ITEM 1A. RISK FACTORS

The following important factors among others, could cause our actual operating results to differ materially from those indicated or suggested by forward-looking statements made in this Form 10-K or presented elsewhere by management from time to time.

An investment in our common stock involves a number of significant risks, known and unknown, that may prevent us from achieving our goals. If any of these risks actually occur, our business, financial condition or results of operation may be materially adversely affected.

You should carefully consider the following risks and uncertainties in addition to other information in this prospectus (such as the Going Concern note to its financials) in evaluating our Company and our business before purchasing our securities. Our business, operating results and financial condition could be seriously harmed, and the trading price of our common stock could decline and investors could lose all or part of their investment, as a result of the occurrence of any of the following risks. You should invest in our common stock only if you can afford to lose your entire investment.

There could be unidentified risks involved with an investment in our securities.

The following risk factors are not a complete list or explanation of the risks involved with an investment in the securities. Additional risks will likely be experienced that are not presently foreseen by the Company. Prospective investors must not construe the information provided herein as constituting investment, legal, tax or other professional advice. Before making any decision to invest in our securities, you should read this entire prospectus and consult with your own investment, legal, tax and other professional advisors. An investment in our securities is suitable only for investors who can assume the financial risks of an investment in the Company for an indefinite period of time and who can afford to lose their entire investment. The Company makes no representations or warranties of any kind with respect to the likelihood our business will succeed, whether any regulatory agency may enforce the food and drug administration’s ban on consumable CBD/CBG products, including the Company’s products or regarding the value of our securities, any financial returns that may be generated or any tax benefits or consequences that may result from an investment in the Company.

Risks Related to Company’s Business

Cannabinoids are chemical compounds that are commonly found in or derived from cannabis and industrial hemp plants, including but not limited to Tetrahydrocannabinol (THC), the psychoactive chemical compound, and non-psychoactive chemical compounds, such as Cannabidiol (CBD) and Cannabigerol (CBG). It is believed that there are at least 120 cannabinoid compounds within cannabis and industrial hemp plants.

The Company is currently engaged in the sale of products that include CBD, intends to engage in the sale of products that include CBG, and is also is considering creating product lines that include other cannabinoids, although the Company’s current products contain no THC and the Company does not currently plan to produce or sell any products that contain any or more than 0.3% THC.

Cannabinoids can be found in or derived from both cannabis plants and industrial hemp plants. Industrial hemp is a varietal of the cannabis sativa plant that has been bred to have a low level of THC (below 0.3% THC). Cannabis sativa plants that have above 0.3% THC are considered cannabis plants. Due to the unique regulatory framework of both the cannabis and hemp industries, the source of the cannabinoid (i.e., whether it is derived from an industrial hemp plant or a cannabis plant) makes a significant difference in the legality and risks associated with any product that includes such cannabinoid.

As of the date hereof, the Company’s current product offerings contain and intended product offerings will contain CBD and CBG derived exclusively from industrial hemp. A description of industrial hemp industry specific risks is set forth below. While the Company does not currently sell any products derived from cannabis, to the extent that, in the future, Company may decide to offer products with cannabinoids derived from cannabis, cannabis industry specific risks are also described below.

Industrial Hemp Industry Risks

Legal Uncertainty Surrounding Current Industrial Hemp Regulations.

The laws and regulations affecting the industrial hemp industry are constantly changing, which could detrimentally affect the Company’s proposed operations. Local, state and federal industrial hemp laws and regulations are broad in scope and subject to evolving interpretations, which could require the Company to incur substantial costs associated with compliance or alter its business plan. In addition, violations of these laws, or allegations of such violations, could disrupt the Company’s business and result in a material adverse effect on its operations. In addition, it is possible that regulations may be enacted in the future that will be directly applicable to the Company’s proposed business, including, but not limited to, regulations or laws impacting the manufacturing and production methods the Company may utilize. The Company cannot predict the nature of any future laws, regulations, interpretations or applications, nor can the Company determine what effect additional governmental regulations or administrative policies and procedures, if promulgated, could have on the Company’s business.

Uncertainty Regarding the USDA’s Domestic Hemp Production Program.

The Agricultural Improvement Act of 2018 (2018 Farm Bill), tasked the United States Department of Agriculture (USDA) with developing a protocol to approve plans submitted by States and Indian Tribes for the domestic cultivation of industrial hemp (State Plans). It also establishes a Federal plan for cultivators in States or territories of Indian Tribes that do not have their own USDA-approved State Plan. Accordingly, the USDA has issued its Interim Final Rule to establish the domestic hemp production program and to facilitate the cultivation of hemp, as set forth in the 2018 Farm Bill. As of this date, the New York Department of Agriculture and Markets (NYDAM) has not yet formally submitted a State Plan pursuant to the Interim Final Rule. The NYDAM has stated that it will continue to operate under the industrial hemp pilot program provisions of the 2014 Farm Bill, which will remain in effect until October 31, 2020. The Interim Final Rule has only established protocols for cultivators of industrial hemp and not processors or manufacturers. Given that Company’s products are reliant on industrial hemp processing and manufacturing and not industrial hemp cultivation, it is unclear how the USDA will handle processors with respect to its licensing structure and such uncertainty could disrupt the Company’s business and result in a material adverse effect on its operations.

Uncertainty Regarding the NYDAM’s Development of a State Plan.

Pursuant to New York Legislation S.6184/A.7680, the NYDAM retains primary regulatory authority over the production and cultivation of industrial hemp within the State of New York. However, pursuant to the 2018 Farm Bill a State Plan must be submitted to the USDA for approval, in order to ensure that the NYDAM’s primary regulatory authority is recognized at the federal level. As of this date, the NYDAM has not yet formally submitted a State Plan and based on public comments issued by the NYDAM it is unclear as to when and how a formal State Plan will be submitted. Until a formal State Plan for New York has been published, submitted and approved by the USDA, it is unclear how the NYDAM will handle any conflicts with federal law which arise over processors and manufacturers of industrial hemp products with respect to its licensing structure and such uncertainty could disrupt the Company’s business and result in a material adverse effect on its operations.

The NYDAM’s Current Position on CBD.

The NYDAM’s has issued updated guidance which prohibits the addition of hemp derived CBD into food and beverages, which are intended for human consumption. However, the NYDAM states that hemp derived CBD is allowed for human consumption in the form of dietary supplements. Because Company’s product is included in food, the NYDAM’s updated guidance may limit Company’s ability to source, manufacture, and sell the product, or limit the consumer’s ability to purchase and use the product, which could severely impact Company’s revenues and profits. Future regulatory changes or enforcement actions by the NYDAM, with respect to CBD, could also have a materially adverse impact on the business, financial condition, results of operations or prospects of the Company.

Uncertainty Regarding the Implementation of New York’s Cannabinoid Hemp Processor and Retailer Licensing Regime.

Recently New York Public Health Law Article 33-B, Regulation of Cannabinoid Hemp and Hemp Extract, was enacted into law. The new regulation which does not become effective until January 1, 2021, will regulate the licensing and oversight of hemp cannabinoid manufacturing, which will include hemp derived CBD and CBG. The new regulations require both cannabinoid hemp retailers and cannabinoid hemp processors to become licensed prior to manufacturing or selling of hemp derived cannabinoid products. The new regulations also allow for the products produced pursuant to the regulatory regime, to be used for human consumption. At this time, it is unclear how the new regulatory regime for cannabinoid hemp processors will impact Company’s manufacturing and retailing partners, and such uncertainty could disrupt the Company’s business and result in a material adverse effect on its operations.

Uncertainty Regarding Production of CBD Products Through the use of White Labeling.

Company operates its CBD product business as a white label operation, however, if Company is deemed to be operating its business without a required manufacturing license this could impact Company’s ability to maintain this business or subject it to significant penalties, fees, fines, or other financial consequences. If Company’s manufacturing and production partners were to lose their license this could also significantly impact Company’s revenues as a result of lost profits as Company sought out new partners or waited for current partners to become compliant.

State and local laws and regulations surrounding the production and manufacture of industrial hemp derived CBD products are still in flux as states and local agencies figure out how best to regulate these products. State and local laws may change in unexpected ways that could result in Company’s manufacturing partners being forced to change their products or services, or raise prices, all of which could impact Company’s revenues and prospective profits.

In addition, state or local laws may prohibit the white labeling of industrial hemp derived CBD products, which would force Company to abandon its current business strategy with regard to Company’s products or rework Company’s current relationships with Company’s partners, which would significantly impact Company’s revenues and prospective profits.

The FDA’s Current Position on CBD.

The 2018 Farm Bill removed industrial hemp and hemp derivatives from the definition of marijuana in the United States Federal Controlled Substances Act (21 U.S.C. § 811) (CSA). However, the 2018 Farm Bill specifically preserved the United States Food and Drug Administration’s (FDA) authority over hemp derived consumer products. The FDA has taken the position that it is currently illegal to put into interstate commerce a food to which cannabidiol (CBD) has been added, or to market CBD as, or in, a dietary supplement. The FDA prohibits these uses of CBD because CBD was the subject of substantial clinical investigations into its potential medical uses before it was added to foods (including dietary supplements), and, separately, because CBD is the active ingredient in an FDA-approved prescription drug product which is used to treat rare, severe forms of epilepsy. The FDA had sought public comments regarding issues surrounding CBD and has not issued any guidance, rules, or regulations regarding the use of CBD in foods, drugs, or cosmetics since closing the comment period. Because Company’s product is included in food, FDA rules and regulations limiting Company’s ability to source, manufacture, and sell the product, or limiting the consumer’s ability to purchase and use the products, could severely impact Company’s revenues and profits. Future regulatory changes or enforcement actions by the FDA, with respect to CBD, could also have a materially adverse impact on the business, financial condition, results of operations or prospects of the Company.

Uncertainty Regarding the FDA’s Potential Position on CBG.

Cannabigerol (CBG) is a cannabinoid which can be lawfully derived from industrial hemp and Company has plans to develop CBG products. The 2018 Farm Bill preserved the FDA’s authority over industrial hemp derived consumer products and as of this date, the FDA has provided no guidance as to how cannabinoids other than CBD shall be regulated under the Food Drug and Cosmetic Act (FD&C Act). Future regulatory changes or enforcement actions by the FDA, with respect to CBG or other hemp derived cannabinoids, could have a materially adverse impact on the business, financial condition, results of operations or prospects of the Company.

The FDA Limits the Ability to Discuss the 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 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, Company’s inability to make such health claims about its CBD products, may limit Company’s ability to market and sell its product to consumers, which would negatively impact Company’s revenues and profits.

Federal intellectual property laws may limit Company’s ability to protect its trademarks, names, logos, and other intellectual property

On May 2, 2019, the United States Patent and Trademark Office (USPTO) promulgated Examination Guide 1-19, which provides, among other things, that trademarks for food products, beverage products, dietary supplement products, or pet treat products containing hemp derived CBD (“Consumable Hemp Derived CBD Products”) can be rejected by the USPTO on the basis that the sale of such products in interstate commerce allegedly violates FDA law (see discussion of FDA law above).

Because of the USPTO’s current position, obtaining trademarks for Consumable Hemp Derived CBD Products is problematic, making it difficult to enforce and protect intellectual property relating to Consumable Hemp Derived CBD Products. Company’s product offerings include Consumable Hemp Derived CBD Products. There can be no assurance that all of the steps Company takes to protect such intellectual property will be adequate. In many cases, Company may not have sufficient protection or rights to take sufficient action to protect material intellectual property. If efforts to protect such intellectual property are not adequate, or if any third-party misappropriates or infringes on such intellectual property, whether in print, on the Internet or through other media, the value of the impacted brands may be harmed, which could have a material adverse effect on Company’s prospects, including the failure of such brands and branded products to achieve and maintain market acceptance. Such failure would likely adversely impact Company’s revenue stream, and accordingly, Company’s ability to make distributions to shareholders.

There can be no assurance that third parties will not assert infringement or misappropriation claims against Company, or assert claims that Company’s rights in certain trademarks, service marks, trade dress and other intellectual property assets are invalid or unenforceable. Any such claims could have a material adverse effect on Company’s financial condition as well as its ability to allocate time and effort to other aspects of its business. If Company’s rights in any intellectual property were invalidated or deemed unenforceable, it could permit competing uses of intellectual property by third parties, which, in turn, could lead to a decline in Company’s results of operations. If Company is found to infringe upon a third party’s intellectual property rights, it may be forced to pay damages, be required to develop or adopt non-infringing intellectual property or be obligated to acquire a license to such intellectual property. There could be significant expenses associated with the defense of any infringement, misappropriation, or other third-party claims. Although in the case of intellectual property in respect of which Company has a license, Company may have a right to indemnification from the licensor, Company cannot assure that the financial condition of the licensor will be sufficient to satisfy any licensor indemnification obligation, or that such indemnification obligation would cover lost profits, consequential or other non-direct damages.

New York City has implemented an embargo on food and beverage CBD products.

On July 1, 2019, months after the NYC Department of Heath announced a ban on CBD in foods and beverages (mainly focused on restaurants and baked goods), the updated New York City Health Code now includes an embargo of CBD-infused Edible(s) Products (including packaged products). Company has taken a conservative approach towards the production of its products, including, for example, ensuring that its product manufacturer periodically tests for compliance with the 2018 Farm Bill, in order to ensure that the products are utilizing CBD oils derived from industrial hemp plants and that the products contain 0% THC content. Company remains confident that the current embargo on CBD Edible(s) products will be lifted and/or clarified. However, as a result of this embargo, Company has taken the necessary steps to ensure that its marketing efforts are focused on areas outside of New York City, while still maintaining its New York City (the 5 Boroughs) presence. Similar embargoes and bans have been implemented in other municipalities and jurisdictions, and this trend may continue, making it difficult for Company to conduct a sufficient amount of sales and business and could have a materially adverse impact on the business, financial condition, results of operations or prospects of the Company.

Fraudulent or Illegal Activity by Industrial Hemp Suppliers.

The Company is exposed to the risk that its suppliers of industrial hemp materials may engage in fraudulent or other illegal activity. Misconduct by these parties could include intentional, reckless and/or negligent conduct or disclosure of unauthorized activities to the Company that violates: (i) government regulations; (ii) cultivation standards; or (iii) laws that require the true, complete and accurate reporting of information or data. It may not always be possible for the Company to identify and deter misconduct by its suppliers and other third parties, and the precautions taken by the Company to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting the Company from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against Company, and it is not successful in defending itself or asserting its rights, those actions could have a significant impact on the Company’s business, including the imposition of civil, criminal and administrative penalties, damages, monetary fines, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of the Company’s operations, any of which could have a material adverse effect on the Company’s business, financial condition, results of operations or prospects.

Potential Federal Legislation Regarding CBD

On January 13, 2020, Representative Collin C. Peterson introduced H.R. 5587, a bill seeking to amend the FD&C Act with respect to the regulation of hemp-derived CBD and substances containing hemp-derived CBD. If enacted into law, H.R. 5587 would consider hemp-derived CBD and substances containing hemp-derived CBD to be dietary supplements under the FD&C Act, resolving ambiguity and providing clear guidance to stakeholders about how to comply with applicable FDA law. However, H.R. 5587 was only recently introduced in the House of Representatives, it is currently in the House Committee on Agriculture, Subcommittee on Biotechnology, Horticulture, and Research, and requires substantial further approvals, including approval of the House of Representatives, the Senate and the President of the United States before being enacted into law, if at all. At this time Company cannot determine what effect these additional governmental regulations, if promulgated, could have on the Company’s business.

Results of Future Clinical Research on Industrial Hemp Derived Cannabinoids.

Research in the U.S. and internationally regarding the medical benefits, viability, safety, efficacy, dosing and social acceptance of industrial hemp or isolated cannabinoids derived from industrial hemp remains in early stages. Future research and clinical trials may prove prior research results to be incorrect, or could raise concerns regarding, and perceptions relating to, industrial hemp and industrial hemp derived cannabinoids. Given these risks, uncertainties and assumptions, prospective shareholders should not place undue reliance on prior research articles and reports. 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 industrial hemp and industrial hemp derived cannabinoids, which could have a material adverse effect on the demand for the Company’s products with the potential to lead to a material adverse effect on the Company’s business, financial condition, results of operations or prospects.

Product Liability for Industrial Hemp Related Companies.

Industrial hemp companies are subject to strict product liability laws where a Company who sells a defective product to a consumer is subject to liability for any harm that befalls that consumer due to the defect. For example, a Company who sells industrial hemp CBD infused products could be held liable if that product was tainted in the cultivation or manufacturing process or inadequately labeled and a consumer subsequently fell ill. This area of law is unsettled and there is very little statutory or case law regarding industrial hemp and products liability. Under certain circumstances, the Company, or distributors or retailers of its products, may be required to recall or withdraw products. Even if a situation does not necessitate a recall or market withdrawal, product liability claims may be asserted against the Company. If the consumption of any of the products causes, or is alleged to have caused, a health-related illness, the Company may become subject to claims or lawsuits relating to such matters. Even if a product liability claim is unsuccessful, the negative publicity surrounding any assertion that the products caused illness or physical harm could adversely affect the Company’s reputation and brand equity.

Cannabis Industry Risks

THIS TIME COMPANY IS NOT ENGAGED IN CANNABIS ACTIVITIES. COMPANY IS CURRENTLY ONLY ENGAGED IN THE SALE AND DEVELOPMENT OF PRODUCTS THAT CONTAIN INDUSTRIAL HEMP DERIVED CANNABINOIDS. HOWEVER, TO THE EXTENT THAT COMPANY MAY DECIDE SUBSEQUENTLY OFFER PRODUCTS THAT CONTAIN CANNABINOIDS DERIVED FROM CANNABIS, THE RELEVANT CANNABIS INDUSTRY RISKS ARE SET FORTH BELOW:

Federal regulation and enforcement may adversely affect the implementation of cannabis laws and regulations may negatively impact Company’s business operations, revenues and profits.

Currently, there are 33 states in the United States, plus the District of Columbia, that have laws and/or regulations that recognize, in one form or another, medical benefits or other uses for cannabis or cannabis related products. These states have also passed laws governing the use and sale of cannabis products and others are considering similar legislation.

Nonetheless, the possession, use, cultivation, manufacturing, sale distribution and transfer of cannabis is illegal under Federal Law. Cannabis is classified as a Schedule I drug, which is viewed as having a high potential for abuse and no currently accepted use for medical treatment in the U.S. and lacking acceptable safety for use under medical supervision.

The United States Supreme Court has ruled that the federal government has the right to regulate and criminalize cannabis, even for medical purposes, and thus federal law criminalizing the use of cannabis preempts state laws that legalize its use (U.S. v. Oakland Cannabis Buyers’ Coop., and Gonzales v. Raich). Although the Obama administration stated that it is not an efficient use of resources to direct federal law enforcement agencies to prosecute those lawfully abiding by state-designated laws allowing the use and distribution of medical and adult-use cannabis, and Congress passed the Consolidated and Further Continuing Appropriations Act, 2019, eliminating any application of the federal budget toward the prosecution of individuals or entities operating in compliance with state cannabis laws, there is no guarantee that the Trump administration will not change the current stated policy regarding the low priority enforcement of federal laws in states where cannabis has been legalized under state law. Several members of President Trump’s cabinet have made statements indicating they are opposed to legalization efforts.

In January 2018, former Attorney General Jeff Sessions rescinded the 2013 Obama-era Cole Memo which had previously indicated that resources would not be directed for federal enforcement activity, including civil enforcement and criminal investigations and prosecutions related to cannabis activities. This has created significant uncertainty as to the enforcement policies and priorities of the federal government and agencies against cannabis operators and businesses in the cannabis industry. Although Jeff Sessions has been replaced by President Trump with Attorney General William Barr, there is still very little clarity as to how President Trump, or Attorney General Barr, will enforce federal law or how they will deal with states that have legalized medical or adult-use cannabis. Even for businesses compliant with state laws, cannabis-related investments remain a risk under federal law. As such, any investment into a commercial cannabis business is laden with risk under federal law, and an increased amount of risk due to former Attorney General Sessions actions against the cannabis industry. Any change in the federal government’s enforcement of federal laws could cause significant damage to Company and its growth prospects.

As the possession, cultivation, use and distribution of cannabis is illegal under the CSA, any person engaged in such activities may be deemed to be conducting or aiding and abetting illegal activities. As a result, Company and possibly certain beneficial owners of its equity may be subject to enforcement actions and/or prosecution by law enforcement authorities. Strict enforcement of the CSA by the DOJ would materially and adversely affect Company’s ability to generate funds for distributions to the holders of stock. Additionally, any action taken against Company for conducting or aiding and abetting illegal activities may force Company to cease operations and investors could lose their entire investment. In any such action, Company’s assets may be subject to forfeiture and investors could additionally face fines, penalties or the possibility of criminal prosecution. Companies that engage in any form of commerce in the cannabis industry and individuals investing in a cannabis business may be subject to federal criminal prosecution along with civil fines and penalties. The federal, and in some cases state, law enforcement authorities have frequently investigated and/or closed dispensaries, grow operators, manufacturers, and other cannabis-related businesses. Federal enforcement would have a material adverse effect on the business and operations of the Company and could lead to dissolution, asset forfeiture and total loss of investment in the Company.

Variations in state and local regulation, and enforcement in states that have legalized cannabis, may restrict cannabis-related activities, which may negatively impact Company’s revenues and prospective profits.

Many state and local cannabis laws are relatively new and there is a relatively small body of interpretive guidance and case law available to understand how certain laws, rules and regulations will be interpreted or applied by enforcement agencies or the courts. Additionally, the state and local licensing regulations are interdependent but, in part due to the variability of applicable local rules and differences in their effective administration, the results of such interdependency are often inefficient and may be impossible to comply with. As a result, Company’s business may be required to operate in a grey area, which subjects Company to the risk that it will unintentionally violate laws, rules or regulations.

The Company must be prepared for possible changes in laws and regulations which could seriously impact the Company’s business. The Company will incur ongoing costs and obligations related to regulatory compliance and failure to do so may result in additional costs for corrective measures, penalties, or in restrictions on the Company’s operations. In addition, changes in regulations, more vigorous enforcement thereof, or other unanticipated events could require extensive changes to the Company’s operations, increased compliance costs, or give rise to material liabilities, which could have a material adverse effect on the business, results of operations, and financial condition of the Company. Company cannot predict the nature of any future laws, regulations, interpretations, or applications, nor can it determine what effect additional governmental regulations or administrative policies and procedures, when and if promulgated, could have on its business. Accordingly, the unfavorable enforcement or change in applicable state or local laws could materially and adversely affect Company’s ability to make payments to the holders of Company’s stock and could result in the loss of investment in Company.

These state and local legal regimes often require companies to apply for and be awarded a license in order to operate a cannabis business operation. Company plans to operate its potential cannabis business as a white label operation. However, if such potential operations are deemed to be operating without a required license this could impact Company’s ability to engage in this business model or potentially subject Company to significant penalties, fees, fines, or other financial consequences.

Laws regarding the transportation of Cannabis

Laws related to transportation of cannabis may significantly impact Company’s ability to get products to market or may raise the cost of doing so, which would impact Company’s revenue and potential profits. Both state and federal law make it illegal to transport cannabis products across state lines. Any accidental or intentional transportation of Company’s products across state lines could, therefore, result in significant consequences including loss of a state issues license or permit, financial penalties, seizure of Company’s products, and prosecution for the illegal transportation of a Schedule I substance. These consequences may impact Company’s revenues, potential profits, or ability to continue operating in this line of business.

Federal intellectual property laws may limit Company’s ability to protect Company’s trademarks, names, logos, and other intellectual property

The United States Patent and Trademark Office does not provide trademark protection for cannabis or cannabis-related marks, making it difficult to enforce and protect intellectual property. It is possible to obtain trademarks for brands used in the cannabis industry, but only on non-cannabis goods. Some states may issue state trademarks for cannabis-related products, but state trademarks provide significantly less protection than federal trademarks. Patents are also very difficult to receive in the cannabis industry and require complex legal and scientific questions. There can be no assurance that all of the steps Company takes to protect such intellectual property will be adequate. In many cases, Company may not have sufficient protection or rights to take sufficient action to protect material intellectual property. If efforts to protect such intellectual property are not adequate, or if any third-party misappropriates or infringes on such intellectual property, whether in print, on the Internet or through other media, the value of the impacted brands may be harmed, which could have a material adverse effect on Company’s prospects, including the failure of such brands and branded products to achieve and maintain market acceptance. Such failure would likely adversely impact Company’s revenue stream, and accordingly, Company’s ability to make distributions to shareholders.

There can be no assurance that third parties will not assert infringement or misappropriation claims against Company, or assert claims that Company’s rights in certain trademarks, service marks, trade dress and other intellectual property assets are invalid or unenforceable. Any such claims could have a material adverse effect on Company’s financial condition as well as its ability to allocate time and effort to other aspects of its business. If Company’s rights in any intellectual property were invalidated or deemed unenforceable, it could permit competing uses of intellectual property by third parties, which, in turn, could lead to a decline in Company’s results of operations. If Company is found to infringe upon a third party’s intellectual property rights, it may be forced to pay damages, be required to develop or adopt non-infringing intellectual property or be obligated to acquire a license to such intellectual property. There could be significant expenses associated with the defense of any infringement, misappropriation, or other third-party claims. Although in the case of intellectual property in respect of which Company has a license, Company may have a right to indemnification from the licensor, Company cannot assure that the financial condition of the licensor will be sufficient to satisfy any licensor indemnification obligation, or that such indemnification obligation would cover lost profits, consequential or other non-direct damages.

Tax laws related to cannabis may impact Company’s ability to generate revenue or potential profits.

Section 280E of the Internal Revenue Code prohibits cannabis businesses from deducting their ordinary and necessary business expenses, except for some “costs of goods sold”, forcing cannabis businesses to pay higher effective federal tax rates than similar companies in other industries. The effective tax rate on a cannabis business depends on how large its ratio of nondeductible expenses is to its total revenues.

State tax laws are also changing. Even though state taxes are already high, many local jurisdictions are imposing heavy additional taxes either as a disincentive for cannabis companies to operate there or in order to cash in on the growing number of cannabis companies paying taxes. These taxes may overwhelm Company’s partner companies causing them to go out of business or raise prices for their services, which in turn may impact Company’s revenues and profits by forcing us to find different partners in more tax friendly areas or pay higher prices.

Collectively, federal state and local taxes will place a substantial burden on Company’s revenue and could make its business model economically unfeasible. Accordingly, Company may not be able to make payments to the holders of its stock, in which case, investors may lose the value of their investment.

Company may have difficulty accessing the service of banks, which may make it difficult for Company to operate.

In February 2014, the FinCEN bureau of the U.S. Treasury Department issued guidance (which is not law) with respect to financial institutions providing banking services to cannabis business, including burdensome due diligence expectations and reporting requirements. This guidance does not provide any safe harbors or legal defenses from examination or regulatory or criminal enforcement actions by the DOJ, FinCEN or other federal regulators. Thus, most banks and other financial institutions in the United States do not appear to be comfortable providing banking services to cannabis-related businesses, or relying on this guidance, which can be amended or revoked at any time by the Trump Administration. In addition to the foregoing, banks may refuse to process debit card payments and credit card companies generally refuse to process credit card payments for cannabis-related businesses. As a result, the Company may have limited or no access to banking or other financial services in the United States. In addition, federal money laundering statutes and Bank Secrecy Act regulations discourage financial institutions from working with any organization that sells a controlled substance, regardless of whether the state it resides in permits cannabis sales. While the United States Congress is contemplating the SAFE Act, the passage of which would permit ‎commercial banks to offer services to cannabis companies that are in compliance with state law, if ‎Congress fails to pass the SAFE Act, the Company’s inability, or limitations on the Company’s ability, to open or maintain bank accounts, obtain other banking services and/or accept credit card and debit card payments may make it difficult for the Company to operate and conduct its business as planned or to operate efficiently.

Due to the federal regulatory environment, including the Bank Secrecy Act (the “BSA”), banks in the United States often refuse to open or maintain accounts for companies that operate in the cannabis industry. The BSA also requires that banks file with the FinCEN suspicious activity reports (“SARs”) to provide FinCEN with information about transactions that may show participation in illegal activities including money laundering or funding of terrorist activities. To satisfy their legal obligations, banks often question transactions, including large cash transactions or transactions involving money orders. Typically, the account holder is not informed that the bank has filed a SAR with respect to any transaction. A bank that is uncomfortable with a transaction may file a SAR and/or close the accounts in question. As a result, companies in the cannabis industry, including Company, are at a risk of being non-bankable. An inability to make full, or any use of bank account services would impact management of Company’s operations and could have a material adverse effect on its business, financial condition and/or results of operations.

If Company incurs substantial liability from litigation, complaints, or enforcement actions, Company’s financial condition could suffer.

Company’s participation in the cannabis industry may lead to litigation, formal or informal complaints, enforcement actions, and inquiries by various federal, state, or local governmental authorities against us. Litigation, complaints, and enforcement actions could consume considerable amounts of financial and other corporate resources, which could have a negative impact on Company’s sales, revenue, profitability, and growth prospects. Company has not been, and are not currently, subject to any material litigation, complaint, or enforcement action regarding cannabis or cannabis products (or otherwise) brought by any federal, state, or local governmental authority. However, should Company become the subject of litigation, the cost to defend such litigation may be significant and may require a diversion of Company’s resources. There also may be adverse publicity associated with litigation that could negatively affect customer perception of Company’s business, regardless of whether the allegations are valid or whether Company is ultimately found liable. Company does not currently carry litigation liability insurance, and, therefore, the Company could be significantly financially burdened by legal claims, litigation or administrative proceedings against us.

Prospective customers may be deterred from doing business with a company with a significant nationwide e-commerce presence because of fears of federal or state enforcement of laws prohibiting possession and sale of medical or adult-use cannabis.

Company’s website is visible in jurisdictions where medicinal and adult use of cannabis is not permitted and, as a result, Company may be found to be violating the laws of those jurisdictions. Having to block access to Company’s website in certain jurisdictions may negatively impact Company’s visibility and ability to secure partnerships with companies or engage consumers in those areas.

Third-Party Service Providers

As a result of any adverse change to the approach in enforcement of the U.S. cannabis laws, adverse regulatory or political changes, additional scrutiny by regulatory authorities, adverse changes in the public perception in respect to the consumption of cannabis or otherwise, third-party service providers to the Company could suspend or withdraw their services, which may have a material adverse effect on the business, revenues, operating results, financial condition or prospects of the Company.

Enforceability of Contracts

Since cannabis is illegal at a federal level, judges in multiple U.S. states have on several occasions refused to enforce contracts for the repayment of money when the loan was used in connection with activities that violate federal law, even if there is no violation of state law. Therefore, there is uncertainty that the Company will be able to legally enforce its material agreements

Ability to file for Bankruptcy

Federal courts in the United States have held that cannabis businesses are not able to receive protection under bankruptcy laws. It has also been held that owners of cannabis businesses seeking personal bankruptcy protection will also be unable to take advantage of filing for bankruptcy. Therefore, in the event Company faces financial trouble, it will not be possible to file for bankruptcy protection without a drastic change in federal law.

Our business and financial performance may be adversely affected by downturns in the target markets that we serve or reduced demand for the types of products we sell.

Demand for the products we sell can be affected by general economic conditions as well as product-use trends in our target markets. These changes may result in decreased demand for our products. The occurrence of these conditions is beyond our ability to control and, when they occur, they may have a significant impact on our sales and results of operations.

We may be classified as an inadvertent investment company.

We are not primarily engaged in the business of investing, reinvesting, or trading in securities, and we do not hold ourselves out as being engaged in those activities. Under the Investment Company Act of 1940, as amended (the “1940 Act”), however, a company may be deemed an investment company under section 3(a)(1)(C) of the 1940 Act if the value of its investment securities is more than 40% of its total assets (exclusive of government securities and cash items) on a consolidated basis.

As a result of our December 13, 2017 purchase of shares of Vistagen Therapeutics Inc. (NASDAQ: VTGN), and the subsequent investments the Company has made in public and privately held companies in the subsequent period, the investment securities presently held by us exceeds 40% of our total assets, exclusive of cash items and, accordingly, we are currently an inadvertent investment company. As of March 31, 2020, the Company held common stock in one publicly traded company and warrants exercisable for common stock in two publicly traded companies. The Company also has investments recorded at cost in two private companies. An inadvertent investment company can avoid being classified as an investment company if it can rely on one of the exclusions under the 1940 Act. One such exclusion, Rule 3a-2 under the 1940 Act, allows an inadvertent investment company a grace period of one year from the earlier of (a) the date on which an issuer owns securities and/or cash having a value exceeding 50% of the issuer’s total assets on either a consolidated or unconsolidated basis and (b) the date on which an issuer owns or proposes to acquire investment securities having a value exceeding 40% of the value of such issuer’s total assets (exclusive of government securities and cash items) on an unconsolidated basis. We have taken actions to cause the investment securities held by us to be less than 40% of our total assets and will continue to evaluate other feasible actions towards this end, which may include acquiring assets with our cash on hand, consummating a significant merger/acquisition transaction, or liquidating our investment securities. We also may seek a no-action letter from the SEC if we are unable to acquire sufficient non-securities assets or liquidate sufficient investment securities in a timely manner.

As Rule 3a-2 is available to a company no more than once every three years, and assuming no other exclusion were available to us, we would have to keep within the 40% limit for at least three years after we cease being an inadvertent investment company. This may limit our ability to make certain investments or enter into joint ventures that could otherwise have a positive impact on our earnings. In any event, we do not intend to become an investment company engaged in the business of investing and trading securities.

Classification as an investment company under the 1940 Act requires registration with the SEC. If an investment company fails to register, it would have to stop doing almost all business, and its contracts would become voidable. Registration is time consuming and restrictive and would require a restructuring of our operations, and we would be very constrained in the kind of business we could do as a registered investment company. Further, we would become subject to substantial regulation concerning management, operations, transactions with affiliated persons and portfolio composition, and would need to file reports under the 1940 Act regime. The cost of such compliance would result in the Company incurring substantial additional expenses and could result in the complete cessation of our operations, and the failure to register if required would have a materially adverse impact to conduct our operations.

Risks relating to our exposure to equity securities of other companies in which we are currently invested.

We are not primarily engaged in the business of investing, reinvesting, or trading in securities, and we do not hold ourselves out as being engaged in those activities; however, the Company has purchased securities of certain publicly traded and privately held companies and continue to hold a number of the securities obtained as part of such transactions, primarily in the form of equity or equity derivative securities. These investments carry risk of partial or total loss, as with any such investment of this kind, and we could lose all or some of the cash we have utilized in making such investments. We generally monitor the Company’s investments to keep abreast of the investments and positions, but do not portend to actively trade in these securities and we do not have broker-dealers daily monitoring our investments to take positions in the event of market swings or fluctuations, whether on the upside or downside; hence, these investments bear certain risks of loss or failure to attain maximum gain.

The Company has multiple convertible notes having cross default provisions.

Multiple notes issued by the Company contain provisions where if the Company shall have defaulted on or breached any term of any other note of similar debt instrument into which the Company has entered and failed to cure such default within the appropriate grace period would be considered in default of all such convertible note instruments containing such default clauses. Should the Company for some reason default on one of its debt instruments, exercisable securities or convertible notes, if those instruments are not promptly cured other debt instruments or agreements could be caused, claimed or deemed to be in default, significantly increasing the principal amounts, amount of stock issuable and calculated interest rates thereunder. This could cause our stock price to decrease significantly, result in substantial dilution or cause us the inability to use the maximum or any of the equity credit line with Tangiers, which could materially impair our ability to execute our business plan or be able to fund operations.

Because we continue to develop and commercialize new products, we expect to incur significant additional operating losses.

Although we have commercialized a number of our products, we continue to develop new products and product lines, and, therefore, we expect to incur substantial additional operating expenses over the next several years as our research, development, and new business venture activities increase, including in connection with the potential to develop a pharmaceutical line of products through its subsidiary, Tauriga Pharma Corp., and the concomitant costs and expenses of such new business endeavors. The amount of our future losses and when, if ever, we will achieve profitability are uncertain. We remain early in our sales and marketing efforts of Tauri-Gum^TM and Tauri-Gummies^TM which has resulted in commercial revenue but there is no guarantee that we can generate sufficient revenue to sustain operations or achieve profitability. Our ability to generate revenue and achieve profitability will depend on, among other things, the following:

We might not succeed at all, or at any, of these undertakings. If we are unsuccessful at some or all of these undertakings, our business, prospects, and results of operations may be materially adversely affected.

We have few distribution agreements on which we are highly dependent. These agreements have no performance requirements or in some cases terms under which agreed responsibilities will be carried out.

Since the launch of our Tauri-Gum^TM product line, the Company has entered into multiple non-exclusive distribution agreements. These agreements are a critical component in the Company’s success in generating sufficient sales related cash flow to fund ongoing operations. These contracts are relationship based and involve a high degree of trust that the distributor will achieve positive results. However, under these agreements, the Company would have no recourse against distributors if sufficient results were not achieved with regard to amount of stock or cash paid to distributors. These distributors could additionally not perform at all under these agreements and even walk away entirely.

The Company has only one manufacturer/supplier of its product in a highly regulated industry.

In 2019, the Company entered into a comprehensive manufacturing agreement with Per Os Bio to bring to market a white label CBD Oil infused chewing gum product line to be sold and marketed under the name Tauri-Gum^TM and Tauri-Gummies^TM. If for some reason, there was a disruption with our supplier or this manufacturer for any reason at all, it could have a dramatic impact on the Company’s ability to continue to generate revenue, or could cost the Company a significant amount of capital and time to re-establish our manufacturing with another manufacturer and/or supplier, and to obtain applicable certifications surrounding our Company products.

The Company has recently entered a new line of business which is highly competitive and while it is largely unregulated today, it may be highly regulated in the future.

Entering a new line of business has many risks, including obtaining sufficient capital to cover startup and other expenses and to continue to fund operations until sales are sufficient to fund and/or expand ongoing operations. A new business line may never generate significant revenues, bring products to market or have enough sales to be profitable, as the case may be. With respect to any new line of business, including our entry into the CBD/CBG lines of products, we may have competitors that are better established in the market, have greater experience with such line of business or have greater resources than we do. We anticipate that products will be developed for and distributed to the retail market, but there can be no guaranty that sufficient revenue to support operations will ever be generated. Furthermore, we have limited experience in marketing consumer products, including chewing gum products, and may have limited experience with respect to any other line of business we may enter into as we seek to expand our operations. Due to this competition, there is no assurance that we will not encounter difficulties in obtaining revenues and market share or in the positioning of our products. There are no assurances that competition in our respective industries will not lead to reduced prices for our products. If we are unable to successfully compete with existing companies and new entrants to the market this will have a negative impact on our business and financial condition.

Although we believe that our products and processes do not and will not infringe upon the patents or violate the proprietary rights of others, it is possible such infringement or violation has occurred or may occur, which could have a material adverse effect on our business.

We are not aware of any infringement by us of any person’s or entity’s intellectual property rights. In the event that products we sell or processes we employ are deemed to infringe upon the patents or proprietary rights of others, we could be required to modify our products or processes or obtain a license for the manufacture and/or sale of such products or processes or cease selling such products or employing such processes. In such event, there can be no assurance that we would be able to do so in a timely manner, upon acceptable terms and conditions, or at all, and the failure to do any of the foregoing could have a material adverse effect upon our business.

There can be no assurance that we will have the financial or other resources necessary to enforce or defend a patent infringement or proprietary rights violation action. If our products or processes are deemed to infringe or likely to infringe upon the patents or proprietary rights of others, we could be subject to injunctive relief and, under certain circumstances, become liable for damages, which could also have a material adverse effect on our business and our financial condition.

Regulations are constantly changing, and in the future our business may be subject to additional regulations that increase our compliance costs.

We believe that we understand the current laws and regulations to which our existing products will be subject in the future. However, federal, state and foreign laws and regulations relating to the sale of our products are subject to future changes, as are administrative interpretations of regulatory agencies. If we fail to comply with such federal, state or foreign laws or regulations, we may fail to obtain regulatory approval for our products and, if we have already obtained regulatory approval, we could be subject to enforcement actions, including injunctions preventing us from conducting our business, withdrawal of clearances or approvals and civil and criminal penalties. In the event that federal, state, and foreign laws and regulations change, we may need to incur additional costs to seek government approvals. If we are slow or unable to adapt to changes in existing regulatory requirements or the promulgation of new regulatory requirements or policies, we or our licensees may lose marketing approval for our products which will impact our ability to conduct business in the future.

On May 31, 2019, the FDA held public hearings to obtain scientific data and information about the safety, manufacturing, product quality, marketing, labeling, and sale of products containing cannabis or cannabis-derived compounds, including CBD. The hearing comes approximately five months after the Farm Bill, went into effect and removed industrial hemp from the Schedule I prohibition under the CSA (industrial hemp means cannabis plants and derivatives that contain no more than 0.3 percent tetrahydrocannabinol, or THC, on a dry weight basis).

Though the Farm Bill removed industrial hemp from the Schedule I list, the Farm Bill preserved the regulatory authority of the FDA over cannabis and cannabis-derived compounds used in food and pharmaceutical products under the Federal Food, Drug, and Cosmetic Act (FD&C Act) and section 351 of the Public Health Service Act. The FDA has been clear that it intends to use this authority to regulate cannabis and cannabis-derived products, including CBD, in the same manner as any other food or drug ingredient. As part of the FDA hearing, the agency had requested comments by July 2, 2019 regarding any health and safety risks of CBD use, and how products containing CBD are currently produced and marketed, which comment period was completed on July 16, 2019. As of the date hereof, the FDA has taken the position that it is unlawful to put into interstate commerce food products containing hemp derived CBD, or to market CBD as, or in, a dietary supplement. Furthermore, since the closure of the FDA hearings on this issue, some state and city agencies have issued a ban on the sale of any food or beverages containing CBD. H.R. 5587, a newly introduced legislative effort at the federal level, seeks to consider hemp-derived CBD and substances containing hemp-derived CBD to be dietary supplements under the FD&C Act, which would resolve ambiguity and provide clear guidance to stakeholders about how to comply with applicable FDA law. However, H.R. 5587 was only recently introduced in the House of Representatives, and is in its infancy, requiring substantial further approvals, including approval of the House of Representatives, the Senate and the President of the United States before being enacted into law, if at all.

In addition, with respect to Company’s developing CBG product line, the FDA has provided no guidance as to how cannabinoids other than CBD (sch as CBG) shall be regulated under the FD&C Act, and it is unclear at this time how such potential regulation could affect the results of the operations or prospects of the Company.

Any subsequent regulations issued by the FDA and/or legislation passed by Congress, state or local jurisdictions can have an effect on our manufacture, supplier and our product.

If we infringe upon the rights of third parties, we could be prevented from selling products and forced to pay damages and defend against litigation.

If our products, methods, processes and other technologies infringe the proprietary rights of other parties, we could incur substantial costs and we may be required to:

Any of these events could substantially harm our earnings, financial condition, stock price, operations and our prospects for success.

We rely solely on two key officers, our directors and consultants and losing them would harm the business.

We are highly dependent on our officers, consultants, advisors and directors. We do not have “key person” life insurance policy for our Chief Executive Officer. If we are unable to obtain additional funding, we will be unable to meet our current and future compensation obligations to such employees and consultants. In light of the foregoing, we are at risk that one or more of our consultants or employees may leave our company for other opportunities where there is no concern about such employers fulfilling their compensation obligations, or for other reasons. The loss of the technical knowledge and management and industry expertise of any of our key personnel could result in delays in product development, loss of customers and sales and diversion of management resources, which could adversely affect our results of operations.

If we are unable to attract, train and retain highly qualified personnel, the quality of our services may decline and we may not successfully execute our internal growth strategies.

Our success will depend in large part upon our ability to attract, train, motivate and retain highly skilled and experienced employees in the areas of business into which we expand, including technical personnel. Qualified technical employees periodically are in great demand and may be unavailable in the time frame required to satisfy our operating requirements. Expansion of our business could further require us to employ additional highly skilled technical personnel.

There can be no assurance that we will be able to attract and retain sufficient numbers of highly skilled technical employees in the future. The loss of personnel or our inability to hire or retain sufficient personnel at competitive rates of compensation could impair our ability to develop our products or services or secure and complete customer engagements and could harm our business.

If we do not effectively manage changes in our business, these changes could place a significant strain on our management and operations.

Our ability to grow successfully requires an effective planning and management process. The expansion and growth of our business could place a significant strain on our management systems, infrastructure and other resources. To manage our growth successfully, we must continue to improve and expand our systems and infrastructure in a timely and efficient manner. Our controls, systems, procedures and resources are currently not adequate to support a changing and growing company. If our management fails to respond effectively to changes and growth in our business, including acquisitions or growth of our line of Tauri-Gum^TM and Tauri-Gummies^TM product lines of business, there could be a material adverse effect on our business, financial condition, results of operations and future prospects.

We may be unable to identify additional operating businesses or assets, and even if we do, we may be unable to finance such an acquisition.

Our strategies ultimately include making significant investments in sales and marketing programs, either directly or through distributors, to achieve revenue growth and margin improvement targets. If we do not achieve the expected benefits from these investments or otherwise fail to execute on our strategic initiatives, we may not achieve the growth improvement we are targeting, and our results of operations may be adversely affected. We may also fail to secure the capital necessary to make these investments, which will hinder our growth.

In addition, as part of our strategy for growth, we may make acquisitions, enter into strategic alliances such as joint ventures and joint development agreements or other strategic transactions. However, we may not be able to identify suitable acquisition or other strategic partner candidates, complete acquisitions or integrate acquisitions successfully, and our strategic alliances may not prove to be successful. In this regard, acquisitions and other strategic transactions involve numerous risks, including difficulties in the integration of the operations, technologies, services and products of the acquired companies and the diversion of management’s attention from other business concerns. Although we will endeavor to evaluate the risks inherent in any particular transaction, there can be no assurance that we will properly ascertain all such risks. In addition, acquisitions and other strategic transactions could result in the incurrence of substantial additional indebtedness and other expenses or in potentially dilutive issuances of equity securities. Even if we identify assets, transactions or additional lines of business, we may have insufficient liquidity to be able to complete such a transaction. There can be no assurance that difficulties encountered with such transaction(s) will not have a material adverse effect on our business, financial condition and results of operations.

We do not have long experience in building significant sales, marketing or distribution operations and will need to expand our expertise in these areas.

While we have recently been conducting a material amount of e-commerce sales and marketing, and in 2019 had begun our other sales, marketing or distribution operations in connection with the commercialization of our products, we will continue to need to develop and expand our expertise in these areas. To increase internal sales, distribution and marketing expertise and be able to conduct these operations, we would have to invest significant amounts of financial and management resources. In developing these functions ourselves, we could face a number of risks, including:

We experienced, and continue to experience, changes in its operations, which has placed, and will continue to place, significant demands on its management, operational and financial infrastructure.

If the Company does not effectively manage its growth, the quality of its products and services could suffer, which could negatively affect the Company’s brand and operating results. To effectively manage this growth, the Company will need to continue to improve its operational, financial and management controls and its reporting systems and procedures. Failure to implement these improvements could hurt the Company’s ability to manage its growth and financial position.

We may not be able to effectively manage our growth or improve our operational, financial, and management information systems, which would impair our results of operations.

Our ability to grow successfully requires an effective planning and management process. In the near term, we intend to expand the scope of our operations activities significantly. If we are successful in executing our business plan, we will experience growth in our business that could place a significant strain on our business operations, finances, management, and other resources. The factors that may place strain on our resources include, but are not limited to, the following:

Additionally, our strategy envisions a period of growth that may impose a significant burden on our administrative, infrastructure and operational resources. Our ability to effectively manage growth will require us to substantially and timely expand the capabilities of our administrative and operational resources and to attract, train, manage, and retain qualified management and/or other personnel. There can be no assurance that we will be successful in recruiting and retaining new employees or retaining existing employees.

We cannot provide assurances that our management will be able to manage this growth effectively, efficiently or in a timely manner. Our failure to successfully manage growth could result in our sales not increasing commensurately with capital investments or otherwise materially adversely affecting our business, financial condition, results of operations or future prospects. Our controls, systems, procedures and resources are currently not adequate to support a changing and growing company.

We are and will be dependent on the popularity of consumer acceptance of our product lines.

Our ability to generate revenue and be successful in the implementation of our business plan is dependent on consumer acceptance and demand of our product lines. Acceptance of our products will depend on several factors, including availability, cost, consumer familiarity of product benefits, brand recognition, convenience, effectiveness, safety, and reliability. If customers do not accept our products, or if we fail to meet customers’ needs and expectations adequately, our ability to continue generating revenues could be reduced or otherwise materially impacted.

Risks Related to Our Common Stock

We may need to finance our future cash needs through public or private equity offerings, debt financings or corporate collaboration and licensing arrangements. Any additional funds that we obtain may not be on terms favorable to us or our stockholders and may require us to relinquish valuable rights.

As of our most recent year ended March 31, 2020, we had $5,348 of available cash as well as $101,200 held in trading securities at fair market value. We will need to raise additional funds or liquidate the remainder of our marketable securities to pay outstanding vendor invoices and execute our business plan. Our future cash flows depend on our ability to market and sell our common stock and to enter into licensing arrangements. There can be no assurance that we will have sufficient funds to execute our business plan or complete a strategic transaction, or that additional funds will be available when needed from any source or, if available, will be available on terms that are acceptable to us.

We cannot guarantee that we will generate significate revenues from our products in the near future. Therefore, for the foreseeable future, we may have to fund all or most of our operations and capital expenditures from cash on hand, public or private equity offerings, debt financings, bank credit facilities, other borrowings (including borrowings from our officers and directors) or corporate collaboration and licensing arrangements. We will need to raise additional funds if we choose to expand our product development efforts more rapidly than we presently anticipate.

If we seek to sell additional equity or debt securities or enter into a corporate collaboration or licensing arrangement, we may not obtain favorable terms for us and/or our stockholders or be able to raise any capital at all, all of which could result in a material adverse effect on our business and results of operations. The sale of additional equity or debt securities, if convertible, could result in dilution to our stockholders. The incurrence of indebtedness would result in increased fixed obligations and could also result in covenants that would restrict our operations. Raising additional funds through collaboration or licensing arrangements with third parties may require us to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates, or to grant licenses on terms that may not be favorable to us or our stockholders. In addition, we could be forced to discontinue product development, reduce or forego sales and marketing efforts and forego attractive business opportunities, all of which could have an adverse impact on our business and results of operations.

The sale of our stock could encourage short sales by third parties, which could contribute to the future decline of our stock price.

In many circumstances, the provision of financing based on the distribution of equity for companies that are traded on the OTCQB has the potential to cause a significant downward pressure on the price of common stock. This is especially the case if the shares being placed into the market exceed the market’s ability to take up the increased stock or if we have not performed in such a manner to show that the equity funds raised will be used to grow our business. Such an event could place further downward pressure on the price of our common stock. Regardless of our activities, the opportunity exists for short sellers and others to contribute to the future decline of our stock price. If there are significant short sales of our common stock, the price decline that would result from this activity will cause the share price to decline more, which may cause other stockholders of the stock to sell their shares, thereby contributing to sales of common stock in the market. If there are many more shares of our common stock on the market for sale than the market will absorb, the price of our common shares will likely decline.

The market price and trading volume of shares of our common stock may be volatile.

The market price of our common stock could fluctuate significantly for many reasons, including reasons unrelated to our performance, such as limited liquidity for our stock, reports by industry analysts, investor perceptions or general economic and industry conditions. Fluctuations in operating results or the failure of operating results to meet the expectations of public market analysts and investors may negatively impact the price of our securities. Quarterly operating results may fluctuate in the future due to a variety of factors that could negatively affect revenues or expenses in any particular quarter, including vulnerability of our business to a general economic downturn, changes in the laws that affect our products or operations, competition, compensation related expenses, application of accounting standards and our ability to obtain and maintain all necessary government certifications and/or licenses to conduct our business. In addition, if the market price of a company’s shares drops significantly, stockholders could institute securities class action lawsuits against the company. A lawsuit against us would cause us to incur substantial costs and could divert the time and attention of our management and other resources.

We may not pay dividends in the future. Any return on investment may be limited to the value of our common stock.

We have never paid dividends and do not anticipate paying cash dividends in the foreseeable future. The payment of dividends on our common stock will depend on earnings, financial condition and other business and economic factors affecting us at such time as our board of directors may consider relevant. If we do not pay dividends, our common stock may be less valuable because a return on your investment will only occur if our stock price appreciates. Furthermore, requirements of Florida corporate law and bankruptcy laws may prohibit us from declaring or paying dividends on our stock.

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

If our stockholders sell substantial amounts of our common stock in the public market, or upon the expiration of any statutory holding period under Rule 144, or issued upon the exercise of outstanding options or 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.

Our common stock is currently considered a “penny stock,” which may make it more difficult for our investors to sell their shares.

Our stock is categorized as a penny stock. The SEC has adopted Rule 15g-9 which generally defines “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and accredited investors. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make 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. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.

We are a publicly registered company that is subject to the reporting requirements of federal securities laws, which can be expensive and may divert resources from other projects, thus impairing our ability to grow.

We are a public reporting company and, accordingly, subject to the information and reporting requirements of the Exchange Act and other federal securities laws, including compliance with the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). The costs of preparing and filing annual, quarterly and current reports, proxy statements and other information with the SEC and furnishing audited reports to stockholders causes our expenses to be higher than they would have been if we remained private.

As a public company, these rules and regulations have increased our compliance costs and make certain activities more time consuming and costly. As a public company, it is also more difficult and expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our board of directors or as executive officers.

The Sarbanes-Oxley Act also requires corporate governance practices of public companies, which can be burdensome to smaller reporting companies. As a smaller reporting company (as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended), we are required to evaluate our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”). Section 404 requires us to include an internal control report with the Annual Report on Form 10-K. This report must include management’s assessment of the effectiveness of our internal control over financial reporting as of the end of the fiscal year. This report must also include disclosure of any material weaknesses in internal control over financial reporting that we have identified. Failure to comply, or any adverse results from such evaluation, could result in a loss of investor confidence in our financial reports and have an adverse effect on the trading price of our equity securities. Management believes that our internal controls and procedures are currently not effective to detect the inappropriate application of U.S. GAAP rules. Management realizes there are deficiencies in the design or operation of our internal control that adversely affect our internal controls which management considers to be material weaknesses including those described below:

Achieving continued compliance with Section 404 may require us to incur significant costs and expend significant time and management resources. We cannot assure you that we will be able to fully comply with Section 404 or that we and our independent registered public accounting firm would be able to conclude that our internal control over financial reporting is effective at fiscal year-end. As a result, investors could lose confidence in our reported financial information, which could have an adverse effect on the trading price of our securities, as well as subject us to civil or criminal investigations and penalties. In addition, our independent registered public accounting firm may not agree with our management’s assessment or conclude that our internal control over financial reporting is operating effectively.

FINRA sales practice requirements may also limit a stockholder’s ability to buy and sell our stock.

In addition to the “penny stock” rules described in this annual report, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for many customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.

Tangiers will pay less than the then-prevailing market price for our common stock.

Our common stock to be issued to Tangiers pursuant to the Investment Agreement, dated January 21, 2020 will be purchased at 88% of the lowest VWAP of the common stock during the pricing period applicable to the Company’s Put Notice (described in under the heading “Investment Agreement” in this prospectus), provided, however, an additional 10% will be added to the discount of each company put if (i) the Company is not DWAC eligible and (ii) an additional 15% will be added to the discount of each Company put if the Company is under DTC “chill” status on the applicable put notice date. “VWAP” means, for any date, the price determined by the daily volume weighted average price of the common stock for such date (or the nearest preceding date) on the Company’s trading market on which the common stock is then listed or quoted for trading. Tangiers has a financial incentive to sell our common stock immediately upon receiving the shares to realize the profit equal to the difference between the discounted price and the market price. If Tangiers sells the shares, the price of our common stock could decrease. If our stock price decreases, Tangiers may have a further incentive to sell the shares of our common stock that it holds. These sales may have a further impact on our stock price and may result in dilution to you and our existing stockholders.

We may not have access to the full amount available under the investment agreement with Tangiers.

Our ability to draw down funds and sell up to a maximum of 76,00,000 shares of our Common Stock under the Investment Agreement with Tangiers requires that the registration statement which we had filed and was declared effective by the Securities and Exchange Commission in March 2020, continue to be effective. The registration statement remains subject to review and comment by the staff of the Securities and Exchange Commission. The effectiveness of these registration statements is a condition precedent to our ability to sell shares of our Common Stock to Tangiers under the Investment Agreement. Even with the effectiveness of our Registration Statement, we may not be able to sell the shares unless certain other conditions are met. Accordingly, because our ability to draw down any amounts under the Investment Agreement is subject to a number of conditions, there is no guarantee that we will be able to draw down any portion or all of the proceeds of $5,000,000 (or such then remaining undrawn amount) under the investment agreement with Tangiers.

Risks related to the 2020 Global Pandemic

In March 2020, the World Health Organization declared a global pandemic related to the virus known as COVID-19. The expected impact on domestic and global commerce have been and are anticipated to continue to be far reaching. To date there have been significant stock market declines and the movement of people and goods worldwide has become severely restricted. Management is actively monitoring the situation and is taking appropriate steps as needed to ensure minimal disruption to the Company’s operations; however, there is a risk the COVID-19 pandemic will continue to disrupt the Company’s operations, including, for example, its sales channels through international retailers who have been impacted by the Covid-19 pandemic, and therefore, the movement of goods and services, as well as its investments in personnel, expansion, marketing and sales generally.