes payable. Any future sales of our securities will result in dilution to existing shareholders. Furthermore, we may incur debt in the future, and may not have sufficient funds to repay our future indebtedness or may default on our future debts, jeopardizing our business viability.

We may not be able to borrow or raise additional capital in the future, on favorable terms, if at all, to meet our needs or to otherwise provide the capital necessary to expand our operations and business, which might result in the value of our securities decreasing in value or becoming worthless. Additional financing may not be available to us on terms that are acceptable. Consequently, we may not be able to proceed with our intended business plans.  Obtaining additional financing contains risks, including:

•additional equity financing may not be available to us on satisfactory terms and any equity we are able to issue could lead to dilution for current shareholders; 

•current or future laws or regulations may make it impossible, or more difficult for the Company to raise funding, due to the fact that it operates in the cannabinoid industry; 

•loans or other debt instruments may have terms and/or conditions, such as interest rate, restrictive covenants and control or revocation provisions, which are not acceptable to management or our directors; 

•the current environment in capital markets combined with our capital constraints may prevent us from being able to obtain adequate debt financing; and 

•if we fail to obtain required additional financing to grow our business, we would need to delay or scale back our business plan, reduce our operating costs, or reduce our headcount, each of which would have a material adverse effect on our business, future prospects, and financial condition. 

Additionally, we may have difficulty obtaining additional funding, and we may have to accept terms that would adversely affect our shareholders.  For example, the terms of any future financings may impose restrictions on our right to declare dividends or on the manner in which we conduct our business.  Additionally, lending institutions or private investors may impose restrictions on a future decision by us to make capital expenditures, acquisitions or significant asset sales.  If we are unable to raise additional funds, we may be forced to curtail or even abandon our business plan.

Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern.

Our historical financial statements have been prepared under the assumption that we will continue as a going concern. Our independent registered public accounting firm has issued reports on our financial statements for the years ended December 31, 2022 and 2021, that includes an explanatory paragraph referring to our recurring operating losses and expressing substantial doubt in our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability to obtain additional equity financing or other capital, attain further operating efficiencies, reduce expenditures, and, ultimately, generate revenue. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty. However, if adequate funds are not available to us when we need it, we will be required to curtail our operations which would, in turn, further raise substantial doubt about our ability to continue as a going concern. The doubt regarding our potential ability to continue as a going concern may adversely affect our ability to obtain new financing on reasonable terms or at all. Additionally, if we are unable to continue as a going concern, our stockholders may lose some or all of their investment in the Company.

Because our business is dependent upon continued market acceptance by consumers, any negative trends will adversely affect our business operations.

We will be substantially dependent on continued market acceptance and proliferation of consumers of hemp related products-including our current planned products and any new products we may offer. We believe that as hemp and hemp-derived cannabidiol becomes more accepted, the stigma associated with these sectors will diminish and as

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a result consumer demand will continue to grow. While we believe that the market and opportunity in the hemp space continues to grow, we cannot predict the future growth rate and size of the market. Any negative outlook on the industry will adversely affect our business operations. Additionally, the failure of the market to accept our current and any future products will have a material adverse effect on our revenues and prospects.

We may not succeed in restarting or growing our sales and creating a viable market for our products, and our failure to do so would have a material adverse effect on our business, prospects, financial condition and operating results.

We are a new business operating in a relatively new market sector. As is typical in a new and rapidly evolving industry, demand and market acceptance for recently introduced products and services are subject to a high level of uncertainty and risk. Because the market for our products is new and evolving, it is difficult to predict with any certainty the size of this market and its growth rate, if any. A market for our products may not develop and/or demand for our products may not emerge or be sustainable. If the market fails to develop, develops more slowly than expected or becomes saturated with competitors, our business, financial condition and operating results would be materially adversely affected.

Changes in public opinion and perception could negatively affect our business operations.

Government policy changes or public opinion may also result in a significant influence over the regulation of the hemp industry in the United States or elsewhere. Public opinion and support for hemp and hemp products has traditionally been inconsistent and varies from jurisdiction to jurisdiction. While public opinion and support appears to be rising for legalizing hemp and hemp products, it remains a controversial issue subject to differing opinions surrounding the level of legalization. A negative shift in the public’s perception of hemp and hemp products in the United States or any other applicable jurisdiction could negatively affect current or future legislation or regulation.

Our change in our business strategy and name could subject us to increased SEC scrutiny.

We previously were engaged in the business of crypto-currency mining under our former corporate name. In November 2019, we adopted a new business strategy focused on developing potential commercial opportunities involving the rapid application of therapeutics using inhaler technology that the Company has licensed from a third party. In January 2020, we changed our corporate name to more closely reflect this new business strategy. The SEC has announced that it is scrutinizing public companies that change their name or business model in a bid to capitalize upon the hype surrounding new and emerging technologies, and has suspended trading of certain of such companies.  As a result, we could be subject to substantial SEC scrutiny that could require devotion of significant management and other resources and potentially have an adverse impact on the trading of our stock.

The current continued outbreak of the novel coronavirus, or COVID-19, has caused severe disruptions in the global economy and may have an adverse impact on our performance and results of operations.

The current continued outbreak of the novel coronavirus, or COVID-19, which has been declared by the World Health Organization (WHO) to be a “pandemic”, has spread across the globe and is impacting worldwide economic activity. COVID-19 has severely restricted the level of economic activity around the world. A public health epidemic, including COVID-19, or the fear of a potential pandemic, poses the risk that we or our employees, contractors, suppliers, and other partners may be prevented from conducting business activities for an indefinite period of time, and our customers may be prevented from purchasing our products, due to shutdowns, “stay at home” mandates or other preventative measures that may be requested or mandated by governmental authorities.  The governments of many countries, states, cities and other geographic regions have taken previous preventative or protective actions, such as imposing restrictions on travel and business operations and advising or requiring individuals to limit or forego their time outside of their homes, the majority of which have expired to date.  Temporary closures of businesses have previously been ordered and numerous other businesses have been forced to temporarily close. Such actions have created a disruption in global supply chains, and adversely impacted many industries. To date, the only effect of the pandemic on our operations, which have been fairly minor, is that the pandemic prevented us from traveling to making sales calls on our primary client groups of physicians and other health and wellness providers, which has delayed our marketing plans. The continued COVID-19 outbreak could have a continued adverse impact on economic and market conditions and trigger a period of global economic slowdown, which could affect the future sales of our products, which have been minimal to date.

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If the pandemic persists, closures or other restrictions on the conduct of business operations of our third-party manufacturers, suppliers or vendors could disrupt our supply chain. Additionally, the increased global demand on shipping and transport services may cause us to experience delays in the future which could impact our ability to obtain materials or deliver our products in a timely manner. These factors could otherwise disrupt our operations and could have an adverse effect on our business, financial condition and results of operations-which disruptions, as discussed above, have been only minor to date.

There is a possibility that COVID-19 will negatively affect our results of operations. If Government-mandated closures continue or increase, we may be unable to market our product as planned, which could negatively affect our revenues, growth and ability to raise capital. The global impact of COVID-19 continues to evolve rapidly, and the extent of its effect on our operational and financial performance will depend on future developments, which are highly uncertain, including the duration, scope and severity of the pandemic, the actions taken to contain or mitigate its impact, and the direct and indirect economic effects of the pandemic and related containment measures, among others.

Even after the pandemic subsides, our business could also be negatively impacted should the effects of COVID-19 lead to changes in consumer behavior, including as a result of a decline in discretionary spending.

Moreover, future events could cause global financial conditions to suddenly and rapidly destabilize, and governmental authorities may have limited resources to respond to such future crises.  Future crises may be precipitated by any number of causes, including natural disasters, geopolitical instability, changes to energy prices or sovereign defaults.  Any sudden or rapid destabilization of global economic conditions could negatively impact our ability to obtain equity or debt financing.  If increased levels of volatility in the business community continue including, but not limited to, short supplies of raw materials, shipping prices, or restrictions on propellants which contain propellant grade HFC 134a/P (“HFC”), or inflation increases, it would likely materially affect our business and the value of our securities. Additionally, presently, the EPA has issued a public notice regarding the use of HFC, this, but to our knowledge, no action has been taken to ban the use of such propellant for medical purposes. We presently have a large reserve of pharmaceutical grade propellant sufficient for our testing purposes and a contract with a major manufacture. Regardless, we are taking steps to secure new propellants to use in testing, which may not be available on commercially reasonable terms, if at all. Additionally, if there is a rapid destabilization of global economic conditions or a prolonged recession resulting from the pandemic, it would likely materially affect our business and the value of our securities.

The long-term health impacts associated with use of hemp derivative products are unknown.

Although there is a long history of human consumption of hemp, there is little in the way of studies on the long-term effects of hemp products use on human health. As such, there are inherent risks associated with using the Company’s hemp products. Previously unknown or unforeseeable adverse reactions arising from human consumption of hemp products may occur and consumers should consume hemp products at their own risk or in accordance with the direction of a health care practitioner. Such adverse reactions could lead to litigation involving the Company, and the Company could ultimately face significant damages and liability in certain cases in connection with such litigation and/or may have to expend significant resources defending itself against claims associated with its products and/or the health effects thereof.

Our products may be subject to recalls for a variety of reasons.

Manufacturers and distributors of products, such as those of the Company, are sometimes subject to recall or return orders for a variety of reasons, including product defects, such as contamination, unintended harmful side effects or interactions with other substances, packaging safety and inadequate or inaccurate labeling disclosure. If any of the products produced by us are recalled due to an alleged product defect or for any other reason, we could be required to incur the unexpected expense of the recall and any legal proceedings that might arise in connection with the recall. We may lose a significant number of sales and may not be able to replace those sales at an acceptable margin or at all. In addition, a product recall may require significant management attention. There can be no assurance that any quality, potency or contamination problems will be detected in time to avoid unforeseen product recalls, regulatory action or lawsuits, whether frivolous or otherwise. Additionally, if any of the products produced by us were subject to recall, the reputation and goodwill of that product and/or us could be harmed. A recall for any of the foregoing reasons could lead to decreased demand for our products and could have a material adverse effect on our business, financial condition and results of operations. Additionally, product recalls may lead to increased scrutiny of our operations by regulatory agencies, requiring further management attention, increased compliance costs and potential legal fees, fines, penalties

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and other expenses. Furthermore, any product recall affecting the hemp industry more broadly could lead consumers to lose confidence in the safety and security of our products, which could have a material adverse effect on our business, financial condition and results of operations.

We are subject to product liability regarding our products, which could result in costly litigation and settlements.

As a distributor of hemp products, the Company faces an inherent risk of exposure to product liability claims, regulatory action and litigation if its products are alleged to have caused significant loss or injury. In addition, the sale of our 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 our 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 our 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 the Company 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 results of operations and financial condition of the Company.

The hemp industry faces strong opposition.

The Company believes it is possible that large, well-funded businesses may have a strong economic opposition to the hemp industry. The hemp industry could face a material threat from the pharmaceutical industry, should hemp cannabinoids displace other drugs or encroach upon the pharmaceutical industry’s products. The pharmaceutical industry is well funded with a strong and experienced lobby that has greater funding than the hemp industry. Any inroads the pharmaceutical industry could make in halting or impeding the hemp industry would harm our business, prospects, results of operation and financial condition.

The results of future clinical research may negatively impact our business.

Research in the U.S. and internationally regarding the medical benefits, viability, safety, efficacy, dosing and social acceptance of hemp isolated cannabinoids (such as CBD or CBG) remains in the early stages. There have been relatively few clinical trials on the benefits of hemp extracts or isolated cannabinoids (such as CBD and CBG). Future research studies and clinical trials may reach negative conclusions regarding the medical benefits, viability, safety, efficacy, dosing, social acceptance or other facts and perceptions related to hemp, which could have a material adverse effect on the demand for our products with the potential to lead to a material adverse effect on our business, financial condition, results of operations or prospects.

The lack of reliable data on the hemp industry may negatively impact our results of operations.

As a result of recent and ongoing regulatory and policy changes in the hemp industry, the market data available is limited and unreliable. Prior to the passage of the 2018 Farm bill, hemp manufacturing was illegal at the Federal level which prevented market research. Therefore, market research and projections by the Company of estimated total retail sales, demographics, demand, and similar consumer research, are based on assumptions from limited and unreliable market data, and generally represent the personal opinions of our management team as of the date of this report.

Hemp companies are subject to recent SEC investor fraud alerts and have been under greater scrutiny by the SEC than companies in other industries.

The SEC has issued an investor alert cautioning investors that scam artists often exploit “hot” industries to trick investors, including by making false promises of high returns with low risks, and that the SEC regularly receives complaints about marijuana-related investments. Consequently, such companies and offerings are often subject to heightened regulatory scrutiny. In the United States, regulators in various states have requested additional information on hemp company financings and in some cases have issued subpoenas for additional information. Due to these concerns, the Company may face more scrutiny than it would if the Company was in another industry, and may become subject to proceedings, fines, and penalties in the future.

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We may be unable to obtain our cleanroom ISO levels, which may lead to contamination of our products.

Our planned filling facility, MDI laboratory and isolate production lab is expected to be certified to ISO 13485 standards for manufacturing of medical devices. This standard is one that FDA approved products are commonly manufactured in and allows us to formulate and manufacture our products in a sterile environment. In the event we fail to maintain certain cleanroom or GMP standards, we may be unable to prevent contaminants from being introduced into our mixing or filling processes. Such contaminants may cause our products to be adulterated, which would be a violation of food and drug safety requirements for purity, and which in turn could cause an adverse reaction in end users of our products, which could result in claims for damages and product safety, fines, damages, losses, and a negative effect on our brand name, any one of which could cause the value of our securities to decrease.

We are dependent upon our current management, who may have conflicts of interest.

We are dependent upon the efforts of our current management. The majority of our officers and directors have duties and affiliations with other companies. Such involvement of our officers and directors in other businesses may therefore present a conflict of interest regarding decisions they make for the Company or with respect to the amount of time available for the Company. The loss of any of our officers or directors and, in particular, Mr. Donal R. Schmidt, Jr., our Chief Executive Officer, or Mr. D. Hughes Watler, Jr., our Chief Financial Officer, could have a materially adverse effect upon our business and future prospects. We do not have key man life insurance upon the life of any of our officers or directors.

We could be subject to hackers or ransomware attacks.

We work with sensitive pharmaceutical information including, but not limited to, trade secrets, pending patents and potentially patentable intellectual property rights. This makes us a potential target for hackers and malware or ransomware. We believe that we employee the most up to date practices we can afford to account for this type of risk. We maintain two outside consultants to regularly review and monitor our systems. With respect to online sales, we rely on large vendors to provide security as is customary in our industry. We have special corporate rules for management of our intellectual property as it is developed and transmitted to our attorneys in the patent areas including not being connect to the internet.

Risks Related to Our Financial Statements

We have identified material weaknesses in our disclosure controls and procedures and internal control over financial reporting. If not remediated, our failure to establish and maintain effective disclosure controls and procedures and internal control over financial reporting could result in material misstatements in our financial statements and a failure to meet our reporting and financial obligations, each of which could have a material adverse effect on our financial condition and the trading price of our securities.

Maintaining effective internal control over financial reporting and effective disclosure controls and procedures are necessary for us to produce reliable financial statements. For the years ended December 31, 2022 and 2021, we have determined that our disclosure controls and procedures as well as our internal control over financial reporting were not effective at the reasonable assurance level, primarily due to a lack of segregation of duties in financial reporting, and continue to be ineffective.

Management has determined that the Company had the following material weaknesses in its internal control over financial reporting as of December 31, 2022 and 2021:

Entity Level Activities - The Company did not maintain an effective control environment based on the criteria established in the COSO framework. The Company has identified deficiencies in the principles associated with the control environment of the COSO framework. Specifically, these control deficiencies constitute material weaknesses, either individually or in the aggregate

Control Activities - The Company did not have adequate selection and development of effective control activities, general controls over technology and effective policies and procedures. These deficiencies attributed to the following individual control activities:

•The Company did not design and maintain effective controls over certain IT general controls for information systems that are relevant to the preparation of our financial statements. Specifically, we  

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did not design and maintain controls to ensure appropriate segregation of duties, adequately restricted user access to certain financial applications and data to appropriate Company personnel, and monitoring of IT control activities. These IT deficiencies, when aggregated, could result in misstatements potentially impacting all financial statement accounts and disclosures that would not be prevented or detected.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Accordingly, a material weakness increases the risk that the financial information we report contains material errors. A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis.

Maintaining effective disclosure controls and procedures and effective internal control over financial reporting are necessary for us to produce reliable financial statements and the Company is committed to remediating its material weaknesses in such controls as promptly as possible. However, there can be no assurance as to when these material weaknesses will be remediated or that additional material weaknesses will not arise in the future. Any failure to remediate the material weaknesses, or the development of new material weaknesses in our internal control over financial reporting, could result in material misstatements in our financial statements and cause us to fail to meet our reporting and financial obligations on a timely and accurate basis. If our financial statements are not accurate, investors may not have a complete understanding of our operations or may lose confidence in our reported financial information. Likewise, if our financial statements are not filed on a timely basis as required by the SEC, OTC Markets, or any stock exchange, as applicable, we could face severe consequences from those authorities. In any of these cases, it could result in a material adverse effect on our business, on our financial condition or have a negative effect on the trading price of our common stock. Further, if we fail to remedy this deficiency (or any other future deficiencies) or maintain the adequacy of our disclosure controls and procedures and our internal controls, we could be subject to regulatory scrutiny, civil or criminal penalties or shareholder litigation against us or our management.

We can give no assurance that the measures we have taken and plan to take in the future will remediate the material weakness identified or that any additional material weaknesses or restatements of our financial statements will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of those controls.

Further, in the future, if we cannot conclude that we have effective internal control over our financial reporting, or if our independent registered public accounting firm is unable to provide an unqualified opinion regarding the effectiveness of our internal control over financial reporting, investors could lose confidence in the reliability of our financial statements, which could lead to a decline in our stock price. Failure to comply with reporting requirements could also subject us to sanctions and/or investigations by the SEC, OTC Markets, any stock exchange or NASDAQ, as applicable, or other regulatory authorities.

In addition, even if we are successful in strengthening our controls and procedures, those controls and procedures may not be adequate to prevent or identify irregularities or facilitate the fair presentation of our financial statements or our periodic reports filed with the SEC.

Regulatory, Licensing and Intellectual Property and Related Risks

We operate in highly regulated industries where the regulatory environments are rapidly developing and we may not always succeed in complying fully with applicable regulatory requirements in all jurisdictions where we carry on business.

Our business and activities are heavily regulated and are subject to various laws, regulations and guidelines by governmental authorities (including, in the U.S., the Food and Drug Administration (FDA), the United States Department of Agriculture (USDA), Drug Enforcement Administration (DEA) and the Federal Trade Commission (FTC) and analogous state agencies, including, but not limited to, the Texas Department of State Health Services), relating to, among other things, the manufacture, marketing, management, transportation, storage, sale, pricing and disposal of hemp-based products, and also including laws, regulations and guidelines relating to health and safety, insurance coverage, the conduct of operations and the protection of the environment (including relating to emissions and discharges to water, air and land, the handling and disposal of hazardous and non-hazardous materials and wastes). Our products are not approved by the FDA or under the FFDCA, or the State of Texas (or any other state). Our

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operations may also be affected in varying degrees by government regulations with respect to, but not limited to, price controls, export controls, controls on currency remittance, increased income taxes, restrictions on foreign investment and government policies rewarding contracts to local competitors or requiring domestic producers or vendors to purchase supplies from a particular jurisdiction. Laws, regulations and guidelines, applied generally, grant government agencies and self-regulatory bodies broad administrative discretion over our activities, including the power to limit or restrict business activities as well as impose additional disclosure requirements on our products and services.

Achievement of our business objectives is contingent, in part, upon compliance with regulatory requirements enacted by these governmental authorities and obtaining all necessary regulatory approvals for the production, storage, transportation, sale, import and export, as applicable, of our products.  The hemp industry is still a new industry. The effect of relevant governmental authorities’ administration, application and enforcement of their respective regulatory regimes and delays in obtaining, or failure to obtain, applicable regulatory approvals which may be required may significantly delay or impact the development of markets, products and sales initiatives and could have a material adverse effect on our business, financial condition and results of operations.  For example, in the U.S., registered federal trademark protection is only available for goods and services that can be lawfully used in interstate commerce; and the U.S. Patent and Trademark Office (USPTO) is not currently approving any trademark applications for hemp, or certain goods containing U.S. hemp-derived CBD.

The regulatory environment for our products is rapidly developing, and the need to build and maintain robust systems to comply with different and changing regulations in multiple jurisdictions increases the possibility that we may violate one or more applicable requirements. While we endeavor to comply with all relevant laws, regulations and guidelines, any failure to comply with the regulatory requirements applicable to our operations could subject us to negative consequences, including, civil and criminal penalties, damages, fines, the curtailment or restructuring of our operations, asset seizures, revocation or imposition of additional conditions on licenses to operate our business, the denial of regulatory applications (including, in the U.S., by other regulatory regimes that rely on the positions of the DEA, FDA and USDA in the application of their respective regimes), the suspension or expulsion from a particular market or jurisdiction or of our key personnel, or the imposition of additional or more stringent inspection, testing and reporting requirements, any of which could materially adversely affect our business and financial results. In the United States, failure to comply with FDA and USDA requirements (and analogous state agencies, including the requirements of the Texas Department of State Health Services) may result in, among other things, injunctions, product withdrawals, recalls, product seizures, fines and criminal prosecutions. The outcome of any regulatory or agency proceedings, investigations, audits, and other contingencies could harm our reputation, require us to take, or refrain from taking, actions that could harm our operations or require us to pay substantial amounts of money, harming our financial condition. Increasingly, communication and coordination among regulators has led in other industries to coordinated responses to regulatory and licensure applications. To the extent that regulators coordinate responses to license applications and regulatory conditions, limitations or denials of licenses in one jurisdiction may lead to denials in other jurisdictions. There can be no assurance that any pending or future regulatory or agency proceedings, investigations and audits will not result in substantial costs or a diversion of management’s attention and resources, negatively impact our future growth plans and opportunities or have a material adverse impact on our business and financial condition.

The State of Texas legalized the manufacturing, consumption and export of legal hemp products containing CBD under Texas House Bill 1325 signed by Governor Abbott on June 10, 2019 and we were subsequently granted a Consumable Hemp Product license. While the Company believes that it meets all known requirements of a license for manufacture of legal hemp products, there is no guarantee that the State of Texas will renew the license and/or will not revoke such license, and if either of those events occur, the Company may be forced to move its operations to another state or curtail its operations altogether. The cost of moving its operations and/or penalties or fines in connection with its failure to obtain a license, may have a material adverse effect on the Company’s results of operations and the value of its securities.

We are constrained by law in our ability to market and advertise our products.

Our marketing and advertising are subject to regulation by various regulatory bodies in the jurisdictions we operate. In the United States, our advertising is subject to regulation by the FTC under the Federal Trade Commission Act as well as the FDA under the FFDCA and USDA, including as amended by the Dietary Supplement Health and Education Act of 1994, and by state agencies under analogous and similar state and local laws.  Some U.S. states also permit content, advertising and labeling laws to be enforced by state attorney generals, who may seek civil and criminal penalties, relief for consumers, Class Action certifications, class wide damages and recalls of products sold by us. There has also been a recent increase in private litigation that seeks, among other things, relief for consumers,

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Class Action certifications, class wide damages and recalls of products.  We could become a target of such private Class Action litigation.  Any actions against us by governmental authorities or private litigants could have a material and adverse effect on our business, financial condition, operating results, liquidity, cash flow and operational performance.

The license we have to use and commercialize the ‘Desirick Procedure’ is only exclusive in four states, and even in those states, is subject to licenses which were existing as of February 9, 2021.

On February 9, 2021, EM3 Methodologies, LLC (“EM3”) provided us with a royalty-free, perpetual license (unless terminated by the Company) to use the Desirick Procedure or any derivation thereof and its application and use, including, but not limited to, related consumables (cans, valves, and actuators), filling equipment for pMDIs, and/or plastic testing vials and training, support or maintenance thereon of any combination thereof, and all intellectual property of EM3 relating to the foregoing, on an exclusive basis in the states of Texas, California, Florida and Nevada (subject to pre-existing licensing rights which have been provided by EM3 in such jurisdictions; provided that we currently have no knowledge of any such pre-existing licensing rights), and on a non-exclusive basis throughout the rest of the world, in consideration for $10. As such, while our license is exclusive in the four states described above, such license is subject to pre-existing license rights which existed as of February 9, 2021, and is non-exclusive in every other state and throughout the world. Consequently, competitors could compete against us in other states, and throughout the rest of the world using the licensed intellectual property, or may already have license rights to the intellectual property in those four states, which remain valid under the terms of the February 9, 2021 license. As a result, we may face competition for our products and future products using the licensed intellectual property and may have no remedy to prevent such competition pursuant to the terms of the license.

Each State and other jurisdiction has its own licensing requirements and regulations when it comes to the sale of cannabinoid products.

We plan in the future to offer products in states other than Texas, California, Florida and Nevada in the future and in foreign jurisdictions. Each state and foreign jurisdiction has its own licensing requirements and regulations. As such, we will need to comply with various rules and requirements which may not be consistent from one jurisdiction to another. The failure to comply with applicable rules and requirements could result in us being prohibited from offering our products in a jurisdiction, fines, penalties or other liabilities. Furthermore, significant resources will be needed to stay on top of changing regulations and requirements to ensure compliance with changes in laws. In the event we fail to comply with applicable laws it could have a material adverse effect on our results of operations and the value of our securities.

The FDA has not approved any of the Company’s products.

While the Company’s MDIs are made using FDA listed cans, valves, actuators, propellant and excipients, the Company’s products have not been approved by the FDA-provided that no approval for such products has been sought. To date the Company is only aware of one hemp or CBD product which is FDA approved, that being Epediolex, an oral solution for the treatment of seizures associated with two rare and severe forms of epilepsy, Lennox-Gastaut syndrome and Dravet syndrome, in patients two years of age and older. The Company and (to the Company’s knowledge) the entire CBD marketplace sells products under the “no enforcement position” of the FDA, which has not been codified (as discussed in greater detail below, under “Description of Business-Regulation”). The lack of FDA approval may prevent market acceptance of our products, result in liability from consumers, or potentially result in liability from the FDA in the future, any one of which could have a material adverse effect on our results of operations.

The propellants we use in our products contain greenhouse gases and may be subject to future restrictions or limitations on use.

The propellants we use in our products contain greenhouse gases. The U.S. government, under President Biden, has initiated a renewed push to reduce the use of greenhouse gases, which have been found to have an impact on global climate. In the event the specific propellants we use in our products are restricted, limited, or phased out, or it becomes more expensive for us to obtain such propellants in the future, our expenses may increase and we may be forced to reformulate our products to use different propellants, which may be costly and/or time consuming, or may produce inferior products. Any of the above may cause the value of our securities to decline and may have an adverse effect on our revenues and results of operations.

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Because we plan to manufacture and sell CBD products, it is possible that, in the future, we may have difficulty accessing the service of banks.

While industrial hemp cultivation was legalized by the 2018 Farm Bill, the FDA is choosing to regulate certain hemp products, including CBD. It is possible that the circumstances surrounding the FDA’s handling of CBD-related issues could cause us to have difficulty securing services from banks, in the future.

The FDA limits our ability to discuss the potential medical benefits of CBD.

Under FDA rules, it is illegal for companies to make “health claims” or claim that a product has a specific medical benefit, without first getting FDA approval for such claim. The FDA has not recognized any medical benefits derived from CBD, which means that the Company is not legally permitted to advertise any potential health claims related to its CBD products. Because of the perception among many consumers that CBD is a health/medicinal product, whether or not such perceptions are true, the Company’s inability to make such health claims about its CBD products, may limit the Company’s ability to market and sell its product to consumers, which could negatively impact the Company’s revenues and profits.

If we are unable to protect our intellectual property, our business may be adversely affected.

We must protect the proprietary nature of the intellectual property used in our business. There can be no assurance that trade secrets and other intellectual property will not be challenged, invalidated, misappropriated or circumvented by third parties. Currently, our intellectual property includes certain non-provisional and provisional patent applications, trademarks and know-how related to business, product and technology development. We plan on taking the necessary steps, including but not limited to the filing of additional patents as appropriate. There is no assurance any additional patents will issue or that when they do issue they will include all of the claims currently included in the applications. Even if they do issue, those new patents and our existing patents must be protected against possible infringement. Nonetheless, we currently rely on contractual obligations of our employees and contractors to maintain the confidentiality of our products. To compete effectively, we need to develop and continue to maintain a proprietary position with respect to our technologies, and business.

The risks and uncertainties that we face with respect to intellectual property rights principally include the following:

•currently, we only have non-provisional and provisional patent applications in place, which may not result in full patents being granted, and any full patent applications that we file may not result in issued patents or may take longer than expected to result in issued patents; 

•we may be subject to interference proceedings; 

•other companies may claim that patents applied for by, assigned or licensed to, us infringe upon their own intellectual property rights; 

•we may be subject to trademark opposition proceedings in the U.S. and in foreign countries; 

•any patents that are issued to us may not provide meaningful protection; 

•we may not be able to develop additional proprietary technologies that are patentable; 

•other companies may challenge patents licensed or issued to us as invalid, unenforceable or not infringed; 

•other companies may independently develop similar or alternative technologies, or duplicate our technologies; 

•other companies may design around technologies that we have licensed or developed; 

•any patents issued to us may expire and competitors may utilize the technology found in such patents to commercialize their own products; and 

•enforcement of patents is complex, uncertain and expensive. 

It is also possible that others may obtain issued patents that could prevent us from commercializing certain aspects of our products or require us to obtain licenses requiring the payment of significant fees or royalties in order to enable us to conduct our business. If we license patents, our rights will depend on maintaining our obligations to the licensor under the applicable license agreement, and we may be unable to do so. Furthermore, there can be no assurance that the work-for-hire, intellectual property assignment and confidentiality agreements entered into by our

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employees and consultants, advisors and collaborators will provide meaningful protection for our trade secrets, know-how or other proprietary information in the event of any unauthorized use or disclosure of such trade secrets, know-how or other proprietary information. The scope and enforceability of patent claims are not systematically predictable with absolute accuracy. The strength of our own patent rights depends, in part, upon the breadth and scope of protection provided by the patent and the validity of our patents, if any.

We operate in an industry with the risk of intellectual property litigation. Claims of infringement against us may hurt our business.

Our success depends, in part, upon non-infringement of intellectual property rights owned by others and being able to resolve claims of intellectual property infringement without major financial expenditures or adverse consequences. Participants that own, or claim to own, intellectual property may aggressively assert their rights. From time to time, we may be subject to legal proceedings and claims relating to the intellectual property rights of others. Future litigation may be necessary to defend us or our clients by determining the scope, enforceability, and validity of third-party proprietary rights or to establish its proprietary rights. Some competitors have substantially greater resources and are able to sustain the costs of complex intellectual property litigation to a greater degree and for longer periods of time. In addition, patent holding companies that focus solely on extracting royalties and settlements by enforcing patent rights may target us. Regardless of whether claims that we are infringing patents or other intellectual property rights have any merit, these claims are time-consuming and costly to evaluate and defend and could:

•cause delays or stoppages in providing products; 

•divert management’s attention and resources; 

•require technology changes to our products that would cause our Company to incur substantial cost; 

•subject us to significant liabilities; and 

•require us to cease some or all of its activities. 

In addition to liability for monetary damages, which may be tripled and may include attorneys’ fees, or, in some circumstances, damages against clients, we may be prohibited from developing, commercializing, or continuing to provide some or all of our products unless we obtain licenses from, and pay royalties to, the holders of the patents or other intellectual property rights, which may not be available on commercially favorable terms, or at all.

If we are unable to obtain or defend our pending patents, our business could be materially adversely affected.

Our patent position is highly uncertain and involves complex legal and factual questions. Accordingly, we cannot predict the breadth of claims that may be allowed or enforced under our pending patents or in third-party patents. For example, we might not have been the first to make the inventions covered by each of our non-provisional and provisional patent applications; we might not have been the first to file patent applications for these inventions; others may independently develop similar or alternative technologies or duplicate any of our technologies; it is possible that none of our non-provisional and provisional patent applications will result in issued patents; our issued patents may not provide a basis for commercially viable technologies, or may not provide us with any competitive advantages, or may be challenged and invalidated by third parties; and, we may not develop additional proprietary technologies that are patentable.

As a result, our future patents (if any) may not be valid and we may not be able to obtain and enforce patents and to maintain trade secret protection for the full commercial extent of our technology. The extent to which we are unable to do so could materially harm our business.

We have applied for and plan to continue to apply for patents for certain products. Such applications may not result in the issuance of any patents, and any patents now held or that may be issued may not provide us with adequate protection from competition. Furthermore, it is possible that patents issued or licensed to us may be challenged successfully. In that event, if we have a preferred competitive position because of such patents, such preferred position would be lost. If we are unable to secure or to continue to maintain a preferred position, we could become subject to competition from the sale of generic products. Failure to receive, inability to protect, or expiration of our patents would adversely affect our business and operations.

Patents issued or licensed to us may be infringed by the products or processes of others. The cost of enforcing our patent rights against infringers, if such enforcement is required, could be significant, and we do not currently have

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the financial resources to fund such litigation. Further, such litigation can go on for years and the time demands could interfere with our normal operations. We may become a party to patent litigation and other proceedings. The cost to us of any patent litigation, even if resolved in our favor, could be substantial. Many of our competitors may be able to sustain the costs of such litigation more effectively than we can because of their substantially greater financial resources. Litigation may also absorb significant management time.

Unpatented trade secrets, improvements, confidential know-how and continuing technological innovation are important to our success. Although we attempt to and will continue to attempt to protect our proprietary information through reliance on trade secret laws and the use of confidentiality agreements with our partners, collaborators, employees and consultants, as well as through other appropriate means, these measures may not effectively prevent disclosure of our proprietary information, and, in any event, others may develop independently, or obtain access to, the same or similar information.

Risks Related to Our Common Stock

Our common stock has in the past been a “penny stock” under SEC rules, and may be subject to the “penny stock” rules in the future. It may be more difficult to resell securities classified as “penny stock.”

Our common stock is currently considered to be a “penny stock” under applicable SEC rules (generally defined as non-exchange traded stock with a per-share price below $5.00). These rules impose additional sales practice requirements on broker-dealers that recommend the purchase or sale of penny stocks to persons other than those who qualify as “established customers” or “accredited investors.” For example, broker-dealers must determine the appropriateness for non-qualifying persons of investments in penny stocks. Broker-dealers must also provide, prior to a transaction in a penny stock not otherwise exempt from the rules, a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, disclose the compensation of the broker-dealer and its salesperson in the transaction, furnish monthly account statements showing the market value of each penny stock held in the customer’s account, provide a special written determination that the penny stock is a suitable investment for the purchaser, and receive the purchaser’s written agreement to the transaction.

Legal remedies available to an investor in “penny stocks” may include the following:

•If a “penny stock” is sold to the investor in violation of the requirements listed above, or other Federal or states securities laws, the investor may be able to cancel the purchase and receive a refund of the investment. 

•If a “penny stock” is sold to the investor in a fraudulent manner, the investor may be able to sue the persons and firms that committed the fraud for damages. 

These requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a security that becomes subject to the penny stock rules. The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in our securities, which could severely limit the market price and liquidity of our securities. These requirements may restrict the ability of broker-dealers to sell our common stock and may affect your ability to resell our common stock.

Many brokerage firms will discourage or refrain from recommending investments in penny stocks. Most institutional investors will not invest in penny stocks. In addition, many individual investors will not invest in penny stocks due to, among other reasons, the increased financial risk generally associated with these investments.

For these reasons, penny stocks may have a limited market and, consequently, limited liquidity. We can give no assurance at what time, if ever, our common stock will not be classified as a “penny stock” in the future.

Your ownership may be diluted if additional capital stock is issued to raise capital, to finance acquisitions or in connection with strategic transactions.

We will need to raise additional funds to expand our operations or finance acquisitions by issuing equity or convertible debt securities, which would reduce the percentage ownership of our existing stockholders. Our Board of Directors has the authority, without action or vote of the stockholders, to issue all or any part of our authorized but unissued shares of common stock. Our Articles of Incorporation, as amended, authorize us to issue up to 800,000,000 shares of common stock and up to 100,000,000 shares of “blank check” preferred stock (of which 16.5 million shares

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of preferred stock are designated as Series A Convertible Preferred Stock, 2 million shares of preferred stock are designated as Series B Convertible Preferred Stock (of which a total of 1 million shares of Series B Preferred Stock have been earned, but not issued, as of the date of this prospectus) and 8.5 million shares of preferred stock are designated as Series C Convertible Preferred Stock). Future issuances of common stock or of certain types of preferred stock could “dilute the voting power” you have over matters on which all stockholders vote and could be dilutive to earnings per share.

Shares issuable upon the conversion of convertible notes may substantially increase the number of shares available for sale in the public market and depress the price of our common stock and our market value.

As of the date of this report, we owed approximately $2,528,000 under various convertible promissory notes. The conversion prices of the convertible notes initially vary between $1.25 per share and $10.00 per share, subject to a 4.99% ownership limitation for each beneficial owner of such notes. As a result, any conversion of the convertible notes and sale of shares of common stock issuable in connection with the conversion thereof may cause the value of our common stock to decline.

In addition, the common stock issuable upon conversion of the convertible notes may represent overhang that may also adversely affect the market price of our common stock. Overhang occurs when there is a greater supply of a company’s stock in the market than there is demand for that stock. When this happens, the price of the company’s stock will decrease, and any additional shares which stockholders attempt to sell in the market will only further decrease the share price. In the event of such overhang, the note holders will have an incentive to sell their common stock as quickly as possible. If the share volume of our common stock cannot absorb the discounted shares, then the value of our common stock will likely decrease.

In order to meet our working capital needs in advance of a planned offering, the Company has sold certain Original Issue Discount Convertible Debentures to an accredited investor in the aggregate original principal amount of $2,352,950 (the “Debentures”) and warrants to purchase up to 592,360 shares of common stock of the Company (the “Investor Warrants”). The amount owed under the Debentures, including amounts owed upon the occurrence of an event of default, may be converted, in whole or part, by the holder, into common stock of the Company, at a conversion price equal to the lower of (a) $10.00 per share, or (b) a 25% discount to the offering price of the Company’s common stock in a Qualified Listing (as defined below)((a) or (b), as applicable, the “Conversion Price”). The conversion of the Debentures is subject to a beneficial ownership limitation of 4.99%, preventing such conversion by the holder thereof if such exercise would result in such holder and its affiliates exceeding ownership of 4.99% of our common stock, which percentage may be increased to up to 9.99%, with at least 61 days’ prior written notice by the holder thereof.

If sequential conversions of the Debentures and sales of such converted shares take place, the price of our common stock may decline. In the future, the shares of common stock, which the Debentures is convertible into or are exercisable for, may be sold without restriction pursuant to Rule 144. As a result, the sale of these shares may adversely affect the market price, if any, of our common stock.

In addition, the common stock issuable upon conversion of the Debentures may represent overhang that may also adversely affect the market price of our common stock. Overhang occurs when there is a greater supply of a company’s stock in the market than there is demand for that stock. When this happens the price of the company’s stock will decrease, and any additional shares which shareholders attempt to sell in the market will only further decrease the share price. If the share volume of our common stock cannot absorb the shares issuable upon conversion of the Debentures, then the value of our common stock will likely decrease.

Certain of our outstanding convertible notes and the Debentures include restrictions on future activities.

So long as the Company has any obligation under the $400,000 promissory note sold to J. Scott Suggs, a member of our Board of Directors in January 2022, the Company is prohibited from selling, leasing or otherwise disposing of any significant portion of its assets outside the ordinary course of business without the prior written consent of the holders of such notes. Such restrictions may prevent the Company from raising funds through the sale of assets and/or result in the default of certain of the Company’s outstanding obligations, which could have a material adverse effect on the Company’s results of operations and the value of its securities

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So long as any portion of the Debentures remain outstanding, the Company and its subsidiaries are prohibited from undertaking any of the following without the prior written consent of the holders of at least 67% in principal amount of the then outstanding Debentures:

•other than certain permitted indebtedness (as discussed in each Debenture), entering into, creating, incurring, assuming, guaranteeing or suffering to exist any indebtedness for borrowed money of any kind, including, but not limited to, a guarantee, on or with respect to any of the Company’s property or assets or any interest therein or any income or profits therefrom; 

•other than certain permitted liens (as discussed in each Debenture), entering into, creating, incurring, assuming or suffering to exist any liens of any kind, on or with respect to any of the Company’s property or assets or any interest therein or any income or profits therefrom; 

•amending its charter documents, including, without limitation, its Articles of Incorporation or Bylaws, in any manner that materially and adversely affects any rights of any holder of the Debentures; 

•repaying, repurchasing or offering to repay, repurchase or otherwise acquire more than a de minimis number of shares of the Company’s common stock or common stock equivalents other than as to (i) the shares of common stock issuable upon conversion of the Debentures or exercise of the warrants granted with the Debentures and (ii) repurchases of common stock or common stock equivalents of departing officers and directors of the Company, provided that such repurchases shall not exceed an aggregate of $100,000 for all officers and directors during the term of the applicable Debenture; 

•repaying, repurchasing or offering to repay, repurchase or otherwise acquire any indebtedness, other than the Debentures, if on a pro-rata basis, except for certain amounts advanced by management that were outstanding on the date the Debentures were entered into; 

•paying cash dividends or distributions on any equity securities of the Company; 

•entering into any transaction with any affiliate of the Company which would be required to be disclosed in any public filing with the SEC, unless such transaction is made on an arm’s-length basis and expressly approved by a majority of the disinterested directors of the Company (even if less than a quorum otherwise required for board approval); or 

•entering into any agreement with respect to any of the foregoing. 

Such restrictions may prevent the Company from raising funds through the sale of assets and/or the other activities set forth above and/or result in the default of certain of the Company’s outstanding obligations, which could have a material adverse effect on the Company’s results of operations and the value of its securities.

The issuance of common stock upon conversion of the Debentures and upon exercise of outstanding warrants will cause immediate and substantial dilution.

The issuance of common stock upon conversion of the Debentures and upon exercise of the outstanding warrants to purchase 1,280,232 shares of common stock, at exercise prices of $1.25 to $10.00 per share (subject to certain anti-dilution rights), will result in immediate and substantial dilution to the interests of other stockholders since the holders of the Debentures and warrants may ultimately receive and sell the full number of shares issuable in connection with the conversion and exercise of such securities. Although the Debentures may not be converted and the warrants may not be exercised if such conversion/exercise would cause the holders thereof to own more than 4.99% of our outstanding common stock (which percentage may be increased to 9.99% with 61 days’ prior written notice), this restriction does not prevent the holders subject to such restrictions from converting/exercising some of their holdings, selling those shares, and then converting the rest of its holdings, while still staying below the 4.99%/9.99% limit. In this way, the holders of the Debentures and warrants could sell more than any applicable ownership limit while never actually holding more shares than the applicable limits allow. If the holders of the Debentures and warrants choose to do this, it will cause substantial dilution to the then existing holders of our common stock.

If exercises of the warrants and sales of shares issuable upon exercise thereof take place, the price of our common stock may decline. In addition, the common stock issuable upon exercise of the warrants may represent overhang that may also adversely affect the market price of our common stock. Overhang occurs when there is a greater supply of a company’s stock in the market than there is demand for that stock. When this happens the price of the company’s stock will decrease, and any additional shares which shareholders attempt to sell in the market will

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only further decrease the share price. If the share volume of our common stock cannot absorb shares sold by the warrant holders, then the value of our common stock will likely decrease.

We currently owe a significant amount of money under our outstanding Debenture.

As of the date of this report, we owe approximately $2,352,940 under the Debentures. With the unanticipated delays in our planned public stock offering, we do not presently have sufficient funds to repay such Debentures.  More recently, the unexpected delays in our public stock offering have continued, therefore, we have reached an agreement in principle with the institutional investor for a further extension of or an increase in our borrowings under this bridge loan, based on terms that are yet to be formally agreed upon.  At the same time, we are pursuing other potential sources of financing besides the public stock offering in order to meet our corporate objectives.

Certain warrants we have granted include anti-dilutive rights which will be triggered in connection with an offering.

Warrants to purchase 592,060 shares of common stock, which we granted in August 2021 and May 2022, have an exercise price of $10.00 per share and have anti-dilution rights. Specifically, if we issue, or are deemed to have issued, common stock or common stock equivalents at a price less than the then effective exercise price of the warrants for a period of 24 months following the date our common stock is uplisted to the Nasdaq Capital Market, subject to certain customary exceptions and the sale of up to $1.5 million in private transactions, the exercise price of the warrants is automatically reduced to such lower value, and the number of shares of common stock issuable upon exercise thereafter is adjusted proportionately, so that the aggregate exercise price payable upon exercise of such warrants is the same prior to and after such reduction in exercise price. As a result, the effect of the anti-dilution right may cause significant dilution to existing shareholders. The warrants (except for warrants to purchase 9,706 shares, which expired in August 2026) are exercisable until August 2028.

Effective April 1, 2022, the Company granted a common stock purchase warrant to a Washington, DC based firm that it has engaged to provide consulting services relating to certain federal regulatory matters. The warrant will enable the firm to purchase up to 360,000 shares of the Company’s common stock at an exercise price of $10.00 per share, or the lower of any public offering related conversion price, for a period of 10 years. The warrant is structured to be exercisable in six separate tranches of from 160,000 shares to 40,000 shares, assuming specified performance milestones are met by the firm for each tranche. The warrant includes cashless exercise rights, a reduction in the exercise price to $7.75 per share upon a sale, merger, change of control or consolidation of the Company, automatic cashless exercise triggers, if upon expiration of the warrant the fair market value of the Company’s common stock is above the exercise price of the warrants, and anti-dilution rights, which are triggered if the Company makes an offering or sells shares of common stock or common stock equivalents below the then exercise price, in connection with the uplisting of the Company’s common stock on a securities exchange or Nasdaq, or while listed on a national securities exchange or Nasdaq, and which reduce the exercise price of the warrants automatically to such lower exercise price. The holder of the warrants is subject to a trading agreement, which prevents the sale or transfer of any warrant shares until April 1, 2023, and further limiting the sale of any warrant shares to more than 5% of the average trading volume of the Company’s common stock during the period from April 2, 2023 to April 1, 2024, subject to certain other restrictions on trading, which restrictions expire 120 days after the Company’s common stock is uplisted to the Nasdaq Capital Market or NYSE.

The concentration of our common stock ownership by our current management will limit your ability to influence corporate matters.

Our directors and executive officers beneficially own and are able to vote in the aggregate approximately 26.5% of our outstanding common stock. As such, our directors and executive officers, as stockholders, will have the ability to exert significant influence over all corporate activities, including the election or removal of directors and the outcome of tender offers, mergers, proxy contests or other purchases of common stock that could give our stockholders the opportunity to realize a premium over the then-prevailing market price for their shares of common stock.  This concentrated control will limit your ability to influence corporate matters and, as a result, we may take actions that our stockholders do not view as beneficial.  In addition, such concentrated control could discourage others from initiating changes of control.  In such cases, the perception of our prospects in the market may be adversely affected and the market price of our common stock may decline.

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There may not be sufficient liquidity in the market for our securities in order for investors to sell their shares. The market price of our comment stock may be volatile.

The market price of our common stock will likely be highly volatile, as is the stock market in general. Some of the factors that may materially affect the market price of our common stock are beyond our control, such as conditions or trends in the industry in which we operate or sales of our common stock. This situation is attributable to a number of factors, including the fact that we are a small company which is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk averse and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares until such time as we became more seasoned and viable.

As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a mature issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. It is possible that a broader or more active public trading market for our common stock will not develop or be sustained, or that trading levels will not continue. These factors may materially adversely affect the market price of our common stock, regardless of our performance. In addition, the public stock markets have experienced extreme price and trading volume volatility. This volatility has significantly affected the market prices of securities of many companies for reasons frequently unrelated to the operating performance of the specific companies. These broad market fluctuations may adversely affect the market price of our common stock.

Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock, if issued, and the shares of common stock issuable upon conversion thereof, will cause significant dilution to existing stockholders.

Pursuant to certain contractual obligations, we have agreed to issue up to 16.5 million shares of Series A Preferred Stock, 2 million shares of Series B Preferred Stock (of which a total of 1 million shares of Series B Preferred Stock have been earned, but not issued, as of the date of this report) and 8.5 million shares of Series C Preferred Stock. Each of such shares of preferred stock, if earned and issued, allow the holders thereof the right to, or in the case of the Series B and Series C Preferred Stock, provided for the automatic conversion thereof into, common stock on a 1-for-25 basis, on the second anniversary of the agreement pursuant to which they are contingently issuable. In the event shares of Series B Preferred Stock and/or Series C Preferred Stock are earned and converted into common stock, such conversions of preferred stock will create significant dilution to existing stockholders.

In addition, the common stock issuable upon conversion of the Series A, B and C Preferred Stock may represent overhang that may also adversely affect the market price of our common stock. Overhang occurs when there is a greater supply of a company’s stock in the market than there is demand for that stock. When this happens the price of the company’s stock will decrease, and any additional shares which stockholders attempt to sell in the market will only further decrease the share price. In the event of such overhang, the Series A, B and C Preferred Stock will have an incentive to sell their common stock as quickly as possible. If the share volume of our common stock cannot absorb the discounted shares, then the value of our common stock will likely decrease.

There is a limited public market for our securities and you could lose all or part of your investment.

Our securities are currently quoted on the OTC Pink Market. We currently have a volatile, sporadic and illiquid market for our common stock, which is subject to wide fluctuations in response to several factors. The trading price of our common stock is likely to continue to be volatile. This volatility may prevent you from being able to sell your securities at or above the price you paid for your securities. Our stock price could be subject to wide fluctuations in response to a variety of factors, which include:

•actual or anticipated variations in our results of operations; 

•our ability or inability to generate revenues; 

•the number of shares in our public float; 

•increased competition; and 

•conditions and trends in the market for our services and products. 

Our stock price may be impacted by factors that are unrelated or disproportionate to our operating performance. These market fluctuations, as well as general economic, political and market conditions, such as

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recessions, interest rates or international currency fluctuations may adversely affect the market price of our common stock and the warrants. Stockholders and potential investors in our common stock should exercise caution before making an investment in us, and should not rely solely on the publicly quoted or traded stock prices in determining our common stock and warrant value, but should instead determine the value of our common stock based on the information contained in our public disclosures, industry information, and those business valuation methods commonly used to value private companies.

Additionally, the market price of our common stock historically has fluctuated significantly based on, but not limited to, such factors as general stock market trends, announcements of developments related to our business, actual or anticipated variations in our operating results, our ability or inability to generate revenues, and conditions and trends in the industries in which our customers are engaged.

In recent years, the stock market in general has experienced extreme price fluctuations that have sometimes been unrelated to the operating performance of the affected companies. Similarly, the market price of our common stock may fluctuate significantly based upon factors unrelated or disproportionate to our operating performance. These market fluctuations, as well as general economic, political and market conditions, such as recessions, interest rates or international currency fluctuations may adversely affect the market price of our common stock.

Since our reverse stock split on March 31, 2022, our common stock has been subject to significant swings in trading prices, and has traded between a low of $0.13 to a high of $6.59. We expect the trading prices of our common stock to continue to be highly illiquid, sporadic and volatile in the future.

General Risk Factors

We will continue to incur increased costs as a result of being a reporting company, and given our limited capital resources, such additional costs may have an adverse impact on our profitability.

We are an SEC reporting company. The rules and regulations under the Exchange Act require reporting companies to provide periodic reports with interactive data files, which require that we engage legal, accounting and auditing professionals, and eXtensible Business Reporting Language (XBRL) and EDGAR (Electronic Data Gathering, Analysis, and Retrieval) service providers. The engagement of such services can be costly, and we may continue to incur additional losses, which may adversely affect our ability to continue as a going concern. In addition, the Sarbanes Oxley Act of 2002, as well as a variety of related rules implemented by the SEC, have required changes in corporate governance practices and generally increased the disclosure requirements of public companies. For example, as a result of being a reporting company, we are required to file periodic and current reports and other information with the SEC and we have adopted policies regarding disclosure controls and procedures and regularly evaluate those controls and procedures.

The additional costs we continue to incur in connection with becoming a reporting company (expected to be approximately a hundred thousand dollars per year) will continue to further stretch our limited capital resources. Due to our limited resources, we have to allocate resources away from other productive uses in order to continue to comply with our obligations as an SEC reporting company. Further, there is no guarantee that we will have sufficient resources to continue to meet our reporting and filing obligations with the SEC as they come due.

We may not be able to compete successfully against present or future competitors.

We do not have the resources to compete with larger providers of similar services at this time. With the limited resources we have available, we may experience great difficulties in expanding our operations. Competition from existing and future competitors could result in our inability to secure funding to expand our business. This competition from other entities with greater resources and experience may result in our failure to maintain or expand our business, as we may never be able to successfully execute our business plan.

Our ability to grow and compete in the future will be adversely affected if adequate capital is not available.

The ability of our business to grow and compete depends on the availability of adequate capital, which in turn depends in large part on our cash flow from operations and the availability of equity and debt financing.  Our cash flow from operations may not be sufficient or we may not be able to obtain equity or debt financing on acceptable terms or at all to implement our growth strategy.  As a result, adequate capital may not be available to finance our

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current growth plans, take advantage of business opportunities or respond to competitive pressures, any of which could harm our business.

We may be subject to claims that we violated intellectual property rights of others, which are extremely costly to defend and could require us to pay significant damages and limit our ability to operate.

There may be intellectual property rights held by others, including issued or pending patents and trademarks, that cover significant aspects of our technologies, products, branding or business methods. Any intellectual property claims against us, regardless of merit, could be time-consuming and expensive to settle or litigate and could divert our management’s attention and other resources. These claims also could subject us to significant liability for damages and could result in our having to stop using technology, products, branding or business methods found to be in violation of another party’s rights. We might be required or may opt to seek a license for rights to intellectual property held by others, which may not be available on commercially reasonable terms, or at all. If we cannot license or develop technology, products, branding or business methods for any allegedly infringing aspect of our business, we may be unable to compete effectively. Even if a license is available, we could be required to pay significant royalties, which could increase our operating expenses. We may also be required to develop alternative non-infringing technology, content, branding or business methods, which could require significant effort and expense and be inferior. Any of these results could harm our operating results.

Failure to adequately manage our planned aggressive growth strategy may harm our business or increase our risk of failure.

For the foreseeable future, we intend to pursue an aggressive growth strategy for the expansion of our operations through increased product development and marketing. Our ability to rapidly expand our operations will depend upon many factors, including our ability to work in a regulated environment, establish and maintain strategic relationships with suppliers, and obtain adequate capital resources on acceptable terms. Any restrictions on our ability to expand may have a materially adverse effect on our business, results of operations, and financial condition. Accordingly, we may be unable to achieve our targets for sales growth, and our operations may not be successful or achieve anticipated operating results.

Additionally, our growth may place a significant strain on our managerial, administrative, operational, and financial resources and our infrastructure. Our future success will depend, in part, upon the ability of our senior management to manage growth effectively. This will require us to, among other things:

•implement additional management information systems; 

•further develop our operating, administrative, legal, financial, and accounting systems and controls; 

•hire additional personnel; 

•develop additional levels of management within our company; 

•locate additional office space; and 

•maintain close coordination among our operations, legal, finance, sales and marketing, and client service and support personnel. 

As a result, we may lack the resources to deploy our services on a timely and cost-effective basis.  Failure to accomplish any of these requirements could impair our ability to deliver services in a timely fashion or attract and retain new customers.

If we make any acquisitions, they may disrupt or have a negative impact on our business.

If we make acquisitions in the future, funding permitting, which may not be available on favorable terms, if at all, we could have difficulty integrating the acquired company’s assets, personnel and operations with our own. We do not anticipate that any acquisitions or mergers we may enter into in the future would result in a change of control of the Company. In addition, the key personnel of the acquired business may not be willing to work for us. We cannot predict the effect expansion may have on our core business. Regardless of whether we are successful in making an acquisition, the negotiations could disrupt our ongoing business, distract our management and employees and increase our expenses. In addition to the risks described above, acquisitions are accompanied by a number of inherent risks, including, without limitation, the following:

•the difficulty of integrating acquired products, services or operations; 

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•the potential disruption of the ongoing businesses and distraction of our management and the management of acquired companies; 

•difficulties in maintaining uniform standards, controls, procedures and policies; 

•the potential impairment of relationships with employees and customers as a result of any integration of new management personnel; 

•the potential inability or failure to achieve additional sales and enhance our customer base through cross-marketing of the products to new and existing customers; 

•the effect of any government regulations which relate to the business acquired; 

•potential unknown liabilities associated with acquired businesses or product lines, or the need to spend significant amounts to retool, reposition or modify the marketing and sales of acquired products or operations, or the defense of any litigation, whether or not successful, resulting from actions of the acquired company prior to our acquisition; and 

•potential expenses under the labor, environmental and other laws of various jurisdictions. 

Our business could be severely impaired if and to the extent that we are unable to succeed in addressing any of these risks or other problems encountered in connection with an acquisition, many of which cannot be presently identified. These risks and problems could disrupt our ongoing business, distract our management and employees, increase our expenses and adversely affect our results of operations.

Our business, including our costs and supply chain, is subject to risks associated with raw material costs, inflation and energy.

Our future planned operating results will be negatively impacted by increases in the prices of our materials, and we have no guarantees that prices will not rise in the future. In addition, as we expand into new categories and product types, we expect that we may not have strong purchasing power in these new areas, which could lead to higher prices than competitors for such materials. We may not be able to pass increased prices on to customers, which could adversely affect our operating results. Moreover, in the event of a significant disruption in the supply of the raw materials used in the manufacture of our future products we may not be able to locate alternative suppliers of materials of comparable quality at an acceptable price. For example, natural disasters may increase raw material costs, impacting pricing. Any delays, interruption, damage to or increased costs in the manufacture of the future products we may offer could adversely affect our operating results. We are also subject to risks associated with inflation and increasing costs of raw materials, manufacturing and energy.

Our Amended and Restated Articles of Incorporation, as amended, provides for the indemnification of officers and directors at our expense and limits their liability, which may result in a major cost to us and hurt the interests of our stockholders because corporate resources may be expended for the benefit of officers or directors.

Our Amended and Restated Articles of Incorporation, as amended, require us to indemnify to the fullest extent under Nevada law, any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Company) by reason of the fact that he is or was a director or officer of the Company, or, while a director or officer of the Company, is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, association or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with which action, suit or proceeding, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Company and, with respect to any criminal action or proceeding, that he had reasonable cause to believe that his conduct was unlawful. Our Amended and Restated Articles of Incorporation, as amended, also provides that no director shall be personally liable to the Company, any of its stockholders or its creditors for money damages for breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is not permitted under the Nevada Revised Statutes.

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We have been advised that, in the opinion of the SEC, indemnification for liabilities arising under federal securities laws is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification for liabilities arising under federal securities laws, other than the payment by us of expenses incurred or paid by a director, officer or controlling person in the successful defense of any action, suit or proceeding, is asserted by a director, officer or controlling person in connection with our activities, we will (unless in the opinion of our counsel, the matter has been settled by controlling precedent) submit to a court of appropriate jurisdiction, the question whether indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The legal process relating to this matter if it were to occur is likely to be very costly and may result in us receiving negative publicity, either of which factors is likely to materially reduce the market and price for our shares, if such a market ever develops.

Stockholders may be diluted significantly through our efforts to obtain financing and satisfy obligations through the issuance of additional shares of our common stock.

Wherever possible, our Board of Directors will attempt to use non-cash consideration to satisfy obligations. In many instances, we believe that the non-cash consideration will consist of restricted shares of our common stock or where shares are to be issued to our officers, directors and applicable consultants. Our Board of Directors has authority, without action or vote of the stockholders, to issue all or part of the authorized but unissued shares of common stock. In addition, we may attempt to raise capital by selling shares of our common stock, possibly at a discount to market. These actions will result in dilution of the ownership interests of existing stockholders, which may further dilute common stock book value, and that dilution may be material. Such issuances may also serve to enhance existing management’s ability to maintain control of the Company because the shares may be issued to parties or entities committed to supporting existing management.

Our common stock may continue to be followed by only a limited number of analysts and there may continue to be a limited number of institutions acting as market makers for our common stock.

For the foreseeable future, our common stock is unlikely to be followed by a significant number of market analysts, and there may be few institutions acting as market makers for our common stock. Either of these factors could adversely affect the liquidity and trading price of our common stock. Until our common stock and warrants are fully distributed and an orderly market develops in our common stock and warrants, if ever, the price at which it trades is likely to fluctuate significantly. Prices for our common stock and warrants are determined in the marketplace and may be influenced by many factors, including the depth and liquidity of the market for shares of our common stock, developments affecting our business, including the impact of the factors referred to elsewhere in these Risk Factors, investor perception of us and general economic and market conditions. No assurances can be given that an orderly or liquid market will ever develop for the shares of our common stock.