Liquidity and Capital Resources

We expect to continue to incur operating losses for the foreseeable future. As of March 31, 2018, we had an accumulated deficit of $6,231,207 compared to $5,759,365 as of March 31, 2017. The increase is attributable to the net loss for the year ended March 31, 2018.

Our net cash used in operating activities was $357,716 and $369,063 for the years ended March 31, 2018 and 2017, respectively. The decrease in cash used is primarily attributable to an increase in loss (after adjusting for non-cash items) of approximately $27,000 and an increase in prepaid expenses of approximately $22,000, which was offset by an increase in accounts payable and accrued interest of approximately $60,000. Cash used in investing activities during the year ended March 31, 2018 consisted of expenditures for software development of approximately $58,000 and a transfer of approximately $9,000 upon the exercise of the Option to purchase TMC. There were no cash flows from investing activities for the year ended March 31, 2017. Net cash provided by financing activities was approximately $636,000 for the year ended March 31, 2018, derived primarily from the proceeds from the sale of preferred stock of approximately $471,000 and funds advanced by the Founder of approximately $115,000. Net cash provided by financing activities was approximately $358,000 for the year ended March 31, 2017 with the funding coming primarily from $367,000 advanced by the Founder.

The Company had previously funded its operations primarily through advances from the Founder. The Company’s recent funding has come through the sale of convertible preferred stock.

The audit report prepared by our independent registered public accounting firm relating to the Company’s consolidated financial statements for the year ended March 31, 2018 included an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern.

The Company’s management has evaluated whether there is substantial doubt about the Company’s ability to continue as a going concern and has determined that substantial doubt existed as of the date of the end of the period covered by this Report. This determination was based on the following factors: (i) the Company’s available cash as of the date of this filing will not be sufficient to fund its anticipated level of operations for the next 12 months; (ii) the Company may require additional financing for the fiscal year ending March 31, 2019 (“Fiscal 2019”) to continue at its expected level of operations; and (iii) if the Company fails to obtain the needed capital, it will be forced to delay, scale back, or eliminate some or all of its development activities or perhaps cease operations. In the opinion of management, these factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern as of the date of the end of the period covered by this Report.

The Company does not have sufficient cash resources to meet its working capital needs for the next 12 months. Accordingly, it needs to raise capital to remain operational. 

There is no assurance that the Company will be successful in any capital-raising efforts that it may undertake to fund operations during the next 12 months. The Company anticipates that it will issue equity and/or debt securities as a source of liquidity, until it begins to generate positive cash flow to support its operations. Any future sales of securities to finance operations will dilute existing stockholders’ ownership. The Company cannot guarantee when or if it will generate positive cash flow.

There are no assurances that the Company will be successful in any other capital-raising efforts that it may undertake to fund operations during the next twelve months. The Company anticipates that it will continue to issue equity and/or debt securities as a source of liquidity, until it begins to generate positive cash flow to support its operations. Any future sales of securities to finance operations will dilute existing stockholders’ ownership. The Company cannot guarantee when or if it will generate positive cash flow.

Off –Balance Sheet Arrangements

None

Related Party Transactions

Immediately following the closing of the License, the Founder exercised the Option to purchase the Company’s subsidiary, TMC, for $5,000. As a result, cash of $9,040 and payables of $23,658 were transferred with TMC. Additionally, notes and accrued interest due to the Founder, aggregating $597,101, were also transferred with TMC. We recorded a credit to additional paid in capital of $616,719 as a result of the exercise of the Option and the transfer of TMC.

For more information on related party transactions and their financial impact, see Note 11 to the consolidated financial statements attached to this Report.

Critical Accounting Estimates and New Accounting Pronouncements

Critical Accounting Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect reported amounts and related disclosures in the financial statements. Management considers an accounting estimate to be critical if it requires assumptions to be made that were uncertain at the time the estimate was made, and changes in the estimate or different estimates that could have been selected could have a material impact on our consolidated results of operations or financial condition.

Convertible Instruments. We evaluate and account for conversion options embedded in convertible instruments in accordance with ASC 815 “Derivatives and Hedging Activities”. Applicable GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.

We account for convertible instruments (when we have determined that the embedded conversion options should not be bifurcated from their host instruments) as follows: We record when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption. We also record when necessary, deemed dividends for the intrinsic value of conversion options embedded in preferred shares based upon the differences between the fair value of the underlying common stock at the commitment date of the transaction and the effective conversion price embedded in the preferred shares.

Derivative Instruments. Our derivative financial instruments consist of embedded derivatives related to the convertible debt and conversion features embedded within our convertible debt. The accounting treatment of derivative financial instruments requires that we record the derivatives at their fair values as of the inception date of the debt agreements and at fair value as of each subsequent balance sheet date. Any change in fair value was recorded as non-operating, non-cash income or expense at each balance sheet date. If the fair value of the derivatives was higher at the subsequent balance sheet date, we recorded a non-operating, non-cash charge. If the fair value of the derivatives was lower at the subsequent balance sheet date, we recorded non-operating, non-cash income.

Income Taxes . We use the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Accounting for Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. Management provides a valuation allowance to reduce the deferred tax assets reported if, based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized. Tax returns for all years are subject to audit by the taxing authorities.

ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. We have no material uncertain tax positions for any of the reporting periods presented.

Stock-Based Compensation. The Company utilizes the Black-Scholes option-pricing model to determine fair value of options and warrants granted as stock-based compensation, which requires us to make judgments relating to the inputs required to be included in the model. In this regard, the expected volatility is based on the historical price volatility of the Company’s common stock. The dividend yield represents the Company’s anticipated cash dividend on common stock over the expected life of the stock options. The U.S. Treasury bill rate for the expected life of the stock options is utilized to determine the risk-free interest rate. The expected term of stock options represents the period of time the stock options granted are expected to be outstanding.

New Accounting Pronouncements

With the exception of those discussed below, there have not been any recent changes in accounting pronouncements and Accounting Standards Update (ASU) issued by the Financial Accounting Standards Board (FASB) during the fiscal year ended March 31, 2018 that are of significance or potential significance to the Company. 

In May 2017, the FASB issued ASU 2017-09, “Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting”, which clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award changes as a result of the change in terms or conditions. If an award is not probable of vesting at the time a change is made, the new guidance clarifies that no new measurement date will be required if there is no change to the fair value, vesting conditions, and classification. This ASU will be applied prospectively and is effective for fiscal years beginning after December 15, 2017, and interim periods within those years, with early adoption permitted. The Company does not expect this standard to have a material impact on its financial statements. 

In July 2017, the FASB issued Accounting Standards Update No. (“ASU’’) 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and Derivatives and Hedging (Topic 815). The amendments in this Update provide guidance about:

1. Accounting for certain financial instruments with down round features

2. Replacement of the indefinite deferral for mandatorily redeemable financial instruments of certain non-public entities and certain non-controlling interests

The amendments in Part I of this update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (EPS) in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down round features are now subject to the specialized guidance for contingent beneficial conversion features (in Subtopic 470-20, Debt—Debt with Conversion and Other Options), including related EPS guidance (in Topic 260).

The amendments in Part II of this update re-characterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a scope exception. Those amendments do not have an accounting effect.

The amendments in Part I of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted for all entities, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The amendments in Part 1 of this Update should be applied in either of the following ways: 1. Retrospectively to outstanding financial instruments with a down round feature by means of a cumulative-effect adjustment to the statement of financial position as of the beginning of the first fiscal year and interim period(s) in which the pending content that links to this paragraph is effective 2. Retrospectively to outstanding financial instruments with a down round feature for each prior reporting period presented in accordance with the guidance on accounting changes in paragraphs 250-10-45-5 through 45-10. The Company adopted this update during the quarter ended December 31, 2017. The Company has retrospectively applied amendments in Part I of ASU 2017-11 to outstanding financial instruments with a down round feature by means of a cumulative-effect adjustment to the statement of financial position as of the beginning of the first fiscal year and interim period(s) in which the pending content that links to this paragraph is effective. On the date of adoption, there were no previously issued outstanding financial instruments with a down round feature.

The amendments in Part II of this Update do not require any transition guidance because those amendments do not have an accounting effect.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Topic 842 affects any entity that enters into a lease, with some specified scope exemptions. The guidance in this Update supersedes Topic 840, Leases. The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For public companies, the amendments in this Update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, which would be the Company’s fiscal year ending March 31, 2020. The Company does not expect the adoption of ASU 2016-09 to have a material effect on its business, its financial position, results of operations or cash flows.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230) Classification of Certain Cash Receipts and Cash Payments, which will make eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. The Company does not expect the adoption of ASU 2016-15 to have a material effect on its business, its financial position, results of operations or cash flows.

In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory, to improve and simplify the accounting for the income tax consequences of intra-entity transfers of assets other than inventory, requiring companies to recognize income tax consequences upon the transfer of the asset to a third party. ASU 2016-16 is effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods, which would be Fiscal 2019. While the Company does not expect the adoption of ASU 2016-16 to have a material effect on its business, the Company is still evaluating any potential impact that adoption of ASU 2016-16 may have on its financial position, results of operations or cash flows.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) which amended the existing accounting standards for revenue recognition. ASU 2014-09 establishes principles for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. In July 2015, the FASB deferred the effective date for annual reporting periods beginning after December 15, 2017 (including interim reporting periods within those periods). Early adoption is permitted to the original effective date for annual reporting periods beginning after December 15, 2016 (including interim reporting periods within those periods). The amendments may be applied retrospectively to each prior period (full retrospective) or retrospectively with the cumulative effect recognized as of the date of initial application (modified retrospective). The Company will adopt ASU 2014-09 in the first quarter of Fiscal 2019 and apply the full retrospective approach. The Company does not expect the adoption of ASU 2014-09 to have a material effect on its business, its financial position, results of operations or cash flows. 

Cautionary Note Regarding Forward-Looking Statements

This Report includes forward-looking statements including statements regarding liquidity, anticipated cash flows, future capital-raising activity, and the development of our services including the Vocaworks platform. The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “could,” “target,” “potential,” “is likely,” “will,” “expect” and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions described in “Risk Factors” elsewhere in this Item 7. New risk factors emerge from time-to-time and it is not possible for us to predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any risk factor, or combination of risk factors, may cause actual results to differ materially from those contained in any forward-looking statements. Except as otherwise required by applicable laws, we undertake no obligation to publicly update or revise any forward-looking statements or the risk factors described in this Report, whether as a result of new information, future events, changed circumstances or any other reason after the date of this Report.

RISK FACTORS

Investing in our common stock involves a high degree of risk. You should carefully consider the following Risk Factors before deciding whether to invest in our Company. Additional risks and uncertainties not presently known to us, or that we currently deem immaterial, may also impair our business operations or our financial condition. If any of the events discussed in the Risk Factors below occur, our business, consolidated financial condition, results of operations or prospects could be materially and adversely affected. In such case, the value and marketability of the common stock could decline.

Risks Relating to Our Business

Our ability to continue is a going concern and is in doubt absent obtaining adequate new debt or equity financing and achieving sufficient sales levels.

We anticipate that we will continue to lose money for the foreseeable future. Our continued existence is dependent upon generating sufficient working capital and obtaining adequate new debt or equity financing. Because of our continuing losses, we may have to continue to reduce our expenditures, without improvements in our cash flow from operations or new financing. Working capital limitations continue to impinge on our day-to-day operations thus contributing to continued operating losses. The report of our independent auditors dated June 29, 2018 on our consolidated financial statements for the year ended March 31, 2018 includes an explanatory paragraph indicating that there is substantial doubt about our ability to continue as a going concern.

We have a history of losses and can make no assurance that we will be able to generate a profit or cash flow from operations in the future.

We have never generated revenue. We have incurred net losses, including a net loss of $471,842 for the year ended March 31, 2018. We expect to continue to incur substantial expenditures to develop and market our services and could continue to incur losses and negative operating cash flow. We may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. Our ability to generate profits will depend, in part, on our expenses and our ability to generate revenue. Our prior losses and any future losses have had and may continue to have an adverse effect on our stockholders’ equity and working capital.

Because we do not generate positive cash flow from operations, we will be required to engage in a future financing.

We have relied upon funding from the Investors to sustain operations. We have no understanding that Investors or any other third parties will provide an additional equity or debt capital. Because of the difficulties which microcap companies have in raising capital, the lack of available credit for companies like us and the level of our stock price and the illiquid market for our common stock, we may be hampered in our ability to raise the necessary working capital. Even if we do find a source of additional capital, we may not be able to negotiate terms and conditions for receiving additional capital that are acceptable to us. Any future capital investments may dilute or otherwise materially and adversely affect the holdings or rights of our existing shareholders. In addition, new debt securities issued by us to obtain financing could have rights, preferences and privileges senior to our common stock. We cannot give you any assurance that any additional financing will be available to us, or if available, will be on terms favorable to us. In such event, our ability to continue as a going concern is in doubt and we may not be able to remain in business. We cannot assure you that we will be successful in raising sufficient capital to run our operations.

If we fail to establish a user database for Vocaworks our revenue, financial results, and business may be significantly harmed.

Our financial performance will be significantly determined by our success in adding, retaining, and engaging active users of our recruiting services. It is possible that the size of our active user base may fluctuate or decline in one or more markets once established. If people do not perceive our service to be useful, reliable, and trustworthy, we may not be able to attract or retain users o r otherwise maintain or increase the frequency and duration of their engagement. Any number of factors could potentially negatively affect user retention, growth, and engagement, including if:

If we are unable to establish or maintain a user base and facilitate user engagement, our revenue and financial results may be adversely affected.

If there are significant changes in the number of job openings in the United States, it may affect our ability to generate revenue.

Because demand for our services is sensitive to changes in the level of economic activity, our business may suffer as a result of economic downturns. Many companies hire fewer employees when economic activity is slow. As a result, demand for our services may be reduced. An overabundance of jobs openings compared to job seekers may also cause our business to suffer. At the end of April 2018 there were 6.7 million job openings in the United States compared to 6.3 million unemployed job seekers. During periods where there are fewer job seekers than job openings, companies may switch their recruiting practices to specialized search firms in order to target currently employed candidates rather than job seekers. As a result, demand for our services may be reduced. If the number of job openings significantly decreases or there is a disproportionate number of job openings compared to people seeking employment there may be fewer job openings posted on our website which may decrease the number of users of our website. Accordingly, if the economy worsens or there is an overabundance of job openings, our business, results of operations and financial condition could be materially and adversely affected.

Because we are relying upon the success of our educational and corporate partners who provide users to the Vocaworks platform we may be materially and adversely affected if these and other future partners fail to deliver users who interact with our platform.

We rely on strategic partnerships with educational partners to provide employee candidates for the Vocaworks platform. Our educational partners, which primarily consist of for-profit universities, schools, and other learning institutions, encourage their enrolled students to use the Vocaworks platform to match with employers listed on Vocaworks and seek out employment through the channels offered on the Vocaworks platform. Our educational partners currently provide a significant portion of the users on the Vocaworks platform. If our educational partners who provide users to the Vocaworks platform cease to do so, or we fail to obtain other educational or corporate partners who will provide us with users, or these partners are unsuccessful in their efforts to provide users to our Vocaworks platform’s user base, our business and future revenue would be materially and adversely affected.

If our users’ profiles are out-of-date, inaccurate or lack the information that users and customers want to see, we may not be able to realize the full potential of our network, which could adversely impact our business.

If our users do not update their information or provide accurate and complete information when they join Vocaworks the value of our network may be negatively impacted because our value proposition as a professional network and as a source of accurate and comprehensive data will be weakened. For example, employers may not find users that meet their qualifications or may misidentify a candidate as having such qualifications, which could result in mismatches that erode customer confidence in our solutions, or our learning and development solutions may not suit our customers’ needs. Similarly, incomplete or outdated user information would diminish the ability of our job seekers to match with potential employers. Therefore, we must provide features and services that demonstrate the value of our network to users and motivate them to contribute additional, timely and accurate information to their profile and our network. If we fail to successfully motivate users to do so, our business and operating results could be adversely affected.

Because our user growth, engagement, and monetization on mobile devices depends upon effective operation with mobile operating systems, networks, and standards that we do not control. We may be materially and adversely affected.

There is no guarantee that mobile devices will continue to feature Vocaworks or other services, or that mobile device users will continue to use our services rather than competing services. We are currently developing a Vocaworks app for Apple iOS and expect to develop an Android app in the future. We are dependent on the interoperability of Vocaworks with popular mobile operating systems, networks, and standards that we do not control, such as the Android and Apple iOS operating systems. Any changes, bugs, or technical issues in such systems, or changes in our relationships with mobile operating system partners, handset manufacturers, or mobile carriers, or in their terms of service or policies that degrade our services’ functionality, reduce or eliminate our ability to distribute our services, give preferential treatment to competitive services, or charge fees related to the distribution of our services could adversely affect the usage of Vocaworks or our other services and monetization on mobile devices.

Additionally, in order to deliver a high quality mobile service, it is important that our platform works well with a range of mobile technologies, systems, networks, and standards that we do not control, and that we have good relationships with handset manufacturers and mobile carriers. Apple has broad discretion in approving or denying which applications are listed on the Apple app store depending on app performance, functionality, content, advertising features, data collection, and other features . Additionally, many apps listed in the Apple app store work on certain mobile devices but not on all devices. The app store for the Apple iOS operating system may refuse to offer Vocaworks as an app to users or its availability as an application may be restricted to certain devices.

In the event that it is more difficult for users to access and use Vocaworks on their mobile devices, or if users choose not to access or use Vocaworks on their mobile devices or use mobile products that do not offer access to Vocaworks our user growth and user engagement could be harmed and our future operating results may be materially and adversely affected. Further, Android mobile phones represent a larger market. If we fail to develop an Android app or we sustain the same issues describes above for the iPhone, we may be materially and adversely affected.

Security breaches and improper access to or disclosure of our data or user data, or other hacking and phishing attacks on our systems, could harm our reputation and adversely affect our business.

Our industry is prone to cyber-attacks by third parties seeking unauthorized access to our data or users’ data or to disrupt our ability to provide service. Any failure to prevent or mitigate security breaches and improper access to or disclosure of our data or user data, including personal information or content from users, could result in the loss or misuse of such data, which could harm our business and reputation and diminish our competitive position. In addition, computer malware, viruses, social engineering (predominantly phishing attacks), and general hacking have become more prevalent in our industry and may occur on our systems in the future. Such attacks may cause interruptions to the services we provide, degrade the user experience, cause users to lose confidence and trust in our service, impair our internal systems, or result in financial harm to us. Our efforts to protect our company data or the information we receive may also be unsuccessful due to software bugs or other technical malfunctions; employee, contractor, or vendor error or malfeasance; government surveillance; or other threats that evolve. In addition, third parties may attempt to fraudulently induce employees or users to disclose information in order to gain access to our data or our users’ data. Cyber-attacks continue to evolve in sophistication and volume, and inherently may be difficult to detect for long periods of time. Although we will employ systems and processes that are designed to protect our data and user data, to prevent data loss, and prevent or detect security breaches, we cannot assure you that such measures will provide absolute security, and we may incur significant costs in protecting against or remediating cyber-attacks. Moreover, if we sustain a ransomware attack, we may incur an unknown financial impact from any payments we make or third party costs we incur.

In addition third parties may receive or store information provided by us or by our users through mobile or web applications integrated with Vocaworks. If these third parties fail to adopt or adhere to adequate data security practices, or in the event of a breach of their networks, our data or our users’ data may be improperly accessed, used, or disclosed.

Affected users or government authorities could initiate legal or regulatory actions against us in connection with any actual or perceived security breaches or improper disclosure of data, which could cause us to incur significant expense and liability or result in orders or consent decrees forcing us to modify our business practices. Such incidents may also result in a decline in our active user base or engagement levels. Any of these events could have a material and adverse effect on our business, reputation, or financial results.

If we receive unfavorable media coverage, it may negatively affect our business.

Social networking and job advertising sites have recently received a high degree of media coverage around the world. Unfavorable publicity regarding, for example, our privacy practices, terms of service, product quality, litigation or regulatory activity, government surveillance, the use of our services for illicit, objectionable, or illegal ends, the actions of our users, the quality and integrity of content shared on our platform, or the actions of other companies that provide similar services to us, could in the future, adversely affect our reputation. Such negative publicity could have an adverse effect on the size, engagement, and loyalty of our user base and result in decreased revenue or receive opportunities, which could adversely affect our business and financial results.

Because our business is subject to complex and evolving United States laws and regulations regarding privacy, data protection, content, competition, consumer protection, and other matters, we may face claims, changes to our business practices, monetary penalties, increased cost of operations, or declines in user growth or engagement, or otherwise have adverse effects on our business.

We are subject to a variety of laws and regulations in the United States that involve matters central to our business, including privacy, data protection and personal information, rights of publicity, content, intellectual property, advertising, marketing, distribution, data security, data retention and deletion, electronic contracts and other communications, competition, protection of minors, consumer protection, telecommunications, taxation, economic or other trade prohibitions or sanctions.

These federal, and state laws and regulations, which in some cases can be enforced by private parties in addition to government entities, are constantly evolving and can be subject to significant change. As a result, the application, interpretation, and enforcement of these laws and regulations are often uncertain, particularly in the new and rapidly evolving industry in which we operate, and may be interpreted and applied inconsistently and inconsistently with our current policies and practices. For example, regulatory or legislative actions affecting the manner in which we display content to our users or obtain consent to various practices could adversely affect user growth and engagement. Such actions could affect the manner in which we provide our services or adversely affect our financial results.

Our business could be adversely affected if laws or regulations are adopted, interpreted, or implemented in a manner that is inconsistent with our current business practices and that require changes to these practices, the design of our website, services, features or our privacy policy. Such changes may require us to modify our services and features, possibly in a material manner, and may limit our ability to develop new features that make use of the data that our users voluntarily share with us. Additionally, if third parties we work with violate applicable laws or regulations or our policies, such violations may also put our users’ content at risk and could in turn have an adverse effect on our business. Any significant change to applicable laws, regulations, or industry practices regarding the collection, use, retention, security, or disclosure of our users’ content, or regarding the manner in which the express or implied consent of users for the collection, use, retention, or disclosure of such content is obtained, could increase our costs and require us to modify our services and features, possibly in a material manner, which we may be unable to complete, and may limit our ability to store and process user data or develop new services and features.

We face intense competition in the market for Vocaworks from third party online recruiting websites, social networking sites and Internet search companies, among others, as well as continued competition for customers. Because the above mentioned competitors are very well known and have substantially greater financial resources, technical expertise and employee depth, we may or may not be able to compete effectively.

We face significant competition in all aspects of our business, and we expect such competition to increase, particularly in the market for online professional networks and engagement of professionals. Our industry is evolving rapidly and is becoming increasingly competitive. Larger and more established companies may focus on our market and could directly compete with us. Smaller companies, including application developers, could also launch new services that compete with us and that could gain market acceptance quickly. We may also face competition if we shift our focus of development to new or different concepts or separate areas of our business.

The space for online recruiting networks is rapidly evolving. Companies such as Monster, LinkedIn, and Indeed are developing or could develop solutions that compete with ours. Further, some of these companies are partnering with third parties to offer services that could compete with ours. Additionally, we face competition from a number of companies outside the United States that provide online professional networking solutions. We also compete against smaller companies that focus on groups of professionals within a specific industry or vertical. Our competitors may announce new services or enhancements that better address changing industry standards or the needs of members and customers, such as mobile access or different market focus. Any such increased competition could cause pricing pressure, loss of business or decreased member activity, any of which could adversely affect our business and operating results. Internet search engines could also change their methodologies in ways that adversely affect our ability to optimize our page rankings within their search results.

If our technologies do not work as anticipated once we achieve meaningful revenue, we will not be successful.

While we believe that we have world class technologies and that there is a major market for Vocaworks, our platform is in the alpha stage and subject to substantial uncertainty. The Company intends to conduct a beta stage testing of Vocaworks this year and launch a final version of Vocaworks by the end of Fiscal 2019. Our ability to successfully launch and maintain Vocaworks is crucial to our ability to generate material revenue. In order to successfully launch Vocaworks we will need to complete both an alpha and beta testing and attract users to our service. During our testing we may encounter software errors or bugs which delay the launch of Vocaworks and acquisition of users on the Vocaworks platform. Without market acceptance, material sales, and positive feedback from users, we cannot be certain that we will be successful in launching Vocaworks or that we will be able to launch Vocaworks by the end of Fiscal 2019 and our inability to successfully launch Vocaworks could have an adverse effect on your investment in us.

Because our management team has experienced turnover in recent periods, it may be difficult to evaluate our existing future prospects and the risk of success or failure of our business.

We have had numerous changes to our Board and executive officer roles in recent years. Mr. Miles Jennings was appointed as Chief Executive Officer of the Company effective October 30, 2017. As a result of the turnover, it may be more difficult to project whether we will be successful in growing our business even if we are able to raise capital.

Our success depends on the efforts, abilities and continued service of Miles Jennings and if we are unable to continue to retain the services of Miles Jennings, we may not be able to continue our operations.

Our success depends to a significant extent upon the continued service of Miles Jennings.  On October 30, 2017, we entered into a one-year employment agreement with Mr. Jennings which automatically renews for one-year periods unless notice of termination is given 60 days before renewal. Loss of the services of Mr. Jennings and any negative market or industry perception arising from the loss of such services could significantly harm our business, future prospects and the price of our common stock. We do not maintain key-person insurance on the life of Mr. Jennings.

If we cannot expand our operations, or if we cannot manage our growth effectively, we may not become profitable.

Businesses which grow rapidly often have difficulty managing their growth. If we successfully obtain financing, we intend to grow rapidly and we will need to expand our management by recruiting and employing experienced executives and key employees capable of providing the necessary support. We cannot assure you that our management will be able to manage our growth effectively or successfully. Our failure to meet these challenges could cause us to lose money, and your investment could be lost.

Because we are relying on our small management team, we lack business development resources which may hurt our ability to generate revenue.

Because we have only one officer dedicated to business development, we lack the resources to grow beyond certain levels. We cannot assure you that we will generate cash flow from operations or from a financing which will enable us to develop and grow our revenues.

If we are unable to hire an experienced sales team, we may not be able to generate material revenue.

Presently our personnel consist of two full-time employees and one part-time employee. Accordingly, we may be required to hire sales persons.  If our management team and any sales persons we hired are unsuccessful, we may be unable to generate material revenue.

Failure to implement and maintain effective internal controls over financial reporting could result in material misstatements in our financial statements, which could require us to restate financial statements, cause investors to lose confidence in our reported financial information and could have an adverse effect on our stock price.

Our management determined that as of March 31, 2018, our internal controls over financial reporting had a material weakness related to both the design and effectiveness of our internal controls over financial reporting. We have not yet been able to remediate the material weakness related to our internal controls over financial reporting.

Additional material weaknesses in our internal control over financial reporting may be identified in the future.  Any failure to maintain existing or implement required new or improved controls, or any difficulties we encounter in their implementation, could result in additional material weaknesses, cause us to fail to meet our periodic reporting obligations or result in material misstatements in our financial statements. If we are unable to effectively remediate material weaknesses in a timely manner, investors could lose confidence in the accuracy and completeness of our financial reports, which could have an adverse effect on our stock price.

If we fail to protect or enforce our intellectual property rights, or if the costs involved in protecting and defending these rights are prohibitively high, our business and operating results may suffer.

Our trade secrets, trademarks, domain names and other rights are critical to our success. We strive to protect our intellectual property rights by relying on federal, state and common law rights, as well as contractual restrictions. We may enter into confidentiality and invention assignment agreements with our employees and contractors and confidentiality agreements with parties with whom we conduct business to limit access to, and disclosure and use of, our proprietary information. However, these contractual arrangements and the other steps we have taken to protect our intellectual property may not prevent the misappropriation of our proprietary information or deter independent development of similar technologies by others. It may be expensive and cost prohibitive to file for intellectual property protection worldwide and we may be financially required to file patents or similar protections for our intellectual property in select countries where we see the greatest potential for our services. As management deems appropriate, we will pursue the registration of our domain names, trademarks, and service marks in the United States and in certain locations outside the United States as we grow and launch our services. We will seek to protect our trademarks, trade secrets, and domain names in an increasing number of jurisdictions, a process that is expensive and time-consuming and may not be successful or which we may not pursue in every location.

If we are required to sue third parties who we allege are violating our intellectual property rights, or if we are sued for violating a third party’s patents or other intellectual property rights, we may incur substantial expenses, and we could incur substantial damages, including amounts we cannot afford to pay.

Litigation may be necessary to enforce our intellectual property rights, protect our trade secrets or determine the validity and scope of proprietary rights claimed by others. Intellectual property litigation is extremely expensive and beyond our ability to pay.  While third parties do, under certain circumstances, finance litigation for companies that file suit, we cannot assure you we could find a third party to finance any claim we choose to pursue.  Moreover, third parties do not finance companies that are sued.  Any litigation of this nature, regardless of outcome or merit, could result in substantial costs, adverse publicity or diversion of management and technical resources, any of which could adversely affect our business and operating results. If we fail to maintain, protect and enhance our intellectual property rights, our business and operating results may be harmed.

From time-to-time, we may face allegations that we have infringed the trademarks, copyrights, and other intellectual property rights of third parties, including from our competitors and inactive entities. Intellectual property litigation may be protracted and expensive, and the results are difficult to predict. As the result of any court judgment or settlement we may be obligated to cancel the launch of a new feature or service, stop offering certain features or services, pay royalties or significant settlement costs, purchase licenses or modify our platform features while we develop substitutes.  

Our inability to successfully launch Vocaworks could adversely affect our ability to pay our debts and to continue to operate our business, which may harm our financial position and cash flow and impact our ability to satisfy redemptions for our preferred stock.

Our outstanding shares of preferred stock will be redeemable for more than $2,000,000 upon their respective maturity date for the Company’s Series A, Series A-1, Series C, and Series C-1 in 2019, 2020, 2022, and 2022, respectively, subject to prior conversion. Our ability to meet our cash obligations, including our obligations under the redeemable preferred stock, is dependent upon our ability to successfully launch Vocaworks. If we are unable to launch and generate material revenue from Vocaworks it will adversely affect our ability to pay our debt and redeem the outstanding shares of preferred stock upon demand by the Investors. Our inability to repay any outstanding debt and redeem our preferred stock could negatively impact our ability to continue operations and render us in default of the terms of the preferred stock.

Risks Relating to Our Common Stock

As a result of our recent financings we are obligated to issue a substantial number of additional shares of common stock, which will dilute our present shareholders.

In October 2017 and June 2018, we engaged in a series of private placement transactions issuing shares of preferred stock and warrants to the Investors. The current outstanding preferred stock converts into a total of 296,938,752 shares of common stock and the warrants are exercisable into a total of 180,000,000 shares of common stock. In the future, we may grant additional options, warrants and convertible securities. The exercise, conversion or exchange of options, warrants or convertible securities, including for other securities, will dilute the percentage ownership of our shareholders. The dilutive effect of the exercise or conversion of these securities may adversely affect our ability to obtain additional capital. The holders of these securities may be expected to exercise or convert such options, warrants and convertible securities at a time when we would be able to obtain additional equity capital on terms more favorable than such securities or when our common stock is trading at a price higher than the exercise or conversion price of the securities. If we issue them with conversion or exercise prices below the prices of the preferred stock held by the Investors, we will be required to reduce the conversion prices of our preferred stock held by the Investors, which will increase future dilution. The exercise or conversion of outstanding warrants, options and convertible securities will have a dilutive effect on the securities held by our shareholders. We have in the past, and may in the future, exchange outstanding securities for other securities on terms that are dilutive to the securities held by other shareholders not participating in such exchange.

Because our common stock is subject to the “penny stock” rules, brokers cannot generally solicit the purchase of our common stock, which adversely affects its liquidity and market price.

The Securities and Exchange Commission (the “SEC”) has adopted regulations which generally define “penny stock” to be an equity security that has a market price of less than $5.00 per share, subject to specific exemptions. The market price of our common stock on the OTC Pink is presently less than $5.00 per share and therefore we are considered a “penny stock” according to SEC rules. Further, while we intend to conduct a reverse stock split in the future and our stock price may rise above $5.00, there is no guarantee that our stock price will rise or stay above $5.00 per share. The “penny stock” designation requires any broker-dealer selling these securities to disclose certain information concerning the transaction, obtain a written agreement from the purchaser and determine that the purchaser is reasonably suitable to purchase the securities. These rules limit the ability of broker-dealers to solicit purchases of our common stock and therefore reduce the liquidity of the public market for our shares.

Moreover, as a result of apparent regulatory pressure from the SEC and the Financial Industry Regulatory Authority, a growing number of broker-dealers decline to permit investors to purchase and sell or otherwise make it difficult to sell shares of penny stocks. The “penny stock” designation may continue to have a depressive effect upon our common stock price.

Our common stock may be affected by limited trading volume and price fluctuations, which could adversely impact the value of our common stock.

There has been limited trading in our common stock and there can be no assurance that an active trading market in our common stock will either develop or be maintained. Our common stock is likely to experience in the future, significant price and volume fluctuations, which could adversely affect the market price of our common stock without regard to our operating performance. In addition, we believe that factors such as quarterly fluctuations in our financial results and changes in the overall economy or the condition of the financial markets could cause the price of our common stock to fluctuate substantially. These fluctuations may also cause short sellers to periodically enter the market in the belief that we will have poor results in the future. We cannot predict the actions of market participants and, therefore, can offer no assurances that the market for our common stock will be stable or appreciate over time.

Offers or availability for sale of a substantial number of shares of our common stock may cause the price of our common stock to decline.

If our shareholders convert preferred stock or exercise warrants, it could create a circumstance commonly referred to as an “overhang” and in anticipation of which the market price of our common stock could fall. The existence of an overhang, whether or not sales have occurred or are occurring, also could make more difficult our ability to raise additional financing through the sale of equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate. The shares of our restricted common stock will be freely tradable upon the earlier of: (i) effectiveness of any registration statement covering such shares and (ii) the date on which such shares may be sold without registration pursuant to Rule 144 (or other applicable exemption) under the Securities Act.

Because we may issue preferred stock without the approval of our shareholders and have other anti-takeover defenses, it may be more difficult for a third party to acquire us and could depress our stock price .

In general, our Board may issue, without a vote of our shareholders, one or more additional series of preferred stock that have more than one vote per share, although the Company’s ability to designate and issue preferred stock is currently restricted by covenants under our agreements with prior investors. Without these restrictions, our Board could issue preferred stock to investors who support us and our management and give effective control of our business to our management. Additionally, issuance of preferred stock could block an acquisition resulting in both a drop in our stock price and a decline in interest of our common stock. This could make it more difficult for shareholders to sell their common stock. This could also cause the market price of our common stock shares to drop significantly, even if our business is performing well.

Because one shareholder controls our Company, it may act to the detriment of minority shareholders.

Recruiter holds a number of shares of common stock which make it the beneficial owner of over 85% of our outstanding common stock. Recruiter has been very supportive of our Company and continues to be involved with the Company. However, investors should be aware that Recruiter is able to exert a significant amount of control over our management and affairs and all matters requiring shareholder approval, including significant corporate transactions. This concentration of ownership may have the effect of delaying or preventing any change in control and might affect the market price of our common stock. If Recruiter so chose it could take action to the detriment of shareholders.

If our common stock becomes subject to a “chill” imposed by the Depository Trust Company, or DTC, your ability to sell your shares may be limited.

The DTC acts as a depository or nominee for street name shares that investors deposit with their brokers. DTC in the last several years has increasingly imposed a chill or freeze on the deposit, withdrawal and transfer of common stock of issuers whose common stock trades on the tiers of the OTC Markets. Depending on the type of restriction, a chill or freeze can prevent shareholders from buying or selling shares and prevent companies from raising money. A chill or freeze may remain imposed on a security for a few days or an extended period of time (in at least one instance a number of years). While we have no reason to believe a chill or freeze will be imposed against our common stock again in the future, if it were your ability to sell your shares would be limited. In such event, your investment will be adversely affected.

Because we may not be able to attract the attention of major brokerage firms, it could have a material impact upon the price of our common stock.

It is not likely that securities analysts of major brokerage firms will provide research coverage for our common stock since these firms cannot recommend the purchase of our common stock under the penny stock rules referenced in an earlier risk factor. The absence of such coverage limits the likelihood that an active market will develop for our common stock. It may also make it more difficult for us to attract new investors at times when we require additional capital.