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+ Risk Factors: See "Risk Factors" and the other information in this prospectus for a discussion of the factors you should consider before deciding to invest in shares of our common stock. After the offering, assuming all of his personal shares that are being registered herein and those shares being offered on behalf of the company are sold, Mr. Abe will have the ability to control 60% of the voting power of our outstanding capital stock. You should rely only upon the information contained in this prospectus. We have not authorized anyone to provide you with information different from that which is contained in this prospectus. We are offering to sell common stock and seeking offers to common stock only in jurisdictions where offers and sales are permitted. - 5 - Table of Contents RISK FACTORS Please consider the following risk factors and other information in this prospectus relating to our business before deciding to invest in our common stock. This offering and any investment in our common stock involves a high degree of risk. You should carefully consider the risks described below and all of the information contained in this prospectus before deciding whether to purchase our common stock. If any of the following risks actually occur, our business, financial condition and results of operations could be harmed. The trading price of our common stock could decline due to any of these risks, and you may lose all or part of your investment. We consider the following to be the material risks for an investor regarding this offering. Our company should be viewed as a high-risk investment and speculative in nature. An investment in our common stock may result in a complete loss of the invested amount. An investment in our common stock is highly speculative, and should only be made by persons who can afford to lose their entire investment in us. You should carefully consider the following risk factors and other information in this report before deciding to become a holder of our common stock. If any of the following risks actually occur, our business and financial results could be negatively affected to a significant extent. Risks Relating to Our Company and Our Industry Any technical issues with our Software Platform Package could severely impact our business operations. As our business is primarily based around our Software Platform Package we are highly dependent upon the continued performance of our platform. As with all software and web applications, there may be, from time to time, technical malfunctions that arise. It is possible that to remedy any such situation would require substantial time, resources and technical knowledge that we may not have or be able to acquire in a timely fashion. In the event that our source code does not function properly when converted to object code it is possible that we may lose customers, we may have to spend additional capital to repair the issue, or our operations would be forced to suspend or cease entirely. Our intellectual property, comprised of our Software Platform System, is not protected by any patents or similar protective measures. Our Software Platform Package is not protected by any patents, or similar protective measures from being copied or stolen without our prior consent. This would negatively impact our business should our intellectual property be comprised in any way and you may lose some or all of your investment. Because we operate in highly competitive industry, our revenues or profits could be harmed if we are unable to compete effectively. The IT Consulting Industry in which we operate is subject to intense competition. We compete against corporations which offer comparable software, platforms, services, have a longer operating history, have greater revenue and resources, amongst other advantages. If we cannot compete effectively we may not generate substantive revenue or profits which could negatively impact the value of our common stock. The consultation services provided by our Chief Executive Officer, Takehiro Abe, pertain to the cryptocurrency industry in Japan, and as such he will need to stay informed of any and all changing regulations and laws in Japan s cryptocurrency industry in order to adequately advise any and all consultation clients. Our Chief Executive Officer, Takehiro Abe, intends to offer IT consulting services to clients who are seeking to better understand, or improve the effectiveness of, their ICOs. Mr. Abe has experience with creating ICOs, such as the FTV Token created on Ethereum, and intends to advise clients based on his own first hand experiences in the industry. Future international regulations, and in Japan specifically, regarding digital currency may present significant obstacles that Mr. Abe may not be qualified to assist clients in overcoming. In the event that Mr. Abe is unable to offer consulting services that are relevant to the changing digital currency industry then the Company may be forced to cease offering consulting services relating to ICOs entirely. At present, Mr. Abe intends to make sure his advice complies with all laws and regulations in the specific jurisdictions in which he intends to provide consultation services by consulting with attorneys experienced with the laws and regulations regarding trading platforms, in Japan and internationally, on a need be basis. The cost for consultation with attorneys may vary and cannot be accurately predicted at this point in time. As the Company does not, and will not, conduct any ICOs or manage any trading platform, the Company does not believe it will ever run the risk of violating laws and regulations regarding the cryptocurrency industry. However, if a client violates any such law, either through the advice of Mr. Abe or by pursuing their own business operations independently, there is the risk that the Company will lose a client, and potentially future clients as a result of acquiring an adverse reputation. This could result in a decrease in the Company s revenue and the Company may need to reevaluate whether or not Mr. Abe will continue to provide consulting services. - 6 - Table of Contents We will require additional funds in the future to achieve our current business strategy. Our inability to obtain funding will cause our business to fail. We will need to raise additional funds through public or private debt or equity sales in order to fund our future. These financings may not be available when needed. Even if these financings are available, it may be on terms that we deem unacceptable or are materially averse to your interests with respect to dilution of book value, dividend preferences, liquidation preferences, or other terms. Our inability to obtain financing would have an adverse effect on our ability to implement our current business plan and develop our operations, and as a result, could require us to diminish or suspend our operations and possibly cease our existence. Even if we are successful in raising capital in the future we will likely need to raise additional capital to continue and/or expand our operations. If we do not raise the additional capital, the value of any investment in our Company may become worthless. In the event we do not raise additional capital from conventional sources, it is likely that we may need to scale back or curtail implementing our business plan. If we were to lose the services of Mr. Takehiro Abe we may not be able to execute our business strategy. We currently depend on the continued services and performance of the only of our management team, Mr. Takehiro Abe, our Chief Executive Officer. His leadership has played an integral role in our company. The loss of the key member of our management team could disrupt our operations and have an adverse effect on our ability to grow our business. In addition, competition for senior executives and key personnel in our industry is intense, and we may be unable to retain our senior executives and key personnel or attract and retain new senior executives and key personnel in the future, in which case our business may be severely disrupted. If we are unable to hire qualified personnel and retain or motivate key personnel, we may not be able to grow effectively. Our future success depends on our continuing ability to identify, hire, develop, motivate and retain skilled personnel for all areas of our organization. Competition in our industry for qualified employees is very competitive. Our continued ability to compete effectively depends on our ability to attract new employees and to retain and motivate our existing employees. We have a limited operating history that you can use to evaluate us, and the likelihood of our success must be considered in light of the problems, expenses, difficulties, complications and delays that we may encounter because we are a small developing company. As a result, we may not be profitable and we may not be able to generate sufficient revenue to develop as we have planned. We have only recently adopted a bona fide business plan. Currently, we operate through our wholly owned subsidiary AIS Japan Co., Ltd. The likelihood of our success must be considered in light of the expenses and difficulties in development of a customer base nationally, attaining and retaining customers and obtaining financing to meet the needs of our plan of operations. Since we have a limited operating history we may not be profitable and we may not be able to generate sufficient revenues to meet our expenses and support our anticipated activities. We are an early stage company with an unproven business strategy and may never be able to fully implement our business plan or achieve profitability. We are at an early stage of development of our operations as a company. We have only recently started to operate business activities and have not generated substantive revenue from such operations. A commitment of substantial resources to conduct time-consuming research in many respects will be required if we are to complete the development of our company into one that is more profitable. There can be no assurance that we will be able to fully implement our business plan at reasonable costs or successfully operate. We expect it will take several years to implement our business plan fully, if at all. - 7 - Table of Contents Any failure to protect our intellectual property could reduce the value of our brand and harm our business. The recognition and reputation of our brand are integral to our success. The success of our business depends in part upon our continued ability to use our intellectual property to increase brand awareness and further develop our brand. There may be times in the future we need to resort to litigation to enforce our intellectual property rights. Litigation of this type could be costly, force us to divert our resources, lead to counterclaims or other claims against us or otherwise harm our business or reputation. Failure to maintain, control and protect our intellectual property would adversely affect our business. Our Principal executive offices are located in Japan and our Company has non-U.S. resident Officers and Directors. As such, it may be difficult to pursue legal action against our Company or Directors. Due to the fact that our Company s executive office is located in Japan and our Company has non-U.S. resident Officers and Directors, the enforceability of civil liability provisions of U.S. federal securities laws against the company s Officers and Directors, and company assets located in foreign jurisdictions, will be limited if possible at all. Our limited operating history makes it difficult for us to accurately forecast net sales and appropriately plan our expenses. We have a very limited operating history. As a result, it is difficult to accurately forecast our net sales and plan our operating expenses. This inability could cause our net income, if there is any income at all, in a given quarter to be lower than expected. If we are unable to successfully create a client base for our Software Platform Package we may never achieve profitability. We do not have a well developed customer base for our Software Platform Package. In the future, if we are unable to successfully market our new customers, we will fail to successfully compete with companies offering similar systems, or for any reason at all, we could be unsuccessful in creating a user base for our system. In the event that we cannot get enough, or any, users to utilize our Software Platform Package then the results of our business would be materially affected and we would be able to offer no assurances that our Company would become profitable in the short term, if at all. We expect our quarterly financial results to fluctuate. We expect our net sales and operating results to vary significantly from quarter to quarter due to a number of factors, including changes in: General economic conditions; The future of digital currency and blockchain technology; Our ability to retain, grow our business and attract new clients; Administrative costs; Advertising and other marketing costs; As a result of the variability of these and other factors, our operating results in future quarters may be below the expectations of public market analysts and investors. Currently, Takehiro Abe owns 100% of our common stock. After the consummation of this offering Takehiro Abe will continue to have majority control of the Company s common stock. As a result, he has a substantial voting power in all matters submitted to our stockholders for approval including: Election of our board of directors; Removal of any of our directors; Amendment of our Certificate of Incorporation or bylaws; Adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination involving us. As a result of his ownership and position Takehiro Abe is able to substantially influence all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. In addition, the future prospect of sales of significant amounts of shares held by Takehiro Abe could affect the market price of our common stock if the marketplace does not orderly adjust to the increase in shares in the market and the value of your investment in our company may decrease. Takehiro Abe stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price. - 8 - Table of Contents The recently enacted JOBS Act will allow the Company to postpone the date by which it must comply with certain laws and regulations intended to protect investors and to reduce the amount of information provided in reports filed with the SEC. The recently enacted JOBS Act is intended to reduce the regulatory burden on "emerging growth companies". The Company meets the definition of an "emerging growth company" and so long as it qualifies as an "emerging growth company," it will, among other things: -be exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that its independent registered public accounting firm provide an attestation report on the effectiveness of its internal control over financial reporting; -be exempt from the "say on pay" provisions (requiring a non-binding shareholder vote to approve compensation of certain executive officers) and the "say on golden parachute" provisions (requiring a non-binding shareholder vote to approve golden parachute arrangements for certain executive officers in connection with mergers and certain other business combinations) of The Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") and certain disclosure requirements of the Dodd-Frank Act relating to compensation of Chief Executive Officers; -be permitted to omit the detailed compensation discussion and analysis from proxy statements and reports filed under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and instead provide a reduced level of disclosure concerning executive compensation; and -be exempt from any rules that may be adopted by the Public Company Accounting Oversight Board (the "PCAOB") requiring mandatory audit firm rotation or a supplement to the auditor s report on the financial statements. Although the Company is still evaluating the JOBS Act, it currently intends to take advantage of all of the reduced regulatory and reporting requirements that will be available to it so long as it qualifies as an "emerging growth company". The Company has elected not to opt out of the extension of time to comply with new or revised financial accounting standards available under Section 102(b)(1) of the JOBS Act. Among other things, this means that the Company's independent registered public accounting firm will not be required to provide an attestation report on the effectiveness of the Company's internal control over financial reporting so long as it qualifies as an "emerging growth company", which may increase the risk that weaknesses or deficiencies in the internal control over financial reporting go undetected. Likewise, so long as it qualifies as an "emerging growth company", the Company may elect not to provide certain information, including certain financial information and certain information regarding compensation of executive officers, which would otherwise have been required to provide in filings with the SEC, which may make it more difficult for investors and securities analysts to evaluate the Company. As a result, investor confidence in the Company and the market price of its common stock may be adversely affected. Notwithstanding the above, we are also 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 are we cease being an "emerging growth company", the disclosure we will be required to provide in our SEC filings will increase, but will still be less than it would be if we were not considered either an "emerging growth company" or a "smaller reporting company". Specifically, 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, being required to provide only two years of audited financial statements in annual reports. Decreased disclosures in our SEC filings due to our status as an "emerging growth company" or "smaller reporting company" may make it harder for investors to analyze the Company s results of operations and financial prospects. - 9 - Table of Contents We are an "emerging growth company" under the JOBS Act of 2012, and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors. We are an "emerging growth company," 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 a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive because we may 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 company" 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 company" can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We are choosing to take advantage of the extended transition period for complying with new or revised accounting standards. As a result, our financial statements may not be comparable to those of companies that comply with public company effective dates. We will remain an "emerging growth company" for up to five years, although we will lose that status sooner if our revenues exceed $1 billion, if we issue more than $1 billion in non-convertible debt in a three year period, or if the market value of our common stock that is held by non-affiliates exceeds $700 million. Due to the fact that we are a publicly reporting company we will continue to incur significant costs in staying current with reporting requirements. Our management will be required to devote substantial time to compliance initiatives. Additionally, the lack of an internal audit group may result in material misstatements to our financial statements and ability to provide accurate financial information to our shareholders. Our management and other personnel will need to devote a substantial amount of time to compliance initiatives to maintain reporting status. Moreover, these rules and regulations, which are necessary to remain as an SEC reporting Company, will be costly because an external third party consultant(s), attorney, or firm, may have to assist us in following the applicable rules and regulations for each filing on behalf of the company. We currently do not have an internal audit group, and we may eventually need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge to have effective internal controls for financial reporting. Additionally, due to the fact that our officers and director have limited experience as an officer or director of a reporting company, such lack of experience may impair our ability to maintain effective internal controls over financial reporting and disclosure controls and procedures, which may result in material misstatements to our financial statements and an inability to provide accurate financial information to our stockholders. Moreover, if we are not able to comply with the requirements or regulations as an SEC reporting company, in any regard, we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources. Our officers and director lack experience in, and with, the reporting and disclosure obligations of publicly-traded companies. Our officers and director lack experience in, and with, the reporting and disclosure obligations of publicly-traded companies and with serving as an officer and or director of a publicly-traded company. This lack of experience may impair our ability to maintain effective internal controls over financial reporting and disclosure controls and procedures, which may result in material misstatements to our financial statements and an inability to provide accurate financial information to our stockholders. Consequently, our operations, future earnings and ultimate financial success could suffer irreparable harm due to our officers and director s ultimate lack of experience in our industry and with publicly-traded companies and their reporting requirements in general. - 10 - Table of Contents Risks Relating to the Company s Securities We do not intend to pay dividends on our common stock. We have no intention to declare or pay any cash dividend on our capital stock. We currently intend to retain any future earnings and do not expect to pay any dividends in the foreseeable future. Our securities have no prior market and an active trading market may not develop, which may cause our common stock to trade below the initial public offering price. Prior to this offering there has been no public market for our common stock. The initial public offering price for our common stock is fixed at $0.03 per share. This offering is being made on a self-underwritten, "best efforts" basis. The fixed price that our common stock is offered at pursuant to this offering is not indicative of the market price of our common stock after this offering. If you purchase shares of our common stock, you may not be able to resell those shares at or above the initial public offering price. We cannot predict the extent to which investor interest in us will lead to the development of an active trading market on or otherwise or how liquid that market might become. An active public market for our common stock may not develop or be sustained after the offering. If an active public market does not develop or is not sustained, it may be difficult for you to sell your shares of common stock at a price that is attractive to you, or at all. We may never have a public market for our common stock or may never trade on a recognized exchange. Therefore, you may be unable to liquidate your investment in our stock. There is no established public trading market for our securities. Our shares are not and have not been listed or quoted on any exchange or quotation system. In order for our shares to be quoted, a market maker must agree to file the necessary documents with the National Association of Securities Dealers, which operates the OTCQB. In addition, it is possible that such application for quotation may not be approved and even if approved it is possible that a regular trading market will not develop or that if it did develop, will be sustained. In the absence of a trading market, an investor may be unable to liquidate their investment. We may, in the future, issue additional shares of our common stock, which may have a dilutive effect on our stockholders. Our Certificate of Incorporation authorizes the issuance of 500,000,000 shares of common stock, of which 20,000,000 shares are issued and outstanding as of June 20, 2019. The future issuance of our common shares may result in substantial dilution in the percentage of our common shares held by our then existing stockholders. We may value any common stock issued in the future on an arbitrary basis. The issuance of common stock for future services or acquisitions or other corporate actions may have the effect of diluting the value of the shares held by our investors, and might have an adverse effect on any trading market for our common stock. We may issue shares of preferred stock in the future which may adversely impact your rights as holders of our common stock. Our Certificate of Incorporation authorizes us to issue up to 20,000,000 shares of preferred stock. Accordingly, our board of directors will have the authority to fix and determine the relative rights and preferences of preferred shares, as well as the authority to issue such shares, without further stockholder approval. At this time we have no shares of preferred stock issued and outstanding. Our preferred stock does not have any dividend, conversion, liquidation, or other rights or preferences, including redemption or sinking fund provisions. However, our board of directors could authorize the issuance of a series of preferred stock that would grant to holders preferred rights to our assets upon liquidation, the right to receive dividends before dividends are declared to holders of our common stock, and the right to the redemption of such preferred shares, together with a premium, prior to the redemption of the common stock. To the extent that we do issue such additional shares of preferred stock, your rights as holders of common stock could be impaired thereby, including, without limitation, dilution of your ownership interests in us. In addition, shares of preferred stock could be issued with terms calculated to delay or prevent a change in control or make removal of management more difficult, which may not be in your interest as holders of common stock. - 11 - Table of Contents Risks Relating to this Offering Investors cannot withdraw funds once invested and will not receive a refund. Investors do not have the right to withdraw invested funds. Subscription payments will be paid to AIS Holdings Group, Inc. and or our subsidiary, AIS Japan Co., Ltd. and held in our corporate bank account if the Subscription Agreements are in good order and the Company accepts the investor s investment. Therefore, once an investment is made, investors will not have the use or right to return of such funds. Mr. Abe will be able to sell his shares at any time during the duration of this offering. This may pose a conflict of interest since Mr. Abe is also selling shares on behalf of the company in this offering. It is possible that this conflict of interest could affect the ultimate amount of funds raised by the Company. This could negatively affect your investment. Mr. Abe is going to be selling shares on behalf of the Company in this offering. Mr. Abe will be able to simultaneously sell shares of stock for his own accord that are registered for resale pursuant to this offering. This conflict of interest could divert Mr. Abe s time and attention in selling shares on behalf of the Company since he will also be able to sell his own shares. This could result in less capital raised by the company, and a lessened desire for investors to purchase shares. As a result of this potential conflict of interest your investment could be adversely affected. Our stock price may be volatile or may decline regardless of our operating performance, and you may not be able to resell your shares at, or above, the initial public offering price and the price of our common stock may fluctuate significantly. After this offering, the market price for our common stock is likely to be volatile, in part because our shares have not been traded publicly. In addition, the market price of our common stock may fluctuate significantly in response to a number of factors, most of which we cannot control, including: changes in general economic or market conditions or trends in our industry or the economy as a whole and, in particular, in the leisure travel environment; changes in key personnel; entry into new geographic markets; actions and announcements by us or our competitors or significant acquisitions, divestitures, strategic partnerships, joint ventures or capital commitments; fluctuations in quarterly operating results, as well as differences between our actual financial and operating results and those expected by investors; the public s response to press releases or other public announcements by us or third parties, including our filings with the SEC; announcements relating to litigation; guidance, if any, that we provide to the public, any changes in this guidance or our failure to meet this guidance; changes in financial estimates or ratings by any securities analysts who follow our common stock, our failure to meet these estimates or failure of those analysts to initiate or maintain coverage of our common stock; the development and sustainability of an active trading market for our common stock; future sales of our common stock by our officers, directors and significant stockholders; and changes in accounting principles. These and other factors may lower the market price of our common stock regardless of our actual operating performance. As a result, our common stock may trade at prices significantly below the initial public offering price. If an active, liquid trading market for our common stock does not develop, you may not be able to sell your shares quickly or at or above the initial offering price. There has not been a public market for our common stock. An active and liquid trading market for our common stock may not develop or be sustained following this offering. The lack of an active market may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. The lack of an active market may also reduce the fair market value of your shares. An inactive market may also impair our ability to raise capital to continue to fund operations by selling shares and may impair our ability to acquire other companies or technologies by using our shares as consideration. You may not be able to sell your shares quickly or at or above the initial offering price. The initial public offering price will be determined by negotiations with the representatives of the underwriters. This price may not be indicative of the price at which our common stock will trade after this offering, and our common stock could trade below the initial public offering price. We may be subject to the penny stock rules which will make shares of our common stock more difficult to sell. We may be subject now and in the future to the SEC s "penny stock" rules if our shares of common stock sell below $5.00 per share. Penny stocks generally are equity securities with a price of less than $5.00. The penny stock rules require broker-dealers to deliver a standardized risk disclosure document prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson, and monthly account statements showing the market value of each penny stock held in the customer s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information must be given to the customer orally or in writing prior to completing the transaction and must be given to the customer in writing before or with the customer s confirmation. In addition, the penny stock rules require that prior to a transaction, the broker dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser s written agreement to the transaction. The penny stock rules are burdensome and may reduce purchases of any offerings and reduce the trading activity for shares of our common stock. As long as our shares of common stock are subject to the penny stock rules, the holders of such shares of common stock may find it more difficult to sell their securities. - 12 - Table of Contents We are selling the shares of this offering without an underwriter and may be unable to sell any shares. This offering is self-underwritten, which means that we are not going to engage the services of an underwriter to sell the shares. We intend to sell our shares through our Chief Executive Officer Takehiro Abe, who will receive no commissions. There is no guarantee that he will be able to sell any of the shares. Unless he is successful in selling all of the shares of our Company s offering, we may have to seek alternative financing to implement our business plan. Due to the lack of a trading market for our securities you may have difficulty selling any shares you purchase in this offering. We are not registered on any market or public stock exchange. There is presently no demand for our common stock and no public market exists for the shares being offered in this prospectus. We plan to contact a market maker immediately following the completion of the offering and apply to have the shares quoted on the OTCQB. The OTCQB is a regulated quotation service that display real-time quotes, last sale prices and volume information in over-the-counter securities. The OTCQB is not an issuer listing service, market or exchange. To be eligible for quotation on the OTCQB, issuers must remain current in their filings with the SEC or applicable regulatory authority. If we are not able to pay the expenses associated with our reporting obligations we will not be able to apply for quotation on the OTCQB. Market makers are not permitted to begin quotation of a security whose issuer does not meet this filing requirement. Securities already quoted on the OTCQB that become delinquent in their required filings will be removed following a 30 to 60 day grace period if they do not make their required filing during that time. We cannot guarantee that our application will be accepted or approved and our stock listed and quoted for sale. As of the date of this filing, there have been no discussions or understandings between the Company and anyone acting on our behalf, with any market maker regarding participation in a future trading market for our securities. If no market is ever developed for our common stock, it will be difficult for you to sell any shares you purchase in this offering. In such a case, you may find that you are unable to achieve any benefit from your investment or liquidate your shares without considerable delay, if at all. In addition, if we fail to have our common stock quoted on a public trading market, your common stock will not have a quantifiable value and it may be difficult, if not impossible, to ever resell your shares, resulting in an inability to realize any value from your investment. We will incur ongoing costs and expenses for SEC reporting and compliance. Without substantive revenue to cover such costs we may not be able to remain in compliance, making it difficult for investors to sell their shares, if at all. The estimated cost of this registration statement is $30,000. After the effective date of this prospectus, we will be required to file annual, quarterly and current reports, or other information with the SEC as provided by the Securities Exchange Act. We plan to contact a market maker immediately following the close of the offering and apply to have the shares quoted on the OTCQB. To be eligible for quotation, issuers must remain current in their filings with the SEC. In order for us to remain in compliance we will require future revenues to cover the cost of these filings, which could comprise a substantial portion of our available cash resources. The costs associated with being a publicly traded company in the next 12 months will be approximately $30,000. If we are unable to generate sufficient revenues to remain in compliance it may be difficult for you to resell any shares you may purchase, if at all. Also, if we are not able to pay the expenses associated with our reporting obligations we will not be able to apply for quotation on the OTCQB. - 13 - Table of Contents SUMMARY

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+ RISK FACTORS An investment in our common stock involves various risks. You should carefully consider the following risks and all of the other information contained in this prospectus before investing in our common stock. In addition, you should read and consider the risk factors associated with our business included in the documents incorporated by reference in this prospectus, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2018. See Where You Can Find More Information. We cannot assure you that any of the events discussed in the risk factors below will not occur. If these risks occur, the value of our securities could decline and you could lose some or all of your investment. Risks Related to Our Business Increased competition could adversely affect our business, results of operations and financial condition. Various competitive properties have opened or will be opening that may affect our flagship casino in Rhode Island, and perhaps our Tiverton property as well. In November 2011, the Expanded Gaming Act was signed into law in Massachusetts, which allowed up to three commercial destination resort casinos located in three geographically diverse regions across the state and a single slots facility for one location statewide. In February 2014, the Massachusetts Gaming Commission (the MGC ) awarded the slots-only gaming license to Plainridge Park Casino in Plainville, Massachusetts which opened in June 2015. In the third quarter of 2018, MGM Resorts International opened the $1.0 billion Springfield resort casino in Springfield, Massachusetts, and the multi-billion Encore Boston Harbor is scheduled to open in June 2019. We took various steps designed to enhance our competitive position in Rhode Island, including building a hotel adjacent to our Twin River casino property in Lincoln, Rhode Island, near Providence, Rhode Island, constructing a new facility in Tiverton, Rhode Island and obtaining regulatory approvals for changes in gaming operations. There can be no assurance that these steps will be effective, or what the ultimate effect of this additional competition will be. In addition, the Massachusetts law allows the MGC at its discretion to award one additional commercial casino license, limited to the southeast region of the Commonwealth. The MGC solicited public comment late in 2018 on this issue as it continues to evaluate whether to issue such license. Finally, construction of a tribal casino in Taunton, Massachusetts is currently on hold following a U.S. Department of the Interior ruling in September 2018 regarding the validity of the tribe s land in trust taking. The tribe has initiated litigation challenging this decision in the U.S. District Court for the District of Columbia. Further, a House bill has been passed in Congress that awards the land in trust to the tribe and prevents any further litigation, including pending cases, with regard to its status but has not been addressed yet in the Senate. The outcome of this litigation and the likelihood of the proposed legislation is inherently uncertain. The gaming industry is very competitive and increased competition, including through legislative legalization or expansion of gaming by states in or near where we own facilities or through Native American gaming facilities and internet gaming, could adversely affect our financial results. We will face significant competition in all of the areas in which we conduct our business. Increased competitive pressures may adversely affect our ability to continue to attract customers or affect our ability to compete efficiently. Several of the facilities where we conduct our business are located in jurisdictions that restrict gaming to certain areas and/or may be affected by state laws that currently prohibit or restrict gaming operations. We also face the risk that existing casino licensees will expand their operations and the risk that Native American gaming will continue to grow. Budgetary pressures faced by state governments could lead to intensified political pressures for the legalization of gaming in jurisdictions where it is currently prohibited. The legalization of gaming in such jurisdictions could be an expansion opportunity for our business, or create competitive pressures, depending on where the legalization occurs and our ability to capitalize on it. Our ability to attract customers to the existing casinos which we own could be significantly and adversely affected by the legalization or expansion of gaming in certain jurisdictions and by the development or expansion of Native American casinos in areas where our customers may visit. In addition, our competitors may refurbish, rebrand or expand their casino offerings, which could result in increased competition. Furthermore, changes in ownership may result in improved quality of our competitors facilities, which may make such facilities more competitive. TABLE OF CONTENTS We also compete with other forms of gaming and entertainment such as bingo, pull-tab games, card parlors, sports books, pari-mutuel or simulcast betting on horse and dog racing, state-sponsored lotteries, instant racing machines, VLTs (including racetracks that offer VLTs), video poker terminals and, in the future, we may compete with gaming or entertainment at other venues. Furthermore, competition from internet lotteries and other internet wagering gaming services, which allow their customers to wager on a wide variety of sporting events and play Las Vegas-style casino games from home, could divert customers from the facilities we own and thus adversely affect our business. Such internet wagering services are likely to expand in future years and become more accessible to domestic gamblers as a result of U.S. Department of Justice positions related to the application of federal laws to intrastate internet gaming and initiatives in some states to consider legislation to legalize intrastate internet wagering. The law in this area has been rapidly evolving, and additional legislative developments may occur at the federal and state levels that would accelerate the proliferation of certain forms of internet gaming in the United States. In addition, in May 2018, the U.S. Supreme Court struck down as unconstitutional the Professional and Amateur Sports Protection Act of 1992, a federal statute enacted to stop the spread of state-sponsored sports gambling. This decision has the effect of lifting federal restrictions on sports wagering and thus allows states to determine by themselves the legality of sports wagering. While new federal online gaming legislation has been introduced in Congress from time to time, there has been no federal legislative response to the U.S. Supreme Court s decision. As a result, Washington D.C., Nevada, Delaware, Mississippi, New Jersey, Pennsylvania, Rhode Island, West Virginia, New Mexico and Arkansas have passed legislation authorizing fixed-odds sports betting, and other states are expected to pass legislation authorizing sport betting in the near future. Our Rhode Island, Delaware and Mississippi properties now offer sports wagering pursuant to state law. We may also face competition from other gaming facilities which are able to offer sports wagering services following the enactment of applicable legislation. A law authorizing sports betting in New York was enacted in 2013, but regulations to implement that law have yet to be promulgated, and a measure to allow for full-scale sports betting failed in June 2018. Numerous states that border the states in which we operate have pending or proposed legislation which would allow for sports betting, including Connecticut, Massachusetts, Maryland, Louisiana, Tennessee, Oklahoma and Kansas, each of which could have an adverse effect on our financial results. Our gaming operations will rely heavily on technology services provided by third parties. In the event that there is an interruption of these services, it may have an adverse effect on our operations and financial condition. We, or one of our state regulatory bodies, engage a number of third parties to provide gaming operating systems for the facilities we own. As a result, we rely on such third parties to provide uninterrupted services in order to run our business efficiently and effectively. In the event one of these third parties experiences a disruption in its ability to provide such services (whether due to technological or financial difficulties or power problems), this may result in a material disruption at the casinos which we own and have a material effect on our business, operating results and financial condition. Any unscheduled interruption in our technology services is likely to result in an immediate, and possibly substantial, loss of revenues due to a shutdown of our gaming operations, cloud computing and lottery systems. Such interruptions may occur as a result of, for example, catastrophic events or rolling blackouts. Our systems are also vulnerable to damage or interruption from earthquakes, floods, fires, telecommunication failures, hurricanes, terrorist attacks, computer viruses, computer denial-of-service attacks and similar events. Our business is particularly sensitive to reductions in discretionary consumer spending. Consumer demand for casinos and casino hotel properties, such as ours, is sensitive to downturns in the economy and the associated impact on discretionary spending on leisure activities. Any adverse change in general economic conditions can adversely affect consumer spending, which can adversely affect our ability to generate revenues from operations. Adverse developments affecting economies throughout the world, including a general tightening of the availability of credit, increasing energy costs, rising prices, TABLE OF CONTENTS inflation, acts of war or terrorism, natural disasters, declining consumer confidence or significant declines in the stock market could lead to a reduction in discretionary spending on entertainment and leisure activities, which could adversely affect our business, financial condition, results of operations or prospects. Recessions have affected our business and financial condition, and economic conditions may continue to affect them in ways that currently cannot accurately be predicted. Economic recessions have had, and may continue to have, far reaching adverse consequences across many industries, including the gaming industry, which may adversely affect our business and financial condition. In the past decade, the U.S. economy has experienced tepid growth following the financial crisis in 2008 2009 and there appears to be an increasing risk of a recession due to international trade and monetary policy and other changes. Moreover, we will rely on the strength of regional and local economies for the performance of each of our properties. If the national economic recovery slows or stalls, the national economy experiences another recession or any of the relevant regional or local economies suffers a downturn, we may experience a material adverse effect on our business, results of operations or financial condition. We are subject to extensive state and local regulation and licensing, and gaming authorities have significant control over our operations, which could have an adverse effect on our business. The ownership and operation of casino gaming and horse racing facilities are subject to extensive state and local regulation, and regulatory authorities at the state and local levels have broad powers with respect to the licensing of these businesses and may revoke, suspend, condition, fail to renew or limit our gaming or other licenses, impose substantial fines and take other actions, each of which poses a significant risk to our business, results of operations and financial condition. We currently hold all state and local licenses and related approvals necessary to conduct our present operations, but must periodically apply to renew many of these licenses and registrations and have the suitability of certain of our directors, officers and employees renewed. There can be no assurance that we will be able to obtain such renewals or that we will be able to obtain future approvals that would allow us to expand our gaming operations. Any failure to maintain or renew existing licenses, registrations, permits or approvals would have a material adverse effect on us. Furthermore, if additional gaming laws or regulations are adopted, these regulations could impose additional restrictions or costs that could have a significant adverse effect on us. Any of the Rhode Island Department of Business Regulation and the Division of Lotteries of the Rhode Island Department of Revenue, the Mississippi Gaming Commission, the Delaware Lottery of the Department of Finance or the Colorado Racing Commission may, in their discretion, require certain holders of any securities issued by us to file applications, be investigated and be found suitable to own our securities if it has reason to believe that the security ownership would be inconsistent with the declared policies of its respective state. The Rhode Island regulatory authorities limit the ability of third parties to acquire (1) 5% or more of our common stock, unless the shareholder has been granted a gaming license or the ownership is otherwise approved by the Rhode Island regulatory authorities, (2) 20% or more of our common stock, unless the acquiring shareholder has been granted a gaming license by the Rhode Island regulatory authorities or such ownership is otherwise approved, or (3) as to passive institutional investors, generally 15% or more of our common stock, but in all cases the amount approved by the Rhode Island regulatory authorities with respect to that investor. Our charter and bylaws include various provisions designed to help implement these restrictions. The regulatory authorities of other states limit the ability of third parties to acquire more than specified percentages of our common stock unless the acquiring shareholder has been granted a license by regulatory authorities or such ownership is otherwise approved. Most states, including Colorado, Delaware, Mississippi and Rhode Island, have short-form licensing for passive institutional investors. The costs of any investigation conducted by any of these or other gaming authorities under these circumstances must be paid by the applicant, and refusal or failure to pay these charges may constitute grounds for a finding that the applicant is unsuitable to own the securities. If any of these or other gaming authorities determines that a person is unsuitable to own our securities, then, under the applicable gaming or horse racing laws and regulations, we could be sanctioned, including the loss of approvals, if, without the prior approval of the applicable gaming authority, we conduct certain business with the unsuitable person. TABLE OF CONTENTS Our officers, directors and key employees will also be subject to a variety of regulatory requirements and various licensing and related approval procedures in the various jurisdictions in which we manage gaming facilities. If any applicable gaming authority were to find any of our officers, directors or key employees unsuitable for licensing or unsuitable to continue having a relationship with it, we would have to sever all relationships with that person. Furthermore, the applicable gaming authority may require us to terminate the employment of any person who refuses to file appropriate applications. Either result could adversely affect our gaming operations. Applicable gaming laws and regulations may restrict our ability to issue certain securities, incur debt and undertake other financing activities. Such transactions would generally require notice and/or approval of applicable gaming authorities, and our financing counterparties, including lenders, might be subject to various licensing and related approval procedures in the various jurisdictions in which we manage gaming facilities. Applicable gaming laws further limit our ability to engage in certain competitive activities and impose requirements relating to the composition of our board of directors and senior management personnel. If state regulatory authorities were to find any person unsuitable with regard to his, her or its relationship to us or any of our subsidiaries, we would be required to sever our relationship with that person, which could materially adversely affect our business. We are subject to numerous other federal, state and local laws that may expose us to liabilities or have a significant adverse impact on our operations. Changes to any such laws could have a material adverse effect on our operations and financial condition. Our business is subject to a variety of other federal, state and local laws. These laws include restrictions and conditions concerning alcoholic beverages, environmental matters, employees, currency transactions, taxation, zoning and building codes and marketing and advertising. Such laws could change or could be interpreted differently in the future, or new laws could be enacted. Changes to any of the laws to which we are subject, new laws or material differences in interpretations by courts or governmental authorities could have an adverse effect on our business, financial condition, results of operations or prospects. Many of our employees, especially those that interact with our customers, receive a base salary or wage that is established by applicable state and federal laws that establish a minimum hourly wage that is, in turn, supplemented through tips and gratuities from customers. From time to time, state and federal lawmakers have increased the minimum wage. It is difficult to predict when such increases may take place. Any such change to the minimum wage could have a material adverse effect on our business, financial condition, results of operations and prospects. The manufacture and sale of alcoholic beverages is a highly regulated and taxed business. Federal, state and local laws govern the production and distribution of beer, including permitting, licensing, trade practices, labeling, advertising, marketing, distributor relationships and related matters. Federal, state and local governmental entities also levy various taxes, license fees and other similar charges and may require bonds to ensure compliance with applicable laws and regulations. Failure to comply with applicable federal, state or local laws could result in higher taxes, penalties, fees and suspension or revocation of permits, licenses or approvals and could have a material adverse effect on our business, financial condition, results of operations or prospects. From time to time, local and state lawmakers, as well as special interest groups, have proposed legislation that would increase the federal and/or state excise tax on alcoholic beverages or certain types of alcoholic beverages. If federal or state excise taxes are increased, we may have to raise prices to maintain our current profit margins. Higher taxes may reduce overall demand for beer, thus negatively impacting sales of our beer. Further federal or state regulation may be forthcoming that could further restrict the distribution and sale of alcohol products. Any material increases in taxes or fees, or the adoption of additional taxes, fees or regulations could have a material adverse effect on our business, financial condition, results of operations or prospects. In addition, each restaurant we operate must obtain a food service license from local authorities. Failure to comply with such regulations could cause our licenses to be revoked or our related restaurant business or businesses to be forced to cease operations. Moreover, state liquor laws may prevent the expansion of restaurant operations into certain geographies. TABLE OF CONTENTS Any violation of applicable anti-money laundering laws or regulations could adversely affect our business, financial condition, results of operations or prospects. We handle significant amounts of cash in our operations and are subject to various reporting and anti-money laundering laws and regulations. Recently, U.S. governmental authorities have evidenced an increased focus on compliance with anti-money laundering laws in the gaming industry. Any violation of anti-money laundering laws could have a material adverse effect on our business, financial condition, results of operations or prospects. Internal control policies and procedures and employee training and compliance programs that we have implemented to deter prohibited practices may not be effective in prohibiting our employees, contractors or agents from violating or circumventing our policies and the law. If we or our employees or agents fail to comply with applicable laws or our policies governing our operations, we may face investigations, prosecutions and other legal proceedings and actions which could result in civil penalties, administrative remedies and criminal sanctions. Any such government investigations, prosecutions or other legal proceedings or actions could have a material adverse effect on our business, financial condition, results of operations or prospects. Failure to comply with the terms of the Regulatory Agreement could result in a breach and could harm our business. We are currently a party to the Regulatory Agreement with Rhode Island regulatory agencies. The Regulatory Agreement imposes certain affirmative and negative covenants on us. A failure to comply with the provisions in the Regulatory Agreement could subject us to injunctive or monetary remedies, payments to the Rhode Island regulatory agencies and ultimately the revocation or suspension of our licenses to operate in Rhode Island. Any such remedy could adversely affect our business, financial condition and results of operations. Among other things, the Regulatory Agreement prohibits us and our subsidiaries from owning, operating, managing or providing gaming specific goods and services to any gaming facilities in Rhode Island (other than Twin River Casino Hotel and Tiverton Casino Hotel), Massachusetts, Connecticut or New Hampshire, which may adversely affect our growth and opportunity in those states. Our VLTs and table games hold percentages may fluctuate. The gaming industry is characterized by an element of chance and our casino guests winnings depend on a variety of factors, some of which are beyond our control. In addition to the element of chance, hold percentages are affected by other factors, including players skill and experience, the mix of games played, the financial resources of players, the volume of bets placed and the amount of time played. The variability of our hold percentages has the potential to adversely affect our business, financial condition, results of operations or prospects. We conduct our business in an industry that is subject to high taxes and may be subject to higher taxes in the future. In gaming jurisdictions in which we conduct our business, with the exception of Rhode Island, state and local governments raise considerable revenues from taxes based on casino revenues and operations. In Rhode Island, the state takes all of the gaming win that comes into our Rhode Island operations and then pays us a percentage of the gaming win. We will also pay property taxes, occupancy taxes, sales and use taxes, payroll taxes, franchise taxes and income taxes. Our profitability will depend on generating enough revenues to cover variable expenses, such as payroll and marketing, as well as largely fixed expenses, such as property taxes and interest expense. From time to time, state and local governments have increased gaming taxes and such increases could significantly impact the profitability of gaming operations. Our operations in Delaware, Colorado and Mississippi are generally subject to significant revenue-based taxes and fees in addition to normal federal, state and local income taxes, and such taxes and fees are subject to increase at any time. In addition, from time to time, federal, state and local legislators and officials have proposed changes in tax laws, or in the administration of such laws, affecting the gaming industry. Further, worsening economic conditions could intensify the efforts of Delaware, Colorado and Mississippi and applicable local governments to raise revenues through increases in gaming taxes and/or property taxes. It is not possible to determine with certainty the likelihood of changes in tax laws in these jurisdictions or in the administration of such laws. Such changes, if adopted, could adversely affect our TABLE OF CONTENTS business, financial condition, results of operations or prospects. The large number of state and local governments with significant current or projected budget deficits makes it more likely that those governments that currently permit gaming will seek to fund such deficits with new or increased gaming taxes and/or property taxes, and worsening economic conditions could intensify those efforts. Any material increase, or the adoption of additional taxes or fees, could adversely affect our future financial results. There can be no assurance that governments in jurisdictions in which we conduct our business, or the federal government, will not enact legislation that increases gaming tax rates. General economic pressures have the potential to reduce revenues of state governments from traditional tax sources, which may cause state legislatures or the federal government to be more inclined to increase gaming tax rates. We are subject to risks associated with labor relations, labor costs and labor disruptions. We are subject to the costs and risks generally associated with labor disputes and organizing activities related to unionized labor. From time to time, our operations may be disrupted by strikes, public demonstrations or other coordinated actions and publicity. We may incur increased legal costs and indirect labor costs as a result of contractual disputes, negotiations or other labor-related disruptions. We have collective bargaining agreements applicable to 39% of our employees as of March 31, 2019. We have 12 collective bargaining agreements with terms ranging between three to five years generally. These agreements are based solely in Rhode Island. We may also face organizing activities that could result in additional employees becoming unionized. Furthermore, collective bargaining agreements may limit our ability to reduce the size of our workforce during an economic downturn, which could put us at a competitive disadvantage. Our obligation to fund multiemployer defined benefit plans to which we are a party adversely affects us. We must contribute to a number of multiemployer defined benefit pension plans under the terms of collective-bargaining agreements that cover certain union-represented employees. The risks of participating in these multiemployer plans are different from single-employer plans in the following aspects: assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers; if a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers; and if we choose to stop participating in some of our multiemployer plans, we may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability. In addition, the funding obligations for our pension plans will be impacted by the performance of the financial markets, particularly the equity markets, and interest rates. Funding obligations are determined by government regulations and are measured each year based on the value of assets and liabilities on a specific date. If the financial markets do not provide the long-term returns that are expected, we could be required to make larger contributions. The equity markets can be very volatile and, therefore, our estimate of future contribution requirements can change dramatically in relatively short periods of time. Similarly, changes in interest rates and legislation enacted by governmental authorities can impact the timing and amounts of contribution requirements. An adverse change in the funded status of the plans could significantly increase our required contributions in the future and adversely impact our liquidity. In 2018, we made a $1.8 million one-time contribution, which included interest and penalties on one of our multiemployer pension plans. The casino, hotel and hospitality industry is capital intensive and we may not be able to finance development, expansion and renovation projects, which could put us at a competitive disadvantage. Our casino and hotel properties have an ongoing need for renovations and other capital improvements to remain competitive, including room refurbishments, amenity upgrades and replacement, from time to time, of furniture, fixtures and equipment. We may also need to make capital expenditures to comply with applicable laws and regulations. Construction projects entail significant risks, which can substantially increase costs or delay completion of a project. Such risks include shortages of materials or skilled labor, TABLE OF CONTENTS unforeseen engineering, environmental or geological problems, work stoppages, weather interference and unanticipated cost increases. Most of these factors are beyond our control. In addition, difficulties or delays in obtaining any of the requisite licenses, permits or authorizations from regulatory authorities can increase the cost or delay the completion of an expansion or development. Significant budget overruns or delays with respect to expansion and development projects could adversely affect our business and our results of operations. Renovations and other capital improvements of casino properties in particular require significant capital expenditures. In addition, any such renovations and capital improvements usually generate little or no cash flow until the projects are completed. We may not be able to fund such projects solely from cash provided from operating activities. Consequently, we may have to rely upon the availability of debt or equity capital to fund renovations and capital improvements, and our ability to carry them out will be limited if we cannot obtain satisfactory debt or equity financing, which will depend on, among other things, market conditions. We cannot assure you that we will be able to obtain additional equity or debt financing on favorable terms or at all. Our failure to renovate and maintain gaming and entertainment venues from time to time may put us at a competitive disadvantage to gaming and entertainment venues offering more modern and better maintained facilities, which could adversely affect our business, financial condition, results of operations or prospects. Because we will be heavily dependent upon hotel/casino and related operations that are conducted in certain regions, we will be subject to greater risks than a company that is geographically or otherwise more diversified. We are heavily dependent upon hotel/casino and related operations that are conducted in Rhode Island, Mississippi and Delaware for all of our cash flow. As a result, we are subject to a greater degree of risk than a gaming company that has greater geographical diversity. The risks to which we may have a greater degree of exposure include the following: local economic and competitive conditions; inaccessibility due to weather conditions, road construction or closure of primary access routes; changes in local and state governmental laws and regulations, including gaming laws and regulations; natural and other disasters, including earthquakes, hurricanes and flooding; a decline in the number of residents in or near, or visitors to, our operations; an increase in gaming activities in neighboring jurisdictions; and a decrease in gaming activities at any of our facilities. Any of the factors outlined above could adversely affect our ability to generate sufficient cash flow to make payments on our outstanding indebtedness. We may not realize the anticipated benefits from our acquisitions, including the Dover Acquisition. We cannot assure you that our acquisition of Dover Downs, our proposed acquisition in Black Hawk, Colorado or any future acquisitions will enhance our financial performance. Our ability to achieve the expected benefits of any acquisitions will depend on, among other things, our ability to effectively translate our strategies into revenue, our ability to retain and assimilate the acquired businesses employees, our ability to retain customers and suppliers on terms similar to those in place with the acquired businesses, the adequacy of our implementation plans, our ability to maintain our financial and internal controls and systems as we expand our operations, the ability of our management to oversee and operate effectively the combined operations and our ability to achieve desired operating efficiencies and revenue goals. The integration of the businesses that we acquire might also cause us to incur unforeseen costs, which would lower our future earnings and would prevent us from realizing the expected benefits of such acquisitions. Failure to achieve these anticipated benefits could result in decreases in the amount of expected revenues and diversion of management s time and energy and could adversely affect our business, financial condition, results of operations or prospects. TABLE OF CONTENTS Our acquisition strategy may adversely affect our business. A portion of our past growth has been achieved through acquisitions of other gaming companies and we expect to continue to pursue acquisitions. There are risks related to acquisitions, including those described in the preceding risk factor. To the extent that our future growth includes acquisitions, we cannot assure you that we will not overpay for acquisitions, we may lose key employees of acquired companies or we may fail to achieve potential synergies or successful expansion into new geographies as a result of our acquisitions. Therefore, future acquisitions, if any, may adversely affect our business, financial condition, results of operations or prospects, particularly in periods immediately following the consummation of those transactions while the operations of the acquired business are being integrated with our operations. Achieving the benefits of acquisitions depends on timely, efficient and successful execution of a number of post-acquisition events, including: maintaining the customer and supplier base; optimizing operations; coordinating administrative and finance functions; and integrating management information systems and personnel. The integration process could divert the attention of management. Any difficulties or problems encountered in the transition process could adversely affect our business, financial condition, results of operations or prospects. In particular, the integration process may temporarily redirect resources previously focused on increasing profitability. In addition, the process of combining companies could cause the interruption of, or a loss of momentum and operating profits in, the activities of the respective businesses, which could adversely affect their combined operations. In connection with acquisitions of businesses in the future we may decide to consolidate the operations of any acquired businesses with our existing operations or make other changes with respect to the acquired businesses, which could result in special charges or other expenses. Our results of operations also may be adversely affected by expenses we incur in making acquisitions, by amortization of acquisition-related intangible assets with definite lives and by additional depreciation and amortization attributable to acquired assets. Any of the businesses we acquire may also have liabilities or adverse operating issues, including some that we fail to discover before the acquisition, and our indemnity for such liabilities may also be limited. Additionally, our ability to make any future acquisitions may depend upon obtaining additional financing. We may not be able to obtain additional financing on acceptable terms or at all. To the extent that we seek to acquire other businesses in exchange for our common stock, fluctuations in our stock price could adversely affect our ability to complete acquisitions. We may incur impairments to goodwill, indefinite-lived intangible assets or long-lived assets. We monitor the recoverability of our long-lived assets, such as buildings, and evaluate their carrying value for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be fully recoverable. We annually review goodwill to determine if impairment has occurred. Additionally, interim reviews are performed whenever events or changes in circumstances indicate that impairment may have occurred. If the testing performed indicates that impairment has occurred, we are required to record a non-cash impairment charge for the difference between the carrying value and fair value of the long-lived assets or the carrying value and fair value of the reporting unit, in the period the determination is made. The testing of long-lived assets and goodwill for impairment requires us to make estimates that are subject to significant assumptions about our future revenue, profitability, cash flows, fair value of assets and liabilities, weighted average cost of capital, as well as other assumptions. Changes in these estimates, or changes in actual performance compared with these estimates, may affect the fair value of long-lived assets or reporting unit, which may result in an impairment charge. We cannot accurately predict the amount or timing of any impairment of assets. Should the value of long-lived assets or goodwill become impaired, our financial condition or results of operations may be adversely affected. TABLE OF CONTENTS Our debt agreements contain restrictive covenants that may limit our operating flexibility. Our credit documents include financial and other covenants. Our ability to comply with these provisions may be affected by general economic conditions, industry conditions and other events beyond our control. There can be no assurance that we will be able to comply with these covenants. The failure to comply with a financial covenant or other restrictions contained in the agreements governing such indebtedness may result in an event of default. An event of default could result in acceleration of some or all of the applicable indebtedness and the inability to borrow additional funds. We do not have, and cannot be certain we would be able to obtain, sufficient funds to repay any such indebtedness if it is accelerated. Additionally, our future debt agreements might contain numerous covenants imposing financial and operating restrictions on our business. These restrictions might affect our ability to operate our business, might limit our ability to take advantage of potential business opportunities as they arise and might adversely affect the conduct of our current business, including by restricting our ability to finance future operations and capital needs and limiting our ability to engage in other business activities. Our existing and future indebtedness may limit our operating and financial flexibility. As of June 12, 2019, we have approximately $700 million of outstanding indebtedness, including $400 million of Senior Notes governed by an indenture and $300 million of secured indebtedness provided under a bank credit agreement. This indebtedness may have important negative consequences for us, including requirements that we make payments of principal and interest, as well as prepayments in certain circumstances, and limitations on our ability to take certain actions. We are or may become involved in legal proceedings that, if adversely adjudicated or settled, could impact our business and financial condition. From time to time, we are named in lawsuits or other legal proceedings relating to our businesses. In particular, we are subject to the risk of lawsuits filed by customers, past and present employees, shareholders, competitors, business partners and others in the ordinary course of business. As with all legal proceedings, no assurances can be given as to the outcome of these matters. Moreover, legal proceedings can be expensive and time consuming, and we may not be successful in defending or prosecuting these lawsuits, which could result in settlements or damages that could adversely affect our business, financial condition, results of operations or prospects. We are subject to extensive environmental regulation, which creates uncertainty regarding future environmental expenditures and liabilities. We are subject to various federal, state and local environmental laws that govern activities that may have adverse environmental effects, such as discharges to air and water, as well as the management and disposal of solid, animal and hazardous wastes and exposure to hazardous materials. These laws which are complex and subject to change, include United States Environmental Protection Agency regulations. In addition, our horseracing facility in Colorado is subject to state laws and regulations that address the impacts of manure and wastewater generated by Concentrated Animal Feeding Operations ( CAFO ) on water quality, including, but not limited to, storm water discharges. CAFO regulations include permit requirements and water quality discharge standards. Enforcement of CAFO regulations has been receiving increased governmental attention. Compliance with these and other environmental laws can, in some circumstances, require significant capital expenditures. For example, we may incur future costs under existing and new laws and regulations pertaining to storm water and wastewater management at our racetracks. Moreover, violations can result in significant penalties and, in some instances, interruption or cessation of operations. We are also subject to laws that create liability and cleanup responsibility for releases of regulated materials into the environment. Certain of these laws and regulations impose strict, and under certain circumstances joint and several, liability on a current or previous owner or operator of property for the costs of remediating regulated materials on or emanating from our property. The costs of investigation, remediation or removal of those substances may be substantial. The presence of, or failure to remediate properly, such materials may adversely affect the ability to sell or rent such property or to borrow funds using such property as collateral. Additionally, as an owner or manager of real property, we could be TABLE OF CONTENTS subject to claims by third parties based on damages and costs resulting from environmental contamination at or emanating from third party sites. These laws typically impose clean-up responsibility and liability without regard to whether the owner or manager knew of or caused the presence of the contaminants and the liability under those laws has been interpreted to be joint and several unless the harm is divisible and there is a reasonable basis for allocation of the responsibility. In addition, environmental requirements address the impacts of development on wetlands. The possibility exists that contamination, as yet unknown, may exist on our properties. There can be no assurance that we will not incur expenditures for environmental investigations or remediation in the future. We are largely dependent on the skill and experience of management and key personnel. We expect to experience strong competition in hiring and retaining qualified property and corporate management personnel, including competition from Native American gaming facilities that are not subject to the same taxation regimes as we are and therefore may be willing and able to pay higher rates of compensation. From time to time, a number of vacancies in key corporate and property management positions can be expected. If we are unable to successfully recruit and retain qualified management personnel at our facilities or at the corporate level, our results of operations could be adversely affected. In addition, our officers, directors and key employees are required to file applications with the gaming authorities in each of the jurisdictions in which we conduct our business and are required to be licensed or found suitable by these gaming authorities. If the gaming authorities were to find an officer, director or key employee unsuitable for licensing or unsuitable to continue having a relationship with us, we would have to sever all relationships with that person. Furthermore, the gaming authorities may require us to terminate the employment of any person who refuses to file appropriate applications. Either result could significantly impair our operations. The time and effort needed to successfully complete the application process could impact our ability to attract, hire and retain top talent. We expect to incur increased costs and are now subject to additional regulations and requirements as a result of being a public company, and our management may be required to devote substantial time to new compliance matters, which could lower our profits or make it more difficult for us to run our business. As a public company, we are likely to incur significant legal, accounting and other expenses that we have not incurred historically, and these expenses may increase even more after we are no longer an emerging growth company. We anticipate incurring costs associated with the Sarbanes-Oxley Act of 2002 ( Sarbanes-Oxley Act ) and related rules implemented by the SEC and the NYSE where we are traded. The expenses incurred by public companies generally for reporting and corporate governance purposes have been increasing. We expect these rules and regulations to increase our legal and financial costs and to make some activities more time-consuming and costly, although we are currently unable to estimate these costs with any degree of certainty. In addition, we will not be a smaller reporting company or a controlled company and, as such will not be able to take advantage of the scaled disclosure requirements. Our management will need to devote a substantial amount of time to ensure that we comply with all of these requirements. As a public company we are obligated to develop and maintain proper and effective internal control over financial reporting and any failure to do so may adversely affect investor confidence in us and, as a result, the value of our common stock. Following a transition period afforded to companies that were not previously SEC reporting companies, we will be required by Section 404 of the Sarbanes-Oxley Act to furnish a report by management on, among other things, our assessment of the effectiveness of our internal control over financial reporting. This assessment will need to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting. We are also required to disclose significant changes made in our internal control procedures on a quarterly basis. The process of designing, implementing and testing internal controls over financial reporting is time consuming, costly and complicated. However, for as long as we remain an emerging growth company as defined in the JOBS Act, we intend to take advantage of the exemption permitting us to avoid the independent registered public accounting firm attestation requirement. TABLE OF CONTENTS Our independent registered public accounting firm believes that we had a material weakness in internal control over financial reporting when we prepared financial statements as a private company relating to non-cash stock-based compensation. We remediated the issue in 2018 by retaining an accounting consulting firm to provide additional depth and breadth in our technical accounting and financial reporting capabilities which we intend to continue to retain until our permanent technical accounting resources, most of which have been identified or hired, are fully on-boarded. No assurance can be given as to the timing for us to recruit additional qualified accounting and finance personnel to provide needed levels of expertise in our internal accounting function. If we are unable to successfully remediate any future deficiencies or weaknesses in our internal control over financial reporting, or if we identify any additional deficiencies or weaknesses, the accuracy and timing of our financial reporting could be adversely affected, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, investors may lose confidence in our financial reporting and/or our stock price may decline as a result. Our business may be harmed from cybersecurity risk and we may be subject to legal claims if there is loss, disclosure or misappropriation of or access to our guests , business partners or our own information or other breaches of information security. We make extensive use of online services and centralized data processing, including through third party service providers. We have experienced cyber-attacks, attempts to breach our systems and other similar incidents. The secure maintenance and transmission of customer information will be a critical element of our operations. Our information technology and other systems that maintain and transmit guest information, or those of service providers, business partners or employee information may be compromised by a malicious third party penetration of our network security, or that of a third party service provider or business partner, or impacted by intentional or unintentional actions or inactions by our employees, or those of a third party service provider or business partner. As a result, our guests information may be lost, disclosed, accessed or taken without our guests consent. In addition, third party service providers and other business partners process and maintain proprietary business information and data related to our employees, guests, suppliers and other business partners. Our information technology and other systems that maintain and transmit this information, or those of service providers or business partners, may also be compromised by a malicious third party penetration of our network security or that of a third party service provider or business partner, or impacted by intentional or unintentional actions or inactions by our employees or those of a third party-service provider or business partner. As a result, our business information, guest, supplier and other business partner data may be lost, disclosed, accessed or taken without consent. Any such loss, disclosure or misappropriation of, or access to, guests or business partners information or other breach of our information security can result in legal claims or legal proceedings, including regulatory investigations and actions, may have a serious impact on our reputation and may adversely affect our business, operating results and financial condition. Furthermore, the loss, disclosure or misappropriation of our business information may adversely affect our reputation, business, financial condition, results of operations or prospects. We are subject to risks relating to mechanical failure. All of our facilities will generally be subject to the risk that operations could be halted for a temporary or extended period of time, as the result of casualty, forces of nature, mechanical failure or extended or extraordinary maintenance, among other causes. In addition, our gaming operations could be damaged or halted due to extreme weather conditions. These risks are particularly pronounced at our Hard Rock Biloxi property because of its location adjacent to water and the potential for hurricanes in the Gulf of Mexico. Our operations have historically been subject to seasonal variations and quarterly fluctuations in operating results, and we can expect to experience such variations and fluctuations in the future. Historically, our gaming facilities have typically been subject to seasonal variations. All of our facilities are exposed to reductions in capabilities due to weather, especially snowfall in the winter and severe storms in hurricane season. TABLE OF CONTENTS Our results of operations and financial condition could be materially adversely affected by the occurrence of natural disasters, such as hurricanes, or other catastrophic events, including war and terrorism. Natural disasters, such as major hurricanes, typhoons, floods, fires and earthquakes, could adversely affect our business and operating results. Hurricanes are common in the areas in which our Mississippi property is located, and the severity of such natural disasters is unpredictable. For example, in 2005, Hurricane Katrina destroyed the Hard Rock Biloxi before its opening and the property had to be rebuilt. In 2017, customer traffic to the Hard Rock Biloxi was negatively impacted by Hurricanes Harvey and Nate. In addition, catastrophic events, such as terrorist attacks in the United States and elsewhere, have had a negative effect on travel and leisure expenditures, including lodging, gaming (in some jurisdictions) and tourism. We cannot accurately predict the extent to which such events may affect us, directly or indirectly, in the future. There can be no assurance that we will be able to obtain or choose to purchase any insurance coverage with respect to occurrences of terrorist acts and any losses that could result from these acts. If there is a prolonged disruption at our facilities due to natural disasters, terrorist attacks or other catastrophic events, our results of operations and financial condition would be adversely affected. We may incur property and other losses that are not adequately covered by insurance. Although we maintain insurance that we believe is customary and appropriate for our business, we cannot assure you that insurance will be available or adequate to cover all losses and damage to which our business or our assets might be subjected. The lack of adequate insurance for certain types or levels of risk could expose us to significant losses in the event that a catastrophe occurred for which we are uninsured or underinsured. Any losses we incur that are not adequately covered by insurance may decrease our future operating income, require us to find replacements or repairs for destroyed property and reduce the funds available for payments of our obligations. We renew our insurance policies on an annual basis. The cost of coverage may become so high that we may need to further reduce our policy limits, further increase our deductibles or agree to certain exclusions from our coverage. Risks Related to Our Common Stock and this Offering The market price of our common stock could fluctuate significantly. There have been periods of time when the U.S. securities markets have experienced significant price fluctuations. These price fluctuations may be day-to-day or they may last for extended periods of time. Significant price fluctuations in the securities markets as a whole may cause the market price of our common stock to be volatile and subject to wide fluctuations. Prior to March 28, 2019, we were a privately held company without an active public market for our shares. The trading volume of our common stock may fluctuate and cause significant price variations to occur. Additional factors that could cause fluctuations in, or adversely affect, our stock price or trading volume include: general market and economic conditions, including market conditions in the gaming and hotel industries; actual or expected variations in quarterly operating results; differences between actual operating results and those expected by investors and analysts; sales of our common stock by current shareholders seeking liquidity in the public market; changes in recommendations by securities analysts; operations and stock performance of competitors; accounting charges, including charges relating to the impairment of goodwill; significant acquisitions or strategic alliances by us or by competitors; sales of our common stock by our directors and officers or significant investors; and recruitment or departure of key personnel. TABLE OF CONTENTS There can be no assurance that the stock price of our common stock will not fluctuate or decline significantly in the future. In addition, the stock market in general can experience considerable price and volume fluctuations that may be unrelated to our performance. Our largest shareholder owns a meaningful percentage of our outstanding common stock, which could limit the ability of other shareholders to influence corporate matters. Before giving effect to any sales contemplated hereby, our largest shareholder beneficially owns 31.8% of our outstanding common stock. As a result, this shareholder may be able to exert influence over our affairs and policies. This concentrated ownership could limit the ability of the remaining shareholders to influence corporate matters, and the interests of the large shareholder may not coincide with our interests or the interests of the remaining shareholders. The concentration of ownership may also have the effect of delaying, preventing or deterring a change of control. Any decision to pay dividends in the future will be at the discretion of our board of directors The board of directors approved the payment of quarterly dividends at the rate of $0.10 per share, with the first dividend payable on July 23, 2019 to shareholders of record as of the close of business on July 9, 2019. However, any determination to pay future dividends is at the discretion of our board and depends upon, among other factors, our earnings, cash requirements, financial condition, requirements to comply with the covenants under our debt instruments and the Regulatory Agreement, legal considerations, and other factors that our board deems relevant. As an emerging growth company, we intend to take advantage of reduced governance requirements applicable to emerging growth companies, which could result in our common stock being less attractive to investors. We are an emerging growth company, as defined in the JOBS Act and we intend to take advantage of certain exemptions from various SEC 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 the Sarbanes-Oxley Act. We cannot accurately 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, our stock price may be more volatile and it may be difficult for us to raise additional capital as and when we need it. If we are unable to raise additional capital as and when we need it, our financial condition and results of operations may be materially and adversely affected. We may take advantage of these reporting exemptions until we are no longer an emerging growth company, which in certain circumstances could be for up to five years. We will remain an emerging growth company until the earliest of (1) the last day of the first fiscal year in which our annual gross revenues exceed $1.07 billion, (2) the date that we become a large accelerated filer as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the Exchange Act ), which would occur if the market value of our shares that are held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, (3) the date on which we have issued more than $1.0 billion in nonconvertible debt during the preceding three-year period and (4) the last day of our fiscal year containing the fifth anniversary of the date on which shares of our common stock became publicly traded in the United States, or December 31, 2024. Future sales of Twin River common stock in the public market by existing holders of Twin River common stock could cause volatility in the price of Twin River common stock or cause the share price to fall. Before giving effect to any sales contemplated hereby, and based on the 41,147,497 shares outstanding as of June 12, 2019, 35% of our outstanding shares is beneficially owned by our executive officers and our directors. Each of our executive officers and our directors and the selling shareholders will enter into a lock-up agreement with the underwriters, which regulates their sales of our common stock for a period of 45 days for non-affiliates, 60 days for affiliates and 90 days for Standard General L.P., subject to certain exceptions. Sales of substantial amounts of our common stock in the public market after this offering, or the perception that such sales will occur, could adversely affect the market price of our common stock and the market price of Twin River common stock could be extremely volatile. TABLE OF CONTENTS In addition, as of June 12, 2019, we have 1,646,676 shares that are reserved for issuance under our employee stock plans, which shares may be issued from time to time upon the vesting or exercise, as applicable, of various equity awards. TABLE OF CONTENTS

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+ Risk Factors An investment in our securities involves a high degree of risk. You should carefully consider the risks described below before making an investment decision. Our business, prospects, financial condition, or operating results could be harmed by any of these risks, as well as other risks not currently known to us or that we currently consider immaterial. The trading price of our securities could decline due to any of these risks, and, as a result, you may lose all or part of your investment. Risks Related to our Business and Operations Our business is cyclical in nature and a slowdown in the economic recovery or a decrease in general economic activity could have a material adverse effect on our revenues and operating results. Substantially all of our customer base comes from the commercial, infrastructure and residential construction sectors. A worsening of economic conditions or a decrease in available capital for investments could cause weakness in our end markets, cause declines in construction and industrial activity, and adversely affect our revenue and operating results. The following factors, among others, may cause weakness in our end markets, either temporarily or long-term: the depth and duration of an economic downturn and lack of availability of credit; uncertainty regarding global, regional or sovereign economic conditions; reductions in corporate spending for plants and facilities or government spending for infrastructure projects; the cyclical nature of our customers businesses, particularly those operating in the commercial, infrastructure and residential construction sectors; an increase in the cost of construction materials; a decrease in investment in certain of our key geographic regions; an increase in interest rates; an overcapacity in the businesses that drive the need for construction; adverse weather conditions, which may temporarily affect a particular region or regions; reduced construction activity in our end markets; terrorism or hostilities involving the United States or the United Kingdom; change in structural construction designs of buildings (e.g., wood versus concrete); negative impact on our U.K. business as a result of Brexit; and oversupply of equipment or new entrants into the market causing pricing pressure. A downturn in any of our end markets in one or more of our geographic regions caused by these or other factors could have a material adverse effect on our business, financial conditions, results of operations and cash flows. Our business is seasonal and subject to adverse weather. Since our business is primarily conducted outdoors, erratic weather patterns, seasonal changes and other weather related conditions affect our business. Adverse weather conditions, including hurricanes and tropical storms, cold weather, snow, and heavy or sustained rainfall, reduce construction activity, restrict the demand for our products and services, and impede our ability to deliver and pump concrete efficiently or at all. In addition, severe drought conditions can restrict available water supplies and restrict production. Consequently, these events could adversely affect our business, financial condition, results of operations, liquidity and cash flows. Our revenue and operating results have varied historically from period to period and any unexpected periods of decline could result in an overall decline in our available cash flows. Table of Contents Our revenue and operating results have varied historically from period to period and may continue to do so. We have identified below certain of the factors that may cause our revenue and operating results to vary: seasonal weather patterns in the construction industry on which we rely, with activity tending to be lowest in the winter and spring; the timing of expenditure for maintaining existing equipment, new equipment and the disposal of used equipment; changes in demand for our services or the prices we charge due to changes in economic conditions, competition or other factors; changes in the interest rates applicable to our variable rate debt, and the overall level of our debt; fluctuations in fuel costs; general economic conditions in the sectors where we operate; the cyclical nature of our customers businesses; price changes in response to competitive factors; other cost fluctuations, such as costs for employee-related compensation and benefits; labor shortages, work stoppages or other labor difficulties and labor issues in trades on which our business may be dependent in particular regions; potential enactment of new legislation affecting our operations or labor relations; timing of acquisitions and new branch openings and related costs; possible unrecorded liabilities of acquired companies and difficulties associated with integrating acquired companies into our existing operations; changes in the exchange rate between the United States dollar and Great Britain pound sterling; potential increased demand from our customers to develop and provide new technological services in our business to meet changing customer preferences; our ability to control costs and maintain quality; our effectiveness in integrating new locations and acquisitions; and possible write-offs or exceptional charges due to changes in applicable accounting standards, goodwill impairments, reorganizations or restructurings, obsolete or damaged equipment or the refinancing of our existing debt. Our business is highly competitive and competition may increase, which could have a material adverse effect on our business. The concrete pumping industry is highly competitive and fragmented. Many of the markets in which we operate are served by several competitors, ranging from larger regional companies to small, independent businesses with a limited fleet and geographic scope of operations. Some of our principal competitors may have more flexible capital structures or may have greater name recognition in one or more of our geographic markets and may be better able to withstand adverse market conditions within the industry. We generally compete on the basis of, among other things, quality and breadth of service, expertise, reliability, price and the size, quality and availability of our fleet of pumping equipment, which is significantly affected by the level of our capital expenditures. If we are required to reduce or delay capital expenditures for any reason, including due to restrictions contained in, or debt service payments required by, our credit facilities or otherwise, or due to the use of cash for acquisitions, the ability to replace our fleet or the age of our fleet may put us at a disadvantage to our competitors and adversely impact our ability to generate revenue. In addition, our industry may be subject to competitive price decreases in the future, particularly during cyclical downturns in our end markets, which can adversely affect revenue, profitability and cash flow. We may encounter increased competition from existing competitors or new market entrants in the future, which could have a material adverse effect on our business, financial condition, results of operations and cash flows. Table of Contents We are dependent on our relationships with key suppliers to obtain equipment for our business. We depend on a small group of key manufacturers of concrete pumping equipment, and has historically relied primarily on three companies, the largest two of which experienced ownership changes in 2012. We cannot predict the impact on our suppliers of changes in the economic environment and other developments in their respective businesses, and we cannot provide any assurance that our vendors will provide their historically high level of service support and quality. Any deterioration in such service support or quality could result in additional maintenance costs, operational issues, or both. Insolvency, financial difficulties, strategic changes or other factors may result in our suppliers not being able to fulfill the terms of their agreements with us, whether satisfactorily or at all. Further, such factors may render suppliers unwilling to extend contracts that provide favorable terms to us, or may force them to seek to renegotiate existing contracts with us. We believe the market for supplying equipment used in our business is increasingly competitive however, termination of our relationship with any of our key suppliers, or interruption of our access to concrete pumping equipment, pipe or other supplies, could have a material adverse effect on our business, financial condition, results of operations and cash flows in the event that we are unable to obtain adequate and reliable equipment or supplies from other sources in a timely manner or at all. If our average fleet age increases, our offerings may not be as attractive to potential customers and our operating costs may increase, impacting our results of operations. As our equipment ages, the cost of maintaining such equipment, if not replaced within a certain period of time or amount of use, will likely increase. We estimate that our fleet assets generally will have a useful life of up to 25 years depending on the size of the machine, hours in service, yardage pumped, and, in certain instances, other circumstances unique to an asset. We manage our fleet of equipment according to the wear and tear that a specific type of equipment is expected to experience over its useful life. As of January 31, 2019, the average age of our equipment was approximately 9 years, and it is our strategy to maintain average fleet age at approximately 10 years. If the average age of our equipment increases, whether as a result of our inability to access sufficient capital to maintain or replace equipment in a timely manner or otherwise, our investment in the maintenance, parts and repair for individual pieces of equipment may exceed the book value or replacement value of that equipment. We cannot assure you that costs of maintenance will not materially increase in the future. Any material increase in such costs could have a material adverse effect on our business, financial condition and results of operations. Additionally, as our equipment ages, it may become less attractive to potential customers, thus decreasing our ability to effectively compete for new business. The costs of new equipment we use in our fleet may increase, requiring us to spend more for replacement equipment or preventing us from procuring equipment on a timely basis. The cost of new equipment for use in our concrete pumping fleet could increase due to increased material costs to our suppliers or other factors beyond our control. Such increases could materially adversely impact our financial condition, results of operations and cash flows in future periods. Furthermore, changes in technology or customer demand could cause certain of our existing equipment to become obsolete and require us to purchase new equipment at increased costs. We sell used equipment on a regular basis. Our fleet is subject to residual value risk upon disposition, and may not sell at the prices or in the quantities we expect. We continuously evaluate our fleet of equipment as we seek to optimize our vehicle size and capabilities for our end markets in multiple locations. We therefore seek to sell used equipment on a regular basis. The market value of any given piece of equipment could be less than its depreciated value at the time it is sold. The market value of used equipment depends on several factors, including: the market price for comparable new equipment; wear and tear on the equipment relative to its age and the effectiveness of preventive maintenance; the time of year that it is sold; the supply of similar used equipment on the market; the existence and capacities of different sales outlets; the age of the equipment, and the amount of usage of such equipment relative to its age, at the time it is sold; worldwide and domestic demand for used equipment; the effect of advances and changes in technology in new equipment models; changing perception of residual value of used equipment by our suppliers; and general economic conditions. Table of Contents We include in income from operations the difference between the sales price and the depreciated value of an item of equipment sold. Changes in our assumptions regarding depreciation could change our depreciation expense, as well as the gain or loss realized upon disposal of equipment. Sales of our used concrete pumping equipment at prices that fall significantly below our expectations or in lesser quantities than we anticipate could have a negative impact on our financial condition, results of operations and cash flows. We are exposed to liability claims on a continuing basis, which may exceed the level of our insurance or not be covered at all, and this could have a material adverse effect on our operating performance. Our business exposes itself to claims for personal injury, death or property damage resulting from the use of the equipment we operate, rent, sell, service or repair and from injuries caused in motor vehicle or other accidents in which our personnel are involved. Our business also exposes it to worker compensation claims and other employment-related claims. We carry comprehensive insurance, subject to deductibles, at levels we believe are sufficient to cover existing and future claims. Future claims may exceed the level of our insurance, and our insurance may not continue to be available on economically reasonable terms, or at all. Certain types of claims, such as claims for punitive damages, are not covered by our insurance. In addition, we are self-insured for the deductibles on our policies and have established reserves for incurred but not reported claims. If actual claims exceed our reserves, our results of operations could be adversely affected. Whether or not we are covered by insurance, certain claims may generate negative publicity, which may lead to lower revenues, as well as additional similar claims being filed. Our business is subject to significant operating risks and hazards that could result in personal injury or damage or destruction to property, which could result in losses or liabilities to us. Construction sites are potentially dangerous workplaces and often put our employees and others in close proximity with mechanized equipment and moving vehicles. Our equipment has been involved in workplace incidents and incidents involving mobile operators of our equipment in transit in the past and may be involved in such incidents in the future. Our safety record is an important consideration for us and for our customers. If serious accidents or fatalities occur, regardless of whether we were at fault, or our safety record were to deteriorate, we may be ineligible to bid on certain work, be exposed to possible litigation, and existing service arrangements could be terminated, which could have a material adverse impact on our financial position, results of operations, cash flows and liquidity. Adverse experience with hazards and claims could have a negative effect on our reputation with our existing or potential new customers and our prospects for future work. In the commercial concrete infrastructure sector, our workers are subject to the usual hazards associated with providing construction and related services on construction sites, including environmental hazards, industrial accidents, hurricanes, adverse weather conditions and flooding. Operating hazards can cause personal injury or death, damage to or destruction of property, plant and equipment, environmental damage, performance delays, monetary losses or legal liability. Table of Contents Potential acquisitions and expansions into new markets may result in significant transaction expense and expose us to risks associated with entering new markets and integrating new or acquired operations. We may encounter risks associated with entering new markets in which we have limited or no experience. New operations require significant capital expenditures and may initially have a negative impact on our short-term cash flow, net income and results of operations. New start-up locations may not become profitable when projected or ever. In addition, our industry is highly fragmented and we expect to consider acquisition opportunities from time to time when we believe they would enhance our business and financial performance. Acquisitions, such as the Capital Acquisition, may impose significant strains on our management, operating systems and financial resources, and could experience unanticipated integration issues. The pursuit and integration of acquisitions, such as the Capital Acquisition, may require substantial attention from our senior management, which will limit the amount of time they have available to devote to our existing operations. Our ability to realize the expected benefits from any future acquisitions, such as the Capital Acquisition, depends in large part on our ability to integrate and consolidate the new operations with our existing operations in a timely and effective manner. Future acquisitions, such as the Capital Acquisition, also could result in the incurrence of substantial amounts of indebtedness and contingent liabilities (including environmental, employee benefits and safety and health liabilities), accumulation of goodwill that may become impaired, an increase in amortization expenses related to intangible assets, and potential penalties or other break fees if such negotiated acquisitions are not consummated. Any significant diversion of management s attention from our existing operations, the loss of key employees or customers of any acquired business, any major difficulties encountered in the opening of start-up locations or the integration of acquired operations or any associated increases in indebtedness, liabilities or expenses could have a material adverse effect on our business, financial condition or results of operations. We may not realize the anticipated synergies and cost savings from acquisitions. We have completed a number of acquisitions in recent years that we believe present revenue and cost-saving synergy opportunities and we expect to realize significant synergies from the Capital Acquisition. However, the integration of recent or future acquisitions may not result in the realization of the full benefits of the revenue and cost synergies that we expected at the time or currently expect within the anticipated time frame or at all. Moreover, we may incur substantial expenses or unforeseen liabilities in connection with the integration of acquired businesses, including in connection with the Capital Acquisition. While we anticipate that certain expenses will be incurred, such expenses are difficult to estimate accurately and may exceed our estimates. Accordingly, the expected benefits may be offset by costs or delays incurred in integrating the businesses. Failure of recent or future acquisitions to meet our expectations and be integrated successfully could have a material adverse effect on our financial condition and results of operations. We have operations throughout the United States and the United Kingdom, which subjects us to multiple federal, state, and local laws and regulations. Moreover, we operate at times as a government contractor or subcontractor which subjects us to additional laws, regulations, and contract provisions. Changes in law, regulations, government contract provisions, or other legal requirements, or our material failure to comply with any of them, can increase our costs and have other negative impacts on our business. As of January 31, 2019, our locations in the United States, which include 80 locations operated by Brundage-Bone and 14 locations operated by Eco-Pan, provided services across approximately 22 states, and our 28 locations in the U.K. are in England, Scotland and Wales. Each of our sites are exposed to a host of different local laws and regulations. These requirements address multiple aspects of our operations, such as worker safety, consumer rights, privacy, employee benefits, antitrust, emissions regulations and may also impact other areas of our business, such as pricing. In addition, government contracts and subcontracts are subject to a wide range of requirements not applicable in the purely commercial context, such as extensive auditing and disclosure requirements; anti-money laundering, antibribery and anti-gratuity rules; political campaign contribution and lobbying limitations; and small and/or disadvantaged business preferences. Even when a government contractor has reasonable policies and practices in place to address these risks and requirements, it is still possible for problems to arise. Moreover, government contracts or subcontracts are generally riskier than commercial contracts, because, when problems arise, the adverse consequences can be severe, including civil false claims (which can involve penalties and treble damages), suspension and debarment, and even criminal prosecution. Moreover, the requirements of laws, regulations, and government contract provisions are often different in different jurisdictions. Changes in these requirements, or any material failure by us to comply with them, can increase our costs, negatively affect our reputation, reduce our business, require significant management time and attention and generally otherwise impact our operations in adverse ways. Table of Contents We are subject to numerous environmental and safety regulations. If we are required to incur compliance or remediation costs that are not currently anticipated, our liquidity and operating results could be materially and adversely affected. Our facilities and operations are subject to comprehensive and frequently changing federal, state and local laws and regulations relating to environmental protection and health and safety. These laws and regulations govern, among other things, occupational safety, employee relations, the discharge of substances into the air, water and land, the handling, storage, transport, use and disposal of hazardous materials and wastes and the cleanup of properties affected by pollutants. We have in the past and may in the future fail to comply with applicable environmental and safety regulations. If we violate environmental or safety laws or regulations, we may be required to implement corrective actions and could be subject to civil or criminal fines or penalties or other sanctions. We cannot assure you that we will not have to make significant capital or operating expenditures in the future in order to comply with applicable laws and regulations or that we will comply with applicable environmental laws at all times. Such violations or liability could have a material adverse effect on our business, financial condition and results of operations. Environmental laws also impose obligations and liability for the investigation and cleanup of properties affected by releases or spills of hazardous substances or fuels. These liabilities can be imposed jointly and severally without regard to fault or intent on the parties who own or operate the contaminated land, who arranged for the transport of hazardous substances to the land for disposal, or who transported the hazardous substances. We may also have liability for any contaminated properties historically owned or operated by companies that we have acquired or merged with, even though we never owned or operated such properties. Accordingly, we may become liable, either contractually or by operation of law, for investigation, remediation, monitoring and other costs even if the contaminated property is not presently owned or operated by us, is owned or primarily operated by a customer of ours but has been impacted by our services, was formerly owned or operated by a predecessor in interest to us, or if the contamination was caused by third parties during or prior to our ownership or operation of the property. Contamination and exposure to hazardous substances can also result in claims for damages, including personal injury, property damage, and natural resources damage claims. Most of our properties currently have above or below ground storage tanks for fuel and other petroleum products and oil-water separators (or equivalent wastewater collection/treatment systems). Given the nature of our operations (which involve the use of diesel and other petroleum products, solvents and other hazardous substances) for fueling and maintaining our equipment and vehicles, the generation, handling and transport of concrete "washout" and other waste at and from customer job sites, and the historical operations at some of our properties, we may incur material costs associated with soil or groundwater contamination. Future events, such as changes in existing laws or policies or their enforcement, or the discovery of currently unknown contamination, may give rise to remediation liabilities or other claims or costs that may be material. Our business depends on favorable relations with our employees, and any deterioration of these relations, labor shortages or increases in labor costs could adversely affect our business, financial condition and results of operations and our collective bargaining agreements and our relationship with our union-represented employees could disrupt our ability to serve our customers, lead to higher labor costs or the payment of withdrawal liability in connection with multiemployer plans. As of January 31, 2019, approximately 13% of our employees in the United States (but none of our employees in the United Kingdom) were represented by unions or covered by collective bargaining agreements. The states in which our employees are represented by unions or covered by collective bargaining agreements are California, Washington and Oregon. There can be no assurance that our non-unionized employees will not become members of a union or become covered by a collective bargaining agreement, including through an acquisition of a business whose employees are subject to such an agreement. Any significant deterioration in employee relations, shortages of labor or increases in labor costs at any of our locations could have a material adverse effect on our business, financial condition or results of operations. A slowdown or work stoppage that lasts for a significant period of time could cause lost revenues and increased costs and could adversely affect our ability to meet our customers needs. Furthermore, our labor costs could increase as a result of the settlement of actual or threatened labor disputes. In addition, our collective bargaining agreement with our union in California and Oregon expire in 2019 and 2020, respectively and will need to be renegotiated. Our collective bargaining agreement with our union in Washington expires in 2037. We cannot assure you that renegotiation of these agreements will be successful or will not result in adverse economic terms or work stoppages or slowdowns. Table of Contents Under our collective bargaining agreements, we are, and have previously been, obligated to contribute to several multiemployer pension plans on behalf of our unionized employees. A multiemployer pension plan is a defined benefit pension plan that provides pension benefits to the union-represented workers of various generally unrelated companies. Under the Employment Retirement Income Security Act of 1974 ("ERISA"), an employer that has an obligation to contribute to an underfunded multiemployer plan, as well as any other entities that are treated as a single employer with such employer under applicable tax and ERISA rules, may become jointly and severally liable, generally upon complete or partial withdrawal from a multiemployer plan, for its proportionate share of the plan s unfunded benefit obligations. These liabilities are known as "withdrawal liabilities." Certain of the multiemployer plans to which we are obligated to contribute have been in the past, and currently remain, significantly underfunded. Moreover, due to the level of underfunding, at least one of these multiemployer plans has been and continues to be in "critical status," meaning, among other things, that the trustees of the plan are required to adopt a rehabilitation plan and we are required to pay a surcharge on top of our regular contributions to the plan. We currently have no intention of withdrawing, in either a complete or partial withdrawal, from any of the multiemployer plans to which we currently contribute and we have not been assessed any withdrawal liability in the past when we have ceased participating in certain multiemployer plans to which we previously contributed. In addition, we believe that the "construction industry" multiemployer plan exception may apply if we did withdraw from any of our current multiemployer plans. The "construction industry" exception generally delays the imposition of withdrawal liability in connection with an employer s withdrawal from a "construction industry" multiemployer plan unless and until (among other things) that employer continues or resumes covered operations in the relevant geographic market without continuing or resuming (as applicable) contributions to the multiemployer plan. If this exception applies, withdrawal liability may be delayed or even inapplicable if we cease participation in any multiemployer plan(s). However, there can be no assurance that we will not withdraw from one or more multiemployer plans in the future, that the "construction industry exception" would apply if we did withdraw, or that we will not incur withdrawal liability if we do withdraw. Accordingly, we may be required to pay material amounts of withdrawal liability if one or more of those plans is underfunded at the time of withdrawal and withdrawal liability applies in connection with our withdrawal. In addition, we may incur material liabilities if any multiemployer plan(s) in which we participate requires us to increase our contribution levels to alleviate existing underfunding and/or becomes insolvent, terminates or liquidates. Labor relations matters at construction sites where we provide services may result in increases in our operating costs, disruptions in our business and decreases in our earnings. Labor relations matters at construction sites where we provide services may result in work stoppages, which would in turn affect our ability to provide services at such locations. If any such work stoppages were to occur at work sites where we provide services, we could experience a significant disruption of our operations, which could materially and adversely affect our business, financial condition, results of operations, liquidity, and cash flows. Also, labor relations matters affecting our suppliers could adversely impact our business from time to time. If we determine that our goodwill has become impaired, we may incur impairment charges, which would negatively impact our operating results. At January 31, 2019, we had recorded goodwill of $238.8 million related to the Business Combination. Goodwill represents the excess of cost over the fair value of net assets acquired in business combinations. We assess potential impairment of our goodwill at least annually. Impairment may result from significant changes in the manner of use of the acquired assets, negative industry or economic trends or significant underperformance relative to historical or projected operating results. An impairment of our goodwill may have a material adverse effect on our results of operations. Turnover of members of our management, staff and pump operators and our ability to attract and retain key personnel may affect our ability to efficiently manage our business and execute our strategy. Our business depends on the quality of, and our ability to attract and retain, our senior management and staff, and competition in our industry and the business world for top management talent is generally significant. Although we believe we generally have competitive pay packages, we can provide no assurance that our efforts to attract and retain senior management staff will be successful. In addition, the loss of services of certain members of our senior management could adversely affect our business until suitable replacements can be found. Table of Contents We depend upon the quality of our staff personnel, including sales and customer service personnel who routinely interact with and fulfill the needs of our customers, and on our ability to attract and retain and motivate skilled operators and fleet maintenance personnel and other associated personnel to operate our equipment in order to provide our concrete pumping services to our customers. There is significant competition for qualified personnel in a number of our markets, including Texas, Colorado, Utah, and Idaho where we face competition from the oil and gas industry for qualified drivers and operators. There is a limited number of persons with the requisite skills to serve in these positions, and such positions require a significant investment by us in initial training of operators of our equipment. We cannot assure you that we will be able to locate, employ, or retain such qualified personnel on terms acceptable to us or at all. Our costs of operations and selling, general and administrative expenses have increased in certain markets and may increase in the future if we are required to increase wages and salaries to attract qualified personnel, and there is no assurance that we can increase our prices to offset any such cost increases. There is also no assurance that we can effectively limit staff turnover as competitors or other employers seek to hire our personnel. A significant increase in such turnover could negatively affect our business, financial condition, results of operations and cash flows. Our credit facilities may limit the business financial and operating flexibility. Our credit facilities include negative covenants (including a springing fixed charge coverage ratio financial covenant under the ABL Credit Agreement (as defined below)) restricting our ability to incur additional indebtedness, pay dividends or make other payments, make loans and investments, sell assets, incur certain liens, enter into transactions with affiliates, and consolidate, merge or sell assets. These covenants limit the ability of the respective restricted entities to fund future working capital and capital expenditures, engage in future acquisitions or development activities, or otherwise realize the value of their assets and opportunities fully because of the need to dedicate a portion of cash flow from operations to payments on debt. In addition, such covenants limit the flexibility of the respective restricted entities in planning for, or reacting to, changes in the industries in which they operate. We have a significant amount of indebtedness, which could adversely affect our cash flow and our ability to operate our business and to fulfill our obligations under our indebtedness. We have a significant amount of indebtedness. As of January 31, 2019, we had $353.9 million of indebtedness outstanding in addition to $41.4 million of availability under our ABL Credit Agreement. Furthermore, we expect to finance the Capital Acquisition through the sale of shares of common stock in this offering and an additional $40 million of borrowings under our Term Loan Agreement and we may incur additional indebtedness to finance the Capital Acquisition. Our substantial level of indebtedness increases the possibility that we may not generate enough cash flow from operations to pay, when due, the principal of, interest on or other amounts due in respect of, these obligations. Other risks relating to our long-term indebtedness include: increased vulnerability to general adverse economic and industry conditions; higher interest expense if interest rates increase on our floating rate borrowings and our hedging strategies do not effectively mitigate the effects of these increases; need to divert a significant portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of cash to fund working capital, capital expenditures, acquisitions, investments and other general corporate purposes; limited ability to obtain additional financing, on terms we find acceptable, if needed, for working capital, capital expenditures, acquisitions and other investments, which may adversely affect our ability to implement our business strategy; limited flexibility in planning for, or reacting to, changes in our businesses and the markets in which we operate or to take advantage of market opportunities; and a competitive disadvantage compared to our competitors that have less debt. In addition, it is possible that we may need to incur additional indebtedness in the future in the ordinary course of business. The terms of our Term Loan Agreement and the ABL Credit Agreement allow us to incur additional debt subject to certain limitations. If new debt is added to current debt levels, the risks described above could intensify. In addition, our inability to maintain certain leverage ratios could result in acceleration of a portion of our debt obligations and could cause us to be in default if we are unable to repay the accelerated obligations. Our business could be hurt if we are unable to obtain capital as required, resulting in a decrease in our revenue and cash flows. We require capital for, among other purposes, purchasing equipment to replace existing equipment that has reached the end of its useful life and for growth resulting from expansion into new markets, completing acquisitions and refinancing existing debt. If the cash that we generate from our business, together with cash that we may borrow under our credit facilities, is not sufficient to fund our capital requirements, we will require additional debt or equity financing. If such additional financing is not available to fund our capital requirements, we could suffer a decrease in our revenue and cash flows that would have a material adverse effect on our business. Furthermore, our ability to incur additional debt is and will be contingent upon, among other things, the covenants contained in our credit facilities. In addition, our credit facilities place restrictions on our and our restricted subsidiaries ability to pay dividends and make other restricted payments (subject to certain exceptions). We cannot be certain that any additional financing that we require will be available or, if available, will be available on terms that are satisfactory to us. If we are unable to obtain sufficient additional capital in the future, our business could be materially adversely affected. We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under applicable debt instruments, which may not be successful. Our ability to make scheduled payments on or to refinance our indebtedness obligations, including our credit facilities, depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and certain financial, business and other factors beyond our control. We may not be able to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness. If our cash flows and capital resources are insufficient to fund debt service obligations, we may be forced to reduce or delay investments and capital expenditures, sell assets, seek additional capital or restructure or refinance indebtedness. Our ability to restructure or refinance our indebtedness will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of indebtedness could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict business operations. The terms of existing or future debt instruments may restrict us from adopting some of these alternatives. In addition, any failure to make payments of interest and principal on outstanding indebtedness on a timely basis would likely result in a reduction of our credit rating, which could harm our ability to incur additional indebtedness. Table of Contents If we are unable to collect on contracts with customers, our operating results would be adversely affected. We have billing arrangements with a majority of our customers that provide for payment on agreed terms after our services are provided. If we are unable to manage credit risk issues adequately, or if a large number of customers should have financial difficulties at the same time, our credit losses could increase significantly above their low historical levels and our operating results would be adversely affected. Further, delinquencies and credit losses increased during the last recession and generally can be expected to increase during economic slowdowns or recessions. If we are unable to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act or our internal control over financial reporting is not effective, the reliability of our financial statements may be questioned and our stock price may suffer. Section 404 of the Sarbanes-Oxley Act requires any company subject to the reporting requirements of the U.S. securities laws to do a comprehensive evaluation of its and its consolidated subsidiaries internal control over financial reporting. To comply with this statute, we are currently required to document, test and report on our internal controls over financial reporting. In addition, starting in our 2022 fiscal year (and possibly earlier), our independent auditors will be required to issue an opinion on our audit of our internal control over financial reporting. The rules governing the standards that must be met for management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation to meet the detailed standards under the rules. During the course of our testing, our management may identify material weaknesses or deficiencies which may not be remedied in time to meet the deadline imposed by the Sarbanes-Oxley Act. For example, we currently have material weaknesses in internal controls over financial reporting relating to (a) lack of segregation of duties to effectively perform detailed review of account reconciliations and journal entries; (b) cut-off and completeness of accrual for accounting close; (c) lack of formally documented precision levels relating to management review controls; (d) accounting for significant and/or unusual transactions; and (e) insufficient restrictions on admin access for information technology in the U.K. The aforementioned material weaknesses in internal control are primarily driven by a lack of resources as we make our transition from a private to public entity. To respond to these material weaknesses, we have retained a global accounting and consulting firm with technical expertise in accounting and SEC reporting matters to support the preparation of our financial statements and assist us in performing additional analysis and other post-closing procedures to ensure that such financial statements were prepared in accordance with GAAP. In addition, we have hired additional personnel with relevant accounting experience, skills and knowledge and plan to add new personnel as we deem necessary. If our management is unable to favorably assess the effectiveness of our internal control over financial reporting or our auditors identify material weaknesses in our internal controls, investor confidence in our financial results may weaken, and our stock price may suffer. Disruptions in our information technology systems due to cyber security threats or other factors could limit our ability to effectively monitor and control our operations and adversely affect our operating results, and unauthorized access to customer information on our systems could adversely affect our relationships with our customers or result in liability. Our information technology systems, including our enterprise resource planning system, facilitate our ability to monitor and control our assets and operations and adjust to changing market conditions and customer needs. Any disruptions in these systems or the failure of these systems to operate as expected could, depending on the magnitude of the problem, adversely affect our operating results by limiting our capacity to effectively monitor and control our assets and operations and adjust to changing market conditions in a timely manner. Many of our business records at most of our branches are still maintained manually, and loss of those records as a result of facility damage, personnel changes or otherwise could also cause such disruptions. In addition, because our systems sometimes contain information about individuals and businesses, our failure to appropriately safeguard the security of the data it holds, whether as a result of our own error or the malfeasance or errors of others, could harm our reputation or give rise to legal liabilities, leading to lower revenue, increased costs and other material adverse effects on our results of operations. Table of Contents We have taken steps intended to mitigate these risks, including business continuity planning, disaster recovery planning and business impact analysis. However, a significant disruption or cyber intrusion could adversely affect our results of operations, financial condition and liquidity. Furthermore, instability in the financial markets as a result of terrorism, sustained or significant cyber-attacks, or war could also materially adversely affect our ability to raise capital. Fluctuations in fuel costs or reduced supplies of fuel could harm our business. Fuel costs represent a significant portion of our operating expenses and we are dependent upon fuel to transport and operate our equipment. We could be adversely affected by limitations on fuel supplies or increases in fuel prices that result in higher costs of transporting equipment to and from job sites and higher costs to operate our concrete pumps and other equipment. Although we are able to pass through the impact of fuel price charges to most of our customers, there is often a lag before such pass-through arrangements are reflected in our operating results and there may be a limit to how much of any fuel price increases we can pass onto our customers. Any such limits may adversely affect our results of operations. We depend on access to our branch facilities to service our customers and maintain and store our equipment. We depend on our primary branch facilities in the U.S. and U.K., respectively, to store, service and maintain our fleet. These facilities contain most of the specialized equipment we require to service our fleet, in addition to the extensive secure storage areas needed for a significant number of large vehicles. If any of our facilities were to sustain significant damage or become unavailable to us for any reason, including natural disasters, our operations could be disrupted, which could in turn adversely affect our relationships with our customers and our results of operations and cash flow. Any limitation on our access to facilities as a result of any breach of, or dispute under, our leases could also disrupt and adversely affect our operations. Our acquisitions made in the U.K. may divert our resources from other aspects of our business and require us to incur additional debt, and will subject us to additional and different regulations. Failure to manage these economic, financial, business and regulatory risks may adversely impact our growth in the U.K. and our results of operations. Our expansion into the U.K. required, and may continue to require, us to incur additional debt and divert resources from other aspects of our business. In addition, we may incur difficulties in staffing and managing our U.K. operations, and face fluctuations in currency exchange rates, exposure to additional regulatory requirements, including certain trade barriers, changes in political and economic conditions, and exposure to additional and potentially adverse tax regimes. Our success in the U.K. will depend, in part, on our ability to anticipate and effectively manage these and other risks. Our failure to manage these risks may adversely affect our growth in the U.K. and lead to increased administrative and other costs. We may be adversely affected by recent developments relating to the U.K. s referendum vote in favor of leaving the European Union. The U.K. held a referendum on June 23, 2016 in which a majority voted for the U.K. s withdrawal from the European Union, which is commonly referred to as Brexit. As a result of this vote, a process of negotiation has begun to determine the terms of Brexit and of the U.K. s relationship with the European Union going forward. The effects of the Brexit vote and the perceptions as to the impact of the withdrawal of the U.K. from the European Union may adversely affect business activity and economic and market conditions in the U.K., the Eurozone, and globally and could contribute to instability in global financial and foreign exchange markets, including volatility in the value of the pound sterling and the euro. In addition, Brexit could lead to additional political, legal and economic instability in the European Union. Specifically, we have not identified any additional risk factors under Brexit than those discussed herein. Additionally, we have not identified any trends or potential changes to critical accounting estimates as a result of Brexit. We will continue to assess risk factors and accounting and reporting considerations Any of these effects of Brexit, and others we cannot anticipate, could adversely affect the value of our assets in the U.K., as well as our business, financial condition, results of operations and cash flows. Due to the material portion of our business conducted in currency other than U.S. dollars, we have significant foreign currency risk. Our consolidated financial statements are presented in accordance with GAAP, and we report, and will continue to report, our results in U.S. dollars. Some of our operations are conducted by subsidiaries in the United Kingdom. The results of operations and the financial position of these subsidiaries are recorded in the relevant foreign currencies and then translated into U.S. dollars. Any change in the value of the pound sterling against the U.S. dollar during a given financial reporting period would result in a foreign currency loss or gain on the translation of U.S. dollar denominated revenues and costs. The exchange rates between the pound sterling against the U.S. dollar have fluctuated significantly in recent years and may fluctuate significantly in the future. Consequently, our reported earnings could fluctuate materially as a result of foreign exchange translation gains or losses and may not be comparable from period to period. Table of Contents We face market risks attributable to fluctuations in foreign currency exchange rates and foreign currency exposure on the translation into U.S. dollars of the financial results of our operations in the United Kingdom. Exchange rate fluctuations could have an adverse effect on our results of operations. Both favorable and unfavorable foreign currency impacts to our foreign currency-denominated operating expenses are mitigated to a certain extent by the natural, opposite impact on our foreign currency-denominated revenue. Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our financial condition and results of operations. We will be subject to income taxes in the United States, and our domestic tax liabilities will be subject to the allocation of expenses in differing jurisdictions. Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including: expected timing and amount of the release of any tax valuation allowances; tax effects of stock-based compensation; costs related to intercompany restructurings; changes in tax laws, regulations or interpretations thereof; and lower than anticipated future earnings in jurisdictions where we have lower statutory tax rates and higher than anticipated future earnings in jurisdictions where we have higher statutory tax rates. In addition, we may be subject to audits of our income, sales and other transaction taxes by U.S. federal and state authorities. Outcomes from these audits could have an adverse effect on our financial condition and results of operations. Risks Related to our Securities There can be no assurance that we will be able to comply with Nasdaq s continued listing standards. If Nasdaq delists our securities from trading on its exchange for failure to meet the continued listing standards, we and our security holders could face significant material adverse consequences including: a limited availability of market quotations for our securities; a determination that our common stock is a "penny stock" which will require brokers trading in our common stock to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for our common stock; a decreased ability to issue additional securities or obtain additional financing in the future. Shares of our common stock have been thinly traded in the past. Although a trading market for our common stock exists, the trading volume has not been significant and there can be no assurance that an active trading market for our common stock will develop or, if developed, be sustained in the future. As a result of the thin trading market or "float" for our stock, the market price for our common stock may fluctuate significantly more than the stock market as a whole. Without a large float, our common stock is less liquid than the stock of companies with broader public ownership and, as a result, the trading prices of our common stock may be more volatile. In the absence of an active public trading market, an investor may be unable to liquidate his or her investment in our common stock. Trading of a relatively small volume of our common stock may have a greater impact on the trading price for our stock than would be the case if our public float were larger. We cannot predict the prices at which our common stock will trade in the future. Table of Contents In addition, the price of our securities can vary due to general economic conditions and forecasts, our general business condition and the release of our financial reports. Additionally, if our securities become delisted from Nasdaq for any reason, and are quoted on the OTC Markets, the liquidity and price of our securities may be more limited than if we were quoted or listed on Nasdaq or another national securities exchange. You may be unable to sell your securities unless a market can be established or sustained. If the benefits of the Business Combination and/or the Capital Acquisition do not meet the expectations of investors, stockholders or financial analysts, the market price of our securities may decline. If the benefits of the Business Combination and/or the Capital Acquisition do not meet the expectations of investors or securities analysts, the market price of our securities may decline. If an active market for our securities develops and continues, the trading price of our securities could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond our control. Any of the factors listed below could have a material adverse effect on your investment in our securities and our securities may trade at prices significantly below the price you paid for them. In such circumstances, the trading price of our securities may not recover and may experience a further decline. Factors affecting the trading price of our securities may include: actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us; changes in the market s expectations about our operating results; the public s reaction to our press releases, our other public announcements and our filings with the SEC; speculation in the press or investment community; success of competitors; our operating results failing to meet the expectation of securities analysts or investors in a particular period; changes in financial estimates and recommendations by securities analysts concerning company or the market in general; operating and stock price performance of other companies that investors deem comparable to us; any failure of the Capital Acquisition to close; our future acquisition activity; our ability to market new and enhanced products on a timely basis; changes in laws and regulations affecting our business; commencement of, or involvement in, litigation involving the Company; changes in our capital structure, such as future issuances of securities or the incurrence of additional debt; the volume of shares of our common stock available for public sale; any major change in our Board or management; sales of substantial amounts of our common stock by our directors, officers or significant stockholders or the perception that such sales could occur; and general economic and political conditions such as recessions, interest rates, fuel prices, international currency fluctuations and acts of war or terrorism. Broad market and industry factors may materially harm the market price of our securities irrespective of our operating performance. The stock market in general and Nasdaq have experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. The trading prices and valuations of these stocks, and of our securities, may not be predictable. A loss of investor confidence in the market for the stocks of other companies which investors perceive to be similar to us could depress our stock price regardless of our business, prospects, financial conditions or results of operations. A decline in the market price of our securities also could adversely affect our ability to issue additional securities and our ability to obtain additional financing in the future. Table of Contents In the past, securities class action litigation has often been initiated against companies following periods of volatility in their stock price. This type of litigation could result in substantial costs and divert our management s attention and resources, and could also require us to make substantial payments to satisfy judgments or to settle litigation. Future sales of our common stock may cause the market price of our securities to drop significantly, even if our business is doing well. Pursuant to that certain stockholders agreement, dated as of December 6, 2018 and amended on April 1, 2019 (the "Stockholders Agreement"), by and between the Company, CFLL Sponsor Holdings, LLC (formerly known as Industrea Alexandria LLC) ("CFLL Sponsor" or the "Sponsor"), Industrea s former independent directors (collectively with the Sponsor and affiliates, the "Initial Stockholders"), Argand Partners Fund, LP (the "Argand Investor") and certain holders of CPH s capital stock prior to the Business Combination (the "CPH stockholders"): Subject to certain exceptions, the CFLL Sponsor has agreed not to transfer 4,403,325 shares of our common stock (which were issued upon conversion of Industrea s Class B common stock in connection with the Business Combination) (the "founder shares") until the earlier of (A) March 6, 2020 or (B) earlier if (x) the last sale price of our common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing May 5, 2019 or (y) the date on which we complete a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of our stockholders having the right to exchange their shares of our common stock for cash, securities or other property; Each CPH Management Holder (as defined therein) has agreed not to transfer any shares of our common stock acquired by such CPH Management Holder in connection with the Business Combination for a period commencing on December 6, 2018 and ending on (a) December 6, 2019 with respect to one-third of such CPH Management Holder s securities of the Company held as of the date of Closing; (b) December 6, 2020 with respect to one-third of such CPH Management Holder s securities of the Company held as of the date of Closing; and (c) December 6, 2021 with respect to one-third of such CPH Management Holder s securities of the Company held as of the date of Closing; Each Non-Management CPH Holder (as defined therein) may not transfer any shares of our common stock acquired by such Non-Management CPH Holder in connection with the Business Combination until June 4, 2019; and Subject to certain exceptions, until March 6, 2020, (i) CFLL Holdings, LLC ("CFLL Holdings"), an affiliate of the Argand Investor, may not transfer 7,784,313 shares of our common stock held by it and (ii) the CFLL Sponsor may not transfer 1,664,500 shares of our common stock held by it. Notwithstanding the foregoing, if Peninsula Pacific or its affiliates no longer own in excess of 882,353 shares of our common stock, then the transfer restrictions on the shares of our common stock held the CFLL Sponsor and CFLL Holdings will be shortened to December 6, 2019. In addition, transfers of these securities are permitted in certain limited circumstances as set forth in the Stockholders Agreement, including with the prior written consent of our Board (with any director who has been designated to serve on our Board by or who is an affiliate of the requesting party abstaining from such vote) and to "affiliates," as defined in the Stockholders Agreement. In addition, the Initial Stockholders and certain of our other stockholders who received shares of our common stock in connection with the Closing are entitled to registration rights, subject to certain limitations, with respect to our common stock they received in the Business Combination pursuant to the Stockholders Agreement entered into in connection with the consummation of the Business Combination. Pursuant to the Stockholders Agreement, we filed a registration statement covering the founder shares, the private placement warrants (including any common stock issued or issuable upon exercise of any such private placement warrants) and the shares of our common stock issued at the Closing. In addition, these stockholders have certain demand and "piggyback" registration rights following the consummation of the Business Combination. We will bear certain expenses incurred in connection with the exercise of such rights. Furthermore, we expect to finance the Capital Acquisition through the sale of shares of common stock in this offering and an additional $40 million of borrowings under our Term Loan Agreement and we may incur additional indebtedness to finance the Capital Acquisition. The presence of these additional securities trading in the public market as well as the shares of the Company s common stock that may be issued pursuant to the Offer and Consent Solicitation, may have an adverse effect on the market price of the Company s common stock. Table of Contents Our quarterly operating results may fluctuate significantly and could fall below the expectations of securities analysts and investors due to seasonality and other factors, some of which are beyond our control, resulting in a decline in our stock price. Our quarterly operating results may fluctuate significantly because of several factors, including: labor availability and costs for hourly and management personnel; profitability of our products, especially in new markets and due to seasonal fluctuations; changes in interest rates; impairment of long-lived assets; macroeconomic conditions, both nationally and locally; negative publicity relating to products we serve; changes in consumer preferences and competitive conditions; expansion to new markets; and fluctuations in commodity prices. If securities or industry analysts do not publish or cease publishing research or reports about us, our business, or our industry, or if they change their recommendations regarding our common stock adversely, then the price and trading volume of our common stock could decline. The trading market for our common stock will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our industry, or our competitors. Securities and industry analysts do not currently, and may never, publish research on us. If no securities or industry analysts commence coverage of the Company, our stock price and trading volume would likely be negatively impacted. If any of the analysts who may cover the Company change their recommendation regarding our stock adversely, or provide more favorable relative recommendations about our competitors, the price of our common stock would likely decline. If any analyst who may cover the Company were to cease coverage of the Company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our stock price or trading volume to decline. Changes in laws or, regulations or rules, or a failure to comply with any laws, regulations or rules, may adversely affect our business, investments and results of operations. We are subject to laws, regulations and rules enacted by national, regional and local governments and Nasdaq. In particular, we are required to comply with certain SEC, Nasdaq and other legal or regulatory requirements. Compliance with, and monitoring of, applicable laws, regulations and rules may be difficult, time consuming and costly. Those laws, regulations or rules and their interpretation and application may also change from time to time and those changes could have a material adverse effect on our business, investments and results of operations. In addition, a failure to comply with applicable laws, regulations or rules, as interpreted and applied, could have a material adverse effect on our business and results of operations. We may amend the terms of the warrants in a manner that may be adverse to holders with the approval by the holders of at least 65% of the then-outstanding warrants. As a result, the exercise price of our warrants could be increased, the exercise period could be shortened and the number of shares of common stock purchasable upon exercise of a warrant could be decreased without a warrant holder s approval. Our warrants were issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us. The warrant agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 65% of the then-outstanding public warrants to make any change that adversely affects the interests of the registered holders. Accordingly, we may amend the terms of the warrants in a manner adverse to a holder if holders of at least 65% of the then-outstanding public warrants approve of such amendment. Although our ability to amend the terms of the warrants with the consent of at least 65% of the then-outstanding public warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the warrants, shorten the exercise period or decrease the number of shares of common stock purchasable upon exercise of a warrant or automatically at our option. Our warrants are exercisable for common stock, which would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders. Industrea issued 23,000,000 public warrants as part of its IPO, and simultaneously with the closing of the IPO, Industrea issued 11,100,000 private placement warrants to the Sponsor. Each warrant is exercisable for one share of common stock at $11.50 per share. In connection with the Business Combination, we assumed Industrea s warrants, and such warrants are exercisable for shares of our common stock. Pursuant to the Offer and Consent Solicitation, on or about April 29, 2019, we issued 2,101,213 shares of common stock in exchange for 9,982,123 public warrants tendered for exchange, and 1,707,175 shares of common stock in exchange for 11,100,000 private placement warrants tendered for exchange. As a result, as of the date of this prospectus, there are 13,017,777 public warrants and no private placement warrants outstanding, respectively. To the extent such warrants are exercised, additional shares of common stock will be issued, which will result in dilution to the holders of common stock and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market could adversely affect the market price of our common stock. Table of Contents We are a holding company with no business operations of our own and we depend on cash flow from our wholly owned subsidiaries to meet our obligations. We are a holding company with no business operations of its own or material assets other than the stock of its subsidiaries, all of which are wholly-owned. All of our operations are conducted by our subsidiaries and as a holding company, we require dividends and other payments from our subsidiaries to meet cash requirements. The terms of any credit facility may restrict our subsidiaries from paying dividends and otherwise transferring cash or other assets to us. If there is an insolvency, liquidation or other reorganization of any of our subsidiaries, our stockholders likely will have no right to proceed against their assets. Creditors of those subsidiaries will be entitled to payment in full from the sale or other disposal of the assets of those subsidiaries before we, as an equityholder, would be entitled to receive any distribution from that sale or disposal. If our subsidiaries are unable to pay dividends or make other payments to us when needed, we will be unable to satisfy our obligations. Anti-takeover provisions contained in the Charter and Bylaws, as well as provisions of Delaware law, could impair a takeover attempt. The Charter contains provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests. We are also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together, these provisions may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities. These provisions include: a staggered board of directors providing for three classes of directors, which limits the ability of a stockholder or group to gain control of our Board; no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; the right of our Board to elect a director to fill a vacancy created by the expansion of our Board or the resignation, death or removal of a director in certain circumstances, which prevents stockholders from being able to fill vacancies on our Board; a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; a prohibition on stockholders calling a special meeting and the requirement that a meeting of stockholders may only be called by members of our Board, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; and advance notice procedures that stockholders must comply with in order to nominate candidates to our Board or to propose matters to be acted upon at a meeting of stockholders, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer s own slate of directors or otherwise attempting to obtain control of us. The Charter designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees. The Charter provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for any stockholder (including a beneficial owner) to bring (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Company to the Company or our stockholders, (iii) any action asserting a claim against the Company, our directors, officers or employees arising pursuant to any provision of the DGCL, the Charter or the Bylaws, or (iv) any action asserting a claim against the Company, our directors, officers or employees governed by the internal affairs doctrine, except for, as to each of (i) through (iv) above, any claim (A) as to which the Court of Chancery determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such determination), (B) which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery, or (C) arising under the Securities Act or for which the Court of Chancery does not have subject matter jurisdiction including, without limitation, any claim arising under the Exchange Act, as to which the federal district court for the District of Delaware shall be the sole and exclusive forum. Table of Contents Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock will be deemed to have notice of, and consented to, the provisions of the Charter described in the preceding paragraph. However, stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder. This choice of forum provision may limit a stockholder s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and such persons. Alternatively, a court may determine that the choice of forum provision is unenforceable. If a court were to find these provisions of the Charter inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition or results of operations. The JOBS Act permits "emerging growth companies" like us to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies. We qualify as an "emerging growth company" as defined in Section 2(a)(19) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012, which we refer to as the "JOBS Act." As such, we take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies for as long as we continue to be an emerging growth company, including (i) the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act, (ii) the exemptions from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements and (iii) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. As a result, our stockholders may not have access to certain information they deem important. We had revenues during the fiscal year ended October 31, 2018 of approximately $243.2 million. We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year (a) following August 1, 2022, the fifth anniversary of the Industrea IPO, (b) in which we have total annual gross revenue of at least $1.07 billion or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our prior second fiscal quarter, and (ii) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period. In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the exemption from complying with new or revised accounting standards provided in Section 7(a)(2)(B) of the Securities Act as long as we are an emerging growth company. An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies, but any such election to opt out is irrevocable. We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used. We cannot predict if investors will find our securities less attractive because we will rely on these exemptions. If some investors find our securities less attractive as a result, there may be a less active trading market for securities and our stock price may be more volatile. Risks Related to the Capital Acquisition If we fail to raise sufficient net proceeds from this offering to fund the Capital Acquisition Consideration, and cannot obtain alternative sources of financing, we will be unable to consummate the Capital Acquisition. If we are unable to raise sufficient funds from this offering, we will need to seek alternative sources of financing to fund the Capital Acquisition Consideration. We may not be able to obtain alternative sources of financing sufficient to fund the Capital Acquisition Consideration on terms acceptable to us, if at all. Moreover, no assurance can be provided as to the terms of such alternative financing. If we are unable to obtain sufficient financing, we will be unable to consummate the Capital Acquisition. In such event, we may terminate the Interest Purchase Agreement pursuant to its terms. Furthermore, if the Sellers terminate the Interest Purchase Agreement, under certain circumstances, we may be required to pay the Sellers $5.0 million in cash as liquidated damages in accordance with the terms of the Interest Purchase Agreement. See "The Proposed Capital Acquisition," below. Table of Contents Cash expenditures associated with the Capital Acquisition may create significant liquidity and cash flow risks for us. We expect to incur significant transaction costs and some integration costs in connection with the proposed Capital Acquisition. While we have assumed that this level of expense will be incurred, there are many factors beyond our control that could affect the total amount or the timing of the Capital Acquisition and integration expenses. Moreover, many of the expenses that will be incurred are, by their nature, difficult to estimate accurately. To the extent these Capital Acquisition and integration expenses are higher than anticipated, we may experience liquidity or cash flow issues. Failure to complete the Capital Acquisition could materially and adversely affect our results of operations and the market price of our common stock. Our consummation of the Capital Acquisition is subject to many contingences and conditions, including raising the financing required to pay the Capital Acquisition Consideration. We cannot assure you that we will be able to successfully consummate the Capital Acquisition as currently contemplated or at all. This offering is not contingent upon the consummation of the Capital Acquisition. Risks related to the failure of the proposed Capital Acquisition to be consummated include, but are not limited to, the following: we may have raised proceeds from this offering and may not be able to deploy them and realize the same benefits as if the Capital Acquisition had been consummated; we would not realize any of the potential benefits of the transaction, which could have a negative effect on our stock price; we expect to incur, and have incurred, significant fees and expenses regardless of whether the Capital Acquisition is consummated, including due diligence fees and expenses, accounting fees in connection with the preparation of the Capital Companies financial statements, and legal fees and expenses; we may experience negative reactions to the Capital Acquisition from customers, clients, business partners, lenders, and employees; the trading price of our common stock may decline to the extent that the current market price of our stock reflects a market assumption that the Capital Acquisition will be completed; and the attention of our management may be diverted to the Capital Acquisition rather than to our own operations and the pursuit of other opportunities that could have been beneficial to us. The occurrence of any of these events individually or in combination could materially and adversely affect our results of operations and the market price of our common stock. If the Capital Acquisition is consummated, the combined company may not perform as we or the market expects, which could have an adverse effect on the price of our common stock. Even if the Capital Acquisition is consummated, the combined company may not perform as we or the market expects. Risks associated with the combined company following the Capital Acquisition include: integrating businesses is a difficult, expensive, and time-consuming process, and the failure to integrate successfully our businesses with the business of the Capital Companies in the expected time frame would adversely affect our financial condition and results of operation; the Capital Acquisition will materially increase the size of our operations, and, if we are not able to manage our expanded operations effectively, our common stock price may be adversely affected; it is possible that our key employees or key employees of the Capital Companies might decide not to remain with us after the Capital Acquisition is completed, and the loss of such personnel could have a material adverse effect on the financial condition, results of operations, and growth prospects of the combined company; the ability to realize the expected synergies and anticipated cost savings; the success of the combined company will also depend upon relationships with third parties and the Capital Companies or our pre-existing customers, which relationships may be affected by customer preferences or public attitudes about the Capital Acquisition. Any adverse changes in these relationships could adversely affect the combined company s business, financial condition, and results of operations; and if government agencies or regulatory bodies impose requirements, limitations, costs, divestitures, or restrictions on the consummation of the Capital Acquisition, the combined company s ability to realize the anticipated benefits of the Capital Acquisition may be impaired. Table of Contents The obligations and liabilities of the Capital Companies, some of which may be unanticipated or unknown, may be greater than we have anticipated, which may diminish the value of the Capital Companies to us. The Capital Companies obligations and liabilities, some of which may not have been disclosed to us or may not be reflected or reserved for in the Capital Companies historical financial statements, may be greater than we have anticipated. The obligations and liabilities of the Capital Companies could have a material adverse effect on the Capital Companies business or the Capital Companies value to us or on our business, financial condition, or results of operations. Even in cases where we are able to obtain indemnification, we may discover liabilities greater than the contractual limits or the financial resources of the indemnifying party. In the event that we are responsible for liabilities substantially in excess of any amounts recovered through rights to indemnification or alternative remedies that might be available to us, or any applicable insurance, we could suffer severe consequences that would substantially reduce our earnings and cash flows or otherwise materially and adversely affect our business, financial condition, or results of operations. Table of Contents

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+ RISK FACTORS An investment in the Company s securities involves significant risks, including the risks described below. You should carefully consider the risks described below before purchasing the shares. The risks highlighted here are not the only ones that the Company faces. For example, additional risks presently unknown to us or that we currently consider immaterial or unlikely to occur could also impair our operations. If any of the risks or uncertainties described below or any such additional risks and uncertainties actually occur, our business, prospects, financial condition or results of operations could be negatively affected, and you might lose all or part of your investment. Risks Related to Our Business We have a history of operating losses. If we continue to incur operating losses, we eventually may have insufficient working capital to maintain or expand operations according to our business plan. For the year ended December 31, 2018, the Company recorded a net loss of $7,322,823 and used cash from operations of $4,128,284. For the year ended December 31, 2017, the Company recorded a net loss of $8,911,540 and utilized cash in operations of $7,334,249. We have a history of operating losses and negative cash flow. These operating losses have been generated while we market to potential customers. We cannot guarantee that we will become profitable. As our operations grow, we expect to experience significant increases in our working capital requirements. These conditions raise substantial doubt over our ability to meet all of our obligations over the next twelve months. Management has evaluated these conditions and concluded that current plans should alleviate this concern. We have significantly reduced core operating costs beginning in 2016. In addition, we plan to raise additional capital. There can be no assurance that we will be able to obtain such financing on acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to pursue our business objectives and would be required to reduce our level of operations, including reducing infrastructure, promotions, personnel and other operating expenses. These events could adversely affect our business, results of operations and financial condition. Even if we achieve profitability, given the competitive and evolving nature of the industry in which we operate, we may be unable to sustain or increase profitability and our failure to do so would adversely affect the Company s business, including our ability to raise additional funds. We may need additional financing in the future, which may not be available when needed or may be costly and dilutive. We may require additional financing to support our working capital needs in the future. The amount of additional capital we may require, the timing of our capital needs and the availability of financing to fund those needs will depend on a number of factors, including our strategic initiatives and operating plans, the performance of our business and the market conditions for debt or equity financing. Additionally, the amount of capital required will depend on our ability to meet our case sales goals and otherwise successfully execute our operating plan. We believe it is imperative to meet these sales objectives in order to lessen our reliance on external financing in the future. Although we believe various debt and equity financing alternatives will be available to us to support our working capital needs, financing arrangements on acceptable terms may not be available to us when needed. Additionally, these alternatives may require significant cash payments for interest and other costs or could be highly dilutive to our existing shareholders. Any such financing alternatives may not provide us with sufficient funds to meet our long-term capital requirements. A worsening of economic conditions or a decrease in consumer spending may adversely impact our ability to implement our business strategy. Our success depends to a significant extent on discretionary consumer spending, which is influenced by general economic conditions and the availability of discretionary income. There is no certainty regarding economic conditions in the United States, and credit and financial markets and confidence in economic conditions could deteriorate at any time. Accordingly, we may experience declines in revenue during economic turmoil or during periods of uncertainty. Any material decline in the amount of discretionary spending, leading cost-conscious consumers to be more selective in restaurants visited, could have a material adverse effect on our revenue, results of operations, business and financial condition. The challenges of competing with the many food services businesses may result in reductions in our revenue and operating margins. We compete with many well-established companies, food service and otherwise, on the basis of taste, quality and price of product offered, customer service, atmosphere, location and overall guest experience. Our success depends, in part, upon the popularity of our products and our ability to develop new menu items that appeal to consumers across all four-day parts. Shifts in consumer preferences away from our products, our inability to develop new menu items that appeal to consumers across all day parts, or changes in our menu that eliminate items popular with some consumers could harm our business. We compete with other smoothie and juice bar retailers, specialty coffee retailers, yogurt and ice cream shops, bagel shops, fast-food restaurants, delicatessens, caf s, take-out food service companies, supermarkets and convenience stores. Our competitors change with each of the four day parts, ranging from coffee bars and bakery caf s to casual dining chains. Many of our competitors or potential competitors have substantially greater financial and other resources than we do, which may allow them to react to changes in the market quicker than we can. In addition, aggressive pricing by our competitors or the entrance of new competitors into our markets, could reduce our revenue and operating margins. We also compete with other employers in our markets for workers and may become subject to higher labor costs as a result of such competition. Fluctuations in various food and supply costs, particularly fruit and dairy, could adversely affect our operating results. Supplies and prices of the various ingredients that we are going to use to can be affected by a variety of factors, such as weather, seasonal fluctuations, demand, politics and economics in the producing countries. These factors subject us to shortages or interruptions in product supplies, which could adversely affect our revenue and profits. In addition, the prices of fruit and dairy, which are the main ingredients in our products, can be highly volatile. The fruit of the quality we seek tends to trade on a negotiated basis, depending on supply and demand at the time of the purchase. An increase in pricing of any fruit that we are going to use in our products could have a significant adverse effect on our profitability. We cannot assure you that we will be able to secure our fruit supply. Our business depends substantially on the continuing efforts of our senior management and other key personnel, and our business may be severely disrupted if we lose their services. Our future success heavily depends on the continued service of our senior management and other key employees. If one or more of our senior executives is unable or unwilling to continue to work for us in his present position, we may have to spend a considerable amount of time and resources searching, recruiting, and integrating a replacement into our operations, which would substantially divert management s attention from our business and severely disrupt our business. This may also adversely affect our ability to execute our business strategy. Our senior management s limited experience managing a publicly traded company may divert management s attention from operations and harm our business. With the exception of our Chief Financial Officer, our senior management team has relatively limited experience managing a publicly traded company and complying with federal securities laws, including compliance with recently adopted disclosure requirements on a timely basis. Our management will be required to design and implement appropriate programs and policies in responding to increased legal, regulatory compliance and reporting requirements, and any failure to do so could lead to the imposition of fines and penalties and harm our business. We may be unable to attract and retain qualified, experienced, highly skilled personnel, which could adversely affect the implementation of our business plan. Our success depends to a significant degree upon our ability to attract, retain and motivate skilled and qualified personnel. As we become a more mature company in the future, we may find recruiting and retention efforts more challenging. If we do not succeed in attracting, hiring and integrating excellent personnel, or retaining and motivating existing personnel, we may be unable to grow effectively. The loss of any key employee, including members of our senior management team, and our inability to attract highly skilled personnel with sufficient experience in our industries could harm our business. Product liability exposure may expose us to significant liability. We may face an inherent business risk of exposure to product liability and other claims and lawsuits in the event that the development or use of our technology or prospective products is alleged to have resulted in adverse effects. We may not be able to avoid significant liability exposure. Although we believe our insurance coverage to be adequate, we may not have sufficient insurance coverage, and we may not be able to obtain sufficient coverage at a reasonable cost. An inability to obtain product liability insurance at acceptable cost or to otherwise protect against potential product liability claims could prevent or inhibit the commercialization of our products. A product liability claim could hurt our financial performance. Even if we ultimately avoid financial liability for this type of exposure, we may incur significant costs in defending ourselves that could hurt our financial performance and condition. Our inability to protect our intellectual property rights may force us to incur unanticipated costs. Our success will depend, in part, on our ability to obtain and maintain protection in the United States and internationally for certain intellectual property incorporated into our products. Our intellectual property rights may be challenged, narrowed, invalidated or circumvented, which could limit our ability to prevent competitors from marketing similar solutions that limit the effectiveness of our patent protection and force us to incur unanticipated costs. In addition, existing laws of some countries in which we may provide services or solutions may offer only limited protection of our intellectual property rights. Our products may infringe the intellectual property rights of third parties, and third parties may infringe our proprietary rights, either of which may result in lawsuits, distraction of management and the impairment of our business. As the number of patents, copyrights, trademarks and other intellectual property rights in our industry increases, products based on our technology may increasingly become the subject of infringement claims. Third parties could assert infringement claims against us in the future. Infringement claims with or without merit could be time consuming, result in costly litigation, cause product shipment delays or require us to enter into royalty or licensing agreements. Royalty or licensing agreements, if required, might not be available on terms acceptable to us, or at all. We may initiate claims or litigation against third parties for infringement of our proprietary rights or to establish the validity of our proprietary rights. Litigation to determine the validity of any claims, whether or not the litigation is resolved in our favor, could result in significant expense to us and divert the efforts of our technical and management personnel from productive tasks. If there is an adverse ruling against us in any litigation, we may be required to pay substantial damages, discontinue the use and sale of infringing products and expend significant resources to develop non-infringing technology or obtain licenses to infringing technology. Our failure to develop or license a substitute technology could prevent us from selling our products. If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about our business, our share price and trading volume could decline. The trading market for our common stock may be impacted, in part, by the research and reports that securities or industry analysts publish about our business or us. There can be no assurance that analysts will cover us, continue to cover us or provide favorable coverage. If one or more analysts downgrade our stock or change their opinion of our stock, our share price may decline. In addition, if one or more analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline. We will continue to incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time to compliance initiatives and corporate governance practices. As a public company, we will continue to incur significant legal, accounting and other expenses. The Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act and other applicable securities rules and regulations impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management and other personnel will need to continue to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and make some activities more time-consuming and costly. We cannot predict or estimate the amount of additional costs we may incur to continue to operate as a public company, nor can we predict the timing of such costs. These rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies which could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. Failure to comply with the United States Foreign Corrupt Practices Act could subject us to penalties and other adverse consequences. As a Delaware corporation, we are subject to the United States Foreign Corrupt Practices Act, which generally prohibits United States companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. Some foreign companies, including some that may compete with our Company, may not be subject to these prohibitions. Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices may occur from time-to-time in countries in which we conduct our business. However, our employees or other agents may engage in conduct for which we might be held responsible. If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties and other consequences that may have a material adverse effect on our business, financial condition and results of operations. We could be subject to cybersecurity attacks. Cybersecurity attacks are evolving and include malicious software, attempts to gain unauthorized access to data, and other electronic security breaches that could lead to disruptions in business processes, unauthorized release of confidential or otherwise protected information and corruption of data. Such unauthorized access could subject us to operational interruption, damage to our brand image and private data exposure, and harm our business. Our reliance on distributors, retailers and brokers could affect our ability to efficiently and profitably distribute and market our products, maintain our existing markets and expand our business into other geographic markets. Our ability to maintain and expand our existing markets for our products, and to establish markets in new geographic distribution areas, is dependent on our ability to establish and maintain successful relationships with reliable distributors, retailers and brokers strategically positioned to serve those areas. Most of our distributors, retailers and brokers sell and distribute competing products and our products may represent a small portion of their businesses. The success of this network will depend on the performance of the distributors, retailers and brokers of this network. There is a risk that the mentioned entities may not adequately perform their functions within the network by, without limitation, failing to distribute to sufficient retailers or positioning our products in localities that may not be receptive to our product. Our ability to incentivize and motivate distributors to manage and sell our products is affected by competition from other companies who have greater resources than we do. To the extent that our distributors, retailers and brokers are distracted from selling our products or do not employ sufficient efforts in managing and selling our products, our sales and results of operations could be adversely affected. Furthermore, such third-parties financial position or market share may deteriorate, which could adversely affect our distribution, marketing and sales activities. Our ability to maintain and expand our distribution network and attract additional distributors, retailers and brokers will depend on a number of factors, some of which are outside our control. Some of these factors include: the level of demand for our brands and products in a particular distribution area; our ability to price our products at levels competitive with those of competing products; and our ability to deliver products in the quantity and at the time ordered by distributors, retailers and brokers. We may not be able to successfully manage all or any of these factors in any of our current or prospective geographic areas of distribution. Our inability to achieve success with regards to any of these factors in a geographic distribution area will have a material adverse effect on our relationships in that particular geographic area, thus limiting our ability to maintain or expand our market, which will likely adversely affect our revenues and financial results. It is difficult to predict the timing and amount of our sales because our distributors and national accounts may not be required to place minimum orders with us. Our distributors are not required to place minimum monthly or annual orders for our products. Accordingly, we cannot predict the timing or quantity of purchases by any of our independent distributors or whether any of our distributors will continue to purchase products from us in the same frequencies and volumes as they may have done in the past. Additionally, our larger distributors and partners may make orders that are larger than we have historically been required to fill. Shortages in inventory levels, supply of raw materials or other key supplies could negatively affect us. If we do not adequately manage our inventory levels, our operating results could be adversely affected. We need to maintain adequate inventory levels to be able to deliver products on a timely basis. Our inventory supply depends on our ability to correctly estimate demand for our products. Our ability to estimate demand for our products is imprecise, particularly for new products, seasonal promotions and new markets. If we materially underestimate demand for our products or are unable to maintain sufficient inventory of raw materials, we might not be able to satisfy demand on a short-term basis. If we overestimate retailer demand for our products, we may end up with too much inventory, resulting in higher storage costs, increased trade spend and the risk of obsolete inventory. If we fail to manage our inventory to meet demand, we could damage our relationships with our retailers and could delay or lose sales opportunities, which would unfavorably impact our future sales and adversely affect our operating results. Risks Related to Ownership of Our Common Stock Our common stock is quoted on the OTCQB, which may have an unfavorable impact on our stock price and liquidity. Our common stock is quoted on the OTCQB, which is a significantly more limited trading market than the New York Stock Exchange, or the NASDAQ Stock Market. The quotation of the Company s shares on the OTCQB may result in a less liquid market available for existing and potential shareholders to trade shares of our common stock, could depress the trading price of our common stock and could have a long-term adverse impact on our ability to raise capital in the future. There is limited liquidity on the OTCQB, which may result in stock price volatility and inaccurate quote information. When fewer shares of a security are being traded on the OTCQB, volatility of prices may increase and price movement may outpace the ability to deliver accurate quote information. Due to lower trading volumes in shares of our common stock, there may be a lower likelihood of one s orders for shares of our common stock being executed, and current prices may differ significantly from the price one was quoted at the time of one s order entry. If we are unable to adequately fund our operations, we may be forced to voluntarily file for deregistration of our common stock with the SEC. Compliance with the periodic reporting requirements required by the SEC consumes a considerable amount of both internal, as well external, resources and represents a significant cost for us. If we are unable to continue to devote adequate funding and the resources needed to maintain such compliance, while continuing our operations, we could be forced to deregister with the SEC. After the deregistration process, our common stock would only be tradable on the "Pink Sheets" and could suffer a decrease in or absence of liquidity. Because we became public by means of a "reverse merger", we may not be able to attract the attention of major brokerage firms. Additional risks may exist since we became public through a "reverse merger". Securities analysts of major brokerage firms may not provide coverage of us since there is little incentive to brokerage firms to recommend the purchase of our common stock. We cannot assure you that brokerage firms will want to conduct any secondary offerings on behalf of our Company in the future. Future sales of our common stock in the public market could lower the price of our common stock and impair our ability to raise funds in future securities offerings. Future sales of a substantial number of shares of our common stock in the public market, or the perception that such sales may occur, could adversely affect the then prevailing market price of our common stock and could make it more difficult for us to raise funds in the future through a public offering of our securities. Our common stock is thinly traded, so you may be unable to sell at or near asking prices or at all if you need to sell your shares to raise money or otherwise desire to liquidate your shares. Currently, the Company s common stock is quoted in the OTCQB and future trading volume may be limited by the fact that many major institutional investment funds, including mutual funds, as well as individual investors follow a policy of not investing in OTCQB stocks and certain major brokerage firms restrict their brokers from recommending OTCQB stocks because they are considered speculative, volatile and thinly traded. The OTCQB market is an inter-dealer market much less regulated than the major exchanges and our common stock is subject to abuses, volatility and shorting. Thus, there is currently no broadly followed and established trading market for the Company s 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 there. The trading volume of our common stock has been and may continue to be limited and sporadic. As a result of such trading activity, the quoted price for the Company s common stock on the OTCQB may not necessarily be a reliable indicator of its fair market value. Further, if we cease to be quoted, holders would find it more difficult to dispose of our common stock or to obtain accurate quotations as to the market value of the Company s common stock and as a result, the market value of our common stock likely would decline. Our common stock is subject to price volatility unrelated to our operations. The market price of our common stock could fluctuate substantially due to a variety of factors, including market perception of our ability to achieve our planned growth, quarterly operating results of other companies in the same industry, trading volume in our common stock, changes in general conditions in the economy and the financial markets or other developments affecting the Company s competitors or the Company itself. In addition, the OTCQB is subject to extreme price and volume fluctuations in general. This volatility has had a significant effect on the market price of securities issued by many companies for reasons unrelated to their operating performance and could have the same effect on our common stock. We are subject to penny stock regulations and restrictions and you may have difficulty selling shares of our common stock. Our common stock is currently quoted on the OTCQB. Our common stock is subject to the requirements of Rule 15(g)-9, promulgated under the Securities Exchange Act as long as the price of our common stock is below $5.00 per share. Under such rule, broker-dealers who recommend low-priced securities to persons other than established customers and accredited investors must satisfy special sales practice requirements, including a requirement that they make an individualized written suitability determination for the purchaser and receive the purchaser s consent prior to the transaction. The Securities Enforcement Remedies and Penny Stock Reform Act of 1990, also requires additional disclosure in connection with any trades involving a stock defined as a penny stock. Generally, the Commission defines a penny stock as any equity security not traded on a national exchange that has a market price of less than $5.00 per share. The required penny stock disclosures include the delivery, prior to any transaction, of a disclosure schedule explaining the penny stock market and the risks associated with it. Such requirements could severely limit the market liquidity of the securities and the ability of purchasers to sell their securities in the secondary market. Because we do not intend to pay dividends, shareholders will benefit from an investment in our common stock only if it appreciates in value. We have never declared or paid any cash dividends on our preferred stock or common stock. For the foreseeable future, it is expected that earnings, if any, generated from our operations will be used to finance the growth of our business, and that no dividends will be paid to holders of the Company s common stock. As a result, the success of an investment in our common stock will depend upon any future appreciation in its value. There can be no guarantee that our common stock will appreciate in value. The price of our common stock may become volatile, which could lead to losses by investors and costly securities litigation. The trading price of our common stock is likely to be highly volatile and could fluctuate in response to factors such as: actual or anticipated variations in our operating results; announcements of developments by us or our competitors; announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments; adoption of new accounting standards affecting the our industry; additions or departures of key personnel; introduction of new products by us or our competitors; sales of our common stock or other securities in the open market; and other events or factors, many of which are beyond our control. The stock market is subject to significant price and volume fluctuations. In the past, following periods of volatility in the market price of a company s securities, securities class action litigation has often been initiated against such a company. Litigation initiated against us, whether or not successful, could result in substantial costs and diversion of our management s attention and Company resources, which could harm our business and financial condition. Investors may experience dilution of their ownership interests because of the future issuance of additional shares of our common stock. We intend to continue to seek financing through the issuance of equity or convertible securities to fund our operations. In the future, we may also issue additional equity securities resulting in the dilution of the ownership interests of our present shareholders. We may also issue additional shares of our common stock or other securities that are convertible into or exercisable for our common stock in connection with hiring or retaining employees, future acquisitions or for other business purposes. The future issuance of any such additional shares of common stock will result in dilution to our shareholders and may create downward pressure on the trading price of our common stock. Provisions in our corporate charter documents and under Delaware law could make an acquisition of our company, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management. Provisions in our certificate of incorporation and our bylaws may discourage, delay or prevent a merger, acquisition or other change in control of our company that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. In addition, because our board of directors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.

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+ RISK FACTORS An investment in our securities involves a high degree of risk. You should consider carefully the following risks, along with all of the other information included in this report, before deciding to buy our common stock. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also impair our business operations. If we are unable to prevent events that have a negative effect from occurring, then our business may suffer. RISKS RELATED TO OUR COMPANY We have incurred losses since our inception in 2007 and may never be profitable, which raises doubt about our ability to continue as a going concern. Since our inception in 2007 and until the Merger in 2015, we had nominal operations and incurred operating losses. As of March 31, 2019, our accumulated deficit since inception was $25,795,942. We have substantial current obligations and at March 31, 2019, we had $22,150,053 of current liabilities compared to only $490,818 of current assets. Since inception, we have been able to raise only minimal additional capital, and we have minimal cash on hand. Accordingly, the Company does not have sufficient cash resources or current assets to pay its current obligations, and we have been meeting many of our obligations through the issuance of our common stock to our employees, consultants and advisors as payment for the goods and services. Our management continues to search for additional financing; however, considering the difficult U.S. and global economic conditions along with the substantial turmoil in the capital and credit markets, there is a significant possibility that we will be unable to obtain financing to continue our operations. As we are in the beginning stages of our exploration activities on UP and Burlington, and such property has not generated revenue in the recent past, we expect to incur additional losses in the foreseeable future, and such losses may continue to be significant. To become profitable, we must be successful in raising capital to continue with our mining efforts, exploration activities, meet the work commitment requirements on UP and Burlington and Clavo Rico, discover economically feasible mineralization deposits and establish reserves, successfully develop the properties and finally realize adequate prices on our minerals in the marketplace. These circumstances raise substantial doubt about our ability to continue as a going concern as described in an explanatory paragraph to our independent registered public accounting firm s report on our audited financial statements as of and for the year ended December 31, 2018. If we are unable to continue as a going concern, investors will likely lose all of their investment in our company. We have a limited operating history. As an early stage company that has made acquisitions in only the past several years, we are subject to all the risks inherent in the initial organization, financing, expenditures, complications, and delays inherent in a new business. Investors should evaluate an investment in us in light of the uncertainties encountered by developing companies in a competitive environment. Our business is dependent upon the implementation of our business plan. There can be no assurance that our efforts will be successful or that we will ultimately be able to attain profitability. Additionally, the Company s merger with the operating foreign entity was based on a review of all historical data and potential revenue streams and resources as could be ascertained from the submission of documents and a thorough review of all data made available. We believe the materials to be accurate and have attempted to discount the valuations due to perceived risks of foreign operations and the tasks of incorporating a non-public operating entity into Inception Mining Inc. The feasibility of mineral extraction from UP and Burlington has not yet been established, as we have not completed exploration or other work necessary to determine if it is commercially feasible to develop the properties. UP and Burlington does not have any proven or probable reserves. A "reserve," as defined by the SEC, is that part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination. A reserve requires a feasibility study demonstrating with reasonable certainty that the deposit can be economically extracted and produced. We have not yet completed our feasibility study with regard to UP and Burlington. As a result, we currently have no reserves and there are no assurances that we will be able to prove that there are reserves on UP and Burlington. Exploring for gold is an inherently speculative business. Natural resource exploration, and exploring for gold in particular, is a business that by its nature is very speculative. There is a strong possibility that we will not discover gold or any other resources that can be mined or extracted at a profit at our UP and Burlington project. Even if we do discover gold or other deposits at that project, the deposit may not be of the quality or size necessary for us to make a profit after extracting it. Few properties that are explored are ultimately developed into producing mines. Unusual or unexpected geological formations, geological formation pressures, fires, power outages, labor disruptions, flooding, explosions, cave-ins, landslides, and the inability to obtain suitable or adequate machinery, equipment or labor are just some of the many risks involved in mineral exploration programs and the subsequent development of gold deposits. At our Clavo Rico mine, the resources may become scarce or more difficult to obtain. We will require significant additional capital to continue our exploration activities, and, if warranted, to develop mining operations. We will be required to raise significantly more capital in order to develop UP and Burlington for mining production, assuming economically viable reserves exist. There is no assurance that our investments in UP and Burlington will be financially productive. We will also be required to raise significantly more capital in order to fund our Clavo Rico operations. Our ability to obtain necessary funding depends upon a number of factors, including the price of gold, base metals, and other minerals we are able to mine, the status of the national and worldwide economy, and the availability of funds in the capital markets. If we are unable to obtain the required financing in the near future for these or other purposes, our exploration activities would be delayed or indefinitely postponed, we would likely may lose our lease and options to acquire an ownership interest in UP and Burlington and be unable to fund our operations at the Clavo Rico mine in Honduras. This would likely lead to failure of our Company. Even if financing is available, it may be on terms that are not favorable to us, in which case, our ability to become profitable or to continue operating would be adversely affected. If we are unable to raise funds, the market value of our securities will likely decline, and our investors may lose some or all of their investment. The global financial conditions may have an impact on our business and financial condition in ways that we currently cannot predict. The continued pressure on commodities markets and related turmoil in the global financial system may have an impact on our business and financial position. The recent high costs of consumables may negatively impact costs of our operations. In addition, current financial market conditions may limit our ability to raise capital through credit and equity markets. As discussed further below, the prices of the metals that we may produce are affected by a number of factors, and it is unknown how these factors will be impacted by a continuation of the financial crisis. Fluctuating gold and mineral prices could negatively impact our business plan. The potential for profitability of our gold and mineral mining operations and the value of any mining properties we may acquire will be directly related to the market price of gold and minerals that we mine. Historically, gold and other mineral prices have widely fluctuated, and are influenced by a wide variety of factors, including inflation, currency fluctuations, regional and global demand, and political and economic conditions. Fluctuations in the price of gold and other minerals that we mine may have a significant influence on the market price of our common stock and a prolonged decline in these prices will have a negative effect on our results of operations and financial condition. Our business is subject to extensive environmental regulations which may make exploring for or mining prohibitively expensive, and which may change at any time. All of our operations are subject to extensive environmental regulations, which could make exploration expensive or prohibit it altogether. We may be subject to potential liabilities associated with the pollution of the environment and the disposal of waste products that may occur as the result of exploring and other related activities on our properties. We may have to pay to remedy environmental pollution, which may reduce the amount of money that we have available to use for exploration. This may adversely affect our financial position, which may cause you to lose your investment. If we are unable to fully remedy an environmental problem, we might be required to suspend operations or to enter into interim compliance measures pending the completion of the required remedy. If a decision is made to mine our properties and we retain any operational responsibility for doing so, our potential exposure for remediation may be significant, and this may have a material adverse effect upon our business and financial position. We have not yet purchased insurance for potential environmental risks (including potential liability for pollution or other hazards associated with the disposal of waste products from our exploration activities). However, if we mine one or more of our properties and retain operational responsibility for mining, then such insurance may not be available to us on reasonable terms or at a reasonable price. All of our exploration and, if warranted, development activities may be subject to regulation under one or more local, state and federal environmental impact analyses and public review processes. It is possible that future changes in applicable laws, regulations and permits or changes in their enforcement or regulatory interpretation could have significant impact on some portion of our business, which may require our business to be economically re-evaluated from time to time. These risks include, but are not limited to, the risk that regulatory authorities may increase bonding requirements beyond our financial capability. Inasmuch as posting of bonding in accordance with regulatory determinations is a condition to the right to operate under all material operating permits, increases in bonding requirements could prevent operations even if we are in full compliance with all substantive environmental laws. We may be denied the government licenses and permits which we need to explore on our properties. In the event that we discover commercially exploitable deposits, we may be denied the additional government licenses and permits which we will need to mine our properties. Exploration activities usually require the granting of permits from various governmental agencies. For example, exploration drilling on unpatented mineral claims requires a permit to be obtained from the United States Bureau of Land Management, which may take several months or longer to grant the requested permit. Depending on the size, location and scope of the exploration program, additional permits may also be required before exploration activities can be undertaken. Prehistoric or Indian graveyards, threatened or endangered species, archeological sites or the possibility thereof, difficult access, excessive dust and important nearby water resources may all result in the need for additional permits before exploration activities can commence. As with all permitting processes, there is the risk that unexpected delays and excessive costs may be experienced in obtaining required permits. The needed permits may not be granted at all. Delays in or our inability to obtain necessary permits will result in unanticipated costs, which may result in serious adverse effects upon our business. The values of our properties are subject to volatility in the price of gold and any other deposits we may seek or locate. Our ability to obtain additional and continuing funding, and our profitability in the event we ever commence mining operations or sell our rights to mine, will be significantly affected by changes in the market price of gold. Further, the gold deposits that are recovered from our Clavo Rico mine with also be subject to the volatility in the price of gold. Gold prices fluctuate widely and are affected by numerous factors, all of which are beyond our control. Some of these factors include the sale or purchase of gold by central banks and financial institutions; interest rates; currency exchange rates; inflation or deflation; fluctuation in the value of the United States dollar and other currencies; speculation; global and regional supply and demand, including investment, industrial and jewelry demand; and the political and economic conditions of major gold or other mineral producing countries throughout the world, such as Russia and South Africa. The price of gold or other minerals have fluctuated widely in recent years, and a decline in the price of gold could cause a significant decrease in the value of our properties, limit our ability to raise money, and render continued exploration and development of our properties impracticable. If that happens, then we could lose our rights to our properties and be compelled to sell some or all of these rights. Additionally, the future development of our properties beyond the exploration stage is heavily dependent upon the level of gold prices remaining sufficiently high to make the development of our properties economically viable. You may lose your investment if the price of gold decreases. The greater the decrease in the price of gold, the more likely it is that you will lose money. Our property titles may be challenged. We are not insured against any challenges, impairments or defects to our mineral claims or property titles. We have not fully verified title to our properties. Our future unpatented claims will be created and maintained in accordance with the federal General Mining Law of 1872. Unpatented claims are unique U.S. property interests and are generally considered to be subject to greater title risk than other real property interests because the validity of unpatented claims is often uncertain. This uncertainty arises, in part, out of the complex federal and state laws and regulations under the General Mining Law. Defending any challenges to our future property titles may be costly and may divert funds that could otherwise be used for exploration activities and other purposes. In addition, unpatented claims are always subject to possible challenges by third parties or contests by the federal government, which, if successful, may prevent us from exploiting our discovery of commercially extractable gold. Challenges to our title may increase our costs of operation or limit our ability to explore on certain portions of our properties. We are not insured against challenges, impairments or defects to our property titles, nor do we intend to carry extensive title insurance in the future. Potential conflicts to our mineral claims are discussed in detail elsewhere herein. Honduran mining operations have increased exposure. Sustaining foreign mining operations, such as those in Honduras, comes with increased uncertainty, due to less stable governments, political interruptions, volatility in taxes and fees, implementation of new laws and regulations, and more. The effect of this exposure can lead to closure of operations, nationalization, and strikes, all of which are beyond the company s control. Granting and maintaining concessions is highly subject to political whim and maintaining the concessions is subject to a number of factors and variables beyond the company s control. We do not currently insure against these interruptions but have chosen to structure our operations to minimize exposure to capital assets by subcontracting major areas of work, and to otherwise keep our financial exposure limited even at the expense of operation costs and our bottom line. Foreign operations involve numerous risks associated with fluctuating exchange rates and other financial risks. Foreign operations involve numerous risks associated with fluctuating exchange rates and with increasing taxes and fees associated with importing of necessary goods, equipment and services not adequately found in country and with exporting of the finished gold dore . Recent enactment of the Honduran mining laws has helped stabilize the fees, but continual review by the various government operations, and central bank subject the historical operations to review and could impact our ability to export on a timely basis and/or face possible fines etc. associated with repatriation of past revenues, etc. Possible amendments to the General Mining Law could make it more difficult or impossible for us to execute our business plan. The U.S. Congress has considered proposals to amend the General Mining Law of 1872 that would have, among other things, permanently banned the sale of public land for mining. The proposed amendment would have expanded the environmental regulations to which we might be subject and would have given Indian tribes the ability to hinder or prohibit mining operations near tribal lands. The proposed amendment would also have imposed a royalty of 8% of gross revenue on new mining operations located on federal public land, which might have applied to our future properties. The proposed amendment would have made it more expensive or perhaps too expensive to recover any otherwise commercially exploitable gold deposits which we might find on our future properties. While at this time the proposed amendment is no longer pending, this or similar changes to the law in the future could have a significant impact on our business model. Market forces or unforeseen developments may prevent us from obtaining the supplies and equipment necessary to explore for gold and other resources. Gold exploration, and resource exploration in general, demands contractors available for such work, and unforeseen shortages of supplies and/or equipment could result in the disruption of our planned exploration activities. Current demand for exploration drilling services, equipment and supplies is robust and could result in suitable equipment and skilled manpower being unavailable at scheduled times for our exploration program. Fuel prices are extremely volatile as well. We will attempt to locate suitable equipment, materials, manpower and fuel if sufficient funds are available. If we cannot find the equipment and supplies needed for our various exploration programs, we may have to suspend some or all of them until equipment, supplies, funds and/or skilled manpower become available. Any such disruption in our activities may adversely affect our exploration activities and financial condition. We may not be able to maintain the infrastructure necessary to conduct exploration activities. Our exploration activities depend upon adequate infrastructure. Reliable roads, bridges, power sources, and water supply are important factors that affect capital and operating costs. Unusual or infrequent weather phenomena, sabotage, government or other interference in the maintenance or provision of such infrastructure could adversely affect our exploration activities and financial condition. Our exploration activities may be adversely affected by the local climates, which could prevent or impair us from exploring our properties year-round. The local climate in our area of operations may impair or prevent us from conducting exploration activities on our properties year round. Because of its rural location and limited infrastructure in this area, our property is generally impassible for several weeks each year as a result of significant rain or snow events. Earthquakes, heavy rains, snowstorms, and floods could result in serious damage to or the destruction of facilities, equipment or means of access to our properties, or may otherwise prevent us from conducting exploration activities on our properties. We do not currently carry any property or casualty insurance. Our business is subject to a number of risks and hazards generally, including but not limited to, adverse environmental conditions, industrial accidents, unusual or unexpected geological conditions, ground or slope failures, cave-ins, changes in the regulatory environment, and natural phenomena such as inclement weather conditions, floods and earthquakes. Such occurrences could result in damage to our properties, equipment, infrastructure, personal injury or death, environmental damage, delays, monetary losses and possible legal liability. You could lose all or part of your investment if any such catastrophic event occurs. We do not carry any property or casualty insurance at this time (but we will carry all insurances that we are required to by law, such as motor vehicle and workers compensation, plus other coverage that may be in the best interest of the Company). Even if we do obtain insurance, it may not cover all of the risks associated with our operations. Insurance against risks such as environmental pollution or other hazards as a result of exploration and operations are often not available to us or to other companies in our business on acceptable terms. Should any events against which we are not insured actually occur, we may become subject to substantial losses, costs and liabilities, which will adversely affect our financial condition. Reclamation obligations could require significant additional expenditures. We are responsible for the reclamation obligations related to any exploratory and mining activities. The satisfaction of current and future bonding requirements and reclamation obligations will require a significant amount of capital. There is a risk we will be unable to fund these additional bonding requirements, and further, increases to our bonding requirements or excessive actual reclamation costs will negatively affect our financial position and results of operation. Title to mineral properties can be uncertain, and we are at risk of loss of ownership of our property. Our ability to explore and mine future leased and optioned properties depends on the validity of title to that property. These uncertainties relate to such things as the sufficiency of mineral discovery, proper posting and marking of boundaries, failure to meet statutory guidelines, assessment work and possible conflicts with other claims not determinable from descriptions of record. Since a substantial portion of all mineral exploration, development and mining in the United States now occurs on unpatented mining claims, this uncertainty is inherent in the mining industry. Thus, there may be challenges to the title to future properties, which, if successful, could impair development and/or operations. The probability of a mining claim having the necessary quantity and quality to result in a profitable mining operation is uncertain, and our claims, even with large investments by us, may never generate a profit. We are dependent upon the successful exploration of our mining property and the discovery of valuable mineralization on the property. All anticipated future revenues would come directly or indirectly from the UP and Burlington and Clavo Rico projects. Should we fail to locate economically extractable mineralization on our property or enter into an agreement to option and sell our interests to some other mining operation, we will have no revenue and our business will fail. Our ongoing operations and past mining activities of others are subject to environmental risks, which could expose us to significant liability and delay, suspension or termination of our operations. Mining exploration and exploitation activities are subject to federal, state and local laws, regulations and policies, including laws regulating the removal of natural resources from the ground and the discharge of materials into the environment. These regulations mandate, among other things, the maintenance of air and water quality standards and land reclamation. They also set forth limitations on the generation, transportation, storage and disposal of solid and hazardous waste. Exploration and exploitation activities are also subject to federal, state and local laws and regulations which seek to maintain health and safety standards by regulating the design and use of exploration methods and equipment. Environmental and other legal standards imposed by federal, state or local authorities are constantly evolving, and typically in a manner which will require stricter standards and enforcement, and increased fines and penalties for non-compliance. Such changes may prevent us from conducting planned activities or increase our costs of doing so, which would have material adverse effects on our business. Moreover, compliance with such laws may cause substantial delays or require capital outlays in excess of those anticipated, thus causing an adverse effect on us. Additionally, we may be subject to liability for pollution or other environmental damages that we may not be able to or elect not to insure against due to prohibitive premium costs and other reasons. Unknown environmental hazards may exist on UP and Burlington and/or on Clavo Rico, or we may acquire properties in the future that have unknown environmental issues caused by previous owners or operators, or that may have occurred naturally. We could be exposed to significant liability for violations of hazardous substances laws because of the use or presence of such substances at our project. Our mining operations are subject to numerous federal, state, and local statutory and regulatory standards relating to the use, storage, and disposal of hazardous substances. We use cyanide, propane and industrial lubricants and other substances at our mining locations, which are or could become classified as hazardous substances. If it is discovered that any hazardous substances have been released into the environment at or by the project in concentrations that exceed regulatory limits, we could become liable for the investigation and removal of those substances, regardless of their source and time of release. If we fail to comply with these laws, ordinances or regulations (or any change thereto), we could be subject to civil or criminal liability, the imposition of liens or fines, and large expenditures to bring the project into compliance. Furthermore, we may be held liable for the cleanup of releases of hazardous substances at other locations where we arranged for disposal of those substances, even if we did not cause the release at that location. The cost of any remediation activities in connection with a spill or other release of such substances could be significant. Our industry is highly competitive, attractive mineral lands are scarce, and we may not be able to obtain quality properties. We compete with many companies in the mining industry, including large, established mining companies with capabilities, personnel and financial resources that far exceed our limited resources. In addition, there is a limited supply of desirable mineral lands available for claim-staking, lease or acquisition in the United States, and other areas where we may conduct exploration activities. We are at a competitive disadvantage in acquiring mineral properties, since we compete with these larger individuals and companies, many of which have greater financial resources and larger technical staffs. Likewise, our competition extends to locating and employing competent personnel and contractors to prospect, develop and operate mining properties. Many of our competitors can offer attractive compensation packages that we may not be able to meet. Such competition may result in our company being unable not only to acquire desired properties, but to recruit or retain qualified employees or to acquire the capital necessary to fund our operation and advance our properties. Our inability to compete with other companies for these resources would have a material adverse effect on our results of operation and business. We depend on our Chief Executive Officer and Chief Financial Officer and the loss of these individuals could adversely affect our business. Our company is completely dependent on Trent D Ambrosio, our Chief Executive Officer and Chief Financial Officer. Mr. D Ambrosio is also a member of our Board of Directors. The loss of Mr. D Ambrosio could significantly and adversely affect our business and could even result in a complete failure of the Company. We do not carry any life insurance on the life of Mr. D Ambrosio. The nature of mineral exploration and production activities involves a high degree of risk and the possibility of uninsured losses that could materially and adversely affect our operations. Exploration for minerals is highly speculative and involves greater risk than many other businesses. Many exploration programs do not result in the discovery of economically feasible mineralization. Few properties that are explored are ultimately advanced to the stage of producing mines. We are subject to all of the operating hazards and risks normally incident to exploring for and developing mineral properties such as, but not limited to: economically insufficient mineralized material; fluctuations in production costs that may make mining uneconomical; labor disputes; unanticipated variations in grade and other geologic problems; environmental hazards; water conditions; difficult surface or underground conditions; industrial accidents, such as personal injury, fire, flooding, cave-ins, and landslides; metallurgical and other processing problems; mechanical and equipment performance problems; and decreases in revenues and reserves due to lower gold and mineral prices. Any of these risks can materially and adversely affect, among other things, the development of properties, production quantities and rates, costs and expenditures and production commencement dates. We currently have no insurance to guard against any of these risks. If we determine that capitalized costs associated with any of our mineral interests are not likely to be recovered, we would incur a write-down of our investment in these interests. All of these factors may result in losses in relation to amounts spent that are not recoverable. Our operations are subject to permitting requirements that could require us to delay, suspend or terminate our operations on our mining property. Our operations and exploration activities require permits from the local, state and federal governments. We may be unable to obtain these permits in a timely manner, on reasonable terms or at all. If we cannot obtain or maintain the necessary permits, or if there is a delay in receiving these permits, our timetable and business plan for Inception will be adversely affected. We may never find commercially viable gold or other reserves on UP and Burlington. Mineral exploration and development involve a high degree of risk and few properties that are explored are ultimately developed into producing mines. We cannot assure you that any future mineral exploration and development activities will result in any discoveries of proven or probable reserves as defined by the SEC since such discoveries are remote. Nor can we provide any assurance that, even if we discover commercial quantities of mineralization, a mineral property will be brought into commercial production. Development of our mineral properties will follow only upon obtaining sufficient funding and satisfactory exploration results. Mineral deposit estimates are imprecise and subject to error. Mineral deposit estimation calculations may prove unreliable. Assumptions made regarding the supporting data may prove inaccurate and unforeseen events may lead to further inaccuracies. Sample variability, mining and processing adjustments, environmental changes, metal price fluctuations, and law and regulation changes are all factors that could lead to deviances from any original estimations. Despite future investment in exploration activities, there is no guarantee we will locate additional commercially viable ore deposits or reserves. Most exploration projects do not result in discovery of commercially viable and mineable ore deposits. With little capital available, we will have to limit our exploration, which decreases the chances of finding a commercially viable ore body. Even if potentially promising mineralization is identified at UP and Burlington, we may choose to not begin production due to high extraction costs, low gold prices, or inadequate amount and reduced recovery rates. Further, we may cease our production operations at Clavo Rico due to high extraction costs, low gold prices, or inadequate amount and reduced recovery rates. If exploration activities do not suggest a commercially successful prospect, then we may altogether abandon plans to pursue efforts to further develop these properties. Historical production of gold at UP and Burlington and Clavo Rico may not be indicative of the potential for future development or revenue. Historical production of gold and minerals from UP and Burlington and Clavo Rico cannot be relied upon as an indication that these mines will have commercially feasible reserves. Investors in our securities should not rely on historical operations of UP and Burlington and Clavo Rico as an indication that we will be able to place them into commercial production again. We expect to incur losses unless and until such time as the properties enter into commercial production and generate sufficient revenue to fund our continuing operations. Our independent auditors have expressed substantial doubt about our ability to continue as a going concern. In their audit opinion issued in connection with our consolidated balance sheets as of December 31, 2018 and our related consolidated statements of operations, deficiency in stockholders deficit, and cash flows for the year ended December 31, 2018, our auditors have expressed substantial doubt about our ability to continue as a going concern given our recurring net losses, negative cash flows from operations and the limited amount of funds on our balance sheet. We have prepared our financial statements on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The consolidated financial statements do not include any adjustments that might be necessary should we be unable to continue in existence. This could make it more difficult to raise capital in the future. Risks Associated with Our Common Stock Trading on the Over the Counter markets may be volatile and sporadic, which could depress the market price of our common stock and make it difficult for our stockholders to resell their shares. Our common stock is quoted on the OTCQB tier of the over-the-counter alternative trading system administered by OTC Markets Group, Inc. under the symbol "IMII". Trading in stock quoted on over the counter markets is often thin, volatile, and characterized by wide fluctuations in trading prices due to many factors that may have little to do with our operations or business prospects. This volatility could depress the market price of our common stock for reasons unrelated to operating performance. Moreover, the over the counter markets are not a stock exchange, and trading of securities on the over the counter markets is often more sporadic than the trading of securities listed on other stock exchanges such as the NASDAQ Stock Market, New York Stock Exchange or American Stock Exchange. Accordingly, our shareholders may have difficulty reselling any of their shares. Our stock is a penny stock. Trading of our stock may be restricted by the SEC s penny stock regulations and the FINRA s sales practice requirements, which may limit a stockholders ability to buy and sell our stock. Our stock is a penny stock. The SEC has adopted Rule 15g-9 which generally defines penny stock to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and accredited investors. The term accredited investor refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customers account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability or willingness of broker-dealers to trade our securities. We believe that the penny stock rules discourage broker-dealer and investor interest in, and limit the marketability of, our common stock. Our common stock may be affected by limited trading volume and price fluctuation which could adversely impact the value of our common stock. There has been limited trading in our common stock and there can be no assurance that an active trading market in our common stock will either develop or be maintained. Our common stock has experienced, and is likely to experience in the future, significant price and volume fluctuations which could adversely affect the market price of our common stock without regard to our operating performance. In addition, we believe that factors such as quarterly fluctuations in our financial results and changes in the overall economy or the condition of the financial markets could cause the price of our common stock to fluctuate substantially. These fluctuations may also cause short sellers to periodically enter the market in the belief that we will have poor results in the future. We cannot predict the actions of market participants and, therefore, can offer no assurances that the market for our common stock will be stable or appreciate over time. FINRA sales practice requirements may also limit a stockholders ability to buy and sell our stock. In addition to the penny stock rules promulgated by the SEC, which are discussed in the immediately preceding risk factor, FINRA rules require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit the ability to buy and sell our stock and have an adverse effect on the market value for our shares. Because the SEC imposes additional sales practice requirements on brokers who deal in shares of penny stocks, some brokers may be unwilling to trade our securities. This means that you may have difficulty reselling your shares, which may cause the value of your investment to decline. Our shares are classified as penny stocks and are covered by Section 15(g) of the Securities Exchange Act of 1934 (the "Exchange Act") which imposes additional sales practice requirements on broker-dealers who sell our securities in this offering or in the aftermarket. For sales of our securities, broker-dealers must make a special suitability determination and receive a written agreement prior from you to making a sale on your behalf. Because of the imposition of the foregoing additional sales practices, it is possible that broker-dealers will not want to make a market in our common stock. This could prevent you from reselling your shares and may cause the value of your investment to decline. A decline in the price of our common stock could affect our ability to raise further working capital, it may adversely impact our ability to continue operations and we may go out of business. 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. Because we may attempt to acquire a significant portion of the funds we need in order to conduct our planned operations through the sale of equity securities, or convertible debt instruments, a decline in the price of our common stock could be detrimental to our liquidity and our operations because the decline may cause investors to not choose to invest in our stock. If we are unable to raise the funds we require for all our planned operations, we may be forced to reallocate funds from other planned uses and may suffer a significant negative effect on our business plan and operations, including our ability to develop new products and continue our current operations. As a result, our business may suffer, and not be successful and we may go out of business. We also might not be able to meet our financial obligations if we cannot raise enough funds through the sale of our common stock and we may be forced to go out of business. Our stock price may be volatile. The stock market in general has experienced volatility that often has been unrelated to the operating performance of any specific public company. The market price of our common stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including the following: changes in our industry; competitive pricing pressures; our ability to obtain working capital financing; additions or departures of key personnel; limited "public float" in the hands of a small number of persons whose sales or lack of sales could result in positive or negative pricing pressure on the market prices of our common stock; sales of our common stock; our ability to execute our business plan; operating results that fall below expectations; loss of any strategic relationship; regulatory developments; economic and other external factors; and period-to-period fluctuations in our financial results. In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock. We have never paid a cash dividend on our common stock and we do not anticipate paying any in the foreseeable future. We have not paid a cash dividend on our common stock to date, and we do not intend to pay cash dividends in the foreseeable future. Our ability to pay dividends will depend on our ability to successfully develop one or more properties and generate revenue from operations. Notwithstanding, we will likely elect to retain any earnings, if any, to finance our growth. Future dividends may also be limited by bank loan agreements or other financing instruments that we may enter into in the future. The declaration and payment of dividends will be at the discretion of our Board of Directors. We have not voluntarily implemented various corporate governance measures, in the absence of which, shareholders may have more limited protections against interested director transactions, conflicts of interest and similar matters. Recent federal legislation, including the Sarbanes-Oxley Act of 2002 and the Jumpstart our Business Startups Act of 2012, among others, has resulted in the adoption of various corporate governance measures designed to promote the integrity of the corporate management and the securities markets. Some of these measures have been adopted in response to legal requirements. Others have been adopted by companies in response to the requirements of national securities exchanges, such as the NYSE or The NASDAQ Stock Market, on which their securities are listed. Among the corporate governance measures that are required under the rules of national securities exchanges and NASDAQ are those that address board of directors independence, audit committee oversight and the adoption of a code of ethics. While our Board of Directors has adopted a Code of Ethics and Business Conduct, we have not yet adopted any of these corporate governance measures and, since our securities are not listed on a national securities exchange or NASDAQ, we are not required to do so. It is possible that if we were to adopt some or all of these corporate governance measures, shareholders would benefit from somewhat greater assurances that internal corporate decisions were being made by disinterested directors and that policies had been implemented to define responsible conduct. For example, in the absence of audit, nominating and compensation committees comprised of at least a majority of independent directors, decisions concerning matters such as compensation packages to our senior officers and recommendations for director nominees may be made by a majority of directors who have an interest in the outcome of the matters being decided. Prospective investors should bear in mind our current lack of corporate governance measures in formulating their investment decisions. Difficulties we may encounter managing our growth could adversely affect our results of operations. As our business needs expand, we may need to hire a significant number of employees. This expansion may place a significant strain on our managerial and financial resources. To manage the potential growth of our operations and personnel, we will be required to: improve existing, and implement new, operational, financial and management controls, reporting systems and procedures; install enhanced management information systems; and train, motivate, and manage our employees. We may not be able to install adequate management information and control systems in an efficient and timely manner, and our current or planned personnel, systems, procedures and controls may not be adequate to support our future operations. If we are unable to manage growth effectively, our business would be seriously harmed. If we lose key personnel or are unable to attract and retain additional qualified personnel, we may not be able to successfully manage our business and achieve our objectives. We believe our future success will depend upon our ability to retain our key management, primarily Mr. D Ambrosio, our Chief Executive Officer and Chief Financial Officer. We may not be successful in attracting, assimilating and retaining our employees in the future. Offers or availability for sale of a substantial number of shares of our common stock may cause the price of our common stock to decline. If our stockholders sell substantial amounts of our common stock in the public market upon the expiration of any statutory holding period, under Rule 144, or issued upon the exercise of outstanding options or warrants, it could create a circumstance commonly referred to as an "overhang" and in anticipation of which the market price of our common stock could fall. The existence of an overhang, whether or not sales have occurred or are occurring, also could make more difficult our ability to raise additional financing through the sale of equity or equity related securities in the future at a time and price that we deem reasonable or appropriate. FORWARD-LOOKING INFORMATION This prospectus contains forward-looking statements. These statements can be identified by the use of the forward-looking words "anticipate," "estimate," "project," "likely," "believe," "intend," "expect," or similar words. These statements discuss future expectations, contain projections regarding future developments, operations,

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+ Certain stockholders possess a majority of our voting power, and through this ownership, may control our Company and our corporate actions. Our controlling stockholders, The 2GP Group, LLC and Fiona Oakley, hold approximately 59.14% of the total voting power of our outstanding capital stock as of January 15 , 201 9 . The 2GP Group, LLC is an entity controlled by our Chief Executive Officer s son, Geordan Pursglove, who holds sole voting and dispositive power over these shares. Mr. Geordan Pursglove is over the age of eighteen and does not live in the same household as our Chief Executive Officer. Each share of Series A Preferred Stock is convertible into one share of common stock. In addition, each share of Series A Preferred Stock entitles its holder to (i) cumulative, non-participating dividends in preference and priority to any declaration or payment of a dividend on any of the Company s common stock, at a rate of 12% per annum, and (ii) three times (3x) voting preference over common stock. These shareholders have the ability to control our management and affairs through the election and removal of our entire Board of Directors, the amendment of our articles of incorporation or bylaws, and the adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination involving us. Such concentrated control of the Company may adversely affect the price of our common stock. A stockholder that acquires common stock will not have an effective voice in the management of the Company. We have no plans to pay dividends on our Common Stock or our Series A Preferred Stock. We have not previously paid any cash dividends, nor have we determined to pay dividends on any share of Series A Preferred Stock or shares of Common Stock, except as described in the rights and preferences detailed in the Certificate of Designation of Preferences for the Series A Preferred Stock filed with the Secretary of State of the State of Nevada. The permissibility to pay dividends on our shares is restricted by Section 78.288 of the Nevada Revised Statutes, which provides that a company may not issue a dividend if the result of such dividend would be to make the company have negative retained earnings. There can be no assurance that our operations will result in sufficient revenues to enable us to operate at profitable levels or to generate positive cash flows. Furthermore, there is no assurance that the Board of Directors will declare dividends even if profitable. Dividend policy is subject to the Nevada Revised Statutes and the discretion of our Board of Directors and will depend on, among other things, our earnings, financial condition, capital requirements and other factors. If we issue additional shares in the future, it will result in the dilution of our existing stockholders. We are authorized to issue up to 1,100,000,000 shares of common stock with a par value of $0.001, of which 1,017,450,000 are currently issued and outstanding. Our board of directors, upon the approval of the stockholders, may seek to increase the number of authorized shares in the future and may choose to issue some or all of such shares to acquire one or more businesses or to provide additional financing in the future. The issuance of any such shares will result in a reduction of the book value and market price of the outstanding shares of our common stock. If we issue any such additional shares, such issuance will cause a reduction in the proportionate ownership and voting power of all current shareholders. Further, such issuance may result in a change of control of our company. Voting power is highly concentrated in holders of our Series A Preferred Stock. We are authorized to issue up to 250,000,000 shares of preferred stock, all of which are designated Series A Preferred Stock and all of which are currently issued and outstanding. Holders of our Series A Preferred Stock are entitled to three times (3x) voting preference over holders of common stock. Such concentrated control of the Company may adversely affect the price of our common stock. A stockholder that acquires common stock will not have an effective voice in the management of the Company. 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 an smaller reporting company, as defined in Rule 12b-2 under the Exchange Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies, including emerging growth companies such as, 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 Table of Contents regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. Our status as a smaller reporting company is determined on an annual basis. We cannot predict if investors will find our Common Stock less attractive or our company less comparable to certain other public companies because we will rely on these exemptions. For example, if we do not adopt a new or revised accounting standard, our future financial results may not be as comparable to the financial results of certain other companies in our industry that adopted such standards. 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. The requirements of being a reporting public company may strain our resources, divert management s attention and affect our ability to attract and retain additional executive management and qualified board members. As a reporting public company, we will be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, and the Dodd-Frank Act, and other applicable securities rules and regulations. Compliance with these rules and regulations will increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources, particularly after we are no longer a smaller reporting company. The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and results of operations. As a smaller reporting company, we receive certain reporting exemptions under The Sarbanes-Oxley Act. Changing laws, regulations and standards relating to corporate governance and public disclosure create uncertainty for public companies, increase legal and financial compliance costs and increase time expenditures for internal personnel. These laws, regulations and standards are subject to interpretation, in many cases due to their lack of specificity, their application in practice may evolve over time as regulators and governing bodies provide new guidance. These changes may result in continued uncertainty regarding compliance matters and may necessitate higher costs due to ongoing revisions to filings, disclosures and governance practices. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management s time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate regulatory or legal proceedings against us and our business may be adversely affected. As a public company under these rules and regulations, we expect that it may make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee and compensation committee and could also make it more difficult to attract qualified executive officers. As a result of disclosure of information in this prospectus and in filings required of a public company, our business and financial condition will become more visible, which we believe may result in threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our business and results of operations could be adversely affected, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and adversely affect our business and results of operations. Our stock price may be volatile, which may result in losses to our shareholders. The stock markets experienced and may experience significant price and trading volume fluctuations, and the market prices of companies quoted on the OTCQB, which is where our stock is currently quoted, have experienced sharp share price and trading volume changes. The trading price of our common stock is likely to be volatile and could fluctuate widely in response to many factors both in and outside of our control, and include but are not limited to the following: variations in our operating results; changes in expectations of our future financial performance, including financial estimates by securities analysts and investors; changes in operating and stock price performance of other companies in our industry; additions or departures of key personnel; and future sales of our common stock. Domestic and international stock markets often experience significant price and volume fluctuations. These fluctuations, as well as general economic and political conditions unrelated to our performance, may adversely affect the price of our common stock. Volatility in the price of our common stock may subject us to securities litigation. The market for our common stock may be characterized by significant price volatility as compared to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. In the past, plaintiffs have often initiated securities class action litigation against a company following periods of volatility in the market price of its securities. We may, in the future, be the target of similar litigation. Securities litigation could result in substantial costs and liabilities and could divert management's attention and resources. Our common stock may become thinly traded and you may be unable to sell at or near ask prices, or at all. We cannot predict the extent to which an active public market for trading our common stock will be sustained. The trading volume of our common stock may be sporadically or thinly-traded, meaning that the number of persons interested in purchasing our common stock at or near bid prices at certain given time may be relatively small or non-existent. 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 who generate or influence sales volume. Even if we came to the attention of such persons, those persons tend to be risk-averse and may be reluctant to follow, purchase, or recommend the purchase of shares of an unproven company such as ours until such time as we become 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. The market price for our common stock may become volatile given our status as a relatively small company, which could lead to wide fluctuations in our share price. You may be unable to sell your common stock at or above your purchase price if at all, which may result in substantial losses to you. Stockholders should be aware that, according to SEC Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include but are not limited to: (1) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (2) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (3) boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (4) excessive and undisclosed bid-ask differential and markups by selling broker-dealers and (5) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with 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 Table of Contents established with respect to our securities. The occurrence of these patterns or practices could increase the volatility of our share price. General risk statement. Based on all of the foregoing, we believe it is possible for future revenue, expenses and operating results to vary significantly from quarter to quarter and year to year. As a result, quarter-to-quarter and year-to-year comparisons of operating results are not necessarily meaningful or indicative of future performance. Furthermore, we believe that it is possible that in any given quarter or fiscal year our operating results could differ from the expectations of public market analysts or investors. In such event or in the event that adverse conditions prevail, or are perceived to prevail, with respect to our business or generally, the market price of our Common Stock would likely decline. Table of Contents CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This prospectus contains forward-looking statements. Such statements include statements regarding our expectations, hopes, beliefs or intentions regarding the future, including but not limited to statements regarding our market, strategy, competition, development plans (including acquisitions and expansion), financing, revenues, operations, and compliance with applicable laws. Forward-looking statements involve certain risks and uncertainties, and actual results may differ materially from those discussed in any such statement. Factors that could cause actual results to differ materially from such forward-looking statements include the risks described in greater detail in the section entitled

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+ RISK FACTORS An investment in our securities involves a high degree of risk. You should carefully consider the risk factors described below, together with the other information included this prospectus and incorporated by reference herein from our SEC filings. If any of the following risks or uncertainties occurs, our business, financial condition, and operating results could be materially and adversely affected. As a result, the trading price of our Ordinary Shares could decline and you could lose all or a part of your investment. You should carefully consider all of the risks described below regarding the Company and its subsidiaries. Additional risks and uncertainties not currently known to us or that we currently deem immaterial also may materially and adversely affect our business operations. Risks Related to Our Business and Operations We have a history of operating losses that may continue into the foreseeable future. We have a history of operating losses and negative cash flow that may continue into the foreseeable future. If we fail to execute our strategy to achieve and maintain profitability in the future, investors could lose confidence in the value of our Ordinary Shares, which could cause our share price to decline and adversely affect our ability to raise additional capital. Investors should evaluate an investment in our company in light of this. If we are unable to obtain additional financing on acceptable terms, we may have to curtail our growth or cease our development plans and operations. The operation of our business and our growth efforts will require significant cash outlays. We are largely dependent on outside capital to implement our business plan and support our operations. We anticipate for the foreseeable future that cash on hand and cash generated from operations will not be sufficient to meet our cash requirements, and that we will need to raise additional capital through investments to fund our operations and growth. We cannot assure you that we will be able to raise additional capital as needed on terms acceptable to us, if at all. If we are unable to raise capital as needed, we may be required to reduce the scope of our growth efforts, which could harm our business plans, financial condition and operating results, or cease our operations entirely, in which case, you may lose all your investment. Financings, including future equity investments, if obtained, may be on terms that are dilutive to our stockholders, and the prices at which new investors would be willing to purchase our securities may be lower than the price at which you purchase your shares. Furthermore, the terms of securities issued in a financing, if obtained, may be more favorable for new investors. Investors should be aware that the value of an investment in our company may go down as well as up. In addition, there can be no certainty that the market value of an investment in our company will fully reflect its underlying value. We have a concentration of sales to key customers and any substantial reduction in sales to these customers would have a material adverse effect on our business. During the twelve month period ended January 31, 2018, sales were concentrated with Myer, Farmers and Woolworths accounting for 7%, 6% and 2% respectively. During the twelve month period ended January 31, 2017 sales were concentrated with Myer, Farmers, Macy s and Woolworths accounting for 10%, 7%, 5% and 2%, respectively, of our sales. Our results of operations would be materially adversely affected if these relationships ceased. Although we have diversified our customers and continue to receive increasing sales orders from existing customers, these customers do not have any ongoing purchase commitment agreement with us; therefore, we cannot guarantee that the volume of sales will remain consistent going forward. Any substantial change in purchasing decisions by these customers, whether due to actions by our competitors, industry factors or otherwise, could have a material adverse effect on our business and our financial condition. Our customers generally purchase our products on credit, and as a result, our results of operations and financial condition may be adversely affected if our customers experience financial difficulties. During the past several years, various retailers, including some of our largest customers, have experienced significant difficulties, including restructurings, bankruptcies and liquidations. This could adversely affect us because our customers generally pay us after goods are delivered. Adverse changes in our customers financial position could cause us to limit or discontinue business with that customer, require us to assume more credit risk relating to that customer s future purchases or limit our ability to collect accounts receivable relating to previous purchases by that customer, all of which could have a material adverse effect on our business, results of operations and financial condition. We operate in a highly competitive market and the size and resources of some of our competitors may allow them to compete more effectively than we can, resulting in a loss of our market share and a decrease in our net revenue and profitability. The market for intimate apparel products is highly competitive. Competition may result in pricing pressures, reduced profit margins or lost market share or a failure to grow our market share, any of which could substantially harm our business and results of operations. We compete directly against wholesalers and direct retailers of intimate apparel products, including large, diversified companies with substantial market share and strong worldwide brand recognition, such as L Brands Inc., Hanesbrands Inc. and PVH Corp., whose brands include Victoria s Secrets, Calvin Klein, Maidenform, Bonds and others. Many of our competitors have significant competitive advantages, including longer operating histories, larger and broader customer bases, more established relationships with a broader set of suppliers, greater brand recognition and greater financial, research and development, marketing, distribution and other resources than we do. Our competitors may be able to achieve and maintain brand awareness and market share more quickly and effectively than we can. Many of our competitors promote their brands through traditional forms of advertising, such as print media and television commercials, and through celebrity endorsements, and have greater and substantial resources to devote to such efforts. Our competitors may also create and maintain brand awareness using traditional forms of advertising more quickly than we can. Our competitors may also be able to increase sales in their new and existing markets faster than we can by emphasizing different distribution channels than we do, such as catalog sales or an extensive franchise network, as opposed to distribution through retail stores, wholesale or internet, and many of our competitors have substantial resources to devote toward increasing sales in such ways. If we are unable to anticipate consumer preferences and successfully develop and introduce new, innovative and updated products, we may not be able to maintain or increase our sales and profitability. Our success depends on our ability to identify and originate product trends as well as to anticipate and react to changing consumer demands in a timely manner. All of our products are subject to changing consumer preferences that cannot be predicted with certainty. We may be unable to introduce new products in a timely manner. Our customers may not accept our new products including our recently launched women s products, or our competitors may introduce similar products in a more timely fashion. Failure to anticipate and respond in a timely manner to changing consumer preferences could lead to, among other things, lower sales and excess inventory levels. Even if we are successful in anticipating consumer preferences, our ability to adequately react to and address those preferences will in part depend upon our continued ability to develop and introduce innovative, high-quality products. Our failure to effectively introduce new products that are accepted by consumers could have a material adverse effect on our financial condition. Our net sales, profit results and cash flows are sensitive to, and may be affected by, general economic conditions, consumer confidence, spending patterns, weather or other market disruptions. Our net sales, profit, cash flows and future growth may be affected by negative local, regional, national or international political or economic trends or developments that reduce the consumers ability or willingness to spend, including the effects of national and international security concerns such as war, terrorism or the threat thereof. In addition, market disruptions due to severe weather conditions, natural disasters, health hazards or other major events or the prospect of these events could also impact consumer spending and confidence levels. Purchases of women s intimate and other apparel, beauty and personal care products and accessories often decline during periods when economic or market conditions are unsettled or weak. In such circumstances, we may increase the number of promotional sales, which could have a material adverse effect on our results of operations, financial condition and cash flows. The decision by the United Kingdom to leave the European Union ("Brexit") has increased the uncertainty in the economic and political environment in Europe. In particular, our business in the United Kingdom may be adversely impacted by fluctuations in currency exchange rates, changes in trade policies, or changes in labor, immigration, tax or other laws. Extreme weather conditions in the areas in which our stores are located, particularly in markets where we have multiple stores, could adversely affect our business. For example, heavy snowfall, rainfall or other extreme weather conditions over a prolonged period might make it difficult for our customers to travel to our stores and thereby reduce our sales and profitability. Our net sales, operating income, cash and inventory levels fluctuate on a seasonal basis. We experience major seasonal fluctuations in our net sales and operating income, with a significant portion of our operating income typically realized during the fourth quarter holiday season. Any decrease in sales or margins during this period could have a material adverse effect on our results of operations, financial condition and cash flows. Seasonal fluctuations also affect our cash and inventory levels, since we usually order merchandise in advance of peak selling periods and sometimes before new fashion trends are confirmed by customer purchases. We must carry a significant amount of inventory, especially before the holiday season selling period. If we are not successful in selling inventory, we may have to sell the inventory at significantly reduced prices or may not be able to sell the inventory at all, which could have a material adverse effect on our results of operations, financial condition and cash flows. We are subject to risks associated with leasing retail space, are generally subject to long-term non-cancelable leases and are required to make substantial lease payments under our operating leases. Any failure to make these lease payments when due may lead to the landlord terminating the lease, which would harm our business, profitability and results of operations. We do not own any of our stores, but instead lease all of our retail stores under operating leases. Our leases generally have initial terms of 5 years. All of our leases require a fixed annual rent, and some of them require the payment of additional rent if store sales exceed a negotiated amount. Most of our leases are "net" leases, which require us to pay all of the cost of insurance, taxes, maintenance and utilities, and we generally cannot cancel these leases at our option. Our net sales depend on a volume of traffic to our stores and the availability of suitable lease space. Most of our stores are located in retail shopping areas including malls and other types of retail centers. Sales at these stores are derived, in part, from the volume of traffic in those retail areas. Our stores benefit from the ability of the retail center and other attractions in an area, including "destination" retail stores, to generate consumer traffic in the vicinity of our stores. Sales volume and retail traffic may be adversely affected by factors that we cannot control, such as economic downturns or changes in consumer demographics in a particular area, competition from internet and other retailers and other retail areas where we do not have stores, the closing or decline in popularity of other stores in the shopping areas where our stores are located and the deterioration in the financial condition of the operators of the shopping areas or developers in which our stores are located. Our ability to grow depends in part on new store openings and existing store remodels and expansions. Our continued growth and success will depend in part on our ability to open and operate new stores and expand and remodel existing stores on a timely and profitable basis. Accomplishing our new and existing store expansion goals will depend upon a number of factors, including the ability to partner with developers and landlords to obtain suitable sites for new and expanded stores at acceptable costs, the hiring and training of qualified personnel and the integration of new stores into existing operations. There can be no assurance we will be able to achieve our store expansion goals, manage our growth effectively, successfully integrate the planned new stores into our operations or operate our new, remodeled and expanded stores profitably. These risks could have a material adverse effect on our ability to grow and results of operations, financial condition and cash flows. Our planned international expansion may adversely impact our results and reputation. We intend to further expand into international markets through partner arrangements and/or company-owned stores. The risks associated with our expansion into international markets include difficulties in attracting customers due to a lack of customer familiarity with our brands, our lack of familiarity with local customer preferences and seasonal differences in the market. Such expansions will also have upfront investment costs. If the expansion is not accompanied by sufficient revenues to achieve typical or expected operational and financial performance, it may have a material adverse effect on our results of operations and our business reputation. We may not select suitable business partners for our international expansion, which could have a materially adverse effect on our results of operations. In expanding into international markets through partner arrangements, we may be exposed to risks if we fail to identify suitable business partners. For example, these third parties may be unable to meet their projections regarding store openings and sales or they may fail to maintain compliance with federal and local law. Because these parties likely will be independent contractors, certain aspects of these arrangements will be outside of our direct control. These risks could have a material adverse effect on our results of operations, financial condition and cash flows. Our operations in international markets are subject to additional political, economic, and other risks and uncertainties that could adversely affect our business, and our exposure to such risks will increase as we expand into additional international markets. Our operations in international markets are subject to a number of risks inherent in any business operating in multiple countries. As we continue our international expansion, our operations will continue to encounter the following risks, among others: Competition with new competitors or with existing competitors with an established market presence. General economic conditions in specific countries or markets. Volatility in the geopolitical landscape. Restrictions on the repatriation of funds held internationally Disruptions or delays in shipments. Changes in diplomatic and trade relationships. Political instability. Foreign governmental regulation. If any of these or other similar events should occur, it could have a material adverse effect on our results of operations, financial condition and cash flows. Our performance may be affected by general economic conditions and financial difficulties. Our performance is subject to worldwide economic conditions and their impact on levels of consumer spending. Some of the factors that have, or have had, an impact on discretionary consumer spending include general economic conditions, employment, consumer debt, changes in personal net worth based on changes in securities market price levels, residential real estate and mortgage markets, taxation, healthcare costs, fuel and energy prices, interest rates, credit availability, consumer confidence and other macroeconomic factors. The worldwide apparel industry is heavily influenced by general economic cycles. Apparel retailing is a cyclical industry that is heavily dependent upon the overall level of consumer spending. Purchases of specialty apparel and related goods tend to be highly correlated with the cycles of the levels of disposable income of consumers. As a result, any substantial deterioration in general economic conditions could materially and adversely affect our net sales and results of operations. Downturns, or the expectation of a downturn, in general economic conditions could materially and adversely affect consumer spending patterns, our sales and our results of operations. Consumer purchases of discretionary items generally decline during recessionary periods and other periods where disposable income is adversely affected. Any downturn in the economy may affect consumer purchases of our merchandise and have an adverse impact on our sales, results of operations and cash flow. Because apparel generally is a discretionary purchase, declines in consumer spending may have a more negative effect on apparel retailers than on other retailers. A decline in consumer spending may negatively affect our profitability. Future increases in interest rates or other tightening of the credit markets, or future turmoil in the financial markets, could make it more difficult for us to access funds, to refinance our indebtedness (if necessary), to enter into agreements for new indebtedness, or to obtain funding through the issuance of our securities. Any such adverse changes in the credit or financial markets could also impact the ability of our suppliers to access liquidity, or could result in the insolvency of suppliers, which in turn could lead to their failure to deliver our merchandise. Worsening economic conditions could also result in difficulties for financial institutions (including bank failures) and other parties that we may do business with, which could potentially impair our ability to access financing under existing arrangements or to otherwise recover amounts as they become due under our other contractual arrangements. Additionally, either as a result of, or independent of, any financial difficulties and economic weakness in the United States, material fluctuations in currency exchange rates could have a negative impact on our business. We may be impacted by our ability to service or refinance our debt. We currently have substantial indebtedness. Some of our debt agreements contain covenants which require maintenance of certain financial ratios and also, under certain conditions, restrict our ability to pay dividends, repurchase common shares and make other restricted payments as defined in those agreements. Our cash flow from operations provides the primary source of funds for our debt service payments. If our cash flow from operations declines, we may be unable to service or refinance our current debt. If we do not comply with the terms of our existing debt agreements, and such debt agreements cannot be amended or replaced with new indebtedness, we may be in default of our obligations under such debt agreements. Our existing debt agreements (including our credit facility and our term loan agreement) contain a number of affirmative and negative covenants and representations and warranties. We have, in the past, been required to seek waivers of compliance with, or amendments of, certain of the financial covenants in the debt agreements, and we may be required to seek such waivers or amendments in the future. Our ability to meet these financial covenants may be affected by events beyond our control, and there can be no assurance that the lenders will grant any required waivers under, or amendments to, the debt agreements if for any reason we are unable to meet the requirements of such covenants. If we fail to comply with covenants, representations or warranties under our debt agreements and do not either receive a waiver or amendment from our lenders or refinance the indebtedness subject to such agreements, such failure could trigger a default under our debt agreements. If we default, the lenders under those debt agreements could declare all borrowings owed to them, including accrued interest and other fees, to be due and payable, which declaration could have an adverse impact on our business and results of operations and may adversely impact our ability to consummate the Transactions. Our business is exposed to foreign currency exchange rate fluctuations and control regulations. Our business has substantial international components that expose us to significant foreign exchange risk. Changes in exchange rates can impact our financial results in two ways: a translation impact and a transaction impact. The translation impact refers to the impact that changes in exchange rates can have on our financial results, as our operating results in local foreign currencies are translated into New Zealand dollars using an average exchange rate over the representative period. Accordingly, during times of a strengthening New Zealand dollar, particularly against the Australian dollar, the Euro, the British pound sterling and the U . S . dollar, our results of operations will be negatively impacted, and during times of a weakening New Zealand dollar, our results of operations will be favorably impacted. The transaction impact on financial results is common for apparel companies operating outside the United States that purchase goods in U.S. dollars, as is the case with most of our foreign operations. During times of a strengthening U.S. dollar, our results of operations will be negatively impacted from these transactions as the increased local currency value of inventory results in higher cost of goods sold in local currency when the goods are sold, and during times of a weakening U.S. dollar, our results of operations will be favorably impacted. We also have exposure to changes in foreign currency exchange rates related to certain intercompany transactions and, to a lesser extent, SG&A expenses that are denominated in currencies other than the functional currency of a particular entity. We currently use and plan to continue to use foreign currency forward exchange contracts or other derivative instruments to mitigate the cash flow or market value risks associated with these inventory and intercompany transactions, but we are unable to entirely eliminate these risks. We are also exposed to market risk for changes in exchange rates for the U.S. dollar in connection with our business as a licensee. Most of our license agreements require us to pay in Unites States dollars based on the exchange rate as of the last day of the contractual selling period but the sales are reported in the relevant territories local currencies. Thus we are exposed to exchange rate changes during and up to the last day of the selling period. In addition, we are exposed to exchange rate changes up to the date we make payment in U.S. dollars. As a result, during times of a strengthening U.S. dollar, our royalty fees will be positively impacted, and during times of a weakening U.S. dollar, our royalty fees will be negatively impacted. We conduct business, directly or through licensees and other partners, in countries that are or have been subject to exchange rate control regulations and have, as a result, experienced difficulties in receiving payments owed to us when due, with amounts left unpaid for extended periods of time. Although the amounts to date have been immaterial to our results, as our international businesses grow and if controls are enacted or enforced in additional countries, there can be no assurance that such controls would not have a material and adverse effect on our business, financial condition or results of operations. Our reported financial results may be adversely affected by changes in accounting principles Generally accepted accounting principles are subject to interpretation by the SEC and the Public Company Accounting Oversight Board and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported financial results, and could affect the reporting of transactions completed before the announcement of a change. While we believe we have taken the steps necessary to improve the effectiveness of our internal control over financial reporting, we can give no assurance that any material weaknesses will arise in the future Any material weakness or other deficiencies in our disclosure controls and procedures and internal control over financial reporting may affect our ability to report our financial results on a timely and accurate basis and to comply with disclosure obligations or cause our consolidated financial statements to contain material misstatements, which could negatively affect the market price and trading liquidity of our common stock or cause investors to lose confidence in our reported financial information. Investors relying upon our consolidated financial statements may make a misinformed investment decision. Acquisitions may not be successful in achieving intended benefits, cost savings and synergies. One component of our growth strategy has been to make acquisitions. Prior to completing any acquisition, our management team identifies expected synergies, cost savings and growth opportunities but, due to legal and business limitations, we may not have access to all necessary information. The integration process may be complex, costly and time-consuming. The potential difficulties of integrating the operations of an acquired business and realizing our expectations for an acquisition, including the benefits that may be realized, include, among other things: failure to implement our business plan for the combined business; delays or difficulties in completing the integration of acquired companies or assets; higher than expected costs, lower than expected cost savings or a need to allocate resources to manage unexpected operating difficulties; unanticipated issues in integrating manufacturing, logistics, information, communications and other systems; unanticipated changes in applicable laws and regulations affecting the acquired business; unanticipated changes in the combined business due to potential divestitures or other requirements imposed by antitrust regulators; retaining key customers, suppliers and employees; retaining and obtaining required regulatory approvals, licenses and permits; operating risks inherent in the acquired business; diversion of the attention and resources of management; consumers failure to accept product offerings by us or our licensees; assumption of liabilities not identified in due diligence; the impact on our or an acquired business internal controls and compliance with the requirements under the Sarbanes-Oxley Act of 2002; and other unanticipated issues, expenses and liabilities. We have completed acquisitions that have not performed as well as initially expected and cannot assure you that any acquisition will not have a material adverse impact on our financial condition and results of operations. The loss of the services of Justin Davis-Rice, members of our executive management team, or other key personnel could have a material adverse effect on our business. Justin Davis-Rice s leadership in the design and marketing areas of our business has been a critical element of our success since our inception. The death or disability of Mr. Davis-Rice or other extended or permanent loss of his services, or any negative market or industry perception with respect to him or arising from his loss, could have a material adverse effect on our business, results of operations, and financial condition. We also depend on the service and management experience of other key executive officers and other members of senior management who have substantial experience and expertise in our industry and our business and have made significant contributions to our growth and success. The loss of the services of any of our key executive officers or other members of senior management, or one or more of our other key personnel, or the concurrent loss of several of these individuals or any negative public perception with respect to these individuals, could also have a material adverse effect on our business, results of operations, and financial condition. We are not protected by a material amount of key-man or similar life insurance covering our executive officers, including Mr. Davis-Rice, or other members of senior management. We have entered into employment agreements with certain of our executive officers, but competition for experienced executives in our industry is intense and the non-compete period with respect to certain of our executive officers could, in some circumstances in the event of their termination of employment with our company, end prior to the employment term set forth in their employment agreements. Bendon Limited Notes to the Consolidated Financial Statements For the Periods Ended 31 January 2018, 31 January 2017, 30 June 2016 and 30 June 2015 8 Cash and Cash Equivalents 31 January 31 January 30 June 30 June 2018 2017 2016 2015 NZ$000 s NZ$000 s NZ$000 s NZ$000 s Cash on hand 54 48 47 52 Cash at bank 10,685 2,596 4,146 1,194 10,739 2,644 4,193 1,246 9 Trade and Other Receivables 31 January 31 January 30 June 30 June 2018 2017 2016 2015 NZ$000 s NZ$000 s NZ$000 s NZ$000 s Trade receivables 9,982 26,499 20,603 16,020 Provision for impairment (a) (326 ) (537 ) (268 ) (340 ) 9,656 25,962 20,335 15,680 Prepayments 1,792 1,779 2,659 935 Other receivables 1,717 349 347 206 13,165 28,090 23,341 16,821 Due to the short-term nature of the current receivables, their carrying amount is considered to be the same as their fair value. (a) Impairment of receivables Reconciliation of changes in the provision for impairment of receivables is as follows: For the Year For the 7 Months For the Year For the Year Ended 31 Ended 31 Ended 30 Ended 30 January 2018 January 2017 June 2016 June 2015 NZ$000 s NZ$000 s NZ$000 s NZ$000 s Balance at beginning of the period (537) (268) (340) (368) Provision charged (92) (364) (16) - Reversal of impairment 316 80 88 28 Foreign exchange movement (13) We rely on third-party suppliers and manufacturers to provide fabrics for and to produce our products, and we have limited control over them and may not be able to obtain quality products on a timely basis or in sufficient quantity. We do not manufacture our products or the raw materials for them and rely instead on third-party suppliers and manufacturers. Many of the specialty fabrics used in our products are technically advanced textile products developed and manufactured by third parties and may be available, in the short-term, from only one or a very limited number of sources. We may experience a significant disruption in the supply of fabrics or raw materials from current sources or, in the event of a disruption, we may be unable to locate alternative materials suppliers of comparable quality at an acceptable price, or at all. In addition, if we experience significant increased demand, or if we need to replace an existing supplier manufacturer, we may be unable to locate additional suppliers of fabrics or raw materials or additional manufacturing capacity on terms that are acceptable to us, or at all, or we may be unable to locate any supplier or manufacturer with sufficient capacity to meet our requirements or to fill our orders in a timely manner. Identifying a suitable supplier is an involved process that requires us to become satisfied with their quality control, responsiveness and service, financial stability and labor and other ethical practices. Even if we are able to expand existing or find new manufacturing or fabric sources, we may encounter delays in production and added costs as a result of the time it takes to train our suppliers and manufacturers in our methods, products and quality control standards. Delays related to supplier changes could also arise due to an increase in shipping times if new suppliers are located farther away from other participants in our supply chain. Any delays, interruption or increased costs in the supply of fabric or manufacture of our products could have an adverse effect on our ability to meet customer demand for our products and result in lower net revenue and income from operations both in the short and long term. We have occasionally received, and may in the future continue to receive, shipments of products that fail to comply with our technical specifications or that fail to conform to our quality control standards. In that event, unless we are able to obtain replacement products in a timely manner, we risk the loss of net revenue resulting from the inability to sell those products and related increased administrative and shipping costs. If defects in the manufacture of our products are not discovered until after our customers purchase such products, our customers could lose confidence in the technical attributes of our products and our results of operations could suffer and our business could be harmed. The fluctuating cost of raw materials could increase our cost of goods sold and cause our results of operations and financial condition to suffer. The fabrics used by our suppliers and manufacturers include synthetic fabrics whose raw materials include petroleum-based products. Our products also include natural fibers, including cotton. Our costs for raw materials are affected by, among other things, weather, consumer demand, speculation on the commodities market, the relative valuations and fluctuations of the currencies of producer versus consumer countries and other factors that are generally unpredictable and beyond our control. Increases in the cost of raw materials could have a material adverse effect on our cost of goods sold, results of operations, financial condition and cash flows. If we are unable to safeguard against security breaches with respect to our information systems our business may be adversely affected. In the course of our business, we gather, transmit and retain confidential information, including personal information about our customers, and process payment transactions through our information systems. Although we endeavor to protect confidential information and payment information through the implementation of security technologies, processes and procedures, it is possible that an individual or group could defeat security measures and access sensitive information about our customers, employees and other third parties. Any misappropriation, loss or other unauthorized disclosure of confidential or personally identifiable information gathered, stored or used by us could have a material impact on the operation of our business, including damaging our reputation with our customers, employees, third parties and investors. We could also incur significant costs implementing additional security measures to comply with applicable federal, state or international laws and regulations governing the unauthorized disclosure of confidential or personally identifiable information as well as increased costs such as organizational changes, implementing additional protection technologies, training employees or engaging consultants. In addition, we could incur lost revenues and face increased litigation as a result of any potential cyber-security breach. We are not aware of that we have experienced any material misappropriation, loss or other unauthorized disclosure of confidential or personally identifiable information as a result of a cyber-security breach or other act, however, a cyber-security breach or other act and/or disruption to our information technology systems could have a material adverse effect on our business, prospects, financial condition or results of operations. Bendon Limited Notes to the Consolidated Financial Statements For the Periods Ended 31 January 2018, 31 January 2017, 30 June 2016 and 30 June 2015 7 Operating Segments (c) Segment performance NZ Retail AU Retail NZ Wholesale AU Wholesale US Wholesale EU Wholesale e-commerce Unallocated Total For the 7 months ended 31 January 2017 NZ$000 s NZ$000 s NZ$000 s NZ$000 s NZ$000 s NZ$000 s NZ$000 s NZ$000 s NZ$000 s Revenue from external customers 21,953 12,053 7,484 18,091 9,015 9,548 18,140 - 96,284 21,953 12,053 7,484 18,091 9,015 9,548 18,140 - 96,284 Cost of sales (9,707) (5,592) (4,961) (11,431) (6,934) (6,277) (11,902) (340) (57,144) Gross margin 12,246 6,461 2,523 6,660 2,081 3,271 6,238 (340) 39,140 Other segment expenses* (7,480) (6,196) (475) (2,089) (2,065) (2,013) (3,654) (8,068) (32,040) Unallocated expenses Administrative expenses - - - - - - - (541) (541) Corporate expenses - - - - - - - (8,082) (8,082) Other foreign exchange gain/loss - - - - - - - (603) (603) EBITDA 4,766 265 2,048 4,571 16 1,258 2,584 (17,634) (2,126) Brand transition, restructure and transaction expenses - - - - - - - (1,321) (1,321) Finance expense - - - - - - - (6,238) (6,238) Impairment expense - (281) - - - - - (11) (292) Depreciation and amortisation expense - - - - - - - (1,842) (1,842) Fair value gain/(loss) on foreign exchange contracts - - - - - - - (2,135) (2,135) Unrealised foreign exchange (gain)/loss - - - - - - - (568) (568) Fair value (gain)/loss on Convertible Note derivative - - - - - - - (592) (592) Loss before income tax expense 4,766 (16) 2,048 4,571 16 1,258 2,584 (30,341) (15,114) Income tax expense - - - - - - - (865) (865) Loss after income tax expense 4,766 (16) 2,048 4,571 Our fabrics and manufacturing technology are not patented and can be imitated by our competitors. The intellectual property rights in the technology, fabrics and processes used to manufacture our products are owned or controlled by our suppliers and are generally not unique to us. Our ability to obtain intellectual property protection for our products is therefore limited and we currently own no patents or exclusive intellectual property rights in the technology, fabrics or processes underlying our products. As a result, our current and future competitors are able to manufacture and sell products with performance characteristics, fabrics and styling similar to our products. Because many of our competitors have significantly greater financial, distribution, marketing and other resources than we do, they may be able to manufacture and sell products based on our fabrics and manufacturing technology at lower prices than we can. If our competitors do sell similar products to ours at lower prices, our net revenue and profitability could suffer. Our failure or inability to protect our intellectual property rights could diminish the value of our brand and weaken our competitive position. We currently rely on trademarks, as well as confidentiality procedures, to establish and protect our intellectual property rights. We cannot assure you that the steps taken by us to protect our intellectual property rights will be adequate to prevent infringement of such rights by others, including imitation of our products and misappropriation of our brand. In addition, intellectual property protection may be unavailable or limited in some foreign countries where laws or law enforcement practices may not protect our intellectual property rights as fully as in the United States, Canada or the European Union, and it may be more difficult for us to successfully challenge the use of our intellectual property rights by other parties in these countries. If we fail to protect and maintain our intellectual property rights, the value of our brand could be diminished and our competitive position may suffer. We may be impacted by changes in taxation, trade and other regulatory requirements. We are subject to income tax in local, national and international jurisdictions. In addition, our products are subject to import and excise duties and/or sales or value-added taxes in many jurisdictions. We are also subject to the examination of our tax returns and other tax matters by the Internal Revenue Service and other tax authorities and governmental bodies. We regularly assess the likelihood of an adverse outcome resulting from these examinations to determine the adequacy of our provision for taxes. There can be no assurance as to the outcome of these examinations. Fluctuations in tax rates and duties, changes in tax legislation or regulation or adverse outcomes of these examinations could have a material adverse effect on our results of operations, financial condition and cash flows. We have significant tax losses arising on historical trading losses. The availability to utilize these tax losses to offset future taxable profit is dependent on future performance and trade of the business. There can be no assurance as to the availability of these losses for utilization. There is increased uncertainty with respect to tax policy and trade relations between the U.S. and other countries. Major developments in tax policy or trade relations, such as the disallowance of tax deductions for imported merchandise or the imposition of unilateral tariffs on imported products, could have a material adverse effect on our results of operations, financial condition and cash flows. Our current operations in international markets and our efforts to expand into additional international markets, and any earnings in those markets, may be affected by legal and regulatory risks. We are subject to the U.S. Foreign Corrupt Practices Act, in addition to the anti-corruption laws of the foreign countries in which we operate and manufacture our products. Although we implement policies and procedures designed to promote compliance with these laws, our employees, contractors and agents, as well as those companies to which we outsource certain of our business operations, may take actions in violation of our policies. Any such violation could result in sanctions or other penalties and have an adverse effect on our business, reputation and operating results. Bendon Limited Notes to the Consolidated Financial Statements For the Periods Ended 31 January 2018, 31 January 2017, 30 June 2016 and 30 June 2015 12 Intangible Assets (a) Movements in carrying amounts of intangible assets Patents and Software licences Brands Goodwill Total NZ$000 s NZ$000 s NZ$000 s NZ$000 s NZ$000 s Year ended 30 June 2016 Balance at the beginning of the year 2,315 17 12,702 2,347 17,381 Additions 211 264 - - 475 Amortisation (316 ) (7 ) - - (323 ) Impairment - - - (2,157 ) (2,157 ) Foreign exchange movements (14 ) - (597 ) (190 ) (801 ) Closing value at 30 June 2016 2,196 274 12,105 - 14,575 Patents and Software licences Brands Goodwill Total NZ$000 s NZ$000 s NZ$000 s NZ$000 s NZ$000 s Year ended 30 June 2015 Balance at the beginning of the year 2,081 117 12,274 2,211 16,683 Additions 1,093 - - - 1,093 Amortisation (787 ) (104 ) - - (891 ) Foreign exchange movements (72 ) 4 428 136 496 Closing value at 30 June 2015 2,315 We may be subject to loss and theft. Our merchandise is subject to loss, including those caused by illegal or unethical conduct by associates, customers, vendors or unaffiliated third parties. We have experienced events such as inventory shrinkage in the past, and we cannot assure that incidences of loss and theft will decrease in the future or that the measures we are taking will effectively reduce these losses. Higher rates of loss or increased security costs to combat theft could have a material adverse effect on our results of operations, financial condition and cash flows. We could have failures in our system of internal controls causing us to inaccurately report our financial results or to fail to prevent fraud. We have had control deficiencies in the past, and cannot assure you that there will not be any control deficiencies in the future. Should we become aware of any significant deficiencies or material weaknesses, we would report them to the Audit Committee and recommend prompt remediation. We cannot be certain that these measures will ensure that our controls are adequate in the future or that adequate controls will be effective in preventing fraud. If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud. Any failures in the effectiveness of our internal controls could have a material adverse effect on our financial condition or operating results or cause us to fail to meet reporting obligations. A portion of our revenue is dependent on royalties and licensing. License arrangements exist for Heidi Klum and Fredericks of Hollywood, and previously existed for Stella McCartney through June 30, 2018. The license arrangements for Heidi Klum, Stella McCartney and Fredericks of Hollywood contributed revenue of 25%, 11% and 21% of group sales, respectively, in the twelve month period to January 31, 2018. The gross margin contribution during this period was 19%, 12%, and 30%, respectively, of total group gross margin. The license arrangements for Heidi Klum, Stella McCartney and Fredericks of Hollywood contributed revenue of 32%, 9% and 11% of group sales, respectively, in the twelve month period to January 31, 2017. The gross margin contribution during this period was 29%, 8%, and 16%, respectively, of total group gross margin. The operating profit associated with our royalty, advertising and other revenue is significant because the operating expenses directly associated with administering and monitoring an individual licensing or similar agreement are minimal. Therefore, the loss of a significant licensing partner, whether due to the termination or expiration of the relationship, the cessation of the licensing partner s operations or otherwise (including as a result of financial difficulties of the partner), without an equivalent replacement, could materially impact our profitability. For example, Bendon Limited s license to use the Stella McCartney brand terminated effective June 30, 2018. While we generally have significant control over our licensing partners products and advertising, we rely on our licensing partners for, among other things, operational and financial controls over their businesses. Our licensing partners failure to successfully market licensed products or our inability to replace our existing licensing partners could materially and adversely affect our revenue both directly from reduced royalty and advertising and other revenue received and indirectly from reduced sales of our other products. Risks are also associated with our licensing partners ability to obtain capital, execute their business plans, timely deliver quality products, manage their labor relations, maintain relationships with their suppliers, manage their credit risk effectively and maintain relationships with their customers. A significant shift in the relative sources of our earnings, adverse decisions of tax authorities or changes in tax treaties, laws, rules or interpretations could have a material adverse effect on our results of operations and cash flow. We have direct operations in many countries and the applicable tax rates vary by jurisdiction. As a result, our overall effective tax rate could be materially affected by the relative level of earnings in the various taxing jurisdictions to which our earnings are subject. In addition, the tax laws and regulations in the countries where we operate may be subject to change and there may be changes in interpretation and enforcement of tax law. As a result, we may pay additional taxes if tax rates increase or if tax laws, regulations or treaties in the jurisdictions where we operate are modified by the competent authorities in an adverse manner. In addition, various national and local taxing authorities periodically examine us and our subsidiaries. The resolution of an examination or audit may result in us paying more than the amount that we may have reserved for a particular tax matter, which could have a material adverse effect on our cash flows, business, financial condition and results of operations for any affected reporting period. We and our subsidiaries are engaged in a number of intercompany transactions. Although we believe that these transactions reflect arm s length terms and that proper transfer pricing documentation is in place, which should be respected for tax purposes, the transfer prices and conditions may be scrutinized by local tax authorities, which could result in additional tax liabilities. We have identified material weaknesses in our internal controls over financial reporting. We have identified material weaknesses that existed as of January 31, 2018, January 31, 2017, June 30, 2016 and June 30, 2015. A material weakness is a deficiency, or a combination of deficiencies in internal controls over financial reporting, such that if there is a material misstatement in our financial statements, they will not necessarily be prevented or detected on a timely basis. The matters involving internal controls and procedures that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: 1) Lack of a functioning audit committee; 2) Lack of independent directors on our board of directors that are financial experts, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; 3) Lack of skilled resources and lack of expertise with complex GAAP and SEC reporting matters; 4) Lack of adequate processes, procedures and internal controls over the collation and review of contracts executed by our company; and 5) No formally implemented system of internal control over financial reporting and no associated written documentation of our internal control policies and procedures We believe that these material weaknesses primarily related to our lack of board oversight and appropriately skilled resources. While these material weaknesses have not resulted in errors that were material to our financial statements in the current year, it impacted our company s ability to close financial reporting on a timely basis and resulted in numerous late amendments to draft financial statements. The introduction of a properly constituted Board with diverse skills and talent will manage the risks across the business. We delayed implementing the appointment of an appropriately qualified personnel on the basis we are preparing to merge with Naked which has on its Board a newly appointed Independent Non Executive Director and we will also provide appropriate support for our CFO. We plan to take a number of actions to correct these material weaknesses upon going public including, but not limited to, appointing independent directors, establishing an independent Audit Committee, adding experienced accounting and financial personnel and retaining third party consultants to review our internal controls and recommend improvements. Our efforts to remediate these material weaknesses may not be effective. If our efforts to remediate these material weaknesses are not successful, the remediated material weaknesses may reoccur, or other material weaknesses could occur in the future. As a result of these material weaknesses, we may be unable to report our financial results accurately on a timely basis, which could cause our reported financial results to be materially misstated and result in the loss of investor confidence and could cause the stock price to decline. As a result of such failures, we could also become subject to investigation by the stock exchange on which our shares are listed, the SEC, or other regulatory authorities, and become subject to litigation from investors, which would harm our reputation, business, financial condition and results or operations, and divert financial and management recoveries from our core business. The material weaknesses will require management to devote significant time and incur significant expenses to remediate the material weaknesses and they might not be able to remediate the weaknesses in a timely manner. If we fail to implement and maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. We previously have identified deficiencies in our internal controls that are deemed to be material weaknesses. In addition, any future testing by us conducted in connection with Section 404 of the Sarbanes-Oxley Act, or the subsequent testing by our independent registered public accounting firm, if and when required, may reveal additional deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our consolidated financial statements or identify other areas for further attention or improvement. If we are unable to remedy the existing material weaknesses in our internal control over financial reporting, if in the future we identify additional material weaknesses in our internal control over financial reporting, including at some of our acquired companies, if we are unable to comply with the requirements of Section 404 in a timely manner or assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm required to and is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected, and we could become subject to investigations by the stock exchange on which our securities are then listed, the SEC, or other regulatory authorities, which could require additional financial and management resources. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock. We incurred substantial transaction fees and costs in connection with the Merger. We incurred material non-recurring expenses in connection with the Merger Agreement and consummation of the Transactions contemplated by the Merger Agreement. Additional unanticipated costs may be incurred in the course of the integration of the businesses of Bendon Limited and Naked. We cannot be certain that the elimination of duplicative costs or the realization of other efficiencies related to the integration of the two businesses will offset the transaction and integration costs in the near term, or at all. Risks Related to the Offering Sales by the Selling Shareholders of the Ordinary Shares covered by this prospectus could adversely affect the trading price of our Ordinary Shares. We are registering for resale up to 18,563,311 Ordinary Shares and up to 29,880,671 Ordinary Shares underlying the October Warrants, March Warrants and Consultant Warrants, which together represent approximately 56.8% of our outstanding Ordinary Shares, on a fully-diluted basis. This amount includes 150% of the initial number of shares issued and issuable pursuant to cash exercise of the March Warrants (or the number of shares so issued and issuable as of the filing of the registration statement to which this prospectus relates, if more), which represents a good faith estimate of the maximum number of Ordinary Shares that may be issued upon exercise of such warrants. Even if the March Warrants are exercised in full, the actual number of shares issued upon such exercise may be more or less than our estimate, depending, among other things, on whether the number of shares is adjusted in connection with a subsequent equity issuance and whether the warrants are exercised on a cash or cashless basis. The resale of all or a substantial portion of the Ordinary Shares registered hereby in the public market, or the perception that these sales might occur, could cause the market price of our Ordinary Shares to decrease and may make it more difficult for us to sell Ordinary Shares in the future at a time and upon terms that we deem appropriate. The financial information related to the consummation of the Transactions included and incorporated by reference in this prospectus may not be an indication of our financial condition or results of operations. The financial information related to the consummation of the Transactions included and incorporated by reference in this prospectus is based on various adjustments and assumptions and may not be an accurate indication of our financial condition or results of operations. Our actual financial condition and results of operations may not be consistent with, or evident from, such financial information. In addition, the assumptions used in preparing the financial information and estimates may not prove to be accurate, and other factors may affect our financial condition or results of operations following consummation of the Transactions. We do not intend to pay any dividends on our Ordinary Shares at this time. We have not paid any cash dividends on our Ordinary Shares to date. The payment of cash dividends on our Ordinary Shares in the future will be dependent upon our revenue and earnings, if any, capital requirements, and general financial condition, as well as the limitations on dividends and distributions that exist under the laws and regulations of Australia, and will be within the discretion of our board of directors. It is the present intention of our board of directors to retain all earnings, if any, for use in our business operations and, accordingly, our board of directors does not anticipate declaring any dividends on our Ordinary Shares in the foreseeable future. As a result, any gain you will realize on our Ordinary Shares (including shares of common stock obtained upon exercise of our warrants) will result solely from the appreciation of such shares. We may issue additional securities in the future, which may result in dilution to our shareholders. As of April 3, 2019, we had 24,391,036 Ordinary Shares subject to outstanding options and warrants, including 21,053,780 Ordinary Shares underlying our outstanding October Warrants, March Warrants and Consultant Warrants. (This amount excludes the additional 50% of the initial number of shares issued and issuable pursuant to cash exercise of the March Warrants (or the number of shares so issued and issuable as of the filing of the registration statement to which this prospectus relates, if more) that are registered hereby in accordance with the March RRA). In addition, we are not restricted from issuing additional Ordinary Shares or securities convertible into or exchangeable for Ordinary Shares. Because we may need to raise additional capital in the future to operate and/or expand our business, we may conduct additional equity offerings. To the extent our outstanding options and warrants are exercised or we conduct additional equity offerings, additional Ordinary Shares will be issued, which may result in dilution to our shareholders. Sales of substantial numbers of such shares in the public market could adversely affect the market price of our Ordinary Shares. Nasdaq may delist our Ordinary Shares from quotation on its exchange, which could limit investors ability to sell and purchase our securities and subject us to additional trading restrictions. Our Ordinary Shares are currently listed on the Nasdaq Capital Market under the trading symbol "NAKD". However, on February 5, 2019, we received a notice from the Listing Qualifications Department of Nasdaq stating that, for the last 30 consecutive business days, the closing bid price for our Ordinary Shares had been below the minimum of US$1.00 per share required for continued inclusion on the Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2). We will be afforded 180 calendar days (until August 5, 2019) to regain compliance with the minimum bid price requirement. In order to regain compliance, the bid price for shares of the Company s common stock must close at US$1.00 per share or more for a minimum of ten consecutive business days. The notification letter also states that in the event we do not regain compliance within the 180 day period, we will be eligible for additional time if we meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for the Nasdaq Capital Market, with the exception of the bid price requirement, and notify Nasdaq of our intention to cure the deficiency during such second compliance period, including by effecting a reverse stock split, if necessary. There can be no assurance that we will regain compliance with the minimum bid price requirement within the allotted period, or that we will be able to maintain compliance with the other continued listing requirements under the Nasdaq Listing Rules. If our Ordinary Shares are not listed on Nasdaq at any time after this offering, we could face significant material adverse consequences, including: a limited availability of market quotations for our securities; reduced liquidity; a determination that our common stock is "penny stock" which will require brokers trading in our shares to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for our common stock; a limited amount of news and analyst coverage for our company; and a decreased ability to issue additional securities or obtain additional financing in the future. As a foreign private issuer, we are permitted and expect to follow certain home country corporate governance practices (in our case Australian) in lieu of certain Nasdaq requirements applicable to domestic issuers and we are permitted to file less information with the Securities and Exchange Commission than a company that is not a foreign private issuer. This may afford less protection to holders of our securities. As a foreign private issuer under the Exchange Act, Nasdaq allows us to follow home country governance practices (in our case Australian) in lieu of the otherwise applicable Nasdaq corporate governance requirements. In accordance with this exception, we follow Australian corporate governance practices in lieu of certain of the Nasdaq corporate governance standards, as more fully described in our Annual Report on Form 20-F for the fiscal year ended January 31, 2018, as amended, which is incorporated herein by reference. See "Where You Can Find Additional Information." In particular, we will follow Australian law and corporate governance practices with respect to the composition of our board and quorum requirements applicable to shareholder meetings. These differences may result in a board that is more difficult to remove as well as less shareholder approvals required generally. We will also follow Australian law instead of the Nasdaq requirement to obtain shareholder approval prior to the issuance of securities in connection with a change of control, certain acquisitions, private placements of securities, or the establishment or amendment of certain stock option, purchase, or other equity compensation plans or arrangements. These differences may result in less shareholder oversight and requisite approvals for certain acquisition or financing related decisions or for certain company compensation related decisions. The Australian home country practices described above may afford less protection to holders of our securities than that provided under the Nasdaq Listing Rules.

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+ RISK FACTORS Before you invest in our securities, you should be aware that there are various risks. You should consider carefully these risk factors, together with all of the other information included in this annual report before you decide to purchase our securities. If any of the following risks and uncertainties develop into actual events, our business, financial condition or results of operations could be materially adversely affected. We have a limited operating history and have not yet generated revenues. We are an early stage business that was founded in 2014, with little operating history from which to evaluate its business prospects. We have accrued accumulated net losses from our date of inception. We face risks encountered by early stage companies in general, including but not limited to: difficulty in raising sufficient funding to achieve growth objectives, uncertainty of market acceptance of our products and services, and the ability to attract and retain qualified personnel. There can be no guarantees that we will be successful in managing these risks, and if we are unsuccessful in doing so, our shareholders face the risk of losing their entire investment. We may be deemed to be a "shell company" and as such shareholders may not be able to rely on the provisions of Rule 144 for resale of their shares until certain conditions are met. Rule 405 promulgated under the Securities Act of 1933 defines a "shell company" as a registrant… that has: no or nominal operations; and either (a) no or nominal assets; (b) assets consisting solely of cash and cash equivalents; or (c) assets consisting of any amount of cash and cash equivalents and nominal other assets. While the Company does not believe that it is a "shell company", designation as a "shell company" could result in the application of Rule 144(i), which would limit the availability of the exemption from registration provided in Rule 144 for certain shares of Company common stock and could result in certain persons affiliated with the Company being deemed "statutory underwriters under Rule 145(c). If the Company is a shell company, the securities issued by the Company can only be resold by filing a registration statement for those shares or utilizing the provisions of Rule 144 once certain conditions are met, specifically: (i) the Company has ceased to be a shell company (ii) the Company is subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, (iii) the Company has filed all required reports under the Exchange Act of the preceding 12 months and (iv) one year has elapsed since the Company filed "Form 10" information. Thus, a shareholder of the Company may not be able to sell its shares until such time as a registration statement for those shares is filed or the Company has ceased to be a shell company either by effecting a business combination or by developmental growth, the Company has remained current on its Exchange Act filings for 12 months and the Company has filed the information as would be required by a "Form 10" registration statement filing (e.g. audited financial statements, management information and compensation, shareholder information, etc.). In addition, if the Company were to be deemed a "shell company", it would be prohibited from filing a registration statement on Form S-8 and be subject to certain enhanced reporting requirements. Designation as a "shell company" could also have a detrimental impact on the Company s ability to attract additional capital through subsequent unregistered offerings. We may be considered a "Blank Check" Company The Company may be a "Blank Check" company as defined in Rule 419 promulgated under the Securities Act of 1933, as amended. If we are a "Blank Check" company, we will need to comply with the rules and regulations in Rule 419 related to the sales of securities and deposit of the proceeds of such sales and the certificates related thereto into an escrow or trust, which proceeds will not be available to the Company until the completion of a transaction pursuant to an acquisition agreement (See Rule 419 (e)). If this requirement is deemed to be applicable, the Company may not have sufficient funds to continue operations until a qualifying acquisition is completed. Our independent auditors have expressed substantial doubt about our ability to continue as a going concern, which may hinder our ability to continue as a going concern and our ability to obtain future financing. In their report dated April 1, 2019 our independent auditors stated that our financial statements for the year ended December 31, 2018 were prepared assuming that we would continue as a going concern and they expressed substantial doubt about our ability to continue as a going concern. This doubt is based entirely upon the Company s losses since inception, negative cash flows from operations and negative working capital. Our ability to continue as a going concern is an issue as we have just commenced operations as a development stage company. In our early stages of operations, we expect to experience net losses. Our ability to continue as a going concern is subject to our ability to generate a profit and/or obtain necessary funding from outside sources, including obtaining additional funding from the sale of our securities, increasing sales or obtaining loans and grants from various financial institutions where possible. If we are unable to continue as a going concern, you may lose your entire investment. Without immediately raising additional funding, we will run out of funds in the near term. To fund the Company s ongoing operating expenses, the Company will clearly require additional funding for ongoing operations pursuant to its business plan. There is no guarantee that we will be able to raise any additional capital and have no current arrangements for any such financing. The inability to obtain this funding either in the near term and/or longer term will materially affect the ability of the Company to implement its business plan of operations and jeopardize the viability of the Company. In that case, the Company may need to suspend its operations and reevaluate and revise its plan of operations We are not profitable and have limited access to capital. We are not currently profitable, there is no guarantee that we will ever become profitable, and if we do become profitable, this is no guarantee that we will remain profitable. We may need to raise additional financing to support our operations and such financing(s) will be dilutive to our stockholders. There is no guarantee that we will be able to raise such additional financing on terms acceptable to us or our stockholders, or even to raise such additional financing at all. The ability of our business to grow and compete depends on the availability of adequate capital, which in turn depends in large part on our cash flow from operations and the availability of equity and debt financing. We cannot assure you that our cash flow from operations will be sufficient or that we will be able to obtain equity or debt financing on acceptable terms or at all to implement our growth strategy. We estimate that we will need a minimum of $2,000,000 to successfully achieve our short-term goals. As a result, we cannot assure you that adequate capital will be available to finance our current growth plans, take advantage of business opportunities or respond to competitive pressures, any of which could harm our business. Our officers and directors lack experience in running a public company. Our officers and directors have either limited or no experience in the management and governance of a public company and will significantly look to the advice of outside professionals in this regard. This lack of experience could lead to such officers and directors making decisions that either lack business judgment or are inconsistent with applicable principals of corporate governance. To the extent this occurs, the Company could be detrimentally affected and shareholders investments may be jeopardized. We may not be successful in competing with current and future participants in our industry. We may not be successful in competing against current and future participants in our market sector. Some of our competitors may have longer operating histories, possess greater industry and brand name recognition, and/or have significantly greater financial, technical, and marketing resources than we do. We may not be able to negotiate and complete any acquisitions on terms favorable to the Company. The business plan of the Company includes the possibility of identifying and completing acquisitions of targeted companies in the consulting business in China. We may not be able to complete any such acquisitions in the near or long term, and if we do, such acquisitions may not be on terms that are favorable to the Company. Unfavorable changes in market and economic conditions could affect the demand for Professional Consulting Services. The demand for and price of professional consulting services has historically been positively and negatively affected by various economic factors both in the industry and generally, any or all of which could result in the demand for such services being adversely affected. Risks Related to Ownership of the Company s Common Stock There is only a limited public trading market for our common stock and you may not be able to resell our common stock. There only a limited public trading market for our securities and our shares have only been sporadically quoted in the Pink Sheets. We have not applied for quotation on any quotation system or exchange and the Company will need a market maker to apply for the quotation of our common stock. We cannot assure you that any market maker will agree to make a market in our common stock. In the absence of a more robust trading market, you may not be able to liquidate your investment, which could result in the loss of your investment. Future issuances of our common stock would dilute the interests of existing shareholders. We intend to issue additional shares of our common stock in the future. The issuance of a substantial amount of common stock would have the effect of substantially diluting the interests of our shareholders. In addition, the sale of a substantial amount of common stock in the public market, either in the initial issuance or in a subsequent resale could have an adverse effect on the market price of our common stock. Acquisitions in the future may result in the demand for significant additional funding which may result in substantial dilution to existing shareholders. If we engage in any acquisition activity in the future, we may require funding which will result in significant dilution to our existing shareholders. The financial results of acquired businesses may not achieve expectation which may significant impact our per share earnings, and thus, the value of our stock. We have no plans to pay dividends. To date, we have paid no cash dividends on our common stock. For the foreseeable future, earnings generated from our operations will be retained for use in our business and not to pay dividends. If our common stock is ultimately listed on a public exchange, application of the Securities and Exchange Commission "penny stock" rules could limit trading activity in the market, and our shareholders may find it more difficult to sell their stock. If our common stock is ultimately listed on a public exchange, it is likely that such shares will be trading for some period at less than $5.00 per share and are therefore will be subject to the U.S. Securities and Exchange Commission ("SEC") penny stock rules. Penny stocks generally are equity securities with a price of less than $5.00. Penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer s account. The broker-dealer must also make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser s written agreement to the transaction. These requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a security that becomes subject to the penny stock rules. These requirements may restrict the ability of broker-dealers to sell our common stock and may affect your ability to resell your shares of our common stock. We may not have adequate internal accounting controls. While we have certain internal procedures in our budgeting, forecasting and in the management and allocation of funds, our internal controls may not be adequate. We are constantly striving to improve our internal accounting controls. Our board of directors has not designated an Audit Committee and we do not have any outside directors. We do not have a dedicated full time Chief Financial Officer. We hope to develop an adequate internal accounting control to budget, forecast, manage and allocate our funds and account for them. There is no guarantee that such improvements will be adequate or successful or that such improvements will be carried out on a timely basis. If we do not have adequate internal accounting controls, we may not be able to appropriately budget, forecast and manage our funds, we may also be unable to prepare accurate accounts on a timely basis to meet our continuing financial reporting obligations and we may not be able to satisfy our obligations under US securities laws. There may be limitations on the effectiveness of our internal controls, and a failure of our control systems to prevent error or fraud may materially harm our Company. We do not expect that internal control over financial accounting and disclosure, even if timely and well established, will prevent all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Failure of our control systems to prevent error or fraud could materially adversely affect our business. We have not implemented various voluntary corporate governance measures, in the absence of which, stockholders may have more limited protections against interested director transactions, conflicts of interest and similar matters. Recent U.S. Federal legislation, including the Sarbanes-Oxley Act of 2002 (the "SOX Act"), has resulted in the adoption of various corporate governance measures designed to promote the integrity of the corporate management and the securities markets. Some of these measures have been adopted in response to legal requirements. Others have been adopted by companies in response to the requirements of national securities exchanges, such as the NYSE, or the Nasdaq Stock Market, on which their securities are listed. Among the corporate governance measures that are required under the rules of national securities exchanges and Nasdaq are those that address board of directors independence, audit committee oversight, and the adoption of a code of ethics. We have not yet adopted many of these other corporate governance measures and, since our securities are not listed on a national securities exchange or Nasdaq, we are not required to do so. It is possible that if we were to adopt some or all of these corporate governance measures, stockholders would benefit from somewhat greater assurances that internal corporate decisions were being made by disinterested directors and that policies had been implemented to define responsible conduct. We incur significant costs being a reporting issuer that may affect our profitability. As a publicly-reporting company in the U.S. we are subject to applicable U.S. securities laws relating to public disclosure. Public disclosure generally involves a substantial expenditure of financial resources. Compliance with these rules and regulations significantly increases our legal and financial compliance costs and some activities will become more time-consuming and costly as time passes. Management may need to increase compensation for senior executive officers, engage additional senior financial officers who are able to adopt financial reporting and control procedures, allocate a budget for an investor and public relations program, and increase our financial and accounting staff in order to meet the demands and financial reporting requirements as a public reporting company. Such additional personnel, public relations, reporting and compliance costs may negatively impact our financial results. In the event a liquid market develops for our common stock, the trading may be highly volatile. In the event a liquid market develops for our common stock, the market price of our common stock may be highly volatile, as is the stock market in general, and the market for OTC Market quoted stocks in particular. Some of the factors that may materially affect the market price of our common stock are beyond our control, such as changes in financial estimates by industry and securities analysts, conditions or trends in the industry in which we operate or sales of our common stock. These factors may materially adversely affect the market price of our common stock, regardless of our performance. In addition, the public stock markets have experienced extreme price and trading volume volatility. This volatility has significantly affected the market prices of securities of many companies for reasons frequently unrelated to the operating performance of the specific companies. These broad market fluctuations may adversely affect the market price of our common stock. As a reporting issuer, compliance requirements may make it more difficult to attract and retain officers and directors. Applicable US securities laws, the SOX Act and rules subsequently implemented by the SEC have required changes in corporate governance practices of public companies. We expect that these rules and regulations may make it more difficult and expensive for us to obtain director and officer liability insurance in the future and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our board of directors or as executive officers. Because our sole director and officer owns approximately 96.35% of the Common Stock of the Company, he can exert significant control over our business and affairs and have actual or potential interests that may depart from other shareholders. Our sole director and executive officer (Zilin Wang) owns, collectively and beneficially, approximately 96.35% of the outstanding shares of our common stock. Additionally, the holdings of our director and executive officer may increase in the future upon vesting or other maturation of exercise rights under any of the options or warrants he may hold or in the future be granted or if he otherwise acquires additional shares of our common stock. The interests of such person may differ from the interests of our other shareholders, if any. As a result, in addition to his board seat and offices, Mr. Wang will have significant influence over and control all corporate actions requiring shareholder approval, irrespective of how the Company s other shareholders, if any, may vote, including the following actions: to elect or defeat the election of our directors; to amend or prevent amendment of our Articles of Incorporation or by-laws; to effect or prevent a merger, sale of assets or other corporate transaction; and to control the outcome of any other matter submitted to our shareholders for vote. Mr. Wang s stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of the Company, which in turn could reduce our stock price or prevent our shareholders from realizing a premium over our stock price. Our officer and director has limited liability, and we are required in certain instances to indemnify our officer and director for breaches of his fiduciary duties. We have adopted provisions in our by-laws and intend to adopt provisions in our Articles of Incorporation, which limit the liability of our officers and directors and provide for indemnification by us of our officers and directors to the full extent permitted by Nevada corporate law. Such provisions substantially limit our shareholders ability to hold officers and directors liable for breaches of fiduciary duty and may require us to indemnify our officers and directors. As an "emerging growth company" under applicable law, we may be subject to reduced disclosure requirements, which could leave our stockholders without information or rights available to stockholders of more mature companies. For as long as we remain an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"), 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 SOX Act; taking advantage of extensions of time to comply with certain new or revised financial accounting standards; being permitted to comply with reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements; and being exempt from the requirement to hold a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We expect to take advantage of these reporting exemptions until we are no longer an emerging growth company. We will remain an "emerging growth company" for up to five years, although if the market value of the shares of our common stock that are held by non-affiliates exceed $700 million as of any June 30 before that time, we would cease to be an "emerging growth company" as of the following December 31. Because of the lessened regulatory requirements discussed above, our stockholders will be left without information or rights available to stockholders of more mature companies. Future sales of our common stock may result in a decrease in the market price of our common stock, even if our business is doing well. The market price of our common stock, when and if established, could drop due to sales of a large number of shares of our common stock in the market or the perception that such sales could occur. This could make it more difficult to raise funds through future offerings of common stock. We have conducted no market research or identification of business opportunities, which may affect our ability to implement our business plan. We have not conducted market research concerning prospective business opportunities, nor have others made the results of such market research available to us. Therefore, we have no assurances that market demand exists for our business consistent with our business plan. Our business is subject to all of the risks associated with an early stage business. As such, there is a risk that conventional private or public offerings of securities or conventional bank financing will not be available. There is no assurance that we will be able to pursue our business plan on terms favorable to us. If we do not use our funds in an efficient manner, our business may suffer. Our board of directors will retain broad discretion as to the use of Company funds based upon market and business conditions. Accordingly, our shareholders will not have the opportunity to evaluate the economic, financial and other relevant information that we may consider in the application of any of our available funds. We cannot guarantee that we will make the most efficient use of our available funds or that you will agree with the way in which such funds are used. Our failure to apply these funds effectively could have a material adverse effect on our business, results of operations and financial condition. No legal or tax advice. A holding in our common stock may involve certain material federal and state tax consequences. Shareholders should not rely on the Company for legal, tax, or business advice. Shareholders are encouraged to consult with their respective legal counsel, accountant or business adviser as to legal, tax and related matters concerning their investment in the Company. Miscellaneous Risk Factors Forward-looking statements made by the Company may prove to be untrue or unachievable. This Registration Statement on Form S-1 contains "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended. These statements relate to future events or to ALLYME s future operating or financial performance and involve known and unknown risks, uncertainties and other factors which may cause ALLYME s actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by the forward-looking statements. Certain or all of these forward-looking statements may prove to be untrue or may never be accomplished or achieved. If such were to occur, the operations and financial prospects of the Company could be materially impaired, which could have a significant detrimental impact your investment in the Company. Our success depends on the skills and expertise of our management. There is no guarantee that they will manage our business successfully and that our operations will be successful in their businesses. We do not have an employment agreement with our management, nor do we carry life or disability insurance on them. The loss of the services of any member of our management, for any reason, or the failure of our tenants to properly manage their businesses, may have a material adverse effect on your investment in the Company. Lack of additional working capital may cause curtailment of any expansion plans while raising of capital through sale of equity securities would dilute existing shareholders percentage of ownership Without taking into account the offering, we will run out of funds approximately December 31, 2019. We additionally incur public company reporting costs of approximately $50,000 per year or $12,500 per quarter. To fund the Company s operating expenses following December 31, 2019, the Company will clearly require additional funding for ongoing operations and to finance additional products and services it may identify. There is no guarantee that we will be able to raise any additional capital and have no current arrangements for any such financing. A shortage of capital would affect our ability to fund our working capital requirements. If we require additional capital, funds may not be available on acceptable terms, if at all. In addition, if we raise additional capital through the sale of equity or convertible debt securities, the issuance of these securities could dilute existing shareholders. If funds are not available, we could be placed in the position of having to cease all operations. We do not presently have a traditional credit facility with a financial institution. This absence may adversely affect our operations We do not presently have a traditional credit facility with a financial institution. The absence of a traditional credit facility with a financial institution could adversely impact our operations. If adequate funds are not otherwise available, we may be required to delay, scale back or eliminate portions of our operations and product development efforts. Without such credit facilities, the Company could be forced to cease operations and investors in our common stock or other securities could lose their entire investment. Our inability to successfully achieve a critical mass of revenues could adversely affect our financial condition No assurance can be given that we will be able to successfully achieve a critical mass of revenue in order to cover our operating expenses and achieve sustainable profitability. Without such critical mass of revenues, the Company could be forced to cease operations. Our success is substantially dependent on general economic conditions and business trends, a downturn of which could adversely affect our operations The success of our operations depends to a significant extent upon a number of factors relating to spending on consulting in China. These factors include economic conditions, activity in the financial markets, general business conditions, personnel cost, inflation, interest rates and taxation. Our business is affected by the general condition and economic stability of our consumers and their continued willingness to accept our products and services. An overall decline in the economy could cause a reduction in our revenues and the Company could face a situation where it never achieves a critical mass of revenues and thereby be forced to cease operations. Changes in generally accepted accounting principles could have an adverse effect on our business financial condition, cash flows, revenue and results of operations We are subject to changes in and interpretations of financial accounting matters that govern the measurement of our performance. Based on our reading and interpretations of relevant guidance, principles or concepts issued by, among other authorities, the American Institute of Certified Public Accountants, the Financial Accounting Standards Board, and the United States Securities and Exchange Commission, our management believes that our current contract terms and business arrangements have been properly reported. However, there continue to be issued interpretations and guidance for applying the relevant standards to a wide range of contract terms and business arrangements that are prevalent in the industries in which we operate. Future interpretations or changes by the regulators of existing accounting standards or changes in our business practices could result in future changes in our revenue recognition and/or other accounting policies and practices that could have a material adverse effect on our business, financial condition, cash flows, revenue and results of operations. We will need to increase the size of our organization and may experience difficulties in managing growth. We are a small company with no current full-time employees. We expect to experience a period of significant expansion in headcount, facilities, infrastructure and overhead and anticipate that further expansion will be required to address potential growth and market opportunities. Future growth will impose significant added responsibilities on members of management, including the need to identify, recruit, maintain and integrate managers. Our future financial performance and its ability to compete effectively will depend, in part, on its ability to manage any future growth effectively. We are subject to compliance with securities law, which exposes us to potential liabilities, including potential rescission rights. We have offered and sold our common stock to investors pursuant to certain exemptions from the registration requirements of the Securities Act of 1933, as well as those of various state securities laws. The basis for relying on such exemptions is factual; that is, the applicability of such exemptions depends upon our conduct and that of those persons contacting prospective investors and making the offering. We have not received a legal opinion to the effect that any of our prior offerings were exempt from registration under any federal or state law. Instead, we have relied upon the operative facts as the basis for such exemptions, including information provided by investors themselves. If any prior offering did not qualify for such exemption, an investor would have the right to rescind its purchase of the securities if it so desired. It is possible that if an investor should seek rescission, such investor would succeed. A similar situation prevails under state law in those states where the securities may be offered without registration in reliance on the partial preemption from the registration or qualification provisions of such state statutes under the National Securities Markets Improvement Act of 1996. If investors were successful in seeking rescission, we would face severe financial demands that could adversely affect our business and operations. Additionally, if we did not in fact qualify for the exemptions upon which it has relied, we may become subject to significant fines and penalties imposed by the SEC and state securities agencies. We incur costs associated with SEC reporting compliance. The Company is an SEC "reporting company" and must comply with all applicable laws and regulations. We incur certain costs of compliance with applicable SEC reporting rules and regulations including, but not limited to attorneys fees, accounting and auditing fees, other professional fees, financial printing costs and Sarbanes-Oxley compliance costs in an amount estimated at approximately $50,000 per year. The Company determined that the incurrence of such costs and expenses was preferable to the Company being in a position where it had very limited access to additional capital funding. The availability of a large number of authorized but unissued shares of common stock may, upon their insurance, lead to dilution of existing shareholders. As of December 31, 2018, 8,944,060 shares were issued and outstanding and we expect to issue up to an additional 2,000,000 shares in this Offering. At this time, the Company is authorized to issue an additional 741,055,940 shares of common stock and 20,000,000 shares of preferred stock. These additional shares may be issued by our board of directors without further shareholder approval. The issuance of large numbers of shares, possibly at below market prices, is likely to result in substantial dilution to the interests of other shareholders. In addition, issuances of large numbers of shares may adversely affect the market price of our common stock. Our need for additional capital that could dilute the ownership interest of investors. We require substantial working capital to fund our business. If we raise additional funds through the issuance of equity, equity-related or convertible debt securities, these securities may have rights, preferences or privileges senior to those of the rights of holders of our Common Shares and they may experience additional dilution. We cannot predict whether additional financing will be available to us on favorable terms when required, or at all. Since our inception, we have experienced negative cash flow from operations and expect to experience significant negative cash flow from operations in the future. The issuance of additional Common Shares or Preferred Shares by the Company may have the effect of further diluting the proportionate equity interest and voting power of holders of our Common Shares. We may not have adequate insurance coverage We currently do not have any general liability insurance and we cannot assure you that we would not face liability upon the occurrence of any uninsured event which could result in any loss or damages being assessed against the Company. We are subject to numerous laws and regulations that can adversely affect the cost, manner or feasibility of doing business. Our operations (which are currently exclusively in China) are subject to extensive national, state and local laws and regulations relating to the financial markets. Future laws or regulations, any adverse change in the interpretation of existing laws and regulations or our failure to comply with existing legal requirements may result in substantial penalties and harm to our business, results of operations and financial condition. We may be required to make large and unanticipated capital expenditures to comply with governmental regulations. Our operations could be significantly delayed or curtailed and our cost of operations could significantly increase as a result of regulatory requirements or restrictions. We are unable to predict the ultimate cost of compliance with these requirements or their effect on our operations. Our Common Shares are illiquid and subject to price volatility unrelated to our operations The market price of our Common Shares could fluctuate substantially due to a variety of factors, including market perception of our ability to achieve our planned growth, quarterly operating results of other companies in the same industry, trading volume in our Common Shares, changes in general conditions in the economy and the financial markets or other developments affecting our competitors or us. In addition, the stock market is subject to extreme price and volume fluctuations. This volatility has had a significant effect on the market price of securities issued by many companies for reasons unrelated to their operating performance and could have the same effect on our common stock. Sales of substantial amounts of Common Shares, or the perception that such sales could occur, could adversely affect the market price of our Common Shares and could impair our ability to raise capital through the sale of our equity securities. Management will have broad discretion as to the use of the proceeds from this offering, and we may not use the proceeds effectively. Our management will have broad discretion in the application of the net proceeds from this offering and could spend the proceeds in ways that do not improve our results of operations or enhance the value of our shares. Our failure to apply these funds effectively could have a material adverse effect on our business, stunt the growth of our business domestically and in foreign markets, and cause the price of our Common Shares to decline. You will experience immediate and substantial dilution in the net tangible book value per share of the common stock you purchase. Since the price per Common Share being offered is substantially higher than the net tangible book value per Common Share you will suffer substantial dilution in the net tangible book value of the Common Shares you purchase in this offering. Based on the offering price of $1.00 per share, if you purchase Common Shares in this offering, you will suffer immediate and substantial dilution of $0.82 per share in the net tangible book value of the Common Shares if the Offering is fully subscribed. See the section entitled "Dilution" below for a more detailed discussion of the dilution you will incur if you purchase Common Shares in this offering. You may experience future dilution as a result of future equity offerings and other issuances of our common stock or other securities. In addition, this offering and future equity offerings and other issuances of our Common Shares or other securities may adversely affect our Common Share price. In order to raise additional capital, we may in the future offer additional shares of our Common Shares or other securities convertible into or exchangeable for our common stock, including but not limited to Preferred Shares and convertible debt. We cannot assure you that we will be able to sell shares or other securities in any other offering at a price per share that is equal to or greater than the price per share paid by investors in this offering, and investors purchasing shares or other securities in the future could have rights superior to existing stockholders. The price per share at which we sell additional Common Shares or securities convertible into Common Shares in future transactions may be higher or lower than the price per share in this offering. In addition, the sale of shares in this offering and any future sales of a substantial number of Common Shares in the public market, or the perception that such sales may occur, could adversely affect the price of our Common Shares. We cannot predict the effect, if any, that market sales of those shares of Common Shares or the availability of those Common Shares for sale will have on the market price of our Common Shares. We have not voluntarily implemented various corporate governance measures, in the absence of which, shareholders may have more limited protections against interested director transactions, conflicts of interest and similar matters. Federal legislation, including the Sarbanes-Oxley Act of 2002, has resulted in the adoption of various corporate governance measures designed to promote the integrity of the corporate management and the securities markets. Some of these measures have been adopted in response to legal requirements. Others have been adopted by companies in response to the requirements of national securities exchanges, such as the NYSE or other Stock Market, on which their securities are listed. Among the corporate governance measures that are required under the rules of national securities exchanges are those that address board of directors independence, audit committee oversight, and the adoption of a code of ethics. We have not yet adopted any of these corporate governance measures and, since our securities are not yet listed on a national securities exchange, we are not required to do so. It is possible that if we were to adopt some or all of these corporate governance measures, shareholders would benefit from somewhat greater assurances that internal corporate decisions were being made by disinterested directors and that policies had been implemented to define responsible conduct. Prospective investors should bear in mind our current lack of corporate governance measures in formulating their investment decisions. RISKS RELATED TO OUR BUSINESS AND INDUSTRY If the market does not accept or embrace our services, our business may fail. The services we are offering have not been tested in the market on a large-scale basis. As a result, we can only speculate as to the market acceptance of these and other services we may provide. No assurance can be given that the market will accept our services, or any of them. If the public fails to accept our services to a satisfactory degree, our business may fail. Our market is highly competitive. The market for consulting services in China is highly competitive and many competitive companies and services will be far better financed and capitalized and have substantially greater resources than ours. While we believe that our services are competitive with services provided by other companies, there is no guarantee that we will be able to effectively compete against them, and if we do not effectively compete, our business may fail.

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+RISK FACTORS
+ Investing in our common stock involves a high degree of risk. Investors should carefully consider the risks described below and all of the other information set forth in this prospectus, including our consolidated financial statements and the related notes and Management s Discussion and Analysis of Financial Condition and Results of Operations, before deciding to invest in our common stock. If any of the events or developments described below occur, our business, financial condition, or results of operations could be negatively affected. In that case, the market price of our common stock could decline, and investors could lose all or part of their investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our operations.
+ Risks Related to Our Business and Strategy
+ We may need additional capital in the future, which could dilute the ownership of current shareholders or we may be unable to secure additional funding in the future or to obtain such funding on favorable terms.
+ Historically, we have raised equity capital, including debt convertible into equity capital, to support and expand our operations. To the extent that we raise additional equity capital, existing shareholders will experience a dilution in the voting power and ownership of their common stock, and earnings per share, if any, would be negatively impacted. Our inability to use our equity securities to finance our operations could materially limit our growth. Any borrowings made to finance operations could make us more vulnerable to a downturn in our operating results, a downturn in economic conditions, or increases in interest rates on borrowings that are subject to interest rate fluctuations. The amount and timing of such additional financing needs will vary principally depending on the timing of new product launches, investments and/or acquisitions, and the amount of cash flow from our operations. If our resources are insufficient to satisfy our cash requirements, we may seek to issue additional equity or debt securities or obtain a credit facility. If our cash flow from operations is insufficient to meet any debt service requirements, we could be required to sell additional equity securities, refinance our obligations, or dispose of assets in order to meet debt service requirements. There can be no assurance that any financing will be available to us when needed or will be available on terms acceptable to us. Our failure to obtain sufficient financing on favorable terms and conditions could have a material adverse effect on our growth prospects and our business, financial condition and results of operations.
+ Even if we obtain more customers, there is no assurance that we will make a profit.
+ We have not earned a profit since inception. Even if we obtain more customers or increase sales to our existing customers, there is no guarantee that we will be able to generate a profit. Because we are a small company and have limited capital, we must limit our products and services. Because we will be limiting our marketing activities, we may not be able to attract enough customers to buy our products to operate profitably. Further, we are subject to raw material pricing which can erode the profitability of our products and put additional negative pressure on profitability. If we cannot operate profitably, we may have to suspend or cease operations.
+ Our gross margins have been negatively affected since inception by manufacturing quality control issues with our contact manufacturers in China, which may continue to adversely affect us in the future.
+ We have experienced quality control issues with our Chinese manufacturers for our products, principally our Shark 710 Filling machine, which have had an adverse effect on our gross margins by increasing product returns by our customers. We believe quality control for our products has been affected by a number of issues at our Chinese manufacturers beyond our ability to control, including:
+ Employee turnover, leading to less experienced staff assembling our products;
+ Quality control issues by suppliers of component parts, also located in China and with whom we have no direct relationship;
+ Quality control testing procedures using fluids not later adequately cleaned out of our products prior to shipment to us;
+ Use of incorrect component materials in our cartridges, specifically the cotton, causing excess absorption.
+ We continue to work with our Chinese manufacturers to improve the manufacturing process and quality control. There can be no assurance that we will be successful in these efforts. If we are unable to successfully resolve these issues, it could continue to have a material adverse effect on our growth prospects and our business, financial condition and results of operations.
+U.S. Federal and foreign regulation and enforcement may adversely affect the implementation of cannabis laws and regulations and may negatively impact our revenue or we may be found to be violating the Controlled Substances Act or other U.S. federal, state, or foreign laws.
+ Cannabis is a Schedule-I controlled substance and is illegal under federal law. Even in those states where the use of cannabis has been legalized, its use remains a violation of federal law. A Schedule I controlled substance is defined as a substance that has no currently accepted medical use in the United States, a lack of safety for use under medical supervision and a high potential for abuse. The Department of Justice defines Schedule 1 controlled substances as the most dangerous drugs of all the drug schedules with potentially severe psychological or physical dependence.
+ At present, 30 states and the District of Columbia allow their citizens to use medical cannabis. Additionally, 9 states have approved legalization of cannabis for adult recreational use. The laws of these states are in conflict with the Federal Controlled Substances Act, which makes cannabis use and possession illegal on a national level. If the federal government decides to enforce the Controlled Substances Act with respect to cannabis, persons that are charged with distributing, possessing with intent to distribute, or growing cannabis could be subject to fines and imprisonment, the maximum being life imprisonment and a $50 million fine. Any such change in the federal government s enforcement of current federal laws will cause significant financial damage to us.
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+ Previously, the Obama administration, memorialized in what has come to be commonly known as the Cole Memorandum, took the position that it was not an efficient use of resources to direct federal law enforcement agencies to prosecute those lawfully abiding by state-designated laws allowing the use and distribution of medical cannabis. The Trump administration has revised this policy. Specifically, Attorney General Jeff Sessions has rescinded the Cole Memorandum guidance in favor of deferral of any enforcement of federal regulation to the individual states US Attorney.
+ Even under the prior Cole Memorandum guidance, the Department of Justice stated that it would continue to enforce the Controlled Substance Act with respect to cannabis to prevent:
+ the distribution of cannabis to minors;
+ criminal enterprises, gangs and cartels receiving revenue from the sale of cannabis;
+ the diversion of cannabis from states where it is legal under state law to other states;
+ state-authorized cannabis activity from being used as a cover or pretext for the trafficking of other illegal drugs or other illegal activity;
+ violence and the use of firearms in the cultivation and distribution of cannabis;
+ driving while impaired and the exacerbation of other adverse public health consequences associated with cannabis use;
+ the growing of cannabis on public lands; and
+ cannabis possession or use on federal property.
+ Despite the rescission of the Cole Memorandum, certain other protections for state-legal cannabis businesses remain in place via budgetary an element embedment which limits funding of any enforcement of anti-cannabis legislation. However, being an amendment to an appropriations bill, those protections must be renewed annually. The currently enacted Commerce, Justice, Science, and Related Agencies Act, which includes the protective embedment (the Rohrabacher-Farr Amendment), is effective by passage of a short-term continuing resolution only through December 8, 2017, and Attorney General Jeff Sessions has urged members of Congress to not renew the amendment.
+ Since the use of cannabis is illegal under federal law, federally chartered banks will not accept for deposit funds from businesses involved with cannabis. Consequently, businesses involved in the cannabis industry often have trouble finding a bank willing to accept their business. The inability to open bank accounts may make it difficult for our customers to operate. There does appears to be recent movement to allow state-chartered banks and credit unions to provide banking to the industry, but as of the date of this report there are only nominal entities that have been formed that offer these services. Further, in a February 6, 2018, Forbes article, United States Secretary of the Treasury, Steven Mnuchin, is reported to have testified that his department is reviewing the existing guidance. But he clarified that he doesn t want to rescind it without having an alternate policy in place to address public safety concerns.
+ Any change in the federal government s enforcement of current federal laws could cause significant financial damage to us and our shareholders.
+ Laws and regulations affecting the cannabis industry are constantly changing, which could detrimentally affect our operations. Local, state and federal cannabis laws and regulations are broad in scope and subject to evolving interpretations, which could require us to incur substantial costs associated with compliance or alter our business plan. In addition, violations of these laws, or allegations of such violations, could disrupt our business and result in a material adverse effect on our operations. It is also possible that regulations may be enacted in the future that will be directly applicable to our business. These ever-changing regulations could even affect federal tax policies that may make it difficult to claim tax deductions on our returns. We cannot predict the nature of any future laws, regulations, interpretations or applications, nor can we determine what effect additional governmental regulations or administrative policies and procedures, when and if promulgated, could have on our business.
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+ We and our customers may have difficulty accessing the service of banks, which may make it difficult to sell our products and services.
+ Financial transactions involving proceeds generated by cannabis-related conduct can form the basis for prosecution under the federal money laundering statutes, unlicensed money transmitter statute and the U.S. Bank Secrecy Act. Despite guidance from the U.S. Department of the Treasury suggesting it may be possible for financial institutions to provide services to cannabis-related businesses consistent with their obligations under the Bank Secrecy Act, banks remain hesitant to offer banking services to cannabis-related businesses. Consequently, those businesses involved in the cannabis industry continue to encounter difficulty establishing banking relationships. Our inability to maintain our current bank accounts would make it difficult for us to operate our business, increase our operating costs, and pose additional operational, logistical and security challenges and could result in our inability to implement our business plan. Similarly, many of our customers are directly involved in cannabis sales and further restriction to their ability to access banking services may make it difficult for them to purchase our products, which could have a material adverse effect on our business, financial condition and results of operations.
+ We are subject to certain federal regulations relating to cash reporting.
+ The Bank Secrecy Act, enforced by FinCEN, requires us to report currency transactions in excess of $10,000, including identification of the customer by name and social security number, to the IRS. This regulation also requires us to report certain suspicious activity, including any transaction that exceeds $5,000 that we know, suspect or have reason to believe involves funds from illegal activity or is designed to evade federal regulations or reporting requirements and to verify sources of funds. Substantial penalties can be imposed against us if we fail to comply with this regulation. If we fail to comply with these laws and regulations, the imposition of a substantial penalty could have a material adverse effect on our business, financial condition and results of operations.
+ Our inability to effectively manage our growth could harm our business and materially and adversely affect our operating results and financial condition.
+ Our strategy envisions growing our business. We plan to expand our product, sales, administrative and marketing operations. Any growth in or expansion of our business is likely to continue to place a strain on our management and administrative resources, infrastructure and systems. As with other growing businesses, we expect that we will need to further refine and expand our business development capabilities, our systems and processes and our access to financing sources. We also will need to hire, train, supervise, and manage new employees. These processes are time consuming and expensive, will increase management responsibilities and will divert management attention. We cannot assure that we will be able to:
+ expand our products effectively or efficiently or in a timely manner;
+ allocate our human resources optimally;
+ meet our capital needs;
+ identify and hire qualified employees or retain valued employees; or
+ effectively incorporate the components of any business or product line that we may acquire in our effort to achieve growth.
+ Our inability or failure to manage our growth and expansion effectively could harm our business and materially and adversely affect our operating results and financial condition.
+ If we do not successfully generate additional products and services, or if such products and services are developed but not successfully commercialized, we could lose revenue opportunities.
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+ Our future success depends, in part, on our ability to expand our product and service offerings. To that end we have engaged in the process of identifying new product opportunities to provide additional products and related services to our customers. The processes of identifying and commercializing new products is complex and uncertain, and if we fail to accurately predict our customers changing needs and emerging trends, our business could be harmed. We have already and may have to continue to commit significant resources to commercializing new products before knowing whether our investments will result in products the market will accept. Furthermore, we may not execute successfully on commercializing those products because of errors in product planning or timing, technical hurdles that we fail to overcome in a timely fashion, or a lack of appropriate resources. This could result in competitors providing those solutions before we do and a reduction in net sales and earnings.
+ The success of new products depends on several factors, including proper new product definition, timely completion, and introduction of these products, differentiation of new products from those of our competitors, and market acceptance of these products. There can be no assurance that we will successfully identify additional new product opportunities, develop and bring new products to market in a timely manner, or achieve market acceptance of our products or that products and technologies developed by others will not render our products or technologies obsolete or noncompetitive.
+ Our future success depends on our ability to grow and expand our customer base. Our failure to achieve such growth or expansion could materially harm our business.
+ To date, our revenue growth has been derived from the sale of our products. Our success and the planned growth and expansion of our business depend on us achieving greater and broader acceptance of our products and expanding our customer base. There can be no assurance that customers will purchase our products or that we will continue to expand our customer base. If we are unable to effectively market or expand our product offerings, we will be unable to grow and expand our business or implement our business strategy. This could materially impair our ability to increase sales and revenue and materially and adversely affect our margins, which could harm our business.
+ Our suppliers could fail to fulfill our orders for parts used to assemble our products, which would disrupt our business, increase our costs, harm our reputation, and potentially cause us to lose our market.
+ We depend on third party suppliers in The People s Republic of China for manufacture of our products, namely our 710 Shark machine and some of proprietary cartridges. Our suppliers could fail to produce products to our specifications or in a workmanlike manner and may not deliver the material or products on a timely basis. Our suppliers may also have to obtain inventories of the necessary parts and tools for production. Any change in our suppliers approach to resolving production issues could disrupt our ability to fulfill orders and could also disrupt our business due to delays in finding new suppliers, providing specifications and testing initial production. Such disruptions in our business and/or delays in fulfilling orders could harm our reputation and could potentially cause us to lose our market.
+ Our inability to effectively protect our intellectual property would adversely affect our ability to compete effectively, our revenue, our financial condition, and our results of operations.
+ At present we have only a single patent, issued by The People s Republic of China, for our 710 Shark filling machine on May 31, 2017, which is valid for ten years. We do not have any other US or foreign patents. We may be unable to obtain intellectual property rights to effectively protect our branding, products, and other intangible assets. Our ability to compete effectively may be affected by the nature and breadth of our intellectual property rights. While we intend to defend against any threats to our intellectual property rights, there can be no assurance that any such actions will adequately protect our interests. If we are unable to secure intellectual property rights to effectively protect our branding, products, and other intangible assets, our revenue and earnings, financial condition, or results of operations could be adversely affected.
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+ We also rely on non-disclosure and non-competition agreements to protect portions of our intellectual property portfolio. There can be no assurance that these agreements will not be breached, that we will have adequate remedies for any breach, that third parties will not otherwise gain access to our trade secrets or proprietary knowledge, or that third parties will not independently develop competitive products with similar intellectual property. This practice is a recent development. Historically we did not require all customers to sign non-disclosure and non-competition agreements. These documents were recently added to our document proposal package which are required for all sales over $2,500.
+ We will be required to attract and retain top quality talent to compete in the marketplace.
+ We believe our future growth and success will depend in part on our ability to attract and retain highly skilled managerial, product development, sales and marketing, and finance personnel. There can be no assurance of success in attracting and retaining such personnel. Shortages in qualified personnel could limit our ability to increase sales of existing products and launch new product offerings.
+ If we fail to retain key personnel and hire, train and retain qualified employees, we may not be able to compete effectively, which could result in reduced revenue or increased costs.
+ Our success is highly dependent on the continued services of key management and technical personnel. Our management and other employees may voluntarily terminate their employment at any time upon short notice. The loss of the services of any member of the senior management team, including our Chief Executive Officer, Mark Adams; our Chief Financial Officer, Michael Sakala; or any of the managerial or technical staff may significantly delay or prevent the achievement of product development, our growth strategies and other business objectives. Our future success will also depend on our ability to identify, recruit and retain additional qualified technical and managerial personnel. Competition for qualified personnel is often intense, particularly in the areas of general management, finance, engineering and science, and the process of hiring suitably qualified personnel is often lengthy and expensive and may become more expensive in the future. If we are unable to hire and retain a sufficient number of qualified employees, our ability to conduct and expand our business could be seriously reduced.
+ If product liability lawsuits are successfully brought against us, we will incur substantial liabilities.
+ We face an inherent risk of product liability. For example, we may be sued if any product we sell allegedly causes injury or is found to be otherwise unsuitable during product testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability and a breach of warranties. Claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit sales of our products. Even successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result in:
+ decreased demand for our products;
+ injury to our reputation;
+ costs to defend the related litigation;
+ a diversion of management s time and our resources;
+ substantial monetary awards to users of our products;
+ product recalls or withdrawals;
+ loss of revenue; and
+ a decline in our stock price.
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+ In addition, while we continue to take what we believe are appropriate precautions, we may be unable to avoid significant liability if any product liability lawsuit is brought against us.
+ Risks Related to Ownership of our Capital Stock
+ The trading market for our common stock is limited.
+ We are quoted on the OTC Markets Group s pink trading platform under the trading symbol CGND . The OTC Markets Group is regarded as a junior trading venue. This may result in limited shareholder interest and hence lower prices for our common stock than might otherwise be obtained.
+ There is not any significant trading activity in our Common Stock or a market for shares of our Common Stock, and an active trading market for our shares may never develop or be sustained. As a result, investors in our Common Stock must bear the economic risk of holding those shares for an indefinite period of time. We do not now, and may not in the future, meet the initial listing standards of any national securities exchange, and our Common Stock may be quoted on the OTC pink system for the foreseeable future. In these marketplaces, our stockholders may find it difficult to obtain accurate quotations as to the market value of their shares of our Common Stock and may find few buyers to purchase their stock and few market makers to support its price. As a result of these and other factors, investors may be unable to resell shares of our Common Stock at or above the price for which they purchased them, at or near quoted bid prices, or at all. Further, an inactive market may also impair our ability to raise capital by selling additional equity in the future and may impair our ability to enter into strategic partnerships or acquire companies or products by using shares of our Common Stock as consideration.
+ Our principal stockholders, executive officers and directors own a significant percentage of our common stock and will be able to exert a significant control over matters submitted to the stockholders for approval.
+ Our officers and directors and stockholders who own more than 5% of our common stock beneficially own approximately 89% of our common stock, based upon 48,272,311 current issued and outstanding shares of our common stock. Assuming the full conversion of the 2017 Debentures and the exercise of the Altar Rock Warrant, the number of shares issued and outstanding of our common stock will increase to 61,864,811 shares, and the percentage beneficially owned by our officers and directors and stockholders who own more than 5% of our common stock will decrease to approximately 69%, which will still be a substantial majority. This significant concentration of share ownership may adversely affect the trading price for our common stock because investors often perceive disadvantages in owning stock in companies with controlling stockholders. These stockholders, if they acted together, could significantly influence all matters requiring approval by the stockholders, including the election of directors. The interests of these stockholders may not always coincide with the interests of other stockholders.
+ We do not intend to pay dividends on our common stock and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.
+ We have never declared or paid any cash dividend on our common stock and do not currently intend to do so for the foreseeable future. We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. Therefore, the success of an investment in shares of our common stock will depend upon any future appreciation in their value. There is no guarantee that shares of our common stock will appreciate in value or even maintain the price at which our stockholders have purchased their shares.
+ If we fail to establish or maintain effective internal control over financial reporting, we may be unable to accurately report our financial results or prevent fraud, and investor confidence and the market price of our common stock may, therefore, be adversely impacted.
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+ Our reporting obligations as a public company place a significant strain on our management, operational and financial resources, and systems for the foreseeable future. Annually, we are required to prepare a management report on our internal control over financial reporting containing our management s assessment of the effectiveness of our internal control over financial reporting. Management has presently concluded that our internal control over financial reporting is effective and has reported such in management s report in our Form 10-Q filed November 5, 2018. In the event that the Company s status with the SEC changes to that of an accelerated filer from a smaller reporting company, our independent registered public accounting firm will be required to attest to and report on our management s assessment of the effectiveness of our internal control over financial reporting. Under such circumstances, even if our management concludes that our internal control over financial reporting are effective, our independent registered public accounting firm may still decline to attest to our management s assessment or may issue a report that is qualified if it is not satisfied with our controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us.
+ The market price of our common stock may be volatile and may be affected by market conditions beyond our control. The market price of our common stock is subject to significant fluctuations in response to, among other factors:
+ variations in our operating results and market conditions specific to our business;
+ the emergence of new competitors or new technologies;
+ operating and market price performance of other companies that investors deem comparable;
+ changes in our Board or management;
+ sales or purchases of our common stock by insiders;
+ commencement of, or involvement in, litigation;
+ changes in governmental regulations, in particular with respect to the cannabis industry; and
+ general economic conditions and slow or negative growth of related markets.
+ In addition, if the market for stocks in our industry, or the stock market in general, experiences a loss of investor confidence, the market price of our common stock could decline for reasons unrelated to our business, financial condition, or results of operations. If any of the foregoing occurs, it could cause the price of our common stock to fall and may expose us to lawsuits that, even if unsuccessful, could be costly to defend and a distraction to our Board of Directors and management.
+ The application of the penny stock rules could adversely affect the market price of our common shares and increase your transaction costs to sell those shares.
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+ The SEC has adopted Rule 3a51-1, which establishes the definition of a penny stock, for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, Rule 15g-9 requires:
+ that a broker or dealer approve a person s account for transactions in penny stocks, and
+ the broker or dealer receives from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.
+ In order to approve a person s account for transactions in penny stocks, the broker or dealer must:
+ obtain financial information and investment experience objectives of the person, and
+ make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
+ The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form:
+ sets forth the basis on which the broker or dealer made the suitability determination and
+ that the broker or dealer received a signed, written agreement from the investor prior to the transaction.
+ Generally, brokers may be less willing to execute transactions in securities subject to the penny stock rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.
+ We may have material liabilities that were not discovered before, and have not been discovered since, the closing of the Merger.
+ As a result of the Merger, our prior business plan and management were abandoned and replaced with the business and management team of Jacksam. Prior to the Merger, there were no relationships or other connections among the businesses or individuals associated with the two pre-Merger entities. As a result, we may have material liabilities based on activities before the Merger that have not been discovered or asserted. Those liabilities may include material debt or other obligations which, per the asserted terms, are not barred under the applicable statutes of limitations. It will be difficult, if not practically impossible, to defend against a claimant asserting the existence of any such obligation without the assistance of pre-Merger management, particularly management prior to Mr. Glass assuming control in April 2016. We could experience losses as a result of any such undisclosed liabilities that are discovered in the future, which could materially harm our business and financial condition. Although the agreement entered into in connection with the Merger contains customary representations and warranties from both pre-Merger entities concerning their respective assets, liabilities, financial condition and affairs, there may be limited or no recourse against the pre-Merger stockholders or principals in the event those representations prove to be untrue. As a result, our current and future stockholders will bear some, or all, of the risks relating to any such unknown or undisclosed liabilities.
+ We may be exposed to additional risks as a result of going public by means of a reverse acquisition transaction.
+ We may be exposed to additional risks because the prior business operations of Jacksam have become a public company through a reverse acquisition transaction. There has been increased focus by government agencies on transactions structured similarly to the Merger in recent years, and we may be subject to increased scrutiny by the SEC and other government agencies and holders of our securities as a result of the Merger.
+ Further, as a result of our existence as a shell company under applicable rules of the SEC, prior to the closing of the Merger, we are subject to certain restrictions and limitations for certain specified periods of time relating to potential future issuances of our securities and compliance with applicable SEC rules and regulations. Additionally, our going public by means of a reverse acquisition transaction may make it more difficult for us to obtain coverage from securities analysts of brokerage firms following the Merger because of the perceived risk to those brokerage firms of recommending the purchase of our Common Stock. Further, investment banks may be less likely to agree to underwrite secondary offerings on our behalf than they might if we became a public reporting company by means of an initial public offering, or IPO, because they may be less familiar with our company as a result of more limited coverage by analysts and the media, and because we became public at an early stage in our development. The failure to receive research coverage or support in the market for our shares will have an adverse effect on our ability to develop a liquid market for our Common Stock. The occurrence of any such event could cause our business or stock price to suffer.
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+ Being a public company is expensive and administratively burdensome.
+ The costs of preparing and filing annual and quarterly reports, interim reports and other information with the SEC and furnishing audited reports to stockholders are much greater than those of a privately-held company, and compliance with these rules and regulations may require us to hire additional financial reporting, internal controls and other finance personnel, and will involve a material increase in regulatory, legal and accounting expenses and the attention of management. There can be no assurance that we will be able to comply with the applicable regulations in a timely manner, if at all. In addition, being a public company makes it more expensive for us to obtain director and officer liability insurance. In the future, we may be required to accept reduced coverage or incur substantially higher costs to obtain this coverage. These factors could also make it more difficult for us to attract and retain qualified executives and members of our board of directors.
+ 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. However, similar to emerging growth companies under the JOBS Act, 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 this registration statement. 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.
+ We do not have a class of our securities registered under Section 12 of the Exchange Act. Until we do, we will not be required to provide certain reports to our shareholders.
+ Upon effectiveness of this registration statement, we will be required to file periodic reports with the SEC by virtue of Section 15(d) of the Exchange Act. However, until we register a class of our securities under Section 12 of the Exchange Act, we are not subject to the SEC s proxy rules, and large holders of our capital stock will not be subject to beneficial ownership reporting requirements under Sections 13 or 16 of the Exchange Act and their related rules. As a result, our stockholders and potential investors may not have available to them as much or as robust information as they may have if and when we become subject to those requirements.
+ Shares of our Common Stock that have not been registered under federal securities laws are subject to resale restrictions imposed by Rule 144, including those set forth in Rule 144(i) which apply to a former shell company.
+ Prior to the closing of the Merger, we were deemed a shell company under applicable SEC rules and regulations because we had no or nominal operations and either no or nominal assets, assets consisting solely of cash and cash equivalents, or assets consisting of any amount of cash and cash equivalents and nominal other assets. Pursuant to Rule 144 promulgated under the Securities Act, sales of the securities of a former shell company, such as us, under that rule are not permitted (i) until at least 12 months have elapsed from the date on which our Current Report on Form 8-K reflecting our status as a non-shell company, was filed with the SEC; (ii) unless at the time of a proposed sale, we are subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act and have filed all reports and other materials required to be filed by Section 13 or 15(d) of the Exchange Act, as applicable, during the preceding 12 months, other than Form 8-K reports; or (iii) until the effectiveness of a registration statement under the Securities Act relating to our Common Stock. We are currently a voluntary filer, and upon effectiveness of a registration statement, or upon our becoming subject to the reporting rules under the Exchange Act, we will not be subject to the reporting requirements under the Exchange Act. Therefore, unless we register such shares of Common Stock for sale under the Securities Act, most of our stockholders will be forced to hold their shares of our Common Stock for at least that 12-month period before they are eligible to sell those shares, and even after that month period, sales may not be made under Rule 144 unless we and the selling stockholders are in compliance with other requirements of Rule 144. Further, it will be more difficult for us to raise funding to support our operations through the sale of debt or equity securities unless we agree to register such securities under the Securities Act, which could cause us to expend significant time and cash resources. Additionally, our previous status as a shell company could also limit our use of our securities to pay for any acquisitions we may seek to pursue in the future (although none are currently planned). The lack of liquidity of our securities as a result of the inability to sell under Rule 144 for a longer period of time than a non- former shell company could cause the market price of our securities to decline.
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+ RISK FACTORS Investment in our securities involves a high degree of risk. You should carefully consider the risks described below, as well as those risks described in the sections titled Risk Factors and Management s Discussion and Analysis of Financial Condition and Results of Operations, each contained in our most recent Annual Report on Form 10-K for the year ended December 31, 2018, which has been filed with the SEC and is incorporated herein by reference in its entirety, as well as other information in this prospectus or in any other documents incorporated by reference. Each of the risks described in these sections and documents could adversely affect our business, financial condition, results of operations and prospects, and could result in a complete loss of your investment. This prospectus and the incorporated documents also contain forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks mentioned above. Risks Related to Our Business We have a history of losses and may never become profitable. In each of our last five years, we have experienced significant net losses and negative cash flows from operations. In 2018, we incurred a net loss of $8.1 million and had negative cash flows from operations of $6.9 million. In 2017, we incurred a net loss of $9.5 million and had negative cash flows from operations of $7.4 million. If we fail to increase our revenues, we may not achieve and may not maintain profitability, we may not realize our investment in infrastructure, and may not meet our expectations or the expectations of financial analysts who report on our stock. If we cannot raise any needed funds, we might be forced to make further substantial reductions in our operating expenses, which could adversely affect our ability to implement our current business plan and ultimately our viability as a company. These factors, as further detailed in Note 2 to our consolidated financial statements appearing in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, raise substantial doubt about our ability to continue as a going concern. Our independent registered public accounting firm has also included in its audit reports an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. We need to raise additional capital. If we are unable to raise capital our ability to implement our current business plan and ultimately our viability as a company could be adversely affected. At June 29, 2019, we had $2.5 million in cash and cash equivalents compared to $5.6 million in cash and cash equivalents at December 31, 2018. On May 23, 2019 we completed a public offering of an aggregate of 1,700,000 shares of our common stock with gross proceeds to us of $1.7 million. The offering was priced at $1.00 per share of common stock. The net proceeds to us from the offering, after deducting the underwriter discounts and fees and our estimated offering expenses, was approximately $1.4 million. The underwriter received warrants to purchase 119,000 shares of common stock, at an exercise price of $1.25, that are subject to a six month lock-up and will expire May 23, 2024. Our current forecast is that our existing cash resources will be sufficient to fund our planned operations into the fourth quarter of 2019. Our cash resources will not be sufficient to fund our business through December 31, 2019. Therefore, unless we can materially grow our revenues from commercial operations during such period, we will need to raise additional capital by the end of the fourth quarter of 2019 to continue to implement our current business plan and maintain the viability of the Company. We believe the key factors to our future liquidity will be our ability to successfully use our expertise and our technology to generate revenues in various ways, including commercial operations, joint ventures and licenses. Because of the expected timing and uncertainty of these factors, we will need to raise funds to meet our working capital needs. Additional financing may not be available on acceptable terms or at all. If we issue additional equity securities to raise funds, the ownership percentage of our existing stockholders would be reduced. New investors may demand rights, preferences or privileges senior to those of existing holders of common stock and could also require that we issue warrants in connection with sales of our stock. If we cannot raise any needed funds to grow our commercial resources, we might be forced to make changes to, or delay aspects of, our business plan which could adversely affect our ability to implement our current business plan and ultimately our viability as a company. Table of Contents Our strategic initiative to develop a new wire platform may not prove to be successful and our decision to focus our research and development efforts on next generation power applications (NGEMs) may not be the most advantageous market opportunity for HTS. We have spent a considerable amount of resources in developing a new wire platform for power applications. In late 2010, we transitioned our research and development efforts to adapting our proprietary HTS material deposition techniques to the production of our HTS Conductus wire. In early 2018, we announced the concentration of our future Conductus wire product development efforts on NGEMs to capitalize on several accelerating energy megatrends. While this refined focus is very synergistic with our program with the Department of Energy (DOE) award for the development of superconducting wire to enable NGEMs other applications for the use of HTS wire may ultimately prove to have been more advantageous to us had we not focused on NGEMs. Substantial technical and business challenges remain before we can have a commercially successful product introduction. We may not be able to overcome these challenges in a timely or cost effective manner, if at all. Such a failure could adversely impact our prospects, liquidity, stock price and carrying value of our fixed assets. There are numerous technological challenges that must be overcome in order for our Conductus wire to become commercially successful and our ability to address such technological challenges may adversely affect our ability to gain customers. Our plan is for commercial production of Conductus wire following completion of qualification orders. We have experienced in the past, and may continue to experience, delays in achieving commercial production of Conductus . Commercialization can be delayed, among other factors, by technological challenges as we seek to improve our products and processes, delays from customer qualification orders and customer analysis of those orders, and decisions made by our customers with respect to post-qualification orders. Many of the factors that affect successful commercialization of our products are affected by third party decisions. Conductus wire is uniquely positioned to address three key technical challenges in the market: high performance, improved economics and commercial-scale capacity. To date, we, along with existing HTS wire manufacturers, have not overcome these challenges to allow for broad commercialization of HTS wire. Customers cannot purchase long-length wire with any reasonable confidence or guaranteed volume; and electric utilities lack confidence in product availability which leads to delays in their deployment roadmap. HTS wire performance is currently below what many customers require. Many power applications require high performance wire with high current carrying capacity, mechanical durability, electrical integrity with low AC losses and minimal splices. Producing high performance HTS wire has proven difficult, especially at volumes required for large scale deployment. The high demand for high performance wire available in very low volume results in a high wire price that narrows the market and limits commercial viability. We have made significant progress in these areas, however delays in our Conductus wire development, as a result of technological challenges or other factors, may result in the introduction or commercial acceptance of our Conductus wire products later than expected. The commercial uses of superconducting wire and superconducting wire related products are limited today, and a broad commercial market may not develop. Even if the technological hurdles are overcome, there is no certainty that a robust commercial market for unproven HTS wire products will come to fruition. To date, commercial use of HTS wire has been limited to small feasibility demonstrations, and these projects are largely subsidized by government authorities. While customer demand is high and market forecasts project large revenue opportunity for superconducting wire in power applications, the market may not develop and superconducting wire might never achieve long term, broad commercialization. In such an event, we would not be able to commercialize our Conductus wire initiative and our business could be adversely impacted. We have limited experience marketing and selling superconducting wire products, and our failure to effectively market and sell our superconducting wire solutions would lower our revenue and cash flow. We have limited experience marketing and selling our Conductus wire. Once our Conductus wire is ready for commercial use, we will have to hire and develop a marketing and sales team to effectively demonstrate the advantages of our product over both more traditional products and competing superconducting products or other adjacent technologies. We may not be successful in our efforts to market this new technology. Table of Contents We expect continued customer pressures to reduce our product pricing which may adversely affect our ability to operate on a commercially viable basis. We expect to face pressure to reduce prices and accordingly, the average selling price of our Conductus wire. We anticipate customer pressure on our product pricing will continue for the foreseeable future. HTS wire is currently being sold at $250/kiloampere-meter (kA-m). At this price, HTS wire represents more than half the cost of the end device. A price reduction is required for long term commercialization. Cryogenic systems, including cryocoolers and cryostats, have been developed but will also need to be cost optimized as HTS wire becomes available in volume. We have plans to further reduce the manufacturing cost of our products, but there is no assurance that our future cost reduction efforts will keep pace with price erosion. We will need to further reduce our manufacturing costs through engineering improvements and economies of scale in production and purchasing in order to achieve adequate gross margins. We may not be able to achieve the required product cost savings at a rate needed to keep pace with competitive pricing pressure. Additionally, we may be forced to discount future orders or may never reach commercial viability. If we fail to reach our cost saving objectives or we are required to offer future discounts, our business may be harmed. We face competition with respect to various aspects of our technology and product development. Our current wireless products compete on the basis of performance, functionality, reliability, pricing, quality, and compliance with industry standards. With respect to our Conductus wire materials, our competition includes American Superconductor (AMSC), SuperPower (Furukawa), SuNam , Bruker, Shanghai Superconductor, BASF, SuperOx, Fujikura, Sumitomo and THEVA. In addition, we currently supply components and license technology to several companies that may eventually decide to manufacture or design their own HTS components, rather than purchasing or licensing our technology. If we are unable to compete successfully against our current or future competitors, then our business and results of operations will be adversely affected. We may not be able to compete effectively against alternative technologies. Our products also compete with a number of alternative approaches and technologies. Some of these alternatives may be more cost effective or offer better performance than our products and we may not succeed in competing against these alternatives. We currently rely on specific technologies and may not successfully adapt to the rapidly changing market environments. We must overcome technical challenges to commercialize our Conductus wire. If we are able to do so, we will need to attain customer acceptance of our Conductus wire, and we cannot ensure that such acceptance will occur. We will have to continue to develop and integrate advances to our core technologies. We will also need to continue to develop and integrate advances in complementary technologies. We cannot guarantee that our development efforts will not be rendered obsolete by research efforts and technological advances made by others. Our business success depends upon our ability to keep pace with advancing technology, including materials, processes and industry standards. We may experience significant fluctuations in sales and operating results from quarter to quarter. Our quarterly results may fluctuate due to a number of factors, including: the lack of any contractual obligation by our customers to purchase their forecasted demand for our products; variations in the timing, cancellation, or rescheduling of customer orders and shipments; and high fixed expenses that may disproportionately impact operating expenses, especially during a quarter with a sales shortfall. If our customers desire to purchase products in excess of the forecasted amounts or in a different product mix, there may not be enough inventory or manufacturing capacity to fill their orders. Due to these and other factors, our past results have limited predictive value as to our Conductus wire initiative. Future revenues and operating results may not meet the expectations of stock analysts and investors. In either case, the price of our common stock could be materially adversely affected. Table of Contents Worldwide economic uncertainty may adversely affect our business, operating results and financial condition. The United States and global economies continue to experience a period of economic and financial uncertainty, which could result in economic volatility having direct and indirect adverse effects on our business, operating results and financial condition in a number of ways. For example, current or potential customers may delay or decrease spending with us, may delay paying us for previously purchased products, or may not pay us at all. In addition, this recent downturn has had, and may continue to have, an unprecedented negative impact on the global credit markets. If we are required to obtain financing in the near term to meet our working capital or other business needs, we may not be able to obtain that financing. Further, even if we are able to obtain the financing we need, it may be on terms that are not favorable to us, with increased financing costs and restrictive covenants. Our reliance on a limited number of suppliers and the long lead time of components for our products could impair our ability to manufacture and deliver our systems on a timely basis. A number of components used in our products are available from a limited number of outside suppliers due to unique designs as well as certain quality and performance requirements. Our reliance on sole or limited source suppliers involves certain risks and uncertainties, many of which are beyond our control. These include the possibility of a shortage or the discontinuation of certain key components. Any reduced availability of these parts or components when required could impair our ability to manufacture and deliver our systems on a timely basis and result in the delay or cancellation of orders, which could harm our business. In addition, the purchase of some of our key components involves long lead times and, in the event of unanticipated increases in demand for our solutions, we may be unable to obtain these components in sufficient quantities to meet our customers requirements. We do not have guaranteed supply arrangements with any of these suppliers, do not maintain an extensive inventory of parts or components and customarily purchase sole or limited source parts and components pursuant to purchase orders. Business disruptions, quality issues, production shortfalls or financial difficulties of a sole or limited source supplier could materially and adversely affect us by increasing product costs, or eliminating or delaying the availability of such parts or components. In such events, our inability to develop alternative sources of supply quickly and on a cost-effective basis could impair our ability to manufacture and deliver our systems on a timely basis and could harm our business. Our reliance on a limited number of suppliers exposes us to quality control issues. Our reliance on certain single-source and limited-source components exposes us to quality control issues if these suppliers experience a failure in their production process or otherwise fail to meet our quality requirements. A failure in single-source or limited-source components or products could force us to repair or replace a product utilizing replacement components. If we cannot obtain comparable replacements or effectively return or redesign our products, we could lose customer orders or incur additional costs, which could have a material adverse effect on our gross margins and results of operations. Our ability to protect our patents and other proprietary rights is uncertain, exposing us to possible losses of competitive advantage. Our efforts to protect our proprietary rights may not succeed in preventing infringement by others or ensure that these rights will provide us with a competitive advantage. Pending patent applications may not result in issued patents and the validity of issued patents may be subject to challenge. Third parties may also be able to design around the patented aspects of the products. Additionally, certain of the issued patents and patent applications are owned jointly with third parties. Because any owner or co-owner of a patent can license its rights under jointly-owned patents or applications, inventions made by us jointly with others are not subject to our exclusive control. Any of these possible events could result in losses of competitive advantage. We depend on specific patents and licenses to technologies, and we will likely need additional technologies in the future that we may not be able to obtain. We utilize technologies under licenses of patents from others for our products. These patents may be subject to challenge, which may result in significant litigation expense (which may or may not be recoverable against future royalty obligations). Additionally, we continually try to develop new products, and, in the course of doing so, we may be required to utilize intellectual property rights owned by others and may seek licenses to do so. Such licenses may not be obtainable on commercially reasonable terms, or at all. It is also possible that we may inadvertently utilize intellectual property rights held by others, which could result in substantial claims. Table of Contents Intellectual property infringement claims against us could materially harm results of operations. Our products incorporate a number of technologies, including high-temperature superconductor technology, technology related to other materials, and electronics technologies. Our patent positions, and that of other companies using high- temperature superconductor technology, is uncertain and there is significant risk that others, including our competitors or potential competitors, have obtained or will obtain patents relating to our products or technologies or products or technologies planned to be introduced by us. We believe that patents may be or have been issued, or applications may be pending, claiming various compositions of matter used in our products. We may need to secure one or more licenses of these patents. There can be no assurances that such licenses could be obtained on commercially reasonable terms, or at all. We may be required to expend significant resources to develop alternatives that would not infringe such patents or to obtain licenses to the related technology. We may not be able to successfully design around these patents or obtain licenses to them and may have to defend ourselves at substantial cost against allegations of infringement of third party patents or other rights to intellectual property. In those circumstances, we could face significant liabilities and also be forced to cease the use of key technology. Other parties may have the right to utilize technology important to our business. We utilize certain intellectual property rights under non-exclusive licenses or have granted to others the right to utilize certain intellectual property rights licensed from a third party. Because we may not have the exclusive rights to utilize such intellectual property, other parties may be able to compete with us, which may harm our business. Because competition for target employees is intense, we may be subject to claims of unfair hiring practices, trade secret misappropriation or other related claims. Companies in HTS wire industries whose employees accept positions with competitors frequently claim that competitors have engaged in unfair hiring practices, trade secret misappropriation or other related claims. We may be subject to such claims in the future as we seek to hire qualified personnel, and such claims may result in material litigation. If this should occur, we could incur substantial costs in defending against these claims, regardless of their merits. Our success depends on the attraction and retention of senior management and technical personnel with relevant expertise. As a competitor in a highly technical market, we depend heavily upon the efforts of our existing senior management and technical teams. The loss of the services of one or more members of these teams could slow product development and commercialization objectives. Due to the specialized nature of our products, we also depend upon our ability to attract and retain qualified technical personnel with substantial industry knowledge and expertise. Competition for qualified personnel is intense, and we may not be able to continue to attract and retain qualified personnel necessary for the development of our business. Regulatory changes could substantially harm our business. Certain regulatory agencies in the United States and other countries set standards for operations within their territories. HTS wire is subject to a regulatory regime, which may become more strictly regulated if the market grows. Any failure or delay in obtaining necessary approvals could harm our business. We may acquire or make investments in companies or technologies that could cause loss of value to stockholders and disruption of business. We may explore opportunities to acquire companies or technologies in the future. Other than the acquisition of Conductus, Inc. in 2002, we have not made any such acquisitions or investments to date and, therefore, our ability as an organization to make acquisitions or investments is unproven. An acquisition entails many risks, any of which could adversely affect our business, including: failure to integrate operations, services and personnel; the price paid may exceed the value eventually realized; Table of Contents loss of share value to existing stockholders as a result of issuing equity securities to finance an acquisition; potential loss of key employees from either our then current business or any acquired business; entering into markets in which we have little or no prior experience; diversion of financial resources and management s attention from other business concerns; assumption of unanticipated liabilities related to the acquired assets; and the business or technologies acquired or invested in may have limited operating histories and may be subjected to many of the same risks to which we are exposed. In addition, future acquisitions may result in potentially dilutive issuances of equity securities, or the incurrence of debt, contingent liabilities or amortization expenses or charges related to goodwill or other intangible assets, any of which could harm our business. As a result, if we fail to properly evaluate and execute acquisitions or investments, our business and prospects may be seriously harmed. If we are unable to implement appropriate controls and procedures to manage our potential growth, we may not be able to successfully offer our products and implement our business plan. Our ability to successfully offer our products and implement our business plan in a rapidly evolving market requires an effective planning and management process. Growth in future operations would place a significant strain on management systems and resources. We expect that we would need to improve our financial and managerial controls, reporting systems and procedures, and would need to expand, train and manage our work force worldwide. Furthermore, we expect that we would be required to manage multiple relationships with various customers and other third parties. Compliance with environmental regulations could be especially costly due to the hazardous materials used in the manufacturing process. In addition, we could incur expenditures related to hazardous material accidents. We are subject to a number of federal, state and local governmental regulations related to the use, storage, discharge and disposal of toxic, volatile or otherwise hazardous chemicals used in our business. Current or future laws and regulations could require substantial expenditures for preventative or remedial action, reduction of chemical exposure, waste treatment or disposal. Any failure to comply with present or future regulations could result in the imposition of fines, suspension of production or interruption of operations. In addition, these regulations could restrict our ability to expand or could require us to acquire costly equipment or incur other significant expense to comply with environmental regulations or to clean up prior discharges. In addition, although we believe that our safety procedures for the handling and disposing of hazardous materials comply with the standards prescribed by state and federal regulations, there is always the risk of accidental contamination or injury from these materials. To date, we have not incurred substantial expenditures for preventive action with respect to hazardous materials or for remedial action with respect to any hazardous materials accident, but the use and disposal of hazardous materials involves risk that we could incur substantial expenditures for such preventive or remedial actions. If such an accident were to occur, we could be held liable for resulting damages. The liability in the event of an accident or the costs of such remedial actions could exceed our resources or otherwise have a material adverse effect on our financial condition, results of operations or cash flows. The reliability of market data included in our public filings is uncertain. Since we operate in a rapidly changing market, we have in the past, and may from time to time in the future, include market data from industry publications and our own internal estimates in some of the documents we file with the Securities and Exchange Commission. The reliability of this data cannot be assured. Industry publications generally state that the information contained in these publications has been obtained from sources believed to be reliable, but that its accuracy and completeness is not guaranteed. Although we believe that the market data used in our filings with the Securities and Exchange Commission is and will be reliable, it has not been independently verified. Similarly, internal company estimates, while believed by us to be reliable, have not been verified by any independent sources. Table of Contents Risks Related to the Offering Our stock price is volatile. The market price of our common stock has been, and is expected to be, subject to significant volatility. The value of our common stock may decline regardless of our operating performance or prospects. Factors affecting our market price include: our perceived prospects and liquidity; progress or any lack of progress (or perceptions related to progress) in timely overcoming the remaining substantial technical and commercial challenges related to our Conductus wire initiative; variations in our operating results and whether we have achieved key business targets; changes in, or our failure to meet, earnings estimates; changes in securities analysts buy/sell recommendations; differences between our reported results and those expected by investors and securities analysts; announcements of new contracts by us or our competitors; market reaction to any acquisitions, joint ventures or strategic investments announced by us or our competitors; general economic, political or stock market conditions; the impact of any reverse stock split we may undertake including to maintain compliance with the rules of our primary national securities exchange; and if we fail to maintain the listing of our common stock with a U.S. national securities exchange, the liquidity of our common stock could be adversely affected. Recent events have caused stock prices for many companies, including ours, to fluctuate in ways unrelated or disproportionate to their operating performance. The general economic, political and stock market conditions that may affect the market price of our common stock are beyond our control. The market price of our common stock at any particular time may not remain the market price in the future. If we fail to maintain the listing of our common stock with a U.S. national securities exchange, the liquidity of our common stock could be adversely affected. Our ability to publicly or privately sell equity securities and the liquidity of our common stock could be adversely affected if we are delisted from the Nasdaq Capital Market or if we are unable to transfer our listing to another stock market. Our common stock is listed for trading on the Nasdaq Capital Market. Nasdaq has adopted a number of continued listing standards that are applicable to our common stock, including a requirement that the bid price of our common stock be at least $1.00 per share. Failure to maintain the minimum bid price can result in the delisting of our common stock from the Nasdaq Capital Market. On July 9, 2019, we received a letter from the Listing Qualifications Department of the Nasdaq Stock Market notifying us that the minimum bid price per share for our common stock fell below $1.00 for a period of 30 consecutive business days and that therefore we did not meet the minimum bid price requirement set forth in Nasdaq Listing Rule 5550(a)(2). The letter also states that we will be provided 180 calendar days, or until January 6, 2020, to regain compliance with the minimum bid price requirement. In accordance with Rule 5810(c)(3)(A), we can regain compliance if at any time during the 180-day period the closing bid price of our common stock is at least $1.00 for a minimum of 10 consecutive business days. If by January 6, 2020, we cannot demonstrate compliance with the Rule 5550(a)(2), we may be eligible for additional time to regain compliance. To qualify for additional time, we will be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the bid price requirement, and we will need to provide written notice of our intention to cure the deficiency during the second compliance period. If we are not eligible for the second compliance period, then the Nasdaq Staff will provide notice that our securities will be subject to delisting. At such time, we may appeal the delisting determination to a Hearings Panel. Table of Contents We intend to monitor the closing bid price of our common stock and may, if appropriate, consider implementing available options to regain compliance with the minimum bid price requirement. These options include completing a reverse stock split of our common stock for the purpose of meeting the closing bid price requirement. On October 2, 2019, we filed a preliminary proxy statement relating to a proposed special meeting of our stockholders for the purpose of considering a proposal to authorize our board of directors to implement a reverse stock split of our common stock. Such authorization has been proposed to provide our board of directors with the discretion to implement (or not implement) such reverse stock split of our outstanding and authorized shares of common stock based on the board s determination of whether it is in the best interests of the Company and its stockholders. Such meeting and any resulting reverse stock split would occur following completion of this offering and the impact of any such proposed reverse stock split is not reflected in the share and per share data in this prospectus. We have previously completed reverse stock splits in connection with complying with our listing requirement and any such option we undertake will not, in of itself, cause us to remain in compliance. We have previously completed reverse stock splits in connection with complying with our listing requirement and any such option we undertake will not, in of itself, cause us to remain in compliance. On July 24, 2018, we effected a reverse stock split of the issued and outstanding shares of our common stock, at a ratio of one share for ten shares (the 2018 Reverse Stock Split ). The 2018 Reverse Stock Split did not change the authorized number of shares or the par value of our common stock. Certain of the information contained in the historical documents incorporated by reference in this prospectus present information on our common stock on a pre-2018 Reverse Stock Split basis. On July 18, 2016, we effected a 1-for-15 reverse stock split of our common stock, or the 2016 Reverse Stock Split. As a result of the 2016 Reverse Stock Split, every fifteen shares of our pre-2016 Reverse Stock Split common stock were combined and reclassified into one share of our common stock. Previously, effective March 11, 2013, we effected a 1-for-12 reverse stock split of our common stock, or the March 2013 Reverse Stock Split. As a result of the March 2013 Reverse Stock Split, every twelve shares of our pre-March 2013 Reverse Stock Split common stock were combined and reclassified into one share of our common stock. If our common stock is delisted by Nasdaq, our common stock may be eligible to trade on the OTC Bulletin Board, OTC QB or another over-the-counter market. Any such alternative would likely result in it being more difficult for us to raise additional capital through the public or private sale of equity securities and for investors to dispose of, or obtain accurate quotations as to the market value of, our common stock. In addition, there can be no assurance that our common stock would be eligible for trading on any such alternative exchange or markets. Management will have broad discretion as to the use of the proceeds from this offering, and we may not use the proceeds effectively. We have not designated the amount of net proceeds from this offering to be used for any particular purpose. Accordingly, our management will have broad discretion as to the application of the net proceeds from this offering and could use them for purposes other than those contemplated at the time of this offering. Our stockholders may not agree with the manner in which our management chooses to allocate and spend the net proceeds. Moreover, our management may use the net proceeds for corporate purposes that may not increase our profitability or market value. We have a significant number of outstanding warrants and options, and future sales of the shares obtained upon exercise of these options or warrants could adversely affect the market price of our common stock. As of June 29, 2019, we had outstanding options exercisable for an aggregate of 140,323 shares of common stock at a weighted average exercise price of $25.29 per share and warrants to purchase up to 3,914,136 shares of our common stock at a weighted average exercise price of $9.89 per share. The holders may sell these shares in the public markets from time to time under a registration statement or under Rule 144, without limitations on the timing, amount or method of sale. If our stock price rises, the holders may exercise their warrants and options and sell a large number of shares. This could cause the market price of our common stock to decline. Our corporate governance structure may prevent our acquisition by another company at a premium over the public trading price of our shares. It is possible that the acquisition of a majority of our outstanding voting stock by another company could result in our stockholders receiving a premium over the public trading price for our shares. Provisions of our restated certificate of incorporation and our amended and restated bylaws, each as amended, and of Delaware corporate law could delay or make more difficult an acquisition of our company by merger, tender offer or proxy contest, even if it would create an immediate benefit to our stockholders. For example, our restated certificate of incorporation does not permit stockholders to act by written consent, and our bylaws generally require ninety days advance notice of any matters to be brought before the stockholders at an annual or special meeting. Table of Contents In addition, our board of directors has the authority to issue up to 2,000,000 shares of preferred stock and to determine the terms, rights and preferences of this preferred stock, including voting rights of those shares, without any further vote or action by the stockholders. At June 29, 2019, we had 328,925 Series A Preferred Stock issued and outstanding and no other preferred stock outstanding. The rights of the holders of common stock may be subordinate to, and adversely affected by, the rights of holders of preferred stock that may be issued in the future. The issuance of preferred stock could also make it more difficult for a third party to acquire a majority of our outstanding voting stock, even at a premium over our public trading price. Furthermore, our certificate of incorporation also provides for a classified board of directors with directors divided into three classes serving staggered terms. These provisions may have the effect of delaying or preventing a change in control of us without action by our stockholders and, therefore, could adversely affect the price of our stock or the possibility of sale of shares to an acquiring person. We do not anticipate declaring any cash dividends on our common stock. We have never declared or paid cash dividends on our common stock and do not plan to pay any cash dividends in the near future. Our current policy is to retain all funds and earnings for use in the operation and expansion of our business. There is no public market for the warrants to purchase shares of our common stock being offered by us in this offering. There is no established public trading market for the warrants being offered in this offering, and we do not expect a market to develop. In addition, we do not intend to apply to list the warrants on any national securities exchange or other nationally recognized trading system, including the Nasdaq Capital Market. Without an active market, the liquidity of the warrants will be limited. You will experience immediate dilution in the book value per share of common stock as a result of this offering. Investors in this offering will experience immediate dilution in their net tangible book value per share to the extent of the difference between the public offering price per share of common stock and the adjusted net tangible book value per share after giving effect to the offering. Our net tangible book value as of June 29, 2019 was approximately $ 2.6 million, or $0.48 per share of our common stock based on 5,502,609 shares outstanding. Assuming that we issue $5,000,000 of Class A Units at an assumed offering price of $0.62 per Class A Unit, the closing price of our common stock on the Nasdaq Capital Market on September 30, 2019, and after deducting placement agents fees and estimated offering expenses payable by us, our net tangible book value as of , 2019, would have been approximately $6.9 million, or $0.51 per share of our common stock. This calculation excludes the proceeds, if any, from the exercise of the warrants issued in this offering. This amount represents an increase in net tangible book value of $0.03 per share to our existing stockholders and an immediate dilution in net tangible book value of $0.11 per share to investors in this offering. See the section titled Dilution below. Additional Risks Related to our Business, Industry and an Investment in our Common Stock For a discussion of additional risks associated with our business, our industry and an investment in our common stock, see the section titled Risk Factors in our most recent Annual Report on Form 10-K, as filed with the SEC on March 29, 2019, as well as the disclosures contained in documents filed by us thereafter pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, which are incorporated by reference into, and deemed to be a part of, this prospectus. Table of Contents

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+ RISK FACTORS An investment in our Common Stock involves a significant degree of risk. You should not invest in our Common Stock unless you can afford to lose your entire investment. You should consider carefully the following risk factors and other information in this prospectus before deciding to invest in our Common Stock. Risks Related to this Offering We are dependent upon the proceeds from various offerings to provide funds to develop our business. There are no assurances we will raise sufficient capital to enable us to continue to develop our business. While this offering will give us capital to implement our immediate strategies we cannot guarantee prospective investors that we will ever generate any significant revenues or report profitable operations, or that our revenues will not decline in future periods. Until we begin making enough cash flow from our operations we are dependent upon the proceeds from various offerings to provide funds for the development of our business. If we cannot raise sufficient funds, we will have significantly less funds available to us to implement our business strategy, and our ability to generate any revenues may be adversely affected. We do not have any firm commitments to provide capital and we anticipate that we will have certain difficulties raising capital given the development stage of our company, and the lack of a public market for our securities. Accordingly, we cannot assure you that additional working capital as needed will be available to us upon terms acceptable to us. If we do not raise funds as needed, our ability to continue to implement our business model is in jeopardy and we may never be able to achieve profitable operations. In that event, our ability to continue as a going concern is in jeopardy and you could lose all of your investment in our company. Our management has full discretion regarding the use of proceeds from this offering. We anticipate that the net proceeds from this offering will be used the purposes set forth under "Use of Proceeds" appearing elsewhere in this prospectus. We reserve the right, however, to use the net proceeds from this offering for other purposes not presently contemplated which we deem to be in our best interests in order to address changed circumstances and opportunities. As a result of the foregoing, investors in the shares of Common Stock offered hereby will be entrusting their funds to our management, upon whose judgment and discretion the investors must depend. There may not be enough liquidity in the market to sell the shares being registered in this offering. Our common stock is currently listed on OTCQB. Over the last thirty (30) day period from January 10, 2019, the average daily volume was 11,605 shares traded (as reported on OTC Markets), which may not be adequate to sell any significant number of shares if you wish to sell a significant number of your shares that you may buy through this offering due to that lack of liquidity in our stock in the market. There is no assurance that a more liquid market for our shares would ever develop and if so you may stand to lose your total investment you make buying our stock. Risks Related to Our Business Our auditors have issued a going concern opinion with respect to our consolidated financial statements, although our financial statements are prepared using generally accepted accounting principles, assuming the Company will continue as a going concern. Inherent risks currently exist in this industry as a result of the determination by many nationally-chartered banks that they would be operating outside the federal laws by accepting deposits from industrial hemp oil producers. Many states have legalized the growing, production, sale, and consumption of various industrial hemp related products, but the federal government has continued to take the position that such activities are not legal. However, the federal government has taken the posture for years that it will defer to the states in those matters insofar as certain products, such as those containing a high concentration of THC, are not transported across state lines. While the federal government has generally turned a blind eye to these matters in favor of state legislation, it nonetheless sends confusing signals to the industry. As such, many nationally-chartered banks fear prosecution under money-laundering or other statutes, relegating some businesses to maintain large sums of cash on hand, even meeting payrolls and accounts payable obligations with cash rather than checks. As a result, those businesses are placed at high risk of internal and external theft and crimes relating to the lack of controls and security afforded by transactional banking. The Company is currently utilizing credit unions for its deposit needs, but this still creates risks when the proceeds at diverse production locations, are often themselves in cash due to the same issues and cannot be deposited in nearby accessible depositories. The Company has acquired an armored vehicle for use in the transport of cash and industrial hemp products but believes those risks will not be minimized until national depository institutions allow industrial hemp-related businesses to utilize their facilities. Table of Contents Because we have limited operating history, it is difficult to evaluate our business. On January 15, 2016, the Company acquired certain assets that it will utilize in revenue-producing operations under two new operating subsidiaries related to the medicinal industrial hemp industry. As a result of our limited operating history in those businesses, you have very little operating and financial data about us upon which to base an evaluation. You should consider our prospects in light of the risks, expenses and difficulties we may encounter, including those frequently encountered by new companies. If we are unable to execute our plans and grow our business, either as a result of the risks identified in this section or for any other reason, this failure would have a material adverse effect on our results of operations, business prospects, and financial condition. The medicinal cannabis and industrial hemp industry faces very uncertain regulation in the light of the continuing deregulation of industrial hemp products in many states, either as high-CBD/low-THC products, or as high-THC products, but the continuing regulation of the industrial hemp industry by the federal government. While the federal government has for several years chosen to not intervene in the industrial hemp business conducted legally within the states that have legislated such activities, there is nonetheless the potential that the federal government may at any time chose to begin enforcing its rules against the manufacturing, possession, or use of industrial hemp-based products. 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. In the event the federal government were to tighten its regulation of the industry, the Company would likely suffer substantial losses. In the event the federal government were to loosen or change its rules or laws in favor of the industry, the Company would have an opportunity to benefit substantially if it were properly positioned to take advantage of the new opportunities. As such, the purchase of our securities is a purchase of an interest in what should be considered as a high-risk venture or in a new or "start-up" venture with all the unforeseen costs, expenses, problems, and difficulties to which such ventures are subject. We also plan to grow through acquisitions. We also plan to grow through expansion of our new operations, creation of new businesses, acquisitions, and/or mergers, and investors have little current basis to evaluate the possible merits or risks of the target businesses operations or our ability to identify and integrate acquired operations into our company. Because we intend to develop and expand our business at least in part through selective acquisitions of or mergers with other businesses, there are significant risks that we may not be successful. We may not be able to identify, acquire or profitably manage additional companies or assets or successfully integrate such additional companies or assets into our Company without substantial costs, delays or other problems. In addition, companies we may acquire may not be profitable at the time of their acquisition or may not achieve levels of profitability that would justify our investment. Acquisitions may involve a number of special risks, including but not limited to: adverse short-term effects on our reported operating results, diversion of management s attention, dependence on hiring, training, and retaining key personnel, risks associated with unanticipated problems or legal liabilities, amortization of acquired intangible assets, some or all of which could reflect poorly on our operating results and financial reports, implementation or remediation of controls, procedures and policies appropriate for a public company at companies that, prior to the acquisition, lacked these controls, procedures and policies; and, incursion of debt to make acquisitions or for other operating uses. To the extent we complete a business combination with a financially unstable company or an entity in its development stage, we may be affected by numerous risks inherent in the business operations of those entities. Although our management will endeavor to evaluate the risks inherent in a particular target business, we cannot assure you that we will properly ascertain or assess all of the significant risk factors. We may acquire a business in what may be considered a mature industry in which single-digit or low double-digit growth may occur. Most growth for our Company would, accordingly, occur largely through acquisitions. To the extent that competitors are also seeking to grow through acquisitions, we could encounter competition for those acquisitions or a generally increasing price to acquire going concerns. Table of Contents A part of the Company s strategy is to establish revenue through the acquisition of or merger with additional companies or operations. There can be no assurance that the Company will be able to identify, acquire, combine with, or profitably manage additional companies or successfully integrate the operations of additional companies into those of the Company without encountering substantial costs, delays or other problems. In addition, there can be no assurance that companies acquired in the future will achieve or maintain profitability that justify liabilities that could materially adversely affect the Company s results of operations or financial condition. The Company may compete for acquisition, merger, and expansion opportunities with companies that have greater resources than the Company. There can be no assurance that suitable acquisition or merger candidates will be available, that purchase terms or financing for acquisitions or mergers will be obtainable on terms acceptable to the Company, that acquisitions or mergers can be consummated, or that acquired businesses can be integrated successfully and profitability into the Company s operations. Further, the Company s results of operations in fiscal quarters immediately following a material acquisition or merger could be materially adversely affected while the Company integrates the acquired business into its existing structure. The Company will attempt to acquire or merge with business entities that are going and functioning concerns with a trailing history of profitability but may acquire or merge with certain businesses that have either been unprofitable, have had inconsistent profitability prior to their acquisition or combination therewith, or that have had no operating history. An inability of the Company to improve the profitability of these acquired businesses could have a material adverse effect on the Company. Finally, the Company s acquisition and merger strategy places significant demands on the Company s resources and there can be no assurance that the Company s management and operational systems and structure can be expanded to effectively support the Company s acquisition strategy. If the Company is unable to successfully implement its acquisition and merger strategy, this inability could have a material adverse effect on the Company s business, results of operations, or financial condition. The Company may face the opportunity to enhance shareholder value by being acquired by another company. Upon any acquisition of the Company, the Company would be subject to various risks, including the replacement of its management by persons currently unknown. There can also be no assurance that, if acquired, new management will be successfully integrated or can profitably manage the Company. In addition, any acquisition or merger of or by the Company may involve immediate dilution to existing shareholders of the Company. No assurances can be given that the Company will be able to or desire to be acquired or be able to acquire or merge with additional companies. Need for additional financing. During the year ended December 31, 2017, we generated revenues of $478,231 and incurred a net loss of $1,833,728. We have a cumulative deficit of $4,953,946 at December 31, 2017. The Company does not have adequate capital or resources to fund its operations and other capital needs for the next six months without new and expanding revenue sources or additional capital infusion, and there can be no assurance that such funds will become available in amounts sufficient to meet the obligations of our business. The Company may require additional amounts of capital for its future expansion and working capital, possibly from private placements of its common stock or borrowing, but there can be no assurance that such financing will be available, or that such financing will be available on acceptable terms. On February 14, 2019 (the "Closing Date"), the Company entered into the CSPA with Triton Funds LP, whereby, upon the terms and subject to the conditions thereof, Triton is committed to purchase shares of the Company s common stock at an aggregate price of up to $1,000,000 (the "Total Commitment Amount") over the course of the CSPA. The actual amount of proceeds the Company receives pursuant to each Purchase Notice (each, the "Purchase Notice") is to be determined by multiplying the Purchase Notice Share amount requested by the applicable purchase price. The purchase price for each of the Purchase Shares equals 85% of the average of two lowest closing prices of our common stock five days prior to the Closing Date. Upon the terms and conditions set forth (in the CSPA), Triton shall have the right, but not the obligation, to direct the Company, by its delivery to the Company of a Purchase Notice from time to time, to purchase Purchase Notice Shares provided that the amount of Purchase Notice Shares shall not exceed the Beneficial Ownership Limitation (9.99%) set forth in the CSPA. At any time and from time to time during the Commitment Period, except as provided in the CSPA, Triton may deliver a Purchase Notice to Company, subject to satisfaction of the conditions set forth in Section 7.2 (of the CSPA) and otherwise as provided in the CSPA. The Company shall deliver the Purchase Notice Shares as DWAC Shares to Triton immediately upon receipt of the Purchase Notice. Table of Contents If, by the day after the Expiration Date, Triton has invested less than the Commitment Amount, pursuant to this Agreement, Triton shall within one (1) Business Day transfer to the Company the amount representing the difference between the Commitment Amount and the amount Triton has already paid to the Company. The Purchase Price for this amount shall be 85% of the average of the Two lowest closing prices of the Common Stock for the previous five Business Days, (ii) the Company shall immediately deliver the Purchase Notice Shares as DWAC Shares to Triton, and (iii) Triton shall immediately wire to the Company the Purchase Price multiplied by the lessor of the Beneficial Ownership Limitation or the remaining Commitment Amount. We anticipate we will need approximately $5,000,000 to successfully carry out our business plans, which include legal fees and purchase of assets, including real estate, and build out of our future manufacturing facility. Our ability to utilize the funds under this agreement depends upon the volume of our shares. At the present time, our stock does not trade at the level of volume that enables us to draw funds out of this agreement. If the trading volume remains low, it is not likely that we will be able to access the funds provided by this agreement. We cannot forecast the likelihood that we will have access to the full amount available to us under this arrangement Dependence on key personnel. Our future performance depends in significant part upon the continued service of our Chief Executive Officer, Richard K. Pertile. The loss of Mr. Pertile s services could have a material adverse effect on our business, prospects, financial condition and results of operations. The Company does not presently maintain key man life insurance on Mr. Pertile but may obtain such insurance at the discretion of its board of directors for such term as it may deem suitable or desirable. Our future success may depend on our ability to attract and retain highly qualified technical, sales and managerial personnel. The competition for such personnel can be intense, and there can be no assurance that we can attract, assimilate or retain highly qualified technical, sales and managerial personnel for favorable compensations in the future. Our industry is subject to frequent and rapidly changing technologies and any failure of the Company to adapt to and compete with such changes could have a material adverse effect on our business, results of operations and financial condition. Technology, particularly the ability to (i) stay abreast of and ahead of current production oil extraction technologies; (ii) successfully create and promote new products related to our industry; (iii) continue to take a leading role in maintenance and distribution of our planned GeoTraking technology as it relates to RFID tracking from seed to sale, HIPAA compliance across the board including in its proprietary PoS systems, and otherwise; and (iv) use the Internet to conduct business and allow several management functions, is characterized by rapidly changing technology, evolving industry standards, frequent new product and service announcements, introductions and enhancements, and changing customer demands. Our future success will to some degree depend on our ability to adapt to rapidly changing technologies, our ability to adapt its solutions to meet evolving industry standards and our ability to improve continually the performance, features and reliability of its solutions. The failure of the Company to adapt successfully to such changes in a timely manner could have a material adverse effect on the Company s business, results of operations and financial condition. Furthermore, there can be no assurance that the Company will not experience difficulties that could delay or prevent the successful implementation of solutions, or that any new solutions or enhancements to existing solutions will adequately meet the requirements of its current and prospective customers and achieve any degree of significant market acceptance. If the Company is unable, for technological or other reasons, to develop and introduce new solutions or enhancements to existing solutions in a timely manner or in response to changing market conditions or customer requirements, or if its solutions or enhancements do not achieve a significant degree of market acceptance, the Company s business, results of operations and financial condition could be materially and adversely affected. Table of Contents The industrial hemp industry is a highly competitive business with many participants worldwide and there can be no assurances that we will be able to compete with other entities domestic and foreign that may be subject to lower regulatory and business costs in this industry. Any industry served by the Company is likely to be highly competitive across the entire United States and the rest of the world. In particular, the industrial hemp industry, being the impetus of all the Company s attention at this juncture, is very highly competitive and has drawn thousands of competing entities. While the Company believes its technology, programs, and plans place it in a posture to compete at the highest levels, the sheer numbers of competitors must be recognized. The Company has elected to devote the majority of its efforts on production and sales of its products and services within the continental United States but may institute operations in diverse countries. Even so, the Company must be considered as currently competing with other companies in diverse countries than can potentially produce and sell competitive products at lower prices. While the Company believes that there are other hurdles for those foreign entities to overcome, including the high cost of international shipping to U.S. buyers, we believe that they nonetheless can compete with us in our markets. We will potentially compete with a variety of companies, both domestic and international, and as such will be subject to various levels of competition. There is no assurance the Company will be able to adhere to its plans or to engage in any acquisitions or mergers at all. The Company will consider fielding opportunities to buy, sell or distribute its products in other countries. Control. Our Chief Executive Officer and Chairman of the Board of Directors owns or controls a significant percentage of our outstanding voting securities which could reduce the ability of minority shareholders to effect certain corporate actions. As of January 15, 2016, in subsequent actions related to the acquisition of assets of the MariJ Group of companies by the Company, our Chief Executive Officer and Chairman of the Board of Directors, Richard K. Pertile, was issued 1,014,000 new Common shares of the Company in exchange for his interests in the acquired entities. In addition, he was granted, from the CEO and Chairman of the Board of the Company until that date, Steven L. Sample, the right of first refusal to purchase 2,500,000 shares of Mr. Sample s Common stock of the Company in a window between April 4 and May 4, 2019 and was also given a proxy to vote those shares in the interim. As such, following those transactions, Mr. Pertile owned 6.57% of the Company s issued and outstanding common stock and controlled through the proxy 2,500,000 additional votes, or 16.20% of the total issued and outstanding voting power of the Company for a combined 3,514,000 votes, or 22.77% of the total. As a result, he currently possesses significant influence and can elect a majority of our board of directors and authorize or prevent proposed significant corporate transactions. His effective control may also have the effect of delaying or preventing a future change in control, impeding a merger, consolidation, takeover or other business combination or discourage a potential acquirer from making a tender offer. As of the same date, Mr. Sample, the outgoing CEO and Chairman of the Company, continued to control the dispositive voting power of his remaining personal shares of the Company, after accounting for those votes given to Mr. Pertile by proxy, of 3,015,479 shares, or 19.54% of all issued and outstanding votes of the Company. In the event Mr. Sample were to combine his votes on any issue with the votes held by Mr. Pertile, they would jointly possess 42.31% of the voting power of the Company, allowing them significant influence that could elect a majority of our board of directors and authorize or prevent proposed significant corporate transactions. As of that same date, all officers and directors of the Company owned a combined total 6,809,979 shares representing 44.26% of the Company s issued and outstanding common stock and voting power. Based upon the Company s current business plan, it is anticipated that Mr. Pertile will continue to have substantial influence over, if not effective control over the Company s operations in the near future, including the election of a majority of its board of directors, the issuance of additional shares of equity securities, and other matters of corporate governance, perhaps even after some potential subsequent issuances by the Company of new common shares for capital raising activities, acquisitions, or merger activities. We may, in the future, issue additional shares of common stock, which would reduce investors percentage of ownership and may dilute our share value. Our Articles of Incorporation, as amended, authorize the issuance of 150,000,000 shares of common stock. The future issuance of common stock may result in substantial dilution in the percentage of our common stock held by our then existing shareholders. We may value any common stock issued in the future on an arbitrary basis. The issuance of common stock for future services or acquisitions or other corporate actions may have the effect of diluting the value of the shares held by our investors and might have an adverse effect on any trading market for our common stock. Table of Contents We may not be able to acquire other businesses or assets to implement our growth plans and our inability to successfully manage our anticipated growth effectively could have a material adverse effect on our future business, results of operations and financial condition. The Company is continually seeking to identify and acquire viable businesses. As a result, the Company must manage relationships with a growing number of third parties as it seeks to accommodate this goal. The Company s management, personnel, systems, procedures and controls may not be adequate to support the Company s future operations. The Company s ability to manage its growth effectively will require it to continue to expand its operating and financial procedures and controls, to replace or upgrade its operational, financial and management information systems and to attract, train, motivate, manage and retain key employees. If the Company s executives are unable to manage growth effectively, the Company s business, results of operations and financial condition could be materially adversely affected. If successful in acquiring or combining with other operations, the Company anticipates it may inherit a substantial portion of the staff necessary to operate the new entities, but there is no assurance that will happen, or that if it does happen, that the staff will remain employed by the Company for any period of time. We may find that some of the personnel and management of any acquisition target(s) may not be suitable for continued employment, while other suitable candidates may elect to discontinue their employment or affiliation with the Company for various reasons. This can create a burden on the Company s management as it seeks to fill key positions. Failure of the Company to do so in a timely manner can result in disruption of operations, loss of revenues, and an attendant reduction in profits or even substantial losses. We anticipate there will be various risks associated with expansion and there can be no assurances that we will be able to successfully manage those risks as we expand our line of goods and services into other markets. The Company desires to start, acquire or combine with other businesses, perhaps in diverse locations and markets. To date, the Company does not have substantial experience in developing services on a regional or national scale. There can be no assurance that the Company will be able to deploy successfully its goods or services in those markets. There are certain risks inherent in doing business in several diverse markets, such as; unexpected changes in regulatory requirements, potentially adverse tax consequences, local restrictions, controls relating to inter-company communications and technology, difficulties in staffing and managing distant operations, fluctuations in manpower availability, effects of local competition, weather and climactic trends, and customer preferences, any of which could have a material adverse effect on the success of the Company s operations and, consequently, on the Company s business, results of operations, and financial condition. Check, credit card, and other fraud. Our business could be harmed if we experience significant credit, wire transfer, draft, check, credit card, or other fraud. If we fail to adequately control fraudulent transactions, our revenues and results of operations could be harmed. The Company may attempt to obtain insurance as partial protections from such potential losses, but even while the Company s exposure to loss in this event may be limited by the purchase of any such insurance, losses could nonetheless occur. Any losses sustained as a result of fraud or fraudulent activity would adversely affect the Company s business and results of operations, and its financial condition could be materially adversely affected. We may be subject to various liability claims from consumers, regulators and other participants in our industry and there can be no assurances that our liability insurance will be sufficient to cover any claim that may arise. The Company may face costly liability claims by consumers or other businesses. Any claim of liability by a client, employee, consumer or other entity against us, regardless of merit, could be costly financially and could divert the attention of our management. It could also create negative publicity, which would harm our business. Although we maintain certain forms of liability insurance, it may not provide protections in the event of certain liability claims or may not be sufficient to cover a covered claim if one is made. The Company may not be able to attain profitability without additional funding, which may be unavailable. The Company has limited capital resources. Unless the Company begins to generate sufficient revenues to finance operations as a going concern, the Company may experience liquidity and solvency problems. Such liquidity and solvency problems may force the Company to cease operations if additional financing is not available. No known alternative resources of funds are available in the event we do not generate sufficient funds from operations. Table of Contents Our lack of history in our current industry makes evaluating our business difficult. We have a limited operating history in our current industry and we may not sustain profitability in the future. To sustain profitability, we must: develop and identify new clients in need of our product; economically increase production output; compete with larger, more established competitors in our industry; maintain and enhance our brand recognition; and adapt to meet changes in our markets and competitive developments. We may not be successful in accomplishing these objectives. Further, our lack of operating history makes it difficult to evaluate our business and prospects. Our prospects must be considered in light of the risks, uncertainties, expenses and difficulties frequently encountered by companies in their early stages of development, particularly companies in highly competitive industries. The historical information in this report may not be indicative of our future financial condition and future performance. For example, we expect that our future annual growth rate in revenues will be moderate and likely be less than the growth rates experienced in the early part of our history. The industrial hemp industry is subject to substantial governmental regulation any change of electorate and/or legislative attitude toward the industry could result in the implementation of statutes, rules and/or regulations that may have a material adverse effect on the entirety of our business. We will seek to implement our acquisition strategy in certain industries that may have unknown risks due to governmental regulation. The Company, through its new subsidiaries, will operate in the medicinal industrial hemp sector. In order to help our shareholders better understand the products it intends to employ in its business plans, we have provided certain explanations and definitions below. The Company will initially extract and process a derivative of the industrial hemp plant known as CBD oil. CBD is one of dozens of compounds found in industrial hemp plants that belong to a class called cannabinoids. Of these compounds, CBD and THC are usually present in the highest concentrations and have the most common practical applications in the medical field. The Company s subsidiaries currently give most attention to high-CBD/low-THC products. Hemp, unlike most modern-day medicine, contains a wide range of chemical compounds. Many other non-cannabinoid compounds are produced by the plant, but these are the compounds are most addressed as having a use by the medical community. Terpenes, the molecules responsible for industrial hemp s smell, have been shown to block some cannabinoid receptor sites in the brain while promoting cannabinoid binding in others. As a result, terpenes are believed to affect many aspects of how the brain takes in THC or CBD, while offering various therapeutic benefits of their own. In fact, while THC has gotten most of the attention, studies suggest many of the compounds in industrial hemp work together to produce a synergy of effects. This is known as the "entourage effect." CBD and THC levels tend to vary between different strains and varieties of industrial hemp. By using selective breeding techniques, certain growers have managed to create varieties with high levels of CBD and THC, being the varieties currently employed for oil production by the Company s MariJ Pharmaceuticals subsidiary. That subsidiary also specialized in extracting oil from certified organic plants, rather than the standard non-organic varieties. Unlike THC, CBD does not cause a high or hallucinogenic effect. The reason why CBD is non-psychoactive is due to its lack of affinity for CB1 receptors, such as are found in high concentrations in the brain, and which become the channels through which THC is able to port its psychoactive effects. The medicinal industrial hemp industry faces very uncertain regulation in the light of the continuing deregulation of industrial hemp products in many states, either as high-CBD/low-THC products, or as high-THC products, or the continuing regulation of the industrial hemp industry by the federal government. While the federal government has for several years chosen to not intervene in the industrial hemp business conducted legally within the states that have legislated such activities, there is nonetheless the potential that the federal government may at any time chose to begin enforcing its rules against the manufacturing, possession, or use of industrial hemp-based products. Table of Contents Any new legislation or regulation, or the application of laws or regulations from jurisdictions whose laws do not currently apply to the Company s business could have a material adverse effect on the Company s business, results of operations and financial condition. Current federal regulations adverse to the medicinal hemp and industrial hemp industries are generally contradictory to legislated approval of that industry in a number of states. The disparity in those divergent governmental views has and will continue to lead to conflicts and confusions in the perceived legalities on many operations related to the industry unless they ultimately come to congruence. Inherent risks currently exist in this industry as a result of the determination by many nationally-chartered banks that they would be operating outside federal regulations by accepting deposits from industrial hemp oil producers. Governmental regulation in this area may adversely affect the Company s operations or may eliminate this barrier to normalization of the capital controls function. A majority of the states that have legalized the growing, production, and use of industrial hemp oil have legislated the use of high-CBD content and low-THC content oils. As a result, and in keeping with regulations and laws in those venues, the Company, through its subsidiaries, intends to concentrate on those products unless and until the laws change to facilitate a wider range of grow and production opportunities. The Company does have the technology and capability of extracting high-THC oils in those venues that do allow it and will provide services to growers in those areas as contracted. The Company, as with most other companies, is subject to various business regulations, permits and licenses. The Company, through its new subsidiaries, has enter a new business realm that may entail considerably more regulation than its previous endeavors, and faces uncertainties related to federal laws that are in conflict with state laws in which the Company s subsidiaries now operate or may operate in the future. It is possible that the federal government will ease its regulations relating to the industrial hemp industry, or even legalize the operation of and transporting of products resulting from business operations in that sector. However, it is also possible that the government may decide to harden its stance against industrial hemp related products. In the event the federal government takes a harder stance against industrial hemp-related products, the Company could suffer impairment of its operations and could sustain substantial losses. The Company cannot foresee what direction the federal government may take in these matters, if any, but sees a continuing evidence that various states are legalizing industrial hemp products, both high-CBD/low-THC compounds as well as compounds containing high levels of THC. The Company believes that it has complied with appropriate state requirements for operations and believes it has obtained all permits necessary to function under the current state regulations. If we fail to effectively manage our growth, our business, brand and reputation, results of operations and financial condition may be adversely affected. We may experience a rapid growth in operations, which may place significant demands on our management team and our operational and financial infrastructure. As we continue to grow, we must effectively identify, integrate, develop and motivate new employees, and maintain the beneficial aspects of our corporate culture. To attract top talent, we believe we will have to offer attractive compensation packages. The risks of over-hiring or over compensating and the challenges of integrating a rapidly growing employee base may impact profitability. Additionally, if we do not effectively manage our growth, the quality of our services could suffer, which could adversely affect our business, brand and reputation, results of operations and financial condition. If operational, technology and infrastructure improvements are not implemented successfully, our ability to manage our growth will be impaired and we may have to make significant additional expenditures to address these issues. To effectively manage our growth, we will need to continue to improve our operational, financial and management controls and our reporting systems and procedures. This will require that we refine our information technology systems to maintain effective online services and enhance information and communication systems to ensure that our employees effectively communicate with each other and our growing base of customers. These system enhancements and improvements will require significant incremental and ongoing capital expenditures and allocation of valuable management and employee resources. If we fail to implement these improvements and maintenance programs effectively, our ability to manage our expected growth and comply with the rules and regulations that are applicable to publicly reporting companies will be impaired and we may incur additional expenses. Table of Contents We may be subject to regulatory inquiries, claims, suits, or prosecutions that may impact our profitability. Any failure or perceived failure by us to comply with applicable laws and regulations may subject us to regulatory inquiries, claims, suits and prosecutions. We can give no assurance that we will prevail in such regulatory inquiries, claims, suits and prosecutions on commercially reasonable terms or at all. Responding to, defending and/or settling regulatory inquiries, claims, suits and prosecutions may be time-consuming and divert management and financial resources or have other adverse effects on our business. A negative outcome in any of these proceedings may result in changes to or discontinuance of some of our services, potential liabilities or additional costs that could have a material adverse effect on our business, results of operations, financial condition and future prospects. Expanding our product offerings or number of offices may not be profitable. We may choose to develop new products to offer. Developing new offerings involves inherent risks, including: our inability to estimate demand for the new offerings; our inability to perfect the new products; our ability to locate and identify new buyers for those products; competition from more established market participants; and a lack of market understanding. In addition, expanding into new geographic areas and/or expanding current service offerings is challenging and may require integrating new employees into our culture as well as assessing the demand in the applicable market. Risks Related To Our Common Stock. Risks of low priced stocks. Following its initial public offering of its common stock in 1996, the Company s shares were originally traded on the NASDAQ Exchange into 2000 as Gibbs Construction, Inc. under the trading symbol GBSE. Gibbs encountered severe financial difficulties in 2000, after which it was moved from the NASDAQ Capital Markets to the OTC Pink Sheets. Following the resurrection of the Company s operations in 2007 through the intervention and assistance of the Company s CEO, Mr. Sample, its stock currently trades on the OTCQB exchange under the trading symbol ACCA. Most of the Company s issued and outstanding common shares continue to be restricted shares resulting in a small "float". For that and other reasons the Company s securities have been thinly traded, and while a trading market for the Company s common stock could develop further with its current or new operations and the further release of restrictions on registered shares, there can be no assurance that it will do so. Following the acquisition of the MariJ Group of companies on January 15, 2016, the Company saw immediate and continuing increased activity in the trading of its stock, with trading volumes exceeding any for at least the past ten years. The Securities and Exchange Commission (the "SEC" or "Commission") has adopted regulations which define a "penny stock" to be any equity security, such as those of the Company, that has a market price of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. In the event the Company determined to offer its common stock for sale or elected to utilize its common stock in an acquisition of merger transaction, it would be required to advise the potential purchasers or parties to any such acquisition or merger transaction of the risks of penny stocks. For any transaction involving a penny stock, unless exempt, the rules require the delivery, prior to any transaction involving a penny stock by a retail customer, of a disclosure schedule prepared by the Securities and Exchange commission relating to the penny stock market. Disclosure is also required to be made about commissions payable to both the broker/dealer and the registered representative and current quotations for the securities. Accordingly, market makers may be less inclined to participate in marketing the Company s securities, which may have an adverse impact upon the liquidity of the Company s securities. Table of Contents If the Company were successful in identifying a new business opportunity and/or identifying an acquisition or merger target, became successful in actually launching a new business or acquiring or merging with any such target, and was successful in bringing profitable operations to the Company, it would intend to seek to meet the new listing requirements of the NASDAQ Capital market and attempt to return to that Exchange, which listing requirements include minimal capitalization, share price, and other benchmark requirements. There is no assurance the Company can successfully identify any suitable new business opportunity, acquisition or merger candidate, or if successful in identifying a new business opportunity or merger/acquisition candidate, that it can be successful in developing a new business or completing any acquisition or merger, or if successful in developing a new business or completing any acquisition or merger that the Company could be successful in meeting the new listing requirements of the NASDAQ, or if successful in meeting those requirements, that the NASDAQ would accept the Company as a member, or that if the Company were successful in achieving a listing on the NASDAQ exchange that its share values would improve. Any attempt to return to the NASDAQ Exchange, even if the Company were successful in meeting the requirements to do so, could take as long as two years or more to complete. We are subject to penny stock regulations and restrictions and you may have difficulty selling shares of our common stock. The SEC has adopted regulations which generally define so-called "penny stocks" to be an equity security that has a market price less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exemptions. Our common stock is therefore considered a "penny stock", and we are subject to Rule 15g-9 under the Exchange Act, or the "Penny Stock Rule". This rule imposes additional sales practice requirements on broker-dealers that sell such securities to persons other than established customers. For transactions covered by Rule 15g-9, a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser s written consent to the transaction prior to sale. As a result, this rule may affect the ability of broker-dealers to sell our securities and may affect the ability of purchasers to sell any of our securities in the secondary market. For any transaction involving a penny stock, unless exempt, the rules require delivery, prior to any transaction in a penny stock, of a disclosure schedule prepared by the SEC relating to the penny stock market. Disclosure is also required to be made about sales commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements are required to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stock. We have no history of paying any dividends and there can be no assurances that there will be any future payment of dividends. Should the Company acquire additional operations, and should the operations of the Company become profitable, it is likely that the Company would retain much or all of its earnings in order to finance future growth and expansion. Therefore, the Company does not presently intend to pay dividends, and it is not likely that any dividends will be paid in the foreseeable future. We may not be able to generate sufficient cash flows or otherwise raise outside capital to meet our potential future capital needs. The Company may not be successful in generating sufficient cash from its new operations or in raising capital in sufficient amounts or on acceptable terms to meet its capital needs. The failure to generate sufficient cash flows or to raise sufficient funds may require the Company to delay or abandon some or all of its development and expansion plans or otherwise forego market opportunities and may make it difficult for the Company to respond to competitive pressures, any of which could have a material adverse effect on the Company s business, results of operations, and financial condition. While the Company may seek to raise capital through the offering of common stock, there can be no assurance that it will be successful in doing so, or if successful in raising capital that the proceeds in any such offering will be sufficient to permit the Company to implement its proposed business plan, or that any assumptions relating to the implementation of such plan will prove to be accurate. To the extent that the proceeds of any such offering are not sufficient to enable the Company to generate sufficient revenues or achieve profitable operations, the inability to obtain additional financing will have a material adverse effect on the Company. There can be no assurance that any such financing will be available to the Company on commercially reasonable terms, or at all, or that the Company will be successful in finding new operations. Table of Contents Our ability to implement our current business plan is dependent on our raising additional working capital and there can be no assurances that such capital can be raise either through business operations or outside financing. The Company currently does not have sufficient working capital to pursue our business plan in its entirety as described herein. Our ability to implement our business plan will depend on our ability to obtain sufficient working capital and to execute its business plans. No assurance can be given that we will be able to obtain additional capital, or, if available, that such capital will be available at terms acceptable to us, or that we will be able to generate profit from operations, or if profits are generated, that they will be sufficient to carry out our business plans, or that the plans will not be modified. Our CSPA agreement with Triton could result in the issuance of our common stock at a deep discount to the current price at the time of such issuance and may result in substantial dilution to our shareholders. On February 14, 2019 (the "Closing Date"), the Company entered into the CSPA with Triton Fund LP, whereby, upon the terms and subject to the conditions thereof, Triton is committed to purchase shares of the Company s common stock (the "Purchase Shares") at an aggregate price of up to $1,000,000 (the "Total Commitment Amount") over the course of the CSPA. The actual amount of proceeds the Company receives pursuant to each Purchase Notice (each, the "Purchase Notice") is to be determined by multiplying the Purchase Notice Share amount requested by the applicable purchase price. The purchase price for each of the Purchase Shares equals 85% of the average of two lowest closing prices of our common stock five days prior to the Closing Date. Upon the terms and conditions set forth (in the CSPA), Triton shall have the right, but not the obligation, to direct the Company, by its delivery to the Company of a Purchase Notice from time to time, to purchase Purchase Notice Shares provided that the amount of Purchase Notice Shares shall not exceed the Beneficial Ownership Limitation (9.99%) set forth in the CSPA. At any time and from time to time during the Commitment Period, except as provided in the CSPA, Triton may deliver a Purchase Notice to Company, subject to satisfaction of the conditions set forth in Section 7.2 and otherwise provided in the CSPA. The Company shall deliver the Purchase Notice Shares as DWAC Shares to Triton immediately upon receipt of the Purchase Notice. If, by the day after the Expiration Date, Triton has invested less than the Commitment Amount, pursuant to this Agreement, Triton shall within one (1) Business Day transfer to the Company the amount representing the difference between the Commitment Amount and the amount Triton has already paid to the Company. The Purchase Price for this amount shall be 85% of the average of the Two lowest closing prices of the Common Stock for the previous five Business Days, (ii) the Company shall immediately deliver the Purchase Notice Shares as DWAC Shares to Triton, and (iii) Triton shall immediately wire to the Company the Purchase Price multiplied by the lessor of the Beneficial Ownership Limitation or the remaining Commitment Amount. Legal and Regulatory Risks We are subject to complex corporate governance, public disclosure and accounting requirements to which most of our competitors are not subject. We are subject to changing rules and regulations of federal and state governments, as well as the Public Company Accounting Oversight Board ("PCAOB"). The Securities and Exchange Commission (the "SEC") has issued a significant number of new and increasingly complex requirements and regulations over the course of the last several years and continues to develop additional regulations and requirements in response to laws enacted by the U.S. Congress. For example, in 2010, the Dodd-Frank Wall Street Reform and Protection Act (the "Dodd-Frank Act") was signed into law. The Dodd-Frank Act includes significant corporate governance and executive compensation-related provisions that require the SEC to adopt additional rules and regulations in these areas. Our efforts to comply with new requirements of law and regulation are likely to result in an increase in expenses and a diversion of management s time from other business activities. Also, those laws, rules and regulations may make it more difficult and expensive for us to attract and retain key employees and directors and to maintain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to maintain coverage. Our competitors generally are not subject to these rules and regulations because they are not SEC reporting companies. As a result, our competitors generally are not subject to the risks identified above. In addition, the public disclosures that we are required to provide pursuant to these rules and regulations may furnish our competitors with greater competitive information regarding our operations and financial results than we are able to obtain regarding their operations and financial results, thereby placing us at a competitive disadvantage. Table of Contents Our financial results and operations may be adversely affected by violations of anti-bribery laws. The FCPA and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to non-U.S. officials for the purpose of obtaining or retaining business. Our policies mandate compliance with these anti-bribery laws. Depending upon business opportunities that may come available, we may expand our operations to other parts of the world that have experienced governmental corruption to some degree and, in certain circumstances; strict compliance with anti-bribery laws may conflict with local customs and practices. We presently conduct business operations only in the continental United States, specifically Colorado and Tennessee, along with our administrative offices in Florida. We cannot assure you that our internal controls and procedures always will protect us from the reckless or criminal acts committed by our employees or agents. If we were found to be liable for FCPA violations (either due to our own acts or our inadvertence or due to the acts or inadvertence of others), we could be liable for criminal or civil penalties or other sanctions, which could have a material adverse effect on our business. The Industrial Hemp industry is extremely speculative and its legality is uncertain. While management believes that legalization of industrial hemp creates a compelling business opportunity for early movers, there is no assurance that those trends will continue and be realized, that existing limited markets will continue to be available or that any new markets for industrial hemp and related products will emerge for the Company. Our business plan is based on the premise that industrial hemp legalization will continue, that consumer demand for industrial hemp will continue to exceed supply for the foreseeable future, and that consumer demand for industrial hemp for medical uses will grow. There is no assurance that this premise will prove to be correct or that we will be profitable in the future. Our business is subject to various government regulations. We are subject to various federal, state and local laws affecting the possession, consumption, production, supply and sale of industrial hemp. The Federal Trade Commission, the Federal Food and Drug Administration, the Federal Drug Enforcement Agency and equivalent state agencies regulate all aspects of industrial hemp and the advertising and representations made by businesses in the sale of products, which will apply to us.

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+ RISK FACTORS Risks Relating to Our Business Risks Relating to Our Lack of Operating History and Industry. Any investment in our shares of common stock involves a high degree of risk. You should carefully consider the following information about these risks, together with the other information contained in this annual report before you decide to invest in our common stock. Each of the following risks may materially and adversely affect our business objective, plan of operation and financial condition. These risks may cause the market price of our common stock to decline, which may cause you to lose all or a part of the money you invested in our common stock. We provide the following cautionary discussion of risks, uncertainties and possible inaccurate assumptions relevant to our business plan. In addition to other information included in this annual report, the following factors should be considered in evaluating the Company s business and future prospects. The Company has a limited operating history and very limited resources. The Company s recent operations have been limited and has had no revenues from operations. Investors will have no basis upon which to evaluate the Company s ability to achieve the Company s plan of operation. The Company s officers and sole director may allocate their time to other businesses thereby causing conflicts of interest in his determination as to how much time to devote to the Company s affairs. This could have a negative impact on the Company s ability to implement its plan of operation. The Company s two executive officers, Oded Gilboa, our CFO, and Liron Carmel, our CEO and sole director, are not required nor are they expected to commit their full time to the Company s affairs, which may result in a conflict in allocating their time between the Company s business and other businesses. Management of the Company is engaged in several other business endeavors and while none of which are involved in the medical cannabis business, they are not precluded by employment or non-competition agreements or otherwise from becoming involved in cannabis related businesses that may compete with the Company, either directly or indirectly. Members of our Management are not obligated to contribute any specific number of hours per week to the Company s affairs. If Management s other business affairs require them to devote a substantial amount of time to such other business affairs, it could limit their ability to devote time to the Company s affairs and could have a negative impact on the Company s ability to implement its plan of operation. Mr. Gilboa s other business endeavors include providing financial statement preparation, book and record keeping and financial consulting for a number of small to medium sized businesses in addition to Canna Powder Inc. During the past five years, Mr. Gilboa has provided services to private Israeli companies including: (i) Bootnest Ltd, an Internet service provider with headquarters located in Ra anana, Israel that identifies, develops and utilizes business opportunities in various fields of interest, with emphasis on business initiatives in the field of sports, among other fields, and provides business consulting and relates services in raising capital; and (ii) Professional Patent Solutions Ltd, engaged in developing technology based and industry-based IP strategies for leading start-ups and established companies in the fields of communication, semiconductors and computing principally in Israel. Mr. Carmel s other business endeavors include providing management and strategic consulting services to a number of small to medium sized businesses and organization including: (i) Board member and consultant to Virtual Crypto Technologies Ltd. a company engaged in technology development to allow fast and accurate cryptocurrencies trade executions (ii) Active chairman of the Israeli Table Tennis Association. (iii) From 2013 – 2017 vice president of the Givatayim city Economic Company. The Company may be unable to obtain additional financing, if required, to complete its plan of operation or to fund the operations and growth of it business, which could compel the Company to abandon its business. If we require funds, we will be required to seek additional financing. We cannot assure you that such financing would be available on acceptable terms, if at all. To the extent that additional financing proves to be unavailable when needed, we would be compelled to abandon our business plan. In addition, we may require additional financing to fund the operations or growth of our business. The failure to secure additional financing could have a material adverse effect on the continued development or growth of our business. The Company s officers, director or stockholders are not required to provide any financing to us. Broad discretion of Management Any person who invests in the Company s common stock will do so without an opportunity to evaluate the specific merits or risks our business. As a result, investors will be entirely dependent on the broad discretion and judgment of Management. There can be no assurance that determinations made by the Company s Management will permit us to achieve the Company s business plan. General Economic Risks. The Company s current and future business objectives and plan of operation are likely dependent, in large part, on the state of the general economy. Adverse changes in economic conditions may adversely affect the Company s business objective and plan of operation. These conditions and other factors beyond the Company s control include also but are not limited to regulatory changes. Our control shareholders have significant voting power and may take actions that may be different than actions sought by our other stockholders. Our control shareholders own approximately 40.2% of the outstanding shares of our Common Stock. These stockholders will be able to exercise significant influence over all matters requiring stockholder approval. This influence over our affairs might be adverse to the interest of our other stockholders. In addition, this concentration of ownership could delay or prevent a change in control and might have an adverse effect on the market price of our common stock. Our officers and sole director are located in Israel and our assets may also be held from time to time outside of the United States. Since all of our officers and sole director are currently located in and/or are residents of Israel, any attempt to enforce liabilities upon such individuals under the U.S. federal securities and bankruptcy laws may be difficult. In accordance with the Israeli Law on Enforcement of Foreign Judgments, 5718-1958, and subject to certain time limitations (the application to enforce the judgment must be made within five years of the date of judgment or such other period as might be agreed between Israel and the United States), an Israeli court may declare a foreign civil judgment enforceable if it finds that: - the judgment was rendered by a court which was, according to the laws of the State in which the court is located, competent to render the judgment; - the judgment may no longer be appealed; - the obligation imposed by the judgment is enforceable according to the rules relating to the enforceability of judgments in Israel and the substance of the judgment is not contrary to public policy; and - the judgment is executory in the State in which it was given. An Israeli court will not declare a foreign judgment enforceable if: - the judgment was obtained by fraud; - there is a finding of lack of due process; - the judgment was rendered by a court not competent to render it according to the laws of private international law in Israel; - the judgment is in conflict with another judgment that was given in the same matter between the same parties and that is still valid; or - the time the action was instituted in the foreign court, a suit in the same matter and between the same parties was pending before a court or tribunal in Israel. Furthermore, Israeli courts may not adjudicate a claim based on a violation of U.S. securities laws if the court determines that Israel is not the most appropriate forum in which to bring such a claim. Even if an Israeli court agrees to hear such a claim, it may determine that Israeli law, not U.S. law, is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proven as a fact, which can be a time-consuming and costly process. Our assets may also be held from time to time outside of the United States. Since our director and executive officers are foreign citizens and do not reside in the United States, it may be difficult for courts in the United States to obtain jurisdiction over our foreign assets or persons, and as a result, it may be difficult or impossible for you to enforce judgments rendered against us or our sole director or executive officers in United States courts. Thus, investing in us may pose a greater risk because should any situation arise in the future in which you would have a cause of action against these persons or against us, you may face potential difficulties in bringing lawsuits or, if successful, in collecting judgments against these persons or against the Company. Regulatory Risks We face risks related to compliance with corporate governance laws and financial reporting standards. The Sarbanes-Oxley Act of 2002, as well as related new rules and regulations implemented by the Securities and Exchange Commission and the Public Company Accounting Oversight Board, require changes in the corporate governance practices and financial reporting standards for public companies. These new laws, rules and regulations, including compliance with Section 404 of the Sarbanes-Oxley Act of 2002 relating to internal control over financial reporting, have materially increased the legal and financial compliance costs of small companies and have made some activities more time-consuming and more burdensome. We face risks associated with laws and regulations applicable to controlled substances; difficulties of complying with laws that differ from jurisdiction to jurisdiction. Our planned cannabis powder-based products will contain controlled substances and are subject laws of the U.S. and many foreign countries as well as a myriad of rules and regulations. Controlled substance laws differ, often radically, between countries and from state to state in the United States and legislation in certain countries and states are subject to change, perhaps to our detriment, and, as a result, may restrict or even severely limit our ability to distribute cannabis-based powders, if and when we complete development, of which there can be no assurance. Furthermore, there can be no assurance that we will be able to successfully address the difficulties we expect to confront in efforts to comply with the laws and regulations applicable to cannabis-related medical products in different jurisdictions in which we will seek to operate. These differences, from jurisdiction to jurisdiction and from state to state may be expected to restrict or limit in a material manner our ability to commercially exploit and distribute our products in one or more jurisdictions/states where the regulations or laws are in conflict or are mutually exclusive. We may not have effective internal controls. The rules and regulations of the SEC require a public company to prepare and file periodic reports under the Exchange Act, which will require that the Company engage legal, accounting, auditing and other professional service providers. The engagement of such services is costly and continuing. Additionally, the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act") requires, among other things, that we design, implement and maintain adequate internal controls and procedures over financial reporting. The costs of complying with the Sarbanes-Oxley Act and the limited technically qualified personnel we have may make it difficult for us to design, implement and maintain adequate internal controls over financial reporting. We expect these costs to be increased as our operations increase in scope and magnitude. In the event that we fail to maintain an effective system of internal controls or discover material weaknesses in our internal controls, we may not be able to produce reliable financial reports and/or discover and report fraud, which may harm our overall financial condition and result in loss of investor confidence and a decline in our share price. As a public company and the effective date of the Company s registration statement on Form 10 on June 29, 2018, we became subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Act of 2010 and other applicable securities rules and regulations. Our legal and financial compliance costs related to these rules and regulations may increase, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources. The Exchange Act requires, among other things, that we file annual and quarterly, and, from time-to-time, current reports with respect to our business and operating results. We are working with our legal, independent accounting and financial advisors to identify those areas in which changes should or could be made to improve our financial and management control systems in order to manage our growth and our legal obligations as a public company. These areas include corporate governance, corporate control, disclosure controls and procedures and financial reporting and accounting systems. We have made, and will continue to make, changes in these and other areas, if and when any perceived deficiencies are discovered. However, we anticipate that the expenses associated with being a reporting public company are expected to be both material and continuing. We estimate that the aggregate cost of legal services; accounting and audit functions; personnel, such as a chief financial officer familiar with the obligations of public company reporting; and consultants to design and implement internal controls could be material. In addition, if and when we retain independent directors and/or additional members of senior management, we may incur additional expenses related to director compensation and/or premiums for directors and officers liability insurance ("D&O Insurance"), the costs of which we cannot estimate at this time. We may also incur additional expenses associated with investor relations and similar functions, the cost of which we also cannot estimate at this time. However, these additional expenses individually, or in the aggregate, may also be expected to be material. In addition, being a public company could make it more difficult or more-costly for us to obtain certain types of insurance, including D&O Insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these events could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers. Risks Relating to Operating in Israel. We conduct our operations in Israel and therefore our results may be adversely affected by political, economic and military instability in Israel or the Middle East. Our subsidiary offices and our officers and sole director are located in Israel. Accordingly, political, economic and military conditions in Israel and the Middle East may directly affect our business. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its Arab neighbors. Any hostilities involving Israel or the interruption or curtailment of trade within Israel or between Israel and its trading partners could adversely affect our operations and could make it more difficult for us to raise capital. Since September 2000, terrorist violence in Israel has increased significantly and negotiations between Israel and Palestinian representatives have not achieved a peaceful resolution of the conflict. The establishment in 2006 of a government in Gaza by representatives of the Hamas militant group has created additional unrest and uncertainty in the region. Further, Israel is currently engaged in an armed conflict with Hamas, which until Operation Cast Lead in January 2009 had involved thousands of missile-strikes and had disrupted most day-to-day civilian activity in southern Israel. The missile attacks by Hamas did not target Tel Aviv, the location of our principal executive offices; however, any armed conflict, terrorist activity or political instability in the region may negatively affect business conditions and could significantly harm our results of operations. Risks Related to Our Common Stock Our historic stock price has been volatile and the future market price for our common stock is likely to continue to be volatile. Further, the limited market for our shares will make our price more volatile. This may make it difficult for you to sell our common stock. The public market for our Common Stock has been very volatile. Over the past three fiscal years and subsequent quarterly periods, the market price for our Common Stock has ranged from $0.35 to $2.70 (See "Market for Common Equity and Related Stockholder Matters" in this annual report). Any future market price for our shares is likely to continue to be very volatile. This price volatility may make it more difficult for you to sell shares when you want at a price you find attractive. Further, the market for our Common Stock is limited and we cannot assure you that a larger market will ever be developed or maintained. Market fluctuations and volatility, as well as general economic, market and political conditions, could reduce our market price. As a result, this may make it difficult or impossible for you to sell our Common Stock. The Company s shares of common stock are quoted on the OTC Pink Sheet market, which limits the liquidity and price of the Company s common stock. The Company s shares of Common Stock are traded on the OTC Pink Sheet market under the symbol CAPD. Quotation of the Company s securities on the OTC Pink Sheet market limits the liquidity and price of the Company s Common Stock more than if the Company s shares of Common Stock were listed on The Nasdaq Stock Market or a national exchange. There is currently no active trading market in the Company s Common Stock. There can be no assurance that there will be an active trading market for the Company s Common Stock following a business combination. In the event that an active trading market commences, there can be no assurance as to the market price of the Company s shares of Common Stock, whether any trading market will provide liquidity to investors, or whether any trading market will be sustained. Furthermore, because our shares of Common Stock are traded on the OTC Pink Sheet market, the shares of our Common Stock may only be offered and sold by Selling Shareholders at a fixed price of $1.60 per share until our Common Stock is quoted on the OTCQB tier of the OTC Markets, and thereafter at prevailing market prices or privately negotiated prices or in transactions that are not in the public market. We cannot assure you that our Common Stock will be quoted on the OTCQB tier notwithstanding our belief that we will satisfy the eligibility standards for admission to, and our intention to make application for quotation on the OTCQB. Our common stock is subject to the Penny Stock Rules of the SEC and the trading market in our common stock is limited, which makes transactions in our stock cumbersome and may reduce the value of an investment in our common stock. The Securities and Exchange Commission has adopted Rule 3a51-1 which establishes the definition of a "penny stock," for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, Rule 15g-9 require: - that a broker or dealer approve a person s account for transactions in penny stocks; and - the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person s account for transactions in penny stocks, the broker or dealer must: - obtain financial information and investment experience objectives of the person; and - make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form: - sets forth the basis on which the broker or dealer made the suitability determination; and - that the broker or dealer received a signed, written agreement from the investor prior to the transaction. Generally, brokers may be less willing to execute transactions in securities subject to the "penny stock" rules. This may make it more difficult for investors to dispose of our Common Stock and cause a decline in the market value of our stock. Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. State blue sky registration; potential limitations on resale of the Company s common stock The holders of the Company s shares of Common Stock registered under the Exchange Act and those persons who desire to purchase them in any trading market that may develop in the future, should be aware that there may be state blue-sky law restrictions upon the ability of investors to resell the Company s securities. Accordingly, investors should consider the secondary market for the Registrant s securities to be a limited one. It is the intention of our Management to seek coverage and publication of information regarding the Registrant in an accepted publication manual which permits a manual exemption. The manual exemption permits a security to be distributed in a particular state without being registered if the Registrant issuing the security has a listing for that security in a securities manual recognized by the state. However, it is not enough for the security to be listed in a recognized manual. The listing entry must contain (1) the names of issuers, officers, and directors, (2) an issuer s balance sheet, and (3) a profit and loss statement for either the fiscal year preceding the balance sheet or for the most recent fiscal year of operations. Furthermore, the manual exemption is a non-issuer exemption restricted to secondary trading transactions, making it unavailable for issuers selling newly issued securities. Most of the accepted manuals are those published by Standard and Poor s, Moody s Investor Service, Fitch s Investment Service, and Best s Insurance Reports, and many states expressly recognize these manuals. A smaller number of states declare that they "recognize securities manuals" but do not specify the recognized manuals. The following states do not have any provisions and therefore do not expressly recognize the manual exemption: Alabama, Georgia, Illinois, Kentucky, Louisiana, Montana, South Dakota, Tennessee, Vermont and Wisconsin. Dividends unlikely The Company does not expect to pay dividends for the foreseeable future because it has no revenues or cash resources. The payment of dividends will be contingent upon the Company s future revenues and earnings, if any, capital requirements and overall financial conditions. The payment of any future dividends will be within the discretion of the Company s board of directors as then constituted. It is the Company s expectation that future management, following a business combination, will determine to retain any earnings for use in its business operations and accordingly, the Company does not anticipate declaring any dividends in the foreseeable future. In anticipation of the formation of Canna Powder Ltd, the Company s Israeli subsidiary organized on August 30, 2017, the Company began to raise capital through the private sale of its equity securities primarily pursuant to the exemptions provided under Regulation S promulgated by the Securities and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended (the "Act") and, to a lesser extent, pursuant to Regulation D promulgated by the SEC under the Act (collectively, the "Equity Raise"). To date, the Company has raised approximately $1,643,979 in the Equity Raise. Reference is made to the disclosure "Note 8 Subsequent Events" in the Notes to Consolidated Financial Statements for the nine-month period ended September 30, 2018, below.

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+Risk
+Factors
+You
+should read the "Risk Factors" section starting on page 4 of this
+prospectus for a discussion of factors to consider carefully before
+deciding to invest in shares of our common stock.
+Symbol
+PHOT
+(1)
+ The number of shares of our common
+stock outstanding before this offering is based
+on 3,858,188,075 shares of our common stock outstanding as
+of October 18, 2019, and excludes:
+________ shares of our common stock issuable upon the exercise
+of stock options outstanding as of October __, 2019 at a
+weighted-average exercise price of $0.____ per
+share;
+___________ shares of our common stock issuable upon the
+exercise of warrants outstanding as of October __, 2019 (at a
+weighted-average exercise price of $0.___ per share. These
+warrants will expire between ________, ______ and _________,
+________;
+____________ shares of common stock to be issued for the conversion of Convertible Notes
+Payables as of October __, 2019 with expiration dates
+between __________ and ___________ at conversion
+prices of $0.___ per share;
+__________ additional shares of our common stock available for
+future issuance under our 2017 Amended Stock Incentive
+Plan;
+__________ shares of our common stock issuable upon the conversion
+of convertible promissory notes; and,
+ up to
+625,000,000 shares of our common stock pursuant to this
+Registration Statement.
+3
+RISK FACTORS
+Investing in our common stock is highly
+speculative and involves a high degree of
+risk. You should carefully consider the risks and uncertainties
+described below, together with all of the other information
+contained in this prospectus, including our financial statements
+and the related notes appearing at the end of this prospectus,
+before deciding to invest in our common stock. If any of the
+following risks actually occur, our business, prospects, operating
+results and financial condition could suffer materially, the
+trading price of our common stock could decline and you could lose
+all or part of your investment. There are
+certain inherent risks which will have an effect on the
+Company s development in the future and the most significant risks
+and uncertainties known and identified by our management are
+described below.
+Risks Related to Our Business
+There are certain inherent risks which will have an effect on the
+Company s development in the future and the most
+significant risks and uncertainties known and identified by our
+management are described below.
+Risks Associated with Securities Purchase Agreement with Chicago
+Venture.
+The
+Securities Purchase Agreement with Chicago Venture will terminate
+if we file protection from its creditors, a Registration Statement
+on Form S-1 is not effective, and our market capitalization or the
+trading volume of our common stock does not reach certain levels.
+If terminated, we will be unable to draw down all or substantially
+all of our Chicago Venture Notes.
+Our
+ability to require Chicago Venture to fund the Chicago Venture Note
+is at our discretion, subject to certain limitations. Chicago
+Venture is obligated to fund if each of the following conditions
+are met; (i) the average and median daily dollar volumes of our
+common stock for the twenty (20) and sixty (60) trading days
+immediately preceding the funding date are greater than $100,000;
+(ii) our market capitalization on the funding date is greater than
+$17,000,000; (iii) we are not in default with respect to share
+delivery obligations under the note as of the funding date; and
+(iv) we are current in our reporting obligations.
+There
+is no guarantee that we will be able to meet the foregoing
+conditions or any other conditions under the Securities Purchase
+Agreement and/or Chicago Venture Note or that we will be able to
+draw down any portion of the amounts available under the Securities
+Purchase Agreement and/or Chicago Venture Note.
+If we
+not able to draw down all due under the Securities Purchase
+Agreement or if the Securities Purchase Agreement is terminated, we
+may be forced to curtail the scope of our operations or alter our
+business plan if other financing is not available to
+us.
+Our common stock.
+On
+October 17, 2017, we were informed by Alpine Securities Corporation
+( Alpine ) that Alpine has demonstrated compliance with
+the Financial Industry Regulatory Authority ( FINRA )
+Rule 6432 and Rule 15c2-11 under the Securities Exchange Act of
+1934. We filed an amended application with the OTC Markets to list
+the Company s common stock on the OTCQB and begin to trade on
+this market as of March 20, 2018. As
+of March 4, 2019, we began to trade on the OTC Markets
+Pink
+Sheet because our bid
+price had closed below $0.01 for more than 30 consecutive calendar
+days.
+4
+This
+action had a material adverse effect on our business, financial
+condition and results of operations. If we are unable to obtain
+additional financing when it is needed, we will need to restructure
+our operations, and divest all or a portion of our
+business.
+We have been involved in Legal Proceedings.
+We have
+been involved in certain disputes and legal proceedings as
+discussed in the section title Legal Proceedings
+within our Form 10-Q for the quarter year ended June 30, 2019. In
+addition, as a public company, we are also potentially susceptible
+to litigation, such as claims asserting violations of securities
+laws. Any such claims, with or without merit, if not resolved,
+could be time-consuming and result in costly litigation. There can
+be no assurance that an adverse result in any future proceeding
+would not have a potentially material adverse on our business,
+results of operations or financial condition.
+We may engage in acquisitions, mergers, strategic alliances, joint
+ventures and divestures that could result in final results that are
+different than expected.
+In the normal course of business, we engage in discussions relating
+to possible acquisitions, equity investments, mergers, strategic
+alliances, joint ventures and divestitures. Such transactions are
+accompanied by a number of risks, including the use of significant
+amounts of cash, potentially dilutive issuances of equity
+securities, incurrence of
+debt on potentially unfavorable terms as well as impairment
+expenses related to goodwill and amortization expenses related to
+other intangible assets, the possibility that we may pay too much
+cash or issue too many of our shares as the purchase price for an
+acquisition relative to the economic benefits that we ultimately
+derive from such acquisition, and various potential difficulties
+involved in integrating acquired businesses into our
+operations.
+From time to time, we have also engaged in discussions with
+candidates regarding the potential acquisitions of our product
+lines, technologies and businesses. If a divestiture such as this
+does occur, we cannot be certain that our business, operating
+results and financial condition will not be materially and
+adversely affected. A successful divestiture depends on various
+factors, including our ability to effectively transfer liabilities,
+contracts, facilities and employees to any purchaser; identify and
+separate the intellectual property to be divested from the
+intellectual property that we wish to retain; reduce fixed costs
+previously associated with the divested assets or business; and
+collect the proceeds from any divestitures.
+If we do not realize the expected benefits of any acquisition or
+divestiture transaction, our financial position, results of
+operations, cash flows and stock price could be negatively
+impacted.
+Our proposed business is dependent on laws pertaining to the
+marijuana industry.
+Continued
+development of the marijuana industry is dependent upon continued
+legislative authorization of the use and cultivation of marijuana
+at the state level. Any number of factors could slow or
+halt progress in this area. Further, progress, while
+encouraging, is not assured. While there may be ample
+public support for legislative action, numerous factors impact
+the legislative process. Any one of these factors could
+slow or halt use of marijuana, which would negatively impact our
+proposed business.
+Currently,
+thirty three states and the District of Columbia allow its citizens
+to use medical cannabis. Additionally, ten states and
+the District of Columbia have legalized cannabis for adult
+use. The state laws are in conflict with the federal
+Controlled Substances Act, which makes marijuana use and possession
+illegal on a national level. The Obama administration previously
+effectively stated that it is not an efficient use of resources to
+direct law federal law enforcement agencies to prosecute those
+lawfully abiding by state-designated laws allowing the use and
+distribution of medical marijuana. The Trump
+administration position is unknown. However, there is no
+guarantee that the Trump administration will not change current
+policy regarding the low-priority enforcement of federal
+laws. Additionally, any new administration that follows
+could change this policy and decide to enforce the federal laws
+strongly. Any such change in the federal
+government s enforcement of current federal laws could cause
+significant financial damage to us and its
+shareholders.
+5
+Further,
+while we do not harvest, distribute or sell marijuana, by supplying
+products to growers of marijuana, we could be deemed to be
+participating in marijuana cultivation, which remains illegal under
+federal law, and exposes us to potential criminal liability, with
+the additional risk that our business could be subject to civil
+forfeiture proceedings.
+The marijuana industry faces strong opposition.
+It is
+believed by many that large, well-funded businesses may have a
+strong economic opposition to the marijuana industry. We
+believe that the pharmaceutical industry clearly does not want to
+cede control of any product that could generate significant
+revenue. For example, medical marijuana will likely
+adversely impact the existing market for the current
+ marijuana pill sold by mainstream pharmaceutical
+companies. Further, the medical marijuana industry could
+face a material threat from the pharmaceutical industry, should
+marijuana displace other drugs or encroach upon the pharmaceutical
+industry s products. The pharmaceutical industry
+is well funded with a strong and experienced lobby that eclipses
+the funding of the medical marijuana movement. Any
+inroads the pharmaceutical industry could make in halting or
+impeding the marijuana industry harm our business, prospects,
+results of operation and financial condition.
+Marijuana remains illegal under Federal
+law.
+Marijuana
+is a Schedule-I controlled substance and is illegal under federal
+law. Even in those states in which the use of marijuana
+has been legalized, its use remains a violation of federal
+law. Since federal law criminalizing the use of
+marijuana preempts state laws that legalize its use, strict
+enforcement of federal law regarding marijuana would harm our
+business, prospects, results of operation and financial
+condition.
+Raising additional capital to implement our business plan and pay
+our debts will cause dilution to our existing stockholders, require
+us to restructure our operations, and divest all or a portion of
+our business.
+We need
+additional financing to implement our business plan and to service
+our ongoing operations and pay our current debts. There can be no
+assurance that we will be able to secure any needed funding, or
+that if such funding is available, the terms or conditions would be
+acceptable to us.
+If we
+raise additional capital through borrowing or other debt financing,
+we may incur substantial interest expense. Sales of additional
+equity securities will dilute on a pro rata basis the percentage
+ownership of all holders of common stock. When we raise more equity
+capital in the future, it will result in substantial dilution to
+our current stockholders.
+If we
+are unable to obtain additional financing when it is needed, we
+will need to restructure our operations, and divest all or a
+portion of our business.
+Closing of bank and merchant processing accounts could have a
+material adverse effect on our business, financial condition and/or
+results of operations.
+As a
+result of the regulatory environment, we have experienced the
+closing of several of our bank and merchant processing accounts
+since March 2014. We have been able to open other bank accounts.
+However, we may have other banking accounts closed. These factors
+impact management and could have a material adverse effect on our
+business, financial condition and/or results of
+operations.
+6
+Federal regulation and enforcement may adversely affect the
+implementation of medical marijuana laws and regulations may
+negatively impact our revenues and
+profits.
+Currently,
+there are thirty three states plus the District of Columbia that
+have laws and/or regulation that recognize in one form or another
+legitimate medical uses for cannabis and consumer use of cannabis
+in connection with medical treatment. Many other states are
+considering legislation to similar effect. As of the date of this
+writing, the policy and regulations of the Federal government and
+its agencies is that cannabis has no medical benefit and a range of
+activities including cultivation and use of cannabis for personal
+use is prohibited on the basis of federal law and may or may not be
+permitted on the basis of state law. Active enforcement of the
+current federal regulatory position on cannabis on a regional or
+national basis may directly and adversely affect the willingness of
+customers of GrowLife to invest in or buy products from GrowLife
+that may be used in connection with cannabis. Active enforcement of
+the current federal regulatory position on cannabis may thus
+indirectly and adversely affect revenues and profits of the
+GrowLife companies.
+Our history of net losses has raised substantial doubt regarding
+our ability to continue as a going concern. If we do not continue
+as a going concern, investors could lose their entire
+investment.
+Our
+history of net losses has raised substantial doubt about our
+ability to continue as a going concern, and as a result, our
+independent registered public accounting firm included an
+explanatory paragraph in its report on our financial statements as
+of and for the years ended December 31, 2018 and 2017 with
+respect to this uncertainty. Accordingly, our ability to continue
+as a going concern will require us to seek alternative financing to
+fund our operations. This going concern opinion could materially
+limit our ability to raise additional funds through the issuance of
+new debt or equity securities or otherwise. Future reports on our
+financial statements may include an explanatory paragraph with
+respect to our ability to continue as a going concern.
+We have a history of operating losses and there can be no assurance
+that we can again achieve or maintain profitability.
+We have
+experienced net losses since inception. As of June 30, 2019, we had
+an accumulated deficit of $145.2 million. There can be no assurance
+that we will achieve or maintain profitability.
+We are subject to corporate governance and internal control
+reporting requirements, and our costs related to compliance with,
+or our failure to comply with existing and future requirements,
+could adversely affect our business.
+We must
+comply with corporate governance requirements under the
+Sarbanes-Oxley Act of 2002 and the Dodd Frank Wall Street
+Reform and Consumer Protection Act of 2010, as well as additional
+rules and regulations currently in place and that may be
+subsequently adopted by the SEC and the Public Company Accounting
+Oversight Board. These laws, rules, and regulations continue to
+evolve and may become increasingly stringent in the future. We are
+required to include management s report on internal controls
+as part of our annual report pursuant to Section 404 of the
+Sarbanes-Oxley Act. We strive to continuously evaluate and improve
+our control structure to help ensure that we comply with Section
+404 of the Sarbanes-Oxley Act. The financial cost of compliance
+with these laws, rules, and regulations is expected to remain
+substantial.
+We
+cannot assure you that we will be able to fully comply with these
+laws, rules, and regulations that address corporate governance,
+internal control reporting, and similar matters. Failure to comply
+with these laws, rules and regulations could materially adversely
+affect our reputation, financial condition, and the value of our
+securities.
+Our inability or failure to effectively manage our growth could
+harm our business and materially and adversely affect our operating
+results and financial condition.
+Our
+strategy envisions growing our business. We plan to expand our
+product, sales, administrative and marketing organizations. Any
+growth in or expansion of our business is likely to continue to
+place a strain on our management and administrative resources,
+infrastructure and systems. As with other growing businesses, we
+expect that we will need to further refine and expand our business
+development capabilities, our systems and processes and our access
+to financing sources. We also will need to hire, train, supervise
+and manage new and retain contributing employees. These processes
+are time consuming and expensive, will increase management
+responsibilities and will divert management attention. We cannot
+assure you that we will be able to:
+expand
+our products effectively or efficiently or in a timely
+manner;
+allocate
+our human resources optimally;
+meet
+our capital needs;
+identify
+and hire qualified employees or retain valued employees;
+or
+incorporate
+effectively the components of any business or product line that we
+may acquire in our effort to achieve growth.
+7
+Our
+operating results may fluctuate significantly based on customer
+acceptance of our products. As a result, period-to-period
+comparisons of our results of operations are unlikely to provide a
+good indication of our future performance. Management expects that
+we will experience substantial variations in our net sales and
+operating results from quarter to quarter due to customer
+acceptance of our products. If customers don t accept our
+products, our sales and revenues will decline, resulting in a
+reduction in our operating income.
+Customer
+interest for our products could also be impacted by the timing of
+our introduction of new products. If our competitors introduce new
+products around the same time that we issue new products, and if
+such competing products are superior to our own, customers
+desire for our products could decrease, resulting in a decrease in
+our sales and revenues. To the extent that we introduce new
+products and customers decide not to migrate to our new products
+from our older products, our revenues could be negatively impacted
+due to the loss of revenue from those customers. In the event that
+our newer products do not sell as well as our older products, we
+could also experience a reduction in our revenues and operating
+income.
+If we do not successfully generate additional products and
+services, or if such products and services are developed but not
+successfully commercialized, we could lose revenue
+opportunities.
+Our
+future success depends, in part, on our ability to expand our
+product and service offerings. To that end we have engaged in the
+process of identifying new product opportunities to provide
+additional products and related services to our customers. The
+process of identifying and commercializing new products is complex
+and uncertain, and if we fail to accurately predict
+customers changing needs and emerging technological trends
+our business could be harmed. We may have to commit significant
+resources to commercializing new products before knowing whether
+our investments will result in products the market will accept.
+Furthermore, we may not execute successfully on commercializing
+those products because of errors in product planning or timing,
+technical hurdles that we fail to overcome in a timely fashion, or
+a lack of appropriate resources. This could result in competitors
+providing those solutions before we do and a reduction in net sales
+and earnings.
+The
+success of new products depends on several factors, including
+proper new product definition, timely completion and introduction
+of these products, differentiation of new products from those of
+our competitors, and market acceptance of these products. There can
+be no assurance that we will successfully identify new product
+opportunities, develop and bring new products to market in a timely
+manner, or achieve market acceptance of our products or that
+products and technologies developed by others will not render our
+products or technologies obsolete or noncompetitive.
+Our future success depends on our ability to grow and expand our
+customer base. Our failure to achieve such growth or
+expansion could materially harm our business.
+To
+date, our revenue growth has been derived primarily from the sale
+of our products and through the purchase of existing businesses.
+Our success and the planned growth and expansion of our business
+depend on us achieving greater and broader acceptance of our
+products and expanding our customer base. There can be no assurance
+that customers will purchase our products or that we will continue
+to expand our customer base. If we are unable to effectively market
+or expand our product offerings, we will be unable to grow and
+expand our business or implement our business strategy. This could
+materially impair our ability to increase sales and revenue and
+materially and adversely affect our margins, which could harm our
+business and cause our stock price to decline.
+If we
+incur substantial liability from litigation, complaints, or
+enforcement actions resulting from misconduct by our distributors,
+our financial condition could suffer. We will require that our
+distributors comply with applicable law and with our policies and
+procedures. Although we will use various means to address
+misconduct by our distributors, including maintaining these
+policies and procedures to govern the conduct of our distributors
+and conducting training seminars, it will still be difficult to
+detect and correct all instances of misconduct. Violations of
+applicable law or our policies and procedures by our distributors
+could lead to litigation, formal or informal complaints,
+enforcement actions, and inquiries by various federal, state, or
+foreign regulatory authorities against us and/or our distributors.
+and could consume considerable amounts of financial and other
+corporate resources, which could have a negative impact on our
+sales, revenue, profitability and growth prospects. As we are
+currently in the process of implementing our direct sales
+distributor program, we have not been, and are not currently,
+subject to any material litigation, complaint or enforcement action
+regarding distributor misconduct by any federal, state or foreign
+regulatory authority.
+8
+Our
+future manufacturers could fail to fulfill our orders for products,
+which would disrupt our business, increase our costs, harm our
+reputation and potentially cause us to lose our
+market.
+We may
+depend on contract manufacturers in the future to produce our
+products. These manufacturers could fail to produce products to our
+specifications or in a workmanlike manner and may not deliver the
+units on a timely basis. Our manufacturers may also have to obtain
+inventories of the necessary parts and tools for production. Any
+change in manufacturers to resolve production issues could disrupt
+our ability to fulfill orders. Any change in manufacturers to
+resolve production issues could also disrupt our business due to
+delays in finding new manufacturers, providing specifications and
+testing initial production. Such disruptions in our business and/or
+delays in fulfilling orders would harm our reputation and would
+potentially cause us to lose our market.
+Our inability to effectively protect our intellectual property
+would adversely affect our ability to compete effectively, our
+revenue, our financial condition and our results of
+operations.
+We may
+be unable to obtain intellectual property rights to effectively
+protect our business. Our ability to compete effectively may be
+affected by the nature and breadth of our intellectual property
+rights. While we intend to defend against any threats to our
+intellectual property rights, there can be no assurance that any
+such actions will adequately protect our interests. If we are
+unable to secure intellectual property rights to effectively
+protect our technology, our revenue and earnings, financial
+condition, and/or results of operations would be adversely
+affected.
+We may
+also rely on nondisclosure and non-competition agreements to
+protect portions of our technology. There can be no assurance that
+these agreements will not be breached, that we will have adequate
+remedies for any breach, that third parties will not otherwise gain
+access to our trade secrets or proprietary knowledge, or that third
+parties will not independently develop the technology.
+We do
+not warrant any opinion as to non-infringement of any patent,
+trademark, or copyright by us or any of our affiliates, providers,
+or distributors. Nor do we warrant any opinion as to invalidity of
+any third-party patent or unpatentability of any third-party
+pending patent application.
+Our industry is highly competitive and we have less capital and
+resources than many of our competitors, which may give them an
+advantage in developing and marketing products similar to ours or
+make our products obsolete.
+We are
+involved in a highly competitive industry where we may compete with
+numerous other companies who offer alternative methods or
+approaches, may have far greater resources, more experience, and
+personnel perhaps more qualified than we do. Such resources may
+give our competitors an advantage in developing and marketing
+products similar to ours or products that make our products
+obsolete. There can be no assurance that we will be able to
+successfully compete against these other entities.
+Transfers of our securities may be restricted by virtue of state
+securities blue sky laws, which prohibit trading
+absent compliance with individual state laws. These restrictions
+may make it difficult or impossible to sell shares in those
+states.
+Transfers
+of our common stock may be restricted under the securities or
+securities regulations laws promulgated by various states and
+foreign jurisdictions, commonly referred to as "blue sky" laws.
+Absent compliance with such individual state laws, our common stock
+may not be traded in such jurisdictions. Because the securities
+held by many of our stockholders have not been registered for
+resale under the blue sky laws of any state, the holders of such
+shares and persons who desire to purchase them should be aware that
+there may be significant state blue sky law restrictions upon the
+ability of investors to sell the securities and of purchasers to
+purchase the securities. These restrictions may prohibit the
+secondary trading of our common stock. Investors should consider
+the secondary market for our securities to be a limited
+one.
+9
+We are dependent on key personnel.
+Our
+success depends to a significant degree upon the continued
+contributions of key management and other personnel, some of whom
+could be difficult to replace. We do not maintain key man life
+insurance covering our officers. Our success will depend on the
+performance of our officers and key management and other personnel,
+our ability to retain and motivate our officers, our ability to
+integrate new officers and key management and other personnel into
+our operations, and the ability of all personnel to work together
+effectively as a team. Our failure to retain and recruit
+officers and other key personnel could have a material adverse
+effect on our business, financial condition and results of
+operations.
+We have limited insurance.
+We have
+limited directors and officers liability insurance
+and limited commercial liability insurance policies. Any
+significant claims would have a material adverse effect on our
+business, financial condition and results of
+operations.
+Risks Related to our Common Stock
+An investment in our shares is highly speculative.
+The shares of our common stock are highly speculative in nature,
+involve a high degree of risk and should be purchased only by
+persons who can afford to lose the entire amount invested in the
+common stock. Before purchasing any of the shares of common stock,
+you should carefully consider the risk factors contained herein
+relating to our business and prospects. If any of the risks
+presented herein actually occur, 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
+you may lose all or part of your investment.
+The market price of our Common Stock may fluctuate significantly in
+the future.
+We expect that the market price of our Common Stock may fluctuate
+in response to one or more of the following factors, many of which
+are beyond our control:
+competitive
+pricing pressures;
+our
+ability to market our services on a cost-effective and timely
+basis;
+changing
+conditions in the market;
+changes
+in market valuations of similar companies;
+stock
+market price and volume fluctuations generally;
+regulatory
+developments;
+fluctuations
+in our quarterly or annual operating results;
+additions
+or departures of key personnel; and
+future
+sales of our Common Stock or other securities.
+The price at which you purchase shares of our Common Stock may not
+be indicative of the price that will prevail in the trading market.
+Shareholders may experience wide fluctuations in the market price
+of our securities. These fluctuations may have a negative effect on
+the market price of our securities and may prevent a shareholder
+from obtaining a market price equal to the purchase price such
+shareholder paid when the shareholder attempts to sell our
+securities in the open market. In these situations, the shareholder
+may be required either to sell our securities at a market price,
+which is lower than the purchase price the shareholder paid, or to
+hold our securities for a longer period than planned. An inactive
+or low trading market may also impair our ability to raise capital
+by selling shares of capital stock. You may be unable to sell your
+shares of Common Stock at or above your purchase price, which may
+result in substantial losses to you and which may include the
+complete loss of your investment. Any of the risks described above
+could adversely affect our sales and profitability and the price of
+our Common Stock.
+10
+Chicago Venture could have significant influence over matters
+submitted to stockholders for approval.
+Chicago Venture, Iliad and St. George
+As a
+result of funding from Chicago Venture, Iliad and St. George as
+previously detailed, they exercise significant control over
+us.
+If
+these persons were to choose to act together, they would be able to
+significantly influence all matters submitted to our stockholders
+for approval, as well as our officers, directors, management and
+affairs. For example, these persons, if they choose to act
+together, could significantly influence the election of directors
+and approval of any merger, consolidation or sale of all or
+substantially all of our assets. This concentration of voting power
+could delay or prevent an acquisition of us on terms that other
+stockholders may desire.
+Trading in our stock is limited by the SEC s penny stock
+regulations.
+Our
+stock is categorized as a penny stock The SEC has adopted Rule
+15g-9 which generally defines "penny stock" to be any equity
+security that has a market price (as defined) less than US$ 5.00
+per share or an exercise price of less than US $5.00 per share,
+subject to certain exclusions (e.g., net tangible assets in excess
+of $2,000,000 or average revenue of at least $6,000,000 for the
+last three years). The penny stock rules impose additional sales
+practice requirements on broker-dealers who sell to persons other
+than established customers and accredited investors. The penny
+stock rules require a broker-dealer, prior to a transaction in a
+penny stock not otherwise exempt from the rules, to deliver a
+standardized risk disclosure document in a form prepared by the
+SEC, which provides information about penny stocks and the nature
+and level of risks in the penny stock market. The broker-dealer
+also must provide the customer with current bid and offer
+quotations for the penny stock, the compensation of the
+broker-dealer and its salesperson in the transaction, and monthly
+account statements showing the market value of each penny stock
+held in the customer's account. The bid and offer quotations, and
+the broker-dealer and salesperson compensation information, must be
+given to the customer orally or in writing prior to effecting the
+transaction and must be given to the customer in writing before or
+with the customer's confirmation. In addition, the penny stock
+rules require that prior to a transaction in a penny stock not
+otherwise exempt from these rules, the broker-dealer must make a
+special written determination that the penny stock is a suitable
+investment for the purchaser and receive the purchaser's written
+agreement to the transaction. Finally, broker-dealers may not
+handle penny stocks under $0.10 per share.
+These
+disclosure requirements reduce the level of trading activity in the
+secondary market for the stock that is subject to these penny stock
+rules. Consequently, these penny stock rules would affect the
+ability of broker-dealers to trade our securities if we become
+subject to them in the future. The penny stock rules also could
+discourage investor interest in and limit the marketability of our
+common stock to future investors, resulting in limited ability for
+investors to sell their shares.
+FINRA sales practice requirements may also limit a
+shareholder s ability to buy and sell our stock.
+In
+addition to the penny stock rules described above,
+FINRA has adopted rules that require that in recommending an
+investment to a customer, a broker-dealer must have reasonable
+grounds for believing that the investment is suitable for that
+customer. Prior to recommending speculative low priced securities
+to their non-institutional customers, broker-dealers must make
+reasonable efforts to obtain information about the customer s
+financial status, tax status, investment objectives and other
+information. Under interpretations of these rules, FINRA believes
+that there is a high probability that speculative low priced
+securities will not be suitable for at least some customers. The
+FINRA requirements make it more difficult for broker-dealers to
+recommend that their customers buy our common stock, which may
+limit your ability to buy and sell our stock and have an adverse
+effect on the market for our shares.
+11
+The market price of our common stock may be volatile.
+The
+market price of our common stock has been and is likely in the
+future to be volatile. Our common stock price may fluctuate in
+response to factors such as:
+Halting of trading by the SEC or FINRA.
+Announcements
+by us regarding liquidity, legal proceedings, significant
+acquisitions, equity investments and divestitures, strategic
+relationships, addition or loss of significant customers and
+contracts, capital expenditure commitments, loan, note payable and
+agreement defaults, loss of our subsidiaries and impairment of
+assets,
+Issuance
+of convertible or equity securities for general or merger and
+acquisition purposes,
+Issuance
+or repayment of debt, accounts payable or convertible debt for
+general or merger and acquisition purposes,
+Sale of
+a significant number of shares of our common stock by
+shareholders,
+General
+market and economic conditions,
+Quarterly
+variations in our operating results,
+Investor
+relation activities,
+Announcements
+of technological innovations,
+New
+product introductions by us or our competitors,
+Competitive
+activities, and
+Additions
+or departures of key personnel.
+These
+broad market and industry factors may have a material adverse
+effect on the market price of our common stock, regardless of our
+actual operating performance. These factors could have a material
+adverse effect on our business, financial condition, and/or results
+of operations.
+The sale of a significant number of our shares of common stock
+could depress the price of our common stock.
+Sales
+or issuances of a large number of shares of common stock in the
+public market or the perception that sales may occur could cause
+the market price of our common stock to decline. As of June 30,
+2019, there were approximately 3.76 billion shares of our common stock
+issued and outstanding. In addition, as of June 30,
+2019, there are also (i) stock option grants outstanding for the
+purchase of 82.5 million common
+shares at a $0.010 average exercise price; (ii) warrants for the
+purchase of 362.8 million
+common shares at a $0.023 average exercise price; and (iii)
+116.5 million shares related to convertible debt that can be
+converted at $0.0025 per share.
+In addition, we have an unknown number of common shares to be
+issued under the Chicago Venture, Iliad and St. George financing
+agreements because the number of shares ultimately issued to
+Chicago Venture depends on the price at which Chicago Venture
+converts its debt to shares and exercises its warrants. The lower
+the conversion or exercise prices, the more shares that will be
+issued to Chicago Venture upon the conversion of debt to shares. We
+won t know the exact number of shares of stock issued to
+Chicago Venture until the debt is actually converted to
+equity. If all stock option grant and warrant and contingent
+shares are issued, approximately 4.537 billion of our currently
+authorized 6 billion shares of common stock will be issued and
+outstanding. For purposes
+of estimating the number of shares issuable upon the
+exercise/conversion of all stock options, warrants and contingent
+shares, we assumed the number of shares and average share prices
+detailed above.
+These
+stock option grant, warrant and contingent shares could result in
+further dilution to common stockholders and may affect the market
+price of the common stock.
+12
+Significant
+shares of common stock are held by our principal shareholders,
+other Company insiders and other large shareholders. As affiliates
+as defined under Rule 144 of the Securities Act or Rule 144 of the
+Company, our principal shareholders, other Company insiders and
+other large shareholders may only sell their shares of common stock
+in the public market pursuant to an effective registration
+statement or in compliance with Rule 144.
+These
+stock option grant, warrant and contingent shares could result in
+further dilution to common stockholders and may affect the market
+price of the common stock.
+Some of our convertible debentures and warrants may require
+adjustment in the conversion price.
+Our
+Convertible Notes Payable may require an adjustment in the current
+conversion price of $0.002535 per share if we issue common stock,
+warrants or equity below the price that is reflected in the
+convertible notes payable. Our warrant with St. George may require
+an adjustment in the exercise price. The conversion price of the
+convertible notes and warrants will have an impact on the market
+price of our common stock. Specifically, if under the terms of the
+convertible notes the conversion price goes down, then the market
+price, and ultimately the trading price, of our common stock will
+go down. If under the terms of the convertible notes the conversion
+price goes up, then the market price, and ultimately the trading
+price, of our common stock will likely go up. In other words, as
+the conversion price goes down, so does the market price of our
+stock. As the conversion price goes up, so presumably does the
+market price of our stock. The more the conversion price goes down,
+the more shares are issued upon conversion of the debt which
+ultimately means the more stock that might flood into the market,
+potentially causing a further depression of our stock.
+We do not anticipate paying any cash dividends on our capital stock
+in the foreseeable future.
+We have
+never declared or paid cash dividends on our capital stock. We
+currently intend to retain all of our future earnings, if any, to
+finance the growth and development of our business, and we do not
+anticipate paying any cash dividends on our capital stock in the
+foreseeable future. In addition, the terms of any future debt
+agreements may preclude us from paying dividends. As a result,
+capital appreciation, if any, of our common stock will be your sole
+source of gain for the foreseeable future.
+Anti-takeover provisions may limit the ability of another party to
+acquire our company, which could cause our stock price to
+decline.
+Our
+certificate of incorporation, as amended, our bylaws and Delaware
+law contain provisions that could discourage, delay or prevent a
+third party from acquiring our company, even if doing so may be
+beneficial to our stockholders. In addition, these provisions could
+limit the price investors would be willing to pay in the future for
+shares of our common stock.
+We may issue preferred stock that could have rights that are
+preferential to the rights of common stock that could discourage
+potentially beneficially transactions to our common
+shareholders.
+An
+issuance of additional shares of preferred stock could result in a
+class of outstanding securities that would have preferences with
+respect to voting rights and dividends and in liquidation over our
+common stock and could, upon conversion or otherwise, have all of
+the rights of our common stock. Our Board of Directors'
+authority to issue preferred stock could discourage potential
+takeover attempts or could delay or prevent a change in control
+through merger, tender offer, proxy contest or otherwise by making
+these attempts more difficult or costly to achieve. The
+issuance of preferred stock could impair the voting, dividend and
+liquidation rights of common stockholders without their
+approval.
+If the company were to dissolve or wind-up, holders of our common
+stock may not receive a liquidation preference.
+If we
+were too wind-up or dissolve the Company and liquidate and
+distribute our assets, our shareholders would share ratably in our
+assets only after we satisfy any amounts we owe to our
+creditors. If our liquidation or dissolution were
+attributable to our inability to profitably operate our business,
+then it is likely that we would have material liabilities at the
+time of liquidation or dissolution. Accordingly, we
+cannot give you any assurance that sufficient assets will remain
+available after the payment of our creditors to enable you to
+receive any liquidation distribution with respect to any shares you
+may hold.
+13
+SPECIAL NOTE REGARDING FORWARD-LOOKING
+STATEMENTS
+This
+prospectus includes statements that are, or may be deemed,
+"forward-looking statements." In some cases, these forward-looking
+statements can be identified by the use of forward-looking
+terminology, including the terms "believes", "estimates",
+"anticipates", "expects", "plans", "intends", "may", "could",
+"might", "will", "should", "approximately" or, in each case, their
+negative or other variations thereon or comparable terminology,
+although not all forward-looking statements contain these words.
+They appear in a number of places throughout this prospectus and
+include statements regarding our intentions, beliefs, projections,
+outlook, analyses or current expectations concerning, among other
+things, our results of operations, financial condition, liquidity,
+prospects, growth and strategies, the length of time that we will
+be able to continue to fund our operating expenses and capital
+expenditures, our expected financing needs and sources of
+financing, the industry in which we operate and the trends that may
+affect the industry or us.
+By
+their nature, forward-looking statements involve risks and
+uncertainties because they relate to events, competitive dynamics,
+and market developments and depend on the economic circumstances
+that may or may not occur in the future or may occur on longer or
+shorter timelines than anticipated. Although we believe that we
+have a reasonable basis for each forward-looking statement
+contained in this prospectus, we caution you that forward-looking
+statements are not guarantees of future performance and that our
+actual results of operations, financial condition and liquidity,
+and the development of the industry in which we operate may differ
+materially from the forward-looking statements contained in this
+prospectus. In addition, even if our results of operations,
+financial condition and liquidity, and the development of the
+industry in which we operate are consistent with the
+forward-looking statements contained in this prospectus, they may
+not be predictive of results or developments in future
+periods.
+Any
+forward-looking statements that we make in this prospectus speak
+only as of the date of such statement, and we undertake no
+obligation to update such statements to reflect events or
+circumstances after the date of this prospectus.
+You
+should also read carefully the factors described in the "Risk
+Factors" section of this prospectus to better understand the risks
+and uncertainties inherent in our business and underlying any
+forward-looking statements. As a result of these factors, we cannot
+assure you that the forward-looking statements in this prospectus
+will prove to be accurate. Furthermore, if our forward-looking
+statements prove to be inaccurate, the inaccuracy may be material.
+In light of the significant uncertainties in these forward-looking
+statements, you should not regard these statements as a
+representation or warranty by us or any other person that we will
+achieve our objectives and plans in any specified timeframe, or at
+all. We disclaim any obligation to update or revise any
+forward-looking statement as a result of new information, future
+events or for any other reason.
+USE OF PROCEEDS
+Our
+offering is being made in a direct public offering on a
+self-underwritten basis - no minimum of shares must be sold in
+order for the offering to proceed. The offering price per share is
+$0.004 There is no assurance that we will raise the full $2,500,000
+as anticipated.
+14
+Not
+taking into account any possible additional funding or revenues,
+the Company intends to use the proceeds from this offering as
+follows. The following chart indicates the amount of funds that we
+will allocate to each item, but does not indicate the total
+fee/cost of each item. The amount of proceeds we allocate to
+each item is dependent upon the amount of proceeds we receive from
+this offering:
+100% of
+50% of
+25% of
+Shares Sold
+Shares Sold
+Shares Sold

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+ RISK FACTORS Some of the following risks relate principally to us, the industry in which we operate and our business in general. Other risks relate principally to the securities market and ownership of our common shares. The occurrence of any of the events described in this section could significantly and negatively affect our business, financial condition, operating results or cash available for dividends, if any, or the trading price of our common shares. Risks Relating to Our Business The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The accompanying condensed consolidated financial statements have been prepared on a going concern basis as of and for the three-month period ended March 31, 2019 and December 31, 2018, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. For the year ended December 31, 2018, the Company had revenues of 4,589,203 thousand (approximately $3,921,524USD) and sustained a net loss of 1,138,660 thousand (approximately $972,997USD). For the three months ended March 31, 2019 the Company revenues of 1,280,331 thousand (approximately $1,094,056USD) and sustained a net income of 108,409 thousand (approximately $92,636USD). In addition, the Company had an accumulated deficit of 11,522,789 thousand (approximately $9,846,349USD) and 11,631,198 thousand (approximately $9,938,986USD) as of March 31, 2019 and December 31, 2018, respectively. Our condensed consolidated financial statements contemplate that we will continue as a going concern and do not contain any adjustments that might result if we were unable to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability to raise additional capital and implement our business plan. If we are unable to achieve or sustain profitability or to secure additional financing on acceptable terms, we may not be able to meet our obligations as they come due, raising substantial doubts as to our ability to continue as a going concern. Any such inability to continue as a going concern may result in our stockholders losing their entire investment. There is no guarantee that we will become profitable or secure additional financing on acceptable terms We may not be able to raise equity and debt financing sufficient to meet our capital and operating needs and to comply with the covenants that we expect will be contained in our debt agreements, which could have a material adverse effect on our business, financial condition, results of operations and cash flows. We cannot assure you that the net proceeds from any future equity offering or debt financing would be sufficient to satisfy our capital and operating needs and enable us to comply with various debt covenants that we expect will be contained in future debt agreements. In such case, we may not be able to raise additional equity capital or obtain additional debt financing or refinance our existing indebtedness, if necessary. If we are not able to comply with the covenants that we expect will be contained in future debt agreements and our lenders choose to accelerate our indebtedness and foreclose their liens, we could be required to sell any vessels we may own and our ability to continue to conduct our business would be impaired. We are currently in default under certain of our borrowings, and our continued inability to repay these borrowings may adversely affect our financial condition and results of operations. We are currently in default under certain of our borrowings. As of March 31, 2018, we are currently in default of an aggregate of 500,000 thousand in borrowings from two lenders. The borrowings are unsecured and bear an interest of 6.00% per annum. We are currently in negotiations with both lenders to extend the maturity date for each of the borrowings to reduce the risk of further defaults in the near term. However, there can be no assurance that we will be successful in renegotiating these extensions or that we will be able to secure additional funding to repay these borrowings. If we are unable to renegotiate these extensions or secure additional funding to repay these borrowings, this may adversely affect our financial condition and results of operations. Most of our ECDIS sales revenues come from South Korean government contracts. ECDIS sales are a major part of our business. South Korean government contracts make up approximately 95% of our ECDIS sales. Should we fail in the future to obtain South Korean government contracts or are unable to win government contracts at the rate we are currently, our revenues may decrease significantly. A material failure, inadequacy, interruption or security failure of our technology networks and related systems could harm our business. Our information technology networks and related systems are essential to our ability to conduct our day to day operations. As a result, we face risks associated with security breaches, whether through cyber-attacks or cyber intrusions over the internet, malware, computer viruses, attachments to emails, persons who access our systems from inside or outside our organization and other significant disruptions of our information technology networks and related systems. A security breach or other significant disruption involving our information technology networks and related systems or those of our vendors could: disrupt our operations; result in the unauthorized access to, and the destruction, loss, theft, misappropriation or release of, proprietary, personally identifiable, confidential, sensitive or otherwise valuable information including tenant information and lease data, which others could use to compete against us or which could expose us to damage claims by third parties for disruptive, destructive or otherwise harmful outcomes; require significant management attention and resources to remedy any damages that result; subject us to claims for breach of contract, damages, credits, penalties or termination of leases or other agreements; or damage our business relationships or reputation generally. Any or all of the foregoing could materially and adversely affect our business and the value of our stock. The risk of counterparties failing to meet their obligations could cause us to suffer losses or otherwise adversely affect our business. We may enter into in the future, among other things, credit facilities with banks and interest rate swap agreements. Such agreements also would subject us to counterparty risks. The ability of each of the counterparties to perform its obligations under a contract with us will depend on a number of factors that are beyond our control and may include, among other things, general economic conditions, the condition of our industry sector, the overall financial condition of the counterparty, and various expenses. Should a counterparty fail to honor its obligations under agreements with us, we could sustain significant losses which could have a material adverse effect on our business, financial condition, results of operations and cash flows. We or our management may be unable to attract and retain key management personnel and other employees in the shipping industry, which may negatively impact the effectiveness of our management and results of operations. Our success depends to a significant extent upon the abilities and efforts of our management team, including our ability to retain key members of our management team and to hire new members as may be necessary. The loss of any of these individuals could adversely affect our business prospects and financial condition. Difficulty in hiring and retaining replacement personnel could adversely affect our business, results of operations and ability to pay dividends. We do not intend to maintain "key man" life insurance on any of our officers or other members of our management team. Our success is dependent upon our ability to adequately and appropriately serve our customers. Our operations are heavily dependent upon the delivery of superior customer service across a broad customer base, by which negative feedback from agents, insureds or internal staff could result in a loss of revenue for the Company. We may have to pay tax on U.S. source income, which would reduce our earnings. As a foreign corporation to the United States, our operating income generally is taxable in the United States if it is effectively connected with the conduct of a trade or business in the United States. In order to be effectively connected with the conduct of a trade or business in the United States, operating income must be from sources within the United States. The income we derive from the sale of our products and solutions is not derived from sources within the United States. Our products and solutions are provided to companies operating outside the United States and consist of services performed outside the United States. Accordingly, we do not believe that we would be taxable in the United States on our general operating income. However there can be no assurance that we will not have to pay tax on U.S. source income and, if we do, our earnings would be reduced. Industry Specific Risk Factors Risks associated with operating ocean-going vessels in the future could affect our business and reputation, which could adversely affect our revenues and stock price. The operation of ocean-going vessels carries inherent risks. These risks include the possibility of: marine disaster; environmental accidents; cargo and property losses or damage; business interruptions caused by mechanical failure, human error, war, terrorism, political action in various countries, labor strikes or adverse weather conditions; and piracy. These hazards may result in death or injury to persons, loss of revenues or property, environmental damage, damage to our customer relationships, delay or rerouting. World events could adversely affect our results of operations and financial condition. Terrorist attacks and the threat of future terrorist attacks around the world may cause uncertainty in the world s financial markets and may affect our ability to revive manufacturing operations, operating results and financial condition. Continuing conflicts and recent developments in the Middle East, including Egypt, and North Africa, and the presence of U.S. or other armed forces in the Middle East, may lead to additional acts of terrorism and armed conflict around the world, which may contribute to further economic instability in the global financial markets. These uncertainties could also adversely affect our ability to obtain additional financing on terms acceptable to us or at all. In the past, political conflicts have also resulted in attacks on vessels, such as the attack on the MT Limburg, a vessel unaffiliated with us, in October 2002, mining of waterways and other efforts to disrupt international shipping, particularly in the Arabian Gulf region. Acts of terrorism and piracy have also affected vessels trading in regions such as the South China Sea and the Gulf of Aden off the coast of Somalia. Any of these occurrences could have a material adverse impact on our operating results. In the highly competitive international shipping industry, we may not be able to compete for contracts with new entrants or established companies with greater resources which may have a material adverse effect on our business, prospects, financial conditions, liquidity and results of operations. The naval navigation and communication systems market is highly competitive. Some competitors have substantially greater resources than we have. Competition for the contracts is intense and depends on price, location and reputation. Our competitors with greater resources and access to capital than we have may be able to offer lower rates and higher quality products than we may be able to offer. If this were to occur, we may be unable to attract new or former customers on attractive terms or at all, which may have a material adverse effect on our business, prospects, financial condition, liquidity and results of operations. Our competitors may develop products that are less expensive, are safer or more effective, and thus may diminish or eliminate the commercial success of any potential products that we may commercialize. If our competitors market products that are less expensive, safer or more effective than our future products developed from our product candidates, or that reach the market before our product candidates, we may not achieve commercial success. The market may choose to continue utilizing the existing products for any number of reasons, including familiarity with or pricing of these existing products. The failure of any of our product candidates to compete with products marketed by our competitors would impair our ability to generate revenue, which would have a material adverse effect on our future business, financial condition and results of operations. We expect to compete with several companies and our competitors may: develop and market products that are less expensive or more effective than our future products; commercialize competing products before we or our partners can launch any products developed from our product candidates; operate larger research and development programs or have substantially greater financial resources than we do; initiate or withstand substantial price competition more successfully than we can; have greater success in recruiting skilled technical and scientific workers from the limited pool of available talent; more effectively negotiate third-party licenses and strategic relationships; and take advantage of acquisition or other opportunities more readily than we can. Our products are subject to government regulations and customer requirements regarding safety matters that may require significant expenditures by us to ensure compliance. Our products (and certain uses of our products) may be subject to governmental regulations for compliance with applicable safety standards. Any failure to comply with such standards could subject us to both governmental fines as well as possible claims by consumers. Risks Related to Doing Business in Korea The movement of the Korean Won against the U.S. dollar and other currencies may have a material adverse effect on us. The Korean Won has fluctuated significantly against major currencies in recent years, especially as a result of the recent global financial crisis and the relatively speedy recovery of Korean economy therefrom. The appreciation of the Won against U.S. dollar and other foreign currencies typically results in a material increase in the cost of fuel and equipment purchased from overseas and the cost of servicing our foreign currency-denominated debt as the prices for substantially all of the fuel materials and a significant portion of the equipment we purchase are stated in currencies other than the Won, generally in U.S. dollars. As a result, any significant depreciation of Won against the U.S. dollar or other major foreign currencies will have a material adverse effect on our profitability and results of operations. Because we generate all of our revenues in Korean Won but incur a portion of our expenses in other currencies, exchange rate fluctuations could have an adverse impact on our results of operations. We generate substantially all of our revenues in Korean Won but certain of our expenses are incurred in currencies other than the Korean Won. This difference could lead to fluctuations in net income due to changes in the value of the Korean Won relative to these other currencies, in particular the Euro. Expenses incurred in foreign currencies against which the Korean Won falls in value could increase, decreasing our net income and cash flow from operations. Most of the registrant s operations are carried out in the Republic of Korea. As a result, our operations are subject to various political, economic, and other risks and uncertainties. Our main operations are in the Republic of Korea. Our operations are subject to various political, economic, and other risks and uncertainties inherent to the country. Among other risks, the registrant s operations are subject to the risks of political conditions and governmental regulations. If there are any changes to government regulations that affect our ability to operate, we may face significant losses. Escalations in tensions with North Korea could have an adverse effect on us. Relations between Korea and North Korea have been tense throughout Korea s modern history. The level of tension between the two Koreas has fluctuated and may increase abruptly as a result of current and future events. In recent years, there have been heightened security concerns stemming from North Korea s nuclear weapon and long- range missile programs and increased uncertainty regarding North Korea s actions and possible responses from the international community. In December 2002, North Korea removed the seals and surveillance equipment from its Yongbyon nuclear power plant and evicted inspectors from the United Nations International Atomic Energy Agency. In January 2003, North Korea renounced its obligations under the Nuclear Non-Proliferation Treaty. Since the renouncement, Korea, the United States, North Korea, China, Japan and Russia have held numerous rounds of six party multi-lateral talks in an effort to resolve issues relating to North Korea s nuclear weapons program. There can be no assurance that the level of tension on the Korean peninsula will not escalate in the future. Any further increase in tensions, which may occur, for example, if North Korea experiences a leadership crisis, high-level contacts break down or military hostilities occur, could have a material adverse effect on our operations and the market value of our common stock. It may not be possible for investors to enforce U.S. judgments against us. Our operations are primarily conducted outside of the United States. In addition, all of our directors and officers are non-residents of the United States, and all or a substantial portion of the assets of these non-residents are located outside the United States. As a result, it may be difficult or impossible for U.S. investors to serve process within the United States upon us, our subsidiaries or our directors and officers or to enforce a judgment against us for civil liabilities in U.S. courts. In addition, you should not assume that courts in the countries in which we or our subsidiaries are incorporated or where our or the assets of our subsidiaries are located (1) would enforce judgments of U.S. courts obtained in actions against us or our subsidiaries based upon the civil liability provisions of applicable U.S. federal and state securities laws or (2) would enforce, in original actions, liabilities against us or our subsidiaries based on those laws. Failure to comply with the U.S. Foreign Corrupt Practices Act could result in fines, criminal penalties and an adverse effect on our business. We may operate in a number of countries throughout the world, including countries known to have a reputation for corruption. We are committed to doing business in accordance with applicable anti-corruption laws and have adopted a code of business conduct and ethics which is consistent and in full compliance with the U.S. Foreign Corrupt Practices Act of 1977, or the FCPA. We are subject, however, to the risk that we, our affiliated entities or our or their respective officers, directors, employees and agents may take actions determined to be in violation of such anti-corruption laws, including the FCPA. Any such violation could result in substantial fines, sanctions, civil and/or criminal penalties, curtailment of operations in certain jurisdictions, and might adversely affect our business, results of operations or financial condition. In addition, actual or alleged violations could damage our reputation and ability to do business. Furthermore, detecting, investigating, and resolving actual or alleged violations is expensive and can consume significant time and attention of our senior management. We may conduct business in China, where the legal system has inherent uncertainties that could limit the legal protections available to us. Any contracts that we may enter into in the future may be subject to new regulations in China that may require us to incur new or additional compliance or other administrative costs and may require that we pay to the Chinese government new taxes or other fees. Changes in laws and regulations, including with regards to tax matters, and their implementation by local authorities could affect vessels chartered to Chinese customers as well as vessels calling to Chinese ports and could have a material adverse impact on our business, financial condition and results of operations. U.S. tax authorities could treat us as a "passive foreign investment company," which could have adverse U.S. federal income tax consequences to U.S. shareholders. A foreign corporation will be treated as a "passive foreign investment company," or PFIC, for U.S. federal income tax purposes if either (1) at least 75% of its gross income for any taxable year consists of certain types of "passive income" or (2) at least 50% of the average value of the corporation s assets produce, or are held for the production of, those types of "passive income." For purposes of these tests, "passive income" includes dividends, interest, gains from the sale or exchange of investment property, and rents and royalties other than rents and royalties which are received from unrelated parties in connection with the active conduct of a trade or business. For purposes of these tests, income derived from the performance of services does not constitute "passive income." U.S. shareholders of a PFIC are subject to a disadvantageous U.S. federal income tax regime with respect to the income derived by the PFIC, the distributions they receive from the PFIC and the gain, if any, they derive from the sale or other disposition of their shares in the PFIC. Based on our prior method of operations, we do not believe that we will be a PFIC with respect to any taxable year as a result of any income that we may earn. In this regard, we intend to treat the gross income we derive or are deemed to derive from our service activities as services income. Accordingly, we believe that income from our service activities does not constitute "passive income," and the assets that we own and operate in connection with the production of that income do not constitute assets that produce, or are held for the production of, "passive income." However, no assurance can be given that the IRS or a court of law will accept our position, and there is a risk that the IRS or a court of law could determine that we are a PFIC. Moreover, no assurance can be given that we would not constitute a PFIC for any future taxable year if there were to be changes in the nature of our operations. If the IRS were to find that we are or have been a PFIC for any taxable year, our U.S. shareholders would face adverse U.S. federal income tax consequences and information reporting obligations. Under the PFIC rules, unless those U.S. shareholders make an election available under the Code (which election could itself have adverse consequences for such U.S. shareholders), such U.S. shareholders would be liable to pay U.S. federal income tax at the then prevailing U.S. federal income tax rates on ordinary income plus interest upon "excess distributions" and upon any gain from the disposition of our common shares, as if such "excess distribution" or gain had been recognized ratably over the U.S. shareholder s holding period of our common shares. See "Item 10. Additional Information—E. Taxation—Material U.S., Marshall Islands Income Tax Considerations—U.S. Federal Income Taxation of U.S. Holders—Passive Foreign Investment Company Status and Significant Tax Consequences" for a more comprehensive discussion of the U.S. federal income tax consequences to U.S. shareholders if we are treated as a PFIC. The current state of global financial markets and current economic conditions may adversely impact our ability to obtain additional financing or refinance our existing indebtedness on acceptable terms which may hinder or prevent us from expanding our business. Global financial markets and economic conditions continue to be volatile. This volatility has negatively affected the general willingness of banks and other financial institutions to extend credit, particularly in the shipping industry, due to the historically volatile asset values of vessels. The current state of global financial markets might adversely impact our ability to issue additional equity at prices which will not be dilutive to our existing shareholders or preclude us from issuing equity at all. Also, as a result of concerns about the stability of financial markets generally and the solvency of counterparties specifically, the cost of obtaining money from the credit markets has increased as many lenders have increased interest rates, enacted tighter lending standards, refused to refinance existing debt at all or on terms similar to current debt and reduced, and in some cases ceased, to provide funding to borrowers. Due to these factors, we cannot be certain that additional financing will be available if needed and to the extent required, or that we will be able to refinance our existing indebtedness, on acceptable terms or at all. If additional financing or refinancing is not available when needed, or is available only on unfavorable terms, we may be unable to meet our obligations as they come due or we may be unable to revive our shipping operations, complete potential vessel acquisitions or otherwise take advantage of business opportunities as they arise. The instability of the euro or the inability of countries to refinance their debts could have a material adverse effect on our revenue, profitability and financial position. As a result of the credit crisis in Europe, in particular in Greece, Italy, Ireland, Portugal and Spain, the European Commission created the European Financial Stability Facility (the "EFSF"), and the European Financial Stability Mechanism (the "EFSM"), to provide funding to Eurozone countries in financial difficulties that seek such support. In March 2011, the European Council agreed on the need for Eurozone countries to establish a permanent stability mechanism, the European Stability Mechanism, which was established on September 27, 2012 to assume the role of the EFSF and the EFSM in providing external financial assistance to Eurozone countries. Despite these measures, concerns persist regarding the debt burden of certain Eurozone countries and their ability to meet future financial obligations and the overall stability of the euro. An extended period of adverse developments in the outlook for European countries could reduce the overall demand for our products and services. These potential developments, or market perceptions concerning these and related issues, could affect our financial position, results of operations and cash flows. Risks Related to Our Common Stock There is not an active liquid trading market for the Company s common stock. The Company s common stock is quoted on the OTC Pink Market under the symbol "EMRN". However, there has been minimal reported trading to date in the Company s common stock, and we cannot give an assurance that an active trading market will develop. As a result, investors may find it difficult to dispose of, or to obtain accurate quotations of the price of, our securities. This severely limits the liquidity of the common stock and may adversely affect the market price of our common stock. A limited market may also impair our ability to raise capital by selling shares of capital stock and may impair our ability to acquire other companies or assets by using common stock as consideration. If an active market for the Company s common stock develops, there is a significant risk that the Company s stock price may fluctuate dramatically in the future in response to any of the following factors, some of which are beyond our control: variations in our quarterly operating results; announcements that our revenue or income are below analysts expectations; general economic slowdowns; sales of large blocks of the Company s common stock; and announcements by us or our competitors of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments. Our common stock may be subject to the "penny stock" rules of the Securities and Exchange Commission, which may make it more difficult for stockholders to sell our common stock. The SEC has adopted Rule 15g-9 which establishes the definition of a "penny stock," for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require that a broker or dealer approve a person s account for transactions in penny stocks, and the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person s account for transactions in penny stocks, the broker or dealer must obtain financial information and investment experience objectives of the person and make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form sets forth the basis on which the broker or dealer made the suitability determination, and that the broker or dealer received a signed, written agreement from the investor prior to the transaction. Generally, brokers may be less willing to execute transactions in securities subject to the "penny stock" rules. This may make it more difficult for investors to dispose of the Company s common stock if and when such shares are eligible for sale and may cause a decline in the market value of its stock. Because we became a public by means of a reverse acquisition, we may not be able to attract the attention of brokerage firms. Because we became public through a "reverse acquisition", securities analysts of brokerage firms may not provide coverage of us since there is little incentive to brokerage firms to recommend the purchase of our common stock. No assurance can be given that brokerage firms will want to conduct any secondary offerings on behalf of the Company in the future. Applicable regulatory requirements, including those contained in and issued under the Sarbanes-Oxley Act of 2002, may make it difficult for the Company to retain or attract qualified officers and directors, which could adversely affect the management of its business and its ability to obtain or retain listing of its common stock. We may be unable to attract and retain those qualified officers, directors and members of board committees required to provide for effective management because of the rules and regulations that govern publicly held companies, including, but not limited to, certifications by principal executive officers. The enactment of the Sarbanes-Oxley Act has resulted in the issuance of a series of related rules and regulations and the strengthening of existing rules and regulations by the SEC, as well as the adoption of new and more stringent rules by the stock exchanges. The perceived increased personal risk associated with these changes may deter qualified individuals from accepting roles as directors and executive officers. Further, some of these changes heighten the requirements for board or committee membership, particularly with respect to an individual s independence from the corporation and level of experience in finance and accounting matters. We may have difficulty attracting and retaining directors with the requisite qualifications. If we are unable to attract and retain qualified officers and directors, the management of its business and its ability to obtain or retain listing of our shares of common stock on any stock exchange (assuming we elect to seek and are successful in obtaining such listing) could be adversely affected. Public company compliance may make it more difficult to attract and retain officers and directors. The Sarbanes-Oxley Act and new rules subsequently implemented by the SEC have required changes in corporate governance practices of public companies. As a public company, we expect these new rules and regulations to increase our compliance costs in and to make certain activities more time consuming and costly. As a public company, we also expect that these rules and regulations may make it more difficult and expensive for us to obtain director and officer liability insurance in the future and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our board of directors or as executive officers. We do not intend to pay dividends for the foreseeable future. We have paid no dividends on our common stock to date and we do not anticipate paying any cash dividends to holders of our common stock in the foreseeable future. While our future dividend policy will be based on the operating results and capital needs of the business, we currently anticipate that we will retain any earnings to finance our future expansion and for the implementation of our business plan. A lack of a dividend can further affect the market value of our stock and could significantly affect the value of any investment in our Company. Our stockholders may experience significant dilution. We have a significant number of warrants to purchase our common stock outstanding, the exercise of which would be dilutive to stockholders. In certain instances, the exercise prices are subject to adjustment if we issue or sell shares of our common stock or equity-based instruments at a price per share less than the exercise price then in effect. In such case, both the issuance and the adjustment would be dilutive to stockholders. We may from time to time finance our future operations or acquisitions through the issuance of equity securities, which securities may also have rights and preferences senior to the rights and preferences of our common stock. We may also grant options to purchase shares of our common stock to our directors, employees and consultants, the exercise of which would also result in dilution to our stockholders. As an issuer of "penny stock", the protection provided by the federal securities laws relating to forward looking statements does not apply to us. Although federal securities laws provide a safe harbor for forward-looking statements made by a public company that files reports under the federal securities laws, this safe harbor is not available to issuers of penny stocks. As a result, we will not have the benefit of this safe harbor protection in the event of any legal action based upon a claim that the material provided by us contained a material misstatement of fact or was misleading in any material respect because of our failure to include any statements necessary to make the statements not misleading. Such an action could hurt our financial condition. Risks Relating to this Offering If the Selling Stockholders sell a large number of shares all at once or in blocks, the market price of our shares would most likely decline. A significant number of shares of Common Stock may be resold by the Selling Stockholders through this prospectus and as a result of any other registration statement we may file in the future. Should the Selling Stockholders decide to sell their shares at a price below the market price as quoted on the OTC Markets Group, Inc., or any other exchange or market on which our Common Stock might be listed in the future, the price may continue to decline. A steep decline in the price of our Common Stock would adversely affect our ability to raise additional equity capital, and even if we were successful in raising such capital, the terms of such raise may be substantially dilutive to current stockholders SPECIAL

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+ RISK FACTORS Investing in our common stock involves a high degree of risk. Before investing in our common stock, you should consider carefully the risks described below, together with the other information contained in this prospectus and incorporated by reference in this prospectus, including the risk factors incorporated by reference from our Annual Report on Form 10-K for the year ended December 31, 2018 and other filings we make with the SEC. We believe the risks described below and incorporated by reference herein are the risks that are material to us as of the date of this prospectus. If any of the following risks or the risks incorporated by reference herein occur, our business, financial condition, results of operations and future growth prospects could be materially and adversely affected. In these circumstances, the market price of our common stock could decline, and you may lose all or part of your investment. Risks Related to Our Common Stock and this Offering The price of our common stock may be volatile, and you may be unable to resell your shares at or above this follow on offering price. If you purchase shares of common stock in this offering you may be unable to sell those shares of common stock at or above the public offering price. The trading price of our common stock has fluctuated, and it is likely to continue to be subject to substantial fluctuations in response to various factors, some of which are beyond our control. Since the shares were sold in our initial public offering in November 2018 at a price of $14.00 per share, the price per share of our common stock has ranged as low as $14.70 and as high as $24.63 through July 29, 2019. Factors that could cause volatility in the market price of our common stock include, but are not limited to: actual or anticipated fluctuations in our financial condition and operating results; actual or anticipated changes in our growth rate relative to our competitors; commercial success and market acceptance of our products; success of our competitors in developing or commercializing products; ability to commercialize or obtain regulatory approvals for our products, or delays in commercializing or obtaining regulatory approvals; strategic transactions undertaken by us; additions or departures of key personnel; product liability claims; prevailing economic conditions; disputes concerning our intellectual property or other proprietary rights; FDA or other U.S. or foreign regulatory actions affecting us or the healthcare industry; healthcare reform measures in the United States; sales of our common stock by our officers, directors or significant stockholders; future sales or issuances of equity or debt securities by us; Table of Contents international trade disputes; business disruptions caused by earthquakes, fires or other natural disasters; and issuance of new or changed securities analysts reports or recommendations regarding us. In addition, the stock market in general, and the market for companies like ours in particular, have from time to time experienced extreme volatility that has been often unrelated to the operating performance of particular companies. A certain degree of stock price volatility can be attributed to being a newly public company. These broad market and industry fluctuations may negatively impact the price or liquidity of our common stock, regardless of our operating performance. For these reasons, we believe comparisons of our financial results from various reporting periods are not necessarily meaningful and should not be relied upon as an indication of our future performance. Investors in this offering will suffer immediate and substantial dilution of their investment. If you purchase common stock in this offering, you will pay more for your shares than our as adjusted net tangible book value per share. Based upon an assumed public offering price of $19.20 per share, the last reported sale price of our common stock on the NYSE on July 29, 2019, you will incur immediate and substantial dilution of $15.48 per share, representing the difference between our assumed public offering price and our as adjusted net tangible book value per share. To the extent outstanding stock options or warrants are exercised, new investors may incur further dilution. See Dilution for additional information. A significant portion of our total outstanding shares may be sold into the public market at any time, which could cause the market price of our common stock to drop significantly, even if our business is doing well. Sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or the market perception that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock. Subject to the restrictions set forth in the 90-day lock-up agreements entered into by each of our directors and officers and certain of our stockholders in connection with this offering as described elsewhere in this prospectus under the heading Underwriting (which restrictions may be waived, with or without notice, by BofA Securities, Inc. and William Blair & Company, L.L.C.), outstanding shares of our common stock may be freely sold in the public market at any time to the extent permitted by Rules 144 and 701 under the Securities Act of 1933, as amended, or the Securities Act, or to the extent that such shares have already been registered under the Securities Act and are held by non-affiliates of ours. Moreover, holders of a substantial number of shares of our common stock have rights, subject to certain conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders. We also have registered all shares of common stock that we may issue under our equity compensation plans or that are issuable upon exercise of outstanding options. These shares can be freely sold in the public market upon issuance and once vested, subject to volume limitations applicable to affiliates. If any of these additional shares are sold, or if it is perceived that they will be sold, in the public market, the market price of our common stock could decline. We will have broad discretion in the use of the net proceeds from this offering and may invest or spend the proceeds in ways which you do not agree with or that may not yield a return. We currently intend to use the net proceeds from this offering to hire additional sales and marketing personnel and expand marketing programs both in the United States and internationally, to fund product development and research and development activities and for working capital and other general corporate purposes, as described in Use of Proceeds. Although we currently intend to use the net proceeds from this offering in such a manner, we will have broad discretion in the application of the net proceeds. We may use the net proceeds for purposes that do not yield a significant return or any return at all for our stockholders. Table of Contents

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+ RISK FACTORS An investment in our common units involves a high degree of risk. You should carefully consider the risks described below and the risks set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, including, without limitation, the risks described therein related to our growth strategy, our business and the death care industry, together with the other information included or incorporated by reference in this prospectus, before making a decision to invest in our common units or to exercise your subscription rights to purchase common units. If any of these risks actually occur, our business, results of operations and financial condition could suffer. In that case, the market price of our common units could decline, and you may lose all or part of your investment. In addition to the risk factors below related to our business, the Recapitalization Transactions and this offering, we hereby incorporate by reference all of our risk factors included in our Annual Report on Form 10-K for the year ended December 31, 2018. Capitalized terms that are used herein when referring to the Indenture but not defined herein shall have the meaning assigned to such terms in the Indenture. Risks Related to our Business and the Recapitalization Transactions Our turnaround strategy may cause a disruption in operations and may not be successful. In April 2019, we outlined and began implementing a turnaround strategy to return to profitability, which is focused on four key goals: cash flow and liquidity, capital structure, strategic balance sheet/portfolio review and performance improvement from cost reductions and revenue enhancement. The turnaround strategy may negatively impact our operations, which could include disruptions from the realignment of operational functions within the home office, sales of selected properties, changes in the administrative reporting structure and changes in our product assortments or marketing strategies. These changes could adversely affect our business operations and financial results. The impact of these disruptions may be material. These changes could also decrease the cash we have available to fund ongoing liquidity and working capital requirements, and we may experience periods of limited liquidity. In addition, we are currently not generating sufficient cash flow to cover the interest payments on our debt and meet our operating liquidity needs. If our turnaround strategy is not successful, takes longer than initially projected or is not executed effectively, our business operations, financial results, liquidity and cash flow will be adversely affected. Furthermore, no assurances can be given that our turnaround strategy, even if implemented properly, will result in a return to profitability. Economic, financial and stock market fluctuations could affect future potential earnings and cash flows and could result in future goodwill, intangible assets and other long-lived assets impairment, in addition to other financial risks. In addition to an annual review, we assess the impairment of goodwill, intangible assets and other long-lived assets whenever events or changes in circumstances indicate that the carrying value may be greater than fair value. Factors that could trigger an interim impairment review include, but are not limited to, a significant decline in the market value of our stock or debt values, significant under-performance relative to historical or projected future operating results and significant negative industry or economic trends. If these factors occur, we may have a triggering event, which could result in an impairment of our goodwill. Based on the results of our annual goodwill and intangible assets impairment test performed as of October 1, 2018 and our annual review of long-lived assets as of December 31, 2018, we concluded that there was no impairment of our goodwill, intangible assets or other long-lived assets. In order to address these issues, we may be required to issue additional equity or obtain additional financing, the forms and availability of which we cannot predict. Should our strategic initiatives, asset divestitures and capital raising efforts all prove unsuccessful, the cumulative impact of these operational and financial concerns could negatively impact our ability to continue as a going concern. We have not yet performed our annual goodwill and intangible impairment review for 2019. This will be performed effective October 1, 2019. In addition to our annual analysis, due to the trading price of our common units and operating results, on a going forward basis, we will be required to perform interim triggering event Table of Contents goodwill impairment analysis. Accordingly, we have not yet determined if there are any impairment charges to be recognized. Our market capitalization continues to show declines in the market place. This trend may indicate our goodwill and intangible assets should be impaired for 2019, and these impairments may be material. In addition we believe there may also be a recognized non-cash deferred tax liability of approximately $31 million, which may be accrued concurrent with the consummation of the C-Corp Conversion. We are under leadership of a new Board of Directors, who collectively have a limited operating history with the Partnership. In connection with the Recapitalization Transactions, the Board of Directors of GP was reconstituted. Directors Martin R. Lautman, Ph.D., Leo J. Pound, Robert A Sick and Fenton R. Talbott resigned as directors and, pursuant to the Amended and Restated Limited Liability Company Agreement of GP, the authorized number of directors was reduced to seven and Andrew Axelrod, David Miller and Spencer Goldenberg were elected to the board of directors of GP to fill the vacancies created by the resignations. The reconstituted board of directors is comprised of Messrs. Axelrod, Miller and Goldenberg, Robert Hellman, Stephen Negrotti, Patricia Wellenbach and Joe Redling. Certain of our new board members have limited experience with our management team and our business. The ability of our new directors to quickly understand our business plans, operations and turnaround strategies will be critical to their ability to make informed and effective decisions about our strategy and operations, particularly given the competitive environment in which our businesses operate. Our level of indebtedness could adversely affect our financial condition and prevent us from fulfilling our debt obligations. Our indebtedness requires significant interest and principal payments. As of June 30, 2019, we had $386.0 million of total debt (excluding debt issuance costs, debt discounts and capital lease obligations), consisting of $385.0 million of Senior Secured PIK Toggle Notes and $1.0 million of financed vehicles. The Issuers are to pay quarterly interest at either a fixed rate of 9.875% per annum in cash or, at their periodic option through January 30, 2022, a fixed rate of 7.50% per annum in cash plus a fixed rate of 4.00% per annum payable in kind. The Senior Secured Notes will require cash interest payments at 9.875% for all interest periods after January 30, 2022. Our and our subsidiaries level of indebtedness could have important consequences to us, including: continuing to require us and certain of our subsidiaries to dedicate a substantial portion of our cash flow from operations to the payment of our indebtedness, thereby reducing the funds available for operations and any future business opportunities; limiting flexibility in planning for, or reacting to, changes in our business or the industry in which we operate; placing us at a competitive disadvantage compared to our competitors that have less indebtedness; increasing our vulnerability to adverse general economic or industry conditions; and limiting our ability to obtain additional financing to fund working capital, capital expenditures, acquisitions or other general corporate requirements and increasing our cost of borrowing. In addition, the Indenture prohibits us from incurring additional debt or liens for working capital expenditures, acquisitions or other purposes (subject to very limited exceptions), requires us to maintain a minimum liquidity level on a rolling ten business day basis and requires us to meet minimum interest and asset coverage ratios as of the end of each fiscal quarter. Our ability to make payments on and to refinance our indebtedness will depend on our ability to generate cash in the future from operations, financings or asset sales. Our ability to repay our indebtedness and comply with the restrictive and financial maintenance covenants will be dependent on, among other things, the successful execution of our turnaround strategy. If we require additional capacity under the restrictive covenants to successfully execute our turnaround strategy or if we are Table of Contents unable to comply with the financial maintenance covenants, we will need to seek an amendment from a majority of the holders of the Notes. No assurances can be given that we will be successful in obtaining such an amendment and any failure to obtain such an amendment will have a material adverse effect on our business operations and our financial results. Our ability to generate cash is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. We may not generate sufficient funds to service our debt and meet our business needs, such as funding working capital or the expansion of our operations. If we are not able to repay or refinance our debt as it becomes due, we may be forced to take certain actions, including reducing spending on day-to-day operations, reducing future financing for working capital, capital expenditures and general corporate purposes, selling assets or dedicating an unsustainable level of our cash flow from operations to the payment of principal and interest on our indebtedness. In addition, our ability to withstand competitive pressures and to react to changes in our industry could be impaired. The trustee or holders of our debt could also accelerate amounts due in the event that we default, which could potentially trigger a default or acceleration of the maturity of our other debt, including the Notes. Additionally, our leverage could put us at a competitive disadvantage compared to our competitors that are less leveraged. These competitors could have greater financial flexibility to pursue strategic acquisitions and secure additional financing for their operations. Our leverage could also impede our ability to withstand downturns in our industry or the economy in general. We have a history of operating losses and may not achieve or maintain profitability and positive cash flow. We have incurred negative cash flows from operations and net losses for several years and have an accumulated deficit as of June 30, 2019, due to an increased competitive environment, increased expenses due to the proposed C-Corporation Conversion and increases in professional fees and compliance costs. To the extent that we continue to have negative operating cash flow in future periods, we may not have sufficient liquidity and we may not be able to successfully implement our turnaround strategy. We cannot predict if or when we will operate profitably and generate positive cash flows. The prohibition on incurring additional debt in the Indenture for the Notes, as well as future operating results, may require use to issue additional equity securities to finance our working capital and capital expenditure needs. Any such equity issuance may be at a price less than the subscription price, which would result in dilution to your interest in the Partnership. The Indenture prohibits us from incurring additional debt, including to fund working capital and capital expenditures, subject to limited exceptions. This prohibition may require us to issue additional equity securities, which may be in the form of additional preferred units or common units, in order to provide us with sufficient cash to fund our working capital, liquidity and capital expenditure needs. There can be no assurance as to the price and terms on which such equity securities may be issued, and your equity interest in the Partnership may be materially diluted. Furthermore, there can be no assurances that we will be able to issue additional equity on any terms, in which case we may not have sufficient cash to fund our working capital, liquidity and capital expenditure needs and we may be unable to comply with one or more of the financial covenants in the Indenture. Restrictions in the Indenture for the Notes prohibit us from making distributions to you. The Indenture prohibits us from making distributions to you. As a result, you will be able to achieve a return on your investment in the common units purchased in this rights offering only if the common units trade at a premium to the subscription price of $1.20 per common unit. We must comply with covenants in the Indenture for the Notes. Failure to comply with these covenants, which may result from events that are not within our control, may result in an Event of Default under the Indenture, which would have a material adverse effect on the business and financial condition of the Partnership and on the trading price of our common units. The operating and financial restrictions and covenants in the Indenture restrict our ability to finance future operations or capital needs, including working capital and other liquidity, or to expand or pursue our business activities. For example, the Indenture requires us to comply with various affirmative covenants regarding, among other matters, maintenance and investment of trust funds and trust accounts into which certain sales proceeds are Table of Contents required by law to be deposited, minimum liquidity and other covenants. The Indenture also includes other restrictive and financial maintenance covenants including, but not limited to: covenants that, subject to certain exceptions, limit our ability to: incur additional indebtedness, including entering into a working capital facility; grant liens; engage in certain sale/leaseback, merger, consolidation or asset sale transactions; make certain investments; pay dividends or make distributions; engage in affiliate transactions; amend our organizational documents; make capital expenditures; and covenants that require us to maintain: a minimum liquidity level on a rolling ten business day basis; a minimum interest coverage ratio on a trailing twelve month basis as of each fiscal quarter end; and a minimum asset coverage ratio as of each fiscal quarter end. The Indenture also provides for certain events of default, the occurrence and continuation of which could, subject to certain conditions, cause all amounts owing under the Notes to become due and payable, including but not limited to the following: our failure to pay any interest on any senior secured note when it becomes due and payable that remains uncured for five business days; our failure to pay the principal on any of the Notes when they become due and payable, whether at the due date thereof, at a date fixed for redemption, by acceleration or otherwise; our failure to comply with the agreements and covenants relating to maintenance of our legal existence, providing notice of any default or event of default or use of proceeds from the sale of the Notes or any of the restrictive or financial maintenance covenants in the Indenture; our failure to comply with any other agreements or covenants contained in the Indenture or certain other agreements executed in connection with the Indenture that remains uncured for a period of 15 days after the earlier of written notice and request for cure from the Trustee or holders of at least 25% of the aggregate principal amount of the Notes; the acceleration of, or the failure, to pay at final maturity indebtedness (other than the Notes) in a principal amount exceeding $5.0 million; the occurrence of a Change in Control (as defined in the Indenture); certain bankruptcy or insolvency proceedings involving an Issuer or any subsidiary; the C-Corporation Conversion shall not have occurred on or before March 31, 2020 and such default remains uncured for a period of five business days; and failure by the Partnership or any subsidiary to maintain one or more licenses, permits or similar approvals for the conduct of its business where the sum of the revenue associated therewith represents the lesser of (i) 15% of the Partnership s and its subsidiaries consolidated revenue and (ii) $30.0 million, and such breach is not cured within 30 days. Table of Contents At the option of holders holding a majority of the outstanding principal amount of the Notes (and automatically upon any default for failure to pay principal of the Notes when due and payable or certain bankruptcy or insolvency proceedings involving an Issuer), the interest rate on the Notes will increase to 13.50% per annum, payable in cash. Our ability to comply with the covenants and restrictions contained in the Indenture may be affected by events beyond our control, including prevailing economic, financial and industry conditions. As a result of changes in market or other economic conditions, our ability to comply with these covenants may be impaired. If we violate any of the restrictions, covenants, ratios or tests in our Indenture, or fail to pay amounts thereunder when due, the trustee or the holders of at least 25% of the outstanding principal amount of our Notes will be able to accelerate the maturity of all amounts due under the Notes, cause cross-default and demand repayment of amounts outstanding. We might not have, or be able to obtain, sufficient funds to make these accelerated payments, and the failure to make such payments would have a material adverse effect on our business operations and our financial results. Additionally, any subsequent replacement of our debt obligations or any new indebtedness could have similar or greater restrictions. Our merchandise and perpetual care trust funds own investments in equity securities, fixed income securities and mutual funds, which are affected by financial market conditions that are beyond our control. Pursuant to state law, a portion of the proceeds from pre-need sales of merchandise and services is put into merchandise trusts until such time that the Partnership meets the requirements for releasing trust principal, which is generally delivery of merchandise or performance of services. In addition, the Indenture also provides certain limitations on how the assets in the merchandise trusts may be invested. Generally, a majority of the investment earnings generated by the assets in the merchandise trusts, including realized gains and losses, generally are deferred until the associated merchandise is delivered or the services are performed. Also, pursuant to state law, a portion of the proceeds from the sale of cemetery property is required to be paid into perpetual care trusts. The perpetual care trust principal does not belong to the Partnership and must remain in this trust in perpetuity while interest and dividends may be released and used to defray cemetery maintenance costs. We have hired an outside manager to manage these trust assets. There is no guarantee this manager will achieve its objectives and deliver adequate returns, and its investment choices may result in losses. In addition, our returns on these investments are affected by financial market conditions that are beyond our control. If the investments in our trust funds experience significant declines, there could be insufficient funds in the trusts to cover the costs of delivering services and merchandise. Pursuant to state law, we may be required to cover any such shortfall in merchandise trusts with cash flows from operations, which could have a material adverse effect on our financial condition, results of operations or cash flows. If the fair market value of these trusts, plus any other amount due to us upon delivery of the associated contracts, were to decline below the estimated costs to deliver the underlying products and services, we would record a charge to earnings to record a liability for the expected losses on the delivery of the associated contracts. Our ability to use our Net Operating Losses and other Tax Assets is uncertain. As of December 31, 2018, our corporate subsidiaries had net operating loss ( NOL ) carryforwards of approximately $396.6 million for U.S. federal income tax purposes and substantial similar tax assets at the state levels. However, on June 27, 2019, we closed the Recapitalization Transactions. Along with other previous transfers of our interests, we believe the Recapitalization Transactions caused an ownership change for income tax purposes with respect to our corporate subsidiaries, which may significantly limit the corporate subsidiaries ability to use NOLs and certain other tax assets to offset future taxable income, possibly reducing the amount of cash available to our corporate subsidiaries and us to satisfy our obligations. Table of Contents We are involved in Legal Proceedings. We are involved in the disputes and legal proceedings as discussed in Part I. Item 1. Financial Information Notes to the Unaudited Condensed Consolidated Financial Statements Note 11 Commitments and Contingencies of our Quarterly Report on Form 10-Q for the six months ended June 30, 2019. Although Anderson v. StoneMor Partners, LP, et al., No. 2:16-cv-6111 was dismissed by the District Court of Pennsylvania, and that dismissal was affirmed by the Third Circuit on June 20, 2019, a petition for rehearing has been filed with the Third Circuit, and we remain a party to other ongoing litigation against us. In addition, as a public company, we are also potentially susceptible to litigation, such as claims asserting violations of securities laws. Any such claims, with or without merit, if not resolved, could be time-consuming and result in costly litigation. There can be no assurance that an adverse result in any future proceeding would not have a potentially material adverse impact on our business, results of operations or financial condition. For additional information, please see Part I. Item 1. Financial Information Notes to the Unaudited Condensed Consolidated Financial Statements Note 11 Commitments and Contingencies of our Quarterly Report on Form 10-Q for the six months ended June 30, 2019 filed on August 9, 2019. Our ability to generate preneed sales depends on a number of factors, including sales incentives and local and general economic conditions. Significant declines in preneed sales would reduce our backlog and revenue and could reduce our future market share. On the other hand, a significant increase in preneed sales can have a negative impact on cash flow as a result of commissions and other costs incurred initially without corresponding revenue. We are continuing to refine the mix of service and product offerings in both our funeral and cemetery segments, including changes in our sales commission and incentive structure. These changes could cause us to experience declines in preneed sales in the short-run. In addition, economic conditions at the local or national level could cause declines in preneed sales either as a result of less discretionary income or lower consumer confidence. Declines in preneed cemetery property sales reduces current revenue, and declines in other preneed sales would reduce our backlog and future revenue and could reduce future market share. Risks Related to this Offering The market price of our common units is volatile and may decline before or after the subscription rights expire. The market price of our common units could be subject to wide fluctuations in response to numerous factors, some of which are beyond our control. These factors include, among other things, actual or anticipated variations in our costs of doing business, operating results and cash flow; the nature and content of our earnings releases and our competitors earnings releases; actions taken by our customers and competitors; changes in financial estimates by securities analysts, business conditions in our markets and the general state of the securities markets and the market for similar stocks; changes in capital markets that affect the perceived availability of capital to companies in our industries; governmental legislation or regulation; and general economic and market conditions, such as continued downturns in our economy and recessions. We cannot assure you that the market price of our common units will not decline after you elect to exercise your subscription rights. If that occurs, you may have committed to buy common units in the rights offering at a price greater than the prevailing market price and could have an immediate unrealized loss. Moreover, we cannot assure you that following the exercise of your subscription rights you will be able to sell your common units at a price equal to or greater than the subscription price. Until common units are delivered upon expiration of the rights offering, you will not be able to sell the common units that you purchase in the rights offering. Certificates (physical, electronic or book entry from) representing common units purchased will be delivered as soon as practicable after expiration of the rights offering. We will not pay you interest on funds delivered to the Subscription Agent pursuant to the exercise of subscription rights. Table of Contents Your interest in our company may be further diluted as a result of this offering. Common unitholders who do not fully exercise their respective rights will not benefit from the opportunity to reduce the dilution of their interest that resulted from the Recapitalization Transactions, and should expect that they will, at the completion of this rights offering, own a smaller proportional interest in our company than would otherwise be the case had they fully exercised their subscription rights. The subscription rights are not transferable, and there is no market for the subscription rights. You may not sell, transfer or assign your subscription rights. The subscription rights are only transferable by operation of law. Because the subscription rights are non-transferable, there is no market or other means for you to directly realize any value associated with the subscription rights. You must exercise the subscription rights and acquire common units pursuant thereto to realize any value that may be embedded in the subscription rights. This rights offering may cause the price of our common units to decrease. Depending upon the trading price of our common units at the time of our announcement of the announcement of the rights offering and its terms, including the subscription price, together with the number of common units we propose to issue and ultimately will issue if this rights offering is completed, the rights offering may result in an immediate decrease in the market value of our common units. This decrease may continue after the completion of this rights offering. If that occurs, you may have committed to buy common units in the rights offering at a price greater than the prevailing market price. Furthermore, if a substantial number of subscription rights are exercised and the holders of the common units received upon exercise of those subscription rights choose to sell some or all of those common units, the resulting sales could depress the market price of our common units. Your purchase of common units in the rights offering may be at a price greater than the prevailing trading price. There is no assurance that following the exercise of your rights you will be able to sell your common units at a price equal to or greater than the subscription price. You could be committed to buying common units above the prevailing market price. Once you exercise your subscription rights, you may not revoke such exercise even if you later learn information that you consider to be unfavorable to the exercise of your rights. We cannot assure you that the market price of our common units will not decline prior to the expiration of this rights offering or that a subscribing rights holder will be able to sell common units purchased in this rights offering at a price equal to or greater than the subscription price. We may issue additional securities, which could further dilute the ownership percentage of holders of our common units. After completion of the rights offering, we may issue additional securities to raise additional capital and if we do, the ownership percentage of holders of our common units could be further diluted. The subscription price determined for this rights offering is not an indication of the fair value of our common units. In connection with our entry into the Series A Purchase Agreement, we set the subscription price of $1.20 per common unit through negotiations between our general partner and our largest common unitholder. The subscription price does not necessarily bear any relationship to the book value of our assets, results of operations, cash flows, losses, financial condition or any other established criteria for value. You should not consider the subscription price as an indication of the fair value of our common units. After the date of this prospectus supplement, our common units may trade at prices above or below the subscription price. Table of Contents If we terminate this rights offering for any reason, we will have no obligation other than to return subscription monies promptly. We may decide, in our discretion and for any reason, to cancel or terminate the rights offering at any time prior to the expiration date. If this rights offering is terminated, we will have no obligation with respect to rights that have been exercised except to return promptly, without interest or deduction, the subscription monies deposited with the Subscription Agent. If we terminate this rights offering and you have not exercised any rights, such rights will expire worthless. Our common units price may be volatile as a result of this rights offering. The trading price of our common units may fluctuate substantially. The price of the common units that will prevail in the market after this rights offering may be higher or lower than the subscription price depending on many factors, some of which are beyond our control and may not be directly related to our operating performance. These factors include, but are not limited to, the following: price and volume fluctuations in the overall stock market from time to time; significant volatility in the market price and trading volume of our securities; actual or anticipated changes or fluctuations in our operating results; material announcements by us regarding business performance, financings, mergers and acquisitions or other transactions; general economic conditions and trends; competitive factors; loss of key supplier or distribution relationships; or departures of key personnel. If you do not act on a timely basis and follow subscription instructions, your exercise of rights may be rejected. Holders of common units who desire to purchase common units in this rights offering must act on a timely basis to ensure that all required forms and payments are actually received by the Subscription Agent prior to 5:00 p.m., New York City time, on the expiration date, unless extended. If you are a beneficial owner of common units and you wish to exercise your rights, you must act promptly to ensure that your broker, dealer, custodian bank, trustee or other nominee acts for you and that all required forms and payments are actually received by your broker, dealer, custodian bank, trustee or other nominee in sufficient time to deliver such forms and payments to the Subscription Agent to exercise the rights granted in this rights offering that you beneficially own prior to 5:00 p.m., New York City time on the expiration date, as may be extended. We will not be responsible if your broker, dealer, custodian bank, trustee or other nominee fails to ensure that all required forms and payments are actually received by the Subscription Agent prior to 5:00 p.m., New York City time, on the expiration date, as may be extended. If you fail to complete and sign the required subscription forms, send an incorrect payment amount or otherwise fail to follow the subscription procedures that apply to your exercise in this offering, the Subscription Agent may, depending on the circumstances, reject your subscription or accept it only to the extent of the payment received. Neither we nor the Subscription Agent undertake to contact you concerning an incomplete or incorrect subscription form or payment nor are we under any obligation to correct such forms or payment. We have the sole discretion to determine whether a subscription exercise properly follows the subscription procedures. Table of Contents If you make payment of the subscription price by uncertified check, your check may not clear in sufficient time to enable you to purchase common units in this rights offering. Any uncertified check used to pay for common units to be issued in this rights offering must clear prior to the expiration date of this rights offering, and the clearing process may require five or more business days. If you choose to exercise your subscription rights, in whole or in part, and to pay for common units by uncertified check and your check has not cleared prior to the expiration date of this rights offering, you will not have satisfied the conditions to exercise your subscription rights and will not receive the common units you wish to purchase. We do not expect the rights offering to be a taxable event to our unitholders. While no controlling authority addresses the taxability of the rights offering, we expect that our unitholders will not recognize taxable income as a result of the receipt of non-transferable rights to purchase our common units. However, the issue is not free from doubt, and if the IRS disagrees with our position, our unitholders could be required to recognize taxable income as a result of the rights offering If you exercise your subscription rights, you may receive a gross income allocation that may materially increase the net income allocated to you. If you exercise your subscription rights, you may receive an allocation of gross income equal to the amount by which (i) an existing common unitholder s capital account (as adjusted to reflect the fair market value of our assets) at the time of exercise exceeds (ii) the exercise price, which may materially increase the net income or reduce the net loss allocated to you. Because gross income allocations to exercising subscription rights holders would reduce the net income otherwise allocable to existing common unitholders (partially offsetting the gross income allocation), the higher the level of participation in the rights offering, the lesser the net effect of these gross income allocations will be upon you or any particular exercising subscription right holder. However, it is possible that the full gross income allocation will be taxable to those who exercise their subscription rights. In some circumstances, you may recognize income or gain as a result of the exercise of subscription rights by other unitholders. If you do not exercise your subscription rights, a portion of our liabilities currently allocable to you and our other existing common unitholders will be shifted to the holders of new common units issued upon the exercise of the subscription rights. Thus, to the extent that your share of our liabilities is reduced, including by failure to exercise the subscription rights, you will be deemed to have received a cash distribution equal to the amount by which your share of our liabilities is reduced, which is referred to as a reducing debt shift. Cash distributions made by us generally will not be taxable to you for U.S. federal income tax purposes, except to the extent the amount of any such cash distribution exceeds your tax basis in your common units immediately before the distribution. You generally would not recognize taxable gain if your tax basis in your common units is positive without including any basis associated with your share of our liabilities. Cash distributions from us that are in excess of your tax basis generally will be considered to be gain from the sale or exchange of your common units. Thus, if a reducing debt shift results in a deemed cash distribution that exceeds your basis in your common units, you would recognize gain in an amount equal to such excess. On June 27, 2019, we closed the Recapitalization Transactions. We expect that the Recapitalization Transactions and/or the rights offering has or will trigger an ownership change with respect to our corporate subsidiaries, which could significantly limit the corporate subsidiaries ability to use NOLs and certain other tax assets to offset future taxable income, possibly reducing the amount of cash available to our corporate subsidiaries and to us to satisfy our obligations. Table of Contents We may amend or modify the terms of the rights offering at any time prior to the expiration of the rights offering in our sole discretion. Although we do not presently intend to do so, we may choose to amend or modify the terms of the rights offering for any reason, including, without limitation, in order to increase participation in the rights offering. Such amendments or modifications may include a change in the subscription price, although no such change is presently contemplated. If we should make any fundamental changes to the terms of the rights offering set forth in this prospectus, we will file a post-effective amendment to the registration statement in which this prospectus is included, offer potential purchasers who have subscribed for rights the opportunity to cancel such subscriptions and issue a refund of any subscription payments advanced by such unitholder and recirculate an updated prospectus after the post-effective amendment is declared effective by the SEC. In addition, upon such event, we may extend the expiration date of the rights offering to allow holders of subscription rights ample time to make new investment decisions and for us to recirculate updated documentation. Promptly following any such occurrence, we will issue a press release announcing any changes with respect to the rights offering and the new expiration date. The terms of the rights offering cannot be modified or amended after the expiration date of the rights offering. Table of Contents

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+ RISK FACTORS Investing in our common stock involves a high degree of risk. You should carefully consider each of the following risks, together with all other information set forth in this prospectus, including the consolidated financial statements and the related notes and "Management s Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended September 30, 2018, as updated in our Quarterly Reports on Form 10-Q for the fiscal quarters ended December 31, 2018, March 31, 2019 and June 30, 2019, before deciding whether to invest in our common stock.. The risks and uncertainties described below are not the only ones we face. Other risks and uncertainties, including those that we do not currently consider material, may impair our business. If any of the adverse developments discussed below actually occur, our business, financial condition, operating results or cash flows could be materially and adversely affected. This could cause the value of our common stock to decline, and you may lose all or part of your investment. Risks Related to Our Business and Financial Condition Our business plan requires substantial additional capital, which we may be unable to raise on acceptable terms, if at all, which may in turn limit our ability to execute our business strategy. We have planned operating expenditures through September 2020, of approximately $10.0 million, which includes $6.0 million for drilling related capital expenditures, $1.5 million of other operations related expenditures to include but not limited to bonus payments for new leases and lease rentals to the BOEM and seismic reprocessing costs, and $2.5 million in general and administrative expenses. We will need to raise additional capital in 2020 and may be required to enter into debt and equity financing arrangements and joint ventures. There is no assurance that we will be able to raise the capital necessary to fund our business plan and our operations through September 2020. Failure to raise the required capital to fund our 2020 operations, on favorable terms or at all, will have a material adverse effect on us, and will likely cause us to curtail operations or suspend our 2020 business plan. We expect our capital outlays and operating expenditures to increase substantially over at least the next several years as we expand our operations. Lease acquisition costs and drilling operations are very expensive, and if we are to expand our operations after 2019 we will need to raise substantial additional capital through additional equity offerings, strategic alliances or debt financing. Our future capital requirements will depend on many factors, including: the number, location, terms and pricing of our anticipated lease acquisitions; our financing of the lease acquisitions and associated bonding; our ability to enter into partnerships and farm-outs with other oil and gas E&P companies and/or financial investors on satisfactory terms; location of any drilling activities, whether onshore or offshore, as well as the depth of any wells to be drilled; cost of additional seismic data to license as well as the reprocessing cost; the scope, rate of progress and cost of any exploration and production activities; oil and natural gas prices; our ability to locate and acquire hydrocarbon reserves; our ability to produce those oil or natural gas reserves; access to oil and gas services and existing pipeline infrastructure; the terms and timing of any drilling and other production-related arrangements that we may enter into; the cost and timing of governmental approvals and/or concessions; the cost, number, and access to qualified industry professionals we employ; and the effects of competition by larger companies operating in the oil and gas industry. To the extent we are able to raise capital through equity financings, they may be dilutive to our stockholders. Alternative forms of future financings may include preferred stock with preferences or rights superior to our common stock. Debt financings may involve a pledge of assets and will rank senior to our common stock. We have historically financed our operations through best efforts private equity and debt financings. We do not have any credit or equity facilities available with financial institutions, stockholders or third party investors, and will continue to rely on best efforts financings. There is no assurance that we can raise the capital necessary to expand our operations. Failure to raise the required capital to fund operations, on favorable terms or at all, will have a material adverse effect on us, and will likely cause us to curtail or cease operations. Our financial statements express substantial doubt about our ability to continue as a going concern, raising questions as to our continued existence. We have incurred losses since our inception resulting in an accumulated deficit of approximately $54.6 million at June 30, 2019, and we have a net capital deficiency. Further losses are anticipated as we continue to develop our business. To continue as a going concern, we estimate that we will need approximately $10 million to meet our obligations and planned operating expenditures through September 2020. The $10 million is comprised primarily of capital project expenditures as well as general and administrative expenses. It does not include any amounts due under outstanding debt obligations, which amounted to $11.6 million of current principal and interest as of June 30, 2019. We plan to finance our operations through equity and/or debt financings, and strategic alliances. There are no assurances that financing will be available with acceptable terms, if at all. If we are not successful in obtaining financing, our operations would need to be curtailed or ceased or the Company would need to sell assets or consider alternative plans up to and including restructuring. If we fail to establish and maintain proper internal controls, our ability to produce accurate financial statements or comply with applicable regulations could be impaired. We are required to comply with certain provisions of Section 404 of the Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley Act"). Section 404 requires that we document and test our internal control over financial reporting and issue management s assessment of our internal control over financial reporting. In our annual report for the year ended September 30, 2018, we identified and disclosed material weaknesses related to the failure to record interest on an interest bearing payable and failure to accurately value a fair value financial instrument issued in settlement of a liability. These errors are a result of insufficient control activities related to the review and monitoring of Company contracts to ensure the proper accounting for such contracts. In connection with the restatement of our condensed financial statements, as of March 31, 2019 and for the three and six-months ended, we identified an additional material weakness in our internal control over financial reporting. This additional material weakness is due to a lack of effective controls over the valuation of accounts receivable which resulted in a material error in the financial statements. In an attempt to remediate the material weaknesses, management has developed a contract review process, increased the use of external consultants and is investigating expansion of the accounting department in its ongoing remediation efforts of the material weaknesses. We also are developing a plan for remediation of controls over the valuation of accounts receivable from joint operations. If we fail to comply with the requirements of Section 404 of the Sarbanes-Oxley Act, the accuracy and timeliness of the filing of our annual and quarterly reports may be materially adversely affected and could cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our Common Stock. We have no proved reserves and areas that we decide to drill may not yield oil and natural gas in commercial quantities or quality, or at all. We have no proved reserves. We have identified prospects based on available seismic and geological information that indicates the potential presence of oil and natural gas. However, the areas we decide to drill may not yield oil and natural gas in commercial quantities or quality, or at all. Most of our current prospects are in various stages of evaluation that will require substantial additional seismic data reprocessing and interpretation. Even when properly used and interpreted, 3-D seismic data and visualization techniques are only tools used to assist geoscientists in identifying subsurface structures and hydrocarbon indicators and do not enable the interpreter to know whether hydrocarbons are, in fact, present in those structures. We have drilled two wells, one of which is currently being evaluated. Accordingly, we do not know if our prospects will contain oil and natural gas in sufficient quantities or quality to recover drilling and completion costs or to be economically viable. Even if oil and natural gas is found on our prospects in commercial quantities, construction costs of pipelines and other transportation costs may prevent such prospects from being economically viable. If one or more of our prospects do not prove to be successful, our business, financial condition and results of operations will be materially adversely affected. We are substantially dependent on certain members of our management and technical team. Investors in our common stock must rely upon the ability, expertise, judgment and discretion of our management and the success of our technical team in identifying and acquiring leasehold interests, as well as discovering and developing any oil and gas reserves. Our performance and success are dependent, in part, upon key members of our management and technical team, and their loss or departure could be detrimental to our future success. In making a decision to invest in our common stock, you must be willing to rely to a significant extent on our management s discretion and judgment. The loss of any of our management and technical team members could have a material adverse effect on our business prospects, results of operations and financial condition, as well as on the market price of our common stock. We may not be able to find replacement personnel with comparable skills. If we are unable to attract and retain key personnel, our business may be adversely affected. We do not currently maintain key-man insurance on any member of the management team. The seismic data we use are subject to non-exclusive license arrangements and may be licensed to our competitors, which could adversely affect the execution of our acquisition strategy and business plan. Our 3-D seismic license agreements are non-exclusive, industry-standard agreements. Accordingly, the licensor of such seismic data has the right to license the same data that we acquired to our competitors, which could adversely affect our acquisition strategy and the execution of our business plan. We are not authorized to assign any of our rights under our license agreements, including a transaction with a potential joint venture partner or acquirer, without complying with the terms of the license agreements and a payment to the licensor (by us or the acquirer in the event of a change of control transaction or our partner in a joint venture transaction). However, our interpretation of this seismic data and importantly, reprocessing and the modeling of certain seismic data utilized to identify and technically support oil and gas prospects, is unique and proprietary to the Company. We are an oil and natural gas exploration company with limited operating history, and there can be no assurance that we will be successful in executing our business plan. We may never attain profitability. We commenced our business activity in March 2013, when we entered into 3-D license agreements covering approximately 2.2 million acres, and have entered into additional 3-D license agreements with seismic companies to acquire additional data and reprocess seismic data. While we intend to engage in the drilling, development, and production of oil and natural gas in the future, we currently have no reserves or production. As we are a relatively new business, we are subject to all the risks and uncertainties, which are characteristic of a new business enterprise, including the substantial problems, expenses and other difficulties typically encountered in the course of its business, in addition to normal business risks, as well as those risks that are specific to the oil and gas industry. Investors should evaluate us in light of the delays, expenses, problems and uncertainties frequently encountered by companies developing markets for new products, services and technologies. We may never overcome these obstacles. We may be unable to access the capital markets to obtain additional capital that we will require to implement our business plan, which would restrict our ability to grow. Our current capital on hand is insufficient to enable us to execute our business strategy beyond December 2019. Though, our inability to complete the agreement to extend the maturity date of the $1.0 million remaining balance of the Delek term loan due October 19, 2019 could further effect our liquidity and business plan. Because we are a company with limited resources, we may not be able to compete in the capital markets with much larger, established companies that have ready access to capital. Our ability to obtain needed financing may be impaired by conditions and instability in the capital markets (both generally and in the oil and gas industry in particular), our status as a new enterprise without a demonstrated operating history, the location of our leases and prices of oil and natural gas on the commodities markets (which will impact the amount of financing available to us), and/or the loss of key consultants and management. Further, if oil and/or natural gas prices on the commodities markets continue to decrease, then potential revenues, if any, will decrease, which may increase our requirements for capital. Some of the future contractual arrangements governing our operations may require us to maintain minimum capital (both from a legal and practical perspective), and we may lose our contractual rights if we do not have the required minimum capital. If the amount of capital we can raise is not sufficient, we may be required to curtail or cease our operations. We have a limited operating history with significant losses and expect losses to continue for the foreseeable future. We have incurred annual operating losses since our inception. As a result, at June 30, 2019, we had an accumulated deficit of approximately $54.6 million. We had no revenues in 2018 and do not anticipate generating revenues in fiscal 2019, or in subsequent periods unless we are successful in discovering economically recoverable oil or gas reserves. We expect that our operating expenses will increase as we develop our projects. We expect continued losses in fiscal year 2019, and thereafter until future discoveries are brought online and we begin producing oil and gas. The terms of the definitive documents governing the Term Loan Facility may restrict our operations, particularly our ability to respond to changes or take certain actions. If we are unable to repay the Term Loan Facility as it becomes due, we may be unable to continue as a going concern. On March 1, 2019, we entered into a Term Loan Agreement by and among GulfSlope, as borrower, and Delek, as lender. In the Term Loan Agreement, Delek agreed to provide us with multiple draw term loans in an aggregate stated principal amount of up to $11.0 million (the "Term Loan Facility" and the loans thereunder, the "Loans"). Borrowings under the Term Loan Facility mature in six months and bear interest at the rate of 5.0% and are secured by the assets of the Company. As of the date of this prospectus there is $1.0 million outstanding under the Term Loan Facility and no additional amounts available to be borrowed. The maturity date of the $1,000,000 remaining balance of the term loan is October 19, 2019 and an agreement is being negotiated to extend the maturity date. The definitive documents governing the Term Loan Facility contain a number of restrictive covenants that impose operating and financial restrictions on us and limit our ability to engage in acts that may be in our long-term best interest, including restrictions on the ability to: incur indebtedness, grant liens, undergo certain fundamental changes, dispose of assets, make investments, enter into transactions with affiliates, and make certain restricted payments, in each case subject to limitations and exceptions to be set forth in the definitive documentation for the Term Loan Facility. The definitive documentation governing the Term Loan Facility also contains customary events of default that include, among other things, certain payment defaults, covenant defaults, cross-defaults to other indebtedness, change of control defaults, judgment defaults, and bankruptcy and insolvency defaults. Such events of default may allow the creditor to accelerate the related debt and may result in the acceleration of any other debt to which a cross-acceleration or cross-default provision applies which could have a material adverse effect on our business, operations and financial results. Furthermore, if we are unable to repay the amounts due and payable under the definitive documentation governing our Term Loan Facility, the lender could proceed against the collateral granted to them to secure that indebtedness which could force us into bankruptcy or liquidation. In the event our lender accelerated the repayment of the borrowings, we may not have sufficient assets to repay that indebtedness. Any acceleration of amounts due under the Term Loan Facility would likely have a material adverse effect on us and would threaten our ability to continue as a going concern. As a result of these restrictions, we may be limited in how we conduct business; unable to continue our business operations; unable to raise additional debt or equity financing to operate during general economic or business downturns; or unable to compete effectively or to take advantage of new business opportunities. Our lack of diversification increases the risk of an investment in our common stock. Our business will focus on the oil and gas industry in commercially advantageous offshore areas of the United States. Larger companies have the ability to manage their risk by diversification. However, we lack diversification, in terms of both the nature and geographic scope of our business. As a result, factors affecting our industry, or the regions in which we operate, will likely impact us more acutely than if our business were diversified. Strategic relationships upon which we rely are subject to change, which may diminish our ability to conduct our operations. Our ability to successfully bid on and acquire properties, to discover resources, to participate in drilling opportunities and to identify and enter into commercial arrangements with customers and partners, depends on developing and maintaining close working relationships with industry participants and on our ability to select and evaluate suitable properties. Further, we must consummate transactions in a highly competitive environment. These realities are subject to change and may impair our ability to grow. To develop our business, we will endeavor to use the relationships of our management and to enter into strategic relationships, which may take the form of joint ventures with other private parties or with local government bodies or contractual arrangements with other oil and gas companies, including those that supply equipment and other resources that we will use in our business. We may not be able to establish these strategic relationships, or if established, we may not be able to maintain them. In addition, the dynamics of our relationships with strategic partners may require that we incur expenses or undertake activities we would not otherwise incur or undertake in order to fulfill our obligations to these partners or maintain our relationships. If our strategic relationships are not established or maintained, our business prospects may be limited, which could diminish our ability to conduct our operations. Competition in obtaining rights to explore and develop oil and gas reserves may impair our business. The oil and gas industry is extremely competitive. Present levels of competition for oil and gas leases and drilling rights are high worldwide. Other oil and gas companies with greater resources may compete with us by bidding for leases and drilling rights, as well as other properties and services we may need to operate our business. Additionally, other companies may compete with us in obtaining capital from investors. Competitors include larger, established exploration and production companies, which have access to greater financial and other resources than we have currently, and may be more successful in the recruitment and retention of qualified employees and may conduct their own refining and petroleum marketing operations, giving them a competitive advantage. In addition, actual or potential competitors may be strengthened through the acquisition of additional assets and interests. Because of some or all of these factors, we may not be able to compete. We may not be able to effectively manage our growth, which may harm our future profitability. We are currently not profitable however, our strategy envisions building and expanding our business in order to become profitable. If we fail to effectively manage our growth, our financial results will be adversely affected. Growth may place a strain on our management systems and resources. We must continue to refine and expand our business development capabilities, our systems, processes, and our access to financing sources. As we grow, we must continue to hire, train, supervise and manage new employees. We cannot assure you that we will be able to: expand our systems effectively or efficiently or in a timely manner; optimally allocate our human resources; or identify and hire qualified employees or retain valued employees. If we are unable to manage our growth and our operations, our financial results could be adversely affected, which could prevent us from ever attaining profitability. Any change to government regulation/administrative practices may have a negative impact on our ability to operate profitably. The laws, regulations, policies or current administrative practices of any government body, organization or regulatory agency impacting any jurisdiction where we might conduct our business activities, including the BOEM and EPA, may be changed, applied or interpreted in a manner which may fundamentally alter the ability of the Company to conduct business. The actions, policies or regulations, or changes thereto, of any government body or regulatory agency or other special interest groups, may have a detrimental effect on us. Any or all of these situations may have a negative impact on our ability to operate profitably. Additionally, certain bonding and/or insurance may be required in jurisdictions in which we chose to have operations, increasing our costs to operate. Risks Related to Our Industry An extended decline in oil prices and significant fluctuations in energy prices may continue indefinitely, affecting the commercial viability of our projects and negatively affecting our business prospects and viability. The commercial viability of our projects is highly dependent on the price of oil and natural gas. Prices also affect our ability to borrow money or raise additional capital. We will need to obtain additional financing to fund our activities. Our ability to do so may be adversely affected by an extended decline in oil prices. If we are unable to obtain such financing when needed, on commercially reasonable terms, we may be required to cease our operations, which could have a materially adverse impact on the market price of our stock. An extended decline in oil prices may have a material adverse effect on our planned operations, financial condition and level of expenditures that we may ultimately have to make for the development of any oil and natural gas reserves we may acquire. The oil and gas markets are very volatile, and we cannot predict future oil and natural gas prices. Historically, oil and natural gas prices have been volatile and are subject to fluctuations in response to changes in supply and demand, market uncertainty and a variety of additional factors that are beyond our control. In addition, the prices we receive for any future production and the levels of any future production and reserves will depend on numerous factors beyond our control. These factors include, but are not limited to, the following: changes in global supply and demand for oil and natural gas by both refineries and end users; the ability of the members of the Organization of Petroleum Exporting Countries to agree to and maintain oil price and production controls; the price and volume of imports of foreign oil and natural gas; political and economic conditions, including embargoes, in oil-producing countries or affecting other oil-producing activity; the level of global oil and gas exploration and production activity; the level of global oil and gas inventories; weather conditions; government policies to discourage use of fuels that emit GHGs and encourage use of alternative energy; technological advances affecting energy consumption; domestic and foreign governmental regulations and taxes; proximity and capacity of oil and gas pipelines and other transportation facilities; the price and availability of competitors supplies of oil and gas in captive market areas; the introduction, price and availability of alternative forms of fuel to replace or compete with oil and natural gas; import and export regulations for LNG and/or refined products derived from oil and gas production from the US; speculation in the price of commodities in the commodity futures market; the availability of drilling rigs and completion equipment; and the overall economic environment. Further, oil and natural gas prices do not necessarily fluctuate in direct relationship to each other. The price of oil has been extremely volatile, and we expect this volatility to continue for the foreseeable future. For example, during the period from January 1, 2014 to December 31, 2018, NYMEX West Texas Intermediate oil prices ranged from a high of $107.95 per bbl to a low of $26.19 per bbl. Average daily prices for NYMEX Henry Hub gas ranged from a high of $8.15 per MMBtu to a low of $1.49 per MMBtu during the same period. This near term volatility may affect future prices in 2019 and beyond. The volatility of the energy markets makes it difficult to predict future oil and natural gas price movements with any certainty. Exploration for oil and natural gas is risky and may not be commercially successful, impairing our ability to generate revenues. Oil and natural gas exploration involves a high degree of risk. These risks are more acute in the early stages of exploration. We may not discover oil or natural gas in commercially viable quantities. It is difficult to project the costs of implementing an exploratory drilling program due to the inherent uncertainties of drilling in unknown formations, the costs associated with encountering various drilling conditions, such as over pressured zones (which may lead to blowouts, fires, and explosions) and tools lost in the hole, and changes in drilling plans, locations as a result of prior exploratory wells or additional seismic data and interpretations thereof, and final commercial terms negotiated with partners. Developing exploratory oil and gas properties requires significant capital expenditures and involves a high degree of financial risk. The budgeted costs of drilling, completing, and operating exploratory wells are often exceeded and can increase significantly when drilling costs rise. Drilling may be unsuccessful for many reasons, including title problems, adverse weather conditions (which may be more frequent as climate changes), cost overruns, equipment shortages, mechanical difficulties, and environmental hazards (including spills and toxic gas releases). There is no assurance that we will successfully complete any wells or if successful, that the wells would be economically successful. Moreover, the successful drilling or completion of any oil or gas well does not ensure a profit on investment. Exploratory wells bear a much greater risk of loss than development wells. We cannot assure you that our exploration, exploitation and development activities will result in profitable operations, the result of which will materially adversely affect our business. Oil and natural gas operations are subject to comprehensive regulation which may cause substantial delays or require capital outlays in excess of those anticipated, causing an adverse effect on the Company. Oil and natural gas operations are subject to national, state, and local laws relating to the protection of the environment, including laws regulating removal of natural resources from the ground, spill response capabilities, and the discharge of materials into the environment. Oil and natural gas operations are also subject to national, state, and local laws and regulations, which seek to maintain health and safety standards by regulating the design and use of drilling methods and equipment. Environmental standards imposed by national, state or local authorities may be changed and any such changes may have material adverse effects on our activities. Moreover, compliance with such laws may cause substantial delays or require capital outlays in excess of those anticipated, thus causing an adverse effect on us. Additionally, we may be subject to liability for pollution or other environmental damages which we are unlikely to insure against fully due to prohibitive premium costs and other reasons. To date, we have not been required to spend any amounts on compliance with environmental regulations; however, we may be required to expend substantial sums in the future as we develop projects, and this may affect our ability to begin, maintain, or expand our operations. We may be dependent upon third party operators of any oil and natural gas properties we may acquire. Third parties may act as the operators of our oil and natural gas wells and control the drilling and operating activities to be conducted on our properties, if and when such assets are acquired. Therefore, we may have limited control over certain decisions related to activities on our properties relating to the timing, costs, procedure, and location of drilling or production activities, which could affect the Company s results. Our leases may be terminated if we are unable to make future lease payments or if we do not drill in a timely manner. The failure to timely affect all lease related payments could cause the leases to be terminated by the BOEM. Net lease rental obligations on our existing prospects are expected to be approximately $0.5 million in fiscal year 2019. Our leases have a five-year primary term, expiring in 2020, 2022 and 2023. Each lease may be extended by drilling a well capable of producing hydrocarbons and submitting a Plan of Production approved by the regulatory authorities. In addition, the terms of our leases may be extended for an additional three years, provided a well is spud targeting hydrocarbons with a true vertical depth in excess of 25,000 feet within the primary term of the lease. In addition, the terms of our leases may also be extended by the granting of a Subsalt Lease Term Extension, should we elect to apply and qualify for said extension on any lease(s). If we are not successful in raising additional capital, we may be unable to successfully exploit our properties, and we may lose the rights to develop these properties upon the expiration of our leases. If not successful in securing extensions, those leases will be subject to the competitive bid process in the twice a year BOEM OCS Lease Sales. We may not be able to develop oil and natural gas reserves on an economically viable basis. To the extent that we succeed in discovering oil and/or natural gas reserves, we cannot assure that these reserves will be capable of production levels we project or in sufficient quantities to be commercially viable. On a long-term basis, our viability depends on our ability to find, develop and commercially produce oil and gas reserves, assuming we acquire leases or drilling rights. Our future reserves, if any, will depend not only on our ability to develop then-existing properties, but also on our ability to identify and acquire additional suitable producing properties or prospects, to find markets for the oil and natural gas we develop and to effectively distribute our production into markets. Future oil and gas exploration may involve unprofitable efforts, not only from dry wells, but from wells that are productive but do not produce sufficient net revenues to return a profit after drilling, operating and other costs. Completion of a well does not assure a profit on the investment or recovery of drilling, completion and operating costs. In addition, drilling hazards or environmental damage could greatly increase the cost of operations and various field operating conditions may adversely affect the production from successful wells. These conditions include delays in obtaining governmental approvals or consents, shut-downs of wells resulting from extreme weather conditions, problems in storage and distribution and adverse geological and mechanical conditions. While we will endeavor to effectively manage these conditions, we cannot be assured of doing so optimally, and we will not be able to eliminate them completely in any case. Therefore, these conditions could adversely impact our operations. We may not be able to obtain drilling rigs and other equipment and geophysical service crews necessary to exploit any oil and natural gas resources we may acquire. We may not be able to procure the necessary drilling rigs and related services and equipment or the cost of such items may be prohibitive. Our ability to comply with future license obligations or otherwise generate revenues from the production of operating oil and natural gas wells could be hampered as a result of this, and our business could suffer. Environmental risks may adversely affect our business. All phases of the oil and natural gas business present environmental risks and hazards and are subject to environmental regulation pursuant to a variety of federal, state and local laws and regulations. Environmental legislation provides for, among other things, restrictions and prohibitions on spills, releases or emissions of various substances produced in association with oil and natural gas operations, including products, byproducts, and wastes. The legislation also requires that wells and facility location be sited, operated, maintained, abandoned and reclaimed to the satisfaction of applicable regulatory authorities. Compliance with such legislation can require significant expenditures, and a breach may result in the imposition of fines and penalties, some of which may be material. Environmental legislation is evolving in a manner we expect may result in stricter standards and enforcement, larger fines and liability, prevention of the right to operate or participate in leasing, and potentially increased capital expenditures and operating costs. The discharge of oil, natural gas or other pollutants into the air, soil or water may give rise to liabilities to foreign governments and third parties and may require us to incur costs to remedy such discharge. The application of environmental laws to our business may cause us to curtail our production or increase the costs of our production, development or exploration activities. Any insurance that we may acquire will likely be inadequate to cover liabilities we may incur. Our involvement in the exploration for, and development of, oil and natural gas properties may result in our becoming subject to liability for pollution, blow-outs, property damage, personal injury or other hazards. Although we intend to obtain insurance in accordance with industry standards to address such risks, such insurance has limitations and so will be unlikely to cover the full extent of such liabilities. In addition, such risks may not, in all circumstances be insurable or, in certain circumstances, we may choose not to obtain insurance to protect against specific risks due to the high premiums associated with such insurance or for other reasons. The payment of such uninsured liabilities would reduce the funds available to us. If we suffer a significant event that is not fully insured or if the insurer of such event is not solvent or denies coverage, we could be required to divert funds from capital investment or other uses towards covering our liability for such events. We are subject to cyber security risks. A cyber incident could occur and result in information theft, data corruption, operational disruption or financial loss. The oil and natural gas industry has become increasingly dependent on digital technologies to conduct certain exploration, development, production, processing and distribution activities. For example, we depend on digital technologies to interpret seismic data, conduct reservoir modeling and record financial and other data. Our industry faces various security threats, including cyber-security threats. Cyber-security attacks in particular are increasing and include, but are not limited to, malicious software, attempts to gain unauthorized access to data, and other electronic security breaches that could lead to disruptions in critical systems, unauthorized release of confidential or otherwise protected information and corruption of data. Although to date we have not experienced any material losses related to cyber-security attacks, we may suffer such losses in the future. Moreover, the various procedures and controls we use to monitor and protect against these threats and to mitigate our exposure to such threats may not be sufficient in preventing security threats from materializing. If any of these events were to materialize, they could lead to losses of intellectual property and other sensitive information essential to our business and could have a material adverse effect on our business prospects, reputation and financial position. Risks Related to our Common Stock There is a limited trading market for our shares. You may not be able to sell your shares if you need money. Our common stock is traded on the OTC Markets (QB Marketplace Tier), an inter-dealer automated quotation system for equity securities. During the three calendar months preceding filing of this report, the average daily trading volume of our common stock was approximately 502,000 shares. As of October 2, 2019, we had approximately 190 record holders of our common stock (not including an indeterminate number of stockholders whose shares are held by brokers in "street name"). There has been limited trading activity in our stock, and when it has traded, the price has fluctuated widely. We consider our common stock to be "thinly traded" and any last reported sale prices may not be a true market-based valuation of the common stock. Stockholders may experience difficulty selling their shares if they choose to do so because of the illiquid market and limited public float for our common stock. This situation is attributable to a number of factors, including, but not limited to: we are a small company that is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume; and stock analysts, stock brokers and institutional investors may be risk-averse and reluctant to follow a company such as ours that faces substantial doubt about its ability to continue as a going concern or to purchase or recommend the purchase of our shares until such time as we become more viable. As a result, an investor may find it difficult to dispose of, or to obtain accurate quotations of the price of our common stock. Accordingly, investors must assume they may have to bear the economic risk of an investment in our common stock for an indefinite period of time, and may lose their entire investment. There can be no assurance that a more active market for our common stock will develop, or if one should develop, there is no assurance that it will be sustained. This severely limits the liquidity of our common stock and would likely have a material adverse effect on the market price of our common stock and on our ability to raise additional capital. The amount of common stock registered for resale may significantly impact our share price and volatility. The amount of our common stock to be registered for resale in the Registration Statement represents a significant percentage of our currently outstanding common stock. The 444,095,238 shares of our common stock in registered for resale in this Registration Statement equals approximately 41% of our issued and outstanding common stock. We cannot predict what effect this may have on the price of our common stock or the volume of transactions involving our shares in the market. Sales of a substantial amount of our common stock or the perception that such sales may occur could adversely affect the liquidity of the market for our common stock or their price. Large price changes or low trading volume may preclude you from buying or selling our common stock at all, or at any particular price or during a time frame that satisfies your investment objectives. We may issue preferred stock. Our Certificate of Incorporation authorizes the issuance of up to 50 million shares of "blank check" preferred stock with designations, rights and preferences determined from time to time by the Board of Directors. Accordingly, our Board of Directors is empowered, without stockholder approval, to issue preferred stock with dividend, liquidation, conversion, voting, or other rights, which could adversely affect the voting power or other rights of the holders of the common stock. In the event of issuance, the preferred stock could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of the Company. Although we have no present intention to issue any shares of its authorized preferred stock, there can be no assurance that we will not do so in the future. Future sales of our common stock could lower our stock price. We will likely sell additional shares of common stock to fund working capital obligations in future periods. We cannot predict the size of future issuances of our common stock or the effect, if any, that future issuances and sales of shares of our common stock will have on the market price of our common stock. Sales of substantial amounts of our common stock, or the perception that such sales could occur, may adversely affect prevailing market prices for our common stock. Moreover, sales of our common stock by existing shareholders could also depress the price of our common stock. For instance, we have issued instruments that are convertible into or exercisable for 350 million shares of our Common Stock, which may have conversion or exercise rights that are at prices lower than the trading price of our Common Stock. In particular, the holder of the $2.1 million in Convertible Debentures we have issued may convert at any time a price equal to the lesser of (x) $0.05 per share or (y) 80% of the lowest daily VWAP of a share of our Common Stock (as reported by Bloomberg, LP) for the ten (10) consecutive trading days immediately preceding the date of determination. Our issuance of additional shares of Common Stock, or options or warrants to purchase those shares, would dilute your proportionate ownership and voting rights. We are authorized to issue up to 1,550,000,000 shares of capital stock, comprising 1,500,000,000 shares of Common Stock, par value $0.001 per share, and 50,000,000 shares of preferred stock, par value $0.001 per share ("Preferred Stock"). We have issued and outstanding, as of June 30, 2019, 1,092,266,844 shares of Common Stock and 0 shares of Preferred Stock, plus another approximately 350 million shares may be issued by us if all of the securities we have issued that are exercisable for, or convertible into, shares of Common Stock are exercised or converted. Our board of directors (the "Board") may generally issue shares of Common Stock, Preferred Stock or options or warrants to purchase those shares without further approval by our shareholders, based upon such factors as the Board may deem relevant at that time. See "Description of Capital Stock." It is likely that we will be required to issue a large amount of additional securities to raise capital to further our development. It is also likely that we will issue a large amount of additional securities to directors, officers, employees and consultants as compensatory grants in connection with their services, both in the form of stand-alone grants or under our stock plans. We cannot assure you that we will not issue additional shares of Common Stock, Preferred Stock, or options or warrants to purchase those shares, under circumstances we may deem appropriate at the time. Our common stock is subject to the "penny stock" rules of the SEC and FINRA, which makes transactions in our common stock cumbersome and may reduce the value of an investment in the stock. The SEC has adopted Rule 15g-9 which establishes the definition of a "penny stock," for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require: that a broker or dealer approve a person s account for transactions in penny stocks; and the broker or dealer receives from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person s account for transactions in penny stocks, the broker or dealer must: obtain financial information and investment experience and objectives of the person; and make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form sets forth: the basis on which the broker or dealer made the suitability determination; and that the broker or dealer received a signed, written agreement from the investor prior to the transaction. Generally, brokers may be less willing to execute transactions in securities subject to the "penny stock" rules. This may make it more difficult for investors to dispose of common stock and cause a decline in the market value of stock. Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. In addition to the "penny stock" rules promulgated by the SEC, FINRA has adopted rules that require a broker-dealer to have reasonable grounds for believing that an investment is suitable for a customer when recommending the investment to that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit investors ability to buy and sell our stock and have an adverse effect on the market for our shares. The price of our common stock will remain volatile, which could lead to losses by investors and costly securities litigation. The trading price of our common stock is likely to be highly volatile and could fluctuate in response to factors such as: actual or anticipated variations in our operating results including but not limited to leasing, drilling, and discovery of oil and gas; the price of oil and gas; announcements of developments by us, our strategic partners or our competitors; announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments; adoption of new accounting standards affecting our Company s industry; additions or departures of key personnel; sales of our common stock or other securities in the open market; our ability to acquire seismic data and other intellectual property on commercially reasonable terms and to defend such intellectual property from third party claims; the effects of government regulation, permitting and other legal requirements, including new legislation or regulation; litigation; and other events or factors, many of which are beyond our control. The stock market is subject to significant price and volume fluctuations. In the past, following periods of volatility in the market price of companies securities, securities class action litigation has often been initiated against those companies. Litigation initiated against us, whether or not successful, could result in substantial costs and diversion of our management s attention and resources, which could harm our business and financial condition. We do not anticipate paying any dividends on our common stock. Cash dividends have never been declared or paid on our common stock, and we do not anticipate such a declaration or payment for the foreseeable future. We cannot assure stockholders of a positive return on their investment when they sell their shares, nor can we assure that stockholders will not lose the entire amount of their investment in the Company. Our certificate of incorporation could make a merger, tender offer, or proxy contest difficult. Our shareholders have approved an amendment and restatement of our certificate of incorporation to (i) eliminate the ability of stockholders to act by written consent and (ii) to classify the board of directors into three classes with staggered terms. These amendments may discourage, delay or prevent a change in control. Any of the risk factors discussed herein could have a significant material adverse effect on our business, results of operations, financial condition, or liquidity. Readers of this prospectus should not consider any descriptions of these risk factors to be a complete set of all potential risks that could affect GulfSlope. These factors should be carefully considered together with the other information contained in this prospectus and materials filed by us with the SEC and incorporated herein by reference. Further, any of these risks are interrelated and could occur under similar business and economic conditions, and the occurrence of certain of them may in turn cause the emergence or exacerbate the effect of others. Such a combination could materially increase the severity of the impact of these risks on our business, results of operations, financial condition, or liquidity.

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+ Third parties may assert intellectual property claims against us, particularly as we expand our business and the number of products we offer. Our defense of any claim, regardless of its merit, could be expensive and time consuming and could divert management resources. Successful infringement claims against us could result in significant monetary liability or prevent us from selling some of our products. In addition, resolution of claims may require us to redesign our products, license rights from third parties or cease using those rights altogether. Our proposed business is dependent on laws pertaining to the Hemp industry. Continued development of the Hemp industry is dependent upon continued legislative authorization of Hemp at the state level. Any number of factors could slow or halt progress in this area. Further, progress for the industry, while encouraging, is not assured. While there may be ample public support for legislative action, numerous factors impact the legislative process. Any one of these factors could slow or halt use of Hemp, which would negatively impact our proposed business. Further, and while we do not intend to harvest, distribute or sell cannabis, if we lease buildings to growers of Hemp we could be deemed to be participating in Hemp cultivation, which remains illegal under federal law, and exposes us to potential criminal liability, with the additional risk that our properties could be subject to civil forfeiture proceedings. The Hemp industry faces strong opposition. It is believed by many that large well-funded businesses may have a strong economic opposition to the Hemp industry. We believe that the pharmaceutical industry clearly does not want to cede control of any product that could generate significant revenue. For example, medical Hemp will likely adversely impact the existing market for the current "Hemp pill" sold by mainstream pharmaceutical companies. Further, the medical Hemp industry could face a material threat from the pharmaceutical industry, should Hemp displace other drugs or encroach upon the pharmaceutical industry s products. The pharmaceutical industry is well funded with a strong and experienced lobby that eclipses the funding of the medical Hemp movement. Any inroads the pharmaceutical industry could make in halting or impeding the Hemp industry could have a detrimental impact on our proposed business Hemp remains illegal under Federal law. Hemp is a schedule-I controlled substance and is illegal under federal law. Even in those states in which the use of Hemp has been legalized, its use remains a violation of federal law. Since federal law criminalizing the use of Hemp preempts state laws that legalize its use, strict enforcement of federal law regarding Hemp would likely result in our inability to proceed with our business plan. The previous administration under President Obama had effectively stated that it was not an efficient use of resources to direct federal law enforcement agencies to prosecute those lawfully abiding by state-designated laws allowing the use and distribution of medical cannabis. In this regard, the prior DOJ Deputy Attorney General of the Obama administration issued a memorandum (the "Cole Memo") to all United States Attorneys providing updated guidance to federal prosecutors concerning cannabis enforcement under the Controlled Substances Act. The Cole Memo noted that the Department of Justice is committed to using its investigative and prosecutorial resources to address the most significant threats in the most effective, consistent, and rational way. On January 4, 2018, the U.S. Attorney General Jeff Sessions issued the Sessions Memo stating that the Cole Memo was rescinded effectively immediately. In particular, Mr. Sessions stated that "prosecutors should follow the well-established principles that govern all federal prosecutions," which require "federal prosecutors deciding which cases to prosecute to weigh all relevant considerations, including federal law enforcement priorities set by the Attorney General, the seriousness of the crime, the deterrent effect of criminal prosecution, and the cumulative impact of particular crimes on the community." Mr. Sessions went on to state in the memorandum that "previous nationwide guidance specific to Hemp is unnecessary and is rescinded, effective immediately." It is unclear at this time whether the Sessions Memo indicates that the Trump administration will strongly enforce the federal laws applicable to cannabis or what types of activities will be targeted for enforcement. While we do not currently harvest, distribute or sell cannabis, we may be irreparably harmed by a change in enforcement policies of the federal government depending on the nature of such change. Laws and regulations affecting the medical Hemp industry are constantly changing, which could detrimentally affect our proposed operations Laws and regulations affecting the medical Hemp industry are constantly changing, which could detrimentally affect our proposed operations. Local, state and federal medical Hemp laws and regulations are broad in scope and subject to evolving interpretations, which could require us to incur substantial costs associated with compliance or alter our business plan. In addition, violations of these laws, or allegations of such violations, could disrupt our business and result in a material adverse effect on our operations. In addition, it is possible that regulations may be enacted in the future that will be directly applicable to our proposed business. We cannot predict the nature of any future laws, regulations, interpretations or applications, nor can we determine what effect additional governmental regulations or administrative policies and procedures, when and if promulgated, could have on our business. Risks Relating to our Stock A low market price would severely limit the potential market for our common stock. Our common stock is trading at a price substantially below $5.00 per share, subjecting trading in the stock to certain SEC rules requiring additional disclosures by broker-dealers. These rules generally apply to any non-NASDAQ equity security that has a market price share of less than $5.00 per share, subject to certain exceptions (a "penny stock"). Such rules require the delivery, prior to any penny stock transaction, of a disclosure schedule explaining the penny stock market and the risks associated therewith and impose various sales practice requirements on broker-dealers who sell penny stocks to persons other than established customers and institutional or wealthy investors. For these types of transactions, the broker-dealer must make a special suitability determination for the purchaser and have received the purchaser s written consent to the transaction prior to the sale. The broker-dealer also must disclose the commissions payable to the broker-dealer, current bid and offer quotations for the penny stock and, if the broker-dealer is the sole market maker, the broker-dealer must disclose this fact and the broker-dealer s presumed control over the market. Such information must be provided to the customer orally or in writing before or with the written confirmation of trade sent to the customer. Monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. The additional burdens imposed upon broker-dealers by such requirements could discourage broker-dealers from effecting transactions in our common stock. FINRA sales practice requirements may also limit a stockholders ability to buy and sell our stock. In addition to the penny stock rules promulgated by the SEC, which are discussed in the immediately preceding risk factor, FINRA rules require that in recommending an investment to a customer, a broker -dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative, low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit the ability to buy and sell our stock and have an adverse effect on the market value for our shares. An investor s ability to trade our common stock may be limited by trading volume. A consistently active trading market for our common stock may not occur on the OTC Pinks. A limited trading volume may prevent our shareholders from selling shares at such times or in such amounts as they may otherwise desire. We have not voluntarily implemented various corporate governance measures, in the absence of which, shareholders may have more limited protections against interested director transactions, conflicts of interest and similar matters. Recent federal legislation, including the Sarbanes-Oxley Act of 2002, has resulted in the adoption of various corporate governance measures designed to promote the integrity of the corporate management and the securities markets. Some of these measures have been adopted in response to legal requirements; others have been adopted by companies in response to the requirements of national securities exchanges, such as the NYSE or the NASDAQ Stock Market, on which their securities are listed. Among the corporate governance measures that are required under the rules of national securities exchanges and NASDAQ, are those that address the board of Directors independence, audit committee oversight, and the adoption of a code of ethics. We have not yet adopted any of these corporate governance measures, and since our securities are not listed on a national securities exchange or NASDAQ, we are not required to do so. It is possible that if we were to adopt some or all of these corporate governance measures, shareholders would benefit from somewhat greater assurances that internal corporate decisions were being made by disinterested directors and that policies had been implemented to define responsible conduct. For example, in the absence of audit, nominating and compensation committees comprised of at least a majority of independent directors, decisions concerning matters such as compensation packages to our senior officers and recommendations for director nominees, may be made by a majority of directors who have an interest in the outcome of the matters being decided. Prospective investors should bear in mind our current lack of corporate governance measures in formulating their investment decisions. Because we will not pay dividends in the foreseeable future, stockholders will only benefit from owning common stock if it appreciates. We have never paid dividends on our common stock and we do not intend to do so in the foreseeable future. We intend to retain any future earnings to finance our growth. Accordingly, any potential investor who anticipates the need for current dividends from his investment should not purchase our common stock.

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+ RISK FACTORS An investment in our common stock involves various risks. You should carefully consider the risks and uncertainties described below and the other information included or incorporated by reference in this U.S. Prospectus, including the risk factors set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, before deciding to invest in our common stock. Any of the risk factors described therein or set forth below could significantly and adversely affect our business, prospects, financial condition and results of operations. As a result, the trading price of our CDIs could decline and you could lose a part or all of your investment. Risks Related to Our Business Even after this rights offering, we will need additional funding and may be unable to raise capital when needed, which could force us to delay, reduce, or eliminate planned activities or may result in our inability to operate as a going concern. As we have limited commercialization of our product, we are generating a small amount of revenue and are not cash flow positive or profitable. Our net revenue from sales of AeroForm was approximately $7.8 million and $3.9 million for the years ended December 31, 2018 and 2017, respectively, and, as of December 31, 2018, we had cash and cash equivalents of approximately $9.4 million. As of March 31, 2019, we had cash and cash equivalents of $4.4 million, which we believe will cover operating expenses through the second quarter of 2019. Even with the proceeds from this rights offering (assuming the offering is fully subscribed), our existing capital may be insufficient to meet our requirements. These requirements include, but not limited to, funding our continued commercial launch of AeroForm in the United States, or U.S., building our supporting manufacturing infrastructure and building inventory, continuing to build a dependable partnership with our current and other contract manufacturers, building our salesforce to support our commercialization efforts, repaying our outstanding debt obligations and covering any losses. Consequently, we may need to raise additional funds through financings or borrowings beyond this rights offering in order to accomplish our planned objectives. Failure to raise additional funds could delay, reduce, or halt our commercialization and would impact our ability to continue as a going concern. Additionally, we might be required to consider the sale of our business or assets on unfavorable business terms. We have no committed sources of capital funding and there is no assurance that additional funding, if required, will be available to us in the future or be secured on acceptable terms. If adequate funding is not available, we may no longer be a going concern and may be forced to curtail operations, including our commercial activities and research and development programs, or cease operations altogether, file for bankruptcy, or undertake any combination of the foregoing. In such event, our stockholders may lose their entire investment in our company. In addition, if we do not meet our payment obligations to third parties as they become due, we may be subject to litigation claims and our creditworthiness would be adversely affected. Even if we are successful in defending against these claims, litigation could result in substantial costs and would be a distraction to management, and may have other unfavorable results that could further adversely impact our financial condition. There is substantial doubt about our ability to continue as a going concern. Our independent registered accountants report on our December 31, 2018 consolidated financial statements contains an emphasis of a matter regarding substantial doubt about our ability to continue as a going concern. The consolidated financial statements have been prepared assuming we will continue as a going concern and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets, or the amounts and classification of liabilities that may result if we do not continue as a going concern. Based on our current operating plan, we do not have sufficient capital to continue our operations beyond June 30, 2019 without the proceeds from the rights offering and material operational changes. You should not rely on our consolidated balance sheet as an indication of the amount of proceeds that would be available to satisfy claims of creditors, and potentially be available for distribution to shareholders, in the event of liquidation. We have a history of net losses and we may never achieve or maintain profitability. We are a U.S. based medical device company with a limited history of operations and have limited commercial experience with our product. Medical device product development is a speculative undertaking and involves a substantial degree of risk. To date, we have focused on developing our sole product, AeroForm, and currently have no other products in development. We have incurred net losses since our inception, including net losses of approximately $26.7 million in 2018, $29.0 million in 2017, and $19.4 million in 2016. As of December 31, 2018, our accumulated deficit was approximately $122.0 million. Although we have started to generate revenues from sales in Australia and the United States, we expect to continue to incur significant operating losses for the near future as we incur costs, including those associated with commercializing our products, building our supporting manufacturing infrastructure, building a dependable partnership with our current and other contract manufacturers, as well as the increased costs associated with being a public company in the U.S. with equity securities listed on the ASX. Table of Contents Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods. Our failure to achieve sustained profitability would depress the value of our company and could impair our ability to raise capital, expand our business, diversify our research and development pipeline, market AeroForm or any other products we may identify and pursue, if approved, or continue our operations. Our prior losses, combined with expected future losses, have had and will continue to have an adverse effect on our stockholders equity and working capital. We cannot predict the extent of our future operating losses and accumulated deficit and we may never generate sufficient revenues to achieve or sustain profitability. If we fail to comply with the covenants and other obligations under our security and loan agreement, the lender may be able to accelerate amounts owed under the facility and may foreclose upon the assets securing our obligations. In August 2017, we entered into a loan and security agreement with Oxford Finance LLC, or Oxford, pursuant to which we borrowed $15 million from Oxford. Under the Oxford loan agreement, we are subject to a variety of affirmative and negative covenants. These covenants include required financial reporting, providing an unqualified auditor s opinion together with our annual financial statements within 120 days of the end of our fiscal year (the unqualified audit opinion covenant), limitations on certain dispositions and licensing of assets, limitations on the incurrence of additional debt, and achievement of certain financial milestones. To secure our performance of our obligations under this loan and security agreement, as amended, we granted Oxford a security interest in all of our assets, including our intellectual property. Our failure to comply with the terms of the loan and security agreement, including the unqualified audit opinion covenant, the occurrence of a material adverse change in our business, operations or condition (financial or otherwise) or prospects, the material impairment in our prospect of repayment, a material impairment in the perfection or priority of the Oxford s lien on our assets or the value of Oxford s collateral, failure to achieve agreed financial milestones, or the occurrence of certain other specified events could result in an event of default that, if not cured or waived, could result in the acceleration of all or a substantial portion of our loan, coupled with prepayment penalties, potential foreclosure on our assets, and other adverse results. Oxford has already granted us three waivers in connection with covenant breaches under the loan and security agreement, and we believe they will grant us a waiver for the most recent covenant breach related to the revenue shortfall for the quarter ended March 31, 2019, but there is no certainty that Oxford will grant us a further waiver if we do not comply with any covenants in the future. There is no guarantee that future covenant violations (if any) will similarly be waived. We are currently evaluating our prospects of meeting the covenants in the coming quarters. If Oxford were to declare an event of default, it would have the option, among other things, of accelerating the debt under our loan and security agreement and foreclosing on the Company s assets pledged as collateral for the term loan. Any declaration of an event of default would result in a requirement that we repay indebtedness, which could severely affect our liquidity and significantly harm our business. We must attract and retained skilled staff to pursue our business model. Our long term growth and performance is dependent on attracting and retaining highly skilled staff. The medical device industry, and the San Francisco Bay area where we maintain our headquarters, has strong competition for highly skilled workers (including senior researchers, clinical staff, and management) due to the limited number of people with the appropriate skill set. We currently employ, or engage as consultants, a number of key management and scientific personnel. There is a risk that we will be unable to attract and retain the necessary staff to pursue our business model. In April 2018, Mr. Scott Dodson, our former President and CEO, resigned. In June 2018, Mr. Frank Grillo was hired as our President and CEO. While we were able to attract and hire a replacement, there is no guarantee we can retain Mr. Grillo, or other key management and scientific personnel. This may affect how efficiently we operate our business and our future financial performance could be impacted. We have structured incentive programs for our key personnel, including an equity incentive plan. Despite these measures, there is no guarantee that we will be able to attract and retain suitable qualified personnel, which could negatively affect our ability to reach our goals. Efforts to restructure our operations and align our resources with market opportunities could disrupt our business and affect our results of operations. In 2018, we completed a number of reductions in force and internal reorganizations to reduce the size and cost of our operations and to better match our resources with our market opportunities. We may take similar steps in the future to improve efficiency and match our resources with market opportunities. These changes may not be successful in adequately reducing the cost of our operations. In addition, any such changes could be disruptive to our business. Our business model will depend solely on the success of AeroForm for breast reconstruction procedures. We expect to derive all of our revenue in the foreseeable future from sales of AeroForm for breast reconstruction procedures. We have no other commercial products or products in active development at this time. Acceptance of our product in the marketplace is uncertain, and our failure to achieve sufficient market acceptance will significantly limit our ability to generate revenue and be profitable. If we are unable to successfully achieve meaningful market penetration with AeroForm, our commercial strategy will be unattainable and our business operations, financial results and growth prospects will be materially and adversely affected. Table of Contents We are dependent on the acceptance, promotion and safe usage of AeroForm by surgeons and their patients. Regulatory approval and clearance of AeroForm, including in Australia and the U.S., will not guarantee market adoption. In order to achieve commercial success, we are dependent on the acceptance and promotion of AeroForm by patients and surgeons. Reasons that patients and surgeons may be slow to adopt AeroForm include, but are not limited to: preference of the products of competitors due to familiarity with those products or for various other reasons; concern that radiotherapy treatments may be affected by the presence of AeroForm; pricing of AeroForm as compared to traditional saline expanders; limited clinical data illustrating the benefits of AeroForm to patients and surgeons; concern over potential liability risks involved in using a new product; and any delay in the qualification of AeroForm for reimbursement from relevant health care funding bodies in jurisdictions where approved reimbursement codes and reimbursement status for similar products does not already exist. While we already have early good relationships with a number of leading surgeons in Australia and the U.S., this in and of itself does not ensure the widespread support of AeroForm among surgeons. If a significant number of surgeons in our key markets do not adopt or recommend AeroForm, or continue to promote and use the products of competitors, this would adversely impact or delay our ability to generate revenue and achieve profitability. There have been reports of anaplastic large cell lymphoma linked to textured breast implants. While not directly linked to textured tissue expanders, some have questioned if there is a similar link. These events may lead to a reduction in the demand for textured tissue expanders and could adversely affect our business. Breast implants have been associated with higher rates of anaplastic large cell lymphoma, or ALCL, a rare type of cancer affecting cells of the immune system. In January 2011, the FDA indicated that there was a possible association between saline and silicone gel-filled breast implants and higher rates of ALCL, with the causal links not yet understood. In March 2015, France s National Cancer Institute, or NCI, noted that there is a clearly established link between ALCL and breast implants, which is referred to as breast implant-associated ALCL, or BIA-ALCL. The NCI noted in that report that most of the reported cases occurred in women with textured implants. In response, the Agence Nationale de S curit du M dicament et des Produits de Sant or ANSM, the regulatory authority in France, has required manufacturers marketing breast implants in France to submit biocompatibility data for review, and this review is ongoing. In the fourth quarter of 2018, following the non-renewal of its textured breast implant CE Mark licenses in Europe, Allergan plc suspended sales of textured breast implants and tissue expanders in Europe and withdrew its remaining textured breast implants and tissue expanders then on the market in Europe. In the second quarter of 2019, ANSM banned the sale of macro-textured and polyurethane implants, Health Canada advised Allergan of its intent to suspend its licenses for certain textured breast implants, and the Netherlands temporarily suspended the sale of macro-textured and polyurethane implants. While the Company does not commercialize in these markets, it is possible that as the BIA-ALCL risk becomes highly publicized, this could negatively, and significantly, impact demand for textured tissue expanders, including Aeroform. Additionally, in the fourth quarter of 2018, despite no known linkage between ALCL and textured tissue expanders, the Therapeutic Goods Administration in Australia, the regulatory body responsible for our products, after consultation with us, required thatadditional patient warnings be added to our labeling to disclose the risk of ALCL. Future clinical studies or clinical experience may more strongly indicate that textured breast implants expose patients to greater risks of ALCL, which may reduce demand for textured tissue expanders generally, expose us to product liability claims, as well as to class actions and other lawsuits. These impacts may occur in the absence of any specific linkage with our products. Moreover, if cases of ALCL or other complications are discovered in the future and/or are reported in patients with AeroForm, we could be subject to mandatory product recalls, suspension or withdrawal of our regulatory licensure for sale in one or more countries, and significant legal liability. Any of these may have an adverse effect on our business or operating results, or a negative impact on our share price. We may be unable to compete successfully with current tissue expanders in the market for breast reconstruction. The market for traditional tissue expander products in breast reconstruction procedures is well established and dominated by two large pharmaceutical and medical device companies, Allergan, Inc. and Mentor Worldwide LLC, a division of Johnson & Johnson, which have been market leaders for a number of years. Our AeroForm will compete against the traditional saline expanders which have been used for many years, are supported by clinical data, have a lower average selling price and have significantly greater brand recognition. Furthermore, the resources and scale of the two dominant players in the tissue expander market provides them with significant advantages in terms of financing, research and development, manufacturing and marketing resources and this may restrict out ability to secure market share for AeroForm. Additionally, these companies offer their customers access to a suite of products, including breast implants, which may allow them to offer favorable pricing on volume purchases or bundled purchases. We have limited sales, marketing and distribution resources. We currently have limited marketing resources and will need to commit significant resources to developing sales, distribution and marketing capabilities. We currently utilize a direct sales force in the U.S. but most other markets will likely entail the use of a distributor. We will need to ensure compliance with all legal and regulatory requirements for sales, marketing and distribution in each relevant market. There is a risk that we will be unable to develop sufficient sales, marketing and distribution capacity to effectively commercialize AeroForm. We rely on key suppliers for product components. Our contracts with key suppliers are generally standard in nature, in the form of purchase order arrangements that are common to medical device firms in the early stages of commercialization, with no minimum orders required. As we move further into our commercialization phase, we will increasingly rely on key suppliers for AeroForm components. A disruption at a key supplier could cause a substantial delay in the availability of AeroForm, leading to a potential loss of sales. Development of key manufacturing processes along with process validation testing, device verification testing, and regulatory approvals required for a manufacturing change could take up to six months to complete. However, we believe that alternative suppliers could ultimately be located, qualified and approved for all critical system components with the six month timeframe. We rely on a third party in Costa Rica to manufacture AeroForm. Our main manufacturing of AeroForm is managed by a contract manufacturer located in Costa Rica. While we also plan to retain the ability to manufacture certain AeroForm subassemblies at our California location, there are inherent risks in relying on outsourced contract manufacturers particularly where the contract manufacturer is located outside of the U.S. These risks include risks of economic change, recession, labor strikes or disruptions, political turmoil, changes in tariffs or trade barriers, and lack of contract enforceability. Table of Contents Should the manufacturer s operations be disrupted for any reason or production halted, we may not be able to have enough AeroForm devices manufactured in a timely manner to satisfy product demand. While an alternative manufacturer could be appointed, it would take a significant amount of time to transfer the manufacturing process, which would include installation and validation of equipment, process and product qualifications and regulatory approvals. If such a disruption were to occur, it would adversely impact our ability to sell AeroForm and customers might instead purchase competing tissue expander products. There may also be an ongoing sales impact in the form of a reduction of goodwill as a result of our inability to supply hospitals and surgeons in a timely manner. Third party payers, including government authorities and private health insurers, may not provide sufficient levels of reimbursement or any form of reimbursement for AeroForm. Purchasers of tissue expanders for breast reconstruction procedures generally rely on third party payers, particularly government health administration authorities, including Medicare and Medicaid in the U.S., and private health insurers, to subsidize the cost of the products. We have to date secured reimbursement for AeroForm in Australia and believe that AeroForm benefits from existing reimbursement codes for breast reconstruction procedures in the U.S. Although rates of reimbursement for breast reconstruction procedures in the U.S. have been increasing in recent years, no assurance can be given that reimbursement amounts will continue to increase or that the amounts will be sufficient to enable us to sell AeroForm in the U.S. Moreover, we cannot predict what changes may be made in the future to third party coverage and reimbursement in Australia or the U.S. and what impact any such changes may have on our ability to sell AeroForm. Reimbursement and healthcare payment systems in international markets vary significantly by country. Outside Australia and the U.S., we may not obtain international coverage and reimbursement approvals in a timely manner or at all. In Australia, the report of the Competition Policy Review released on March 31, 2015 (commonly known as the Harper Report) stated that the regulation of prostheses should be further examined to see if pricing and supply can be made more competitive. However, it is not known whether any further review of prostheses regulation will occur and if it does occur, how resulting regulatory changes, if any, will affect the future reimbursement of AeroForm in Australia. We may not be able to pass through the regulatory hurdles and gain the necessary approvals and clearances to sell AeroForm in certain other countries. In the U.S., we received de novo clearance from the FDA, allowing us to commence sales to the U.S. market. We have received TGA and CE Mark approval for AeroForm, allowing us to commence sales to the Australian and European markets, respectively. In other jurisdictions, AeroForm is still at various pre-commercialization phases. We cannot guarantee that we will receive all necessary regulatory approvals, nor can we accurately predict the product approval timelines, or other requirements that may be imposed by regulators (for example, further clinical trials or other requirements proving safety and effectiveness of AeroForm). Furthermore, there may be changes to regulatory standards, which could delay or prevent us from obtaining the necessary regulatory approvals. In addition, any future changes to AeroForm may require separate clearance or approval. Any delays or barriers to our obtaining necessary regulatory clearances would limit the size of the market opportunity until such time, if any, that we will be able to obtain such clearances for AeroForm. We are dependent on the protection and enforcement of our intellectual property rights. The protection of the intellectual property we rely on is critical to our business and commercial success. If we are unable to protect or enforce the intellectual property rights embodied in AeroForm, there is a risk that other companies will incorporate the intellectual property into their technology, which could adversely affect our ability to compete in the market for tissue expanders. As of December 31, 2018, our patent portfolio consisted of four issued and three pending U.S. patents, and 26 issued and 12 pending foreign patents. Our issued foreign patents were granted in Australia, Hong Kong, Japan and several of the major countries in the European Union. In addition, some of the key patents related to AeroForm are co-owned by us and Shalon Ventures (includes U.S. patents) or licensed to us exclusively by Shalon Ventures (non-U.S. patents only). Although the license agreement between us and Shalon Ventures may only be terminated by a party in limited circumstances, if Shalon Ventures was to terminate the license agreement it could affect our ability to produce and sell AeroForm outside the U.S. Table of Contents We may be subject to future third party intellectual property rights disputes. We do not believe that our activities infringe any third party s intellectual property rights. To date, no third party has asserted this to be the case. However, in the future we may be subjected to infringement claims or litigation arising out of patents and pending applications of our competitors, or additional proceedings initiated by third parties or intellectual property authorities to re-examine the patentability of licensed or owned patents. The defense and prosecution of intellectual property claims and litigation, and related legal and administrative proceedings are costly and time-consuming to pursue, and their outcome is uncertain. If we infringe the rights of third parties, we could be prevented from selling AeroForm or any future products and be forced to defend against litigation and to pay damages. We have a limited operating history and may face difficulties encountered by companies early in their commercialization. We have a limited operating history upon which to evaluate our business and forecast future net sales and operating results. In assessing our business prospects, you should consider the various risks and difficulties frequently encountered by companies early in their commercialization in competitive markets, particularly companies that develop and sell medical devices. These risks include our ability to: implement and execute our business strategy; expand and improve the productivity of our sales force and marketing programs; increase awareness of our brand and build loyalty among surgeons; manage expanding operations; respond effectively to competitive pressures and developments; and successfully implement design changes to refine AeroForm over time and obtain any updates to regulatory approvals related to the changes. Ongoing regulation of our products may limit how we manufacture and market our product candidates, which could materially impair our ability to generate revenue. As an approved product in the U.S., AeroForm and its manufacturer are subject to ongoing review and regulation. Any approved or cleared product may only be promoted for its approved or cleared uses consistent with the products labeling. In addition, product labeling, packaging, QSR requirements, adverse event reporting, advertising and promotion, scientific and educational activities, and promotional activities involving the internet and social media will be subject to extensive regulatory requirements. To ensure compliance with regulatory requirements, medical device manufacturers are subject to market surveillance and periodic, pre-scheduled and unannounced inspections by the FDA, and these inspections may include the manufacturing facilities of our current and future contract manufacturers and our subcontractors. Failure to comply with applicable regulatory requirements can result in enforcement action by the FDA, including various sanctions such as warning letters; fines, injunctions, and civil penalties; recall or seizure of our products; operating restrictions, partial suspension or total shutdown of production; refusal to grant 510(k) clearance or PMA approvals of new products; withdrawal of 510(k) clearance or PMA approvals; and criminal prosecution. Further, the cost of compliance with post-approval regulations may have a negative effect on our operating results and financial condition. If we market products in a manner that violates fraud and abuse and other health care laws, we may be subject to significant enforcement and sanctions. In addition to FDA restrictions on marketing of medical device products, several other types of state, federal and foreign health care laws, including those commonly referred to as "fraud and abuse" laws, have been applied to restrict certain marketing practices in the medical device industry. These laws include, among others, the following: The federal anti-kickback statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce, or in return for purchasing, leasing, ordering or arranging for the purchase, lease or order of any good, facility, item or service reimbursable under a federal health care program, such as Medicare or Medicaid. This statute has been interpreted broadly to apply to arrangements between pharmaceutical manufacturers and prescribers, purchasers, and formulary managers, among others. There are statutory exceptions and regulatory safe harbors available to protect certain common activities from prosecution or other regulatory sanctions that must be strictly followed. Failure to meet all of the requirements of a particular statutory exception or regulatory safe harbor does not make the conduct per se illegal under the anti-kickback statute, but subjects the arrangement to a case-by-case basis review of its facts and circumstances. The Affordable Care Act amended the federal anti-kickback statute such that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation and codified case law that a claim including items or services resulting from a violation of the federal anti-kickback statute constitutes a false or fraudulent claim for purposes of the federal False Claims Act. Table of Contents Federal false claims laws, including the civil False Claims Act, false statement laws and civil monetary penalty laws prohibit, among other things, any person or entity from knowingly presenting, or causing to be presented, a false claim for payment to the federal government, or knowingly making, or causing to be made, a false statement to have a false claim paid. The False Claims Act contains qui tam provisions, which allow a private individual, or relator, to bring a civil action on behalf of the federal government alleging that the defendant submitted a false claim to the federal government and to share in any monetary recovery. Certain marketing practices, including off-label promotion, may violate federal false claims laws. The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, created new federal criminal statutes that prohibit among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any health care benefit program, including private third-party payers, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for health care benefits, items or services. Like the federal anti-kickback statute, the Affordable Care Act amended the intent standard for certain health care fraud provisions under HIPAA such that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their respective implementing regulations, imposes specified requirements relating to the privacy, security and transmission of individually identifiable health information. The federal Physician Payments Sunshine Act and its implementing regulations require that certain manufacturers of drugs, devices, biologicals and medical supplies for which payment is available under Medicare, Medicaid or the Children s Health Insurance Program (with certain exceptions) to annually report to the Centers for Medicare & Medicaid Services (CMS) information related to certain payments or other transfers of value made to physicians and teaching hospitals, and to report annually certain ownership and investment interests held by physicians and their immediate family members. The U.S. Foreign Corrupt Practices Act, the U.K Anti-Bribery Act, and similar anti-bribery laws that generally prohibit companies and their intermediaries from making improper payments to officials for the purpose of obtaining or retaining business. Analogous local, state and foreign laws, such as state anti-kickback and false claims laws, which may apply to sales or marketing arrangements and claims involving health care items or services reimbursed by non-governmental third-party payors, including private insurers; state laws that require medical device companies to comply with the device industry s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to health care providers and entities; state and foreign laws that require device manufacturers to report information related to payments and other transfers of value to health care professionals or entities; and state and foreign laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts. Efforts to ensure that our business arrangements with third parties will comply with applicable health care laws and regulations may involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other health care laws. Medical device and other health care companies have been prosecuted under these laws for a variety of promotional and marketing activities, such as providing free trips, free goods, sham consulting fees and grants and other monetary benefits to prescribers; and engaging in off-label promotion. If our operations are found to be in violation of any of the health regulatory laws described above or any other laws that apply to us, we may be subject to significant sanctions, including criminal fines, civil monetary penalties, administrative penalties, disgorgement, individual imprisonment, exclusion from participation in federal health care programs, integrity obligations, contractual damages, injunctions, recall or seizure of products, total or partial suspension of production, reputational harm, administrative burdens, diminished profits and future earnings, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations. Table of Contents We are exposed to the risk of product liability and product recalls. We are exposed to the risk of product liability claims as a company that sells products to the public. This is a particularly sensitive issue for health care companies, and the medical device market has a history of product recalls and litigation. We may be exposed to the risk of product liability claims, which are inherent in the design, manufacturing, marketing and use of medical devices. Furthermore, we must comply with medical device reporting and vigilance requirements in each jurisdiction in which AeroForm and any future products are marketed. Any product liability claim, with or without merit, may cause damage to our reputation and business. We have sought to minimize this risk by taking out product liability insurance, but this may not be sufficient if a large damages claim is awarded. If we are called as a defendant in a product liability suit, this could be a costly activity that may also divert management focus away from key strategic initiatives of the business, potentially adversely impacting financial performance and damaging our reputation. Since we began selling in the United States in the first quarter of 2017, we have reported adverse events associated with use of the AeroForm in the FDA's MAUDE database. To-date, none of these adverse events have resulted in product liability claims against us. Off-label use of AeroForm may harm its image or lead to substantial penalties. We are only permitted to market AeroForm for the uses indicated on the labeling cleared by the relevant regulatory bodies in each market. We cannot prevent a surgeon or other third party from using or recommending the use of AeroForm for purposes outside of its approved intended use. This may lead to the increased likelihood of an adverse event, or inadequate treatment of a patient s condition, which could harm our reputation in addition to potential claims for damages. If we were deemed to have marketed AeroForm for off-label use, we could be subject to civil or criminal sanctions, including fines, damages claims, injunctions or other penalties and our reputation within the industry may be damaged. Risks Related to Our Industry We may be adversely affected by health care reform legislation in the U.S. and other countries. In recent years, there have been numerous initiatives at the U.S. federal and state levels for comprehensive reforms affecting the payment for, the availability of and reimbursement for healthcare services. Recent legislation and many of the proposed bills include funding to assess the comparative effectiveness of medical devices. It is unclear what impact the comparative effectiveness analysis will have on our products or financial performance. If significant reforms are made to the healthcare system in the U.S., or in other jurisdictions, those reforms could adversely affect our financial condition and operating results. In March 2010, President Obama signed into law comprehensive healthcare reform legislation known as the Affordable Care Act, or the ACA, as modified by the Health Care and Education Reconciliation Act of 2010 (U.S.). The ACA was a sweeping law intended to broaden access to health insurance, reduce or constrain the growth of health care spending, enhance remedies against health care fraud and abuse, add new transparency requirements for health care and health insurance industries, impose new taxes and fees on pharmaceutical and medical device manufacturers and impose additional health policy reforms. Substantial new provisions affecting compliance also were enacted, which may affect our business practices with health care practitioners. Complying with the ACA could significantly increase our costs. Some of the provisions of the ACA have yet to be implemented, and there have been judicial and Congressional challenges to certain aspects of the ACA, as well as recent efforts by the Trump administration to repeal or replace certain aspects of the ACA. Since January 2017, President Trump has signed two Executive Orders and other directives designed to delay the implementation of certain provisions of the ACA or otherwise circumvent some of the requirements for health insurance mandated by the ACA. Concurrently, Congress has considered legislation that would repeal or repeal and replace all or part of the ACA. While Congress has not passed comprehensive repeal legislation, two bills affecting the implementation of certain taxes under the ACA have been signed into law. The Tax Cuts and Jobs Act of 2017 includes a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the "individual mandate." Additionally, the continuing resolution on appropriations for fiscal year 2018, recently signed by President Trump, delays the implementation of certain PPACA-mandated fees, including the medical device excise tax on non-exempt medical devices. Further, the Bipartisan Budget Act of 2018, or the BBA, among other things, amends the ACA, effective January 1, 2019, to close the coverage gap in most Medicare drug plans, commonly referred to as the "donut hole." We continue to evaluate the effect that the ACA and its possible repeal and replacement has on our business. Table of Contents We expect that health care reform measures that have been and may be adopted in the future may result in more rigorous coverage criteria and in additional downward pressure on the price that we receive for our products. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payers. The implementation of cost containment measures or other health care reforms may affect our ability to generate revenue and profits or commercialize our product candidates. The manufacturing facilities of AeroForm must comply with stringent regulatory requirements. Our products are classified as medical devices. Medical devices are subject to extensive regulation in the United States by the FDA and numerous other federal, state and foreign governmental authorities. FDA regulations specific to medical devices are wide-ranging and govern, among other things: design, development and manufacturing; testing; clinical trials in humans; electronic product safety; labeling; storage; marketing; premarket clearance or approval; record keeping procedures; advertising and promotion; post-market surveillance and reporting of deaths, serious injuries or malfunctions; and export. Our manufacturing processes are required to comply with the FDA s Quality System Regulations, which cover the procedures and documentation of the design, testing, production, control, quality assurance, labeling, packaging, sterilization, storage and shipping of our devices. The FDA enforces its Quality System Regulations through periodic unannounced inspections. If our manufacturing facility fails a Quality System inspection, our operations and manufacturing could be interrupted. Failure to take adequate and timely corrective action in response to an adverse Quality System inspection could force a shutdown of our manufacturing operations or a recall of our products. As we have outsourced a significant portion of our manufacturing to a contract manufacturer located in Costa Rica, we have limited direct control over the compliance of the facility which manufactures AeroForm. While we have implemented supplier and quality controls over the product being provided to us by the contract manufacturer, if the manufacturer does not comply with any relevant requirements, this may adversely affect our ability to manufacturer and sell AeroForm. Compliance with these regulations can be complex, expensive and time-consuming. If we fail to comply with such regulations, we could be subject to the imposition of injunctions, suspensions or loss of regulatory approvals, product recalls, orders for repair, replacement or refund, customer notifications, termination of distribution, product seizures or civil penalties. In the most egregious cases, criminal sanctions or closure of our manufacturing facilities or those of our contract manufacturers or suppliers are possible. If we are required to shut down our manufacturing operations or recall any of our products, we may not be able to provide our customers with the quantity of products they require, and we could lose customers and suffer reduced revenue. If we are unable to obtain sufficient quantities of high quality products to meet customer demand on a timely basis, we could lose customers, our growth could be limited or halted and our business could be harmed. For example, in June 2018, we initiated a voluntary Class III recall of approximately 50 AeroForm Tissue Expander Systems. A Class III recall is a recall associated with distributed product in which use of, or exposure to, the product is not likely to cause adverse health consequences. Future recalls could divert management attention and financial resources and could harm our reputation with customers which in turn could have a material impact our financial results. We are also subject to medical device reporting regulations that require us to report to the FDA if our products cause or contribute to a death or serious injury or if they malfunction. It is possible that claims could be made against us alleging that our products are defective or unsafe. Our failure to comply with applicable regulatory requirements could result in an enforcement action by the FDA. The identification of serious safety risks could result in product recalls or withdrawal of our clearance or approval. The imposition of any one or more of these penalties could have a negative effect on our business, product sales and profitability. Furthermore, to maintain the CE Mark, The British Standards Institute, our Notified Body, will regularly audit our suppliers and manufacturers. Failure to comply with the applicable regulatory requirements can result in, among other things, temporary manufacturing shutdowns, product recalls, product shortages, bans on imports and exports and a damaged brand name. Our third party contract manufacturer or component manufacturers may also be subject to the same sanctions and, as a result, may be unable to supply components for our products. Any failure to retain governmental clearances or approvals that we currently hold or to obtain additional similar clearances or approvals could prevent us from successfully marketing our products and technology and could harm our operating results. Furthermore, changes in the applicable governmental regulations could prevent further commercialization of our products and technologies and could harm our business. Table of Contents Our presence in the international marketplace exposes us to foreign operational risks. We sell AeroForm in Australia and the U.S. As a significant portion of the manufacturing of AeroForm is performed in Costa Rica, we are exposed to risks of foreign regulations in Costa Rica and national trade laws, including import and export laws as well as customs regulations and laws. There are potentially high compliance costs associated with these laws and failure to comply with any applicable law or regulatory obligations could result in penalties and/or enforcement action (for example, stoppages or delays in clearing our products through customs). Risks Related to our CDIs and Common Stock Our principal stockholders could collectively exert control over us and may not make decisions that in the best interests of all stockholders. As of December 31, 2018, our principal stockholders beneficially owned a substantial percentage of our voting stock. If these significant stockholders were to act together, they would be able to exert a significant degree of influence over our management and affairs and over matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. Accordingly, there is a risk that these stockholders, although unrelated to each other, may make collective decisions that do not accord with, or are not in the best interests of, other stockholders and CDI holders. For example, the principal stockholders could, through their concentration of ownership, delay or prevent a change of control, even if a change of control is in the best interests of our other stockholders and CDI holders. Provisions of our Certificate of Incorporation, our Bylaws and Delaware law could make an acquisition of us more difficult and may prevent attempts by stockholders to replace or remove current members of the Board. Certain provisions of Delaware law, our Certificate of Incorporation and Bylaws could discourage, delay or prevent a change of control or deter tender offers for our common stock that stockholders and CDI holders may consider favorable, including transactions in which CDI holders might otherwise receive a premium for their CDIs. Our Certificate of Incorporation authorizes us to issue up to 10,000,000 shares of preferred stock in one or more different series with terms to be fixed by our board of directors. Stockholder or CDI holder approval is not necessary to issue preferred stock in this manner. Issuance of these shares of preferred stock could have the effect of making it more difficult and more expensive for a person or group to acquire control of us, and could effectively be used as an anti-takeover device. Our Bylaws provide for an advance notice procedure for stockholders or CDI holders to nominate director candidates for election or to bring business before an annual meeting of stockholders, including proposed nominations of persons for election to our board of directors, and require that special meetings of stockholders be called only by our chairman of the board, chief executive officer, president or the board pursuant to a resolution adopted by a majority of the board. The anti-takeover provisions of Delaware law and provisions in our organizational documents may prevent our stockholders from receiving the benefit from any premium to the market price of our common stock offered by a bidder in a takeover context. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stock if they are viewed as discouraging takeover attempts in the future. Table of Contents Being a public company is expensive and administratively burdensome. We are subject to the periodic reporting requirements of the Securities Exchange Act of 1934, as amended (Exchange Act). Although we have been listed on the ASX since 2015 and have been required to file financial information and make certain other filings with the ASX, our status as a U.S. reporting company under the Exchange Act will cause us to incur additional legal, accounting and other expenses that we have not previously incurred. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly. We also expect these 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 approximately 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 (and the Audit and Risk Committee in particular) or as executive officers. We cannot predict or estimate the amount of additional costs we may incur or the timing of such costs. The costs and management time involved in complying with Delaware laws, Australian laws and U.S. reporting requirements are likely to be significant. As a Delaware company with an ASX listing and a registration as a foreign company in Australia, we will need to ensure continuous compliance with Delaware law and relevant Australian laws and regulations, including the ASX Listing Rules and certain provisions of the Corporations Act. To the extent of any inconsistency between Delaware law and Australian law and regulations, we may need to make changes to our business operations, structure or policies to resolve such inconsistency. If we are required to make such changes, this is likely to result in interruptions to our operations, additional demands on key employees and extra costs. The market price of our CDIs is subject to volatility. The current market price of our CDIs may not be indicative of prices that will prevail in the trading markets in the future. The market price of our CDIs has been and could continue to be subject to wide fluctuations in response to numerous factors, many of which are beyond our control. These factors include actual or anticipated variations in our operational results and cash flow, anticipated needs for additional capital, ability to generate positive gross margins, changes in financial estimates by securities analysts, trading volume, market conditions in the industry, the general state of the securities markets and the market for stocks of companies in our industry, governmental legislation or regulation, as well as general economic and market conditions, such as recessions. Sales of large amounts of our common stock or the perception that sales could occur may depress our stock price. Following the rights offering, there is expected to be shares of our common stock outstanding (equivalent to CDIs). There are several stockholders that hold a significant number of shares of our common stock. Sales by one or more of these stockholders could cause significant fluctuation in the price of our CDIs. In the future, we may determine to raise capital through offerings of our common stock (or CDIs), securities convertible into our common stock or rights to acquire these securities or our common stock. In any case, the result could ultimately be dilutive to our common stock by increasing the number of shares outstanding. We cannot predict the effect this dilution may have on the price of our CDIs. A small number of our stockholders could be able to significantly influence our business and affairs. On the date of this U.S. Prospectus, our three largest stockholders beneficially owned over % of our outstanding common stock. If all of the rights covered by this U.S. Prospectus are exercised, the aggregate beneficial ownership percentage of these stockholders should remain approximately the same. These stockholders, either acting alone or in cooperation with other of our significant stockholders, could be able to significantly influence our business and affairs. Accordingly, a small number of our stockholders could be able to control matters requiring approval by our stockholders, including the election of directors and the approval of mergers or other business combination transactions. Risks Relating to the Rights Offering If we do not raise the full amount of the rights offering, we may not be able to continue as a going concern. Failure to raise the full amount of the funds sought under the rights offering could delay, reduce, or halt our commercialization and would impact our ability to continue as a going concern. We have no committed sources of capital funding and there is no assurance that additional funding, if required, will be available to us in the future or be secured on acceptable terms. If adequate funding is not available, we may no longer be a going concern and may be forced to curtail operations, including our commercial activities and research and development programs, or cease operations altogether, file for bankruptcy, or undertake any combination of the foregoing. In such event, our stockholders may lose their entire investment in our company. Stockholders who do not fully exercise their rights will have their interests diluted by stockholders who do exercise their rights. The rights offering is expected to result in our issuance of an additional shares of our common stock (equivalent to CDIs). If you choose not to fully take up your rights prior to the completion of the rights offering, your relative ownership interest in us will be diluted. The rights offering is also non-renounceable and as a result if you do not take up your rights then you will not receive any consideration or value for unused rights. Table of Contents The Issue Price was determined by our board of directors after consideration of a number of factors and is not necessarily an indication of our value or the value of our common stock. Each right entitles its holder to purchase New CDIs for every CDIs (or CDIs for every shares of common stock) held by them at an issue price of A$ per New CDI. Our board of directors determined that the Issue Price should be designed to provide an incentive to our current stockholders and CDI holders to take up their rights and purchase their pro rata allocation of New CDIs. This Issue Price was not intended to bear any relationship to the historical price of our CDIs or our past or future operations, cash flows, net income, current financial condition, the book value of our assets or any other established criteria for value. As a result, the Issue Price should not be considered an indication of the actual value of our company or of our common stock. The price of our CDIs may decline before or after the completion of the rights offering. We cannot assure you that the market price of our CDIs on ASX will not decline below the Issue Price after you elect to take up your rights. Additionally, the rights offering may cause an immediate decrease in the market price of our CDIs. If that occurs, you will have committed to buy New CDIs at a price above the prevailing market price and your application cannot be withdrawn. You will suffer an immediate unrealized loss on those New CDIs as a result. Moreover, we cannot assure you that following the rights offering you will be able to sell your New CDIs at a price equal to or greater than the Issue Price. We may terminate the rights offering at any time prior to the completion of the offer period, and we will have no obligation to you except to return your exercise payments. We may, in our sole discretion, decide not to continue with the rights offering or terminate the rights offering prior to the completion of the offer period. If the rights offering is terminated, we will return as soon as possible all payments in relation to New CDIs, without interest or deduction. You must act promptly and follow instructions carefully if you want to participate in the rights offering. Eligible Holders and, if applicable, brokers, banks or other nominees acting on their behalf, who desire to purchase New CDIs in the rights offering must act promptly to ensure that all required payments and if applicable, the Entitlement and Acceptance Form are actually received by the CDI Registry, prior to the closing of the rights offering. The time period to participate in the rights offering is limited. If you or your nominee fails to follow the procedures that apply to the acceptance of your rights, we may, depending on the circumstances, reject your application or accept it only to the extent of the payment received. Neither we nor the CDI Registry undertakes to contact you concerning, or attempt to correct, an incomplete or incorrect Entitlement and Acceptance Form or payment or contact you concerning whether a broker, bank or other nominee holds rights on your behalf. We have the sole discretion to determine whether an application follows the procedures that apply to the take up of your rights. Management will have broad discretion as to the use of the net proceeds from the rights offering, and we may not use these proceeds effectively. Our management will have broad discretion in the application of the net proceeds from the rights offering and could spend the proceeds in ways that do not improve our results of operations or enhance the value of our common stock. Accordingly, you will be relying on the judgment of our management with regard to the use of these net proceeds, and you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. Our failure to apply these funds effectively could have a material adverse effect on our business and cause the price of our CDIs on ASX to decline. Table of Contents

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+ RISK FACTORS An investment in our common stock involves a high degree of risk. You should carefully consider the following risks and uncertainties in addition to other information in this prospectus in evaluating our company and its business before purchasing our common stock. These risk factors are not necessarily exclusive and other unanticipated risk may arise. Our business, operating results and financial condition could be seriously harmed as a result of the occurrence of any of the following and of unanticipated risks. You could lose all or part of your investment due to any of these risks. You should invest in our common stock only if you can afford to lose your entire investment. RISKS RELATED TO MANUFACTURING, DISTRIBUTING AND SELLING CBD PRODUCTS. Certain states of the United States may limit or prohibit the sale and consumption of CBD and CBD products, notwithstanding the removal of CBD from hemp from the federal schedule of illegal drugs. It is not clear what impact the removal of CBD from hemp from the federal schedule of illegal drugs on the laws of states which independently prohibit CBD from any source, including hemp. Approximately eleven states of the United States either limit or prohibit the sale and consumption of CBC and CBD products. We believe that we cannot legally sell our products containing CBD ingredients in those states, until the laws of those states are changed to legalize CBD from hemp, and we are deprived of sales revenues from distributors and consumers in those states. Without access to consumers in those states, we expect our sales to be less than we might otherwise experience if we were able to legally sell our CBD products in all fifty states of the United States. In the event we offer our products for sale from a website available in all states, we may be found to violate the laws of states in which sale of CBD and CBD products are illegal or restricted, which could expose us to civil and criminal charges and have an adverse impact on our reputation and ability to continue and expand sales of our products. We currently offer our CBD products for sale from our website. The mere visibility of such a website in states where the sale of our CBD containing products is illegal or restricted could result in a finding that we have violated the civil or criminal laws of one or more of such states. Any civil or criminal investigation, suit, prosecution or conviction would be expected to damage our reputation and adversely impact our sales and our ability to remain in business. The acceptance of our CBD products may depend on the general acceptance and levels of use of medical and recreational marijuana and specifically CBD products and economic conditions in the medical and recreational marijuana industry, over which we have no control. We cannot advertise our CBD products as having any medical, health or nutritional benefits under laws and regulations administered by the Food and Drug Administration and the Federal Trade Commission. Our revenues and profitability are dependent upon social attitudes toward medical and recreational marijuana in general and specifically CBD products and by economic conditions and changes in the market for medical and recreational marijuana and specifically CBD products. Loss of favor among users of medical and recreational marijuana generally and specifically CBD products or among society at large or loss of financial viability for the medical and recreational marijuana industry in general and specifically the CBD products industry could adversely affect our business and profitability. RISKS RELATED TO OUR UNCERTAINTY OF PROFITABILITY Our limited product line may hinder our business and contribute to variable and unsteady revenues and profits. We have and plan to further develop a limited number of products at a time. A limited number of products may cause variability and unsteady profits and losses depending on the products offered. Our business strategy may result in increased volatility of revenues and earnings. It is difficult to accurately forecast revenues and operating results which could fluctuate in the future due to a number of factors. These factors may include, among other things, the following: Our ability to raise sufficient capital to take advantage of opportunities and generate sufficient revenues to cover expenses. Our ability to source opportunities with sufficient risk adjusted returns. Our ability to manage our capital and liquidity requirements based on changing market conditions generally. The amount and timing of operating and other costs and expenses. The nature and extent of competition from other companies that may reduce market share and create pressure on pricing and investment return expectations. Adverse changes in the national and regional economies in which we will participate, including, but not limited to, changes in our performance, capital availability, and market demand. Changes in laws, regulations, accounting, taxation, and other requirements affecting our operations and business. Our operating results may fluctuate from year to year due to the factors listed above and others not listed. At times, these fluctuations may be significant. Management of growth will be necessary for us to be competitive. Successful expansion of our business will depend on our ability to effectively attract and manage staff, strategic business relationships, and shareholders. Specifically, we will need to hire skilled management and technical personnel as well as manage partnerships to navigate shifts in the general economic environment. Expansion has the potential to place significant strains on financial, management and operational resources, yet failure to expand will inhibit our profitability goals. Our independent registered Public Accounting firm s auditors report includes an explanatory paragraph stating that there is substantial doubt about our ability to continue as a going concern. We are an early and development stage company and have limited financial resources. We have suffered recurring losses from operations and have an accumulated deficit of $404,273 at September 30, 2018. Our independent registered public accounting firm included an explanatory paragraph in its audit opinion on our financial statements at and for the years ended December 31, 2016 and 2017 that states that our losses from operations raise substantial doubt about our ability to continue as a going concern. We anticipate our auditor will include the explanatory paragraph in its report for the fiscal year ended December 31, 2018. We have generated insufficient revenues from our business to pay all of our expenses, and our expenses in excess of revenue will be accrued until sufficient financing or funding is obtained to pay for these expenses. You have no assurances that we will be able to obtain funds from our shareholders or others to continue our operations. We may need to seek additional financing. The financing sought may be in the form of equity or debt financing or a combination of both from various sources as yet unidentified. You have no assurances we will generate sufficient revenue or obtain the necessary financing to continue as a going concern and the failure to do so could cause us to cease our operations. We are engaged in a highly competitive market. We face strong competition from larger companies that may offer or plan to offer products similar to ours. Many of our current and potential competitors have longer operating histories, significantly greater financial, marketing and other resources and larger client bases than we have (or may be expected to have). If and as CBD infused bakery, cosmetic and confectionary products become more widely accepted, industry dominant cookie, candy and cosmetics manufacturers may decide to enter our business sector and quickly gain significant market share. In such event, our growth, which depends at present on a highly fragmented market for the types of products we offer, could suffer. Given the rapid changes affecting the global, national, and regional economies generally and the law and regulations governing medical marijuana and recreational marijuana industries, in particular, we may not be able to create and maintain a competitive advantage in the marketplace. Our success will depend on our ability to keep pace with any changes in our markets. Our success will depend on our ability to respond to, among other things, changes in the economy, market conditions and competitive pressures. Any failure by us to anticipate or respond adequately to such changes could have a material adverse effect on our financial condition, operating results, liquidity, cash flow and our operational performance. There could be unidentified risks involved with an investment in our common stock. The foregoing risk factors are not a complete list or explanation of the risks involved with an investment in our common stock. Additional risks will likely be experienced that we are not presently able to foresee. Prospective investors must not construe this information provided herein as constituting investment, legal, tax or other professional advice. Before making any decision to invest in our securities, you should read this entire prospectus and consult with your own investment, legal, tax and other professional advisors. An investment in our securities is suitable only for investors who can assume the financial risks of an investment for an indefinite period of time and who can afford to lose their entire investment. We make no representations or warranties of any kind with respect to the likelihood of the success of our business, the value of our securities, any financial returns that may be generated or any tax benefits or consequences that may result from an investment in us. Our officer and directors have significant management responsibilities to companies unrelated to us and which may require or demand more of their time and attention, thus depriving our business and affairs of their time and attention or the sufficient time and attention that we may require to achieve our full potential, to the detriment of our business. Please see Mr. Oran and Mr. Nurieli s biographical information under "Our Management" for information about other companies with which they have significant management responsibilities. You have no assurance that one or more of these other companies will not require a greater portion of Mr. Oran and Mr. Nurieli s attention and thus deprive us of their time and attention with the prospect that we may not receive the amount of their time and attention that we require to become and remain a successful company. In the event Mr. Oran and Mr. Nurieli remain our management, we have a risk that they will have insufficient time available to manage our business and affairs, in which event we may not achieve our full potential and may cease operations. Our failure to attract, train, or retain highly qualified personnel could harm our business. Our success depends on our ability to attract, train, and retain qualified personnel, specifically those with management and product development skills. In particular, we must hire skilled personnel to further our research and development efforts. Competition for such personnel is intense. If we do not succeed in attracting new personnel or retaining and motivating our current personnel, our business could be harmed. We cannot guarantee we will succeed in achieving our goals, and our failure to do so would have a material adverse effect on our business, prospects, financial condition and operating results. Our products are new and are only in the early stages of commercialization. We are not certain these products will be well received as anticipated. Some of our products may have taste, texture and other features that may limit their appeal to consumers and put us at a competitive disadvantage. If our current or future products fail to appeal to consumer tastes or we do not achieve or sustain market acceptance, we could lose customers which could have a material adverse effect on our business, financial condition and operating results. As is typical in a new and rapidly evolving industry, demand and market acceptance for recently introduced products are subject to a high level of uncertainty and risk. Because our markets are new and evolving, it is difficult to predict with any certainty the size of this market and its growth rate, if any. You have no assurance that a market for our products will develop, grow or be sustainable. If the market fails to develop, develops more slowly than expected or becomes saturated with competitors, our business, financial condition and operating results would be materially adversely affected. If we fail to establish and maintain an effective system of internal control, we may not be able to report our financial results accurately or to prevent fraud. Any ability to report and file our financial results accurately and timely could harm our reputation and adversely impact the future trading price of our common stock. Effective internal control is necessary for us to provide reliable financial reports and prevent fraud. If we cannot provide reliable financial reports or prevent fraud, we may not be able to manage our business as effectively as we would if an effective control environment existed, and our business and reputation with investors may be harmed. As a result, our small size and any current internal control deficiencies may adversely affect our financial condition, results of operation and access to capital. We currently have insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements. Additionally, there is a lack of formal process and timeline for closing the books and records at the end of each reporting period and such weaknesses restrict our ability to timely gather, analyze and report information relative to the financial statements. Because of our limited resources, there are limited controls over information processing. There is inadequate segregation of duties consistent with control objectives. Our management is composed of a small number of individuals resulting in a situation where limitations on segregation of duties exist. In order to remedy this situation, we would need to hire additional staff. Currently, we are unable to hire additional staff to facilitate greater segregation of duties. The loss of business of either or both of our largest customers who make up more than half of our business, or the failure of either of both such customers to pay their accounts receivable to us, would in either or both events have a materially adverse impact on our business, financial condition, revenue and prospects. We derived fifty-eight percent of our revenues in 2017 and thirty-seven percent of our revenues in 2018 from two customers. If we were to lose the business from either or both of these customers, or they were to materially decrease their purchases from us, or they were to fail to pay their outstanding balances due to us, and we are unable to replace the business with other existing or new customers, you can expect our revenues, profitability (if any) and the viability of our business to be materially and adversely impacted, causing a decline in our market price per share and our ability to remain in business. If you believe you have a claim against us or against our directors or management, you are required by our Delaware charter to sue us or them in the State of Delaware, which may discourage you from or disadvantage you in a suit upon any such claim. Our Delaware charter requires you to sue us in a Delaware court or in federal court in Delaware for any derivative action, any claim brought under Delaware law, any claim arising under our charter or our bylaws and any claim governed by the internal affairs doctrine under Delaware case law. This provision will deprive you of choosing another jurisdiction with potentially more favorable law and require you to travel to Delaware and to engage Delaware counsel to pursue a claim which you believe you may have against us and our management. We have elected to take advantage of specified reduced disclosure requirements applicable to an "emerging growth company" under the JOBS Act, the information that we provide to stockholders may be different than they might receive from other public companies. As a company with less than $1 billion in revenue during our last fiscal year, we qualify as an "emerging growth company" under the JOBS Act. As an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies. These provisions include: only two years of audited financial statements in addition to any required unaudited interim financial statements with correspondingly

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+ The table below summarizes the Company s warrant activity: Issuances Warrants outstanding at December 31, 2016 682,693 Issuances 8,178,580 Exercised (3,007,412) Warrants outstanding at December 31, 2017 5,853,861 Issuances 12,385,143 Expired (42,465) Exercised (9,481,668) Warrants outstanding at December 31, 2018 8,714,871 9. Convertible Debt 2018 Convertible Note Offering On March 30, 2018, the Company entered into a Securities Purchase Agreement with two unaffiliated institutional and accredited investors for a private placement (the "2018 Note Offering") of up to $10.75 million in principal amount and $10 million funding amount (reflecting $750,000 of original issue discount) of Series A Senior Convertible Notes ("Series A Notes"), Series B Senior Secured Convertible Notes ("Series B Notes," and collectively with the Series A Notes, the "2018 Notes"), and Series Q warrants (the "Series Q Warrants") to purchase 9,126,984 shares of Class A Common Stock. On April 9, 2018, the Company closed the 2018 Note Offering. At the closing on April 9, 2018, the Company received $5 million of the gross proceeds and two secured promissory notes, one note from each investor, in a combined aggregate amount of $5 million (each, an "Investor Note"), secured by cash and/or securities held in investor accounts. These Investor Notes are presented net of the convertible debt carrying amount on the Consolidated Balance Sheets due to right of offset. All amounts outstanding under the 2018 Notes matured and were due and payable on or before the one-year anniversary of the issuance of the 2018 Notes ("Maturity Date"). The 2018 Notes did not incur interest other than upon the occurrence of an event of default, in which case the 2018 Notes bore interest at 18% per year ("Interest Rate"). The 2018 Notes were convertible at any time, at the option of the holders, into shares of Common Stock at a conversion price. The initial fixed conversion price ("ICP") was $1.2405 per share, subject to reduction, as described below, and adjustment for stock splits, stock dividends, and similar events. The ICP of the 2018 Notes were subject to reduction subsequent to shareholder approval. On June 21, 2018 the Company held its 2018 annual shareholder meeting at which time the shareholders approved the 2018 Note Offering and thereby initiating a reset period which enabled the note holders to earn additional amounts ("Additional Amounts"), effectively a make-whole for amounts previously converted. As a result of the shareholder approval, the conversion price of the 2018 Notes and the exercise price of the Series Q Warrants were reset. Subsequent to that date, the Company agreed to permanently reduce the conversion price of the 2018 Notes from $0.3223 to $0.3067 effective on August 27, 2018. The 2018 Notes were convertible at any time, at the option of the holder, into shares of the Company s Class A common stock at a conversion price equal to $0.3067. The Series Q Warrants were exercisable into shares of the Company s Class A common stock at an exercise price of $0.3223 per share. If the Company were to have consummated a Subsequent Placement, subject to some exceptions, a Note holder would have had the right to require that the Company redeem, in whole or in part, a portion of the amounts owed by the Company to such holder under a Note in cash. A Note holder could also have required the Company to redeem all or a portion of its 2018 Note in connection with a transaction resulting from a Change of Control and upon the occurrence of an event of default. The 2018 Notes contained customary events of default, including but not limited to: (i) failure to file or have declared effective by the SEC the applicable registration statement required by the Registration Rights Agreement within certain time periods or failure to keep the registration statement effective as required by the Registration Rights Agreement, (ii) failure to maintain the listing of the Common Stock, (iii) failure to make payments when due under the Notes, (iv) breaches of covenants, and (iv) bankruptcy or insolvency. The occurrence of an event of default under the 2018 Notes would have triggered default interest and would have caused an Equity Condition Failure, which may mean that the Company would have been unable to force mandatory conversion of the Notes and that Note Holders may not be required to prepay the Investor Note under a mandatory prepayment event. Following an event of default, Note holders could have required the Company to redeem all or any portion of their Notes in cash at a conversion price equal to the greater of (i) 125% of the amount to be redeemed, and (ii) the product of (A) the amount to be redeemed divided by the conversion price, multiplied by (B) the product of (x) 125% multiplied by (y) the greatest closing sale price of the Common Stock on any trading day during the period commencing on the date immediately preceding such event of default and ending on the date the Company makes the entire redemption payment. The principal amount of the Series B Notes was considered restricted principal until collection of the Investor Notes was received by the Company ("Restricted Principal"). Upon any offset, the restricted principal under a Series B Note would automatically and simultaneously be reduced, on a dollar-for-dollar basis, in an amount equal to the principal amount of an investor s Investor Note cancelled and offset. Under the terms of the Series B Notes, the Company granted a security interest to each investor in such investor s Investor Note to secure the Company s obligations under the applicable Series B Note. Each investor perfected its security interest by taking possession of such investor s Investor Note at the closing. Each Series Q Warrant is immediately exercisable and will expire five years from the date of issuance. Initially, only 75% of the shares of Common Stock issuable upon exercise of a Series Q Warrant may be exercised, which amount increases upon an investor s prepayment under such investor s Investor Note. A holder may not exercise any of the Series Q Warrants, and the Company may not issue shares of Common Stock upon exercise of any of the Series Q Warrants if, after giving effect to the exercise, a holder together with (i) any investment vehicle, including, any funds, feeder funds or managed accounts, currently, or from time to time after the issuance date, directly or indirectly managed or advised by the holder s investment manager or any of its affiliates or principals, (ii) any direct or indirect affiliates of the holder or any of the foregoing, (iii) any person acting or who could be deemed to be acting as a group together with the holder or any of the foregoing and (iv) any other persons whose beneficial ownership of the Company s Common Stock would or could be aggregated with the holder s and certain other "Attribution Parties" would beneficially own in excess of 4.99 or 9.99%, as elected by each investor at closing, of the outstanding shares of Common Stock. At each holder s option, the cap may be increased or decrease to any other percentage not in excess of 9.99%, except that any increase will not be effective until the 61st day after notice to the Company. As disclosed in Note 2. Significant Accounting Policies, the warrants issued in connection with the 2018 Note Offering as well as the embedded derivatives were accounted for as liabilities that had been initially measured and recorded at fair value and were revalued at each balance sheet date after their initial issuance with the changes in value recorded in earnings. These conversion options accounted for as embedded derivatives were incorporated into the 2018 Notes to incentivize the holders to provide the Company with short term funding for POWERHOUSE . See Note 10. Fair Value Measurements for information about the techniques the Company uses to measure the fair value of our derivative instruments. The fair value of the embedded derivatives and Series Q warrants exceeded the proceeds received from the 2018 Notes Offering which was recognized as a loss within the line item "Change in fair value of derivative liabilities and loss on debt extinguishment" in the statement of operations. 10. Fair Value Measurements The Company complies with the provisions of FASB ASC No. 820, Fair Value Measurements and Disclosures ("ASC 820"), in measuring fair value and in disclosing fair value measurements at the measurement date. ASC 820 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements required under other accounting pronouncements. FASB ASC No. 820-10-35, Fair Value Measurements and Disclosures- Subsequent Measurement ("ASC 820-10-35"), clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820-10-35-3 also requires that a fair value measurement reflect the assumptions market participants would use in pricing an asset or liability based on the best information available. Assumptions include the risks inherent in a particular valuation technique (such as a pricing model) and/or the risks inherent in the inputs to the model. Management will have broad discretion as to the application of the net proceeds from this offering. Our shareholders may not agree with the manner in which management chooses to allocate and spend the net proceeds. Moreover, management may use the net proceeds for corporate purposes that may not increase our profitability or market value. Warrant holders who exercise the Warrants may experience immediate and substantial dilution The exercise price of the Warrants associated with the shares of Common Stock offered pursuant to this prospectus may be substantially higher than the net tangible book value per share of Common Stock. In that situation, if you exercise your Warrant, you will incur immediate and substantial dilution in the net tangible book value per share of Common Stock from the exercise price you pay. Moreover, we have a substantial number of stock options and warrants to purchase Common Stock outstanding. If the holders of outstanding options or warrants exercise those options and warrants at prices below the exercise price you paid, you will incur further dilution. The exercise prices are not indications of our value. The exercise prices of the Warrants may not necessarily bear any relationship to the book value of our assets, past operations, cash flows, losses, financial condition or any other established criteria for value. You should not consider the exercise price as an indication of the value of the Common Stock underlying the Warrants. After the date of this prospectus, the Common Stock may trade at prices above or below such exercise prices. The public trading market for the Common Stock may be limited in the future. Effective February 15, 2019, the Common Stock is quoted on the OTCQX under the symbol "RGSE." Any over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commissions and may not necessarily represent actual transactions. Prior to such date, the Common Stock traded on the Nasdaq Capital Market under the same symbol. The trading volume for the Common Stock fluctuates and, in the past, there have been time periods during which the Common Stock trading volume has been limited. Management can make no assurances that trading volume will not be similarly limited in the future. Without an active trading market, there can be no assurance of any liquidity or resale value of the Common Stock, and shareholders may be required to hold shares of the Common Stock for an indefinite period of time. Risk Factors Related to our Business and Industry We have a history of operating losses, and it is uncertain when, or if, we may be able to achieve or sustain future profitability. If we do not become profitable on an ongoing basis, we may be unable to continue our operations. We have incurred net losses and have an accumulated deficit of $243 million as of December 31, 2018. If we cannot improve our operating results and ultimately generate net income, we may be unable to continue our operations in the future. Our financial statements as of December 31, 2018 were prepared under the assumption that we will continue as a going concern. The independent registered public accounting firm that audited our 2018 financial statements, in their report, included an explanatory paragraph referring to our recurring losses and expressed substantial doubt in our ability to continue as a going concern. Management also concluded that substantial doubt exists in our ability to continue as a going concern, and our financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our ability to continue as a going concern depends on our ability to obtain additional equity or debt financing, increase sales and installations, attain further operating efficiencies, reduce expenditures, and ultimately, to generate revenue. We need to successfully commercialize POWERHOUSE or increase our sales, installations and revenue in order to achieve our goal of operating profitability. Our current levels of sales, installations and revenue are insufficient for profitable operations. We believe we must commercialize POWERHOUSE 3.0, the principle component of our revenue growth strategy, to achieve our goal of operating profitably. Alternatively, we must increase our sales, installations and revenue in our Solar Division to achieve our goal of operating profitably. If we are unsuccessful in executing these plans, we will be unable to increase revenue and will not achieve our goal of operating profitability. We have a history of negative cash flows from operations, and it is uncertain when, or if, in the future we will be able to achieve or sustain positive cash flow from operations. There can be no assurance in the future that we will generate sufficient cash flow from operations or obtain funds from future financings or other sources to fund operations or other liquidity needs which could have important adverse consequences to us, such as: limiting our ability to obtain additional financing; making it more difficult for us to satisfy our obligations with respect to future indebtedness; limiting our ability to respond to changing business, industry and economic conditions and to withstand competitive pressures, which may affect our financial condition; limiting our ability to make investments, dispose of assets, pay cash dividends or repurchase stock; increasing our vulnerability to downturns in our business, our industry or the general economy and restricting us from making improvements or acquisitions or exploring business opportunities; and placing us at a competitive disadvantage to competitors with greater resources. Our future operating performance and our ability to service indebtedness will be subject to future economic conditions and to financial, business and other factors, many of which are beyond our control. Existing rules, regulations and policies pertaining to electricity pricing and technical interconnection of customer-owned electricity generation and changes to these regulations and policies may deter the purchase and use of solar energy systems and negatively impact development of the solar energy industry. The market for solar energy systems is heavily influenced by foreign, federal, state and local government regulations and policies concerning the electric utility industry, as well as policies adopted by electric utilities. These regulations and policies often relate to electricity pricing and technical interconnection of customer-owned electricity generation. For example, the vast majority of states have a regulatory policy known as net energy metering, or "net metering", which allows our customers to interconnect their on-site solar energy systems to the utility grid and offset their utility electricity purchases by receiving a bill credit at the utility s retail rate for energy generated by their solar energy system that is exported to the grid and not consumed on-site. In this way, the customer pays for the net energy used or receives a credit at the retail rate if more electricity is produced than consumed. In some states, net metering is being replaced with lower credits for the excess electricity sent onto the grid from solar energy systems, and utilities are imposing minimum or fixed monthly charges on owners of solar energy systems. These regulations and policies have been modified in the past and may be modified in the future in ways that can restrict the interconnection of solar energy systems and deter purchases of solar energy systems by customers. In addition, electricity generated by solar energy systems competes most favorably in markets with tiered rate structures or peak hour pricing that increase the price of electricity when more is consumed. Modifications to these rate structures by utilities, such as reducing peak hour or tiered pricing or adopting flat rate pricing, could require the price of solar energy systems to be reduced in order to compete with the price of utility generated electricity. The reduction, elimination or expiration of government subsidies and economic incentives for solar energy systems could reduce the demand for our products and services. U.S. federal, state and local government bodies and utilities provide incentives to end-users, distributors, system integrators and manufacturers of solar energy systems to promote solar electricity in the form of rebates, tax credits and other financial incentives such as system performance payments and payments for renewable energy credits associated with renewable energy generation. These incentives enable us to lower the price we charge our customers for solar energy systems. However, these incentives may expire on a particular date, end when the allocated funding is exhausted, or be reduced or terminated as solar energy adoption rates increase. These reductions or terminations often occur without warning. In addition, applicable authorities may adjust or decrease incentives from time to time or include provisions for minimum domestic content requirements or other requirements to qualify for these incentives. The reduction, elimination or expiration of such incentives or delays or interruptions in the implementation of favorable federal or state laws could substantially increase the cost of our systems to our customers, resulting in a significant reduction in demand for our solar energy systems, which would negatively impact our business. Existing regulations, and changes to such regulations, may present technical, regulatory and economic barriers to the installation of solar energy systems, which may significantly reduce demand for our solar energy systems. The installation of solar energy systems is subject to oversight and regulation under local ordinances; building, zoning and fire codes; environmental protection regulation; utility interconnection requirements for metering; and other rules and regulations. We attempt to keep up-to-date on these requirements on a national, state and local level and must design and install our solar energy systems to comply with varying standards. Certain jurisdictions may have ordinances that prevent or increase the cost of installation of our solar energy systems. In addition, new government regulations or utility policies pertaining to the installation of solar energy systems are unpredictable and may result in significant additional expenses or delays, which could cause a significant reduction in demand for solar energy systems. An increase in our cost of materials could arise as a result of the United States imposing trade remedies on imported solar panels, cells, inverters, batteries or other products related to our business. During 2018, the United States and China each imposed new tariffs on various products imported from the other country. The U.S. tariffs include an additional 25% tariff on solar panels and cells that are manufactured in China and a tariff on inverters, certain batteries and other electrical equipment currently set at 25% effective January 1, 2019. The United States also has, from time to time, imposed, or announced tariffs on goods imported from other countries we use in our business. We cannot predict what actions may ultimately be taken with respect to tariffs or trade relations between the United States and other countries, what products may be subject to such actions, or what actions may be taken by the other countries in retaliation. The adoption and expansion of trade restrictions, the occurrence of a trade war, or other governmental action related to tariffs or trade agreements or policies has the potential to adversely impact our supply chain, our costs, our suppliers, and the U.S. economy, which could in turn adversely affect our business, financial condition and results of operation. An increase in our cost of materials could arise as a result of changes in the price of oil and the foreign currency exchange rate for Chinese yuan. The baseplate of our POWERHOUSE in-roof solar shingle is plastic and, accordingly, changes in the price of oil will affect our cost of this material. Currently, we purchase the solar laminate for our POWERHOUSE in-roof solar shingle from a Chinese manufacturer, and, accordingly, changes in the Chinese yuan verses the US Dollar will affect our cost of this material. Although currently there is no shortage of supplies for solar energy systems, from time to time in the past, shortages have occurred and have impacted solar companies such as us. Shortages in the supply of silicon and inverters or supply chain issues could adversely affect the availability and cost of the solar photovoltaic modules used in our solar energy systems. Shortages of silicon and inverters or supply chain issues could adversely affect the availability and cost of our solar energy systems. Manufacturers of photovoltaic modules depend upon the availability and pricing of silicon, one of the primary materials used in photovoltaic modules. The worldwide market for silicon from time to time experiences a shortage of supply, which can cause the prices for photovoltaic modules to increase and supplies to become difficult to obtain. While we have been able to obtain sufficient supplies of solar photovoltaic modules to satisfy our needs to date, this may not be the case in the future. Future increases in the price of silicon or other materials and components could result in an increase in costs to us, price increases to our customers or reduced margins. Other international trade conditions such as work slowdowns and labor strikes at port facilities or major weather events can also adversely impact the availability and price of solar photovoltaic modules. Our business prospects could be harmed if solar energy is not widely adopted or sufficient demand for solar energy systems does not develop or takes longer to develop than we anticipate. The solar energy market is at a relatively early stage of development. The extent to which solar energy will be widely adopted and the extent to which demand for solar energy systems will increase are uncertain. If solar energy does not achieve widespread adoption or demand for solar energy systems fails to develop sufficiently, we may be unable to achieve our revenue and profit targets. In addition, demand for solar energy systems in our targeted markets may not develop or may develop to a lesser extent or more slowly than we anticipate. Many factors may affect the demand for solar energy systems, including the following: availability of government and utility company subsidies and incentives to support the development of the solar energy industry; government and utility policies regarding the interconnection of solar energy systems to the utility grid; fluctuations in economic and market conditions that affect the viability of conventional and non-solar renewable energy sources, such as changes in the price of natural gas and other fossil fuels; cost-effectiveness (including the cost of solar panels), performance and reliability of solar energy systems compared with conventional and other non-solar renewable energy sources and products; success of other renewable energy generation technologies, such as hydroelectric, wind, geothermal, solar thermal, concentrated solar and biomass; availability of customer financing with economically attractive terms; fluctuations in expenditures by purchasers of solar energy systems, which tend to decrease in slower economic environments and periods of rising interest rates and tighter credit; and deregulation of the electric power industry and the broader energy industry. A drop in the retail price of conventional electricity or non-solar renewable energy sources may negatively impact our business. The demand for our solar energy systems depends in part on the price of conventional electricity, which affects return on investment resulting from the purchase of solar energy systems. Fluctuations in economic and market conditions that impact the prices of conventional and non-solar renewable energy sources could cause the demand for solar energy systems to decline, which would have a negative impact on our business. Our sales and installations are subject to seasonality of customer demand and weather conditions which are outside of our control. Our sales are subject to the seasonality of when customers buy solar energy systems. We historically have experienced spikes in orders during the spring and summer months which, due to lead time, result in installations and revenue increasing during the summer and fall. Tax incentives can generate additional backlog prior to the end of the year, depending upon the incentives available and whether customers are looking to take advantage of such incentives before the end of the year. Our ability to construct systems outdoors may be impacted by inclement weather, which can be most prominent in our geographic installation regions during the first and fourth quarters of the year. As a result of these factors, our first quarter is generally our slowest quarter of the year. If unexpected natural events occur and we are unable to manage our cash flow through these seasonal factors, there could be a negative impact on our financial position, liquidity, results of operations and cash flow. Our inability to respond to changing technologies and issues presented by new technologies could harm our business. The solar energy industry is subject to technological change. If we rely on products and technologies that cease to be attractive to customers, or if we are unable to respond appropriately to changing technologies and changes in product function or quality, we may not be successful in capturing or retaining significant market share. In addition, any new technologies utilized in our solar energy systems may not perform as expected or as desired, in which event our adoption of such products or technologies may harm our business. We may be unable to successfully commercialize POWERHOUSE 3.0, which may negatively impact our business and results of operation. There are risks we must address to successfully commercialize POWERHOUSE 3.0: The adequacy of, and access to, capital necessary to commercialize POWERHOUSE 3.0; Our ability to satisfy the conditions and our obligations under the License; Our ability to grow a nationwide network of local roofers and solar installers to purchase POWERHOUSE solar shingles; Our ability to contract with homebuilders to purchase POWERHOUSE solar shingles for their communities; Our ability to manage a supply chain, including the cost and availability of raw materials, in order to achieve production levels and competitive pricing of the POWERHOUSE 3.0 shingles; Our ability to successfully expand operations and realize profitable revenue growth from the sale and installation of POWERHOUSE 3.0; Our ability to successfully and timely expand our POWERHOUSE 3.0 business outside of the United States and manage foreign exchange risks associated with the POWERHOUSE 3.0 business; Intellectual property infringement claims, and warranty claims related to the POWERHOUSE 3.0 business; and Competition in the built-in photovoltaic solar system business. Our License with Dow for the exclusive use of the POWERHOUSE trademark name is subject to our selling of 50 megawatts of POWERHOUSE 3.0 in-roof shingle within the first 5 years and failure to do so could adversely affect our business, financial condition and results of operation. If we do not sell 50 megawatts of POWERHOUSE 3.0 in-roof shingles during the first 5 years after obtaining UL certification, Dow has the right to amend the License to be non-exclusive. If that were to happen, Dow would be allowed to grant rights to others to sell POWERHOUSE 3.0 in-roof solar shingles and use associated intellectual property, thereby increasing competition, which could adversely affect our business, financial condition and results of operation. Our Solar Division operates in a highly competitive market with low barriers to entry and, accordingly, we may face the loss of business or reduced margins. The solar energy system installation market is highly competitive with low barriers to entry. We currently compete with significantly larger companies as well as a large number of relatively small installers and developers. Larger companies may have greater financial, technical and marketing resources and greater name recognition than we do. Smaller companies may lack adequate systems and capital but can benefit from operating efficiencies or from having lower overhead, which enables them to offer lower prices. We believe that our Solar Division s ability to compete depends in part on a number of factors outside of our control, including the following: the availability of solar financing solutions; the price at which competitors offer comparable products; marketing efforts undertaken by our competitors; the extent of our competitors responsiveness to customer needs; and access to materials, labor and installation services. Competition in the solar energy system installation market may increase in the future as a result of low barriers to entry. Increased industry competition could result in reductions in price, margins, and market share and in greater competition for qualified personnel. Our business and operating results would be adversely affected if we are unable to compete effectively. We derive the majority of the revenue from the sale of solar energy systems in east coast states. We currently derive the vast majority of our Solar Division revenue from the sale of solar energy systems in east coast states. This geographic concentration exposes us to increased risks associated with the growth rates, government regulations, economic conditions, weather and other factors that may be specific to those states to which we would be less subject if we were more geographically diversified. Our Board of Directors has concluded that we will exit our mainland residential business and we may not generate the cost savings we expect. On March 27, 2019, our Board of Directors determined to exit our mainland residential solar business to focus on the POWERHOUSE in-roof shingle market and reduce overall cash outflow. This realignment is expected to result in the reduction of workforce payroll plus burden of approximately $4.0 million annually. Revenues and net loss in 2018 for the mainland residential solar business were approximately $8.9 million and $6.3 million, respectively. In order for us to convert our existing backlog to revenue, we plan to use authorized integrators to complete installations throughout the remainder of 2019. These projected cost savings may not be attained, and we may not be successful at converting our existing backlog into revenue utilizing authorized integrators. Our Solar Division installs solar energy systems, and many factors can prevent us from completing installations on time or on budget. Factors that may prevent us from completing installations on time or on budget include: shortages of materials; shortages of skilled labor; unforeseen installation scheduling, engineering, excavation, environmental or geological problems; job site issues that were not apparent during site inspection; natural disasters, hurricanes, weather interference, fires, earthquakes or other casualty losses or delays; delays in obtaining or inability to obtain or maintain necessary licenses or permits; changes to plans or specifications; performance by subcontractors; disputes with subcontractors; and unanticipated cost increases in materials, labor or other elements of our projects beyond budgets and allowances for contingencies. Our installation projects expose us to risks of cost overruns due to typical uncertainties associated with any project or changes in the designs, plans or concepts of such projects. For these and other reasons, installation costs may exceed the estimated cost of completions. Availability and cost of financing for solar energy systems could reduce demand for our services and products. Many of our Solar Division customers, and prospective customers of our POWERHOUSE roofers and homebuilders, depend on loan financing to fund the purchase price of our solar energy systems. The interest rate for this financing varies with market conditions. Third-party financing sources may also charge significant fees for their financing products. If financing sources increase their fees or interest rates, the cost of purchasing our solar energy systems will increase and we may experience decreased demand for our products and services, resulting in reduced revenue. In the alternative, if we elect to absorb any financing price increase by lowering the price of our products and services to keep the total cost to our customers constant, our revenue will decrease, and we will experience lower profit margins. However, we continue to rely on third parties to finance most of our sales of solar energy systems in our Solar Division and we expect that prospective customers of our POWERHOUSE roofers similarly will rely on third parties to finance their purchases. An increase in interest rates or tight credit markets could make it difficult for customers to finance the cost of solar energy systems and could reduce demand for our services and products. Some of our prospective customers may depend on debt financing, such as home equity loans or leasing, to fund the purchase of a solar energy system. Third-party financing sources, specifically for solar energy systems, are currently limited. The lack of financing sources, limitations on available credit, or an increase in interest rates could make it difficult or too costly for our potential customers to secure the financing necessary to purchase a solar energy system on favorable terms, or at all, thus lowering demand for our services and products and negatively impacting our business. We may incur fines and other penalties if we do not conduct our business in accordance with licenses required for our operations and if any such license is suspended or lost, we may be unable to sell or install solar energy systems in the jurisdiction in question and our sales and revenue from that jurisdiction would be adversely affected. As a construction company, we are required to hold general or specialty contractors licenses in some of the jurisdictions in which we operate, although in other jurisdictions we are permitted to utilize the licenses of subcontractors. Some jurisdictions also require licenses to sell home improvement products or services, or to issue consumer credit. If we violate the rules of these licensing authorities, we may incur fines or other penalties or have our licenses suspended or cancelled. Some licenses require us to employ personnel with specific qualifications. If we lose those personnel, we may lose our ability to conduct business in that jurisdiction until we can hire a qualified replacement. We may be subject to unexpected warranty expenses or service claims that could reduce our profits. Our currently standard manufacturing warranty for our POWERHOUSE 3.0 solar shingles comes with an 11-year product warranty, which is the standard product warranty of most traditional solar panels today, and a 24-year power production warranty. Our Solar Division provides warranties for workmanship and, in certain cases, in energy production and, accordingly we bear the risk of warranty claims long after we have completed the installation of a solar energy system. Our current standard warranty for our installation services includes a warranty period of up to 10 years for defective workmanship. In addition, most manufacturers of solar photovoltaic modules offer a 25-year warranty period for declines in power performance. Although we maintain an estimated liability for potential warranty or service claims, claims in excess of our recorded liability could adversely affect our operating results. Our failure to predict accurately future warranty claims could result in unexpected volatility in our financial results. We rely heavily on a limited number of suppliers, installers and other vendors, and if these companies were unable to deliver critical components and services, it would adversely affect our ability to operate and our financial results. We rely on a limited number of third-party suppliers to provide the components used in our POWERHOUSE in-roof solar shingles and our solar energy systems. We also rely on key vendors to provide internal and external services which are critical to our operations, including installation of solar energy systems, accounting and customer relationship management software, facilities and communications. The failure of our suppliers and vendors to supply us with products and services in a timely manner or on commercially reasonable terms could result in lost orders, delay our project schedules, limit our ability to operate and harm our financial results. If any of our suppliers or vendors were to fail to supply our needs on a timely basis or to cease providing us key components or services we use, we would be required to secure alternative sources of supply. We may have difficulty securing alternative sources of supply. If this were to occur, our business would be harmed. The installation and ongoing operation of solar energy systems involves significant safety risks. Solar energy systems generate electricity, which is inherently dangerous. Installation of these systems also involves the risk of falling from rooftops, personal injuries occurring at the job site and other risks typical of construction projects. Although we take many steps to assure the safe installation and operation of our solar energy systems, and maintain insurance against such liabilities, we may nevertheless be exposed to significant losses arising from personal injuries or property damage arising from our projects. Our failure to meet customer expectations in the performance of our services, and the risks and liabilities associated with placing our employees and technicians in our customers homes and businesses, could give rise to claims against us. Our failure or inability to meet customer expectations in the performance of our services could damage our reputation or result in claims against us. In addition, we are subject to various risks and liabilities associated with our employees and technicians providing installation services in the homes and businesses of our customers, including possible claims of errors and omissions, harassment, theft of customer property, criminal activity and other claims. Product liability claims against us could result in adverse publicity and potentially significant monetary damages. As a seller of consumer products, we may face product liability claims in the event that use of our solar energy systems results in injuries. Because solar energy systems produce electricity, it is possible that our products could result in injury, whether by product malfunctions, defects, improper installation or other causes. If such injuries or claims of injuries were to occur, we could incur monetary damages and our business could be adversely affected by any resulting negative publicity. The successful assertion of product liability claims against us also could result in potentially significant monetary damages and, if our insurance protection is inadequate to cover these claims, could require us to make significant payments from our own resources. Our operations are largely dependent on the skill and experience of our management and key personnel. The loss of management and other key personnel or our inability to hire additional personnel could significantly harm our business and our ability to expand, and we may not be able to effectively replace members of management who have left the company. Our continued success and our ability to maintain our competitive position is largely dependent upon, among other things, the efforts and skills of our senior executives and management team. We cannot guarantee that these individuals will remain with us. Further, we do not carry key man life insurance on our executives. If we lose the services of any members of our management team or other key personnel, our business may be significantly impaired. In addition, we cannot assure you that we will be able to attract additional qualified senior executive, management and key personnel. The loss of personnel or failure to hire additional personnel could materially and adversely affect our business, operating results and our ability to expand. The expansion of our business could significantly strain our managerial, financial and personnel resources. To reach our goals, we must successfully recruit, train, motivate and retain additional employees, including management and technical personnel, integrate new employees into our overall operations and enhance our financial and accounting systems, controls and reporting systems. While we believe we have personnel sufficient for the current requirements of our business, expansion of our business could require us to employ additional personnel. The loss of personnel or our failure to hire additional personnel could materially and adversely affect our business, operating results and our ability to expand. From time to time, we are subject to litigation which, if adversely determined, could cause us to incur substantial losses. From time to time during the normal course of operating our businesses, we are subject to various litigation claims and legal disputes. As a result, we might also be required to incur significant legal fees, which may have a material adverse effect on our financial position. In addition, because we cannot accurately predict the outcome of any action, it is possible that, as a result of current and/or future litigation, we will be subject to adverse judgments or settlements that could significantly reduce our earnings or result in losses. Increased information technology security threats and more sophisticated computer crime pose a risk to our systems, networks, products and services. We rely on technology, computer systems, third-party service providers, and our website for obtaining and storing certain information. Our business requires us to receive, retain and transmit personally identifiable information and other information about our customers, suppliers and employees, some of which is entrusted to third-party service providers and other businesses we interact with. Information technology security threats are increasing in frequency and sophistication. Our security measures have been breached in an immaterial manner in the past and may be breached in the future due to a cyber-attack, computer malware or viruses, employee error, malfeasance, fraudulent inducement (including so-called "social engineering" attacks and "phishing" scams) or other acts. Costs associated with our past security breach have not been significant. Unauthorized parties have previously obtained and may in the future obtain access to our data or the data of our customers, suppliers or employees or may otherwise cause damage or interfere with our technology, computer systems or website. We develop and update processes and maintain systems in an effort to try to prevent this from occurring and seek assurances from businesses we interact with that they will do the same, but the development and maintenance of these processes and systems are costly and require ongoing monitoring and updating as technologies change, privacy and information security regulations change, and efforts to overcome security measures become more sophisticated. We have taken, and continue to undertake significant steps to protect such information and seek assurances from businesses we interact with that they will do the same, but there can be no assurance that our data security systems or those of businesses we interact with will not be compromised, and such compromise could result in such information being obtained by unauthorized persons, adverse operational effects or interruptions, substantial additional costs or being subject to legal or regulatory proceedings, any of which could damage our reputation in the marketplace or materially and adversely affect our business, financial condition, operating results and cash flows. While we are exploring and evaluating strategic alternatives, we may not be successful in identifying or completing any strategic alternative and any such strategic alternative may not yield additional value for shareholders. On March 7, 2019, we announced that we had commenced a review of strategic alternatives which could result in, among other things, the possible sale of the Company. Our exploration of strategic alternatives may not result in the identification or consummation of any transaction. In addition, we may incur substantial expenses associated with identifying and evaluating potential strategic alternatives. The process of exploring strategic alternatives may be time consuming and disruptive to our business operations, and if we are unable to effectively manage the process, our business, financial condition and results of operations could be adversely affected. Any potential transaction and the related valuation would be dependent upon a number of factors that may be beyond our control, including, among other factors, market conditions, industry trends, the interest of third parties in our business and the availability of financing to potential buyers on reasonable terms. Risk Factors Related to Our Securities The market price of our Common Stock has been volatile, and future volatility could result in substantial losses for investors. The market price of our Common Stock has been volatile in the past and could fluctuate widely in response to various factors, many of which are beyond our control, including the following: actual or anticipated changes in our operating results; regulatory, legislative or other developments affecting us or the solar energy industry generally; changes in expectations relating to our services and products, plans and strategic position or those of our competitors or customers; market conditions and trends within the solar energy industry; acquisitions or strategic alliances by us or by our competitors; litigation involving us, our industry or both; introductions of new technological innovations, services, products or pricing policies by us or by our competitors; recruitment or departure of key personnel; our ability to execute our business plan; volume and timing of customer orders; price and volume fluctuations in the overall stock market from time to time; changes in investor perception; the level and quality of any research analyst coverage of our Common Stock; changes in earnings estimates or investment recommendations by analysts; the financial guidance we may provide to the public, any changes in such guidance or its failure to meet such guidance; the trading volume of our Common Stock; short-term investment in our Common Stock by investors; our issuance of additional Common Stock or securities convertible into or exercisable for Common Stock; and economic and other external factors that impact purchasing decisions of our potential customers. Future volatility of the market price of our Common Stock could result in substantial losses for investors. Future issuances of stock, options, warrants or other securities will cause substantial dilution and may negatively affect the market price of our Common Stock. Ownership of our securities may be diluted by future issuances of securities or the conversion or exercise of outstanding or to be issued options, warrants, convertible notes, convertible stock or other securities. As of April 29, 2019, there were an aggregate of approximately 29 million shares of our Common Stock issuable upon exercise of outstanding warrants. The exercise price under certain of our outstanding warrants is subject to adjustment in the future. Derivative securities, such as convertible debt, options and warrants, currently outstanding or issued in the future may contain anti-dilution protection provisions, which, if triggered, could require us to issue a larger number of the security underlying such derivative security than the face amount. We cannot predict the effect, if any, that future sales or issuance of shares of our Common Stock into the market, or the availability of shares of our Common Stock for future sale, will have on the market price of our Common Stock. Sales of substantial amounts of our Common Stock (including shares issued upon exercise of options and warrants or conversion of convertible related party debt), or the perception that such sales could occur, may materially affect prevailing market prices for our Common Stock. Our common stock could become subject to the Securities and Exchange Commission s "penny stock" regulations, which may limit the liquidity of Common Stock held by our shareholders. The SEC has adopted regulations which generally define a "penny stock" to be an equity security that has a market price of less than $5.00 per share, subject to specific exemptions. Based on our Common Stock s trading price below $5.00 per share, if we are unable in the future to continue to satisfy an available exemption from the definition of "penny stock", then our Common Stock would be considered a penny stock for purposes of federal securities laws. Penny stock is subject to regulations, which affect the ability of broker-dealers to sell such securities. Broker-dealers who recommend a penny stock to persons (other than established customers and accredited investors) must make a special written suitability determination and receive the purchaser s written agreement to a transaction prior to sale. If penny stock regulations apply to our Common Stock, it may be difficult to trade the stock because compliance with the regulations can delay and/or preclude certain trading transactions. Broker-dealers could be discouraged from effecting transactions in our Common Stock if penny stock regulations apply because of the sales practice and disclosure requirements. This could adversely affect the liquidity or price of our Common Stock and impede the sale of the Common Stock in the secondary market. We do not expect to pay any cash dividends on our Common Stock for the foreseeable future. We do not anticipate paying any cash dividends on our Common Stock for the foreseeable future. Our business is subject to reporting requirements that continue to evolve and change, which could continue to require significant compliance effort and resources. Because our Common Stock is publicly traded, we are subject to certain rules and regulations of federal, state and financial market exchange entities charged with the protection of investors and the oversight of companies whose securities are publicly traded. These entities, including the Public Company Accounting Oversight Board and the SEC, periodically issue new requirements and regulations and legislative bodies also review and revise applicable laws such as the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. As interpretation and implementation of these laws and rules and promulgation of new regulations continues, we will continue to be required to commit significant financial and managerial resources and incur additional expenses. Provisions in our articles of incorporation and bylaws might discourage, delay or prevent a change of control of our company or change in our management and, therefore, depress the trading price of our Common Stock. Our articles of incorporation and bylaws contain provisions that could depress the trading price of our Common Stock by discouraging, delaying or preventing a change of control of our company or changes in our management that our shareholders may believe advantageous. These provisions include: Our Board of Directors may consist of any number of directors, which may be fixed from time to time by our Board of Directors. Newly created directorships resulting from any increase in our authorized number of directors may be filled by the affirmative vote of a majority of the directors then in office or by an election at an annual meeting or special meeting of shareholders called for that purpose, and any vacancies on its Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause may be filled by the affirmative vote of a majority of the remaining Board of Directors, even if less than a quorum is remaining in office. A shareholder must provide advance notice of any proposal to be brought before an annual meeting of shareholders by a shareholder, including any nomination for election of directors by any shareholder entitled to vote for the election of directors at the meeting. No shareholder proposal may be considered at a meeting of our shareholders unless the proposal relates to a matter on which a shareholder vote is required by our articles of incorporation, bylaws or by applicable law. Our Board of Directors has the power to issue preferred stock with designations, preferences, limitations and relative rights determined by our Board of Directors without any vote or action by shareholders. The issuance of preferred stock or of rights to purchase preferred stock could have the effect of making it more difficult for a third party to acquire our company, or of discouraging a third party from attempting to acquire our company. Our Board of Directors may amend, supplement or repeal our bylaws or adopt new bylaws, subject to repeal or change by action of our shareholders.

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+ RISK FACTORS You should carefully consider the risk factors set forth below, as well as the other information contained in or incorporated by reference into this prospectus. The risks described below are not the only risks facing us. Any of the following risks or those described in the Annual Report incorporated herein by reference could materially and adversely affect our business, financial condition or operating results. In such a case, you may lose all or a part of your original investment. Risks Related to Investment in our Company s Securities We may be unable to generate sufficient cash flow to satisfy our debt obligations. As of December 31, 2018, we had approximately $1,121.9 million aggregate principal amount of debt outstanding, consisting of $350.0 million under the First Lien Notes and approximately $771.9 million of the Notes. Our high level of indebtedness and the funds required to service such debt could, among other things, make it more difficult for the Company to satisfy its obligations under such indebtedness, increasing the risk that it may default on such debt obligations. The Company s earnings and cash flow may vary significantly from year to year due to the cyclical nature of the offshore drilling industry. Additionally, the Company s future cash flow may be insufficient to meet its debt obligations and commitments, including the Notes. Any insufficiency could negatively impact the Company s business. A range of economic, competitive, business, and industry factors will affect the Company s future financial performance and, as a result, its ability to generate cash flow from operations and to pay its debt, including the Notes. Many of these factors, such as oil and natural gas prices, economic and financial conditions in the offshore drilling industry and the oil and gas industry, as well as the global economy or competitive initiatives of competitors, are beyond the Company s control. If the Company does not generate enough cash flow from operations to satisfy its debt obligations, it may have to undertake alternative financing plans, such as: Refinancing or restructuring debt; Selling assets; Reducing or delaying capital investments; or Seeking to raise additional capital. It cannot be assured, however, that undertaking alternative financing plans, if necessary, would allow the Company to meet its debt obligations. An inability to generate sufficient cash flow to satisfy its debt obligations, including obligations under the Notes, or to obtain alternative financing, could materially and adversely affect the Company s ability to make payments on the Notes and its business, financial condition, results of operations, and prospects. There is a limited public market for our Stapled Securities and there is no public market for our Ordinary Shares, and there can be no assurance as to the development or liquidity of any market for such securities. There is currently only a limited public market for our Stapled Securities, and there is no public market for our Ordinary Shares. An active trading market may not develop or, if developed, may not be sustained. The lack of an active market may impair your ability to sell your Stapled Securities or Ordinary Shares at the time you wish to sell them or at a price that you consider reasonable. The lack of an active market may also reduce the fair market value of your Stapled Securities or Ordinary Shares. An inactive market may also impair our ability to raise capital to continue to fund operations by selling our equity securities and may impair our ability to make acquisitions by using our equity securities as consideration. If a market for the Stapled Securities or Ordinary Shares develops, they may trade at a discount from the purchase price thereof. If a market for the Stapled Securities or Ordinary Shares develops, they may trade at a discount from the purchase price thereof. The trading market for the Stapled Securities or Ordinary Shares may be adversely affected by, among other things: changes in our financial performance or prospects; the financial performance or prospects for companies in our industry generally; the number of holders of the Stapled Securities or Ordinary Shares; the interest of securities dealers in making a market for the Stapled Securities or Ordinary Shares; and prevailing interest rates and general economic conditions. Table of Contents The price of our Stapled Securities or Ordinary Shares may be volatile or may decline regardless of our operating performance, and you may not be able to resell your Stapled Securities or Ordinary Shares at or above the offering price. The price for our Stapled Securities or Ordinary Shares may be volatile and may fluctuate significantly in response to a number of factors, most of which we cannot control, including, among others: changes in economic trends or the continuation of current economic conditions; industry cycles and trends; changes in government and environmental regulation; adverse resolution of new or pending litigation against us; changes in laws or regulations governing our business and operations; the sustainability of an active trading market for our Ordinary Shares; and future sales of our Stapled Securities or Ordinary Shares by holders thereof. These and other factors may lower the price of our Stapled Securities or Ordinary Shares, regardless of our actual operating performance. In the event of a drop in the price of our Stapled Securities or Ordinary Shares, you could lose a substantial part or all of your investment in our Stapled Securities or Ordinary Shares. In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of securities of many companies. In the past, holders have instituted securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, we could incur substantial costs and our resources and the attention of management could be diverted from our business. The Notes may be converted into Ordinary Shares without your Consent. Upon the occurrence of a Conversion Event, the Notes will become mandatorily convertible into Ordinary Shares upon the delivery of an instruction to the trustee under the Indenture by holders of a majority of the Notes then outstanding or by the Company, as applicable, to the extent of the amount specified in such instruction (subject to a minimum amount of Notes to be converted). See Description of the Notes Conversion Rights. Any such conversion will be effected pro rata among all outstanding Notes, without the need for any direction or instruction of any particular holder of Notes or the consent of any particular holder, by adjusting the principal amount of Notes contained in each unit of Stapled Securities. Following the delivery of any such conversion instruction to the trustee under the Indenture, the Company will, or will arrange for, the provision of a notice of the same to the holders of the Notes. Accordingly, there may be instances where your Notes are converted into equity interests without your consent or sufficient advance notice of such conversion. Future sales of our Stapled Securities or Ordinary Shares, or the perception that these sales may occur, may depress the price of our Stapled Securities or Ordinary Shares. Additional sales of a substantial number of our Stapled Securities or Ordinary Shares, or the perception that such sales may occur, could have a material adverse effect on the price of our Stapled Securities or Ordinary Shares and could materially impair our ability to raise capital through the sale of additional Stapled Securities or Ordinary Shares. As of April 29, 2019, the selling holders beneficially owned approximately 65.91% of our Stapled Securities and 70.38% of our Ordinary Shares. The sale of all or a portion of the Stapled Securities or Ordinary Shares by the selling holders or our other holders, or the perception that these sales may occur, could cause the price of our Stapled Securities or Ordinary Shares to decrease significantly. Pursuant to the Company s Registration Rights Agreements (the Registration Rights Agreements ), the selling holders have certain demand and piggyback rights that may require us to file additional registration statements registering their Stapled Securities or to include sales of such Stapled Securities or Ordinary Shares in registration statements that we may file for ourselves or other holders. Any Stapled Securities sold under these registration statements or this prospectus will be freely tradable. In the event such registration rights are exercised and a large number of Stapled Securities or Ordinary Shares is sold, such sales could reduce the trading price of our Stapled Securities or Ordinary Shares. These sales also could impede our ability to raise future capital. Additionally, we will bear all expenses in connection with this registration and any such registrations, except that the selling holders may be responsible for their pro rata shares of underwriters discounts and commissions, if any, and certain other expenses. Table of Contents The ownership percentage represented by the Stapled Securities and Ordinary Shares is subject to dilution, and future issuances of Stapled Securities or Ordinary Shares may depress the market price of our Stapled Securities and Ordinary Shares. The ownership percentage represented by the Stapled Securities and Ordinary Shares is subject to dilution from issuances in connection with the Management Incentive Plan, conversion of the Stapled Securities (in the case of the Ordinary Shares), any other shares that may be issued, and the conversion of any options, warrants, convertible securities, exercisable securities, or other securities that may be issued. In particular, conversion of the Stapled Securities will dilute the ownership interest of any existing shareholders. Also, in the future, similar to all companies, additional equity financings or other share issuances by the Company on a consolidated basis could adversely affect the value of the Ordinary Shares issuable upon such conversion. The amount and dilutive effect of any of the foregoing could be material. Such future issuances or conversions may depress the market price of our Stapled Securities or Ordinary Shares, and may impair our ability to raise additional capital in the financial markets at a time and price favorable to us. Certain shareholders have significant influence over us, and their interests might conflict with or differ from your interests as a holder. Certain of our shareholders have a significant ownership interest in the Ordinary Shares. If such shareholders were to act as a group, such shareholders would be in a position to control the outcome of all actions requiring shareholder approval, including the election of directors, without the approval of other shareholders. This concentration of ownership could also facilitate or hinder a negotiated change of control of the Company and, consequently, have an impact upon the value of the Ordinary Shares. Your equity interests are subordinated to our indebtedness. In any subsequent liquidation, dissolution, or winding up of the Company, the Ordinary Shares would rank below all debt claims against the Company, including the First Lien Notes and the Notes. As a result, holders of the Ordinary Shares would not be entitled to receive any payment or other distribution of assets upon the liquidation, dissolution, or winding up of the Company until after all the Company s obligations to their debt holders had been satisfied, including payments to holders of the First Lien Notes and the Notes. We have no current intention to pay cash dividends. We do not anticipate paying any cash dividends on the Ordinary Shares in the immediate future as we expect to retain any future cash flows for debt reduction and growth. As a result, the success of an investment in the Ordinary Shares will depend entirely upon any future appreciation in the value of the Ordinary Shares. There is, however, no guarantee that the Ordinary Shares will appreciate in value or even maintain their initial value. We may still be able to incur substantially more debt. This could exacerbate the risks associated with our substantial leverage. Even with our existing level of debt, we and our subsidiaries may be able to incur substantial amounts of additional secured and unsecured indebtedness in the future, including debt under future credit facilities, some or all of which may be secured on a first priority basis. Although the terms of any present or future credit facilities limit our ability to incur additional debt, these terms do not and will not prohibit us from incurring substantial amounts of additional debt for specific purposes or under certain circumstances. If new debt is added to our and our subsidiaries current debt levels, the related risks that we and they now face could intensify and could further exacerbate the risks associated with our substantial leverage. We may have insufficient funds to repurchase the Notes as required by the Indenture. Under the terms of the Indenture, the Company may, at the holder s option, be required to repurchase all or a portion of the Notes, in the event of a change of control or upon certain sales of assets. Additionally, the Company will be required to redeem the Notes upon certain events of loss of a Vessel. In addition, under the terms of the Indenture, the Notes will become due and payable at a make-whole price specified therein upon the occurrence of any event of default provided therein. The Company on a consolidated basis may not have enough funds to pay the repurchase price, the redemption price or the make-whole price on the repurchase date, the redemption date or due date thereof, as applicable. Table of Contents Exhibit Number Exhibit Description Filed Herewith Previously Filed column Incorporated by Reference Form File Number Exhibit Filing Date 4.3 Third Lien Indenture by and between Offshore Group Investment Limited, the guarantors from time to time party thereto (including certain of the Assignors, as defined therein) and U.S. Bank National Association, as trustee and noteholder collateral agent, dated as of February 10, 2016 8-K 333-159299-15 4.3 2/17/2016 4.4 First Supplemental Indenture, dated as of June 8, 2016, among Vantage Drilling International (f/k/a Offshore Group Investment Limited), the guarantors party thereto, and U.S. Bank National Association, as trustee and noteholder collateral agent, to the Third Lien Indenture dated as of February 10, 2016 S-1 333-212081 4.4 6/16/2016 4.5 Second Supplemental Indenture, dated as of January 24, 2019, among Vantage Drilling International (f/k/a Offshore Group Investment Limited), Rig Finance Ltd., the other guarantors party thereto and U.S. Bank National Association, as trustee and as noteholder collateral agent, to the Third Lien Indenture dated as of February 10, 2016 X 4.6 Third Supplemental Indenture, dated as of February 13, 2019, among Vantage Drilling International (f/k/a Offshore Group Investment Limited), ADVantage Drilling Services Company S.A.E., the other guarantors party thereto and U.S. Bank National Association, as trustee and as noteholder collateral agent, to the Third Lien Indenture dated as of February 10, 2016 X 4.7 First Lien Indenture, among Vantage Drilling International, the guarantors party thereto, and U.S. Bank National Association, as trustee and collateral agent, dated as of November 30, 2018 8-K 333-159299-15 4.1 12/4/18 4.8 First Supplemental Indenture, dated as of January 24, 2019, among Vantage Drilling International, Rig Finance Ltd., the other guarantor party thereto and U.S. Bank National Association, as trustee and first lien collateral agent, to the First Lien Indenture, dated as of November 30, 2018 X 4.9 Second Supplemental Indenture, dated as of February 13, 2019, among Vantage Drilling International, ADVantage Drilling Services Company S.A.E., the other guarantor party thereto and U.S. Bank National Association, as trustee and first lien collateral agent, to the First Lien Indenture, dated as of November 30, 2018 X 5.1 Opinion of Milbank LLP X 5.2 Opinion of Maples and Calder X 5.3 Opinion of Ioannides Demetriou LLC X 5.4 Opinion of R ti, Antall & Partners Law Firm X 5.5 Opinion of Hadromi & Partners X 5.6 Opinion of Azmi & Associates X 5.7 Opinion of Heussen B.V. X 5.8 Opinion of D&B David si Baias SCA X 5.9 Opinion of Wong Tan Molly Lim X 5.10 Opinion of Conyers Dill & Pearman Limited Table of Contents Exhibit Number Exhibit Description Filed Herewith Previously Filed column Incorporated by Reference Form File Number Exhibit Filing Date 21.1 Subsidiaries of Vantage Drilling International X 23.1 Consent of BDO USA, LLP, an independent registered public accounting firm X 23.2 Consent of Milbank LLP (included in Exhibit 5.1) X 23.3 Consent of Maples and Calder (included in Exhibit 5.2) X 23.4 Consent of Ioannides Demetriou LLC (included in Exhibit 5.3) X 23.5 Consent of R ti, Antall & Partners Law Firm (included in Exhibit 5.4) X 23.6 Consent of Hadromi & Partners (included in Exhibit 5.5) X 23.7 Consent of Azmi & Associates (included in Exhibit 5.6) X 23.8 Consent of Heussen B.V. (included in Exhibit 5.7) X 23.9 Consent of D&B David si Baias SCA (included in Exhibit 5.8) X 23.1 Consent of Wong Tan Molly Lim (included in Exhibit 5.9) X 23.11 Consent of Conyers Dill & Pearman Limited (included in Exhibit 5.10) X 23.12 Consent of Ibrachy Legal Consultancy (included in Exhibit 5.11) X 24.1 Powers of Attorney of the Directors and Officers of the Registrant (included in signature pages) Table of Contents The terms of the Notes do not have the benefit of fulsome restrictive covenants, and the Notes may be negatively impacted in the event of certain transactions. The Indenture might not protect you from several kinds of transactions that may adversely affect you. In particular, the Indenture will not contain covenants that limit our ability to pay dividends on, make distributions on, or redeem our share capital and, therefore, our ability to make interest payments and the value of the Notes may be negatively impacted in the event of a highly leveraged transaction or other similar transaction. Nor will the Indenture restrict the incurrence of indebtedness by our subsidiaries. We will not have an obligation to make a repurchase offer following acquisitions, refinancings, recapitalizations or other transactions that could affect our capital structure, such as the acquisition of all or a substantial portion of our company by another entity or the consummation of a merger transaction, except in certain circumstances. The offshore drilling industry has seen significant consolidation in recent years with larger companies acquiring their smaller competitors. If we consummate such a transaction, there can be no assurance that such a transaction will require us to make an offer to repurchase the Notes. The conversion rate of the Notes may not be adjusted for all dilutive events that may adversely affect the trading price of the Notes or the Ordinary Shares issuable upon conversion of the Notes. The conversion rate of the Notes is subject to adjustment upon certain events, including the issuance of dividends on our Ordinary Shares, the issuance of rights or warrants, subdivisions, combinations, distributions of capital stock, indebtedness or assets, cash dividends and issuer tender or exchange offers as described under Description of the Notes Conversion Rights Conversion Rate Adjustment. The conversion rate will not be adjusted for other events, including, events that may adversely affect the trading price of the Notes or the Ordinary Shares issuable upon conversion of the notes. Vantage Drilling International is a holding company and is dependent upon cash flows from its subsidiaries to meet its obligations. Vantage Drilling International is a holding company, and as such, it conducts its operations through, most of its assets are owned by, and its operating income and cash flow are generated by, its subsidiaries. The Company is dependent upon cash flows from its subsidiaries to meet its debt service and related obligations, including the obligation to repurchase all or a portion of the Notes in the event of a change of control, as defined in the Indenture, or to pay the make-whole premium on the Notes required by the Indenture upon the occurrence of an event of default thereunder. Contractual provisions or laws, as well as its subsidiaries financial conditions and operating requirements, may limit the Company s ability to obtain, from such subsidiaries, the cash required to meet such debt service or related obligations. Applicable tax laws may also subject such payments to further taxation. The inability to obtain cash from its subsidiaries may limit the Company s ability to meet its debt service and related obligations even though there may be sufficient resources on a consolidated basis to satisfy such obligations. If the Notes are rated investment grade at any time by both Rating Agencies and no default has occurred and is continuing under the Indenture, certain covenants contained in the Indenture will be suspended, and the holders of the Notes will lose the protection of these covenants. The Indenture governing the Notes contains certain covenants that will be suspended and cease to have any effect from and after the first date when the Notes receive a rating equal to or higher than Baa3 (or the equivalent) by Moody s Investors Service, Inc., or any successor to the rating agency business thereof ( Moody s ) and BBB- (or the equivalent) by Standard & Poor s Rating Services or any successor to the rating agency business thereof ( Standard & Poor s and, together with Moody s, the Rating Agencies and each rating above such level, an Investment Grade Rating ). See Description of the Notes Certain Covenants. These covenants restrict our ability to sell certain assets and require certain Restricted Subsidiaries to guarantee the Notes. Because these restrictions would not apply to the Notes at any time the Notes receive an Investment Grade Rating from both Rating Agencies, the holders of the Notes would not be able to prevent us from, among other things, making certain asset sales. If after these covenants are suspended, the Rating Agencies were to downgrade their ratings of the Notes to a non-investment grade level, the covenants would be reinstated and the holders of the Notes would again have the protection of these covenants. However, any transactions entered into during such time as the Notes had an Investment Grade Rating would be permitted to remain in effect. There may not be sufficient collateral to pay all or any portion of the Notes. The indebtedness under the First Lien Notes is secured, subject to certain exceptions and permitted liens, on a first-priority basis by security interests in substantially all assets of the Company on a consolidated basis (henceforth, the collateral ). The Notes are secured, subject to certain exceptions and permitted liens, on a second-priority basis by security interests in substantially all of the Company s assets. Table of Contents In the event of a foreclosure on the collateral (or a distribution in respect thereof in a bankruptcy or insolvency proceeding), the proceeds from the collateral securing the Notes may not be sufficient to satisfy the obligations outstanding under such Notes because the proceeds would, under the Third Lien Intercreditor Agreement, first be applied to satisfy the Company s obligations under the First Lien Notes. Only after all of the obligations under the First Lien Notes have been satisfied will any remaining proceeds from the collateral on which the Notes have a second-priority lien be applied to satisfy the Company s obligations under the Stapled Securities. There may be defects in the collateral securing the Notes. The collateral securing the Notes may be subject to exceptions, defects, encumbrances, liens, and other imperfections. Further, the Company has not conducted appraisals of all of its assets constituting collateral securing the Notes to determine if the value of the collateral upon foreclosure or liquidation equals or exceeds the amount of the Notes or such other obligation secured by the collateral. Accordingly, it cannot be assured that the remaining proceeds from a sale of the collateral would be sufficient to repay holders of the Notes all amounts owed under such Notes. Additionally, the fair market value of the collateral is subject to fluctuations based on factors that include, among others, the condition of the offshore drilling industry, the ability to sell collateral in an orderly manner, general economic conditions, the availability of buyers, the Company s failure to implement its business strategy, and similar factors. The amount received upon a sale of collateral would be dependent on numerous factors, including, but not limited to, the actual fair market value of the collateral at such time, and the timing and manner of the sale. By its nature, portions of the collateral may be illiquid and may have no readily ascertainable market value. In the event of a subsequent foreclosure, liquidation, bankruptcy, or similar proceeding, it cannot be assured that the proceeds from any sale or liquidation of the collateral will be sufficient to pay the Company s obligations under the Notes, in full or at all, after first satisfying the obligations under the First Lien Notes, which are senior to the Notes. There can also be no assurance that the collateral will be saleable, and, even if saleable, the timing of its liquidation would be uncertain. Accordingly, there may not be sufficient collateral to pay all or any of the amounts due on the Notes. The Notes are subject to the Third Lien Intercreditor Agreement that provides that the holders rights to receive payments on the Notes will be effectively subordinated to the rights of the holders of the First Lien Notes, who have a first-priority interest in the Collateral. The Collateral is subject to first-priority liens in favor of the holders of the First Lien Notes. The Intercreditor Agreement (as defined herein) provides, among other things, that in the event that the Company is declared bankrupt, becomes insolvent or is liquidated or reorganized, their obligations under the First Lien Notes are entitled to be paid in full from the Collateral pledged as security for such obligation before any payment may be made with respect to the Notes. Holders of the Notes would then be entitled to be paid from the remaining Collateral. See Description of the Notes Security Intercreditor Agreement Subordination of Note Obligations. Rights of holders of the Notes in the collateral may be adversely affected by the failure to perfect liens on the collateral or on collateral acquired in the future. The failure to properly perfect liens on the collateral could adversely affect the collateral agent s ability to enforce its rights with respect to the collateral for the benefit of the holders of the Notes. In addition, applicable law requires that certain property and rights acquired after the grant of a general security interest or lien can only be perfected at the time such property and rights are acquired and identified. There can be no assurance that the trustee or the collateral agent will monitor, or that the Company on a consolidated basis will inform the trustee or the collateral agent of the future acquisition of property and rights that constitute collateral, and that the necessary action will be taken to properly perfect the security interest in such after-acquired collateral. The trustee and the collateral agent have no obligation to monitor the acquisition of additional property or rights that constitute collateral or the perfection of any security interests therein. Such failure may result in the loss of the practical benefits of the liens thereon or of the priority of the liens securing the Notes against third parties. The Indenture and the Third Lien Intercreditor Agreement place limitations on rights of holders of the Notes. The rights of the holders of the Notes with respect to the collateral securing such Notes will be substantially limited by the terms of the lien ranking agreements set forth in the Indenture and the Third Lien Intercreditor Agreement, even during an event of default. Under the Indenture and the Third Lien Intercreditor Agreement, at any time that obligations that have the benefit of the higher priority liens are outstanding, any actions that may be taken with respect to (or in respect of) such collateral, including the ability to cause the commencement of enforcement proceedings against such collateral and to control the conduct of such proceedings, and the approval of amendments to, releases of such collateral from the lien of, and waivers of past defaults under, such documents relating to such collateral, will be at the direction of the holders of the obligations secured by the first-priority liens, and the holders of the Notes (secured by second-priority liens) may be adversely affected. Under the terms of the Third Lien Intercreditor Agreement, at any time Table of Contents that obligations that have the benefit of the first-priority liens on the collateral are outstanding, if the holders of such indebtedness release the collateral in connection with any sale of collateral or in connection with any enforcement action or other exercise of remedies, the second-priority interests in such collateral securing the Notes will be automatically and simultaneously released without any consent or action by the holders of the Notes, subject to certain exceptions. The collateral so released will no longer secure the Company s obligations under the Notes and the related guarantees. The collateral will be subject to casualty risks. The Company will be obligated under the Indenture and collateral agreements governing the Notes to maintain adequate insurance or otherwise insure against hazards as is customarily done by companies having assets of a similar nature in the same or similar localities. There are, however, certain losses that may either be uninsurable or not economically insurable, in whole or in part, including windstorm insurance for drilling units operating in the Gulf of Mexico. As a result, it is possible that the insurance proceeds will not compensate the Company fully for its losses. If there is a total or partial loss of any of the pledged collateral, the insurance proceeds received may be insufficient to satisfy the secured obligations of the Company, including the Senior Secured Notes and the Notes. Rights of holders of Notes in the collateral may be adversely affected by bankruptcy proceedings. The right of the collateral agent to repossess and dispose of the collateral securing the Notes and the guarantees and the other pari passu obligations upon acceleration is likely to be significantly impaired by federal bankruptcy law if bankruptcy proceedings are commenced by or against parent or the issuer prior to or possibly even after the collateral agent has repossessed and disposed of the collateral. Under the U.S. Bankruptcy Code, a secured creditor, such as the collateral agent for the holders of the Notes, is prohibited from repossessing its security from a debtor in a bankruptcy case, or from disposing of security repossessed from a debtor, without bankruptcy court approval. Moreover, bankruptcy law permits the debtor to continue to retain and to use collateral, and the proceeds, products, rents or profits of the collateral, even though the debtor is in default under the applicable debt instruments, provided that the secured creditor is given adequate protection. The meaning of the term adequate protection may vary according to circumstances, but it is intended in general to protect the value of the secured creditor s interest in the collateral and may include cash payments or the granting of additional security, if and at such time as the court in its discretion determines, for any diminution in the value of the collateral as a result of the stay of repossession or disposition or any use of the collateral by the debtor during the pendency of the bankruptcy case. In view of the broad discretionary powers of a bankruptcy court, it is impossible to predict how long payments under the Notes could be delayed following commencement of a bankruptcy case, whether or when the collateral agent would repossess or dispose of the collateral, and whether or to what extent holders of the Notes or holders or lenders under any other instruments or agreements governing pari passu obligations would be compensated for any delay in payment of loss of value of the collateral through the requirements of adequate protection. Furthermore, in the event the bankruptcy court determines that the value of the collateral is not sufficient to repay all amounts due on the Notes or other pari passu obligations, the holders of the Notes and holders of other pari passu obligations would have undersecured claims as to the difference. U.S. federal bankruptcy laws do not permit the payment or accrual of interest, costs and attorneys fees for undersecured claims during the debtor s bankruptcy case. Additionally, the collateral agent s ability to foreclose on the collateral on behalf of the holders of pari passu obligations may be subject to the consent of third parties, prior liens and practical problems associated with the realization of the trustee s security interest in the collateral. Moreover, the debtor or trustee in a bankruptcy case may seek to void an alleged security interest in collateral for the benefit of the bankruptcy estate. It may successfully do so if the security interest is not properly perfected or was perfected within a specified period of time (generally 90 days) prior to the initiation of such proceeding. Under such circumstances, a creditor may hold no security interest and be treated as holding a general unsecured claim in the bankruptcy case. It is impossible to predict what recovery (if any) would be available for such an unsecured claim if the issuer or parent became a debtor in a bankruptcy case. While U.S. bankruptcy law generally invalidates provisions restricting a debtor s ability to assume and/or assign a contract, there are exceptions to this rule which could be applicable in the event that the issuer or parent become subject to a U.S. bankruptcy proceeding. There also can be no assurance that courts outside of the United States would recognize the U.S. bankruptcy court s jurisdiction. Accordingly, difficulties may arise in administering a U.S. bankruptcy proceeding against the issuer or any of the guarantors with property located outside of the United States, and any orders or judgments of a bankruptcy court in the United States may not be enforceable in any foreign jurisdiction in which the issuer or any of the guarantors are organized. The rights of the collateral agent to enforce remedies may be significantly impaired by the restructuring or liquidation provisions of applicable jurisdictional bankruptcy laws, insolvency and other restructuring legislation if the benefit of such legislation is sought with respect to the issuer or parent. The risks outlined above regarding the difficulty of pursuing property that is collateral and that is located outside the United States is particularly relevant for parent, the issuer and the restricted subsidiaries since the drilling units that will serve as significant collateral for the Notes and guarantees and the other pari passu obligations is often, if not usually, outside the United States. Further, the holders of the Notes may receive in exchange for their claims a recovery that could be substantially less than the amounts of their claims (potentially even nothing), and any such recovery might consist of illiquid securities. Table of Contents The Notes could be recharacterized by a bankruptcy court. Recharacterization of a debt obligation to a capital contribution is an equitable remedy a bankruptcy court may direct if it determines that, upon an objection raised by a party in interest, a purported debt obligation is more properly characterized as a capital contribution. In making such a determination, bankruptcy courts consider, among other things, whether the parties intended to create a debt obligation and the nature of the instrument evidencing the obligation. Although the Company believes, and intends, the Notes to be a bona fide debt obligation, there can be no assurance a bankruptcy court would agree with the Company s interpretation. The conversion rate will only be adjusted upon certain events. The conversion rate of the Notes is only subject to adjustment upon certain events, including, share splits, dividends or reclassification with respect to the Ordinary Shares and, certain other adjustments. See Description of the Notes Conversion Rights. The conversion rate will not be adjusted for any other events. Any changes to the Ordinary Shares would affect holders of the Notes. Holders of the Notes will not be entitled to any rights with respect to the Ordinary Shares (including, without limitation, voting rights and rights to participate in any dividends or other distributions on the Ordinary Shares), but holders of the Notes will be subject to all changes affecting the Ordinary Shares. Holders of the Notes will have rights with respect to the Ordinary Shares only upon conversion. For example, in the event an amendment is proposed to the Memorandum and Articles requiring shareholder approval and the record date for determining the shareholders of record entitled to vote on the amendment occurs prior to delivery of the Ordinary Shares, such holders will not be entitled to vote on the amendment, although they will, nevertheless, be subject to any changes in the powers, preferences, or rights of the Ordinary Shares. The Notes may not be rated or may receive a lower rating than anticipated. It is not expected that the Company will seek a rating on the Notes. If, however, one or more rating agencies rates the Notes and assigns them a rating lower than the rating expected by investors, or reduces its rating in the future, the market price of the Notes and/or the Ordinary Shares could be reduced. Any future pledge of collateral might be avoidable in a subsequent bankruptcy. Any future pledge of collateral in favor of the collateral agent, including pursuant to security documents delivered after the date of the Indenture, might be avoidable by the pledgor (as a subsequent debtor in possession) or by its trustee in bankruptcy if certain events or circumstances exist or occur, including, among others, if the pledgor is insolvent at the time of the pledge, the pledge permits the holders of the Notes to receive a greater recovery than if the pledge had not been given, and a bankruptcy proceeding in respect of the pledgor is commenced within 90 days following the pledge, or, in certain circumstances, a longer period. There are circumstances other than repayment or discharge of the Notes under which the collateral securing the Notes and guarantees will be released automatically, without the holders consent or the consent of the trustee under the Indenture governing the Notes. Under various circumstances, some of the collateral securing the Notes will be released automatically, including: a sale, transfer or other disposal of such collateral in a transaction not prohibited under the Indenture governing the Notes; with respect to a contract unwind trigger (as such term is defined in the Indenture governing the Notes); with respect to the collateral held by a Guarantor, upon the release of such Guarantor from its guarantee; to the extent required in accordance with any intercreditor agreement; and to the extent we have defeased or satisfied and discharged the Indenture governing the Notes. In addition, a guarantee will be automatically released in connection with a sale of such Guarantor or a sale of all or substantially all of the assets of that Guarantor, in each case, in a transaction not prohibited under the Indenture governing the Notes. The Indenture governing the Notes will also permit the board of directors of parent to designate one or more of our restricted subsidiaries that is a Guarantor of the Notes as an unrestricted subsidiary. If the board of directors of parent designates a subsidiary guarantor as an unrestricted subsidiary, all of the liens on any collateral owned by such subsidiary or any of its subsidiaries and any guarantees of the Notes by such subsidiary or any of its subsidiaries will be released under the Indenture governing the Notes. Designations of any unrestricted subsidiary will reduce the aggregate value of the collateral securing the Notes to the extent that liens on the assets of the unrestricted subsidiary and its subsidiaries are released. In addition, the creditors of the unrestricted subsidiary and its subsidiaries will have claims to the assets of the unrestricted subsidiary and its subsidiaries that are senior to any claims of the holders of Notes. Table of Contents Foreclosing on the collateral may be difficult. Substantially all of the collateral is located outside of the United States. In particular, the Soehanah jack up rig, the Emerald Driller, Sapphire Driller, Topaz Driller, Aquamarine Driller, Platinum Explorer, Titanium Explorer, and Tungsten Explorer (together, the Vessels ) are highly mobile and are, or may be, located in international waters outside the jurisdiction of any court. Even when such collateral is within the jurisdiction of a court, such jurisdiction may not have effective or favorable foreclosure procedures and lien priorities, particularly if such collateral is routinely in transit. Any foreclosure proceedings could be subject to lengthy delays resulting in increased custodial costs, deterioration in the condition of the collateral, and substantial reduction of the value of such collateral. In addition, some jurisdictions may not provide a legal remedy for the enforcement of mortgages on the collateral. The Vessels operate worldwide and the respective laws of each jurisdiction where a Vessel is actually located at the time the collateral agent may seek to enforce the ship mortgage will govern the foreclosure proceedings and distribution of proceeds. Such laws may vary significantly from jurisdiction to jurisdiction. Furthermore, all or some of those laws and procedures may be less favorable to mortgagees than those in other jurisdictions and may be less favorable than those applicable in the United States. The costs of enforcement in foreign jurisdictions, particularly if proceedings are ongoing simultaneously against the Vessels in different jurisdictions, can be high and can include fees based on the face amount of the mortgage(s) being enforced. Foreign court proceedings can also be slow and have unexpected procedural hurdles. Priorities accorded maritime lien claims and ship mortgages can vary in foreign jurisdictions, and some jurisdictions prefer certain local claimants (such as local suppliers of operating necessaries) to foreign claimants, such as the collateral agent or mortgagee. Consequently there are no assurances that the collateral agent will be able to enforce any one or more of the ship mortgages covering vessels that are located outside the United States. Maritime liens may arise and take priority over the liens securing the Notes. The laws of the various jurisdictions in which the Vessels may operate may give rise to the existence of maritime liens, which may take priority over the ship mortgages. Such liens may arise in support of, among other things, claims by unpaid ship repairers remaining in possession of such collateral, claims for salvage, claims for damage caused by a collision, claims for seamen s wages and other employment benefits and claims for pilotage, as well as potential claims for necessary goods and services supplied to such collateral. This list should not be regarded as definitive or exhaustive, as the categories of claims giving rise to maritime liens, and the ranking of such liens, vary from one jurisdiction to another. Maritime liens can attach without any court action, notice, registration, or documentation and accordingly their existence cannot necessarily be identified. U.S. federal, state and foreign fraudulent transfer laws may permit a court to void the Notes and the guarantees, subordinate claims in respect of the Notes and the guarantees and require holders of the Notes to return payments received. If this occurs, holders of the Notes may not receive any payments on the Notes. U.S. federal, state and foreign fraudulent transfer and conveyance statutes may apply to the issuance of the Notes and the incurrence of any guarantees. Under U.S. federal bankruptcy law and comparable provisions of state fraudulent transfer or conveyance laws, which may vary from state to state and be different from other applicable foreign jurisdictions, the Notes or guarantees could be voided as a fraudulent transfer or conveyance if (1) the issuer or any of the guarantors, as applicable, issued the Notes or incurred the guarantees with the intent of hindering, delaying or defrauding creditors or (2) the issuer or any of the guarantors, as applicable, received less than reasonably equivalent value or fair consideration in return for either issuing the Notes or incurring the guarantees and, in the case of (2) only, one of the following is also true at the time thereof: the issuer or any of the guarantors, as applicable, were insolvent or rendered insolvent by reason of the issuance of the Notes or the incurrence of the guarantees; the issuance of the Notes or the incurrence of the guarantees left the issuer or any of the guarantors, as applicable, with an unreasonably small amount of capital to carry on the business; the issuer or any of the guarantors intended to, or believed that the issuer or such guarantor would, incur debts beyond the issuer s or such guarantor s ability to pay such debts as they mature; the issuer or any of the guarantors was a defendant in an action for money damages, or had a judgment for money damages docketed against the issuer or such guarantor if, in either case, after final judgment, the judgment is unsatisfied. Table of Contents A court would likely find that the issuer or a guarantor did not receive reasonably equivalent value or fair consideration for the Notes or such guarantee if the issuer or such guarantor did not substantially benefit directly or indirectly from the issuance of the Notes or the applicable guarantee. As a general matter, value is given for a transfer or an obligation if, in exchange for the transfer or obligation, property is transferred or an antecedent debt is secured or satisfied. A debtor will generally not be considered to have received value in connection with a debt offering if the debtor uses the proceeds of that offering to make a dividend payment or otherwise retire or redeem equity securities issued by the debtor. The issuer cannot be certain as to the standards a court would use to determine whether or not it or the guarantors were solvent at the relevant time or, regardless of the standard that a court uses, that the issuance of the guarantees would not be further subordinated to the other debt of the issuer or of the guarantors. Generally, however, an entity would be considered insolvent if, at the time it incurred indebtedness: the sum of its debts, including contingent liabilities, was greater than the fair saleable value of all its assets; the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or it could not pay its debts as they become due. If a court were to find that the issuance of the Notes or the incurrence of the guarantee was a fraudulent transfer or conveyance, the court could void the payment obligations under the Notes or such guarantee or further subordinate the Notes or such guarantee to presently existing and future indebtedness of the issuer or of the related guarantor, or require the holders of the Notes to repay any amounts received with respect to such guarantee. In the event of a finding that a fraudulent transfer or conveyance occurred, holders of the Notes may not receive any repayment on the Notes. Further, the voidance of the Notes could result in an event of default with respect to other debt of parent and its subsidiaries that could result in acceleration of such debt. Although each guarantee entered into by a guarantor will contain a provision intended to limit that guarantor s liability to the maximum amount that it could incur without causing the incurrence of obligations under its guarantee to be a fraudulent transfer, this provision may not be effective to protect those guarantees from being voided under fraudulent transfer law, or may reduce that guarantor s obligation to an amount that effectively makes its guarantee worthless. In addition, different or additional fraudulent conveyance laws may exist in foreign jurisdictions which could result in the liens being avoided. If the guarantees by the subsidiary guarantors are not enforceable, the Notes would be effectively subordinated to all liabilities of the subsidiary guarantors, including trade payables. U.S. Federal Income Tax Characterization of the Stapled Securities For U.S. federal income tax purposes, the Company will treat the Stapled Securities as a single, indivisible investment constituting equity in the Company. However, it is possible that the Notes could be treated as a separate debt instrument of the Company for U.S. federal income tax purposes. Pursuant to our Plan of Reorganization, certain holders of debt issued by the Company before its Chapter 11 restructuring received Stapled Securities, among other things, in exchange for such debt. If the Notes were characterized as a separate debt instrument and were deemed to be (or were treated as having been exchanged for other debt that was deemed to be) traded on an established securities market, a U.S. Holder (as defined below) might be required to accrue significant amounts of original issue discount ( OID ) in respect of the Notes. For a discussion of these considerations, see Taxation Certain U.S. Federal Income Tax Considerations. Table of Contents

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+ risk factors actually occur, our business, financial condition or results of operations could be harmed. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment. Moreover, additional risks not presently known to us or that we currently deem less significant also may impact our business, financial condition or results of operations, perhaps materially. For additional information regarding risk factors, see "Forward-Looking Statements." Risks Related to Our Business WE HAVE A HISTORY OF OPERATING LOSSES, ANTICIPATE FUTURE LOSSES AND MAY NEVER BE PROFITABLE. We have experienced significant operating losses in our Company s recent history. Our ability to achieve annual profitability in the future depends on a number of factors, including our ability to attract and service customers on a profitable basis and the growth of the video surveillance industry. If we are unable to achieve annual profitability, we may not be able to execute our business plan, our prospects may be harmed, and our stock price could be materially and adversely affected. THE MARKETS IN WHICH WE COMPETE ARE HIGHLY COMPETITIVE. The video surveillance and consumer markets in which we primarily compete are highly competitive and are influenced by competitive factors including: our ability to rapidly develop and introduce new high performance integrated solutions; the price and total cost of ownership and return on investment associated with the solutions; the simplicity of deployment and use of the solutions; the reliability and scalability of the solutions; the market awareness of a particular brand; our ability to provide secure access to wireless networks; our ability to offer a suite of products and solutions; our ability to allow centralized management of the solutions; and our ability to provide quality product support. New entrants seeking to gain market share by introducing new technology and new products may also make it more difficult for us to sell our products, and could create increased pricing pressure. In addition, broadband equipment providers or system integrators may also offer wireless broadband infrastructure equipment for free or as part of a bundled offering, which could force us to reduce our prices or change our selling model to remain competitive. If there is a shift in the market such that network operators and service providers begin to use closed network solutions that only operate with other equipment from the same vendor, we could experience a significant decline in sales because our products would not be interoperable. We expect competition to continuously intensify as other established and new companies introduce new products in the same markets that we serve or intend to enter, as these markets consolidate. Our business will suffer if we do not maintain our competitiveness. A number of our current or potential competitors have longer operating histories, greater brand recognition, larger customer bases and significantly greater resources than we do. As we move into new markets for different types of products, our brand may not be as well-known as incumbents in those markets. Potential customers may prefer to purchase from their existing suppliers or well-known brands rather than a new supplier, regardless of product performance or features. We expect increased competition from other established and emerging companies if our markets continue to develop and expand. As we enter new markets, we expect to face competition from incumbent and new market participants and there is no assurance that our entry into new markets will be successful. MANY OF THESE COMPANIES HAVE SIGNIFICANTLY GREATER FINANCIAL, TECHNICAL, MARKETING, DISTRIBUTION AND OTHER RESOURCES THAN WE DO AND ARE BETTER POSITIONED TO ACQUIRE AND OFFER COMPLEMENTARY PRODUCTS AND TECHNOLOGIES. Industry consolidation, acquisitions and other arrangements among competitors may adversely affect our competitiveness because it may be more difficult to compete with entities that have access to their combined resources. As a result of such consolidation, acquisition or other arrangements, our current and potential competitors might be able to adapt more quickly to new technologies and consumer preference, devote greater resources to the marketing and promotion of their products, initiate or withstand price competition, and take advantage of acquisitions or other opportunities more readily and develop and expand their products more quickly than we do. These combinations may also affect customers perceptions regarding the viability of companies our size and, consequently, affect their willingness to purchase our products. THE COMPLEXITY OF OUR PRODUCTS COULD RESULT IN UNFORESEEN DELAYS OR EXPENSES CAUSED BY UNDETECTED DEFECTS OR BUGS. Our products may contain defects and bugs when they are introduced, or as new versions are released. We have focused, and intend to focus in the future, on getting our new products to market quickly. Due to our rapid product introductions, defects and bugs that may be contained in our products may not yet have manifested. We have in the past experienced, and may in the future experience, defects and bugs. If any of our products contain material defects or bugs, or has reliability, quality or compatibility problems, we may not be able to promptly or successfully correct these problems. The existence of defects or bugs in our products may damage our reputation and disrupt our sales. If any of these problems are not found until after we have commenced commercial production and distribution of a new product, we may be required to incur additional development costs, repair or replacement costs, and other costs relating to regulatory proceedings, product recalls and litigation, which could harm our reputation and operating results. Undetected defects or bugs may lead to negative online Internet reviews of our products, which are increasingly becoming a significant factor in the success of our new product launches, especially for our consumer products. If we are unable to quickly respond to negative reviews, including end user reviews posted on various prominent online retailers, our ability to sell these products will be harmed. Moreover, we may offer stock rotation rights to our distributors. If we experience greater returns from retailers or end customers, or greater warranty claims, in excess of our reserves, our business, revenue and operating results could be harmed. SECURITY VULNERABILITIES IN OUR PRODUCTS, SERVICES AND SYSTEMS COULD LEAD TO REDUCED REVENUES AND CLAIMS AGAINST US. The quality and performance of some of our products and services may depend upon their ability to withstand cyber attacks. Third parties may develop and deploy viruses, worms and other malicious software programs, some of which may be designed to attack our products, systems, or networks. Some of our products and services also involve the storage and transmission of users and customers proprietary information which may be the target of cyber attacks. Hardware and software that we produce or procure from third parties also may contain defects in manufacture or design, including bugs and other problems, which could compromise their ability to withstand cyber attacks. The costs to us to eliminate or alleviate security vulnerabilities can be significant, and our efforts to address these problems may not be successful and could result in interruptions, delays, cessation of service and loss of existing or potential customers that may impede our sales, manufacturing, distribution or other critical functions, as well as potential liability to the company. The risk that these types of events could seriously harm our business is likely to increase as we expand the web-based products and services that we offer. WE HAVE AN ACCUMULATED DEFICIT AND WE ANTICIPATE CONTINUING LOSSES THAT WILL RESULT IN SIGNIFICANT LIQUIDITY AND CASH FLOW PROBLEMS AND WE MAY BE FORCED TO CEASE OPERATIONS. We have incurred losses since our inception, and have an accumulated deficit of $39,427,642 as of December 31, 2018. Our operations have been financed primarily through the issuance of equity and debt. For the year ended December 31, 2018, net loss and cash used in operations were $10,057,967 and $1,854,095, respectively. We are constantly evaluating our cash needs and our burn rate, in order to make appropriate adjustments in operating expenses. We anticipate that our cash used in operations will continue to increase as a result of becoming a public company as a result of increased professional fees. Our continued existence is dependent upon, among other things, our ability to raise capital and to market and sell our products and services successfully. While we are attempting to increase sales, growth has not been significant enough to support daily operations, there is no assurance that we will continue as a going concern. If we are unable to continue as a going concern and were forced to cease operations, it is likely that our stockholders would lose their entire investment in our company. OUR AUDITORS HAVE EXPRESSED DOUBTS ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN. IF WE WERE FORCED TO CEASE OUR BUSINESS AND OPERATIONS, YOU WOULD LOSE YOUR INVESTMENT IN OUR COMPANY. Our revenues are not sufficient to enable us to meet our operating expenses and otherwise implement our business plan. The report of our independent registered public accounting firm on our financial statements for the year ended December 31, 2018 contains an explanatory paragraph raising doubt as to our ability to continue as a going concern as a result of our losses from operations, stockholders deficit and negative working capital. Our consolidated financial statements, which appear elsewhere in this Form 10-K, are prepared assuming we will continue as a going concern. The financial statements do not include any adjustments to reflect future adverse effects on the recoverability and classification of assets or amounts and classification of liabilities that may result if we are not successful. WE ARE PAST DUE IN THE PAYMENT OF PAYROLL TAXES. At December 31, 2018, we had approximately $40,000 of accrued but unpaid payroll taxes and liabilities due the federal government which includes penalties and interest. We do not have the funds necessary to satisfy this obligation. If we are unable to raise the funds necessary, it is possible that we will be subject to significant additional fines and penalties, Mr. Ralston, our CEO, could be personally subject to a 100% penalty on the amount of unpaid taxes and the government could file liens against our company and our bank accounts until such time as the amounts have been paid. WE WILL NEED ADDITIONAL FINANCING WHICH WE MAY NOT BE ABLE TO OBTAIN ON ACCEPTABLE TERMS IF AT ALL. DUE TO THE SIZE OF OUR COMPANY AND THE LACK OF A PUBLIC MARKET FOR OUR COMMON STOCK IT IS LIKELY THAT THE TERMS OF ANY FINANCING WE MAY BE ABLE TO SECURE WILL BE DETRIMENTAL TO OUR CURRENT STOCKHOLDERS. Our current operations are not sufficient to fund our operating expenses and we will need to raise additional working capital to continue our current business and to provide funds for marketing to support our efforts to increase our revenues. Generally, small businesses such as ours which lack a public market for their securities, face significant difficulties in their efforts to raise equity capital. While to date we have relied upon the relationships of our executive officers in our capital raising efforts, there are no assurances that we will be successful utilizing these existing sources. In such an event, we could be required to engage a broker-dealer to assist us in our capital raising efforts. Even if we are successful in finding a broker-dealer willing to assist us in raising capital, there are no assurances that the terms of financings offered by a broker-dealer will be as favorable as those we have offered our investors to date. While we do not have any commitments to provide additional capital, if we are able to raise capital, the structure of that capital raise could impact our company and our stockholders in a variety of ways. If we raise additional capital through the issuance of debt, this will result in interest expense. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our company held by existing stockholders will be reduced and those stockholders may experience significant dilution. In addition, new securities may contain certain rights, preferences or privileges that are senior to those of our common stock. We cannot assure you that we will be able to raise the working capital as needed in the future on terms acceptable to us, if at all. If we do not raise funds as needed, we may not be able to continue our operations and it is likely that you would lose your entire investment in our company. WE MAY NEED TO RAISE CAPITAL OVER THE NEXT TWELVE MONTHS TO FUND OUR OPERATIONS. We do not have any additional commitments to provide capital and we cannot assure you that funds are available to us upon terms acceptable to us, if at all. If we do not raise funds as needed, our ability to provide for current working capital needs and satisfy our obligations is in jeopardy. In this event, you could lose all of your investment in our company. BECAUSE WE SELL CAPITAL EQUIPMENT, OUR BUSINESS IS SUBJECT TO OUR CUSTOMERS CAPITAL BUDGET AND WE MAY SUFFER DELAYS OR CANCELLATIONS OF ORDERS. ANY DOWNTURN IN THE U.S. ECONOMY MAY ADVERSELY IMPACT NET SALES IN FUTURE PERIODS. Customers for our products are companies that require teleconferencing equipment. These companies may purchase our equipment as part of their capital budget. As a result, we are dependent upon receiving orders from companies that are either expanding their business, commencing a new business, upgrading their capital equipment or otherwise require capital equipment. Our business is therefore dependent upon both the economic health of our customers financial condition and our ability to offer products that meet their requirements based on potential cost savings in using teleconferencing equipment in contrast to existing equipment or equipment offered by others. OUR DEPENDENCE ON A LIMITED NUMBER OF THIRD-PARTY SUPPLIERS FOR KEY SURVEILLANCE, TELECONFERENCING AND CUSTOMIZED EQUIPMENT COULD PREVENT US FROM TIMELY DELIVERING OUR PRODUCTS TO OUR CUSTOMERS IN THE REQUIRED QUANTITIES, WHICH COULD RESULT IN ORDER CANCELLATIONS AND DECREASED REVENUES. We purchase equipment from a limited number of third-party suppliers. If we fail to develop or maintain our relationships with these or our other suppliers, we may be unable to obtain equipment or our products may be available at a higher cost or after a long delay, and we could be prevented from delivering our products to our customers in the required quantities and at prices that are profitable. Problems of this kind could cause us to experience order cancellations and loss of market share. The failure of a supplier to supply components that meet our quality, quantity and cost requirements in a timely manner could impair our ability to deliver our products or increase our costs, particularly if we are unable to obtain these components from alternative sources on a timely basis or on commercially reasonable terms. As a result, such equipment is not readily available from multiple vendors and would be difficult to repair or replace. WE DEPEND ON OUR KEY MANAGEMENT PERSONNEL AND THE LOSS OF THEIR SERVICES COULD ADVERSELY AFFECT OUR BUSINESS. We place substantial reliance upon the efforts and abilities of our executive officers, Roger Ralston, our Chairman and Chief Executive Officer, and Chris Cutchens, our Chief Financial Officer, and a director. The loss of the services of any of our executive officers could have a material adverse effect on our business, operations, revenues or prospects. We do not maintain key man life insurance on the lives of these individuals. MANAGEMENT EXERCISES SIGNIFICANT CONTROL OVER MATTERS REQUIRING SHAREHOLDER APPROVAL WHICH MAY RESULT IN THE DELAY OR PREVENTION OF A CHANGE IN OUR CONTROL. Roger Ralston, our Chairman and Chief Executive Officer, would have voting power equal to approximately 51% of our voting securities. As a result, management through such stock ownership rights has the ability to exercise significant control over all matters requiring shareholder approval, including the election of directors and approval of significant corporate transactions. This concentration of ownership in management may also have the effect of delaying or preventing a change in control of us that may be otherwise viewed as beneficial by shareholders other than management. Risks Related to Our Stock OUR STOCK PRICE MAY BE VOLATILE, WHICH COULD RESULT IN SUBSTANTIAL LOSSES FOR INVESTORS. The market price of our common stock is likely to be highly volatile and could fluctuate widely in response to various factors, many of which are beyond our control, including the following: technological innovations or new products and services by us or our competitors; additions or departures of key personnel; sales of our common stock, particularly under any registration statement for the purposes of selling any other securities, including management shares; negative sentiment from investors, customers, vendors and strategic partners due to doubt about our ability to continue as a going concern; our ability to execute our business plan; operating results that fall below expectations; loss of any strategic relationship; industry developments; economic and other external factors; and period-to-period fluctuations in our financial results. In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also significantly affect the market price of our common stock. WE ARE SUBJECT TO PENNY STOCK RULES WHICH WILL MAKE THE SHARES OF OUR COMMON STOCK MORE DIFFICULT TO SELL. We are subject to the Securities and Exchange Commission s "penny stock" rules since our shares of common stock sell below $5.00 per share. Penny stocks generally are equity securities with a per share price of less than $5.00. The penny stock rules require broker-dealers to deliver a standardized risk disclosure document prepared by the Securities and Exchange Commission that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson, and monthly account statements showing the market value of each penny stock held in the customer s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information must be given to the customer orally or in writing prior to completing the transaction and must be given to the customer in writing before or with the customer s confirmation. In addition, the penny stock rules require that prior to a transaction the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser s written agreement to the transaction. The penny stock rules are burdensome and may reduce purchases of any offerings and reduce the trading activity for shares of our common stock. As long as our shares of common stock are subject to the penny stock rules, the holders of such shares of common stock may find it more difficult to sell their securities. OUR CURRENT CHIEF EXECUTIVE OFFICER AND A MEMBER OF THE BOARD OF DIRECTORS, MR. ROGER RALSTON, HOLDS SERIES A PREFERRED STOCK, CONTROLS A SIGNIFICANT PERCENTAGE OF OUR CAPITAL STOCK AND HAS SUFFICIENT VOTING POWER TO CONTROL THE VOTE ON SUBSTANTIALLY ALL CORPORATE MATTERS. Roger Ralston, our Chief Executive Officer and a member of the board of directors, controls a significant percentage of our capital stock. Accordingly, Mr. Ralston will be able to determine the composition of our board of directors, will retain the effective voting power to approve all matters requiring shareholder approval, will prevail in matters requiring shareholder approval, including, in particular the election and removal of directors, and will continue to have significant influence over our business. As a result of his ownership and position in the Company, Mr. Ralston is able to influence all matters requiring shareholder action, including significant corporate transactions. WE CANNOT ENSURE INVESTORS THAT AN ACTIVE MARKET FOR OUR COMMON STOCK WILL BE SUSTAINED. Our common stock currently trades on the OTC Pink, which generally lacks the liquidity, research coverage and institutional investor following of a national securities exchange like the NYSE MKT, the New York Stock Exchange or the Nasdaq Stock Market. While we intend to list our common stock on a national securities exchange once we satisfy the initial listing standards for such an exchange, we currently do not, and may not ever, satisfy such initial listing standards. OUR BOARD OF DIRECTORS CAN AUTHORIZE THE ISSUANCE OF PREFERRED STOCK, WHICH COULD DIMINISH THE RIGHTS OF HOLDERS OF OUR COMMON STOCK, AND MAKE A CHANGE OF CONTROL OF US MORE DIFFICULT EVEN IF IT MIGHT BENEFIT OUR SHAREHOLDERS. Our board of directors is authorized to issue up to 5,000,000 shares of preferred stock in one or more series and to fix the voting powers, preferences and other rights and limitations of the preferred stock. We currently have 51 shares of Series A Preferred Stock issued and outstanding. We may issue additional shares of preferred stock with a preference over our common stock with respect to dividends or distributions on liquidation or dissolution, or that may otherwise adversely affect the voting or other rights of the holders of common stock. Issuances of preferred stock, depending upon the rights, preferences and designations of the preferred stock, may have the effect of delaying, deterring or preventing a change of control, even if that change of control might benefit our shareholders. OFFERS OR AVAILABILITY FOR SALE OF A SUBSTANTIAL NUMBER OF SHARES OF OUR COMMON STOCK MAY CAUSE THE PRICE OF OUR COMMON STOCK TO DECLINE. Sales of a significant number of shares of our common stock in the public market could harm the market price of our common stock and make it more difficult for us to raise funds through future offerings of common stock. As additional shares of our common stock become available for resale in the public market, the supply of our common stock will increase, which could decrease the price of our common stock. In addition, if our shareholders sell substantial amounts of our common stock in the public market, upon the expiration of any statutory holding period under Rule 144, upon the expiration of lock-up periods applicable to outstanding shares, or upon the exercise of outstanding options or warrants, it could create a circumstance commonly referred to as an "overhang," in anticipation of which the market price of our common stock could fall. The existence of an overhang, whether or not sales have occurred or are occurring, could also make it more difficult for us to raise additional financing through the sale of equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate. WE DO NOT EXPECT TO PAY DIVIDENDS IN THE FUTURE. AS A RESULT, ANY RETURN ON INVESTMENT MAY BE LIMITED TO THE VALUE OF OUR COMMON STOCK. We do not anticipate paying cash dividends on our common stock in the foreseeable future. The payment of dividends on our common stock will depend on our earnings, financial condition and other business and economic factors as our board of directors may consider relevant. If we do not pay dividends, our common stock may be less valuable because a return on an investment in our common stock will only occur if our stock price appreciates. WE HAVE NOT VOLUNTARILY IMPLEMENTED VARIOUS CORPORATE GOVERNANCE MEASURES, IN THE ABSENCE OF WHICH, STOCKHOLDERS MAY HAVE MORE LIMITED PROTECTIONS AGAINST INTERESTED DIRECTOR TRANSACTIONS, CONFLICTS OF INTEREST AND SIMILAR MATTERS. Federal legislation, including the Sarbanes-Oxley Act of 2002, has resulted in the adoption of various corporate governance measures designed to promote the integrity of the corporate management and the securities markets. Some of these measures have been adopted in response to legal requirements. Others have been adopted by companies in response to the requirements of national securities exchanges, such as the NYSE or the NASDAQ Stock Market, on which their securities are listed. Among the corporate governance measures that are required under the rules of national securities exchanges are those that address board of directors independence, audit committee oversight, and the adoption of a code of ethics. While we have adopted certain corporate governance measures such as a Code of Ethics, we presently do not have any independent directors. It is possible that if we were to have independent directors on our board, stockholders would benefit from somewhat greater assurances that internal corporate decisions were being made by disinterested directors and that policies had been implemented to define responsible conduct. For example, in the absence of audit, nominating and compensation committees comprised of at least a majority of independent directors, decisions concerning matters such as compensation packages to our senior officers and recommendations for director nominees may be made by our directors who have an interest in the outcome of the matters being decided. Prospective investors should bear in mind our current lack of corporate governance measures and independent directors in formulating their investment decisions. WE MAY BE EXPOSED TO POTENTIAL RISKS RELATING TO OUR INTERNAL CONTROLS OVER FINANCIAL REPORTING AND OUR ABILITY TO HAVE THOSE CONTROLS ATTESTED TO BY OUR INDEPENDENT AUDITORS. As directed by Section 404 of the Sarbanes-Oxley Act of 2002, the Securities and Exchange Commission adopted rules requiring public companies to include a report of management on the company s internal controls over financial reporting in their annual reports, including Form 10-K. In addition, the independent registered public accounting firm auditing a company s financial statements must also attest to and report on management s assessment of the effectiveness of the company s internal controls over financial reporting as well as the operating effectiveness of the company s internal controls. We were not subject to these requirements for the fiscal year ended December 31, 2018. We are evaluating our internal control systems in order to allow our management to report on our internal controls, as a required part of our Annual Report on Form 10-K. While we expect to expend significant resources in developing the necessary documentation and testing procedures required by SOX 404, there is a risk that we will not comply with all of the requirements imposed thereby. At present, there is no precedent available with which to measure compliance adequacy. Accordingly, there can be no positive assurance that we will receive a positive attestation from our independent auditors. In the event we identify significant deficiencies or material weaknesses in our internal controls that we cannot remediate in a timely manner or we are unable to receive a positive attestation from our independent auditors with respect to our internal controls, investors and others may lose confidence in the reliability of our financial statements and our ability to obtain equity or debt financing could suffer. OUR EXISTING STOCKHOLDERS MAY EXPERIENCE SIGNIFICANT DILUTION FROM THE SALE OF OUR COMMON STOCK PURSUANT TO THE OASIS FINANCING AGREEMENT. The sale of our common stock to Oasis Capital, LLC in accordance with the Equity Purchase Agreement we entered into with Oasis on March 22, 2019 (the "Oasis Financing Agreement") may have a dilutive impact on our shareholders. As a result, the market price of our common stock could decline. In addition, the lower our stock price is at the time we exercise our put options, the more shares of our common stock we will have to issue to Oasis in order to exercise a put under the Oasis Financing Agreement. If our stock price decreases, then our existing shareholders would experience greater dilution for any given dollar amount raised through the offering. THE ISSUANCE OF SHARES PURSUANT TO THE OASIS FINANCING AGREEMENT MAY HAVE A SIGNIFICANT DILUTIVE EFFECT. Depending on the number of shares we issue pursuant to the Oasis Financing Agreement, it could have a significant dilutive effect upon our existing shareholders. Although the number of shares that we may issue pursuant to the Financing Agreement will vary based on our stock price (the higher our stock price, the less shares we have to issue), there may be a potential dilutive effect to our shareholders, based on different potential future stock prices, if the full amount of the Financing Agreement is realized. Dilution is based upon common stock put to Oasis and the stock price discounted to Oasis purchase price of 85% of the lowest trading price during the pricing period. OASIS CAPITAL, LLC WILL PAY LESS THAN THE THEN-PREVAILING MARKET PRICE OF OUR COMMON STOCK WHICH COULD CAUSE THE PRICE OF OUR COMMON STOCK TO DECLINE. Our common stock to be issued under the Oasis Financing Agreement will be purchased at a fifteen percent (15%) discount, or eighty-five percent (85%) of the lowest closing price for the Company s common stock during the ten (10) consecutive trading days immediately preceding the Purchase Date (as defined in the Oasis Financing Agreement). Oasis has a financial incentive to sell our shares immediately upon receiving them to realize the profit between the discounted price and the market price. If Oasis sells our shares, the price of our common stock may decrease. If our stock price decreases, Oasis may have further incentive to sell such shares. Accordingly, the discounted sales price in the Oasis Financing Agreement may cause the price of our common stock to decline.

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+ RISK FACTORS Investing in our common stock involves a high degree of risk. Before investing in our common stock, you should consider carefully the risks described below, together with the other information contained in this prospectus and incorporated by reference in this prospectus, including the risk factors incorporated by reference from our Annual Report on Form 10-K for the year ended December 31, 2018 and other filings we make with the SEC. We believe the risks described below and incorporated by reference herein are the risks that are material to us as of the date of this prospectus. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business. Additional Risks Related to This Offering We may allocate the net proceeds from this offering in ways that you and other stockholders may not approve. We intend to use the net proceeds from this offering, together with our existing cash and cash equivalents, to conduct additional clinical trials evaluating the efficacy of GEN-009; to file an IND and commence clinical development to determine the clinical efficacy of GEN-011; to further preclinical development of GEN-010; and to further invest in ATLAS and related research programs. This expected use of the net proceeds from this offering represents our intentions based upon our current plans and business conditions. The amounts and timing of our actual expenditures may vary significantly depending on numerous factors, including the progress of our development efforts, the status of and results from clinical trials, as well as any collaborations that we may enter into with third parties for our product candidates, and any unforeseen cash needs. Because of the number and variability of factors that will determine our use of the proceeds from this offering, their ultimate use may vary substantially from their currently intended use. As a result, our management will retain broad discretion over the allocation of the net proceeds from this offering and could spend the proceeds in ways that do not necessarily improve our operating results or enhance the value of our common stock. See Use of Proceeds." If you purchase our common stock in this offering, you will incur immediate and substantial dilution in the book value of your shares. The public offering price of our common stock is substantially higher than the net tangible book value per share of our common stock. Therefore, if you purchase shares of our common stock in this offering, you will pay a price per share that substantially exceeds our net tangible book value per share after this offering. After giving effect to the sale of 10,000,000 shares of our common stock in this offering based on an assumed public offering price of $5.38 per share (the last reported sale price of our common stock on The Nasdaq Capital Market on June 17, 2019), less the estimated underwriting discounts and commissions, and estimated offering expenses payable by us and based on a net tangible book value per share of our common stock of $0.35 as of March 31, 2019, if you purchase shares in this offering, you will suffer immediate and substantial dilution of $3.15 per share in the net tangible book value of common stock purchased. To the extent shares are issued under outstanding options, warrants or preferred stock or we sell additional equity or convertible debt securities in the future, you will incur further dilution. See "Dilution" for a more detailed description of the dilution to new investors in the offering. Investors in this offering may experience future dilution. In order to raise additional capital, we may in the future offer additional shares of our common stock or other securities convertible into, or exchangeable for, our common stock at prices that may not be the same as the price per share in this offering. We cannot assure you that we will be able to sell shares of our common stock or other related securities in any other offering at a price per share that is equal to or greater than the price per share paid by investors in this offering. If the price per share at which we sell additional shares of our common stock or related securities in future transactions is less than the price per share in this offering, investors who purchase our common stock in this offering will suffer a dilution in their investment. A significant portion of our total outstanding shares may be sold into the market at any time, which could cause the market price of our common stock to drop significantly, even if our business is doing well. Sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock. Upon the completion of this offering, approximately 4.8 million shares of our common stock beneficially owned by our officers and directors will be subject to lock-up agreements with the underwriters that prohibit, subject to certain exceptions, the disposal or pledge of, or the hedging against, any of their common stock or securities convertible into or exchangeable for shares of common stock for a period of 90 days after the date of this prospectus. However, all of the shares sold in this offering and the remaining shares of our common stock outstanding prior to this offering will not be subject to lock-up agreements with the underwriters and, except to the extent such shares are held by our affiliates, will be freely tradable. The market price of our common stock could decline as a result of sales by our stockholders in the market following completion of this offering or the perception that these sales could occur. These factors could also make it difficult for us to raise additional capital by selling stock.

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+ RISK FACTORS An investment in our common stock involves risks. You should carefully consider the risk factors described below and incorporated by reference to our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 and subsequent Quarterly Reports on Form 10-Q, and all other information contained or incorporated by reference into this prospectus, and in any free writing prospectus that we have authorized for use in connection with this offering, as updated by our subsequent filings under the Exchange Act. The occurrence of any of these risks might cause you to lose all or part of your investment in our common stock. Risks Related to This Offering We will need to raise substantial additional capital in the future to fund our operations and we may be unable to raise such funds when needed and on acceptable terms. We will need to raise substantial additional capital in the future to fund our operations. The extent to which we utilize the Purchase Agreement with Aspire Capital as a source of funding will depend on a number of factors, including the prevailing market price of our common stock, the volume of trading in our common stock and the extent to which we are able to secure funds from other sources. The number of shares that we may sell to Aspire Capital under the Purchase Agreement on any given day and during the term of the agreement is limited. See The Aspire Capital Transaction for additional information. Additionally, we and Aspire Capital may not effect any sales of shares of our common stock under the Purchase Agreement during the continuance of an event of default or on any trading day that the closing sale price of our common stock is less than $0.25 per share. Even if we are able to access the full $25.0 million under the Purchase Agreement, we will still need additional capital to fully implement our business, operating and development plans. The sale of our common stock to Aspire Capital may cause substantial dilution to our existing stockholders and the sale of the shares of common stock acquired by Aspire Capital could cause the price of our common stock to decline. We are registering for sale the Commitment Shares that we have issued and 6,687,008 additional shares that we may sell to Aspire Capital from time to time under the Purchase Agreement. It is anticipated that shares registered in this offering will be sold over a period of up to approximately 30 months from the date of this prospectus. The number of shares ultimately offered for sale by Aspire Capital under this prospectus is dependent upon the number of shares we elect to sell to Aspire Capital under the Purchase Agreement. Depending on a variety of factors, including market liquidity of our common stock, the sale of shares under the Purchase Agreement may cause the trading price of our common stock to decline. Aspire Capital may ultimately purchase all, some or none of the $25.0 million of common stock that, together with the Commitment Shares, is the subject of this prospectus. Aspire Capital may sell all, some or none of our shares that it holds or comes to hold under the Purchase Agreement. Sales by us to Aspire Capital of shares pursuant to the Purchase Agreement may result in dilution to the interests of other holders of our common stock. The sale of a substantial number of shares of our common stock by Aspire Capital in this offering, or anticipation of such sales, could cause the trading price of our common stock to decline or make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise desire. Our restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders' ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees or agents. Our restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of us; (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees or agents to us or our stockholders; (iii) any action asserting a claim against us arising pursuant to any provision of the Delaware General Corporation Law or our amended and restated certificate of incorporation or amended and restated bylaws; or (iv) any action asserting a claim against us governed Table of Contents by the internal affairs doctrine. These choice of forum provisions do not preclude or contract the scope of exclusive federal or concurrent jurisdiction for any actions brought under the Securities Act or the Exchange Act. Accordingly, our choice of forum provisions will not relieve us of our duties to comply with the federal securities laws and the rules and regulations thereunder, and our stockholders will not be deemed to have waived our compliance with these laws, rules and regulations. Any person or entity purchasing or otherwise acquiring any interest in any of our securities shall be deemed to have notice of and consented to these provisions. These choice of forum provisions may limit a stockholder s ability to bring a claim in a judicial forum of its choosing for disputes with us or our directors, officers or other employees or agents, which may discourage lawsuits against us and our directors, officers and other employees or agents. If a court were to find the choice of forum provision contained in our restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, results of operations, and financial condition. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management and other employees. Table of Contents

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