CNGT Cannagistics Inc (CE)

Item 1A: Risk Factors

Risks Related to Our Securities

We have over $1,200,000 of convertible debt outstanding, which we may be unable to pay as and when due or at all, and the conversion of which would have a dilutive effect on our stockholders and could reduce the price of our Common Stock.

As of October 28, 2021, we have $1,200,000 of convertible debt outstanding which convert into a total of 120,000,000 shares of Common Stock id converted at the minimum price of $0.01 per share, in addition to the approximately 219,468,674 shares of Common Stock presently outstanding. Given our history of operating losses and continued expenditures, which we expect to increase in the short-term as we attempt to establish and grow our operations through Integrity Wellness and its products, we may face difficulty paying these obligations as and when they come due. None of the Notes totaling $1,200,000 are currently past due. The convertible notes have maturity beginning July 2022 through August 2022. The promissory notes documenting this indebtedness contain conversion price triggers upon an event of default which entitle the holder to receive more shares of Common Stock upon conversion during a continuing default. Conversions of the convertible debt would therefore have a dilutive effect on our stockholders, whereas payment of the debt will further add to our deficit, either of which could adversely affect our stockholders. The Company’s subsidiary has defaulted Convertible Notes totaling approximately $300,000.

Because we do not have sufficient authorized capital on a fully diluted basis, the excess outstanding capital exposes us to liability, and we will need to increase our authorized capital or obtain effective waivers from derivative securityholders.

As of October 28, 2021, our authorized capital consists of 500,000,000 shares of Common Stock and 20,000,000 shares of Preferred Stock. Of the authorized Common Stock, 219,468,674 shares are issued and outstanding, 725,000,000 shares are reserved for issuance under pending conversions of our prior Series D Convertible Preferred Stock (the “Series D”), a total of 800,000,000 shares are reserved for issuance upon conversion of the outstanding shares of Series E Convertible Preferred Stock (the “Series E”) and Series F Convertible Preferred Stock (the “Series F”), Currently there are no shares are reserved for issuance upon conversion of outstanding convertible indebtedness including the Convertible Notes, and no shares are reserved for issuance upon exercise of outstanding warrants. As such, our fully diluted capital structure is presently well above the amount of Common Stock we are authorized to issue. Therefore, until we either increase our authorized Common Stock or obtain waivers from the holders of the outstanding derivative securities both and with respect to their rights to an adequate reserve from which to receive the shares of Common Stock which underlie their respective securities, we are exposed to the risk of liability arising from the excess fully diluted capitalization. Therefore, in addition to the dilutive effect any exercises of the derivative securities would have, in the event we are unable to obtain the requisite shareholder approval or waivers, or we are delayed in those efforts, the Company and your investment in us would be at risk.

Trading in our Common Stock may become subject to wide price and volume fluctuations.

Our Common Stock is currently quoted for public trading on the OTC Pink Open Market. Presently, this market, places a “shell risk” warning to investors. While the acquisition of Integrity Wellness and commencement of operations with respect to the related CBD products may remove the shell risk designation, the OTC Pink Open Market generally is not an active market. Further, our Common Stock has only traded sporadically. We intend to apply to have our Common Stock quoted on the OTCQB. Even if our Common Stock begins trading on the OTCQB, investors should be aware that the OTCQB is not as liquid as major national securities exchanges.

The trading price and volume of our Common Stock have historically been low and may become subject to wide fluctuations. Trading prices of our Common Stock may fluctuate in response to several factors, many of which are beyond our control. The stock market has generally seen extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of companies such as ours with limited business operations or that recently began operating in an entirely new industry.

These stock market and industry factors may adversely affect the market price of our Common Stock, regardless of our operating performance. Finally, in the past, following periods of volatility in the market price of a company’s securities, securities class-action litigation has often been instituted. Such litigation, if instituted, could result in substantial costs for us and a diversion of management’s attention and resources.

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 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 Open Market is presently less than $5.00 per share and therefore we are considered a “penny stock” company according to SEC rules. Further, we do not expect our stock price to rise above $5.00 in the foreseeable future,. The “penny stock” designation requires any broker-dealer selling our 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 (“FINRA”), 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 have a depressive effect upon our Common Stock price.

As long as our and Series E and Series F Convertible Preferred Stock is outstanding and for two years after conversion, the holders will be able to effectively control our Company regardless of how many shares of common stock or other securities we issue.

We recently filed a Certificate of Designation for 4,400,000 shares of Series F Convertible Preferred Stock (the “Series F”) and a Certificate of Designation for 3,600,000 shares of Series E Convertible Preferred Stock (the “Series E”). As currently drafted the Series F Certificate of Designation gives the holders 44% of the equity and voting power. The Company understands that the correct number to be held by the Series F holders is 55% and intends to file an amendment with approval of its Board as soon as practicable. The intent was to provide the Series F holders with 55% of the equity and voting power as long as they owned any Series F shares, and for a two-year period following conversion of all the Series F shares. This means the holder can own one share of Series F and own the right to obtain 0.00125% of the equity and corresponding voting power. The Series E contains similar provisions, except that it is non-voting, is entitled to 36% of the equity and converts upon the earlier of the conversion of the Series F and June 30, 2023.

The effect is that the Series E and Series F holders get the right to more shares of common stock whenever we issue more shares or other common stock equivalents and no matter how high the future purchase prices are. The Series F holder is Regen, of whom Jim Morrison, our Chief Executive Officer and director, was an officer and a director at the time the underlying purchase agreement was negotiated and who approved the Certificate of Designation as a director of Regen. Further, the holders include Emerging Growth Advisors, Inc. an entity controlled by Jim Zimbler, our officer and a former director who approved the transaction as a director of the Company. While the Company believes the issuances to Regen which became our principal shareholder in connection with its acquisition and Emerging Growth Advisors, Inc. were fair to the Company, it is possible our shareholders may challenge the issuances. We intend to seek shareholder approval of the disinterested shareholders.

If we are required to pay a related party $300,000 plus interest on a related party note, we could cease operations or otherwise be materially and adversely affected.

We recently borrowed $300,000 from a corporation in which Dr. Babak Ghalili, a Cannagistics director, is the president. We issued the corporation a 10% demand note payable upon demand. Even though Dr. Ghalili has a fiduciary duty to us and may not breach his duty of loyalty, that protective governance provision will not apply, and the entity may demand payment at any time without exposing Dr. Ghalili to liability. If we receive a demand to pay the note, we do not have the funds to repay it and could cease operations or otherwise be required to engage in a toxic and dilutive financing to pay the note.

Risks Related to Our Business and the CBD Products and Industry

Because of our history of losses and lack of working capital and revenue, there is substantial doubt about our ability to continue as a going concern.

We have operated at a loss resulting in an accumulated deficit of $(15,612,191) as of July 31, 2021. A large proportion of our expenditures to date have been on developing the SaaS platform which remains in the development phase and may never be completed. Instead, we have recently shifted our business focus to a new industry of selling CBD products, which may not be sufficient to generate revenue or overcome our liabilities which are now over $5,691,709.

We have limited working capital and have not generated revenue from our business. We initially expect to incur losses in the development of our business, which casts substantial doubt on our ability to fully implement our business plan. To continue as a going concern, we will need to generate future profitable operations and/or obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. Among the liabilities we anticipate accruing in the early stages of our development and operations are compensation for our management team, costs related developing, testing, producing and marketing our products, compliance costs, costs related to obtaining and protecting our intellectual property rights and payments to third-party manufacturers and other vendors and service providers on which we rely. If we fail to raise sufficient proceeds in financings, we may not become profitable or be able to continue our business as a going concern.

Because we are highly dependent on the services of our two senior officers, the loss of either and our inability to expand our management team could harm our business.

Our success is largely dependent on the continued services of Jim Morrison, our Chief Executive Officer, and James Zimbler, our Vice President of Corporate Finance. The loss of the services of either of Messrs. Morrison or Zimbler would leave us without sufficient or any executive leadership, which could diminish our business and growth opportunities. Additionally, each of these individuals has business interests outside our company, including Mr. Zimbler as an owner and officer of Emerging Growth Advisors, Inc. a consulting services provider with which the Company contracts for administrative and strategic assistance. Accordingly, from time-to-time our management may not devote their full time and attention to our affairs, which could have a material adverse effect on our operating results, and there can be no assurance that a conflict of interest will not arise from their other business ventures such as the consulting services arrangement with Mr. Zimbler’s entity.

We will also need to build an executive management team around our current officers and directors, including locating and hiring a Chief Financial Officer and other executive officers, which could be a time consuming and expensive process and divert management’s attention from other pressing matters concerning the Company’s operations or growth. The market for highly qualified personnel in this industry is very competitive and we may be unable to attract such personnel in a timely manner, on favorable terms or at all. If we are unable to attract and retain the required personnel, our business could be harmed.

The loss of Mr. Morrison or Mr. Zimbler would have a material adverse effect on us. We do not have key man insurance on the lives of these individuals. In the event either or both individuals terminate their employment, this would leave the Company without adequate leadership which may have a material adverse effect upon us, your investment, and hamper the ability of the Company to continue operations. If we fail to procure the services of additional executive management or implement and execute an effective contingency or succession plan for our current management team, the loss of our management would significantly disrupt our business from which we may not be able to recover.

If we are unable to develop and maintain our brand and reputation for our product offerings, our business and prospects could be materially harmed.

Our business and prospects depend, in part, on developing and then maintaining and strengthening our brand and reputation in the markets we serve which are characterized by intense competition and larger, more well-established CBD brands and products. If problems with our products cause our customers to have a negative experience or failure or delay in the delivery of our products to our customers, our brand and reputation could be diminished. If we fail to develop, promote and maintain our brand and reputation successfully, our business and prospects could be materially harmed.

Because we face intense competition, we may not be able to increase our market share which would materially and adversely affect us.

Our industry is highly competitive. It is possible that future competitors could enter our market, thereby causing us to lose market share and revenues or fail to grow our operations and market presence as intended or at all. In addition, most of our current competitors have significantly greater financial, technical, marketing and other resources than we do or may have more experience or advantages in the markets in which we will compete that will allow them to offer lower prices or higher quality products. If we do not successfully compete with these competitors, we could fail to develop a sufficient market share to achieve our goals and our future business prospects could be materially adversely affected.

Because the sale of our products involves the potential for product liability, we may incur significant losses and expenses in excess of our insurance coverage.

We face an inherent risk of exposure to product liability claims if the use of our products results in, or is believed to have resulted in, illness or injury. Our products are designed for ingestible or topical use and orally and contain combinations of ingredients, and there is little experience with or knowledge of the long-term effects of these combinations. In addition, interactions of these ingredients and products with other products, prescription medications and over-the-counter treatments have not been fully explored or understood and may have unintended consequences. Future research or results may lead to the discovery of unknown adverse side effects from Hemp Oil which would harm our business.

Although the Company believes all of its products will be safe when taken as directed by the Company, there is little long-term research on the effects of human consumption of certain of the new product ingredients or combinations in concentrated form that we use or may in the future use in developing our Hemp Oil products. Any instance of illness or negative side effects of ingesting Hemp oil products or applying them topically on the skin could have a material adverse effect on our business and operations by, among other things, exposing us to the risk of costly litigation and/or governmental sanctions and dramatically reducing the demand for some or all of our products.

Any product liability claims or related developments from our products or Hemp Oil in general may increase our costs and adversely affect our revenue, product demand and operating results. Moreover, liability claims arising from a serious adverse event may increase our costs through higher insurance premiums and deductibles and may make it more difficult to secure adequate insurance coverage in the future. In addition, our product liability insurance may fail to cover future product liability claims, which, if adversely determined, could subject us to substantial monetary damages.

If we fail to appropriately respond to changing consumer preferences and demand for new products, it could significantly harm our customer relationships and product sales and harm our operating results and financial condition.

Our business is subject to changing consumer trends and preferences, especially with respect to targeted OTC, therapeutic, nutraceutical, cosmetics and health and wellness products. Our success will depend in part on our ability to anticipate and respond to these changes, and we may not respond in a timely or commercially appropriate manner to such changes. Furthermore, the target industries for our products are characterized by rapid and frequent changes in demand for products and new product introductions and enhancements. Our failure to accurately predict these trends could negatively impact consumer opinion of our products, which in turn could harm our customer relationships and product demands and cause the loss of sales. The success of our product offerings depends upon a number of factors, including our ability to:

• Accurately anticipate consumer needs;
• Price our products competitively;
• Arrange for the production and delivery our products in sufficient volumes and in a timely manner; and
• Differentiate our products from those of our competitors.

If we do not meet these challenges, some of our products could be rendered obsolete, which could negatively impact our operating results and financial condition.

Adverse publicity associated with our products or ingredients, or those of our competitors or similar businesses, could adversely affect our sales and revenue.

Adverse publicity concerning any actual or purported failure by us or our competitors to comply with applicable laws and regulations or concerning any other aspect of our business or the CBD industry could have an adverse effect on the public perception of us and our products. This, in turn, could negatively affect our ability to obtain financing, endorsers and attract distributors, retailers or consumers for our products, which would have a material adverse effect on our ability to generate sales and revenue.

Our distributors’ and customers’ perception of the safety, utility and quality of our products or even similar products distributed by others can be significantly influenced by national media attention, publicized scientific research or findings, product liability claims and other publicity concerning our products or similar products distributed by others. Adverse publicity, whether or not accurate, that causes a perceived connection between the use of our products or any similar products and illness or other adverse effects, will likely diminish the public’s perception of and in turn the demand for our products. Claims that any products are ineffective, inappropriately labeled or have inaccurate instructions as to their use, could have a material adverse effect on the market demand for our products, including reducing our sales and revenue, which would have a material adverse effect on our business.

If we are unable to obtain our products in sufficient quantities or at defined quality specifications, or if the third parties we use are unable to maintain regulatory approvals for production facilities, we may be unable to meet demand for our products and lose time to market them and generate revenue.

Commercialization of our products require access to facilities to manufacture a sufficient supply of our products in compliance with applicable regulatory requirements. Because of our limited capital and other resources, we must outsource the manufacturing of our products, and while we have manufacturing partners, to the extent we need or want to increase volume or expand to new markets, or to replace current manufacturers for any reason, we may be unable to locate viable third parties and sources and negotiate acceptable terms. Further, the need for GMP certified facilities and compliance with FDA rules and guidelines to produce Hemp Oil products such as ours increases the difficulty of manufacturing efforts and the related costs and could operate to reduce our leverage when we deal with GMP-certified third parties resulting in unfavorable terms.

We may face competition for access to third party supply sources, development or production partners and facilities such as hemp growers and may be subject to production delays if any of those third parties give their other business partners a higher priority than they give to us. Even if we are able to identify additional or replacement third parties, the delays and costs associated with establishing and maintaining a relationship with such third parties may have a material adverse effect on us. Further, we lack control over production of our products due to outsourcing, which exposes us to a greater risk of liability, including regulatory enforcement actions for alleged noncompliance with law and product liability claims. This could also result in lower product quality which could negatively impact demand for our offerings or our competitive advantage. Any of these challenges could prevent us from achieving our business objectives and harm your investment in us.

If the market opportunities for our products are less lucrative than anticipated, our ability to generate revenues may be adversely affected and our business may suffer.

Our understanding, expectation and estimates of the market for our current and future products may prove to be incorrect, and new test results or studies, reports, legislative or regulatory developments or other factors beyond our control may result in the market for our products being lower than anticipated on a regional, national or global scale. The number of individuals in the U.S. who are willing to purchase our products may be lower than expected, or expectations for repetitive purchases and consumption may prove to be incorrect. These occurrences could materially adversely affect our prospects and operational results.

If we are unable to establish relationships with third parties to carry out sales, marketing, and distribution functions or to create effective marketing, sales, and distribution capabilities, we will be unable to market our products successfully.

Our business strategy includes using third parties to market and sell our products. There can be no assurance that we will successfully be able to establish marketing, sales, or distribution relationships with a sufficient number of third parties to meet our goals, that such relationships, if established, will be successful, or that we will be successful in gaining market acceptance for current or future products. To the extent that we enter into any marketing, sales, or distribution arrangements with third parties, our product revenues per unit sold are expected to be lower than if we marketed, sold, and distributed our products directly, and any revenues we receive will depend upon the efforts of such third parties.

If we are unable to establish such third-party marketing and sales relationships, we would have to establish and grow in-house marketing and sales capabilities. To market any products directly, we would have to build a marketing, sales, and distribution force that has technical expertise and could support a distribution capability. Competition in the health and wellness and CBD industries for technically proficient marketing, sales, and distribution personnel is intense, and attracting and retaining such personnel may significantly increase our costs. There can be no assurance that we will be able to establish internal marketing, sales, or distribution capabilities or that these capabilities will be sufficient to meet our needs.

We face and may continue to face business disruption and related risks arising from the COVID-19 pandemic, which has had and could continue to have a material adverse effect on our business.

The development, production and sale of our products has been and could continue to be materially adversely affected by the COVID-19 pandemic. We will rely upon Hemp Oil sales in retail stores including convenience stores in addition to online sales. Sales of our Hemp Oil products could decline as a result of the pandemic, including due to decreased demand caused by economic hardship and uncertainty and production challenges caused by supply shortages and the lockdowns. While vaccinations beginning in 2021 allowed for the partial reopening of the economy, the recent “Delta” and “Omicron” variant of the virus, as well as reduced efficacy of vaccines over time and the possibility that a large number of people decline to get vaccinated or receive booster shots, creates inherent uncertainty as to the future of our business, our industry and the economy in general in light of the pandemic.

We are still assessing our business plans and the impact COVID-19 may have on our ability to commercialize our products, but there can be no assurance that this analysis will enable us to avoid or mitigate part or all of any impact from the spread of COVID-19 or its consequences, including macroeconomic downturns. The extent to which the COVID-19 pandemic and global efforts to contain its spread will impact our operations will depend on future developments, which for a variety of reasons including those described above are highly uncertain and cannot be predicted at this time.

We have a limited operating history upon which investors can evaluate our future prospects.

Integrity Wellness was founded in November 2020 as Cannaworx Holdings, Inc., and changed its name to The Integrity Wellness Group, Inc. in June 2021, and we therefore have a limited operating history upon which an evaluation of its business plan or performance and prospects can be made. The business and prospects of the Company

must be considered in the light of the potential problems, delays, uncertainties and complications encountered in connection with a business which is still in its early stages in a relatively new industry characterized by unexpected change. The risks include, but are not limited to, the possibility that we fail to develop functional and scalable products, or that although functional and scalable, our products will not be economical to market in order to become or remain profitable; that our competitors hold proprietary rights precluding us from marketing such products; that our competitors offer a superior or equivalent product or otherwise achieve or maintain greater market acceptance than us; that we are unable to upgrade or improve our processes and products to accommodate new features and expand our offerings; or that we fail to receive or maintain necessary regulatory clearances and compliance for our products and operations. In order to grow our revenue, we must develop and improve upon our brand name recognition and competitive advantages for our products and expand into new markets. Even if we accomplish such growth, resulting expenses may be greater than estimated, which could reduce or even eliminate any revenue gains for which such endeavors were made. There are no assurances that we can successfully address these challenges. If we are unsuccessful, our business, financial condition and operating results could be materially and adversely affected.

If the market for Hemp Oil products declines, it would materially and adversely affect our business

Following the passage of the 2018 Farm Bill described below and elsewhere in this Filing under the title “Government Regulations,” our industry experienced an influx of hemp farmers and producers which resulted in a saturated marketplace. As a result, the supply for CBD and related products has in the past exceeded demand. This trend could force us to reduce our prices to remain competitive or could result in lower sales levels than we have experienced in the past, either of which would result in a decline in revenue or growth rate and could materially adversely affect our financial condition and prospects.

Even if we meet our growth objectives and/or enter into new markets as and when intended, we may face difficulties evaluating our current and future business prospects, which would increase the risk of your investment losing value.

Any future entry into new markets and/or growth in our consumer base may place a significant strain on our resources and increase demands on our executive management, personnel and operational systems, and our human, administrative and financial resources may be inadequate to meet these demands. We may also be unable to effectively manage any expanded operations or achieve planned growth on a timely or profitable basis, particularly if the number of customers using our products significantly increases within a short period of time. If we are unable to manage any operational expansion effectively, we may experience operating inefficiencies, the quality of and market for our products could decline, and our business and results of operations could be materially adversely affected.

If we cannot manage our growth effectively, our results of operations would be materially and adversely affected.

We expect to experience significant growth following the July 2021 acquisition of Integrity Wellness and further growth if we raise additional capital. Businesses which grow rapidly often have difficulty managing their growth while maintaining their compliance and quality standards. If we grow as rapidly as anticipated, we will need to expand our management by recruiting and employing additional executive and key personnel capable of providing the necessary support. There can be no assurance that management, along with staff, will be able to effectively manage the Company’s growth nor can there be any assurance that growth in our product offerings, customer base or contracts will translate to an increase in revenue or profitability. Any failure to meet the challenges associated with rapid growth could materially and adversely affect our business and operating results.

One of Our Subsidiaries has a judgment of significant amount.

In February 2021, the Supreme Court of the State of New York, County of Suffolk entered an order granting summary judgment to Jeffrey Gates, the plaintiff, against Cannagistics, Inc. (formerly Precious Investments, Inc.), a Nevada corporation, now called Global3pl, Inc., a Delaware corporation, which is a subsidiary of the Company, and James Zimbler, our Vice President of Operations and former director, against the defendants, for a total of $151,712.  As a result of our corporate reorganization under Section 251(g) of the Delaware Corporation Law, completed in May 2021, such that a newly formed corporation became the public company and the predecessor issuer, with all its assets and liabilities became the subsidiary, the obligation for this claim is now in said subsidiary of the current holding company. Based on the reorganization, and while relying on advice of counsel, the parent Company does not believe it is liable for this judgment. In the event the plaintiff seeks to hold the newly formed parent holding company responsible, a court may conclude that we are liable, notwithstanding our corporate restructuring in Delaware. If we are found liable for the judgment, even though Delaware Law expressly provides otherwise, we would be forced to pay such an amount in available cash, if any, and to satisfy the balance by selling our assets which were only $45,007 as of July 31, 2021. Therefore, such a development would have a material adverse effect on our business and could force us to cease operations, in which case your entire investment could become worthless.

Risks Related to Government Regulations

Existing or future governmental regulations relating to Hemp Oil or CBD products may harm or prevent our ability to produce and/or sell our product offerings.

While the Company has determined to not develop, market and distribute products that contain CBD at this time with the exception of one CBD product in our portfolio, it is possible that in the future we decide to have more of a focus on CBD products in addition to our current focus on products containing Hemp Oil.

While a majority of state governments in the United States have legalized the growing, production, and use of cannabis-derived products in some form and subject to certain restrictions, cannabis remains illegal under federal law. In addition, in July 2017, the United States Drug Enforcement Agency issued a statement that certain CBD extractions fall within the definition of marijuana and are therefore a Schedule I controlled substance under the Controlled Substances Act of 1970. Thus, the cannabis industry, including companies which sell products containing hemp or CBD, faces significant uncertainty surrounding regulation by the federal government, which could claim supremacy over state regulatory regimes including those with a “friendlier” view toward cannabis-derived products. While the federal government has for several years chosen to not intervene in the cannabis business conducted legally within the states that have legislated such activities, there is, nonetheless, potential that the federal government may at any time choose to begin enforcing its laws against the manufacture, possession, or use of cannabis-based products such as hemp or CBD. Similarly, there is the possibility that the federal government may enact legislation or rules that authorize the manufacturing, possession or use of those products under specific guidelines. Local, state and federal cannabis laws and regulations are broad in scope and subject to evolving interpretations. Further, as regulators continue to study and evaluate potential adverse health consequences of cannabis-derived products, regulations may become more restrictive on our operations. For example, on September 14, 2021, the Centers for Disease Control and Prevention issued a health advisory stating, among other things, that consumers should be aware that products labeled as hemp or CBD may contain delta-8 THC, and on the same day the FDA issued a consumer update describing potential risks and uncertainties surrounding delta-8 THC. These developments could be a sign of further regulations to come that might affect products such as ours. In the event the federal government was to tighten its regulation of the industry, we would likely suffer a material adverse effect on our business, including potentially substantial losses, and our financial condition and prospects would be diminished.

Because laws and regulations affecting our industry are evolving, changes to any regulation may materially affect our CBD products.

In conjunction with the enactment of the Agriculture Improvement Act of 2018 (the “Farm Bill”), the Food and Drug Administration (the “FDA”) released a statement about the status of CBD as a nutritional supplement, and the agency’s actions in the short term with regards to CBD will guide the industry. As a company whose products contain CBD, we intend to meet all FDA guidelines as the regulations evolve. Any difficulties in compliance with future government regulation could increase our operating costs and adversely impact our results of operations in future periods.

In addition, as a result of the Farm Bill’s passage, we expect that there will be a constant evolution of laws and regulations affecting the Hemp Oil/CBD industry which could affect our operations. Local, state and federal hemp laws and regulations may be broad in scope and subject to changing interpretations. These changes may require us to incur substantial costs associated with legal and compliance fees and ultimately require us to alter our business plan. Furthermore, violations of these laws, or alleged violations, could disrupt our business and result in a material adverse effect on our operations. In addition, we cannot predict the nature of any future laws, regulations, interpretations or applications, and it is possible that regulations may be enacted in the future that will be directly applicable to our business.

Unexpected changes in federal and state law could cause any of our products containing hemp-derived CBD to be illegal, or could otherwise prohibit, limit or restrict any of our products containing CBD.

Our business is based on the production and distribution of products containing Hemp Oil. The Farm Bill, which amended various sections of the U.S. Code, and legalized the cultivation and sale of industrial hemp at the federal level, subject to compliance with certain federal requirements and state law. There can be no assurance that the Farm Bill will not be repealed or amended such that our products containing Hemp Oil or hemp-derived CBD would once again be deemed illegal under federal law.

The Farm Bill delegates the authority to the states to regulate and limit the production and sale of hemp and hemp-derived products within their territories. Although many states have adopted laws and regulations that allow for the production and sale of hemp and hemp-derived products under certain circumstances, no assurance can be given that such state laws may not be repealed or amended such that our intended products containing Hemp Oil or hemp-derived CBD would once again be deemed illegal under the laws of one or more states now permitting such products, which in turn would render such products illegal in those states under federal law even if the federal law is unchanged. In the event of either repeal of federal or state laws and regulations, or of amendments thereto that are adverse to our products, we may be restricted or limited with respect to those products in those jurisdictions, which could adversely impact our intended business plan with respect to such products in the affected markets and in general.

Additionally, the FDA has indicated that certain products containing CBD are not permissible under the Federal Food, Drug, and Cosmetic Act (the “FDCA”), notwithstanding the passage of the Farm Bill. On December 20, 2018, after the Farm Bill became law, then FDA Commissioner Scott Gottlieb issued a statement in which he reiterated the FDA’s position that CBD products that are marketed with a claim of therapeutic benefit must be approved by the FDA for their intended use before they may be distributed in interstate commerce and that the FDCA prohibits interstate distribution of food products containing CBD and marketing products containing CBD as a dietary supplement, regardless of whether the substances are hemp-derived. Although we believe our existing and planned CBD products comply with applicable federal and state laws and regulations, legal proceedings alleging violations of such laws could have a material adverse effect on our results of operations and financial condition. Sources of hemp-derived CBD depend upon legality of cultivation, processing, marketing and sales of products derived from those plants under state law.

Hemp-derived CBD can only be legally produced in states that have laws and regulations that allow for such production and that comply with the Farm Bill, apart from state laws legalizing and regulating medical and recreational cannabis or marijuana, which remains illegal under federal law. Unexpected changes in federal and state law could cause current CBD production methods of our manufacturers, or resulting products, to be illegal or could otherwise prohibit, limit or restrict some or all of our products in the event of repeal or amendment of laws and regulations which are now comparatively favorable to the cannabis/hemp industry in certain states, we would be required to locate new suppliers in states with laws and regulations that qualify under the Farm Bill. If we were to be unsuccessful in arranging new sources of supply of our raw materials, or if our raw materials were to become legally unavailable, our intended business plan with respect to such products could be adversely impacted.

Because we and our distribution partners may only sell and ship our products containing hemp-derived CBD in states that have adopted laws and regulations qualifying under the Farm Bill, a reduction in the number of states having such qualifying laws and regulations could limit, restrict or otherwise preclude the sale of products containing CBD.

The interstate shipment of Hemp Oil products from one state to another is legal only where both states have laws and regulations that allow for the production and sale of such products and that qualify under the Farm Bill. Therefore, the marketing and sale of our products is limited by such factors and is restricted to such states. Although we believe we may lawfully sell any of Hemp Oil products in a majority of states, a repeal or adverse amendment of laws and regulations that are now favorable to the distribution, marketing and sale of our products could significantly limit, restrict or prevent us from generating revenue related to our products that contain Hemp Oil. Additionally, any such adverse changes or existing legislation in new markets we target may stunt our growth and diminish our prospects. Any such repeal or adverse amendment of laws and regulations could have an adverse impact on our business plan with respect to such products.

Costs associated with compliance with numerous laws and regulations and quality standards could adversely impact our financial results.

The manufacture, labeling and distribution of Hemp Oil products is regulated by various federal, state and local government agencies. These governmental authorities regulate our products and processes to ensure that the products are not adulterated or misbranded. We are subject to regulation by the federal government and other state and local agencies as a result of our CBD products. In addition to the risks associated with the possibility of government enforcement or private litigation due to alleged noncompliance, our compliance costs associated with our day-to-day operations are high and are expected to increase as we expand into new markets and/or develop and market new products. For example, our manufacturers over which we have very limited control are responsible for the quality of our products and the processes by which they are made, including the FDA’s GMP guidelines. Compliance with regulations imposed on the manufacturers and service providers we utilize in the development, production and distribution process are costly and result in diminished potential for profit margins. In general, compliance with these and other government requirements for product monitoring, quality, labelling and distribution are costly which may delay or reduce our revenue capabilities or limit our profitability.

Our contract manufacturers are subject to significant regulation with respect to the manufacturing of products, and the manufacturing facilities on which we rely may not continue to meet regulatory requirements or have limited capacity.

We currently have relationships with a limited number of manufacturers of our products. Each such contractor may require licenses to manufacture such components if such processes are not owned by the contractor or in the public domain and we may be unable to transfer or sublicense the intellectual property rights we may have with respect to such activities.

All entities involved in the preparation of therapeutics and similar products for commercial sale, including our existing contract manufacturers for some of our CBD and planned exosome product offerings, are subject to extensive regulation. Components of a finished product approved for commercial sale must be manufactured in accordance with GMP. These regulations govern manufacturing processes and procedures (including record keeping) and the implementation and operation of quality systems to control and assure the quality of investigational products and products approved for sale. Poor control of production processes can lead to the introduction of adventitious agents or other contaminants, or to inadvertent changes in the properties or stability of our product candidates that may not be detectable in final product testing. Our manufacturers must supply all necessary documentation on a timely basis and may need to adhere to the FDA’s good laboratory practices, in addition to GMP regulations enforced by the FDA through its facilities inspection program. Our manufacturers’ facilities and quality systems also need to pass a pre-approval inspection for compliance with the applicable regulations as a condition of regulatory approval of our products for commercialization.

In addition, the regulatory authorities may, at any time, audit or inspect a manufacturing facility involved with the preparation of our products or the associated quality systems for compliance with the regulations applicable to the activities being conducted. If these facilities do not pass a pre-approval plant inspection, FDA approval of the products will not be granted. Further, if any such inspection or audit identifies a failure to comply with applicable regulations or if a violation of our product specifications or applicable regulations occurs independent of such an inspection or audit, we or the relevant regulatory authority may require remedial measures that may be costly and/or time-consuming for us or a third party to implement and that may include the temporary or permanent suspension of development, testing or commercial sales or the temporary or permanent closure of a facility. Any such remedial measures imposed upon us or third parties with whom we contract could materially harm our business.

If we or any of our third-party manufacturers fail to maintain regulatory compliance, the FDA can impose regulatory sanctions including, among other things, refusal to approve a pending application for a new product, or revocation of a pre-existing approval. Additionally, if supply, such as due to raw material shortages or FDA action, from one approved manufacturer is interrupted, there could be a significant disruption in commercial supply. An alternative manufacturer would need to be qualified which could result in further delay.

Any or all of the foregoing factors could cause the delay of product development, testing, regulatory submissions, required approvals or commercialization of our current or planned products, cause us to incur higher costs and prevent us from commercializing our products successfully.

Our products or third parties with whom we do business may not comply with health, safety and labelling standards.

We do not have control over all of the third parties involved in the distribution and sale of our products and their compliance with government health, safety and labelling standards. Even if our products meet these standards, they could otherwise become contaminated or fail, or the standards could be changed in a manner adverse to our operations or those of our business partners. A failure to meet these standards could occur in our operations or those of our distributors or suppliers. This could result in expensive production interruptions, recalls, regulatory investigations and enforcement actions and liability claims. Moreover, negative publicity could be generated from false, unfounded or nominal liability claims or limited recalls. Any of these failures or occurrences could negatively affect our business and financial performance.

If we fail to comply with U.S. laws related to privacy, data security, and data protection, it could adversely affect our operating results and financial condition.

We rely on a variety of marketing techniques, including social media marketing, targeted online advertisements, and sales representatives], and we are or may become subject to various laws and regulations that govern such marketing and advertising practices. A variety of federal and state laws and regulations, including those enforced by various federal government agencies such as the Federal Trade Commission, Federal Communications Commission, and state and local agencies, govern the collection, use, retention, sharing, and security of personal data, particularly in the context of online advertising, which we utilize to attract new customers.

The legislative and regulatory bodies or self-regulatory organizations in various jurisdictions inside the United States may expand current laws or regulations, enact new laws or regulations, or issue revised rules or guidance regarding privacy, data protection, consumer protection, information security, and online advertising. California has enacted the California Consumer Privacy Act of 2018 (the “CCPA”), which became operative on January 1, 2020, and its implementing regulations took effect in August 2020. The CCPA requires companies that process personal information on California residents to make new disclosures to consumers about such companies’ data collection, use, and sharing practices and inform consumers of their personal information rights such as deletion rights, allows consumers to opt out of certain data sharing with third parties, and provides a new cause of action for data breaches. In November 2020, California enacted the California Privacy Rights Act of 2020 (the “CPRA”), which amends and expands the scope of the CCPA, while introducing new privacy protections that extend beyond those included in the CCPA and its implementing regulations. The CCPA, as amended and expanded by the CPRA, is one of the most prescriptive general privacy laws in the United States and may lead to similar laws being enacted in other U.S. states or at the federal level. For example, the State of Nevada also passed a law effective on October 1, 2019, that amends the state’s online privacy law to allow consumers to submit requests to prevent websites and online service providers (“Operators”) from selling personally identifiable information that Operators collect through a website or online service.

Further, on March 2, 2021, the Governor of Virginia signed into law the Virginia Consumer Data Protection Act (the “VCDPA”). The VCDPA creates consumer rights, similar to the CCPA, but also imposes security and assessment requirements for businesses. In addition, on July 7, 2021, Colorado, the state in which we are headquartered, enacted the Colorado Privacy Act (“CoCPA”), becoming the third comprehensive consumer privacy law to be passed in the United States (after the CCPA and VCDPA). Although the CoCPA closely resembles the VCDPA, both of which do not contain a private right of action and will instead be enforced by the respective states’ Attorney General and district attorneys, the two differ in many ways and once they become enforceable in 2023, we will have to comply with each if our operations fall within the scope of these newly enacted comprehensive mandates. Nevada and Maine have also adopted similar legislation designed to protect the personal information of consumers and penalize companies that fail to comply. Prior efforts undertaken to comply with other recent privacy-related laws have proven that these initiatives require time to carefully plan, assess gaps in current compliance mechanisms, and implement new policies, processes and remediation efforts. Additionally, the Federal Trade Commission and state attorneys general are interpreting federal and state consumer protection laws to impose standards for the online collection, use, dissemination, and security of data. Each of these privacy, security, and data protection laws and regulations, and any other such changes or new laws or regulations, could impose significant limitations, require changes to our business model or practices, or restrict our use or storage of personal information, which may increase our compliance expenses and make our business more costly or less efficient to conduct. In addition, any such changes could compromise our ability to develop an adequate marketing strategy and pursue our growth strategy effectively, which, in turn, could adversely affect our business, financial condition, and results of operations.

While we intend to strive to comply with applicable laws and regulations relating to privacy, data security, and data protection, given that the scope, interpretation, and application of these laws and regulations are often uncertain and may be in conflict across jurisdictions, it is possible that these obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices. Any failure or perceived failure by us or third party service providers to comply with privacy or security policies or privacy-related legal obligations, or any compromise of security that results in the unauthorized release or transfer of personal data, may result in governmental enforcement actions, litigation, or negative publicity, and could have an adverse effect on our operating results and financial condition.

Due to the change in the United States presidency in 2021, we expect increased regulation as well as uncertainty, which may adversely affect our business.

With the inauguration of President Biden, we expect that the FDA, the FTC and other agencies which affect our business may increase their regulatory efforts. At the senior administrative level, new regulators with a regulatory zeal may tighten existing regulations and that approach may also be taken in the routine interactions between staff and our scientists and others. Increased regulation and enforcement may lead to increased costs and further delays in getting approvals, which may adversely affect our business.

Risks Related to Intellectual Property

If we cannot obtain or protect intellectual property rights related to our products, including due to uncertainties surrounding our acquisition of Integrity Wellness and its purported product portfolio, we may not be able to compete effectively in our markets.

We intend to rely upon a combination of patents, trade secret protection and confidentiality agreements to protect the intellectual property related to our products. Issues with respect to patent ownership and documentation for Regen and Integrity Wellness in connection with our acquisition of Integrity Wellness in July 2021, or with respect to other acquisitions or strategic transactions we may undertake in the future, may arise. For example, at least one patent license, for ImmuniZin, was held by Regen and was not assignable without the patent holder’s consent, although the consent from Regen was subsequently obtained. As a result any of these issues should they arise, we may lack patent protection for some of our products, which would hinder our ability to market and sell these products.

The strength of patents in the medical, pharmaceutical, therapeutic and related fields involves complex legal and scientific questions and can be uncertain. The patent applications we own or in-license, specifically ImmuniZin may fail to result in patents with claims that cover the products in the U.S. or in other countries. There is no assurance that all potentially relevant prior art relating to our patents and patent applications has been found; such prior art can invalidate a patent or prevent issuance of a patent based on a pending patent application. Even if patents do successfully issue, third parties may challenge their validity, enforceability or scope, which may cause such patents to be narrowed or invalidated. Even if unchallenged, our patents and patent applications may not adequately protect our intellectual property or prevent others from designing around our claims.

If the patent applications we hold or have in-licensed regarding our products and processes fail to issue or if their breadth or strength of protection is threatened, it could dissuade companies from collaborating with us to develop product candidates and threaten our ability to commercialize products. Patents may not issue and issued patents may be found invalid and unenforceable or challenged by third parties. Since patent applications in the U.S. and most other countries are confidential for a period after filing, and some remain so until issued, we cannot be certain that we were the first to invent a patent application related to a product candidate. In certain situations, if we and one or more third parties have filed patent applications in the U.S. and claiming the same subject matter, an administrative proceeding can be initiated to determine which applicant is entitled to the patent on that subject matter. Patents have a limited lifespan. In the U.S., the natural expiration of a patent is 20 years after it is filed, although various extensions may be available. The life of a patent, and the protection it affords, is limited. When the patent life has expired for a product, we will become vulnerable to competition from generic medications and therapeutics attempting to replicate that product. Further, if we encounter delays in regulatory approvals, the time during which we will be able to market and commercialize a product candidate under patent protection could be reduced.

In addition to patent protection, we rely on trade secret protection and confidentiality agreements to protect proprietary know-how that is not patentable, processes for which patents are difficult to enforce and any other elements of our products and development and production processes that involve proprietary know-how, information or technology not covered by patents. We plan to require each of our employees to agree to assign their inventions to us through an employee inventions or similar agreement. In addition, as a general practice, we intend to have our employees, consultants, advisors and any third parties who have access to our proprietary know-how, information or technology enter into confidentiality agreements. Nonetheless, our trade secrets and other confidential proprietary information may be disclosed, and competitors may otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques. In addition, in January 2018 the FDA as part of its Transparency Initiative, launched a voluntary pilot program calling on biopharmaceutical research companies to release clinical study reports summarizing clinical trial data. Following the completion of this pilot program in March 2020, the FDA may consider making release of clinical study reports mandatory and may consider making additional information publicly available on a routine basis in response to concerns expressed by the academic community emphasized by the COVID-19 pandemic, including information we may consider to be trade secrets or other proprietary information. If the FDA takes these measures, we may be forced to disclose propriety information about our products, research and processes, which could materially harm our business.

The laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws of the United States. We may encounter significant problems in protecting and defending our intellectual property both in the United States and abroad. If we are unable to prevent material disclosure of the non-patented intellectual property related to our technologies to third parties, and there is no guarantee we will have any such enforceable trade secret protection, we may not be able to establish or maintain a competitive advantage in our market, which could materially adversely affect our business, results of operations and financial condition.

If third-party intellectual property infringement claims are asserted against us, it may prevent or delay our development and commercialization efforts and have a material adverse effect on our business and future prospects.

Our commercial success depends in part on our avoiding infringement on the patents and proprietary rights of third parties. There is substantial litigation, both within and outside the United States, involving patent and other intellectual property rights in the biotechnology, pharmaceutical therapeutic and related industries, including patent infringement lawsuits, interferences, oppositions, and reexaminations and other post-grant proceedings before the U.S. Patent and Trademark Office, and corresponding foreign patent offices. Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we and our partners are pursuing product candidates. As the biotechnology, pharmaceutical, therapeutic and related industries expand and more patents are issued, the risk increases that our product candidates may be subject to claims of infringement of the patent rights of third parties.

Third parties may assert that we are employing their proprietary technology without authorization. There may be third-party patents or patent applications with claims to materials, formulations, methods of manufacture or methods for treatment related to the use or manufacture of our product candidates. Because patent applications can take many years to issue, there may be patent applications currently pending that may later result in patents that our product candidates may infringe upon. Third parties may obtain patents in the future and claim that use of our technologies infringes on these patents. If any third-party patents were to be held by a court of competent jurisdiction to cover the manufacturing process of any of our product candidates, any molecules formed during the manufacturing process or any final product itself, the holders of any such patents may be able to block our ability to commercialize such product candidate unless we obtained a license under the applicable patents, or until such patents expire. Similarly, if any third-party patents were to be held by a court of competent jurisdiction to cover aspects of our formulations, processes for manufacture or methods of use, including combination therapy, the holders of any such patents may be able to block our ability to develop and commercialize the applicable product candidate unless we obtained a license or until such patent expires. In either case, such a license may not be available on commercially reasonable terms or at all.

Parties making intellectual property claims against us may obtain injunctive or other equitable relief, which could block our ability to further develop and commercialize one or more of our product candidates. Defense of these claims, regardless of their merit, involves substantial litigation expense and diversion of our management’s attention from our business. If a claim of infringement against us succeeds, we may have to pay substantial damages, possibly including treble damages and attorneys’ fees for willful infringement, pay royalties, redesign our infringing products or obtain one or more licenses from third parties, which may be impossible or require substantial time and monetary expenditure.

Because of the costs involved in defending patent litigation, we currently lack and may in the future lack the capital to defend our intellectual property rights.

The intellectual property behind our products may include unpublished know-how which is dependent on certain key individuals, as well as existing and pending intellectual property protection.

The commercialization of our products is partially dependent upon know-how and trade secrets held by certain individuals working with and for us. Because the expertise runs deep in these few individuals, if something were to happen to any or all of these individuals, the ability to properly manufacture our products without compromising quality and performance could be diminished greatly. Further, while our employees and contractors are subject to non-disclosure obligations, any misappropriation of confidential information including trade secrets and know-how could allow our competitors and others to overcome any advantage we have and reduce our market share and viability.

We may need to obtain licenses to intellectual property rights from third parties.

We may need to obtain licenses from third parties to sell products as intended, particularly to the extent we proceed with our planned operations selling exosome products. We may fail to obtain these licenses at a reasonable cost or on reasonable terms, if at all. In that event, we would be unable to sell such products or generate revenue therefrom, which could harm our business. We cannot provide any assurances that third-party patents do not exist that might be enforced against our products or those of our collaborators, resulting in either an injunction prohibiting our sales, or, with respect to our sales and other activities, an obligation on our part to pay royalties and/or other forms of compensation to third parties

The licensing and acquisition of third-party intellectual property rights is a competitive practice, and companies that may be more established, or have greater resources than we do, may also be pursuing strategies to license or acquire third-party intellectual property rights that we may consider necessary or attractive in order to develop and commercialize products. More established companies may have a competitive advantage over us due to their larger size and cash resources or greater research, development, production and commercialization capabilities. We may not be able to successfully complete such negotiations and ultimately acquire the rights to the intellectual property surrounding products that we may seek to acquire; in which case our business could be harmed.

We may in the future be involved in lawsuits to protect or enforce our patents or the patents of our licensors, which could be expensive, time-consuming and unsuccessful.

Competitors may infringe on our patents or the patents of our licensors. To counter such infringement or unauthorized use, we may be required to file infringement claims, or we may be required to defend the validity or enforceability of such patents, which can be expensive and time-consuming. In an infringement proceeding, a court may decide that either one or more of our patents or our licensors’ patents is not valid or is unenforceable or may refuse to stop the other party from using the technology at issue because our patents do not cover that technology. An adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being invalidated or interpreted narrowly and could put our patent applications at risk of not issuing.

Interference proceedings provoked by third parties or brought by us may be necessary to determine the priority of inventions regarding our patents or patent applications or those of our partners or licensors. An unfavorable outcome could require us to cease using the related technology or to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms. Our defense of litigation or interference proceedings may fail and, even if successful, may cause us to incur substantial costs and distract the attention of our management and other employees. We may not be able to prevent, alone or with our licensors, misappropriation of our intellectual property rights, particularly in countries where the laws may not protect those rights as fully as in the United States.

Because of the substantial amount of discovery required in intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of our Common Stock.

We may be subject to claims that our employees, consultants, or independent contractors have wrongfully used or disclosed confidential information of third parties.

We may be subject to claims asserting that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed confidential information of our employees’ former employers or other third parties. We may also be subject to claims that former employers or other third parties have an ownership interest in our patents. Litigation may be necessary to defend against these claims. There is no guarantee of success in defending these claims, and if we succeed, litigation could cause substantial cost and be a distraction to our management and other employees.

Risks Related to Our Planned Sale of Exosome Products

We have yet to enter into an agreement to develop or commercialize any exosome products, and there can be no assurance that we will be successful.

Our planned operations of selling exosome products have not commenced, and management has only just began developing a business plan for our entry into the regenerative health market and sale of exosome products. As such, investors will face difficulty in evaluating that proposed aspect of our business. The use of exosomes is a relatively new therapeutic approach and no products based on exosomes have been approved to date in the U.S., the United Kingdom, or the European Union. The FDA imposes robust regulatory requirements, including clinical trials and safety testing, prior to commercialization. Further, we will rely almost entirely on third parties with respect to these efforts except for sales which can only commence when the substantial development and testing stages have been completed. As such it is difficult to accurately predict the developmental challenges we may face in this industry. As a result of these factors, it is more difficult for us to predict the timeline and cost of our planned operations with respect to exosome products. We could deploy significant capital and human resources on this endeavor and ultimately not obtain rights to or sell any products or otherwise be successful. Delay or failure to obtain or unexpected costs in obtaining commercialization of exosome products could decrease our ability to generate sufficient revenue in which case our business and prospects may be harmed.

Because the future commercial success of our planned exosome products sales efforts will depend on gaining regulatory approval for such products over which we will have no control, we cannot generate revenue therefrom without our collaborative partners obtaining approvals.

Our long-term success and generation of revenue from the sale of exosome products will depend upon the successful development of such products by our collaborative partners. Product development is very expensive and involves a high degree of risk. Only a small number of research and development programs result in the commercialization of a product. The process for obtaining regulatory approval to market product candidates is expensive, usually takes many years, and can vary substantially based on the type, complexity, and novelty of the product candidates involved. Our ability to generate revenues would be adversely affected if our collaborative efforts with third parties are delayed or unable to successfully develop the underlying products. We cannot guarantee that any marketing application for the exosome products we seek to sell will be approved. If regulatory approval of these products is not obtained or is significantly delayed, we cannot generate revenue therefrom, and we may need to significantly curtail these operations, regardless of our expenditures on this endeavor.

Negative developments in the field of exosomes could damage public perception of the products we seek to sell.

Exosome therapeutics are novel and unproven, with no exosome therapeutic approved to date. Exosome therapeutics may not gain the acceptance of the public, medical or health and wellness communities. To date, other efforts to leverage natural exosomes have generally demonstrated an inability to generate exosomes with predictable biologically active properties or to manufacture exosomes at suitable scale to distribute as intended. If any of the exosome products is unable to successfully target a certain cell type or pathway to provide the benefits for which it was designed and marketed, it may indicate that we will not be able to bring that product to market, including due to adverse impact on the public’s perception of the product and exosome therapeutics in general.

Any future negative developments in the field of exosomes and their use could also result in greater governmental regulation, stricter labeling requirements and potential regulatory delays in the development, testing or approvals of the products we intend to eventually sell.

Changes in exosome product manufacturing or formulation may result in additional costs or delay, which could adversely affect our business, results of operations and financial condition.

As product candidates are developed through testing towards approval and commercialization, it is common that various aspects of the development program, such as manufacturing methods or formulation, are altered along the way in an effort to optimize processes and results. Any of these changes could cause prospective exosome products to perform differently and affect the results of ongoing or planned research and development efforts conducted with the altered materials. In addition, such changes and any other similar changes in the future may also require additional testing, notification to or approval by the FDA or other regulatory authorities. This could delay completion of development efforts, require further testing or studies, create the needed for repetition of one or more steps in the process, increase related costs, delay regulatory approval of our product candidates and/or jeopardize our ability to commence product sales and generate revenue.