FONU FONU2 Inc (PK)

RISK FACTORS

Our business is subject to numerous risk factors, including the following:

1.            Our auditors have raised substantial doubt about our ability to continue as a going concern.

Because we do not have sufficient working capital necessary to pursue our business objectives, our auditors have expressed their opinion that we may fail in the future if we do not generate revenue and profits in the near future. This opinion must be disclosed to all potential investors and other sources of capital, which may adversely affect our ability to raise capital. Shareholders’ and creditors' confidence may be low in evaluating our registrant. If we are successful in acquiring a loan or a line of credit, we may be charged a much higher interest rate because of our financial condition.

We have not yet established an ongoing source of revenues sufficient to cover our operating costs and allow us to continue as a going concern.  During the nine months ended June 30, 2015, the registrant realized a net loss of $5,153,309. The registrant used $819,919 in cash from operating activities and had a working capital deficit of $3,807,273 for the nine months ended June 30, 2015.  Our ability to continue as a going concern is dependent on obtaining adequate capital to fund operating losses until we become profitable. If we are unable to obtain adequate capital, we could be forced to cease operations.

In order to continue as a going concern, we will need, among other things, additional capital resources. Management's plan is to obtain such resources for the registrant by obtaining capital from high net worth and institutional investors sufficient to meet our minimal operating expenses and seeking equity and/or debt financing for specific project financing. However, management cannot provide any assurances that we will be successful in accomplishing any of our plans.

2.            Our success depends on certain key employees.

Our success depends to a significant extent on the performance of Roger Miguel, chief executive officer, Jake Shapiro, chairman of the board and Graham Bradstreet, chief financial officer.

We do not have “key person” insurance on the lives of any of our officers or directors. We have entered into employment agreements with our top executive officers. These agreements entitle us to possible injunctive relief for breach of the agreements. These agreements cannot assure us of the continued services of such employees. In addition, competition for the limited number of business, production and creative personnel necessary to create and distribute our entertainment content is intense and may grow in the future. Our inability to retain or successfully replace where necessary members of our senior management and other key employees could have a material adverse effect on our business, results of operations and financial condition.

3.            Our business requires substantial investments of capital. 

The design, engineering, and construction of sound stages, offices, and infrastructure require substantial capital. The production, acquisition and distribution of motion pictures require a significant amount of capital. A significant amount of time may elapse between our expenditure of funds and the receipt of commercial revenues or tax credits derived from the production of our motion pictures. This time lapse requires us to fund a significant portion of our capital requirements from various financing sources. We cannot be certain that we can successfully implement these financing arrangements or that we will not be subject to substantial financial risks relating to the production, acquisition, completion and release of future motion pictures. We intend to employ a variety of structuring techniques, including debt or equity financing, in efforts to achieve our investment objectives. We cannot be certain that we will be able to negotiate structures that accomplish our objectives. We intend to create (through internal growth, additional financing or acquisition) our production slate and/or our production budgets, and, if we do, we will be required to increase overhead and/or make larger up-front payments, including those to talent and, consequently, bear greater financial risks. Any of the foregoing could have a material adverse effect on our business, results of operations and financial condition.

4.            The costs of producing and marketing feature films have steadily increased and may further increase in the future, making it more difficult for a film to generate a profit. 

The costs of producing and marketing feature films have generally increased in recent years. These costs may continue to increase in the future, which may make it more difficult for our films to generate a profit or compete against other films. Historically, production costs and marketing costs have risen at a higher rate than increases in either the number of domestic admissions to movie theaters or admission ticket prices. A continuation of this trend would leave us more dependent on other media, such as home video/DVD (a declining market), television, international markets and new media for revenue, which may not be sufficient to offset an increase in the cost of motion picture production. If we cannot successfully exploit these other media, it could have a material adverse effect on our business, results of operations and financial condition.

5.            Budget overruns may adversely affect our business. 

Our business model requires that we be efficient in the production of our motion pictures. Actual motion picture production costs often exceed their budgets, sometimes significantly. The production, completion and distribution of motion pictures are subject to a number of uncertainties, including delays and increased expenditures due to creative differences among key cast members and other key creative personnel or other disruptions or events beyond our control. Risks such as death or disability of star performers, technical complications with special effects or other aspects of production, shortages of necessary equipment, damage to film negatives, master tapes and recordings or adverse weather conditions may cause cost overruns and delay or frustrate completion of a production. If a motion picture incurs substantial budget overruns, we may have to seek additional financing from outside sources to complete production, which may not be available on suitable terms. We cannot assure you that such financing on terms acceptable to us will be available, and the lack of such financing could have a material adverse effect on our business, results of operations and financial condition.

In addition, if a motion picture production incurs substantial budget overruns, we cannot assure you that we will recoup these costs, which could have a material adverse effect on our business, results of operations and financial condition. Increased costs incurred with respect to a particular film may result in any such film not being ready for release at the intended time and the postponement to a potentially less favorable time, all of which could cause a decline in box office performance, and, thus, the overall financial success of such film. Budget overruns could also prevent a picture from being completed or released. Any of the foregoing could have a material adverse effect on our business, results of operations and financial condition.

6.            Our future motion pictures may not generate enough revenue to satisfy obligations entered into to finance their production.

We intend to obtain financing for our motion pictures and secure those financings with the assets from those and other motion pictures. If we are unable to generate sufficient revenues to repay those obligations under the terms of the financings, we may lose those motion picture assets and any future revenues that we could derive from those assets.

We cannot give assurances that a failure to repay those obligations will not make the terms of future financings more onerous or prohibitive. We also cannot give assurances that our estimates of future revenues from motion pictures securing any other current or future financings will be accurate, and that we will be able to satisfy those financings with the revenues from the motion pictures securing those financings. The loss of motion picture or other assets as a result of any such default would adversely affect our business.

7.            Revenues and results of operations will be difficult to predict and depend on a variety of factors. 

Our revenues and results of operations will depend significantly upon the performance of the motion pictures that we license for distribution, which we cannot predict with certainty. Accordingly, our revenues and results of operations may fluctuate significantly from period to period, and the results of any one period may not be indicative of the results for any future periods. Furthermore, largely as a result of these predictive difficulties, we may not be able to achieve the earnings projected by any analysts that follow our stock. Revisions to projected earnings could cause investors to lose confidence in us, which in turn could materially and adversely affect our business, our financial condition and the market value of our securities.

8.            Accounting practices used in our industry may accentuate fluctuations in operating results.

In addition to the cyclical nature of the entertainment industry, industry accounting practices may accentuate fluctuations in our operating results. As operations commence, we may in the future experience such fluctuations due to industry-wide accounting practices. In accordance with U.S. generally accepted accounting principles and industry practice, we will amortize film and television programming costs using the “individual-film-forecast” method, whereby these costs are amortized and participations and residuals costs are accrued in the proportion that current year’s revenue bears to management’s estimate of ultimate revenue at the beginning of the current year expected to be recognized from the exploitation, exhibition or sale of the films. The majority of a film’s costs (80% or more) will be amortized within three years of the picture’s initial release.

Ultimate revenue includes estimates over a period not to exceed ten years following the date of initial release. Film costs are stated at the lower of amortized cost or the film’s estimated fair value. Individual film costs are reviewed on a title-by-title basis, when an event or change in circumstances indicates that the fair value of a film is less than its unamortized cost. The fair value of the film is determined using management’s future revenue and cost estimates and a discounted cash flow approach. Additional amortization is recorded in the amount by which the unamortized costs exceed the estimated fair value of the film. Estimates of future revenue involve measurement uncertainty and it is therefore possible that reductions in the carrying value of investment in films may be required as a consequence of changes in management’s future revenue estimates.

9.            We depend on a limited number of projects, and the loss or failure of a major project could have a material adverse effect on our business. 

Our revenue will be generated from a limited number of films. Films that we develop, finance, or license for distribution vary due to the opportunities available to us and to targeted audience response, both of which are unpredictable and subject to change. The loss or failure of a major project could have a material adverse effect on our results of operations and financial condition as well as on the market price of our securities. We cannot give assurances that any project we undertake or participate in will be successful.

10.          We incorporated and now operate during challenging general economic conditions.

The entertainment industry has suffered difficult times over the past several years. Sales of film DVDs and console games have dropped dramatically, therefore making it more difficult for film productions to obtain necessary financing and exploitation revenues.

11.          There is no assurance that we will generate profits or that the market price of our common stock will be increased thereby.

We may have a shortage of working capital in the future due to delays in realizing revenues and/or increased capital requirements for construction of the studio or film production which could jeopardize our ability to carry out our business plan.

The costs of producing and marketing feature films have steadily increased and may further increase in the future, making it more difficult for a film to generate a profit or compete against other films. Budget overruns may adversely affect our business .

12.          We intend to rely upon pre-sales, advances and guarantees for film finance. 

Market conditions can fluctuate dramatically which could result in an inability to finance our film productions.

13.          We intend to rely on tax preference and tax credit transactions and similar programs for a substantial portion of our revenues and recovery of film costs.

We cannot be certain that such revenues and cost recoveries will be available to us in future periods. These benefits will accrue pursuant principally by means of statutes in various states in the U.S., the United Kingdom and other countries, which could be repealed or amended based on general income tax considerations or political changes.

14.          We do not currently have a credit facility.

We may require a secure credit facility with respect to financing development, production and exploitation of our motion pictures. The lender would have certain lien rights on the registrant’s accounts receivables and intellectual property. Our business plan depends upon financing arrangements tied to specific motion pictures for the funding of our film productions. We cannot assure investors that we can secure a credit facility or that, if we secure a credit facility, the terms will be favorable to us. Without a credit facility, we may not have the same flexibility with our financing arrangements as some of our competitors and will need to continue to rely upon financing arrangements tied to specific motion pictures for the funding of our productions and the exploitation thereof.

15.          Our success depends on the performance of our films.

It is widely acknowledged that the entertainment industry is inherently volatile and therefore unpredictable . Our future revenues and results of operations may fluctuate significantly.  Revenues and results of operations are difficult to predict and depend on a variety of factors .  Our revenues and results of operations will depend significantly upon the performance of the motion pictures that we will license for distribution, which we cannot predict with certainty. Accordingly, our revenues and results of operations may fluctuate significantly from period to period, and the results of any one period may not be indicative of the results for any future periods. Furthermore, largely as a result of these predictive difficulties, we may not be able to achieve the earnings projected by any analysts that follow our securities.

16.          We intend to license exploitation rights to our films to distributors worldwide.

Because we do not control the timing and manner in which the distributors promote and release our product that may have an adverse impact on our revenues.  

17.          Adverse actions by the unions could adversely affect operations.

The film industry is heavily unionized and we could be adversely affected by strikes, potential strikes or other union job actions .

18.          Protecting and defending against intellectual property claims may have a material adverse effect on our business.  

Our ability to compete depends, in part, upon successful protection of our intellectual property. We do not have the financial resources to protect our rights to the same extent as other independent producers and/or the major studios. We are not a member of the Motion Picture Association of America as are the major studios and as a result we cannot rely on MPAA resources to prevent piracy and copyright infringements. We will attempt to protect proprietary and intellectual property rights to our productions through available copyright and trademark laws and licensing and distribution arrangements with reputable international companies in specific territories and media for limited durations. Despite these precautions, existing copyright and trademark laws afford only limited practical protection in certain countries.

We intend to distribute our products in other countries in which there may be no copyright or trademark protection. As a result, it may be possible for unauthorized third parties to copy and distribute our productions or certain portions or applications of our intended productions, which could have a material adverse effect on our business, results of operations and financial condition.

Litigation may also be necessary in the future to enforce our intellectual property rights, to protect our trade secrets, or to determine the validity and scope of the proprietary rights of others or to defend against claims of infringement or invalidity. Any such litigation could result in substantial costs and the diversion of resources and could have a material adverse effect on our business, results of operations and financial condition. We cannot assure investors that infringement or invalidity claims will not materially adversely affect our business, results of operations and financial condition. Regardless of the validity or the success of the assertion of these claims, we could incur significant costs and diversion of resources in enforcing our intellectual property rights or in defending against such claims, which could have a material adverse effect on our business, results of operations and financial condition.

19.          Others may assert intellectual property infringement claims against us.  

One of the risks of the film production business is the possibility that others may claim that our productions and production techniques misappropriate or infringe the intellectual property rights of third parties with respect to their previously developed films, stories, characters, other entertainment or intellectual property. We may receive in the future claims of infringement or misappropriation of other parties’ proprietary rights. Any such assertions or claims may materially adversely affect our business, financial condition or results of operations. Irrespective of the validity or the successful assertion of such claims, we could incur significant costs and diversion of resources in defending against them, which could have a material adverse effect on our business, financial condition or results of operations. If any claims or actions are asserted against us, we may seek to settle such claim by obtaining a license from the plaintiff covering the disputed intellectual property rights. We cannot assure, however, that under such circumstances a license, or any other form of settlement, would be available on reasonable terms or at all.

20.          Piracy of motion pictures, including digital and Internet piracy may reduce the gross receipts from the exploitation of our films.

Motion picture piracy is extensive in many parts of the world and is made easier by technological advances and the conversion of motion pictures into digital formats.

21.          There is a potential for disputes and litigation in the motion picture business.

There are risks of disputes and litigation with financiers, competitors, unions, producers and other talent, and with distributors. We cannot assure investors that we will prevail in the event of any disputes or litigation.

22.          We may default under the terms and conditions of the property lease agreement.

The registrant entered a lease agreement on August 21, 2013, with the Effingham County Industrial Development Authority (the “IDA”). Under the lease, approximately 1,560 acres of land located predominantly within Effingham County, Georgia was leased. The lease is effective from August 21, 2013 through July 1, 2033. No interest is payable and no payments are due for the first two years, with the total rent of $10 million being paid in 18 equal annual installments, commencing February 28, 2016. The registrant is obligated to pay additional rent if it does not achieve the specified goals of $90 million in investment and 527 jobs on or before the end of year 5 (five). During the five year period there are also a number of mutually agreed milestones to be met. If not met the registrant will be subject to various default provisions that could have a material adverse effect on our business, results of operations and financial condition.

23.          Capital requirements may not be met.

Under the terms of the capital lease with the IDA, various milestones are required to be met in respect of the approved development plan. These include capital expenditures for the years respectively ended December 31 of $20,000,000 (2015), $25,000,000 (2016), $30,000,000 (2017) and $15,000,000 (2018-2033). The registrant does not expect to meet the December 2015 capital expenditure requirement and is currently revising the development plan with the IDA. In addition the rental payment of $555,556 under the terms of the capital lease with the IDA is due on February 29, 2016. If we cannot successfully agree a revised development plan with the IDA, and/or fails to raise the capital required under the terms of the lease, the lease could be put into default and/or canceled. This could have a material adverse effect on our business, results of operations and financial condition.

24.          Any delay in the construction of the studio could have a material adverse effect on our profitability.

Key to the registrant’s business plan is the construction of the film studio. This may be delayed or not achieved for numerous reasons including, but not limited to, (i) our inability to raise the capital required, (ii) default under the terms of the lease with the IDA, (iii) our inability to obtain the necessary permissions, approvals, permits and the like, (iv) failure of contractors and/or subcontractors to deliver as contracted, v) labor disputes (vi) weather, (vii) change orders, or (viii) delays by contractors and (ix) other reasons. Any of these and other factors could have a material adverse effect on our business, results of operations and financial condition.

25.         Any delayed operation of the studio could have a material adverse effect on our profitability.

The operation of the studio may be delayed or not achieved for numerous reasons including, but not limited to (i) our inability to raise the working capital required, (ii) default under the terms of the lease with the IDA, (iii) our inability to obtain the necessary permissions, approvals, permits and the like, (iv) our inability to secure or train qualified labor, (v) labor disputes and (vii) other reasons. Any of these and other factors could have a material adverse effect on our business, results of operations and financial condition.

26.          We may in the future issue more shares that could cause a loss of control by our present management and current shareholders.

We may issue further shares as consideration for the cash or assets or services out of our authorized, but unissued, common stock that would, upon issuance, represent a majority of the voting power and equity of the registrant. The result of such an issuance would be those new shareholders and management would control the registrant, and persons unknown could replace our management at that time. Such an occurrence would result in a greatly reduced percentage of ownership of the registrant by our current shareholders, which could present significant risks to investors.

27.          The management and majority shareholders of the registrant own 33.93% of the issued and outstanding common shares and have 33.72% of the total voting power thereby acting together they may have the ability to choose management or impact operations.

Management and majority shareholders own 33.93% of the outstanding common shares and 100% of the Series B preferred shares. As a result, they have voting power of 33.72% of our issued and outstanding securities. Consequently, management and current shareholders have the ability to influence control of our operations and, acting together, will have the ability to influence or control substantially all matters submitted to shareholders for approval, including:

Election of the board of directors;

Removal of directors; and

Amendment to the articles of incorporation or bylaws.

These shareholders will thus have substantial influence over our management and affairs and other shareholders possess no practical ability to remove management or effect the operations of our business. Accordingly, this concentration of ownership by itself may have the effect of impeding a merger, consolidation, takeover or other business consolidation, or discouraging a potential acquirer from making a tender offer for our common shares.

28.          The elimination of personal liability of our directors and officers under Nevada law and the existence of indemnification rights held by our directors, officers and employees may result in substantial expenses.

We have agreed to indemnification of officers and directors as is provided by Nevada Statute.  Nevada Statutes provide for the indemnification of our directors, officers, employees, and agents, under certain circumstances, against attorney’s fees and other expenses incurred by them in any litigation to which they become a party arising from their association with or activities the registrant’s behalf. The registrant will also bear the expenses of such litigation for any of our directors, officers, employees, or agents, upon such person's promise to repay us therefore if it is ultimately determined that any such person shall not have been entitled to indemnification.

29.          We are a smaller reporting company, and we cannot be certain if the reduced disclosure requirements applicable to smaller reporting companies will make our common stock less attractive to investors.

We are currently a “smaller reporting company,” meaning that we are not an investment company, an asset- backed issuer, or a majority-owned subsidiary of a parent company that is not a smaller reporting company and have a public float of less than $75 million and annual revenues of less than $50 million during the most recently completed fiscal year. In the event that we are still considered a “smaller reporting company,” at such time we cease being an “emerging growth company,” we will be required to provide additional disclosure in our SEC filings. However, similar to “emerging growth companies,” “smaller reporting companies” are able to provide simplified executive compensation disclosures in their filings; are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that independent registered public accounting firms provide an attestation report on the effectiveness of internal control over financial reporting; and have certain other decreased disclosure obligations in their SEC filings, including, among other things, only being required to provide two years of audited financial statements in annual reports and in a registration statement under the Exchange Act on Form 10. Decreased disclosures in our SEC filings due to our status as a “smaller reporting company” may make it harder for investors to analyze our results of operations and financial prospects.

30.          The regulation of penny stocks by SEC and FINRA may discourage the tradability of our securities.

We are a "penny stock" company. Our common stock trades on the OTCQB Market and we are subject to a Securities and Exchange Commission rule that imposes special sales practice requirements upon broker-dealers who sell such securities to persons other than established customers or accredited investors. For purposes of the rule, the phrase "accredited investors" means, in general terms, institutions with assets in excess of $5,000,000, or individuals having a net worth in excess of $1,000,000 or having an annual income that exceeds $200,000 (or that, when combined with a spouse's income, exceeds $300,000). For transactions covered by the rule, the broker-dealer must make a special suitability determination for the purchaser and receive the purchaser's written agreement to the transaction prior to the sale. Effectively, this discourages broker-dealers from executing trades in penny stocks. Consequently, the rule will affect the ability of investors to sell their securities in any market that might develop therefore because it imposes additional regulatory burdens on penny stock transactions.

In addition, the Securities and Exchange Commission has adopted a number of rules to regulate "penny stocks". Such rules include Rules 3a51-1, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Securities and Exchange Act of 1934, as amended. Because our securities constitute "penny stocks" within the meaning of the rules, the rules would apply to us and to our securities. The rules will further affect the ability of owners of shares to sell our securities in any market that might develop for them because it imposes additional regulatory burdens on penny stock transactions.

Shareholders should be aware that, according to Securities and Exchange Commission, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include (i) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (ii) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (iii) "boiler room" practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (iv) excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and (v) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired consequent investor losses. Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our securities.

31.          We lack sufficient internal controls and implementing acceptable internal controls will be difficult with only four officers and directors thereby it will be difficult to ensure that information required to be disclosed in our reports filed and submitted under the Exchange Act is recorded, processed, summarized and reported as and when required.

We lack internal controls over our financials and it may be difficult to implement such controls with only four officers and directors. The lack of these internal controls make it difficult to ensure that information required to be disclosed in our reports is recorded, processed, summarized and reported as and when required.

The reason we believe our disclosure controls and procedures are not effective is because:

32.          We are an “emerging growth registrant” and we cannot be certain whether the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.

We are an “emerging growth registrant,” as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding an annual non-binding advisory vote on executive compensation and nonbinding shareholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive because we will rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

In addition, Section 107 of the JOBS Act also provides that an “emerging growth registrant” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth registrant” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. However, we are choosing to opt out of such extended transition period, and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.

33.          We have not paid dividends to date and do not intend to pay any dividends in the near future.

We have never paid dividends on our shares of common stock  and  presently intend to retain any future earnings to finance the operations of our business. Shareholders may never receive any dividends on our shares.

34.          The exercise of stock options and warrants, the conversion of convertible notes or the later sales of our shares of common stock may further dilute your shares of common shares.

As of October 24, 2015, we have outstanding options for the purchase of our common stock and warrants for the purchase of 81,750,000 common shares.

As of October 24, 2015, we had outstanding convertible notes with a face value of $1,612,760.21, which convert at different rates into shares of our common stock. These notes generally have conversion features with discounts ranging from 35% to 45% of lowest closing bid price on previous 5 to 20 trading days on the exchange. The conversion of these notes could lead to significant dilution of the stock and a decline in share price. The aggregate dollar amount of stock into which our outstanding convertible instruments may be converted as of October 24, 2015 is $1,444,123.93. Potentially we may be required to increase the authorized common shares or require a reverse stock split. We may, in the future, issue additional shares of common stock to finance our operations.

Our board of directors is authorized to sell additional shares of common stock or securities convertible into shares of common stock, if in their discretion they determine that such action would be beneficial to us. Any such issuance below the offering price of the common shares in this prospectus would dilute the interest of persons acquiring common shares in this offering.

35.          If large amounts of our common shares held by existing shareholders are sold in the future, the market price of our common shares could decline.

The market price of our common shares could fall substantially if our existing shareholders or existing creditors who levy on or convert into one common share sell large amounts of our common shares in the public market following this offering. These sales, or the possibility that these sales may occur, could also make it more difficult for us to sell equity or equity-related securities if we need to do so in the future to address then-existing financing needs. U.S. federal securities laws requiring the registration or exemption from registration in connection with the sale of securities limit the number of common shares available for sale in the public market.

36.          There is only a limited trading market for our common stock and quoting our stock price on the OTCQB increases the volatility of our stock and makes it harder to sell our stock.

Currently, our stock prices are quoted on the OTCQB. The OTCQB tends to be highly illiquid, in part because there is no national quotation system by which potential investors can track the market price of shares except through information received or generated by a limited number of broker-dealers that make markets in particular stocks. There is a greater chance of market volatility for securities that trade on the OTCQB as opposed to a national exchange or quotation system. This volatility may be caused by a variety of factors, including:

In a volatile market, you may experience wide fluctuations in the market price of our securities. These fluctuations may have an extremely negative effect on the market price of our securities and may prevent you from obtaining a market price equal to your purchase price when you attempt to sell our securities in the open market. In these situations, you may be required to either sell our securities at a market price which is lower than your purchase price, or to hold our securities for a longer period of time than you planned.

37.          Investors may suffer substantial dilution or an unrealized loss of seniority in preferences and privileges if we need to seek additional funding in the future.

We have authorized 2,000,000,000 common shares with 441,896,628 common shares outstanding. If we desire to raise additional capital in the future we will experience possible losses, and the registrant has little assets in current operations, or we need to expand our operations, then we may have to issue additional equity, preferred securities or convertible debt securities, which may not need the approval of current shareholders. The issuance of new common shares would cause the buyers in this offering to suffer dilution of their ownership percentage. The dilution may be substantial if the maximum of 2,000,000,000 would be issued, the dilution would be approximately seven times, or the current shareholder's ownership would be reduced to about 1/8th. In addition, it is possible that any future securities could grant new shareholders rights, preferences, and/or privileges that are different from this offering.

38.          We may need additional capital in the future, which may not be available to us on favorable terms, or at all, and may dilute your ownership of our common stock.

We have historically relied on outside financing to fund our operations, capital expenditures and expansion. We may require additional capital from equity or debt financing in the future to:

We may not be able to secure timely additional financing on favorable terms, or at all. The terms of any additional financing may place limits on our financial and operating flexibility. If we raise additional funds through issuances of equity, convertible debt securities or other securities convertible into equity, our existing shareholders could suffer significant dilution in their percentage ownership of the registrant, and any new securities we issue could have rights, preferences and privileges senior to those of our common stock. If we are unable to obtain adequate financing or financing on terms satisfactory to us, if and when we require it, our ability to grow or support our business and to respond to business challenges could be significantly limited.

39.          We may expand through acquisitions of, or investments in, other companies or through business relationships, all of which may result in additional dilution to our shareholders and consumption of resources that are necessary to sustain our business.

One of our business strategies is to acquire competing or complementary services, technologies or businesses. In connection with one or more of those transactions, we may: 

40.          Our board of directors has the authority, without shareholder approval, to issue preferred stock with terms that may not be beneficial to existing common shareholders and with the ability to affect adversely shareholder voting power and perpetuate their control over us.

Our certificate of incorporation allows us to issue shares of preferred stock without any vote or further action by our shareholders. Our board of directors has the authority to fix and determine the relative rights and preferences of preferred stock. Our board of directors also has the authority to issue preferred stock without further shareholder approval, including large blocks of preferred stock. As a result, our board of directors could authorize the issuance of a series of preferred stock that would grant to holders thereof the preferred right to our assets upon liquidation, the right to receive dividend payments before dividends are distributed to the holders of common stock or other preferred shareholders and the right to the redemption of the shares, together with a premium, prior to the redemption of our common stock or existing preferred stock, if any.

Preferred stock could be used to dilute a potential hostile acquirer. Accordingly, any future issuance of preferred stock or any rights to purchase preferred stock may have the effect of making it more difficult for a third party to acquire control of us. This may delay, defer or prevent a change of control or an unsolicited acquisition proposal. The issuance of preferred stock also could decrease the amount of earnings attributable to, and assets available for distribution to, the holders of our common stock and could adversely affect the rights and powers, including voting rights, of the holders of our common stock and preferred stock.