The information in this report contains forward-looking
statements. All statements other than statements of historical fact made in this
report are forward looking. In particular, the statements herein regarding
industry prospects and future results of operations or financial position are
forward-looking statements. These forward-looking statements can be identified
by the use of words such as believes, estimates, could, possibly,
probably, anticipates, projects, expects, may, will, or should, or
other variations or similar words. No assurances can be given that the future
results anticipated by the forward-looking statements will be achieved.
Forward-looking statements reflect managements current expectations and are
inherently uncertain. Our actual results may differ significantly from
managements expectations.
Although these forward-looking statements reflect the good
faith judgment of our management, such statements can only be based upon facts
and factors currently known to us. Forward-looking statements are inherently
subject to risks and uncertainties, many of which are beyond our control. As a
result, our actual results could differ materially from those anticipated in
these forward-looking statements as a result of various factors, including those
set forth below under the caption Risk Factors. For these statements, we claim
the protection of the safe harbor for forward-looking statements contained in
the Private Securities Litigation Reform Act of 1995. You should not unduly rely
on these forward-looking statements, which speak only as of the date on which
they were made. They give our expectations regarding the future but are not
guarantees. We undertake no obligation to update publicly or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise, unless required by law.
References in this Annual Report on Form 10-K (the Annual
Report) to we, us, our, Registrant, the Company, Living Breath mean
Living Breath Project, Inc. and our subsidiaries, unless the context otherwise
requires.
ITEM I: BUSINESS
Corporate History
Living Breath Project, Inc. (the Company) was incorporated
under the laws of the State of Nevada, on April 14, 2011 as Dilmax Corp. The
Companys original business was on-line distribution of music for fitness. On
October 1, 2012, Genie OMalley acquired 8,100,000 shares of the Companys
common stock, par value $.001 per share (the Common Stock), resulting in a change of control of the Company. Also, on October 1,
2012, Clear Mind Technology Corp., a company owned and controlled by Ms.
OMalley, acquired 735,000 shares of the Companys Common Stock from twenty-six
non-affiliated shareholders.
On November 6, 2012, the Company consummated an Agreement and Plan
of Merger (the Agreement) with iBreathe, Inc., a Minnesota corporation
(iBreathe) whereby iBreathe merged with and into the Company (the Merger) in
exchange for an aggregate of 6,009,898 pre-split shares (the Merger Shares) of
the Companys newly issued shares of Common Stock. The merger was accounted for
as a reverse merger using the purchase method of accounting, with the former
shareholders of iBreathe controlling approximately 64% of the issued and
outstanding common shares of the Company after the closing of the transaction.
Accordingly, iBreathe was deemed to be the acquirer for accounting purposes. In
connection with the Merger, the Company entered into an exclusive licensing
agreement with OMalley Lifestyle, Inc. a holding company and provider of
services of online, social media, marketing, education and products developed by
Genie OMalley, the Companys sole officer and director. Effective April 18,
2013, the Company rescinded the licensing agreement with OMalley Lifestyle,
Inc. as the Company determined it did not require rights the agreement intended
to license to the Company.
Also on November 6, 2012, the Company amended its Articles of
Incorporation to (i) change its name to Living Breath Project, Inc., (ii)
increase the number of its authorized shares of capital stock from 75,000,000 to
210,000,000 shares of which (a) 200,000,000 shares were designated common stock,
par value $0.001 per share and (b) 10,000,000 were designated blank check
preferred stock, par value $0.001 per share, and (iii) effect a three-for-one
forward-split of its Common Stock for shareholders of record as of November 6,
2012.
Following the Merger, the Company adopted the business plan of
iBreathe to provide proprietary and integrated products, services, education and
film that can assist individuals to awaken stillness, direction, health and all
over well-being using cleansing language of life. The Company has also been
developing its website, product distribution procedures, and social media plan.
The Company also intends to undertake a global research initiative studying the
benefits of cleansing emotions individually and how this process can motivate
change, healing and support within communities. The Company is an organization
which is deeply passionate about recidivism, those who suffer within it and how
communities can become free of the financial and emotional burdens presented by
recidivism.
1
Company Overview
Living Breath Project, Inc. (LBP) is an innovative lifestyle
company that focuses on delivering its unique and proprietary emotional wellness
process, called the Living Breath Emotional Brain Technology. The companys
pioneering product is its three-step process that combines self-analysis,
breath, and language and has been developed, tested, and delivered in four key
markets as products, education, film, and services that are today recognized as
the Living Breath Series. Living Breath Project is the proprietary services,
education, and holding company of the Living Breath Series pioneered by the
companys founder, Genie OMalley.
Through the LBP Emotional Brain Technology, lifestyle enhancement products,
training and education, the Living Breath Project aims to assist in dropping the
high rates of drug addiction that break the prosperity and potential of
communities. It aims to reunite and cleanse families from the language of
addiction and incarceration, as well as re-educate communities on bridging the
gap that is created through the brokenness of addiction. In the past four years,
Living Breath Project has completed community case studies under the name Clear
Mind Experience, Clear Mind System, and Clear Mind Healthy Planet. During these
case studies, community incubators were set up where Genie OMalley and members
of her staff immersed themselves in communities to create incubators to study
heroin addiction, opioid addiction, stress, anxiety, ADHD, PTSD, ADD, violence
and depression protocols within the community. Participants had full access to
Ms. OMalley and her staff during this research initiative. It was a vital part
of the research initiative as Living Breath Project gained valuable knowledge
and insight into the causes of the breakdown of communities and how we can
assess participants in order for a community to support their healing into
emotional wellness.
Living Breath Project (LBP), has been developing a Global Community Research
Initiative that is aimed to provide neuroscience with various studies on the
benefits of dissolving unconscious language from within the emotional brain that
engages us in behaviors that can be self-destructive to ourselves and our
communities as a whole. The Living Breath Emotional Brain Technology In-Home
Programs are the daily in-home practice which allow participants to become free
of conditions, obstacles and limitations that are created through depression,
anxiety, addiction, stress, breakdowns within relationships, loss, abuse,
trauma, and fears that play out in daily life.
Website
Our website address is
www.livingbreathproject.com
.
We intend to make available through our website, all of our
filings with the Commission and all amendments to these reports as soon as
reasonably practicable after filing, by providing a hyperlink to the EDGAR
website containing our reports.
Available Information
The Company is required to file annual, quarterly and special
reports, proxy statements and other information with the Securities and Exchange
Commission (SEC). Investors may read and copy any document that the Company
files, including this Annual Report on Form 10-K, at the SECs Public Reference
Room at 450 F Street, N.W., Washington, DC 20549. Investors may obtain
information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. In addition, the SEC maintains an Internet site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding issuers that file electronically with the SEC, from
which investors can electronically access the Companys SEC filings.
Our Information
Our
registered offices are currently located at 2360 Corporate Circle Suite 400,
Henderson, Nevada, 89074 and our telephone number is (800) 422-0691. We can be
contacted by email at
info@livingbreathproject.com
.
ITEM
1A. RISK FACTORS
Our business, financial condition, operating results and
prospects are subject to the following risks. Additional risks and uncertainties
not presently foreseeable to us may also impair our business operations. If any
of the following risks actually occurs, our business, financial condition or
operating results could be materially adversely affected. In such case, the
trading price of our common stock could decline, and our stockholders may lose
all or part of their investment in the shares of our common stock.
2
This Form 10-K contains forward-looking statements that involve
risks and uncertainties. These statements can be identified by the use of
forward-looking terminology such as believes, expects, intends, plans,
may, will, should, or anticipation or the negative thereof or other
variations thereon or comparable terminology. Actual results could differ
materially from those discussed in the forward- looking statements as a result
of certain factors, including those set forth below and elsewhere in this Form
10-K.
RISK FACTORS ASSOCIATED WITH OUR BUSINESS
We have inadequate capital and need for additional
financing to accomplish our business and strategic plans.
We
have very limited funds, and such funds are not adequate to develop our current
business plan. We believe that for our company to be successful, we will be
required to spend significant sums to market our products. If the sales of our
products do not enable us to meet this need, our ultimate success may depend on
our ability to raise additional capital. In the absence of additional financing
or significant revenues and profits, the Company will have to approach its
business plan from a much different and much more restricted direction,
attempting to secure additional funding sources to fund its growth, borrowing
money from lenders or elsewhere or to take other actions to attempt to provide
funding. We cannot guarantee that we will be able to obtain sufficient
additional funds when needed, or that such funds, if available, will be
obtainable on terms satisfactory to us.
Our limited operating history does not afford investors a
sufficient history on which to base an investment decision.
We are currently in the early stages of developing our business.
There can be no assurance that at this time that we will operate profitably or
will have adequate working capital to meet our obligations as they become due.
Investors must consider the risks and difficulties frequently
encountered by early stage companies, particularly in rapidly evolving and
changing markets. Such risks include the following:
-
the nature of our competition and our ability to effectively market the
Companys products and services;
-
ability to effectively manage expanding operations; amount and timing of
operating costs and capital expenditures relating to expansion of our
business, operations, and infrastructure; and
-
dependence upon key personnel to market and sell our products and services
and the loss of one of our key managers may adversely affect the marketing of
our services.
We
cannot be certain that our business strategy will be successful or that we will
successfully address these risks. In the event that we do not successfully
address these risks, our business, prospects, financial condition, and results
of operations could be materially and adversely affected and we may not have the
resources to continue or expand our business operations.
Because our auditors have issued a going concern opinion,
there is substantial doubt about our ability to continue as a going concern.
Our
report from our independent registered public accounting firm for the year ended
May 31, 2013 includes an explanatory paragraph stating that our recurring losses
from operations and negative cash flows raise substantial doubt about our
ability to continue as a going concern. If we are unable to obtain sufficient
funding, our business, prospects, financial condition and results of operations
will be materially and adversely affected and we may be unable to continue as a
going concern. If we are unable to continue as a going concern, we may have to
liquidate our assets and may receive less than the value at which those assets
are carried on our audited consolidated financial statements, and it is likely
that investors will lose all or a part of their investment. After this offering,
future reports from our independent registered public accounting firm may also
contain statements expressing doubt about our ability to continue as a going
concern. If we seek additional financing to fund our business activities in the
future and there remains doubt about our ability to continue as a going concern,
investors or other financing sources may be unwilling to provide additional
funding on commercially reasonable terms or at all.
We need external funding to sustain and grow our business
and if we cannot find this funding on acceptable terms, we may have to curtail
our operations and we may not be able to implement our business plan which would
reduce our revenues.
We
may not be able to generate sufficient revenues from our existing operations to
fund our capital requirements. We will require additional funds to enable us to
operate profitably and grow our business. We believe we will need approximately
$700,000 to $1,000,000 to run our business for the next twelve months.
3
The
financing we need may not be available on terms acceptable to us or at all. We
currently have no bank borrowings and we may not be able to arrange any debt
financing. Additionally, we may not be able to successfully consummate offerings
of stock or other securities in order to meet our future capital requirements.
If we seek additional equity financing, the issuance of additional shares will
dilute the current interests of our shareholders. We may not be able to obtain
additional funding. If we cannot raise additional capital through issuing stock
or creating debt, we may not be able to sustain or grow our business which may
cause our revenues and stock price to decline.
Recent worldwide and domestic economic trends and
financial market conditions could adversely impact our financial
performance.
The
worldwide and domestic economies have experienced adverse conditions and may be
subject to further deterioration for the foreseeable future. We are subject to
risks associated with these adverse conditions, including economic slowdown and
the disruption, volatility and tightening of credit and capital markets. These
macroeconomic developments have and could continue to negatively impact our
business, which depends on the general economic environment and levels of
consumer spending. As a result, we may not be able to maintain our existing
customers or attract new customers, or we may be forced to reduce our service
fees. If the global economic slowdown continues for a significant period or
continues to worsen, our results of operations, financial condition, and cash
flows could be materially adversely affected.
There
can be no assurance that market conditions will improve in the near future. A
prolonged downturn, further worsening or broadening of the adverse conditions in
the worldwide and domestic economies could affect consumer spending patterns and
create or exacerbate credit issues, cash flow issues and other financial
hardships for us and our consumers. Depending upon their severity and duration,
these conditions could have a material adverse impact on our business,
liquidity, financial condition and results of operations. We are unable to
predict the likely duration and severity of the current disruption in the
financial markets and the adverse economic conditions in the U.S. and other
markets.
We operate in highly competitive industries, and
competitive pressures could have a material adverse effect on our
business.
The
market we operate is very competitive and fragmented. We compete with other
companies offering educational products, self-help services and more traditional
methods of education and training in assisting individuals in improving their
lives.
If we are unable to retain key executives and other key
affiliates, our growth could be significantly inhibited and our business harmed
with a material adverse effect on our business, financial condition and results
of operations.
Our
success is attributable in large part to the management, sales and marketing,
and operational and technical expertise of Genie OMalley, our founder, Chief
Executive Officer, Chief Financial Officer, Secretary and Treasurer. Ms.
OMalley performs key functions in the operation of our business. Her loss would
have a material adverse effect upon our business, financial condition, and
results of operations. We do not maintain key-person insurance for members of
our management team because it is cost prohibitive at this point. If we lose the
services of any senior management, we may not be able to locate suitable or
qualified replacements, and may incur additional expenses to recruit and train
new personnel, which could severely disrupt our business and prospects.
Our
success in the future may depend on our ability to establish and maintain
strategic alliances, and any failure on our part to establish and maintain such
relationships would adversely affect our market penetration and revenue growth.
Our management team may not be able to successfully
implement our business strategies.
If
our management team is unable to execute on its business strategies, then our
development, including the establishment of revenues and our sales and marketing
activities would be materially and adversely affected. In addition, we may
encounter difficulties in effectively managing the budgeting, forecasting and
other process control issues presented by any future growth. We may seek to
augment or replace members of our management team or we may lose key members of
our management team, and we may not be able to attract new management talent
with sufficient skill and experience.
Our financial results may not meet the expectations of
investors and may fluctuate because of many factors and, as a result, investors
should not rely on our revenue and/or financial projections as indicative of
future results.
Fluctuations
in operating results or the failure of operating results to meet the
expectations investors may negatively impact the value of our securities.
Operating results may fluctuate due to a variety of factors that could affect
revenues or expenses in any particular quarter. Fluctuations in operating
results could cause the value of our securities to decline. Investors should not
rely on revenue or financial projections or comparisons of results of operations
as an indication of future performance. As a result of the factors listed below, it is possible that in future periods
results of operations may be below the expectations of investors. This could
cause the market price of our securities to decline. Factors that may affect our
quarterly results include:
4
-
delays in sales resulting from potential customer sales cycles;
-
variations or inconsistencies in return on investment models and results;
-
delays in demonstrating product performance or installations;
-
changes in competition; and
-
changes or threats of significant changes in legislation or rules or
standards that would change the drivers for product adoption.
Our strategy may include acquiring companies which may
result in unsuitable acquisitions or failure to successfully integrate acquired
companies, which could lead to reduced profitability.
We may embark on a growth strategy through acquisitions of companies or
operations that complement existing product lines, customers or other
capabilities. We may be unsuccessful in identifying suitable acquisition
candidates, or may be unable to consummate desired acquisitions. To the extent
any future acquisitions are completed, we may be unsuccessful in integrating
acquired companies or their operations, or if integration is more difficult than
anticipated, we may experience disruptions that could have a material adverse
impact on future profitability. Some of the risks that may affect our ability to
integrate, or realize any anticipated benefits from, acquisitions include:
-
unexpected losses of key employees or customer of the acquired company;
-
difficulties integrating the acquired companys standards, processes,
procedures and controls;
-
difficulties coordinating new product and process development;
-
difficulties hiring additional management and other critical personnel;
-
difficulties increasing the scope, geographic diversity and complexity of
our operations;
-
difficulties consolidating facilities, transferring processes and know-how;
-
difficulties reducing costs of the acquired companys business;
-
diversion of managements attention from our management; and
-
adverse impacts on retaining existing business relationships with
customers.
RISKS RELATED TO THE SECURITIES MARKETS AND INVESTMENTS IN
OUR COMMON STOCK
Our Executive Officers and certain stockholders possess
the majority of our voting power, and through this ownership, control our
Company and our corporate actions.
Genie
OMalley, our sole executive officer and director, holds approximately 63%
of the voting power of the outstanding shares of Common Stock. These officers
have a controlling influence in determining the outcome of any corporate
transaction or other matters submitted to our stockholders for approval,
including mergers, consolidations and the sale of all or substantially all of
our assets, election of directors, and other significant corporate actions. As
such our executive officers have the power to prevent or cause a change in
control; therefore, without his consent we could be prevented from entering into
transactions that could be beneficial to us. The interests of our executive
officers may give rise to a conflict of interest with the Company and the
Companys shareholders. For additional details concerning voting power please
refer to the section below entitled Description of Securities.
There is a substantial lack of liquidity of our common
stock and volatility risks.
Our
common stock is quoted on the OTCQB under the symbol DMAX The liquidity of our
common stock may be very limited and affected by our limited trading market. The
OTCQB market is an inter-dealer market much less regulated than the major
exchanges, and is subject to abuses, volatilities and shorting. There is
currently no broadly followed and established trading market for our common
stock. An established trading market may never develop or be maintained. Active
trading markets generally result in lower price volatility and more efficient
execution of buy and sell orders. Absence of an active trading market reduces
the liquidity of the shares traded.
5
The
trading volume of our common stock may be limited and sporadic. This situation
is attributable to a number of factors, including the fact that we are a small
company which is relatively unknown to stock analysts, stock brokers,
institutional investors and others in the investment community that generate or
influence sales volume, and that even if we came to the attention of such
persons, they tend to be risk-averse and would be reluctant to follow an
unproven company such as ours or purchase or recommend the purchase of our
shares until such time as we became more seasoned and viable. As a consequence,
there may be periods of several days or more when trading activity in our shares
is minimal or non-existent, as compared to a seasoned issuer which has a large
and steady volume of trading activity that will generally support continuous
sales without an adverse effect on share price. We cannot give you any assurance
that a broader or more active public trading market for our common stock will
develop or be sustained, or that current trading levels will be sustained. As a
result of such trading activity, the quoted price for our common stock on the
OTCQB may not necessarily be a reliable indicator of our fair market value. In
addition, if our shares of common stock cease to be quoted, holders would find
it more difficult to dispose of or to obtain accurate quotation as to the market
value of, our common stock and as a result, the market value of our common stock
likely would decline.
The market price for our stock may be volatile and subject to
fluctuations in response to factors, including the following:
-
The increased concentration of the ownership of our shares by a limited
number of affiliated stockholders may limit interest in our securities;
-
variations in quarterly operating results from the expectations of
securities analysts or investors;
-
revisions in securities analysts estimates or reductions in security
analysts coverage;
-
announcements of new attractions or services by us or our competitors;
-
reductions in the market share of our services;
-
announcements by us or our competitors of significant acquisitions,
strategic partnerships, joint ventures or capital commitments;
-
general technological, market or economic trends;
-
investor perception of our industry or prospects;
-
insider selling or buying;
-
investors entering into short sale contracts;
-
regulatory developments affecting our industry; and
-
additions or departures of key personnel.
Many
of these factors are beyond our control and may decrease the market price of our
common stock, regardless of our operating performance. We cannot make any
predictions or projections as to what the prevailing market price for our common
stock will be at any time, including as to whether our common stock will sustain
current market prices, or as to what effect that the sale of shares or the
availability of common stock for sale at any time will have on the prevailing
market price.
Our common stock may never be listed on a major stock
exchange.
We
may seek the listing of our common stock on a national or other securities
exchange at some time in the future, assuming that we can satisfy the initial
listing standards for such exchange. We currently do not satisfy the initial
listing standards and cannot ensure that we will be able to satisfy such listing
standards or that our common stock will be accepted for listing on any such
exchange. Should we fail to satisfy the initial listing standards of such
exchanges, or our common stock is otherwise rejected for listing, the trading
price of our common stock could suffer, the trading market for our common stock
may be less liquid, and our common stock price may be subject to increased
volatility.
A decline in the price of our common stock could affect
our ability to raise working capital and adversely impact our ability to
continue operations.
A
prolonged decline in the price of our common stock could result in a reduction
in the liquidity of our common stock and a reduction in our ability to raise
capital. A decline in the price of our common stock could be especially
detrimental to our liquidity and our operations. Such reductions may force us to
reallocate funds from other planned uses and may have a significant negative
effect on our business plan and operations, including our ability to develop new
services and continue our current operations. If our common stock price
declines, we can offer no assurance that we will be able to raise additional
capital or generate funds from operations sufficient to meet our obligations. If
we are unable to raise sufficient capital in the future, we may not be able to
have the resources to continue our normal operations.
Concentrated ownership of our common stock creates a risk
of sudden changes in our common stock price.
6
The
sale by any shareholder of a significant portion of their holdings could have a
material adverse effect on the market price of our common stock.
Sales of our currently issued and outstanding stock may
become freely tradable pursuant to Rule 144 and may dilute the market for your
shares and have a depressive effect on the price of the shares of our common
stock.
A substantial majority of the outstanding shares of common stock
are restricted securities within the meaning of Rule 144 under the Securities
Act of 1933, as amended (the Securities Act) (Rule 144). As restricted
shares, these shares may be resold only pursuant to an effective registration
statement or under the requirements of Rule 144 or other applicable exemptions
from registration under the Securities Act and as required under applicable
state securities laws. Rule 144 provides in essence that a non-affiliate who has
held restricted securities for a period of at least six months may sell their
shares of common stock. Under Rule 144, affiliates who have held restricted
securities for a period of at least six months may, under certain conditions,
sell every three months, in brokerage transactions, a number of shares that does
not exceed the greater of 1% of a companys outstanding shares of common stock
or the average weekly trading volume during the four calendar weeks prior to the
sale (the four calendar week rule does not apply to companies quoted on the
OTCQB). A sale under Rule 144 or under any other exemption from the Securities
Act, if available, or pursuant to subsequent registrations of our shares of
common stock, may have a depressive effect upon the price of our shares of
common stock in any active market that may develop.
If we issue additional shares or derivative securities in
the future, it will result in the dilution of our existing stockholders.
Our
Articles of Incorporation authorizes the issuance of up to 200,000,000 shares of
common stock, $0.001 par value per share. Our board of directors may choose to
issue some or all of such shares, or derivative securities to purchase some or
all of such shares, to provide additional financing in the future.
We do not plan to declare or pay any dividends to our
stockholders in the near future.
We have not declared any dividends in the past, and we do not
intend to distribute dividends in the near future. The declaration, payment and
amount of any future dividends will be made at the discretion of the board of
directors and will depend upon, among other things, the results of operations,
cash flows and financial condition, operating and capital requirements, and
other factors as the board of directors considers relevant. There is no
assurance that future dividends will be paid, and if dividends are paid, there
is no assurance with respect to the amount of any such dividend.
The requirements of being a public company may strain our
resources and distract management.
As
a public company, we are subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the Exchange Act), and the Sarbanes-Oxley
Act of 2002 (the Sarbanes-Oxley Act). These requirements are extensive. The
Exchange Act requires that we file annual, quarterly and current reports with
respect to our business and financial condition. The Sarbanes-Oxley Act requires
that we maintain effective disclosure controls and procedures and internal
controls over financial reporting.
We
may incur significant costs associated with our public company reporting
requirements and costs associated with applicable corporate governance
requirements. We expect all of these applicable rules and regulations to
significantly increase our legal and financial compliance costs and to make some
activities more time consuming and costly. This may divert managements
attention from other business concerns, which could have a material adverse
effect on our business, financial condition and results of operations. We also
expect that these applicable rules and regulations may make it more difficult
and more 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 individuals to
serve on our board of directors or as executive officers. We are currently
evaluating and monitoring developments with respect to these rules, and we
cannot predict or estimate the amount of additional costs we may incur or the
timing of such costs.
If we do not file our quarterly or annual reports with
the SEC, we may be de-listed from the OTCQB.
OTCQB
is the middle tier of the OTC market. OTCQB companies report to the SEC or a
U.S. banking regulator, making it easy for investors to identify companies that
are current in their reporting obligations. There are no financial or
qualitative standards to be in this tier. OTCQB securities may also be quoted on
the FINRA BB. The OTCQB allows investors to easily identify reporting companies
traded in the OTC market regardless of where they are quoted.
Under
OTCQB rules relating to the timely filing of periodic reports with the SEC, any
OTCQB issuer who fails to file a periodic report (Forms 10-Q or 10-K) by the due
date of such report, period we may be removed from the OTCQB and our common
stock may only be able to be traded on the OTC Pink. The OTC Pink is the bottom
tier of the OTC market a speculative trading marketplace that helps broker-dealers get the best prices for
investors. Accordingly, our securities may become worthless and we may be forced
to curtail or abandon our business plan.
7
Persons associated with securities offerings, including
consultants, may be deemed to be broker dealers.
In the event that any of our securities are offered without engaging a
registered broker-dealer, we may face claims for rescission and other remedies.
If any claims or actions were to be brought against us relating to our lack of
compliance with the broker-dealer requirements, we could be subject to
penalties, required to pay fines, make damages payments or settlement payments,
or repurchase such securities. In addition, any claims or actions could force us
to expend significant financial resources to defend our company, could divert
the attention of our management from our core business and could harm our
reputation.
Future changes in financial accounting standards or
practices may cause adverse unexpected financial reporting fluctuations and
affect reported results of operations.
A change in accounting standards or practices can have a significant effect on
our reported results and may even affect our reporting of transactions completed
before the change is effective. New accounting pronouncements and varying
interpretations of accounting pronouncements have occurred and may occur in the
future. Changes to existing rules or the questioning of current practices may
adversely affect our reported financial results or the way we conduct business.
Penny Stock rules may make buying or selling our common
stock difficult.
Trading in our common stock is subject to the penny stock rules. The SEC has
adopted regulations that generally define a penny stock to be any equity
security that has a market price of less than $5.00 per share, subject to
certain exceptions. These rules require that any broker-dealer that recommends
our common stock to persons other than prior customers and accredited investors,
must, prior to the sale, make a special written suitability determination for
the purchaser and receive the purchasers written agreement to execute the
transaction. Unless an exception is available, the regulations require the
delivery, prior to any transaction involving a penny stock, of a disclosure
schedule explaining the penny stock market and the risks associated with trading
in the penny stock market. In addition, broker-dealers must disclose commissions
payable to both the broker-dealer and the registered representative and current
quotations for the securities they offer. The additional burdens imposed upon
broker-dealers by such requirements may discourage broker-dealers from effecting
transactions in our common stock, which could severely limit the market price
and liquidity of our common stock.