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+RISK FACTORS Investing in our securities involves a high degree of risk. Before deciding to invest in our securities, you should consider carefully the risks and uncertainties described below and under Item 1A. Risk Factors in our Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission, or SEC, on November 12, 2020, which is incorporated by reference in this prospectus, together with all of the other information contained in this prospectus and documents incorporated by reference herein, and in any free writing prospectus that we have authorized for use in connection with this offering. If any of the matters discussed in the following risk factors were to occur, our business, financial condition, results of operations, cash flows or prospects could be materially adversely affected, the market price of our common stock could decline and you could lose all or part of your investment in our securities. Additional risks and uncertainties not presently known or which we consider immaterial as of the date hereof may also have an adverse effect on our business. Risks Related to This Offering Management will have broad discretion as to the use of proceeds from this offering and we may use the net proceeds in ways with which you may disagree. We intend to use the net proceeds of this offering to fund our Phase 3 ORCA-2 trial, and clinical research and development, as well as for working capital and general corporate purposes. We may also use a portion of the net proceeds for the acquisition of, or investment in, technologies, intellectual property or businesses that complement our business, although we have no present commitments or agreements to this effect. 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 common stock. Accordingly, you will be relying on the judgment of our management on the use of 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, delay the development of our product candidates and cause the price of our common stock to decline. If you purchase our common stock in this offering, you will incur immediate and substantial dilution in the book value of your shares. You will suffer immediate and substantial dilution in the net tangible book value of our common stock you purchase in this offering. Assuming a public offering price of $8.93 per share, the last reported sale price of our common stock on The Nasdaq Capital Market on November 24, 2020, purchasers of common stock in this offering will experience immediate dilution of $2.09 per share in net tangible book value of our common stock. In the past, we issued options, warrants and other securities to acquire common stock at prices below the public offering price. To the extent these outstanding securities are ultimately exercised, investors purchasing common stock in this offering will sustain further dilution. See Dilution for a more detailed description of the dilution to new investors in the offering.

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+RISK FACTORS Investing in our securities involves a high degree of risk. You should carefully consider the specific risks described below before making an investment decision. Any of the risks we describe below could cause our business, financial condition, results of operations or future prospects to be materially adversely affected. The market price of our common stock could decline if one or more of these risks and uncertainties develop into actual events and you could lose all or part of your investment. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition, results of operations or future prospects. In addition, some of the statements in this section of the prospectus are forward-looking statements. For more information about forward-looking statements, please see the section of this prospectus entitled "Cautionary Note Regarding Forward-Looking Statements" above. Amounts within the "Risk Factors" section are stated in thousands with the exception of share information. ALLIED ESPORTS RISK FACTORS General Risks Allied Esports is subject to risks associated with operating in a rapidly developing industry and a relatively new market. Many elements of Allied Esports business are unique, evolving and relatively unproven. Its business and prospects depend on the continuing development of live streaming of competitive esports gaming. The market for esports gaming competition is relatively new and rapidly developing and is subject to significant challenges. Allied Esports business relies upon its ability to grow and garner an active gamer community, and successfully monetize this community through tournament fees, live event ticket sales, and advertising and sponsorships. In addition, Allied Esports continued growth depends, in part, on its ability to respond to constant changes in the esports gaming industry, including technological evolution, shifts in gamer trends and demands, introductions of new games, game publisher intellectual property right practices, and industry standards and practices. While change in this industry may be inevitable, and Allied Esports will try to adapt its business model as needed to accommodate change and remain on the forefront of its competitors, Allied Esports may be unsuccessful in doing so and does not provide any guarantees or assurances of success as the industry continues to evolve. Allied Esports may not be able to generate sufficient revenue to achieve and sustain profitability. Allied Esports expects its operating expenses to increase significantly as it continues to expand its marketing efforts and operations in existing and new geographies and vertical markets (including its online esports tournament and gaming subscription platform it intends to develop). In addition, Allied Esports expects to incur significant additional legal, accounting and other expenses related to being a public company. If its revenue declines or fails to grow at a rate faster than these increases in operating expenses, it will not be able to achieve and maintain profitability in future periods. As a result, Allied Esports may generate losses. Allied Esports cannot assure you that it will achieve or maintain profitability. Allied Esports generates a portion of its revenues from advertising and sponsorship. If it fails to attract more advertisers and sponsors to its live events, tournaments or content, or if advertisers or sponsors are less willing to advertise with or sponsor Allied Esports, its revenues may be adversely affected. Allied Esports generates revenue from advertising and sponsorship, and it expects to further develop and expand its focus on these revenues in the future. These revenues partly depend on the advertisers willingness to advertise in the esports gaming industry. If the esports gaming advertising and sponsorship market does not continue to grow, or if Allied Esports is unable to capture and retain a sufficient share of that market, Allied Esports profitability may be materially and adversely affected. Furthermore, with unfavorable economic external factors, sponsors and advertisers may not have enough budget allocations for spending in sponsorship and advertising in esports, which would also lead to an adverse impact on Allied Esports revenue stream. Allied Esports business model may not remain effective and it cannot guarantee that its future monetization strategies will be successfully implemented or generate sustainable revenues and profit. Allied Esports generates revenues from advertising and sponsorship of its live events, its content, the sale of merchandising, and the operation of its esports arenas. Allied Esports has generated, and expects to continue to generate, a substantial portion of revenues using this revenue model in the near term. Although Allied Esports anticipates growth in Allied Esports business utilizing this revenue model, there is no guarantee that growth will continue in the future, and the demand for its offerings may change, decrease substantially or dissipate, or it may fail to anticipate and serve esports gamer demands effectively. The COVID-19 outbreak may also cause the demand for our in-person events to reduce and shift demand to online gaming. Allied Esports may determine to enter into new opportunities to expand its business, including online gaming platforms, which may or may not be successful. Any such expansions involve additional risks and costs that could materially and adversely affect its business. Allied Esports growth strategy depends on the availability of suitable locations for its proprietary and licensed esports arenas and its ability to open new locations and operate them profitably. A key element of Allied Esports growth strategy is to extend its brand by opening additional flagship arenas throughout the world and licensing the Allied Esports brand to third party esports arena operators, which it believes will provide attractive returns on investment. However, desirable locations may not be available at an acceptable cost. Opening these additional locations will depend upon a number of factors, many of which are beyond Allied Esports control, including its ability or the ability of the selected licensee to: reach acceptable agreements regarding the lease of the locations; comply with applicable zoning, licensing, land use and environmental regulations and orders (including those related to social distancing policies during the COVID-19 pandemic); raise or have available an adequate amount of cash or currently available financing for construction and opening costs; timely hire, train and retain the skilled management and other employees necessary to meet staffing needs; negotiate acceptable terms with any unions representing employees; obtain, for acceptable cost, required permits and approvals, including liquor licenses; and efficiently manage the amount of time and money used to build and open each new location. If Allied Esports succeeds in opening new arenas on a timely and cost-effective basis, it may nonetheless be unable to attract enough gamers or spectators to the new location (or to existing locations of affiliated arenas) because its entertainment and menu options might not appeal to them. Failure to do so could have a significant adverse effect on Allied Esports overall operating results. Allied Esports has not entered into definitive license agreements with all game publishers that it currently has relationships with, and it may never do so. Although Allied Esports has relationships with many game publishers for tournament event and content experiences involving their respective intellectual properties and enters into definitive license agreements with such game publishers from time to time, Allied Esports does not have definitive license agreements in place with all of its game publishers. No assurances can be given as to when or if it will be able to come to agreeable terms with game publishers for any future license agreements. If Allied Esports is unable to come to mutually agreeable terms and enter into definitive license agreements with game publishers, game publishers may unilaterally choose to discontinue its relationship with Allied Esports, thereby preventing Allied Esports from offering tournament event and content experiences using their game intellectual property. Should game publishers choose not to allow Allied Esports to offer tournament event and content experiences involving their intellectual property to Allied Esports customers, the popularity of Allied Esports tournaments and content may decline, which could materially and adversely affect its results of operations and financial condition. Even if Allied Esports is able to license its brand to third party esports operators, there is a risk that those operators could damage its brand by operating esports arenas that are not at Allied Esports standards of operation. As Allied Esports licenses the Allied Esports brand to third party esports arena operators around the world, it will depend on those operators to run those arenas at a quality level similar to Allied Esports owned and operated arenas. Allied Esports strategy depends on customers associating the third party esports arenas as part of Allied Esports network of affiliated arenas, which it believes will expand its brand recognition and increase customers, revenue, and growth. If Allied Esports affiliate arenas are poorly operated, or if those operators fail to use Allied Esports name and branding in a manner consistent with Allied Esports corporate messaging and branding, or if there are safety issues or other negative occurrences at affiliate arenas, Allied Esports name and brand could be significantly damaged, which would make its expansion difficult and materially adversely affect its results of operations and financial condition. Allied Esports growth strategy includes deploying additional mobile arenas in the U.S. and Europe to host its tournaments and events and it must operate them profitably. A key element of Allied Esports growth strategy is to extend its brand by increasing and adding to its portfolio of mobile arenas in the U.S. and Europe, as we believe doing so will provide attractive returns on investment. Adding these mobile arenas will depend upon a number of factors, many of which are beyond Allied Esports control, including but not limited to our ability, or the ability of our licensees, to: reach acceptable agreements regarding the lease or acquisition of the trucks that are the basis of the mobile arenas; comply with applicable zoning, licensing, land use and environmental regulations and orders (including those related to social distancing policies during the COVID-19 pandemic) and obtain required permits and approvals; raise or have available an adequate amount of cash or currently available financing for construction of the mobile arenas and the related operational costs; timely hire, train and retain the skilled management and other employees necessary to operate the mobile arenas; efficiently manage the amount of time and money used to build and operate each new mobile arena; and manage the risks of road hazards, accidents, traffic violations, etc. that may impede the operations of the mobile arenas. The nature of hosting esports events exposes Allied Esports to negative publicity or customer complaints, including in relation to, among other things, accidents, injuries or thefts at the arenas, and health and safety concerns. Allied Esports business of hosting esports events inherently exposes it to negative publicity or customer complaints as a result of accidents, injuries or, in extreme cases, deaths arising from incidents occurring at our arenas, including health, safety or security issues, and quality and service standards. Even isolated or sporadic incidents or accidents may have a negative impact on Allied Esports brand image and reputation, the arenas popularity with gamers and spectators or the ability to host esports events at all. Allied Esports marketing and advertising efforts may fail to resonate with gamers. Allied Esports live events, tournaments and competitions are marketed through a diverse spectrum of advertising and promotional programs such as online and mobile advertising, marketing through websites, event sponsorship and direct communications with the esports gaming community including via email, blogs and other electronic means. An increasing portion of Allied Esports marketing activity is taking place on social media platforms that are either outside, or not totally within, its direct control. Changes to gamer preferences, marketing regulations, privacy and data protection laws, technology changes or service disruptions may negatively impact its ability to reach target gamers. Allied Esports ability to market its tournaments and competitions is dependent in part upon the success of these programs. The esports gaming industry is competitive, and gamers may prefer competitors arenas, leagues, competitions or tournaments over those offered by Allied Esports. The esports gaming industry is competitive. Competitors range from established leagues and championships owned directly, as well as leagues franchised by well-known and capitalized game publishers and developers, interactive entertainment companies, diversified media companies and emerging start-ups. New competitors will likely continue to emerge. Many of these competitors may have greater financial resources than Allied Esports. If Allied Esports competitors develop and launch competing arenas, leagues, tournaments or competitions, Allied Esports revenue, margins, and profitability could decline. Allied Esports may not provide events or tournaments with games or titles for which the esports gaming community is interested. Allied Esports must attract and retain the popular esports gaming titles in order to maintain and increase the popularity of its live events, leagues, tournaments and competitions. Allied Esports must identify and license popular games that resonate with the esports gamer community on an ongoing basis. Allied Esports cannot assure you that it can attract and license popular esports games from their publishers, and failure to do so would have a material and adverse impact on Allied Esports results of operations and financial conditions. If Allied Esports fails to keep its existing gamers engaged, acquire new gamers and expand interest in its live events, leagues, tournaments and competitions, its business, profitability and prospects may be adversely affected. Allied Esports success depends on its ability to maintain and grow the number of gamers attending its live events, tournaments and competitions, and keep its gamers and attendees highly engaged. In order to attract, retain and engage gamers and remain competitive, Allied Esports must continue to develop and expand its live events, leagues, produce engaging tournaments and competitions, and implement new content formats, technologies and strategies to improve its product offerings. There is no assurance it will be able to do so. A decline in the number of gamers may adversely affect the engagement level of gamers with Allied Esports tournament and entertainment platform under development may reduce our revenue opportunities and have a material and adverse effect on our business, financial condition and results of operations. It is vital to Allied Esports operations that its planned online esports tournament and gaming subscriptions platform be responsive to evolving gamer preferences and offer first-tier esports game content and other services that attracts gamers. Allied Esports must also keep providing gamers new features and functions to enable superior content viewing and interaction, or the number of gamers utilizing the platform will likely decline. Any decline in the number of gamers will likely have a material and adverse effect on our operations. There is no guarantee that Allied Esports will be able to complete its planned online esports tournament and gaming subscription platform, or that such platform once completed will be or remain popular. Allied Esports cannot assure you that the online esports tournament and gaming subscription platform it intends to develop will be completed in a timely manner or, if completed, become popular with gamers to offset the costs incurred to operate and expand it. This will require substantial costs and expenses. If such increased costs and expenses do not effectively translate into improved gamer engagement, Allied Esports results of operations may be materially and adversely affected. If Allied Esports fails to maintain and enhance its brands, its business, results of operations and prospects may be materially and adversely affected. Allied Esports believes that maintaining and enhancing its brands is important for its business to succeed by increasing the number of gamers and engagement by the esports community. Since Allied Esports operates in a highly competitive market, brand maintenance and enhancement directly affects its ability to maintain and enhance its market position. As Allied Esports expands, it may conduct various marketing and brand promotion activities using various methods to continue promoting its brands, but it cannot assure you that these activities will be successful. In addition, negative publicity, regardless of its veracity, could harm Allied Esports brands and reputation, which may materially and adversely affect Allied Esports business, results of operations and prospects. If Allied Esports fails to anticipate and successfully implement new esports technologies or adopt new business strategies, technologies or methods, its business may suffer. Rapid technology changes in the esports gaming market requires Allied Esports to anticipate, sometimes years in advance, which technologies it must develop, implement and take advantage of in order to be and remain competitive in the esports gaming market. Allied Esports has invested, and in the future may invest, in new business strategies including its to-be-developed online esports tournament and entertainment subscription platform, technologies, products, or games to engage a growing number of gamers and deliver the best gaming experiences possible. These endeavors involve significant risks and uncertainties, and no assurance can be given that the technology it adopts and the features it pursues will be successful. If Allied Esports does not successfully implement these new technologies, its reputation may be materially adversely affected and its financial condition and operating results may be impacted. Allied Esports uses third-party services in connection with its business, and any disruption to these services could result in a disruption to its business, negative publicity and a slowdown in the growth of its users, materially and adversely affecting its business, financial condition and results of operations. Allied Esports business depends on services provided by, and relationships with, various third parties, including cloud hosting, server operators, broadband providers, and computing peripheral suppliers, among others. The failure of any of these parties to perform in compliance with our agreements may negatively impact Allied Esports business. Additionally, if such third parties increase their prices, fail to provide their services effectively, terminate their service or agreements or discontinue their relationships with Allied Esports, Allied Esports could suffer service interruptions, reduced revenues or increased costs, any of which may have a material adverse effect on its business, financial condition and results of operations. Allied Esports may not be able to procure the necessary permits and licenses to operate its arenas. Allied Esports must obtain certain permits and licenses, including liquor licenses, to operate its arenas. Often these processes can be expensive and time consuming. There is no guarantee that Allied Esports will be able to obtain such permits and licenses on a timely or cost-effective basis. Any delays could jeopardize the ability of Allied Esports to operate the arenas and host events. As a result, Allied Esports business could suffer. Rules and regulations governing sweepstakes, promotions and giveaways vary by state and country and these rules and regulations could restrict or eliminate Allied Esports ability to generate revenues on its esports gaming platform it intends to develop, which could materially and adversely impact the viability of this business. As part of its esports gaming platform to be developed, Allied Esports intends to offer subscribers the chance to win cash and prizes when playing esports games and tournaments on the platform. Awarding cash and prizes would require compliance with the laws or regulations in various states or countries over sweepstakes, promotions and giveaways, which are complex and constantly changing. Any negative finding of law regarding the characterization of the type of online activity carried out on the esports gaming platform could limit or prevent Allied Esports ability to obtain subscribers in those jurisdictions, which in turn could significantly impact Allied Esports ability to generate revenue. The ability or willingness to work with Allied Esports by payment processors and other service providers necessary to conduct the esports gaming platform business also may be limited due to such changes in laws or any perceived negative consequences of engaging in the business of sweepstakes, promotions and giveaways that will be utilized by the esports gaming platform. Negotiations with unionized employees could delay opening or operating Allied Esports arenas. Certain of Allied Esports employees are represented by one or more unions. Allied Esports will need to engage such unions to seek to employ the services of the employees on mutually acceptable terms. However, Allied Esports cannot guarantee that such negotiations will be timely concluded to avoid interruption in its tournament schedule, or that such negotiations will ultimately result in an agreement. Any failure to timely conclude the negotiations could cause a delay in Allied Esports ability to timely open arenas or host events. Either of these events would adversely affect Allied Esports profitability. Allied Esports business is subject to regulation, and changes in applicable regulations may negatively impact its business. Allied Esports is subject to a number of foreign and domestic laws and regulations that affect companies conducting business on the Internet. In addition, laws and regulations relating to user privacy, data collection, retention, electronic commerce, consumer protection, content, advertising, localization, and information security have been adopted or are being considered for adoption by many jurisdictions and countries throughout the world. These laws could harm Allied Esports business by limiting the products and services it can offer consumers or the manner in which it offers them. The compliance costs for these laws may increase in the future as a result of changes in interpretation. Furthermore, Allied Esports failure to comply with these laws or the application of these laws in an unanticipated manner may harm its business and result in penalties or significant legal liability. Risks Related to Allied Esports Intellectual Property Allied Esports licenses certain brand names under agreements that will expire and may also be subject to claims of infringement of third-party intellectual property rights. Allied Esports has a three-year license with a third party, ending in July 2021, to use the names "Esports Arena Las Vegas" and "Esports Arena Drive", which are part of the branding for its Las Vegas flagship esports arena location and its US-based mobile arena, respectively. Once that license expires, there is no assurance that Allied Esports will be able to further license those names or purchase them on satisfactory terms. Although Allied Esports intends to market and promote its esports arenas using intellectual property it owns and controls, there are no assurances that those efforts will be fruitful and that it will be able to maintain brand awareness once the license expires. Furthermore, third parties may claim that Allied Esports has infringed their intellectual property rights. Although Allied Esports takes steps to avoid violating the intellectual property rights of others, it is possible that third parties still may claim infringement. Infringement claims against us, whether valid or not, may be expensive to defend and divert the attention of Allied Esports management and employees from business operations. Such claims or litigation could require Allied Esports to pay damages, royalties, legal fees and other costs. Allied Esports also could be required to stop offering, distributing or supporting esports games, its to-be-developed gaming platform or other features or services which incorporate the affected intellectual property rights, redesign products, features or services to avoid infringement, or obtain a license, all of which could be costly and harm its business. Allied Esports technology, content and brands are subject to the threat of piracy, unauthorized copying and other forms of intellectual property infringement. Allied Esports regards its technology, content and brands as proprietary and takes measures to protect it from infringement. Piracy and other forms of unauthorized copying and use of technology, content and brands are persistent, and policing is difficult. Further, the laws of some countries do not protect intellectual property rights to the same extent as the laws of the United States, or are poorly enforced. Legal protection of Allied Esports rights may be ineffective in such countries, which could have a material adverse effect on its business, financial condition and results of operations. Allied Esports may not be able to prevent others from unauthorized use of its intellectual property, which could harm our business and competitive position. Allied Esports regards its registered trademark and pending trademarks, service marks, pending patents, domain names, trade secrets, proprietary technologies and similar intellectual property as critical to its success. Allied Esports relies on trademark and patent law, trade secret protection and confidentiality and license agreements with its employees and others to protect its proprietary rights. Allied Esports has invested significant resources to develop its own intellectual property and acquire licenses to use and distribute the intellectual property of others. Failure to maintain or protect these rights could harm its business. In addition, any unauthorized use of our intellectual property by third parties may adversely affect its current and future revenues. Allied Esports may not be able to develop compelling intellectual property content or secure media content distributors to promote, sell, and distribute such content, which could harm its business and competitive position. Allied Esports intends to produce licensable content from the various live events, tournaments, and its own initiatives and brands to sell to viewers worldwide. There is no guarantee that it will be able to develop content that is compelling to its targeted customers. Media and gaming company competitors, many of which are better funded, are also creating content from esports events, and it will be difficult to create content that stands out and attracts customers. Furthermore, to carry out Allied Esports worldwide distribution plans, film and media distribution partners will be needed and, in the event, Allied Esports is not able to secure content distributors on terms acceptable to Allied Esports, this will have a significant adverse impact on revenue streams from the sale or licensing of intellectual property. WPT RISK FACTORS Risks Related to WPT s Current Business WPT s broadcast agreement with Fox Sports Net ("FSN") sets a minimum level of distribution that is significantly less than the current distribution level. If WPT s current level of distribution is reduced, the reduction could materially and adversely affect WPT s results of operations. Currently, WPT broadcasts certain of its worldwide Main Tour events throughout the United States on FSN, and they are also available on ClubWPT.com on demand, and on various digital streaming platforms. WPT s programming agreement to broadcast the television series does not provide for any license fees to be paid to WPT for the broadcast rights, and contains a minimum level of distribution. Currently, WPT s programming is broadcast significantly more frequently that the minimum threshold under the programming agreement. With no license fee in place for the distribution, WPT benefits from the program s distribution and promotion of WPT s online products (ClubWPT) and generates fees from sponsors by integrating sponsor logos and other advertising materials into its programs and around the broadcast of the shows through music royalties and distribution of the shows in other markets. The Season 17 sponsors included Hublot S.A., a luxury watch maker, Rockstar, Inc., an energy drink company, Baccarat, Inc., a manufacturer and retailer of fine crystal, Faded Spade Poker, LLC, a playing card manufacturer, and Zynga Inc., a social gaming operator. If WPT s level of distribution were reduced by FSN, the value of the foregoing would be significantly reduced and it may be difficult for WPT to find sponsors on terms acceptable to WPT, or at all. WPT s production costs may increase. In May 2016, WPT entered into a programming agreement for FSN to broadcast Seasons 15 through 18 of the WPT television series through calendar year 2021 on terms that are similar to the prior programming agreement discussed above. WPT may be required to pay the cost to produce these shows for FSN and depending on the amount of the related revenues it is able to generate, the lack of license fees could have a material adverse effect on WPT s financial condition, results of operations and cash flows. Sinclair s acquisition of FSN could have negative consequences on World Poker Tour. The Walt Disney Company ("Disney") recently acquired 21st Century Fox ("FOX"). Under the terms of the acquisition, FOX s non-regional news and sports assets, including FSN, were spun off into a new company, Fox Corporation (which is commonly referred to as "New Fox"), which remains owned by the prior FOX shareholders. The Department of Justice required Disney to sell all regional sports assets obtained as part of the acquisition (the "RSNs") within ninety (90) days after the closing of the Disney/FOX acquisition. WPT s programming agreement with FSN s owner requires FSN to ensure WPT s programming reaches a certain amount of households, which requires FSN s owner to ensure we are broadcast on the RSNs. The FSN agreement also has other important broadcast requirements to ensure that WPT s programming remains "appointment television" and airs at particular times on both the FSN networks and the RSNs. The RSNs (including FSN) were ultimately purchased by a joint venture company owned by Sinclair Broadcast Group and Entertainment Studios, Inc. (collectively, "Sinclair"). Although Sinclair purchased all or substantially all of FOX s RSNs, it will be difficult to ensure WPT s programming is carried on all of the RSNs, or at the times and dates WPT finds desirable. Even though WPT s FSN programming agreement will remain an enforceable obligation against Sinclair, there is no assurance that Sinclair will continue to broadcast WPT s programming on FSN on terms WPT finds reasonable, if at all. Furthermore, the sale of the RSN s to Sinclair and the changes to the FOX and the FSN business could negatively affect WPT s ability to find other traditional television network distribution of the WPT shows in the United States. Any reduction or change of WPT s distribution footprint has the potential to negatively affect its brand and associated sponsorship, marketing and promotional efforts. There is no assurance that FSN will broadcast future seasons of the World Poker Tour, which would materially and adversely affect WPT s results of operations. In May 2016, WPT entered into an agreement for FSN to broadcast Seasons 15 through 18 of the WPT television series through calendar year 2021. If FSN elects to discontinue airing either series and WPT cannot replace its programming agreement with an agreement with a comparable U.S. broadcaster, it may be difficult for WPT to obtain sponsorship funds, it will be detrimental to the viability of the WPT brand and, consequently, would have a material adverse effect on WPT s financial condition, results of operations and cash flows. Consumers shifting to online video on-demand services like Hulu and Netflix and away from cable could have negative consequences on World Poker Tour. Historically, WPT has relied on traditional television network distribution in order to build its brand and generate sponsorship revenue. As online video on-demand services such as Hulu and Netflix have become increasingly popular compared to traditional cable subscriptions, WPT has increased its digital distribution. If these "cable-cutting" trends intensify, however, there is no assurance that WPT can maintain or increase its total distribution and if it cannot, it may be difficult for WPT to obtain sponsorship funds, it will be detrimental to the viability of the WPT brand and, consequently, it would have a material adverse effect on WPT s financial condition, results of operations and cash flows. The ClubWPT.com business is currently heavily dependent upon television as a major source for the generation of new monthly subscribers and WPT continually seeks cost effective online and traditional marketing to generate new subscribers, which if not achieved could materially and adversely affect its results of operations. ClubWPT is the official subscription online poker club of the World Poker Tour. VIP users pay a monthly subscription fee for exclusive access to full episodes from every past season of the WPT television show, plus magazine access, coupons, and more. Each month, members can play poker to win a share of cash and prizes, including seats to WPT events. In addition, in January 2019, WPT added free-to-play (also known as "freemium") social poker and casino gaming on the platform, whereby free chips are offered for play, but additional chips can be purchased (there are no cash prizes offered for freemium play). WPT has produced ClubWPT.com-branded television shows that aired on FSN (such as our "King of the Club" television shows), as well as incorporating significant branding and advertising of ClubWPT into the WPT television shows to build awareness and drive traffic to ClubWPT.com. In order for the ClubWPT business (including its freemium offering) to continue as a viable business, WPT needs to continuously identify cost efficient marketing tools to generate new subscribers for ClubWPT. Traditionally, WPT has marketed by using its large library of content online as a driver to the platform, or through its social media footprint. The number of paid subscribers at ClubWPT grew throughout 2019 as a result of a significant promotion by FSN, while daily active users of our freemium products has increased since we introduced them in January 2019. The number of paid subscribers could decrease in future quarters due to the lack of current spending on marketing for new players. WPT will need to increase its marketing and promotion of ClubWPT through alternative means, such as social media, in person at WPT live events, via cross-promotion with the Allied Esports business, and via other means to ensure ClubWPT remains viable. WPT s reliance on Pala Interactive LLC ("Pala") as a third-party systems provider is subject to system security risks and business viability risks that could disrupt services provided to ClubWPT.com customers, and any such disruption could reduce WPT s revenue, increase its expenses and harm its reputation. Experienced computer programmers and hackers may be able to penetrate Pala s network security and misappropriate confidential information, create system disruptions or cause shutdowns. In addition, computer programmers and hackers may be able to develop and deploy viruses, worms and other malicious software programs that attack their products or otherwise exploit security vulnerabilities in their products. As a result, WPT could lose its existing or potential customers. Pala is a third-party vendor whose business is dependent upon the real money gaming and social gaming business environment. Any business interruption or failure by Pala would directly affect WPT s online business as WPT would need to find a suitable alternative platform provider. Rules and regulations governing sweepstakes, promotions and giveaways vary by state and country and these rules and regulations could restrict or eliminate WPT s ability to generate revenues at ClubWPT.com, which could materially and adversely impact the viability of this business. Changes in laws or regulations in various states or countries over sweepstakes, promotions and giveaways or a negative finding of law regarding the characterization of the type of online activity carried out on ClubWPT.com could result in WPT s inability to obtain subscribers in those jurisdictions, which in turn could significantly impact WPT s ability to generate revenue. The ability or willingness to work with WPT by payment processors and other service providers necessary to conduct the ClubWPT.com business also may be limited due to such changes in laws or any perceived negative consequences of engaging in the business of sweepstakes, promotions and giveaways that are utilized by ClubWPT.com. WPT s success depends in part on our brands and any future brands it may develop, and if the value of its brands were to diminish, its business would be adversely affected. Licensees of WPT s brands may diminish the value of its brands. WPT s success depends on its World Poker Tour and Alpha 8 brands, which consist of a portfolio of trademarks, service marks and copyrighted materials. WPT s intellectual property portfolio includes, but is not limited to, existing and future episodes of the televised programming produced in connection with its existing and future brands and certain elements of these episodes, trade names and other intellectual property rights. In connection with WPT s branding and licensing operations, WPT entered into agreements with certain licensors to utilize the WPT brand and intellectual property in connection with mobile, social media and casual games, horse racing, amateur poker leagues, governmental lottery games, and in-person and online education and training poker workshops. While specific contractual provisions require that the licensees maintain the quality of WPT s licensed brands, WPT cannot be certain that its licensees or their manufacturers and distributors will honor their contractual obligations or that they will not take other actions that will diminish the value of WPT s brands prior to its ability to detect and prevent any such actions. WPT may not be able to protect the format of its episodes, its current and future brands and its other proprietary rights. WPT is susceptible to others imitating its television show format and other products and infringing on its intellectual property rights. Litigation may be necessary to enforce WPT s intellectual property rights and to determine the validity and scope of its proprietary rights. Any litigation could result in substantial expense, may reduce WPT s profits and may not adequately protect its intellectual property rights upon which it is substantially dependent. In addition, the laws of certain foreign countries do not always protect intellectual property rights to the same extent as the laws of the U.S. Imitation of WPT s television show formats and other products or infringement of its intellectual property rights could diminish the value of its brands or otherwise adversely affect its revenues. Any litigation or claims against WPT based upon its intellectual property or other third-party rights, whether or not successful, could result in substantial costs and harm its reputation. In addition, such litigation or claims could force WPT to do one or more of the following: to cease exploitation of the WPT television series and related products or portions thereof that violate the potentially infringed third party rights or intellectual property, which would adversely affect WPT s revenue; to negotiate a license from the holder of the intellectual property or other right alleged to have been infringed, which license may not be available on reasonable terms, if at all; or to modify the WPT television series and related products or portions thereof to avoid infringing the intellectual property or other rights of a third party, which may be costly and time-consuming or impossible to accomplish. Early termination of WPT s agreements with member casinos or violation by member casinos of the restrictive covenants contained in these agreements could negatively affect the size of telecast audiences and lead to declines in the performance of WPT s other lines of business. WPT entered into written agreements with all of the "member casinos" that host WPT tournament stops. However, any member casino may elect to withdraw its tournament from the WPT lineup and terminate the agreement by giving WPT notice by a specified date or, if earlier, a specified length of time before the date of the tournament, which is generally four to six months. While each agreement remains in effect and, in some cases, for varying periods of time thereafter, the member casino is prohibited from televising the tournament itself, permitting any third party to televise the tournament or licensing its name, trademarks or likeness to any other party in conjunction with the telecast of a poker tournament. If a significant number of these member casinos were to terminate their agreements and/or allow a competing company to telecast their tournaments after their expiration for the restricted time period, this could result in a decline in WPT s future telecast audiences, which in turn would lead to declines in the performance and success of WPT s other lines of business. If one or more member casinos were to breach the exclusivity provisions of their contracts with WPT by letting a competing company telecast their tournaments within the restricted time period, litigation may be necessary to enforce those rights. Any litigation could result in substantial expense. Refusal of any gaming commission to register WPT as a non-gaming vendor for its branded casino tournaments could jeopardize the ability of WPT to continue holding its events at member casinos. Some states require WPT to register with the state s gaming commissions as a non-gaming vendor of the member casino that runs a WPT-branded tournament. If such gaming commissions refuse to provide the necessary vendor license, the member casino may not be able to hold WPT s tournaments, and WPT s business could suffer. Termination or impairment of WPT s relationships with key licensing and strategic partners could adversely affect its revenues and results of operations. WPT has developed relationships with key strategic partners in many areas of its business, including poker tournament event sponsorship, merchandise licensing, social poker and casino games, corporate sponsorship and international distribution. WPT hopes to derive significant income from its licensing arrangements and its agreements with its strategic partners are vital to finding these licensing arrangements. If WPT were to fail to manage its existing licensing relationships, this failure could have a material adverse effect on its financial condition and results of operations. WPT would also be materially adversely affected if it were to lose rights under any of its other key contracts or if the counterparty to any of these contracts were to breach its obligations to WPT. WPT relies on a limited number of contracts under which third parties provide it with services vital to WPT s business. These agreements include WPT s agreements with: FSN, pursuant to which FSN broadcasts the WPT television series; Pala, who hosts and operates the ClubWPT product; Zynga, Inc., who licenses the WPT brand for use on its social poker platform; Partypoker Live Ltd., who licenses the WPT brand in connection with online and land-based poker tournaments in Europe; Hugeous Mass Media, who maintains WPT s database of music and collects music royalty revenue for WPT worldwide; CaptivePlay LLC, who licenses the WPT brand in order to operate a social poker product, PlayWPT; HongKong Triple Sevens Interactive Co., Ltd, who licenses the Alpha8 brand to operate a social poker product; Rogers Network and Game TV, for broadcasting in key international territories such as Canada; TV Azteca, pursuant to which WPT is partnering with TV Azteca to create localized WPT-branded content, as well as jointly brand and market a social poker product for the territory of Mexico; AMC and Sport 1 & 2, who license rights to broadcast the WPT television series in 10 territories in Eastern Europe; and OTT (over-the-top) Platforms, specifically PLUTO TV where WPT earns sizeable revenues. If WPT s relationship with any of these or certain other third parties were to be interrupted, or the services provided by any of these third parties were to be delayed or deteriorate for any reason without being adequately replaced, WPT s business could be materially adversely affected. If WPT is forced to find a replacement for any of these strategic partners, this could create disruption in its business and may result in reduced revenues, increased costs or diversion of management s attention and resources. In addition, while WPT has significant control over its licensed products and advertising, WPT does not have operational and financial control over these third parties, and it has limited influence with respect to the manner in which they conduct their businesses. If any of these strategic partners experiences a significant downturn in its business or were otherwise unable to honor its obligations to WPT, WPT s business could be materially disrupted. The loss of the services of Adam Pliska or other key employees or on-air talent, or WPT s failure to attract key individuals, could adversely affect its business. WPT is highly dependent on the services of Adam Pliska, who currently serves as Chief Executive Officer and President of WPT, as well as President of the Company. WPT s continued success is also dependent upon retention of other key management executives and upon its ability to attract and retain employees and on-air talent to implement its corporate development strategy and its branding and licensing efforts. The loss of some of its senior executives, or an inability to attract or retain other key individuals, could materially adversely affect WPT. Growth in WPT s business is dependent, to a large degree, on its ability to retain and attract such employees. WPT seeks to compensate and provide incentives to its key executives, as well as other employees, through competitive salaries, stock ownership and bonus plans, but it can make no assurance that these programs will allow WPT to retain key employees or hire new employees. In addition, WPT s future success may also be affected by the potential need to replace its key on-air talent. Any disputes with the IATSE 700 Editors Union could delay finishing production of shows needing to be delivered to FSN or increase WPT s costs to produce the shows. From time to time, certain of WPT s employees involved in producing the WPT series are members of IATSE 700 Editors Union, and WPT renewed its contract with such union in August 2019 for a three-year term. Although WPT has a current union agreement in place, there is no guarantee that future disagreements with WPT s unionized employees will not lead to any interruption in services. Any failure to timely negotiate and/or settle any such disagreements could cause a delay in WPT s ability to timely produce the WPT series for FSN, and the costs to do so could increase. Either of these events would adversely affect WPT s profitability. WPT s quarterly results may fluctuate, which may negatively affect the value of the common stock. Under sponsorship agreements for WPT, revenues are recognized as each episode is aired. Therefore, WPT s quarterly revenue can fluctuate significantly depending on the number of episodes aired in any one quarter. In addition, the sales of consumer products that utilize WPT s licensed intellectual property vary greatly, due to holiday seasons, school schedules and other outside factors. As a result, WPT s financial results can be expected to fluctuate significantly from quarter to quarter, leading to volatility and a possible adverse effect on the market price of the common stock. Risks Related to WPT s Current Industry WPT s television programming may be unable to maintain a sufficient audience for a variety of reasons, many of which are beyond its control. Television production is a speculative business because revenues and income derived from television depend primarily upon the continued acceptance of that programming by the public, which is difficult to predict. Public acceptance of particular programming is dependent upon, among other things, the quality of the programming, the strength of networks on which the programming is telecast, the promotion and scheduling of the programming and the quality and acceptance of competing television programming and other sources of entertainment and information. Popularity of programming can also be negatively impacted by excessive telecasting of the programming beyond viewers saturation thresholds. WPT s ability to create and sponsor its television programming profitably may be negatively affected by adverse trends that apply to the television production business generally. Television revenues and income may be affected by a number of factors, many of which are not within WPT s control. These factors include a general decline in television viewers, pricing pressure in the television advertising industry, strength of the stations on which its programming is telecast, general economic conditions, increases in production costs and availability of other forms of entertainment and leisure time activities. Furthermore, as the popularity of streaming content over the Internet increases and more consumers "cut the cord" and cease watching traditional broadcast television, the audience for WPT s programming will be dispersed across multiple platforms and its programming could have less overall impact and watchability. All of these factors, as well as others, may quickly change and these changes cannot be predicted with certainty. WPT s future sponsorship opportunities may also be adversely affected by these changes. Accordingly, if any of these changes were to occur, the revenues WPT generates from television programming could decline. A decline in general economic conditions or the popularity of WPT s brand of televised poker tournaments could adversely impact its business. Because WPT s operations are affected by general economic conditions and consumer tastes, its future success is unpredictable. The demand for entertainment and leisure activities tends to be highly sensitive to consumers disposable incomes and thus a decline in general economic conditions could, in turn, have a material adverse effect on WPT s business, operating results and financial condition and the price of the Company s common stock. An economic decline, including the current economic decline as a result of the global COVID-19 pandemic, could also adversely affect WPT s corporate sponsorship business, sales of its branded merchandise and other aspects of its business. The continued popularity of WPT s type of poker entertainment is vital in maintaining the ability to leverage its brand and develop products or services that appeal to its target audiences, which, in turn, is important to WPT s long-term results of operations. Public tastes are unpredictable and subject to change and may be affected by changes in the political and social climates of those countries and territories in which WPT operates. A change in public opinion could have a material adverse effect on WPT s business, operating results and financial condition and, ultimately, the price of the Company s common stock. The political or social climate regarding gaming and poker could negatively impact WPT s ability to negotiate future telecast license arrangements and could negatively impact its chances of renewal. Although the popularity of poker, in particular, and gaming, in general, has continued to grow in the U.S. and abroad, gaming has historically experienced backlash from various constituencies and communities. Currently, the legal operational status of Internet-based casinos and card rooms remains unclear in some countries. The U.S. government has taken steps to curb activities that it believes constitutes unlawful online gaming through legislation such as the Unlawful Internet Gambling Enforcement Act of 2006 and through arrests of off-shore online gaming operators traveling in the U.S. Also, on November 2, 2018, the U.S. Department of Justice (the "DOJ") issued an opinion that interprets the federal Wire Act as prohibiting any gambling that crosses state lines, including non-sports related gambling. This opinion expands the prior opinion issued by the DOJ in 2011 that interpreted the Wire Act as prohibiting interstate sports gambling only. Based on the uncertain regulatory environment surrounding the marketing and promotion of Internet-based casinos and card rooms to viewers in the U.S., FSN has final edit rights to the shows that it broadcasts. FSN had indicated that it will only display the "dot com" names or logos of Internet-based casinos and card rooms in its telecasts that are explicitly legal in select territories in the United States. However, if FSN elects not to allow the display of "dot com" logos on the WPT show, whether because of the recent DOJ opinion or otherwise, WPT may not be able to attract other Internet-based casino sponsors or retain existing online card rooms sponsoring WPT s tour. Additionally, increased regulatory scrutiny on Internet gambling sites may eliminate these sites as sources of advertising revenue for television networks that exhibit poker-related programming, thereby potentially impacting the value of such programming to these networks. Additionally, many participants in WPT s tournament events are sponsored by Internet-based casino sponsors and existing online card rooms. If such sponsors revenues are reduced, they may not be able to sponsor WPT s tournament participants at the same level or at all, which could cause WPT s tournament participation to decline (in terms of numbers and professional players) and the quality and distribution of our WPT series could suffer. The television entertainment market in which WPT operates is highly competitive and competitors with greater financial resources or marketplace presence may enter this market to WPT s detriment. WPT competes with other poker-related television programming, including ESPN s coverage of the "World Series of Poker" and its "World Series of Poker" Circuit Events, among others. These and other producers of poker-related programming may be well established and may have significantly greater resources than WPT does. Based on the popularity of these poker-related televised programs, WPT believes that additional competing televised poker programs may currently be in development or may be developed in the future. WPT s programming also competes for telecast audiences and advertising revenue with telecasts of mainstream professional and amateur sports, as well as other entertainment and leisure activities. These competing programs and activities, and the brands that they build may decrease the popularity of the WPT television series and dilute the WPT s brand. This would adversely affect WPT s operating results and financial condition and, ultimately, the price of the Company s common stock. Risks Related to the completed Merger Future resales of the common stock and warrants issued in the Merger may cause the market price of the Company s securities to drop significantly, even if the business is doing well. In connection with the Merger of an AESE subsidiary with and into AEM, with AEM as the surviving entity, the Company issued to the former owners of Allied Esports and WPT (i) an aggregate of 11,602,754 shares of common stock and (ii) five-year warrants to purchase an aggregate of 3,800,003 shares of common stock at a price per share of $11.50. Additionally, the former owners of Allied Esports and WPT were entitled to receive their pro rata portion of an aggregate of an additional 3,846,153 shares of common stock if the last sales price of the Company s common stock reported on the Nasdaq Capital Market equals or exceeds $13.00 per share (as adjusted for stock splits, dividends, and the like) for 30 consecutive trading days at any time during the five-year period after the consummation of the Merger. At the closing of the Merger, the Company also issued the following shares of its common stock: (i) 744,422 shares to management of WPT in satisfaction of profit participation agreements; (ii) 144,158 shares for prior bonus amounts owed to Adam Pliska, the President of the Company post-closing and the CEO of WPT; (iii) 197,268 shares to finders (one of whom is Adam Pliska, who received 98,634 of such shares), and (iv) 1,842,831 shares to Primo Vital Limited in cancellation of $12,144,260 of debt owed by Allied Esports and WPT. Pursuant to the Merger Agreement, the foregoing recipients entered into lock-up agreements, pursuant to which they agreed to not, subject to certain exceptions, transfer, sell, tender or otherwise dispose of the shares of Company common stock and warrants they received for a period from the closing of the Merger as follows: (i) with respect to 50% of their common stock and warrants, the earlier of one year after the closing of the Merger and the date on which the closing price of the Company s common stock exceeds $12.50 per share for any 20 trading days within a 30-trading day period following the closing of the Merger and, (ii) with respect to the remaining 50% of their common stock and warrants, one year after closing of the Merger, or earlier in each case if, subsequent to the Merger, the Company consummates a subsequent liquidation, merger, stock exchange, or other similar transaction which results in all stockholders having the right to exchange their shares of common stock for cash, securities, or other property. Upon expiration of the applicable lock-up periods and subject to applicable securities laws, these recipients may sell large amounts of the Company s common stock and warrants in the open market or in privately negotiated transactions, which could have the effect of increasing the volatility of, or putting significant downward pressure on, the trading price of our common stock and warrants. Costs associated with the Merger are difficult to estimate, may be higher than expected, and may harm the financial results of the consolidated company. All parties to the Merger incurred substantial direct transaction costs associated with the Merger, and the Company has incurred, and will continue to incur, additional costs associated with consolidation and integration of operations. If the total costs of the Merger exceed estimates, or the benefits of the Merger do not exceed the total costs of the Merger, the Company s consolidated financial results could be adversely affected. Risks Related to the Businesses of both Allied Esports and WPT Allied Esports and WPT have historically operated at a net loss on a consolidated basis, and there is no guarantee that that the consolidated company will be able to be profitable. The combined historical operations of Allied Esports and the WPT have resulted in net losses of $16,738,729 and $31,019,725 for the years ended December 31, 2019 and 2018, respectively. We do not know with any degree of certainty whether or when the consolidated operations of Allied Esports and the WPT will become profitable. Even if we are able to achieve profitability in future periods, we may not be able to sustain or increase our profitability in successive periods. We have formulated our business plans and strategies based on certain assumptions regarding the acceptance of our business model and the marketing of our products and services. Nevertheless, our assessments regarding market size, market share, market acceptance of our products and services and a variety of other factors may prove incorrect. Our future success will depend upon many factors, including factors beyond our control and those that cannot be predicted at this time. Forecasts of our market and market growth may prove to be inaccurate, and even if the markets in which we compete achieve the forecasted growth, there can be no assurance that our business will grow at similar rates, or at all. Growth forecasts included in this prospectus relating to our market opportunities and the expected growth in those markets are subject to significant uncertainty and are based on assumptions and estimates which may prove to be inaccurate. We also plan to operate in a number of foreign markets, and a downturn in any of those markets could have a significant adverse effect on our businesses. Even if these markets meets our size estimate and experiences the forecasted growth, we may not grow our business at a similar rate, or at all. Our growth is subject to many factors, including our success in implementing our business strategy, which is subject to many risks and uncertainties. Accordingly, the forecasts of market growth included in this prospectus should not be taken as indicative of our future growth. Any actual or perceived failure by us to comply with our privacy policies or legal or regulatory requirements in one or multiple jurisdictions could result in proceedings, actions or penalties against us. Allied Esports and WPT have implemented various features intended to better comply with applicable privacy and security requirements in the collection and use of customer data, but these features do not ensure compliance and may not be effective against all potential privacy and data security concerns. A wide variety of domestic and foreign laws and regulations apply to the collection, use, retention, protection, disclosure, transfer, disposal and other processing of personal data. These data protection and privacy-related laws and regulations are evolving and may result in regulatory and public scrutiny and escalating levels of enforcement and sanctions. Our failure to comply with applicable laws and regulations, or to protect any personal data, could result in enforcement actions against us, including fines, claims for damages by customers and other affected individuals, damage to our reputation and loss of goodwill (both in relation to existing customers and prospective customers), any of which could adversely affect our business, operating results, financial performance and prospects. Evolving and changing definitions of personal data and personal information within the EU, the United States and elsewhere may limit or inhibit our ability to operate or expand our business. In jurisdictions outside of the United States, we may face data protection and privacy requirements that are more stringent than those in place in the United States. We are at risk of enforcement actions taken by certain EU data protection authorities until such point in time that we may be able to ensure that all transfers of personal data to us in the United States from the EU are conducted in compliance with all applicable regulatory obligations, the guidance of data protection authorities and evolving best practices. The European General Data Protection Regulation ("GDPR") may impose additional obligations, costs and risks upon our business. The GDPR may increase substantially the penalties to which we could be subject in the event of any non-compliance. In addition, we may incur substantial expense in complying with the obligations imposed by the GDPR and we may be required to make significant changes in our business operations, all of which may adversely affect our revenues and our business overall. Loss, retention or misuse of certain information and alleged violations of laws and regulations relating to privacy and data security, and any relevant claims, may expose us to potential liability and may require us to expend significant resources on data security and in responding to and defending such allegations and claims. In addition, future laws, regulations, standards and other obligations, and changes in the interpretation of existing laws, regulations, standards and other obligations could impair our ability to collect, use or disclose data relating to individuals, which could increase our costs and impair our ability to maintain and grow our customer base and increase our revenue. Allied Esports and WPT publicly post their privacy policies and practices concerning processing, use and disclosure of the personally identifiable information provided to them by website visitors. Publication of such privacy policies and other statements published that provide promises and assurances about privacy and security can subject us to potential state and federal action if they are found to be deceptive or misrepresentative of actual policies and practices or if actual practices are found to be unfair. Evolving and changing definitions of what constitutes "Personal Information" and "Personal Data" within the EU, the United States and elsewhere, especially relating to classification of IP addresses, machine or device identification numbers, location data and other information, may limit or inhibit our ability to operate or expand our business, including limiting technology alliance relationships that may involve the sharing of data. Our failure to raise additional capital or generate cash flows necessary to pay debt, expand our operations and invest in new business initiatives in the future could reduce our ability to compete successfully and harm our operating results. In the future we need to raise additional funds, and we may not be able to obtain additional debt or equity financing on favorable terms, if at all. If we raise additional equity financing, our security holders may experience significant dilution of their ownership interests. If we engage in debt financing, we may be required to accept terms that restrict our ability to incur additional indebtedness, force us to maintain specified liquidity or other ratios or restrict our ability to pay dividends or make acquisitions. If we cannot raise capital on acceptable terms, or at all, we may not be able to, among other things: develop and enhance our products and services; continue to expand our network of arenas; hire, train and retain employees; respond to competitive pressures or unanticipated working capital requirements; or pursue acquisition opportunities. Although we have been able to fund our current working capital requirements through operations, debt and equity financing, there is no assurance that we will be able to do so in the future. As a result, our auditors have indicated that the above-mentioned conditions raise substantial doubt about our ability to continue as a going concern. Our business depends substantially on the continuing efforts of our executive officers, key employees and qualified personnel, and our business operations may be severely disrupted if we lose the services of such personnel. Our future success depends substantially on the continued efforts of our executive officers and key employees. If one or more of our executive officers or key employees are unable or unwilling to continue their services with us, we might not be able to replace them easily, in a timely manner, or at all. Since the esports gaming and poker industry is characterized by high demand and intense competition for talent, we cannot assure you that we will be able to attract or retain qualified staff or other highly skilled employees. If any of our executive officers or key employees terminate their services with us, our business may be severely disrupted, our financial condition and results of operations may be materially and adversely affected and we may incur additional expenses to recruit, train and retain qualified personnel. We may experience security breaches and cyber threats. We face cyber risks and threats that could damage, disrupt or allow third parties to gain improper access to our networks and platforms, supporting infrastructure, intellectual property and other assets. In addition, we rely on technological infrastructure, including third party cloud hosting and broadband, provided by third party business partners to support the functionality of our platforms and content distribution. These business partners are also subject to cyber risks and threats. Such cyber risks and threats may be difficult to detect. The techniques that may be used to obtain unauthorized access or disable, degrade, exploit or sabotage these networks and gaming platforms change frequently and often are not detected. Our systems and processes and those of our third-party business partners may not be adequate. Any failure to prevent or mitigate security breaches or cyber risks, or respond adequately to a security breach or cyber risk, could result in interruptions to our platforms, degrade the gamer/user experiences, cause gamers/users to lose confidence in our platforms and cease utilizing them, as well as significant legal and financial exposure. This could harm our business and reputation, disrupt our relationships with partners and diminish our competitive position. Global health threats, such as the current COVID-19 pandemic, may adversely affect the operations of our Allied Esports and WPT businesses, which could have a material adverse effect on our business. Our business could be adversely affected by the effects of a widespread outbreak of contagious disease, including the recent outbreak of the COVID-19 respiratory illness first identified in Wuhan, Hubei Province, China. A significant outbreak of contagious diseases in the human population could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could affect demand for our products and services. Specifically, as a global entertainment company that hosts numerous live events with spectators and participants in destination cities, outbreaks may cause such people to avoid traveling to our destination cities and attending our events. Sponsors of such events may also cancel such events as precautionary measures or based on guidelines from local or federal health agencies. Recently live events to be hosted by both of our Allied Esports and WPT businesses have been cancelled, and at this time we cannot determine the extent that such outbreak may have on our future operations. Risks Related to Owning Our Common Stock The market price of shares of our common stock may be volatile, which could cause the value of your investment to decline. The market price of our common stock may be highly volatile and could be subject to wide fluctuations. Securities markets worldwide experience significant price and volume fluctuations. This market volatility, as well as general economic, market or political conditions, could reduce the market price of shares of our common stock regardless of our operating performance. In addition, our operating results could be below the expectations of public market analysts and investors due to a number of potential factors, including variations in our quarterly operating results or dividends, if any, to stockholders, additions or departures of key management personnel, failure to meet analysts earnings estimates, publication of research reports about our industry, litigation and government investigations, changes or proposed changes in laws or regulations or differing interpretations or enforcement thereof affecting our business, adverse market reaction to any indebtedness we may incur or securities we may issue in the future, changes in market valuations of similar companies or speculation in the press or investment community, announcements by our competitors of significant contracts, acquisitions, dispositions, strategic partnerships, joint ventures or capital commitments, adverse publicity about the industries we participate in or individual scandals, and, in response, the market price of shares of our common stock could decrease significantly. You may be unable to resell your shares of common stock at or above the public offering price. In the past few years, stock markets have experienced extreme price and volume fluctuations. In the past, following periods of volatility in the overall market and the market price of a company s securities, securities class action litigation has often been instituted against these companies. Such litigation, if instituted against us, could result in substantial costs and a diversion of our management s attention and resources. We have no current plans to pay cash dividends on our common stock; as a result, you may not receive any return on investment unless you sell your common stock for a price greater than that which you paid for it. We have no current plans to pay dividends on our common stock. Any future determination to pay dividends will be made at the discretion of our board of directors, subject to applicable laws, and will depend on a number of factors, including our financial condition, results of operations, capital requirements, contractual, legal, tax and regulatory restrictions, general business conditions and other factors that our board of directors may deem relevant. In addition, our ability to pay cash dividends is restricted by the terms of our debt financing arrangements, and any future debt financing arrangement likely will contain terms restricting or limiting the amount of dividends that may be declared or paid on our common stock. As a result, you may not receive any return on an investment in our common stock unless you sell your common stock for a price greater than that which you paid for it. If our operating and financial performance in any given period does not meet the guidance that we provide to the public, the market price of our common stock may decline. We may, but are not obligated to, provide public guidance on our expected operating and financial results for future periods. Any such guidance will be comprised of forward-looking statements subject to the risks and uncertainties described in this prospectus and in our other public filings and public statements. Our actual results may not always be in line with or exceed any guidance we have provided, especially in times of economic uncertainty. If, in the future, our operating or financial results for a particular period do not meet any guidance we provide or the expectations of investment analysts, or if we reduce our guidance for future periods, the market price of our common stock may decline as well. Even if we do issue public guidance, there can be no assurance that we will continue to do so in the future. 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 our indebtedness, which may not be successful. Our ability to make scheduled interest payments on or to refinance our debt obligations depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business, legislative, regulatory and other factors, some of which are beyond our control. In some cases, we will also be required to obtain the consent our lenders to refinance material portions of our indebtedness. We cannot assure you that we will maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premiums, and interest, if any, on our indebtedness. Some of our indebtedness is maturing in the near term, and if we are unable to raise sufficient capital or generate cash through our operations, we will be unable to meet our debt obligations at maturity. If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay investments and capital expenditures, reduce or eliminate the payment of dividends, sell assets, seek additional capital or seek to restructure or refinance our indebtedness. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. Our ability to restructure or refinance our debt will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. We may not be able to effect any such alternative measures on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow us to meet our scheduled debt service obligations. If our operating results and available cash are insufficient to meet our debt service obligations, we could face substantial liquidity problems and might be required to dispose of material assets or operations to attempt to meet our debt service and other obligations. We may not be able to consummate those dispositions or consummate dispositions at prices that we believe are fair, and the proceeds that we do receive may not be adequate to meet any debt service obligations then due. We will incur increased costs and become subject to additional regulations and requirements as a result of becoming a public company, which could lower our profits or make it more difficult to run our business. As a public company, we will incur significant legal, accounting and other expenses that we have not incurred as a private company, including costs associated with public company reporting requirements. We also have incurred and will continue to incur costs associated with the Sarbanes-Oxley Act, and related rules implemented by the Securities and Exchange Commission (the "SEC") and the Nasdaq Capital Market. The expenses generally incurred by public companies for reporting and corporate governance purposes have been increasing. We expect these rules and regulations to increase our legal and financial compliance 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. These laws and regulations also could make it more difficult or costly for us to obtain certain types of insurance, including director and officer liability 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. These laws and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, on our board committees or as our executive officers. Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of our common stock on the Nasdaq market, fines, sanctions and other regulatory action and potentially civil litigation. We are an "emerging growth company," and the reduced public company reporting requirements applicable to emerging growth companies may make our common stock less attractive to investors. We qualify as an "emerging growth company," as defined in the JOBS Act. For so long as we remain an emerging growth company, we are permitted and plan to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies. These provisions include, but are not limited to: being permitted to have only two years of audited financial statements and only two years of related selected financial data and management s discussion and analysis of financial condition and results of operations disclosure; an exemption from compliance with the auditor attestation requirement in the assessment of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act; not being required to comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor s report providing additional information about the audit and the financial statements; reduced disclosure obligations regarding executive compensation arrangements in our periodic reports, registration statements 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. In addition, the JOBS Act permits emerging growth companies to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We intend to take advantage of the exemptions discussed above. As a result, the information we provide will be different than the information that is available with respect to other public companies. In this prospectus, we have not included all of the executive compensation-related information that would be required if we were not an emerging growth company. We cannot predict whether investors will find our common stock less attractive if we 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 the market price of our common stock may be more volatile. We will remain an emerging growth company until the earliest of (i) the end of our 2022 fiscal year, (ii) the first fiscal year after our annual gross revenues exceed $1.07 billion, (iii) the date on which we have, during the immediately preceding three-year period, issued more than $1.00 billion in non-convertible debt securities or (iv) the end of any fiscal year in which the market value of our common stock held by non-affiliates exceeds $700 million as of the end of the second quarter of that fiscal year. Our failure to achieve and maintain an effective system of disclosure controls and internal control over financial reporting could adversely affect our financial position and lower our stock price. As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, and the rules and regulations of the applicable listing standards of Nasdaq. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. Effective internal controls are necessary for us to provide reliable financial reports. Nevertheless, all internal control systems, no matter how well designed, have inherent limitations. Even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Although management has not completed its assessment regarding internal control over financial reporting as of the date of this Report, management has identified as of December 31, 2019 the following material weaknesses in internal controls: inadequate internal controls, including inadequate segregation of duties, over the preparation and review of the consolidated financial statements and untimely annual closings of the books; inadequate controls and procedures as they relate to completeness of information reported by certain third parties that process transactions related to specific revenue streams; and inadequate information technology general controls as it relates to user access and change management. As a company with limited accounting resources, a significant amount of management s time and attention has been and will be diverted from our business to ensure compliance with these regulatory requirements. This diversion of management s time and attention may have a material adverse effect on our business, financial condition and results of operations. These material weaknesses and any significant deficiencies could harm our operating results or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods. Any failure to implement and maintain effective internal control over financial reporting also could adversely affect the results of periodic management evaluations and any annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that we may be required to include in our periodic reports that will be filed with the SEC. Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, which would likely have a negative effect on the trading price of our common stock. In addition, if we are unable to continue to meet these requirements, we may not be able to maintain our common stock listed on Nasdaq. Increases in interest rates may cause the market price of our common stock to decline. While interest rates are falling and have in recent years been at record low levels, any return to increases in interest rates may cause a corresponding decline in demand for equity investments. Any such increase in interest rates or reduction in demand for our common stock resulting from other relatively more attractive investment opportunities may cause the market price of our common stock to decline. If securities or industry analysts do not publish research or reports about our business or publish negative reports, the market price 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 publish about us or our business. If one of more of these analysts ceases coverage of us or fails to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause the market price or trading volume of our common stock to decline. Moreover, if one or more of the analysts who cover us downgrades our common stock or if our reporting results do not meet their expectations, the market price of our common stock could decline. You will be diluted by the future issuance of common stock, preferred stock, or securities convertible into common or preferred stock, in connection with our incentive plans, acquisitions, capital raises or otherwise. Our amended and restated certificate of incorporation authorizes us to issue these shares of common stock and options, rights, warrants and appreciation rights relating to common stock for the consideration and on the terms and conditions established by our board of directors in its sole discretion, whether in connection with acquisitions or otherwise. In the future, we expect to obtain financing or to further increase our capital resources by issuing additional shares of our capital stock or offering debt or other equity securities, including senior or subordinated notes, debt securities convertible into equity or shares of preferred stock. Issuing additional shares of our capital stock or other equity securities or securities convertible into equity may dilute the economic and voting rights of our existing stockholders or reduce the market price of our common stock or both. Debt securities convertible into equity could be subject to adjustments in the conversion ratio pursuant to which certain events may increase the number of equity securities issuable upon conversion. Preferred shares, if issued, could have a preference with respect to liquidating distributions or a preference with respect to dividend payments that could limit our ability to pay dividends to the holders of our common stock. Our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, which may adversely affect the amount, timing or nature of our future offerings. As a result, holders of our common stock bear the risk that our future offerings may reduce the market price of our common stock and dilute their stockholdings in us. Additionally, we have reserved an aggregate of 3,463,305 shares of common stock for issuance under our 2019 Equity Incentive Plan (the "2019 Plan"). Any common stock that we issue, including under our 2019 Plan or other equity incentive plans that we may adopt in the future, would dilute the percentage ownership held by our common stockholders. We intend to file one or more registration statements on Form S-8 under the Securities Act to register shares of our common stock or securities convertible into or exchangeable for shares of our common stock issued pursuant to our 2019 Plan. Any such Form S-8 registration statements will automatically become effective upon filing. Accordingly, shares registered under such registration statements will be available for sale in the open market. The Company s Certificate of Incorporation, as amended, provides that, to the fullest extent permitted by law, the Court of Chancery of the State of Delaware will be the exclusive forum for certain legal actions between the Company and its stockholders, which could limit the Company s stockholders ability to obtain a judicial forum viewed by the stockholders as more favorable for disputes with the Company or the Company s directors, officers or employees. The Company s Certificate of Incorporation, as amended, provides that unless the Company consents in writing to the selection of an alternative forum, 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 the Company s stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law or the Certificate of Incorporation, as amended, or the Company s Bylaws, or (iv) any action asserting a claim governed by the internal affairs doctrine shall be the Court of Chancery of the State of Delaware (or if the Court of Chancery does not have jurisdiction, another state court located within the State of Delaware, or if no state court located within the State of Delaware has jurisdiction, the federal district court for the District of Delaware) in all cases subject to the court s having personal jurisdiction over the indispensable parties named as defendants. This exclusive forum provision does not apply to suits brought to enforce a duty or liability created by the Exchange Act. It could apply, however, to a suit that falls within one or more of the categories enumerated in the exclusive forum provision and asserts claims under the Securities Act, inasmuch as Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rule and regulations thereunder. There is uncertainty as to whether a court would enforce such provision with respect to claims under the Securities Act, and our stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder. 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 exclusive-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, which may discourage lawsuits against us and our directors, officers and other employees. If a court were to find the choice of forum provision contained in our Certificate of Incorporation, as amended, 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 the Company s management. Our Board of Directors ability to issue undesignated preferred stock and the existence of anti-takeover provisions may depress the value of our common stock. The Company s authorized capital includes 1,000,000 shares of undesignated preferred stock. Our Board has the power to issue any or all of the shares of preferred stock, including the authority to establish one or more series and to fix the powers, preferences, rights and limitations of such class or series, without seeking stockholder approval, subject to certain limitations on this power under Nasdaq listing requirements. Further, as a Delaware corporation, we are subject to provisions of the Delaware General Corporation Law regarding "business combinations." We may, in the future, consider adopting additional anti-takeover measures. The authority of our Board to issue undesignated stock and the anti-takeover provisions of Delaware law, as well as any future anti-takeover measures adopted by us, may, in certain circumstances, delay, deter or prevent takeover attempts and other changes in control of our company that are not approved by our Board. As a result, our stockholders may lose opportunities to dispose of their shares at favorable prices generally available in takeover attempts or that may be available under a merger proposal and the market price, voting and other rights of the holders of common stock may also be affected. USE OF PROCEEDS We will not receive any of the proceeds from the sale of shares of our common stock in this offering. However, we will receive proceeds from the exercise for cash, if any, of the Warrants issued to the selling stockholders pursuant to the Purchase Agreement. We will use these proceeds for general corporate and working capital purposes, or for other purposes that our Board of Directors, in its good faith, deems to be in the best interest of our Company. We have agreed to bear the expenses relating to the registration of the offer and resale by the selling stockholders of the shares being offered hereby.

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+RISK FACTORS
+ 
+ Investing in our common stock involves a high degree of risk. You should carefully consider the following risk factors, as well as the other information in this offering memorandum, before deciding whether to invest in shares of our common stock. If any of the following risks actually occur, our business, financial condition and results of operations would suffer. In that case, the trading price of our common stock would likely decline and you might lose all or part of your investment in our common stock. The risks described below are not the only ones we face. Additional risks that we currently do not know about or that we currently believe to be immaterial may also impair our business, financial conditions and results of operations.
+ 
+ Business Risk Factors
+ 
+ Risks Related to Financing and the Need for Capital
+ 
+ We are a pre-clinical stage pharmaceutical company with a limited operating history.
+ 
+ We are a pre-clinical stage pharmaceutical company with a limited operating history. The Company needs to complete design, development and additional pre-clinical studies of its product programs before submitting for authorization to initiate human clinical trials under an IND (Investigational New Drug) to eventually support a New Drug Application, or NDA, in order to commercialization can commence. The likelihood of success of our business plan must be considered in light of the problems, substantial expenses, difficulties, complications and delays frequently encountered in connection with developing and expanding early-stage businesses and the regulatory and competitive environment in which we operate. Pharmaceutical product development is a highly speculative undertaking, involves a substantial degree of risk and is a capital-intensive business.
+ 
+ Accordingly, potential investors should consider our prospects in light of the costs, uncertainties, delays and difficulties frequently encountered by companies in the early stages of development, especially clinical pharmaceutical companies such as ours. Investors should carefully consider the risks and uncertainties that a company with a limited operating history will face. In particular, potential investors should consider that the Company cannot assure that it will be able to:
+ 
+ 
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+ successfully implement or execute the current business plan, and we cannot assure that the business plan is sound;
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+ successfully manufacture our clinical product and establish commercial drug supply;
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+ 
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+ obtain Drug Enforcement Administration, or DEA, licenses necessary for the manufacturing of several of the proposed products for evaluation in clinical trials;
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+ successfully complete the clinical trials necessary to obtain regulatory approval for the commercial release of the Company s products;
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+ secure market exclusivity and/or adequate intellectual property protection for the proposed products;
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+ attract and retain an experienced management and advisory team;
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+ secure adoption of the Company products in the medical community and with third party payors and consumers;
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+ launch commercial sales of the Company products, whether alone or in collaboration with other strategic partners and/or distributors; and
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+ raise sufficient funds in the capital markets to effectuate our business plan.
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+ If we cannot successfully execute any one of the foregoing, the business may not succeed and investor capital will be adversely affected.
+ 
+ We have incurred operating losses in each year since our inception and expect to continue to incur substantial losses for the foreseeable future. We may never become profitable or, if we achieve profitability, be able to sustain profitability.
+ 
+ Furthermore, the Company has incurred operating losses in the prior year(s) since our inception and expect to continue to incur substantial losses for the foreseeable future. We may never become profitable or, if we achieve profitability, be able to sustain profitability. 
+ 
+ 
+ 3
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+ Table of Contents
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+ 
+ We expect to incur substantial expenses without corresponding revenues unless and until we are able to obtain regulatory approval and successfully commercialize the proposed products. 
+ 
+ We may never be able to obtain regulatory approval for one or more of the products in any indication in the United States or internationally. Even if our regulatory process is successful with one or more of our product candidates, there can be no assurance that we will generate significant revenues or ever achieve profitability.
+ 
+ The ongoing COVID-19 pandemic may adversely affect our business.
+ 
+ In December 2019, a strain of coronavirus was reported to have surfaced in Wuhan, China, and has spread globally, and on March 12, 2020, the WHO declared COVID-19 to be a pandemic. In an effort to contain and mitigate the spread of COVID-19, many countries, including the United States, have imposed unprecedented restrictions on travel, quarantines, and other public health safety measures. Such government-imposed precautionary measures may have been relaxed in certain countries or states, but there is no assurance that more strict measures will be put in place again due to a resurgence in COVID-19 cases. The rapidly evolving nature of the circumstances is such that it is impossible, at this stage, to determine the full and overall impact the COVID-19 pandemic may have, but it could disrupt production and cause delays in the supply and delivery of products used in our research and development efforts, adversely affect our employees, and disrupt our operations, all of which may have a material adverse effect on our business. In addition, the pandemic may have an adverse effect on the ability of regulatory bodies to grant approvals or supervise our candidates and products, may further divert the attention and efforts of the medical community to coping with the coronavirus and disrupt the marketplace in which we operate and may have a material adverse effects on our operations.
+ 
+ Moreover, the COVID-19 pandemic has created significant economic uncertainty and volatility in the credit and capital markets. Management plans to secure the necessary financing through the issue of new equity and/or the entering into of strategic partnership arrangements; however, there is no assurance that our management will be able to obtain such financing on reasonable terms or at all. A continuation or worsening of the levels of market disruption and volatility seen in the recent past could have an adverse effect on our ability to access capital and on the market price of our common stock, and we may not be able to successfully raise capital through the sale of our securities. If we are unsuccessful in commercializing our products or raising capital, we may need to reduce activities, curtail or cease operations.
+ 
+ In addition, a significant outbreak of COVID-19 or other infectious diseases could result in a widespread health crisis that could adversely affect the economies and financial markets worldwide, resulting in an economic downturn that could impact our business, financial condition and results of operations.
+ 
+ Risks Related to Product Development, Regulatory Approval, Manufacturing and Commercialization
+ 
+ We will depend heavily on the success of our proposed products. If we are unable to generate revenues from our products, we will likely need to cease operations.
+ 
+ We will depend entirely on the success of our proposed products. If we are unable to generate revenues, our ability to create stockholder value will be limited. 
+ 
+ Despite the attempt to develop a diversified series of product opportunities to mitigate the risks associated with any single development effort, we will be required to complete Phase 1 safety studies before evaluating efficacy in subsequent clinical studies. There is no guarantee that our clinical trials will be successful or that we will continue with clinical studies to support any approvals from the FDA for any indication. We acknowledges that most drug candidates never reach the clinical development stage and even those that do have only a small chance of successfully completing clinical development and gaining regulatory approval. Therefore, our business currently depends entirely on the successful development, regulatory approval and commercialization of the proposed products, which may never occur.
+ 
+ Our clinical trials may be unsuccessful, which would materially harm our business. Even if our ongoing clinical trials are successful, we will be required to conduct additional clinical trials to establish safety and long-term efficacy, before a New Drug Application, or NDA, can be filed with the FDA for marketing approval.
+ 
+ If we are not able to obtain any required regulatory approvals for our drug candidates, we will not be able to commercialize our product candidates and our ability to generate revenue will be limited.
+ 
+ Clinical testing is expensive, is difficult to design and implement, can take many years to complete and is uncertain as to outcome. Success in early phases of pre-clinical and clinical trials does not ensure that later clinical trials will be successful, and interim results of a clinical trial do not necessarily predict final results. A failure of one or more of our clinical trials can occur at any stage of testing. We may experience numerous unforeseen events during, or as a result of, the clinical trial process that could delay or prevent our ability to receive regulatory approval or product commercialization. The research, testing, manufacturing, labeling, packaging, storage, approval, sale, marketing, advertising and promotion, pricing, export, import and distribution of drug products are subject to extensive regulation by the FDA and other regulatory authorities in the United States and other countries, which regulations differ from country to country. We are not permitted to market these products as a prescription pharmaceutical product in the United States until we receive approval of an NDA from the FDA or comparable regulatory agencies for sales in foreign markets until we receive the requisite approval from such countries. In the United States, the FDA generally requires the completion of clinical trials of each drug to establish its safety and efficacy and extensive pharmaceutical development to ensure its quality before an NDA is approved. Regulatory authorities in other jurisdictions impose similar requirements. Of the large number of drugs in development, only a small percentage result in the submission of an NDA to the FDA and even fewer are eventually approved for commercialization. We have never submitted an NDA to the FDA or comparable applications to other regulatory authorities. If our development efforts for these product candidates, including regulatory approval, are not successful for its planned indications, or if adequate demand for these products is not generated, our business will be harmed.
+ 
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+ 4
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+ Table of Contents
+ 
+ 
+ Receipt of necessary regulatory approval is subject to a number of risks, including the following:
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+ the FDA or comparable foreign regulatory authorities or institutional review boards, or IRBs, may disagree with the design or implementation of the Company s proposed clinical trials;
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+ we may not be able to provide acceptable evidence of these products safety and efficacy;
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+ the results of our clinical trials may not be satisfactory or may not meet the level of statistical or clinical significance required by the FDA, European Medicines Agency, or EMA, or other comparable foreign regulatory authorities for marketing approval;
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+ the proposed dosing studies in a particular clinical trial may not be at an optimal level;
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+ patients in clinical trials may suffer adverse effects for reasons that may or may not be related to the products;
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+ the data collected from clinical trials may not be sufficient to support the submission of an NDA or other submission or to obtain regulatory approval in the United States or elsewhere;
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+ the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes or facilities of third-party manufacturers with which we contract for clinical and commercial supplies; and
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+ the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval.
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+ Failure to obtain regulatory approval for the foregoing or any other reasons will prevent the Company from commercializing this product candidate as a prescription product, and our ability to generate revenue will be materially impaired. We cannot guarantee that regulators will agree with the assessment of the results of our clinical trials or that such trials will be considered by regulators to have shown safety or efficacy of our product candidates. The FDA, EMA and other regulators have substantial discretion in the approval process and may refuse to accept any application or may decide that our data is insufficient for approval and require additional clinical trials, or pre-clinical or other studies. In addition, varying interpretations of the data obtained from pre-clinical and clinical testing could delay, limit or prevent regulatory approval of a product candidate.
+ 
+ We have only limited experience in filing the applications necessary to gain regulatory approvals and expect to rely on consultants and third party contract research organizations, or CROs, with expertise in this area to assist us in this process. Securing FDA approval requires the submission of pre-clinical, clinical and/or pharmacokinetic data, information about product manufacturing processes and inspection of facilities and supporting information to the FDA for each therapeutic indication to establish a product candidate s safety and efficacy for each indication. One or more of the proposed product candidates may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude our obtaining regulatory approval or prevent or limit commercial use with respect to one or all intended indications.
+ 
+ The process of obtaining regulatory approvals is expensive, often takes many years, if approval is obtained at all, and can vary substantially based upon, among other things, the type, complexity and novelty of the product candidates involved, the jurisdiction in which regulatory approval is sought and the substantial discretion of the regulatory authorities. Changes in the regulatory approval policy during the development period, changes in or the enactment of additional statutes or regulations, or changes in regulatory review for a submitted product application may cause delays in the approval or rejection of an application. Regulatory approval obtained in one jurisdiction does not necessarily mean that a product candidate will receive regulatory approval in all jurisdictions in which we may seek approval, but the failure to obtain approval in one jurisdiction may negatively impact our ability to seek approval in a different jurisdiction. Failure to obtain regulatory marketing approval for these proposed products in any indication will prevent us from commercializing the product candidate, and our ability to generate revenue will be materially impaired.
+ 
+ 
+ 5
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+ Table of Contents
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+ 
+ Clinical drug development involves a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial results.
+ 
+ Clinical drug development involves a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial results. Failure can occur at any time during the clinical trial process. The results of pre-clinical studies and early clinical trials may not be predictive of the results of later-stage clinical trials. The Company cannot assure how the FDA will view the results or that any future trials of the proposed products will achieve positive results. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through pre-clinical studies and initial clinical trials. A number of companies in the pharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials. Any future clinical trial results may not be successful.
+ 
+ In addition, a number of factors could contribute to a lack of favorable safety and efficacy results for the products. For example, such trials could result in increased variability due to varying site characteristics, such as local standards of care, differences in evaluation period and surgical technique, and due to varying patient characteristics, including demographic factors and health status.
+ 
+ Even if we receive regulatory approval for our drug candidates, we still may not be able to successfully commercialize any of our products, and the revenue that we generate from sales, if any, may be limited.
+ 
+ Even if regulatory approvals are received, we still may not be able to successfully commercialize these products, and the revenue that we generate from sales, if any, may be limited. If approved for marketing, the commercial success will depend upon its acceptance by the medical community, including physicians, patients and health care payors. The degree of market acceptance will depend on a number of factors, including:
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+ demonstration of clinical safety and efficacy;
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+ relative convenience, pill burden and ease of administration;
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+ the prevalence and severity of any adverse effects;
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+ the willingness of physicians to prescribe the products and of the target patient population to try new alternative therapies;
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+ safety, tolerability and efficacy compared to competing products;
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+ the introduction of any new products that may in the future become available to treat indications for which the proposed products may be approved;
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+ new procedures or methods of treatment that may reduce the incidences of any of the indications in which these products may show utility; 
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+ pricing and cost-effectiveness;
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+ the effectiveness of our or any future collaborators sales and marketing strategies;
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+ limitations or warnings contained in FDA-approved labeling;
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+ our ability to obtain and maintain sufficient third-party coverage or reimbursement from government health care programs, including Medicare and Medicaid, private health insurers and other third-party payors; and
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+ the willingness of patients to pay out-of-pocket in the absence of third-party coverage or reimbursement.
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+ If one or more of the proposed products are approved, but does not achieve an adequate level of acceptance by physicians, health care payors and patients, we may not generate sufficient revenue and we may not be able to achieve or sustain profitability. Our efforts to educate the medical community and third-party payors on the benefits of the products may require significant resources and may never be successful.
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+ 6
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+ Table of Contents
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+ 
+ In addition, even if we obtain regulatory approvals, the timing or scope of any approvals may prohibit or reduce our ability to successfully commercialize these products. For example, if the approval process takes too long, the Company may miss market opportunities and give other companies the ability to develop competing products or establish market dominance. Any regulatory approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render one or more products not commercially viable. For example, regulatory authorities may approve a product for fewer or more limited indications than requested, may not approve the price we intend to charge, may grant approval contingent on the performance of costly post-marketing clinical trials, or may approve a product with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that indication. Further, the FDA or comparable foreign regulatory authorities may place conditions on approvals, such as risk management plans and a Risk Evaluation and Mitigation Strategy, or REMS, to assure the safe use of the drug. If the FDA concludes a REMS is needed, the sponsor of the NDA must submit a proposed REMS; the FDA will not approve the NDA without an approved REMS, if required. A REMS could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. The FDA may also require a REMS for an approved product when new safety information emerges. Any of these limitations on approval or marketing could restrict the commercial promotion, distribution, prescription or dispensing of our products. Moreover, product approvals may be withdrawn for non-compliance with regulatory standards or if problems occur following the initial marketing of the product. Any of the foregoing scenarios could materially harm the commercial success of the proposed products 
+ 
+ Even once marketing approval is obtained, we will be subject to ongoing obligations and continued regulatory review, which may result in significant additional expense. Additionally, these products could be subject to labeling and other restrictions and withdrawal from the market and we may be subject to penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems with the proposed products. 
+ 
+ Even if we obtain marketing approval for our drug candidates, we will be subject to ongoing obligations and continued regulatory review, which may result in significant additional expense. Additionally, our drug candidates could be subject to labeling and other restrictions and withdrawal from the market and we may be subject to penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems with our drug candidates.
+ 
+ Even if we obtain United States regulatory approval of for a specific indication, the FDA may still impose significant restrictions on indicated uses or marketing or the conditions of approval, or impose ongoing requirements for potentially costly and time-consuming post-approval studies, including Phase 4 clinical trials, and post-market surveillance to monitor safety and efficacy. The proposed products will also be subject to ongoing regulatory requirements governing the manufacturing, labeling, packaging, storage, distribution, safety surveillance, advertising, promotion, recordkeeping and reporting of adverse events and other post-market information. These requirements include registration with the FDA, continued compliance with current Good Clinical Practices regulations, or cGCPs, for any clinical trials that we conduct post-approval, continued compliance with the CSA and ongoing review by the DEA. In addition, manufacturers of drug products and their facilities are subject to continual review and periodic inspections by the FDA and other regulatory authorities for compliance with current Good Manufacturing Practices, or cGMP, requirements relating to quality control, quality assurance and corresponding maintenance of records and documents.
+ 
+ With respect to sales and marketing activities by us or any future partner, advertising and promotional materials must comply with FDA rules in addition to other applicable federal, state and local laws in the United States and similar legal requirements in other countries. In the United States, the distribution of product samples to physicians must comply with the requirements of the U.S. Prescription Drug Marketing Act. Application holders must obtain FDA approval for product and manufacturing changes, depending on the nature of the change. We may also be subject, directly or indirectly through our customers and partners, to various fraud and abuse laws, including, without limitation, the U.S. Anti-Kickback Statute, U.S. False Claims Act, and similar state laws, which impact, among other things, our proposed sales, marketing, and scientific/educational grant programs. If we participate in the U.S. Medicaid Drug Rebate Program, the Federal Supply Schedule of the U.S. Department of Veterans Affairs, or other government drug programs, we will be subject to complex laws and regulations regarding reporting and payment obligations. All of these activities are also potentially subject to U.S. federal and state consumer protection and unfair competition laws. Similar requirements exist in many of these areas in other countries.
+ 
+ In addition, if the product(s) are approved for an indication, our product labeling, advertising and promotion would be subject to regulatory requirements and continuing regulatory review. The FDA strictly regulates the promotional claims that may be made about prescription products. In particular, a product may not be promoted for uses that are not approved by the FDA as reflected in the product s approved labeling. If we receive marketing approval for a specific product, physicians may nevertheless legally prescribe our products to their patients in a manner that is inconsistent with the approved label. However, if we are found to have promoted such off-label uses, we may become subject to significant liability and government fines. The federal government has levied large civil and criminal fines against companies for alleged improper promotion and has enjoined several companies from engaging in off-label promotion. The FDA has also requested that companies enter into consent decrees of permanent injunctions under which specified promotional conduct is changed or curtailed.
+ 
+ If we or a regulatory agency discover previously unknown problems with a product, such as adverse events of unanticipated severity or frequency or problems with the facility where the product is manufactured, or if we or our manufacturers fail to comply with applicable regulatory requirements, we may be subject to the following administrative or judicial sanctions:
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+ restrictions on the marketing or manufacturing of the product, withdrawal of the product from the market, or voluntary or mandatory product recalls;
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+ issuance of warning letters or untitled letters;
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+ injunctions or the imposition of civil or criminal penalties or monetary fines;
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+ suspension of any ongoing clinical trials;
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+ 7
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+ Table of Contents
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+ refusal to approve pending applications or supplements to approved applications filed by us, or suspension or revocation of product license approvals;
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+ suspension of, or imposition of restrictions on, operations, including costly new manufacturing requirements; or
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+ product seizure or detention or refusal to permit the import or export of product.
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+ The occurrence of any event or penalty described above may inhibit our ability to commercialize these products and generate revenue. Adverse regulatory action, whether pre- or post-approval, can also potentially lead to product liability claims and increase our product liability exposure.
+ 
+ We currently have no sales and marketing organization. If we are unable to secure a sales and marketing partner or establish satisfactory sales and marketing capabilities, we may not successfully commercialize our drug candidates.
+ 
+ We currently have no sales and marketing organization. If we are unable to secure a sales and marketing partner or establish satisfactory sales and marketing capabilities, we may not successfully commercialize the proposed products.
+ 
+ The Company may not be able to enter into collaboration agreements on terms acceptable to us or at all. In addition, even if we enter into such relationships, we may have limited or no control over the sales, marketing and distribution activities of these third parties. Our future revenues may depend heavily on the success of the efforts of these third parties. If we elect to establish a sales and marketing infrastructure we may not realize a positive return on this investment. In addition, we will have to compete with established and well-funded pharmaceutical and biotechnology companies to recruit, hire, train and retain sales and marketing personnel. Factors that may inhibit our efforts to commercialize the products without strategic partners or licensees include:
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+ our inability to recruit and retain adequate numbers of effective sales and marketing personnel;
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+
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+ the inability of sales personnel to obtain access to or persuade adequate numbers of physicians to prescribe the products;
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+ the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines; and
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+
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+ unforeseen costs and expenses associated with creating an independent sales and marketing organization.
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+ The Company faces competition from other biotechnology and pharmaceutical companies and our operating results will suffer if we fail to compete effectively.
+ 
+ The biotechnology and pharmaceutical industries are intensely competitive and subject to rapid and significant technological change. We have competitors in a number of jurisdictions, many of which have substantially greater name recognition, commercial infrastructures and financial, technical and personnel resources than we have. Established competitors may invest heavily to quickly discover and develop novel compounds that could make these product candidates obsolete or uneconomical. Any new product that competes with an approved product may need to demonstrate compelling advantages in efficacy, cost, convenience, tolerability and safety to be commercially successful. Other competitive factors, including generic competition, could force us to lower prices or could result in reduced sales. In addition, new products developed by others could emerge as competitors. If we are not able to compete effectively against our current and future competitors, our business will not grow and our financial condition and operations will suffer. 
+ 
+ We may be involved in legal proceedings that may result in adverse outcomes.
+ 
+ We may be involved in claims, suits, government investigations, and proceedings arising in the ordinary course of our business, including actions with respect to intellectual property claims, privacy, data protection or law enforcement matters, tax matters, labor and employment claims, commercial claims, as well as stockholder derivative actions, class action lawsuits, and other matters. Such claims, suits, government investigations, and proceedings are inherently uncertain and their results cannot be predicted with certainty. Regardless of their outcomes, such legal proceedings can have an adverse impact on us because of legal costs, diversion of management and other personnel, and other factors. In addition, it is possible that a resolution of one or more such proceedings could result in liability, penalties, or sanctions, as well as judgments, consent decrees, or orders preventing us from offering certain features, functionalities, products, or services, or requiring a change in our business practices, products or technologies, which could in the future materially and adversely affect our business, operating results, and financial condition.
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+ 8
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+ Table of Contents
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+ Financial and Other Risk Factors
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+ Any market that develops in shares of our common stock will be subject to the penny stock regulations and restrictions pertaining to low priced stocks that will create a lack of liquidity and make trading difficult or impossible.
+ 
+ The trading of our securities, if any, will be in the over-the-counter market which is commonly referred to as the OTC . As a result, an investor may find it difficult to dispose of, or to obtain accurate quotations as to the price of our securities.
+ 
+ Broker-dealer practices in connection with transactions in penny stocks are regulated by penny stock rules adopted by the SEC. The term penny stock is defined in Exchange Act Rule 3a51-1 as, among other things, as having a price of less than $5.00 per share as set forth in Exchange Act Rule 3a51-(1)(d). 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 that 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, 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, and monthly account statements showing the market value of each penny stock held in the customer s account. In addition, broker-dealers who sell these securities to persons other than established customers and accredited investors 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. Consequently, these requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a security subject to the penny stock rules, and investors in our common stock may find it difficult to sell their shares.
+ 
+ Disclosure also has to be made about the risks of investing in penny stock in both public offerings and in secondary trading and 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. Additionally, 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.
+ 
+ Because of these regulations, broker-dealers may not wish to engage in the above-referenced necessary paperwork and disclosures and/or may encounter difficulties in their attempt to sell shares of our common stock, which may affect the ability of selling shareholders or other holders to sell their shares in any secondary market and have the effect of reducing the level of trading activity in any secondary market. These additional sales practice and disclosure requirements could impede the sale of our securities, if and when our securities become publicly traded. In addition, the liquidity for our securities may decrease, with a corresponding decrease in the price of our securities. Our shares, in all probability, will be subject to such penny stock rules for the foreseeable future and our shareholders will in all likelihood find it difficult to sell their securities.
+ 
+ The interests of our principal stockholders, who collectively hold 81% of our stock, may not coincide with yours and such controlling stockholder may make decisions with which you may disagree.
+ 
+ As of September 16, 2020, our principal stockholders, Applied Biosciences Corp. and Green Sky Labs, beneficially own 81% of our common stock. As a result, our principal stockholders control substantially all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. In addition, this concentration of ownership may delay or prevent a change in control of our company and make some future transactions more difficult or impossible without the support of our controlling stockholders. The interests of our controlling stockholders may not coincide with our interests or the interests of other stockholders.
+ 
+ Because we are not subject to compliance with rules requiring the adoption of certain corporate governance measures, our stockholders have limited protection against interested director transactions, conflicts of interest and similar matters.
+ 
+ The Sarbanes-Oxley Act of 2002, as well as rule changes proposed and enacted by the SEC, the New York and American Stock Exchanges and the Nasdaq Stock Market (as a result of Sarbanes-Oxley), require the implementation of various measures relating to corporate governance. These measures are designed to enhance the integrity of corporate management and the securities markets and apply to securities that are listed on those exchanges or the Nasdaq Stock Market. Because we are not presently required to comply with many of the corporate governance provisions and because we chose to avoid incurring the substantial additional costs associated with such compliance any sooner than legally required, we have not yet adopted these measures. Until we comply with such corporate governance measures, regardless of whether such compliance is required, the absence of such standards of corporate governance may leave our stockholders without protections against interested director transactions, conflicts of interest, if any, and similar matters and investors may be reluctant to provide us with funds necessary to expand our operations.
+ 
+ We may find it very difficult or be unable to attract and retain qualified officers, directors and members of board committees required to provide for our effective management as a result of Sarbanes-Oxley Act of 2002. The enactment of the Sarbanes-Oxley Act of 2002 has resulted in a series of rules and regulations by the SEC that increase responsibilities and liabilities of directors and executive officers. The perceived increased personal risk associated with these recent changes may make it more costly or deter qualified individuals from accepting these roles. 
+ 
+ If securities or industry analysts do not publish research about our business, or publish negative reports about our business, our share price and trading volume could decline.
+ 
+ The trading market for our common stock, to some extent, may at some point depend on the research and reports that securities or industry analysts publish about our business. We do not have any control over these analysts. If one or more of the analysts elect to cover us downgrade our shares or lower their opinion of our shares, our share price would likely decline. If one or more of these analysts elect to cover us and subsequently 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.
+ 
+ 
+ 9
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+ Table of Contents
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+ 
+ Future sales or potential sales of our common stock in the public market could cause our share price to decline.
+ 
+ If the existing holders of our common stock particularly our directors and officers, sell a large number of shares, they could adversely affect the market price for our common stock. Sales of substantial amounts of our common stock in the public market, or the perception that these sales could occur, could cause the market price of our common stock to decline.
+ 
+ If we are unable to implement and maintain effective internal control over financial reporting in the future, the accuracy and timeliness of our financial reporting may be adversely affected.
+ 
+ If we are unable to maintain adequate internal controls for financial reporting in the future, investor confidence in the accuracy of our financial reports may be impacted or the market price of our common stock could be negatively impacted.
+ 
+ We do not intend to pay dividends for the foreseeable future.
+ 
+ We have never declared or paid any cash dividends on our common stock and do not intend to pay any cash dividends in the foreseeable future. Any determination to pay dividends in the future will be at the discretion of our board of directors. Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments.
+ 
+ Prospective investors need to conduct an independent investment analysis and due diligence review.
+ 
+ No independent legal, accounting or business advisors have been appointed to represent the interests of prospective investors in the Company. Neither the Company nor any of its officers, directors, employees or agents makes any representation or expresses any opinion with respect to the merits of an investment in the shares of the Company, including, without limitation, the proposed value of the Company or the shares. Each prospective investor is therefore encouraged to engage independent accountants, appraisers, attorneys and other advisors to (i) conduct such due diligence review as such prospective investor may deem necessary and advisable, and (ii) provide such opinions with respect to the merits of an investment in the Company and applicable risk factors as such prospective investor may deem necessary and advisable. The Company will cooperate fully with any prospective investor who desires to conduct such an independent analysis, so long as the Company determines, in its sole discretion, that such cooperation is not unduly burdensome.
+ 
+ Prospective investors need to review individual tax consequences of an investment in the Company.
+ 
+ An investment in the Company will have certain tax consequences that will be unique to each investor, depending upon his/her/its personal tax situation, his/her/its nationality and/or place of domicile, and other unique personal circumstances. The Company cannot and does not make any representations or assurances as to individual tax consequences. Investors are encouraged to consult with their own tax advisors in connection with any investment decision with respect to the shares.
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+ 10
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+ Table of Contents

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+Risk factors Investing in our common stock involves a high degree of risk. Before making an investment decision, you should carefully consider the risks described below and in our most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well as any amendments thereto reflected in subsequent filings with the SEC, each of which are incorporated by reference in this prospectus, and all of the other information in this prospectus, including our financial statements and related notes incorporated by reference herein. If any of these risks is realized, our business, financial condition, results of operations and prospects could be materially and adversely affected. In that event, the trading price of our common stock could decline and you could lose part or all of your investment. Additional risks and uncertainties that are not yet identified or that we currently believe to be immaterial may also materially harm our business, financial condition, results of operations and prospects and could result in a complete loss of your investment. Risks related to this offering and our common stock The market price of our stock may be volatile, and you could lose all or part of your investment. The trading price of our common stock is likely to be volatile and subject to wide fluctuations in response to various factors, some of which we cannot control. In addition to the factors discussed in this "Risk Factors" section and elsewhere in this prospectus, these factors include: developments associated with our license with Amgen, including any termination or other change in our relationship with Amgen; the success of competitive products or technologies; regulatory actions with respect to our product candidate or any future product candidates or our competitors' product candidates or products; results of clinical trials of our product candidate or any future product candidates or those of our competitors; actual or anticipated changes in our growth rate relative to our competitors; announcements by us or our competitors or collaborators of significant acquisitions, strategic collaborations, joint ventures, collaborations or capital commitments; regulatory, legal or payor developments in the United States and other countries; developments or disputes concerning patent applications, issued patents or other proprietary rights; the recruitment or departure of key personnel; the level of expenses related to any of our product candidate or any future product candidates or clinical development programs; the results of our efforts to in-license or acquire additional product candidates or products; actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts; variations in our financial results or those of companies that are perceived to be similar to us; Table of Contents fluctuations in the valuation of companies perceived by investors to be comparable to us; share price and volume fluctuations attributable to inconsistent trading volume levels of our shares; announcement or expectation of additional financing efforts; sales of our common stock by us, our insiders or our other stockholders; changes in the structure of healthcare payment systems; general economic, industry and market conditions, including the coronavirus disease 2019 ("COVID-19") pandemic; market conditions in the pharmaceutical and biotechnology sectors; and general economic, industry and market conditions. In addition, the stock market in general, and the market for biotechnology companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies, including very recently in connection with the ongoing COVID-19 pandemic, which has resulted in decreased stock prices for many companies notwithstanding the lack of a fundamental change in their underlying business models or prospects. Broad market and industry factors, including potentially worsening economic conditions and other adverse effects or developments relating to the ongoing COVID-19 pandemic, may significantly reduce the market price of our common stock, regardless of our actual operating performance. The realization of any of the above risks or any of a broad range of other risks, including those described in this "Risk Factors" section, could have a dramatic and material adverse impact on the market price of our common stock. We have broad discretion in the use of the net proceeds from this offering and may not use them effectively. Our management will have broad discretion in the application of the net proceeds from this offering, and you will be relying on the judgment of our management regarding the application of these proceeds. You will not have the opportunity, as part of your investment decision, to assess whether we are using the proceeds appropriately. Our management might not apply our net proceeds in ways that ultimately increase the value of your investment. If we do not invest or apply the net proceeds from this offering in ways that enhance stockholder value, we may fail to achieve expected financial results, which could cause our stock price to decline. Because of potential volatility in our trading price and trading volume, we may incur significant costs from class action securities litigation. Holders of stock in companies that have a volatile stock price frequently bring securities class action litigation against the company that issued the stock. We may be the target of this type of litigation in the future. If any of our stockholders were to bring a lawsuit of this type against us, even if the lawsuit is without merit, we could incur substantial costs defending the lawsuit. A stockholder lawsuit could also divert the time and attention of our management. Securities litigation against us could result in substantial costs and divert our management's attention from other business concerns, which could seriously harm our business. Table of Contents We are an "emerging growth company" as defined in the JOBS Act and a "smaller reporting company" as defined in the Exchange Act and will be able to avail ourselves of reduced disclosure requirements applicable to emerging growth companies and smaller reporting companies, which could make our common stock less attractive to investors and adversely affect the market price of our common stock. For so long as we remain an "emerging growth company" as defined in the JOBS Act, we may take advantage of certain exemptions from various requirements applicable to public companies that are not "emerging growth companies" including: the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that our independent registered public accounting firm provide an attestation report on the effectiveness of our internal control over financial reporting; 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 Act and some of the disclosure requirements of the Dodd-Frank Act relating to compensation of our executive officers; and the requirement to provide detailed compensation discussion and analysis in proxy statements and reports filed under the Exchange Act and instead provide a reduced level of disclosure concerning executive compensation. 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 earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of the 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 requires the market value of our common stock that is held by non-affiliates to exceed $700.0 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. 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. We are also a "smaller reporting company" as defined in the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies until the fiscal year following the determination that our voting and non-voting common stock held by non-affiliates is more than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenues were more than $100.0 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates was more than $700.0 million measured on the last business day of our second fiscal quarter. Although we are still evaluating the JOBS Act, we currently intend to take advantage of some, but not all, of the reduced regulatory and reporting requirements that will be available to us so long as we qualify as an "emerging growth company" and "smaller reporting company." We have elected to avail ourselves of this exemption and, therefore, we are not subject to the same new or revised accounting standards as other public companies that are not emerging growth companies or smaller reporting companies. As a result, changes in rules of U.S. generally accepted accounting principles or their interpretation, the adoption of new guidance or the application of existing guidance to changes in our business could Table of Contents significantly affect our financial position and results of operations. In addition, our independent registered public accounting firm will not be required to provide an attestation report on the effectiveness of our internal control over financial reporting so long as we qualify as an "emerging growth company," which may increase the risk that material weaknesses or significant deficiencies in our internal control over financial reporting go undetected. Likewise, so long as we qualify as a "smaller reporting company" or an "emerging growth company," we may elect not to provide you with certain information, including certain financial information and certain information regarding compensation of our executive officers, that we would otherwise have been required to provide in filings we make with the SEC, which may make it more difficult for investors and securities analysts to evaluate our company. 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 and may decline. If you purchase our common stock in this offering, you may incur immediate and substantial dilution in the net tangible book value of your shares. The offering price per share in this offering may exceed the net tangible book value per share of our common stock outstanding prior to this offering. Assuming that an aggregate of 4,750,000 shares of our common stock are sold at a price of $33.02 per share, the last reported sale price of our common stock on the Nasdaq Global Select Market on July 2, 2020, for aggregate gross proceeds of $156.8 million, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, you would experience immediate dilution of $25.09 per share, representing the difference between our as adjusted net tangible book value per share as of March 31, 2020 after giving effect to this offering at the assumed offering price. The exercise of outstanding stock options and warrants would result in further dilution of your investment. This dilution would be due to the substantially lower price paid by some of our investors who purchased shares prior to this offering as compared to the price offered to the public in this offering and the exercise of stock options granted to our employees, directors and consultants. In addition, we have a significant number of stock options outstanding. The exercise of any of these outstanding options would result in further dilution. As a result of the dilution to investors purchasing shares in this offering, investors may receive significantly less than the purchase price paid in this offering, if anything, in the event of our liquidation. Further, because we expect we will need to raise additional capital to fund our future activities, we may in the future sell substantial amounts of common stock or securities convertible into or exchangeable for common stock. Future issuances of common stock or common stock-related securities, together with the exercise of outstanding stock options, if any, may result in further dilution. For a further description of the dilution that you will experience immediately after this offering, see the section titled "Dilution." We do not intend to pay dividends on our common stock so any returns will be limited to the value of our stock. 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. Any return to stockholders will therefore be limited to the appreciation of their stock. Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud. We designed our disclosure controls and procedures to reasonably assure that information we must disclose in reports we file or submit under the Exchange Act is accumulated and communicated to Table of Contents management, and recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. We believe that any disclosure controls and procedures or internal controls and procedures, no matter how well-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected. Anti-takeover provisions under our organizational documents and Delaware law could delay or prevent a change of control, which could limit the market price of our common stock and may prevent or frustrate attempts by our stockholders to replace or remove our current management. Our fourth amended and restated certificate of incorporation and second amended and restated bylaws contain provisions that could delay or prevent a change of control of our company or changes in our board of directors that our stockholders might consider favorable. Some of these provisions include: a board of directors divided into three classes serving staggered three-year terms, such that not all members of the board will be elected at one time; a prohibition on stockholder action through written consent, which requires that all stockholder actions be taken at a meeting of our stockholders; a requirement that special meetings of the stockholders may be called only by the board of directors acting pursuant to a resolution approved by the affirmative vote of a majority of the directors then in office, and special meetings of stockholders may not be called by any other person or persons; advance notice requirements for stockholder proposals and nominations for election to our board of directors; a requirement that no member of our board of directors may be removed from office by our stockholders except for cause and, in addition to any other vote required by law, upon the approval of not less than two-thirds (2/3) of all outstanding shares of our voting stock then entitled to vote in the election of directors; a requirement of approval of not less than a majority of all outstanding shares of our voting stock to amend any bylaws by stockholder action and not less than two-thirds (2/3) of all outstanding shares of our voting stock to amend specific provisions of our certificate of incorporation; and the authority of the board of directors to issue preferred stock on terms determined by the board of directors without stockholder approval, which preferred stock may include rights superior to the rights of the holders of common stock. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporate Law, which may prohibit certain business combinations with stockholders owning 15% or more of our outstanding voting stock. These anti-takeover provisions and other provisions in our fourth amended and restated certificate of incorporation and second amended and restated bylaws could make it more difficult for stockholders or potential acquirers to obtain control of our board of directors or initiate actions that are opposed by the then-current board of directors and could also delay Table of Contents or impede a merger, tender offer or proxy contest involving our company. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing or cause us to take other corporate actions you desire. Any delay or prevention of a change of control transaction or changes in our board of directors could cause the market price of our common stock to decline. Our second amended and restated bylaws 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. Our second amended and restated bylaws provide that, unless we consent in writing to an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for state law claims for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of fiduciary duty owed by any of our directors, officers, and employees to us or our stockholders, (iii) any action asserting a claim against us or any of our current or former directors, officers, or other employees or stockholders, arising out of or pursuant to any provision of the Delaware General Corporation Law, our amended and restated certificate of incorporation or our second amended and restated bylaws or (iv) any action asserting a claim that is governed by the internal affairs doctrine, in each case subject to the Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein. This exclusive forum provision will not apply to any causes of action arising under the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. In addition, our second amended and restated bylaws will provide that any person or entity purchasing or otherwise acquiring any interest in shares of our common stock is deemed to have notice of and consented to the foregoing provisions. Additionally, the forum selection clause in our second amended and restated bylaws may limit our stockholders' ability to obtain a favorable judicial forum for disputes with us. We have chosen the Court of Chancery of the State of Delaware as the exclusive forum for such causes of action because we are incorporated in the State of Delaware and we are familiar with the procedures and rules applicable in such forum. If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about our business, our stock price and trading volume could decline. The trading market for our common stock will depend, in part, on the research and reports that securities or industry analysts publish about us or our business. Securities and industry analysts may not publish an adequate amount of research on us, which may negatively impact the trading price for our stock. In addition, if one or more of the analysts who cover us downgrade our stock or publish inaccurate or unfavorable research about our business, our stock price would likely decline. Further, if our operating results fail to meet the forecasts of analysts, our stock price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and trading volume to decline. Table of Contents

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+RISK FACTORS You should carefully consider the risks described below and the risks described in our 2019 Annual Report which are incorporated by reference herein, as well as the financial or other information included in this prospectus or incorporated by reference in this prospectus, including our consolidated financial statements and the related notes, before you decide to buy our securities. The risks and uncertainties described below are not the only risks facing us. We may face additional risks and uncertainties not currently known to us or that we currently deem to be immaterial. Any of the risks described below, and any such additional risks, could materially adversely affect our business, financial condition or results of operations. In such case, you may lose all or part of your original investment. Risks Related to this Offering and the Ownership of the ADSs and Ordinary Shares Our management team will have immediate and broad discretion over the use of the net proceeds from this offering and may not use them effectively. We currently expect to use the net proceeds from this offering for working capital, general corporate purposes and pursuing strategic opportunities, including, but not limited to, business combination transactions. See "Use of Proceeds." However, our management will have broad discretion in the application of the net proceeds. Our shareholders may not agree with the manner in which our management chooses to allocate the net proceeds from this offering. The failure by our management to apply these funds effectively could have a material adverse effect on our business, financial condition and results of operation. Pending their use, we may invest the net proceeds from this offering in a manner that does not produce income. The decisions made by our management may not result in positive returns on your investment and you will not have an opportunity to evaluate the economic, financial or other information upon which our management bases its decisions. We may need additional financing in the future. We may be unable to obtain additional financing or if we obtain financing it may not be on terms favorable to us. You may lose your entire investment. We have incurred losses in each year since our inception. If we continue to use cash at our historical rates of use we will need additional financing, which we may seek through a combination of private and public equity offerings, debt financings and collaborations and strategic and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest will be diluted, and the terms of any such offerings may include liquidation or other preferences that may adversely affect the then existing shareholders rights. Debt financing, if available, would result in increased fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions such as incurring debt or making capital expenditures. If we raise additional funds through collaboration, strategic alliance or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams or products, or grant licenses on terms that are not favorable to us. You will experience immediate dilution in book value of any ADSs you purchase. Because the price per Unit being offered is substantially higher than our net tangible book value per ADS, you will suffer substantial dilution in the net tangible book value of any ADSs you purchase in this offering. After giving effect to the sale by us of Units in this offering, based on an assumed public offering price of $1.50 per Unit, which is the last reported sale price of our ADSs on Nasdaq on April 15, 2020, and after deducting underwriters discounts and commissions and offering expenses payable by us, our as adjusted net tangible book value of our ADSs would be approximately $4.7 million, or approximately $0.48 per ADS, as of December 31, 2019. If you purchase Units in this offering, you will suffer immediate and substantial dilution of our as adjusted net tangible book value of approximately $1.02 per ADS. In addition, the remaining April 2019 Financing Debentures and the Greenshoe Debentures also contain the Most Favored Nation Rights for the term of the debentures with respect to a subsequent financing on better terms such that the lenders may convert into a subsequent financing on a dollar-for-dollar basis. See "Dilution" on page 19 for a more detailed discussion of the dilution you will incur in connection with this offering. ADS representing a substantial percentage of our outstanding shares may be sold in this offering, which could cause the price of our ADSs and Ordinary Shares to decline. We may sell in this offering ADSs representing Ordinary Shares, or approximately 239%, of our outstanding Ordinary Shares as of April 15, 2020. This sale and any future sales of a substantial number of ADSs in the public market, or the perception that such sales may occur, or the exercise of a substantial number of the Warrants, could materially adversely affect the price of our ADSs and Ordinary Shares. We cannot predict the effect, if any, that market sales of those ADSs, exercises of Warrants or the availability of those ADSs for sale will have on the market price of our ADSs and Ordinary Shares. There is no public market for the Warrants and Pre-Funded Warrants being offered by us in this offering. We do not intend to apply to list the Warrants and Pre-funded Warrants on any national securities exchange or other nationally recognized trading system, including Nasdaq. Without an active market, the liquidity of the Warrants and Pre-funded Warrants will be limited. The Warrants and Pre-Funded Warrants are speculative in nature. The Warrants and Pre-Funded Warrants offered by us in this offering do not confer any rights of ownership of Ordinary Shares or ADSs on their holders, such as voting rights or the right to receive dividends, but only represent the right to acquire ADSs at a fixed price, and for a limited period of time. Specifically, commencing on the date of issuance, holders of the Warrants may exercise their right to acquire ADSs and pay an exercise price per ADS equal to 115% of the public offering price of the ADSs, subject to adjustment upon certain events, prior to five years from the date of issuance, after which date any unexercised Warrants will expire and have no further value. In addition, commencing on the date of issuance, holders of the Pre-funded Warrants may exercise their right to acquire ADSs and pay an exercise price per ADS of $0.001, subject to adjustment upon certain events. Holders of our Warrants or Pre-funded Warrants will have no rights as shareholders until such holders exercise their Warrants or Pre-funded Warrants and acquire our ADSs. Until holders of the Warrants or Pre-funded Warrants acquire our ADSs upon exercise of the Warrants or Pre-funded Warrants, holders of the Warrants or Pre-funded Warrants will have no rights with respect to our ADSs or ordinary shares underlying such warrants. Upon exercise of the Warrants or Pre-funded Warrants, the holders thereof will be entitled to exercise the rights of a holder of ADSs only as to matters for which the record date occurs after the exercise date. The exercise of the Warrants and Pre-Funded Warrants offered hereby will cause significant dilution to holders of our equity securities. Holders of the Warrants and Pre-Funded Warrants may exercise their Warrants and Pre-Funded Warrants into up to of our ADSs. In the event that the Warrants and Pre-Funded Warrants are exercised in full, the ownership interest of existing holders of our equity securities will be diluted. See "Dilution" for further information. Significant holders or beneficial holders of our Ordinary Shares may not be permitted to exercise Warrants that they hold. The terms of the Warrants being offered hereby will prohibit a holder from exercising its Warrants if doing so would result in such holder (together with such holder s affiliates and any other persons acting as a group together with such holder or any of such holder s affiliates) beneficially owning more than 4.99% of our Ordinary Shares outstanding immediately after giving effect to the exercise, provided that, at the election of a holder and notice to us, such beneficial ownership limitation may be increased or decreased, from time to time, to any other percentage not in excess of 9.99%. As a result, you may not be able to exercise your Warrants at a time when it would be financially beneficial for you to do so. We do not know whether a market for the ADSs and Ordinary Shares will be sustained or what the trading price of the ADSs will be and as a result it may be difficult for you to sell your ADSs or Ordinary Shares. Although our ADSs now trade on Nasdaq and our Ordinary Shares trade on TASE, an active trading market for the ADSs or Ordinary Shares may not be sustained. It may be difficult for you to sell your ADSs or Ordinary Shares without depressing the market price for the ADSs or Ordinary Shares. As a result of these and other factors, you may not be able to sell your ADSs, including ADSs acquired upon the exercise of the Warrants. Further, an inactive market may also impair our ability to raise capital by selling ADSs and Ordinary Shares and may impair our ability to enter into strategic partnerships or acquire companies or products by using our Ordinary Shares as consideration. The price of the ADSs may be volatile. The market price of the ADSs has fluctuated in the past. Consequently, the current market price of the ADSs may not be indicative of future market prices, and we may be unable to sustain or increase the value of your investment in the ADSs. We do not anticipate paying any dividends. No dividends have been paid on our Ordinary Shares. We do not intend to pay cash dividends on our Ordinary Shares in the foreseeable future, and anticipate that profits, if any, received from operations will be reinvested in our business. Any decision to pay dividends will depend upon our profitability at the time, cash available and other relevant factors including, without limitation, the conditions set forth in the Israeli Companies Law, or the Companies Law. You may not have the same voting rights as the holders of our Ordinary Shares and may not receive voting materials in time to be able to exercise the right to vote. Holders of the ADSs are not be able to exercise voting rights attaching to the Ordinary Shares underlying the ADSs on an individual basis. Instead, holders of the ADSs appoint the depositary or its nominee as their representative to exercise the voting rights attaching to the Ordinary Shares in the form of ADSs. Purchasers of ADSs in this offering may not receive voting materials in time to instruct the depositary to vote, and it is possible that they, or persons who hold their ADSs through brokers, dealers or other third parties, will not have the opportunity to exercise a right to vote. Furthermore, the depositary will not be liable for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of any such vote. As a result, you may not be able to exercise voting rights and may lack recourse if your ADSs are not voted as requested. Holders of ADSs may not receive the same distributions or dividends as those we make to the holders of our Ordinary Shares, and, in some limited circumstances, you may not receive dividends or other distributions on our Ordinary Shares and you may not receive any value for them, if it is illegal or impractical to make them available to you. The Depositary for the ADSs has agreed to pay to you any cash dividends or other distributions it or the custodian receives on Ordinary Shares or other deposited securities underlying the ADSs, after deducting its fees and expenses. You will receive these distributions in proportion to the number of Ordinary Shares your ADSs represent. However, the Depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any holders of ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act, but that are not properly registered or distributed under an applicable exemption from registration. In addition, conversion into U.S. dollars from foreign currency that was part of a dividend made in respect of deposited Ordinary Shares may require the approval or license of, or a filing with, any government or agency thereof, which may be unobtainable. In these cases, the Depositary may determine not to distribute such property and hold it as "deposited securities" or may seek to effect a substitute dividend or distribution, including net cash proceeds from the sale of the dividends that the Depositary deems an equitable and practicable substitute. Unless otherwise required pursuant to a specific contractual arrangement, we have no obligation to register under U.S. securities laws any ADSs, Ordinary Shares, rights or other securities received through such distributions. We also have no obligation to take any other action to permit the distribution of ADSs, Ordinary Shares, rights or anything else to holders of ADSs. In addition, the Depositary may withhold from such dividends or distributions its fees and an amount on account of taxes or other governmental charges to the extent the Depositary believes it is required to make such withholding. This means that you may not receive the same distributions or dividends as those we make to the holders of our Ordinary Shares, and, in some limited circumstances, you may not receive any value for such distributions or dividends if it is illegal or impractical for us to make them available to you. These restrictions may cause a material decline in the value of the ADSs. Holders of ADSs must act through the Depositary to exercise their rights as shareholders of our company. Holders of our ADSs do not have the same rights of our shareholders and may only exercise the voting rights with respect to the underlying Ordinary Shares in accordance with the provisions of the Deposit Agreement. Under Israeli law and our articles of association, the minimum notice period required to convene a shareholders meeting is generally no less than 35 calendar days, but in some instances, 21 or 14 calendar days, depending on the proposals on the agenda for the shareholders meeting. When a shareholder meeting is convened, holders of ADSs may not receive sufficient notice of a shareholders meeting to permit them to withdraw their Ordinary Shares to allow them to cast their vote with respect to any specific matter. In addition, the Depositary and its agents may not be able to send voting instructions to holders of ADSs or carry out their voting instructions in a timely manner. We will make all reasonable efforts to cause the Depositary to extend voting rights to holders of the ADSs in a timely manner, but we cannot assure holders that they will receive the voting materials in time to ensure that they can instruct the Depositary to vote their Ordinary Shares underlying the ADSs. Furthermore, the Depositary and its agents will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of any such vote. As a result, holders of our ADSs may not be able to exercise their right to vote and they may lack recourse if their Ordinary Shares underlying the ADSs are not voted as they requested. In addition, in the capacity as a holder of ADSs, they will not be able to call a shareholders meeting. ADSs holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could augur less favorable results to the plaintiff(s) in any such action. The deposit agreement governing the ADSs representing our Ordinary Shares provides that holders and beneficial owners of ADSs irrevocably waive the right to a trial by jury in any legal proceeding arising out of or relating to the deposit agreement or the ADSs, including claims under federal securities laws, against us or the depositary to the fullest extent permitted by applicable law. If this jury trial waiver provision is prohibited by applicable law, an action could nevertheless proceed under the terms of the deposit agreement with a jury trial. To our knowledge, the enforceability of a jury trial waiver under the federal securities laws has not been finally adjudicated by a federal court. However, we believe that a jury trial waiver provision is generally enforceable under the laws of the State of New York, which govern the deposit agreement, by a court of the State of New York or a federal court, which have non-exclusive jurisdiction over matters arising under the deposit agreement, applying such law. In determining whether to enforce a jury trial waiver provision, New York courts and federal courts will consider whether the visibility of the jury trial waiver provision within the agreement is sufficiently prominent such that a party has knowingly waived any right to trial by jury. We believe that this is the case with respect to the deposit agreement and the ADSs. In addition, New York courts will not enforce a jury trial waiver provision in order to bar a viable setoff or counterclaim sounding in fraud or one which is based upon a creditor s negligence in failing to liquidate collateral upon a guarantor s demand, or in the case of an intentional tort claim (as opposed to a contract dispute), none of which we believe are applicable in the case of the deposit agreement or the ADSs. No condition, stipulation or provision of the deposit agreement or ADSs serves as a waiver by any holder or beneficial owner of ADSs or by us or the Depositary of compliance with any provision of the federal securities laws. If you or any other holder or beneficial owner of ADSs brings a claim against us or the Depositary in connection with matters arising under the deposit agreement or the ADSs, you or such other holder or beneficial owner may not be entitled to a jury trial with respect to such claims, which may have the effect of limiting and discouraging lawsuits against us and / or the Depositary. If a lawsuit is brought against us and / or the Depositary under the deposit agreement, it may be heard only by a judge or justice of the applicable trial court, which would be conducted according to different civil procedures and may augur different results than a trial by jury would have had, including results that could be less favorable to the plaintiff(s) in any such action, depending on, among other things, the nature of the claims, the judge or justice hearing such claims, and the venue of the hearing. If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they adversely change their recommendations or publish negative reports regarding our business or our shares, our share price and trading volume could decline. The trading market for the ADSs or Ordinary Shares will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market or our competitors. We do not have any control over these analysts and we cannot provide any assurance that analysts will cover us or provide favorable coverage. If any of the analysts who may cover us adversely change their recommendation regarding our shares, or provide more favorable relative recommendations about our competitors, our share price would likely decline. If any analyst who may cover us were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our share price or trading volume to decline. Risks Related to Our Business We are in breach of certain provisions of the Share and Asset Purchase Agreement with NetNut. On April 4, 2019, we entered into a share and asset purchase agreement, or the Share and Asset Purchase Agreement, with NetNut, pursuant to which we acquired 100% of the fully diluted share capital of NetNut. In connection with the Share and Asset Purchase Agreement we were required to transfer $300,000 to NetNut prior to June 15, 2019, for the purposes of its business and activities as a wholly-owned subsidiary of the Company. As of December 31, 2019, we transferred $175,000. Currently, we accounted for earnout payment based on the provisions of the Share and Asset Purchase Agreement, as well as a provision for a potential compensation to NetNut s former shareholders due to the breach. If the abovementioned breach leads to litigation, there can be no assurance that we will prevail in any legal proceedings instituted by former shareholders of NetNut, or that such proceedings will not have a material adverse effect on our business, financial condition or results of operations. We face business disruption and related risks resulting from the recent outbreak of the novel coronavirus 2019 (COVID-19), which could have a material adverse effect on our business and results of operations. Our operations and business have been disrupted and could be materially adversely affected by the recent outbreak of COVID-19. The spread of COVID-19 from China to other countries has resulted in the Director General of the World Health Organization declaring the outbreak of COVID-19 as a Public Health Emergency of International Concern (PHEIC), based on the advice of the Emergency Committee under the International Health Regulations (2005), and the Centers for Disease Control and Prevention in the U.S. issued a warning on February 25, 2020 regarding the likely spread of COVID-19 to the U.S. International stock markets have begun to reflect the uncertainty associated with the slow-down in the Chinese economy and the reduced levels of international travel experienced since the beginning of January and the significant decline in the Dow Industrial Average at the end of February and through March 2020 was largely attributed to the effects of COVID-19. The COVID-19 may also adversely affect our ability to conduct our business effectively due to disruptions to our capabilities, availability and productivity of personnel, while we simultaneously attempt to comply with rapidly changing restrictions, such as travel restrictions, curfews and others. In particular, following recommendations from the Israeli Ministry of Health and the Ministry of Finance, on March 16, 2020, the Israeli prime minister announced new and more restrictive instructions under which businesses in the private sector must reduce their onsite workforce by 85%. Additional instructions require "non-essential" businesses to shut down, and the public sector to further reduce its workforce. During March 2020, emergency regulations enacted by the Israeli authorities restricted outdoor activities of all citizens. Currently travel to and from work is still permitted, however the authorities may place additional, more restrictive measures on businesses and individuals. Though we may still operate under such regulations, any additional actions taken by the Israeli government could further limit that ability which may have a material adverse effect on our operations and financial results. A significant reduction in our workforce and our compliance with instructions imposed by Israeli authorities may harm our ability to continue operating our business and materially and adversely affect our operations and financial condition. Further, we cannot assure you that we will be designated an "essential business", as defined under the new instructions, and moreover, we cannot foresee whether the Israeli authorities will impose further restrictive instructions, which if implemented may lead to significant changes and potentially a shutdown of our operations. Authorities around the world have and may continue implementing similar restrictions on business and individuals in their jurisdictions. We are still assessing our business operations and system supports and the impact COVID-19 may have on our results and financial condition. To date, we have taken action to reduce our operating expenses in the short term, but there can be no assurance that this analysis or remedial measures will enable us to avoid part or all of any impact from the spread of COVID-19 or its consequences, including downturns in business sentiment generally or in our sector in particular.

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+RISK FACTORS An investment in our Ordinary Shares involves a high degree of risk. Before deciding whether to invest in our Ordinary Shares, you should consider carefully the risks described below, together with all of the other information set forth in this prospectus, including the section titled "Management s Discussion and Analysis of Financial Condition and Results of Operation" and our consolidated financial statements and related notes. If any of these risks actually occurs, our business, financial condition, results of operations or cash flow could be materially and adversely affected, which could cause the trading price of our Ordinary Shares to decline, resulting in a loss of all or part of your investment. The risks described below are not the only ones that we face. Additional risks not presently known to us or that we currently deem immaterial may also affect our business. You should only consider investing in our Ordinary Shares if you can bear the risk of loss of your entire investment. Risks Related to Our Business Changes in capital markets, M&A activity, legal or regulatory requirements, general economic conditions and monetary or geopolitical disruptions, as well as other factors beyond our control, could reduce demand for our practice offerings or services, in which case our revenues and profitability could decline. Different factors outside of our control could affect demand for a segment s practices and our services. These include: fluctuations in U.S. and/or global economies, including economic downturns or recessions and the strength and rate of any general economic recoveries; level of leverage incurred by countries or businesses; M&A activity; frequency and complexity of significant commercial litigation; overexpansion by businesses causing financial difficulties; business and management crises, including the occurrence of alleged fraudulent or illegal activities and practices; new and complex laws and regulations, repeals of existing laws and regulations or changes of enforcement of laws, rules and regulations, including antitrust/competition reviews of proposed M&A transactions; other economic, geographic or political factors; and general business conditions. We are not able to predict the positive or negative effects that future events or changes to the U.S. or global economies will have on our business or the business of any particular segment. Fluctuations, changes and disruptions in financial, credit, M&A and other markets, political instability and general business factors could impact various segments operations and could affect such operations differently. Changes to factors described above, as well as other events, including by way of example, contractions of regional economies, or the economy of a particular country, trade restrictions, monetary systems, banking, real estate and retail or other industries; debt or credit difficulties or defaults by businesses or countries; new, repeals of or changes to laws and regulations, including changes to the bankruptcy and competition laws of the U.S. or other countries; tort reform; banking reform; a decline in the implementation or adoption of new laws or regulation, or in government enforcement, litigation or monetary damages or remedies that are sought; or political instability may have adverse effects on one or more of our segments or service, practice or industry offerings. Our revenues, operating income and cash flows are likely to fluctuate. We experience fluctuations in our revenues and cost structure and the resulting operating income and cash flows and expect that this will continue to occur in the future. We may experience fluctuations in our annual and quarterly financial results, including revenues, operating income and earnings per share, for reasons that may include: (i) the types and complexity, number, size, timing and duration of client engagements; (ii) the timing of revenue recognition under U.S. GAAP; (iii) the utilization of revenue-generating professionals, including the ability to adjust staffing levels up or down to accommodate the business and prospects of the applicable segment and practice; (iv) the time it takes before a new hire becomes profitable; (v) the geographic locations of our clients or the locations where services are rendered; (vi) billing rates and fee arrangements, including the opportunity and ability to successfully reach milestones and complete, and collect success fees and other outcome-contingent or performance-based fees; (vii) the length of billing and collection cycles and changes in amounts that may become uncollectible; (viii) changes in the frequency and complexity of government regulatory and enforcement activities; (ix) business and asset acquisitions; (x) fluctuations in the exchange rates of various currencies against the U.S. dollar; (xi) fee adjustments upon the renewal of expired service contracts or acceptance of new clients due to the adjusted scope per our refined business strategy, and (xii) economic factors beyond our control. The results of different segments and practices may be affected differently by the above factors. Certain of our practices, particularly our taxation and accounting practices, tend to experience their fluctuations subject to regulatory enforcement or tax compliance requirements. The positive effects of certain events or factors on certain segments and practices may not be sufficient to overcome the negative effects of those same events or factors on other parts of our business. In addition, our mix of practice offerings adds complexity to the task of predicting revenues and results of operations and managing our staffing levels and expenditures across changing business cycles and economic environments. Our results are subject to seasonal and other similar factors. While we assess our annual guidance at the end of each quarter and update such guidance when we think it is appropriate, unanticipated future volatility can cause actual results to vary significantly from our guidance, even where that guidance reflects a range of possible results and has been updated to take account of partial-year results. If we do not effectively manage the utilization of our professionals or billable rates, our financial results could decline. Our failure to manage the utilization of our professionals, or maintain or increase the hourly rates we charge our clients for our services, could result in adverse consequences, such as non- or lower-revenue-generating professionals, increased employee turnover, fixed compensation expenses in periods of declining revenues, the inability to appropriately staff engagements (including adding or reducing staff during periods of increased or decreased demand for our services), or special charges associated with reductions in staff or operations. Reductions in workforce or increases of billable rates will not necessarily lead to savings. In such events, our financial results may decline or be adversely impacted. A number of factors affect the utilization of our professionals. Some of these factors we cannot predict with certainty, including general economic and financial market conditions; the complexity, number, type, size and timing of client engagements; the level of demand for our services; appropriate professional staffing levels, in light of changing client demands and market conditions; utilization of professionals across segments and geographic regions; and competition. In addition, our global expansion into or within locations where we are not well-known or where demand for our services is not well-developed could also contribute to low or lower utilization rates in certain locations. The Company may enter into engagements such as fixed fee and time and materials with caps. Failure to effectively manage professional hours and other aspects of alternative fee engagements may result in the costs of providing such services exceeding the fees collected by the Company. Failure to successfully complete or reach milestones with respect to contingent fee or success fee assignments may also lead to lower revenues or the costs of providing services under those types of arrangements may exceed the fees collected by the Company. Our business may face risks of clients default on payment. Some of our clients are businesses experiencing or being exposed to potential financial distress, facing complex challenges, being involved in litigation or regulatory proceedings, or facing foreclosure of collateral or liquidation of assets. The aforementioned situations may become increasingly prevalent among our existing and potential clients in light of the current uncertain micro-economic conditions and/or potential economic slowdowns or recession caused by COVID-19. Such clients may not have sufficient funds to continue operations or to pay for our services. We do not always receive retainers before we begin performing services. In the cases where we have received retainers, we cannot assure that the retainers will adequately cover our fees for the services we perform. We generally offer a fixed fee arrangement on our fees. Our failure to manage the engagements efficiently or collect the fees could expose the Company to a greater risk of loss on such engagements. Providing services to clients that do not correlate to actual costs incurred may negatively impact our profitability on such engagements and adversely affect the financial results of our business. We treat the outstanding fees that we are unable to collect based on objective evidence as write-offs and will not adjust or accept renegotiation. Our fees set forth in existing service contracts are not negotiable and may not be adjusted even if fee collection is not probable. Management periodically monitors the outstanding fees, making an effort to timely collect outstanding fees and reviews the adequacy of write-offs to minimize the impact of the potential payment defaults. We may not manage our growth effectively, and our profitability may suffer. We experience fluctuations in growth of our different segments, practices or services, including periods of rapid or declining growth. Periods of rapid expansion may strain our management team or human resources and information systems. To manage growth successfully, we may need to add qualified managers and employees and periodically update our operating, financial and other systems, as well as our internal procedures and controls. We also must effectively motivate, train and manage a larger professional staff. If we fail to add or retain qualified managers, employees and contractors when needed, estimate costs, or manage our growth effectively, our business, financial results and financial condition may suffer. We cannot assure that we can successfully manage growth and being profitable as we grow. In periods of declining growth, underutilized employees and contractors may result in expenses and costs being a greater percentage of revenues. In such situations, we will have to weigh the benefits of decreasing our workforce or limiting our service offerings and saving costs against the detriment that the Company could experience from losing valued professionals and their industry expertise and clients. Our reputation and brand recognition is crucial to our business. Any harm to our reputation or failure to enhance our brand recognition may materially and adversely affect our business, financial condition and results of operations. Our reputation and brand recognition, which depends on earning and maintaining the trust and confidence of our current or potential clients, is critical to our business. Our reputation and brand is vulnerable to many threats that can be difficult or impossible to control, and costly or impossible to remediate. Regulatory inquiries or investigations, lawsuits initiated by clients or other third parties, employee misconduct, perceptions of conflicts of interest and rumors, among other things, could substantially damage our reputation, even if they are baseless or satisfactorily addressed. Moreover, any negative media publicity about our industry in general or product or service quality problems of other firms in the industry, including our competitors, may also negatively impact our reputation and brand. If we are unable to maintain a good reputation or further enhance our brand recognition, our ability to attract and retain clients and key employees could be harmed and, as a result, our business and revenues would be materially and adversely affected. Our business is subject to risks related to lawsuits and other claims brought by our clients. We may be subject to lawsuits and other claims in the ordinary course of our business. Actions brought against us may result in settlements, awards, injunctions, fines, penalties or other results adverse to us including harm to our reputation. Even if we are successful in defending against these actions, the defense of such matters may result in our incurring significant expenses. Predicting the outcome of such matters is inherently difficult, particularly where claimants seek substantial or unspecified damages, or when arbitration or legal proceedings are at an early stage. A substantial judgment, award, settlement, fine, or penalty could be materially adverse to our operating results or cash flows for a particular future period, depending on our results for that period. We may not be able to grow at the historical rate of growth, and if we fail to manage our growth effectively, our business may be materially and adversely affected. We anticipate significant continuing growth in the foreseeable future. However, we cannot assure you that we will grow at the historical rate of growth. Our rapid growth has placed, and will continue to place, a significant strain on our management, personnel, systems and resources. To accommodate our growth, we will need to implement a variety of new and upgraded operational and systems, procedures and controls, including the improvement of our accounting and other internal management systems. We also will need to recruit, train, manage and motivate employees and manage our relationships with an increasing number of clients. Moreover, as we introduce new services or enter into new markets, we may face unfamiliar market and operational risks and challenges which we may fail to successfully address. We may be unable to manage our growth effectively, which could have a material adverse effect on our business. Our limited operating history may not provide an adequate basis to judge our future prospects and results of operations. Our limited operating history makes the prediction of future results of operations difficult, and therefore, past results of operations achieved by us should not be taken as indicative of the rate of growth, if any, that can be expected in the future. As a result, you should consider our future prospects in light of the risks and uncertainties experienced by early stage companies in a rapidly evolving and increasingly competitive market in Hong Kong. We may not be able to obtain or maintain all necessary licenses, permits and approvals and to make all necessary registrations and filings for our activities in multiple jurisdictions and related to residents therein. We operate in a heavily-regulated industry which requires various licenses, permits and approvals in different jurisdictions to conduct our businesses. Our customers include people who live in jurisdictions where we do not have licenses issued by the local regulatory bodies. It is possible that authorities in those jurisdictions may take the position that we are required to obtain licenses or otherwise comply with laws and regulations which we believe are not required or applicable to our business activities. If we fail to comply with the regulatory requirements, we may encounter the risk of being disqualified for our existing businesses or being rejected for renewal of our qualifications upon expiry by the regulatory authorities as well as other penalties, fines or sanctions. In addition, in respect of any new business that we may contemplate, we may not be able to obtain the relevant approvals for developing such new business if we fail to comply with the relevant regulations and regulatory requirements. As a result, we may fail to develop new business as planned, or we may fall behind our competitors in such businesses. A failure in our information technology, or IT, systems could cause interruptions in our services, undermine the responsiveness of our services, disrupt our business, damage our reputation and cause losses. Our IT systems support all phases of our operations, including marketing, customer development and the provision of customer support services, and are an essential part of our technology infrastructure. If our systems fail to perform, we could experience disruptions in operations, slower response time or decreased customer satisfaction. We must process, record and monitor a large number of transactions and our operations are highly dependent on the integrity of our technology systems and our ability to make timely enhancements and additions to our systems. System interruptions, errors or downtime can result from a variety of causes, including changes in customer usage patterns, technological failures, changes to our systems, linkages with third-party systems and power failures. Our systems are vulnerable to disruptions from human error, execution errors, errors in models such as those used for risk management and compliance, employee misconduct, unauthorized trading, external fraud, computer viruses, distributed denial of service attacks, computer viruses or cyberattacks, terrorist attacks, natural disaster, power outage, capacity constraints, software flaws, events impacting key business partners and vendors, and similar events. It could take an extended period of time to restore full functionality to our technology or other operating systems in the event of an unforeseen occurrence, which could affect our ability to process and settle customer transactions. Moreover, instances of fraud or other misconduct might also negatively impact our reputation and customer confidence in us, in addition to any direct losses that might result from such instances. Despite our efforts to identify areas of risk, oversee operational areas involving risks, and implement policies and procedures designed to manage these risks, there can be no assurance that we will not suffer unexpected losses, reputational damage or regulatory actions due to technology or other operational failures or errors, including those of our vendors or other third parties. We may be subject to intellectual property infringement claims, which may be expensive to defend and may disrupt our business and operations. We cannot be certain that our operations or any aspects of our business do not or will not infringe upon or otherwise violate trademarks, copyrights, know-how or other intellectual property rights held by third parties. We may be from time to time in the future subject to legal proceedings and claims relating to the intellectual property rights of others. In addition, there may be third-party trademarks, copyrights, know-how or other intellectual property rights that are infringed by our products, services or other aspects of our business without our awareness. Holders of such intellectual property rights may seek to enforce such rights against us in Hong Kong, the United States or other jurisdictions. If any third-party infringement claims are brought against us, we may be forced to divert some resources from our business and operations to defend against these claims, regardless of their merits. Additionally, the application and interpretation of Hong Kong s intellectual property right laws and the procedures and standards for granting trademarks, copyrights, know-how or other intellectual property rights in Hong Kong are still evolving and are uncertain, and we cannot ensure that Hong Kong courts or regulatory authorities would agree with our analysis. If we were found to be in violation of the intellectual property rights of others, we may be subject to liability for our infringement activities or may be prohibited from using such intellectual property, and we may incur licensing fees or be forced to develop alternatives of our own. As a result, our business and operating results may be materially and adversely affected. Increases in labor costs in the Hong Kong may adversely affect our business and results of operations. The economy in Hong Kong has experienced increases in inflation and labor costs in recent years. As a result, average wages in Hong Kong are expected to continue to increase. In addition, we are required by Hong Kong laws and regulations to maintain various statutory employee benefits, including mandatory provident fund scheme and work-related injury insurance, to provide statutorily required paid sick leave, annual leave and maternity leave, and pay severance payments or long service payments. The relevant government agencies may examine whether an employer has complied with such requirements, and those employers who fail to comply commit a criminal offence and may be subject to fines and/or imprisonment. We expect that our labor costs, including wages and employee benefits, will continue to increase. Unless we are able to control our labor costs or pass on these increased labor costs to our users by increasing the fees of our services, our financial condition and operating results may be adversely affected. We do not have any business insurance coverage. Currently, while we do maintain worker s injury insurance, we do not have any business liability or disruption insurance to cover our operations. We have determined that the costs of insuring for these risks and the difficulties associated with acquiring such insurance on commercially reasonable terms make it impractical for us to have such insurance. Any uninsured business disruptions may result in our incurring substantial costs and the diversion of resources, which could have an adverse effect on our results of operations and financial condition. Our principal shareholders have substantial influence over our company and their interests may not be aligned with the interests of our other shareholders Mr. Poon Tak Ching Anthony, our Chief Executive Officer, is currently the beneficial owner of 4,080,000 Ordinary Shares or 42.5% of our outstanding shares, which are directly held by APTC Holdings Limited, an entity 100% owned by Mr. Poon. Mr. Poon will own more than 32.69% of our Ordinary Shares following the offering. Mr. Yip Wai Man Raymond, our Chief Financial Officer and Director, is currently the beneficial owner of 4,080,000 Ordinary Shares or 42.5% of our outstanding shares, which are directly held by Wing Sang Holdings Limited, an entity 100% owned by Mr. Yip. Mr. Yip will own more than 32.69% of our Ordinary Shares following the offering. As a result, Mr. Poon and Mr. Yip will be able to exert significant voting influence over our business, including decisions regarding mergers, consolidations and the sale of all or substantially all of our assets, election of directors and other significant corporate actions. These actions may be taken even if they are opposed by our other shareholders, including those who purchased Ordinary Shares in our initial public offering. Moreover, this concentration of ownership may discourage, delay or prevent a change in control of our company, which could deprive our shareholders of an opportunity to receive a premium for their shares as part of a sale of our Company and might reduce the price of our Ordinary Shares. We face risks related to natural disasters, health epidemics and other outbreaks, which could significantly disrupt our operations. We are vulnerable to natural disasters and other calamities. Fire, floods, typhoons, earthquakes, power loss, telecommunications failures, break-ins, war, riots, terrorist attacks or similar events may give rise to server interruptions, breakdowns, system failures, technology platform failures or internet failures, which could cause the loss or corruption of data or malfunctions of software or hardware as well as adversely affect our ability to provide products and services on our platform. In addition, our results of operations could be adversely affected to the extent that any health epidemic harms the Hong Kong economy in general. A prolonged outbreak of any illnesses or other adverse public health developments in Hong Kong or elsewhere in the world could have a material adverse effect on our business operations. Such outbreaks could severely disrupt our operations and adversely affect our business, financial condition and results of operations. Our headquarter is located in Hong Kong, where our management and employees currently reside. Consequently, if any natural disasters, health epidemics or other public safety concerns were to affect Hong Kong or cause travel restriction in or out of Hong Kong or its surrounding areas, our operation may experience material disruptions, which may materially and adversely affect our business, financial condition and results of operations. Our business operations have been and may continue to be materially and adversely affected by the outbreak of the coronavirus (COVID-19). An outbreak of respiratory illness caused by the novel coronavirus, commonly referred as "COVID-19" emerged in late 2019 and has spread globally. The COVID-19 is considered to be highly contagious and poses a serious public health threat. The World Health Organization labeled the COVID-19 outbreak as a pandemic on March 11, 2020, given its threat beyond a public health emergency of international concern the organization had declared on January 30, 2020. Our clients as well as revenues generation are mainly from China (including Hong Kong). The epidemic has resulted in lockdown of cities, travel restrictions, and the temporary closure of stores and facilities in China during the past few months. The negative impacts of the COVID-19 outbreak on our business include: The uncertain economic conditions may refrain clients from engaging our corporate services (including accounting and consulting services or even company secretarial services). Quarantines impeded our ability to contact existing and new clients. Travel restrictions limited other parties ability to visit and meet us in person. Although most communication could be achieved via video calls, this form of remote communication could be less effective in building trust and communicating with existing and new clients. The operations of our clients have been and could continue to be negatively impacted by the epidemic, which may in turn adversely impact their business performance, and result in a decreased demand for our all line of services. The above adverse impacts might be mitigated, as quarantines across China have been largely lifted as of late March and the Chinese government has rolled out an array of favorable fiscal measures. We are unable to accurately predict the impact that the COVID-19 will have due to various uncertainties, including the ultimate geographic spread of the virus, the severity of the disease, the duration of the outbreak globally, and effectiveness of the actions that may be taken by governmental authorities. Failure to comply with laws and regulations applicable to our business could subject us to fines and penalties and could also cause us to lose customers or otherwise harm our business. Our business is subject to regulation by various governmental agencies in Hong Kong, including agencies responsible for monitoring and enforcing compliance with various legal obligations, such as privacy and data protection-related laws and regulations, intellectual property laws, employment and labor laws, workplace safety, governmental trade laws, import and export controls, anti-corruption and anti-bribery laws, and tax laws and regulations. In certain jurisdictions, these regulatory requirements may be more stringent than in Hong Kong. These laws and regulations impose added costs on our business. Noncompliance with applicable regulations or requirements could subject us to: investigations, enforcement actions, and sanctions; mandatory changes to our network and products; disgorgement of profits, fines, and damages; civil and criminal penalties or injunctions; claims for damages by our customers or channel partners; termination of contracts; failure to obtain, maintain or renew certain licenses, approvals, permits, registrations or filings necessary to conduct our operations; and temporary or permanent debarment from sales to public service organizations. If any governmental sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, results of operations, and financial condition could be adversely affected. In addition, responding to any action will likely result in a significant diversion of our management s attention and resources and an increase in professional fees. Enforcement actions and sanctions could materially harm our business, results of operations, and financial condition. Any reviews by regulatory agencies or legislatures may result in substantial regulatory fines, changes to our business practices, and other penalties, which could negatively affect our business and results of operations. Changes in social, political, and regulatory conditions or in laws and policies governing a wide range of topics may cause us to change our business practices. Further, our expansion into a variety of new fields also could raise a number of new regulatory issues. These factors could negatively affect our business and results of operations in material ways. Moreover, we are exposed to the risk of misconduct, errors and failure to functions by our management, employees and parties that we collaborate with, who may from time to time be subject to litigation and regulatory investigations and proceedings or otherwise face potential liability and penalties in relation to noncompliance with applicable laws and regulations, which could harm our reputation and business. If we become directly subject to the recent scrutiny, criticism and negative publicity involving U.S.-listed Chinese companies, we may have to expend significant resources to investigate and resolve the matter which could harm our business operations, stock price and reputation and could result in a loss of your investment in our stock, especially if such matter cannot be addressed and resolved favorably. Recently, U.S. public companies that have substantially all of their operations in China, have been the subject of intense scrutiny, criticism and negative publicity by investors, financial commentators and regulatory agencies, such as the SEC. Much of the scrutiny, criticism and negative publicity has centered around financial and accounting irregularities and mistakes, a lack of effective internal controls over financial accounting, inadequate corporate governance policies or a lack of adherence thereto and, in many cases, allegations of fraud. As a result of the scrutiny, criticism and negative publicity, the publicly traded stock of many U.S. listed Chinese companies has sharply decreased in value and, in some cases, has become virtually worthless. Many of these companies are now subject to shareholder lawsuits and SEC enforcement actions and are conducting internal and external investigations into the allegations. It is not clear what effect this sector-wide scrutiny, criticism and negative publicity will have on our Company, our business and our stock price. Although substantially all of our operations are based in Hong Kong, significant portion of our clients are based in mainland China. If we become the subject of any unfavorable allegations, whether such allegations are proven to be true or untrue, we will have to expend significant resources to investigate such allegations and/or defend our company. This situation will be costly and time consuming and distract our management from growing our company. Risks Related to Our People Our failure to recruit and retain qualified professionals could negatively affect our financial results and our ability to staff client engagements, maintain relationships with clients and drive future growth. We deliver sophisticated professional services to our clients. Our success is dependent, in large part, on our ability to keep our supply of skills and resources in balance with client demand around the world. To attract and retain clients, we need to demonstrate professional acumen and build trust and strong relationships. Our professionals have highly specialized skills. They also develop strong bonds with the clients they serve. Our continued success depends upon our ability to attract and retain professionals who have expertise, a good reputation and client relationships critical to maintaining and developing our business. We face intense competition in recruiting and retaining highly qualified professionals to drive our organic growth and support expansion of our services and geographic footprint. We cannot assure that we will be able to attract or retain qualified professionals to maintain or expand our business. If we are unable to successfully integrate, motivate and retain qualified professionals, our ability to continue to secure work in may suffer. Moreover, competition has caused our costs of retaining and hiring qualified professionals to increase, a trend that could continue and could adversely affect our operating margins and financial results. Despite fixed terms or renewal provisions, we could face retention issues during and at the end of the terms of those agreements and large compensation expenses to secure extensions. There is no assurance we will enter into new or extend employment agreements with our professionals. We monitor contract expirations carefully to commence dialogues with professionals regarding their employment in advance of the actual contract expiration dates. Our goal is to renew employment agreements when advisable and to stagger the expirations of the agreements if possible. Because of the concentration of contract expirations in certain years, we may experience high turnover or other adverse consequences, such as higher costs, loss of clients and engagements or difficulty in staffing engagements, if we are unable to renegotiate employment arrangements or the costs of retaining qualified professionals become too high. The implementation of new compensation arrangements may result in the concentration of potential turnover in future years. Headcount reductions to manage costs during periods of reduced demand for our services could have negative impacts on our business over the longer term. Our people are our primary assets and account for the majority of our expenses. During periods of reduced demand for our services, or in response to unfavorable changes in market or industry conditions, we may seek to align our cost structure more closely with our revenues and increase our utilization rates by reducing headcount and eliminating or consolidating underused locations in affected business segments or practices. Following such actions, in response to subsequent increases in demand for our services, including as a result of favorable changes in market or industry conditions, we may need to hire, train and integrate additional qualified and skilled personnel and may be unable to do so to meet our needs or our clients demands on a timely basis. If we are unable to manage staffing levels on a timely basis in light of changing opportunities or conditions, our ability to accept or service business opportunities and client engagements, take advantage of positive market and industry developments, and realize future growth could be negatively affected, which could negatively impact our revenues and profitability. In addition, while increased utilization resulting from headcount reductions may enhance our profitability in the near term, it could negatively affect our business over the longer term by limiting the time our professionals have to seek out and cultivate new client relationships and win new projects. We rely heavily on our executive officers and the heads of our operating segments and industry leaders for the success of our business. We rely heavily on our executive officers and the heads of our operating segments, regional locations and industries to manage our operations. Given the highly specialized nature of our services and the scale of our operations, our executive officers and the heads of our operating segments and industry and regional leaders must have a thorough understanding of our service offerings, as well as the skills and experience necessary to manage a large organization in diverse geographic locations. We are unable to predict with certainty the impact that leadership transitions may have on our business operations, prospects, financial results, client relationships, or employee retention or morale. Professionals may leave our Company to form or join competitors, and we may not have, or may choose not to pursue, legal recourse against such professionals. Our professionals typically have close relationships with the clients they serve, based on their expertise and bonds of personal trust and confidence. Therefore, the barriers to our professionals pursuing independent business opportunities or joining our competitors should be considered low. Although our clients generally contract for services with us as a company, and not with an individual professional, in the event that a professional leaves, such clients may decide that they prefer to continue working with a specific professional rather than with our Company. In the event an employee departs and acts in a way that we believe violates his or her non-competition or non-solicitation agreement, we will consider any legal remedies we may have against such person on a case-by-case basis. We may decide that preserving cooperation and a professional relationship with a former employee or client, or other concerns, outweighs the benefits of any possible legal recourse. We may also decide that the likelihood of success does not justify the costs of pursuing a legal remedy. Therefore, there may be times we may decide not to pursue legal action, even if it is available to us. Risks Related to Our Client Relationships If we are unable to accept client engagements due to real or perceived relationship issues, our revenues, growth, client engagements and prospects may be negatively affected. Our inability to accept engagements from existing or prospective clients, represent multiple clients in connection with the same or competitive engagements, or any requirement that we resign from a client engagement may negatively impact our revenues, growth and financial results. While we follow internal practices to assess real and potential issues in the relationships between and among our clients, engagements, segments, practices and professionals, such concerns cannot always be avoided. For example, we generally will not represent parties adverse to each other in the same matter. We will consider future strategic or opportunistic acquisitions. In those cases, some or all of the following risks could be applicable. Acquisitions may require us to resign from a client engagement because of relationship issues that are not currently identifiable. In addition, businesses that we acquire or employees who join us may not be free to accept engagements they could have accepted prior to our acquisition or hire because of relationship issues. Claims involving our services could harm our overall professional reputation and our ability to compete and attract business or hire or retain qualified professionals. Our engagements involve matters that may result in a severe impact on a client s business, cause the client a substantial monetary loss or prevent the client from pursuing business opportunities. Our ability to attract new clients and generate new and repeat engagements or hire professionals depends upon our ability to maintain a high degree of client satisfaction, as well as our reputation among industry professionals. As a result, any claims against us involving the quality of our services may be more damaging than similar claims against businesses in other industries. We may incur significant costs and may lose engagements as a result of claims by our clients regarding our services. Many of our engagements involve complex analysis and the exercise of professional judgment, including litigation and governmental investigatory matters where we act as experts. Therefore, we are subject to the risk of professional and other liabilities. Damages and/or expenses resulting from any successful claim against us, for indemnity or otherwise, in excess of the amount of insurance coverage will be borne directly by us and could harm our profitability and financial resources. Any claim by a client or third party against us could expose us to reputational issues that adversely affect our ability to attract new or maintain existing engagements or clients or qualified professionals or other employees, consultants or contractors. We may not have, or may choose not to pursue, legal remedies against clients that terminate their engagements. The engagement letters that we typically have with clients do not obligate them to continue to use our services and permit them to terminate the engagement without penalty at any time. Even if the termination of an ongoing engagement by a client could constitute a breach of the client s engagement agreement, we may decide that preserving the overall client relationship is more important than seeking damages for the breach and, for that or other reasons, decide not to pursue any legal remedies against a client, even though such remedies may be available to us. We make the determination whether to pursue any legal actions against a client on a case-by-case basis. Compromise of confidential or proprietary information could damage our reputation, harm our businesses and adversely impact our financial results. The Company s own confidential and proprietary information and that of our clients could be compromised, whether intentionally or unintentionally, by our employees, consultants or vendors. A compromise of the security of our information technology systems leading to theft or misuse of our own or our clients proprietary or confidential information, or the public disclosure or use of such information by others, could result in losses, third-party claims against us and reputational harm, including the loss of clients. The theft or compromise of our or our clients information could negatively impact our reputation, financial results and prospects. In addition, if our reputation is damaged due to a data security breach, our ability to attract new engagements and clients may be impaired or we may be subjected to damages or penalties, which could negatively impact our businesses, financial results or financial condition. Risks Related to Competition If we fail to compete effectively, we may miss new business opportunities or lose existing clients, and our revenues and profitability may decline. The market for some of our consulting services is highly competitive. We do not compete against the same companies across all of our segments, practices, services, industries or geographic regions. Instead, we compete with different companies or businesses of companies depending on the particular nature of a proposed engagement and the types of requested service(s) and the location of the client or delivery of the service(s). Our operations are highly competitive. Our competitors include large organizations, such as the global accounting firms, global law firms and the large management and financial consulting companies that offer a broad range of consulting services; investment banking firms; IT consulting and software companies, which offer niche services that are the same or similar to services or products offered by one or more of our segments; and small firms and independent contractors that focus on specialized services. Some of our competitors have significantly more financial resources, a larger national or international presence, larger professional staffs and greater brand recognition than we do. Some have lower overhead and other costs and can compete through lower cost-service offerings. Since our business depends in large part on professional relationships, our business has low barriers to entry for professionals electing to start their own firms or work independently. In addition, it is relatively easy for professionals to change employers. If we cannot compete effectively or if the costs of competing, including the costs of hiring and retaining professionals, become too expensive, our revenue growth and financial results could be negatively affected and may differ materially from our expectations. We may face competition from parties who sell us their businesses and from professionals who cease working for us. We will consider future strategic or opportunistic acquisitions. In those cases, some or all of the following risks could be applicable. In connection with our acquisitions, we generally obtain non-solicitation agreements from the professionals we hire, as well as non-competition agreements from senior managers and professionals. We cannot assure that one or more of the parties from whom we acquire a business or assets, or who do not join us or leave our employment, will not compete with us or solicit our employees or clients in the future. States and foreign jurisdictions may interpret restrictions on competition narrowly and in favor of employees or sellers. Therefore, certain restrictions on competition or solicitation may be unenforceable. In addition, we may not pursue legal remedies if we determine that preserving cooperation and a professional relationship with a former employee or his or her clients, or other concerns, outweighs the benefits of any possible legal recourse or the likelihood of success does not justify the costs of pursuing a legal remedy. Such persons, because they have worked for our Company or a business that we acquire, may be able to compete more effectively with us, or be more successful in soliciting our employees and clients, than unaffiliated third parties. Risks Related to Our Operations Our international operations involve special risks. Our international operations involve financial and business risks that differ from or are in addition to those faced by our Hong Kong operations, including: cultural and language differences; limited "brand" recognition; different employment laws and rules, employment or service contracts, compensation methods, and social and cultural factors that could result in employee turnover, lower utilization rates, higher costs and cyclical fluctuations in utilization that could adversely affect financial and operating results; foreign currency disruptions and currency fluctuations between the Hong Kong dollar and foreign currencies that could adversely affect financial and operating results; different legal and regulatory requirements and other barriers to conducting business; greater difficulties in resolving the collection of receivables when legal proceedings are necessary; greater difficulties in managing our non-Hong Kong operations, including client relationships, in certain locations; disparate systems, policies, procedures and processes; failure to comply with the FCPA and anti-bribery laws of other jurisdictions; higher operating costs; longer sales and/or collections cycles; potential restrictions or adverse tax consequences for the repatriation of foreign earnings, such as trapped foreign losses and importation or withholding taxes; different or less stable political and/or economic environments; conflicts between and among the Hong Kong and countries in which we conduct business, including those arising from trade disputes or disruptions, the termination or suspension of treaties, or boycotts; and civil disturbances or other catastrophic events that reduce business activity. If we are not able to quickly adapt to or effectively manage our operations in geographic markets outside the Hong Kong, our business prospects and results of operations could be negatively impacted. If we fail to promote and maintain our brand in a cost-efficient way, our business and results of operations may be harmed. We believe that, in addition to relying on word-of-mouth client referral through our excellent services, developing and maintaining awareness of our brand effectively is critical to attracting new clients and retaining existing ones. This depends largely on the effectiveness of our client acquisition strategy, our marketing efforts, our cooperation with our business partners and the success of the channels we use to promote our services. If any of our current client acquisition strategies or marketing channels become less effective, more costly or no longer feasible, we may not be able to attract new clients in a cost-effective manner or convert potential clients into using our services. It is likely that our future marketing efforts will require us to incur expenses. These efforts may not result in increased revenues in the immediate future or any increases at all and, even if they do, any increases in revenues may not offset the expenses incurred. If we fail to successfully promote and maintain our brand while incurring additional expenses, our results of operations and financial condition would be adversely affected, and our ability to grow our business may be impaired. We may be required to recognize impairment charges for our long-lived assets and other intangible assets, which could materially affect our financial results. We assess our long-lived assets and other intangible assets as and when required by US GAAP to determine whether they are impaired and, if they are, to record appropriate impairment charges. Factors we consider include significant underperformance relative to expected historical or projected future operating results and significant negative industry or economic trends. It is possible that we may be required to record significant impairment charges in the future. Such charges have had and could have an adverse impact on our results of operations. Risks Related to Acquisitions We will consider future strategic or opportunistic acquisitions. In those cases, some or all of the following risks could be applicable. We may have difficulty integrating acquisitions or convincing clients to allow assignment of their engagements to us, which can reduce the benefits we receive from acquisitions. The process of managing and integrating acquisitions into our existing operations may result in unforeseen operating difficulties and may require significant financial, operational and managerial resources that would otherwise be available for the operation, development and organic expansion of our existing operations. To the extent that we misjudge our ability to properly manage and integrate acquisitions, we may have difficulty achieving our operating, strategic and financial objectives. Acquisitions also may involve a number of special financial, business and operational risks, such as: difficulties in integrating diverse corporate cultures and management styles; disparate policies and practices; client relationship issues; decreased utilization during the integration process; loss of key existing or acquired personnel; increased costs to improve or coordinate managerial, operational, financial and administrative systems; dilutive issuances of equity securities, including convertible debt securities, to finance acquisitions; the assumption of legal liabilities; future earn-out payments or other price adjustments; potential future write-offs relating to the impairment of goodwill or other acquired intangible assets or the revaluation of assets; difficulty or inability to collect receivables; and undisclosed liabilities. In addition to the integration challenges mentioned above, our acquisitions of non-U.S. companies offer distinct integration challenges relating to foreign laws and governmental regulations, including tax and employee benefit laws, and other factors relating to operating in countries other than the U.S., which we have addressed above in the discussion regarding the difficulties we may face operating globally. Asset transactions may require us to seek client consents to the assignment of their engagements to us or a subsidiary. All clients may not consent to assignments. In certain cases, such as government contracts and bankruptcy engagements, the consent of clients cannot be solicited until after the acquisition has closed. Further, such engagements may be subject to security clearance requirements or bidding provisions with which we might not be able to comply. There is no assurance that clients of the acquired entity or local, state, federal or foreign governments will agree to novate or assign their contracts to us. The Company may also hire groups of selected professionals from another company. In such event, there may be restrictions on the ability of the professionals who join the Company to compete and work on client engagements. In addition, the Company may enter into arrangements with the former employers of those professionals regarding limitations on their work until any time restrictions pass. In such circumstances, there is no assurance that the Company will enter into mutually agreeable arrangements with any former employer, and the utilization of such professionals may be limited, and our financial results could be negatively affected until their restrictions end. The Company could also face litigation risks from group hires. An acquisition may not be accretive in the near term or at all. Competitive market conditions may require us to pay a price that represents a higher multiple of revenues or profits for an acquisition. As a result of these competitive dynamics, cost of the acquisition or other factors, certain acquisitions may not be accretive to our overall financial results at the time of the acquisition or at all. We may have a different system of governance and management from a company we acquire or its parent, which could cause professionals who join us from an acquired company to leave us. Our governance and management policies and practices will not mirror the policies and practices of an acquired company or its parent. In some cases, different management practices and policies may lead to workplace dissatisfaction on the part of professionals who join our Company. Some professionals may choose not to join our Company or leave after joining us. Existing professionals may leave us as well. The loss of key professionals may harm our business and financial results and cause us not to realize the anticipated benefits of the acquisition. Due to fluctuations in our stock price, acquisition candidates may be reluctant to accept our Ordinary Shares as purchase price consideration, use of our shares as purchase price consideration may be dilutive or the owners of certain companies we seek to acquire may insist on stock price guarantees. We may structure an acquisition to pay a portion of the purchase price in shares of our Ordinary Shares. The number of shares issued as consideration is typically based on an average closing price per share of our Ordinary Shares for a number of days prior to the closing of such acquisition. Stock market volatility, generally, or stock price volatility, specifically, may result in acquisition candidates being reluctant to accept our shares as consideration. In such cases, we may have to issue more shares if stock constitutes part of the consideration, offer stock price guarantees, pay the entire purchase price in cash or negotiate an alternative price structure. The result may be an increase in the cost of an acquisition. There is no assurance that an acquisition candidate will not negotiate stock price guarantees with respect to a future acquisition, which may increase the cost of such acquisition. Risks Related to Our Corporate Structure Our lack of effective internal controls over financial reporting may affect our ability to accurately report our financial results or prevent fraud which may affect the market for and price of our Ordinary Share. To implement Section 404 of the Sarbanes-Oxley Act of 2002, the SEC adopted rules requiring public companies to include a report of management on the company s internal control over financial reporting. Prior to filing the registration statement of which this prospectus is a part, we were a private company with limited accounting personnel and other resources for addressing our internal control over financial reporting. Our management has not completed an assessment of the effectiveness of our internal control over financial reporting and our independent registered public accounting firm has not conducted an audit of our internal control over financial reporting. However, in connection with the audits of our consolidated financial statements as of March 31, 2020 and 2019, we and our independent registered public accounting firm identified material weaknesses in our internal control over financial reporting as well as other control deficiencies for the above mentioned periods. As defined in the standards established by the Public Company Accounting Oversight Board ("PCAOB") of the United States, a "material weakness" is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness identified related to i) inadequate segregation of duties for certain key functions due to limited staff and resources; ii) a lack of documented policies and controls which enable management and other personnel to understand and carry out their internal control responsibilities; and iii) a lack of independent directors and an audit committee. We intent to implement measures designed to improve our internal control over financial reporting to address the underlying causes of these material weaknesses, including i) hiring more qualified staff to fill up the key roles in the operations; ii) setting up a financial and system control framework with formal documentation of polices and controls in place; and iii) appointing independent directors, establishing an audit committee and strengthening corporate governance. We will be subject to the requirement that we maintain internal controls and that management perform periodic evaluation of the effectiveness of the internal controls. Effective internal control over financial reporting is important to prevent fraud. As a result, our business, financial condition, results of operations and prospects, as well as the market for and trading price of our Ordinary Shares, may be materially and adversely affected if we do not have effective internal controls. Before this offering, we were a private company with limited resources. As a result, we may not discover any problems in a timely manner and current and potential shareholders could lose confidence in our financial reporting, which would harm our business and the trading price of our Ordinary Shares. The absence of internal controls over financial reporting may inhibit investors from purchasing our Ordinary Shares and may make it more difficult for us to raise funds in a debt or equity financing. Additional material weaknesses or significant deficiencies may be identified in the future. If we identify such issues or if we are unable to produce accurate and timely financial statements, our stock price may decline and we may be unable to maintain compliance with the OTCQB Listing Rules. If we cease to qualify as a foreign private issuer, we would be required to comply fully with the reporting requirements of the Exchange Act applicable to U.S. domestic issuers, and we would incur significant additional legal, accounting and other expenses that we would not incur as a foreign private issuer. We expect to qualify as a foreign private issuer upon the completion of this offering. As a foreign private issuer, we will be exempt from the rules under the Exchange Act prescribing the furnishing and content of proxy statements, and our officers, directors and principal shareholders will be exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we will not be required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as United States domestic issuers, and we will not be required to disclose in our periodic reports all of the information that United States domestic issuers are required to disclose. While we currently expect to qualify as a foreign private issuer immediately following the completion of this offering, we may cease to qualify as a foreign private issuer in the future. You may face difficulties in protecting your interests as a shareholder, as it may be difficult for a shareholder of ours to effect service of process or to enforce judgements obtained in the United States courts. Currently, all of our operations are conducted outside the United States, and substantially all of our assets are located outside the United States. All of our directors and officers are nationals or residents of jurisdictions other than the United States and a substantial portion of their assets are located outside the United States. As a result, it may be difficult for a shareholder to effect service of process within the United States upon these persons, or to enforce against us or them judgments obtained in United States courts, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States. As a result of all of the above, our shareholders may have more difficulty in protecting their interests through actions against us or our officers, directors or major shareholders than would shareholders of a corporation incorporated in a jurisdiction in the United States. We are an "emerging growth company" within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to emerging growth companies, this could make it more difficult to compare our performance with other public companies. We are an "emerging growth company" within the meaning of the Securities Act, as modified by the JOBS Act. Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. 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 an 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 accountant standards used. As an "emerging growth company" under applicable law, we will be subject to lessened disclosure requirements. Such reduced disclosure may make our Ordinary Shares less attractive to investors. For as long as we remain an "emerging growth company", as defined in the JOBS Act, we will elect to 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 non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. Because of these lessened regulatory requirements, our shareholders would be left without information or rights available to shareholders of more mature companies. If some investors find our Ordinary Shares less attractive as a result, there may be a less active trading market for our Ordinary Shares and our share price may be more volatile. We will incur increased costs as a result of being a public company, particularly after we cease to qualify as an "emerging growth company." Upon consummation of this offering, we will incur significant legal, accounting and other expenses as a public company that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the SEC, impose various requirements on the corporate governance practices of public companies. We are an "emerging growth company," as defined in the JOBS Act and will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of this offering, (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 Ordinary Shares that is held by non-affiliates exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 in the assessment of the emerging growth company s internal control over financial reporting and permission to delay adopting new or revised accounting standards until such time as those standards apply to private companies. Compliance with these rules and regulations increases our legal and financial compliance costs and makes some corporate activities more time-consuming and costly. After we are no longer an "emerging growth company," or until five years following the completion of our initial public offering, whichever is earlier, we expect to incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404 and the other rules and regulations of the SEC. For example, as a public company, we have been required to increase the number of independent directors and adopt policies regarding internal controls and disclosure controls and procedures. We have incurred additional costs in obtaining director and officer liability insurance. In addition, we incur additional costs associated with our public company reporting requirements. It may also be more difficult for us to find qualified persons to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these rules and regulations, and we cannot predict or estimate with any degree of certainty the amount of additional costs we may incur or the timing of such costs. Our board of directors may decline to register transfers of Ordinary Shares in certain circumstances. Our board of directors may, in its sole discretion, decline to register any transfer of any ordinary share which is not fully paid up or on which we have a lien. Our directors may also decline to register any transfer of any share unless (i) the instrument of transfer is lodged with us, accompanied by the certificate for the shares to which it relates and such other evidence as our board of directors may reasonably require to show the right of the transferor to make the transfer; (ii) the instrument of transfer is in respect of only one class of shares; (iii) the instrument of transfer is properly stamped, if required; (iv) in the case of a transfer to joint holders, the number of joint holders to whom the share is to be transferred does not exceed four; (v) the shares conceded are free of any lien in favor of us; or (vi) a fee of such maximum sum as OTCQB Market may determine to be payable, or such lesser sum as our board of directors may from time to time require, is paid to us in respect thereof. If our directors refuse to register a transfer they shall, within one month after the date on which the instrument of transfer was lodged, send to each of the transferor and the transferee notice of such refusal. The registration of transfers may, on 14 days notice being given by advertisement in such one or more newspapers or by electronic means, be suspended and the register closed at such times and for such periods as our board of directors may from time to time determine, provided, however, that the registration of transfers shall not be suspended nor the register closed for more than 30 days in any year. Risks Related to Our Ordinary Shares and This Offering There has been no public market for our Ordinary Shares prior to this offering, and if an active trading market does not develop you may not be able to resell our Ordinary Shares at or above the price you paid, or at all. Prior to this public offering, there has been no public market for our Ordinary Shares. We expect to apply for our Ordinary Shares to be listed on the OTCQB Market. There is no guarantee that our application will be approved by the OTCQB Market. If an active trading market for our Ordinary Shares does not develop after this offering, the market price and liquidity of our Ordinary Shares will be materially adversely affected. You may not be able to sell any Ordinary Shares that you purchase in the offering at or above the public offering price. Accordingly, investors should be prepared to face a complete loss of their investment. Our Ordinary Shares may be thinly traded and you may be unable to sell at or near ask prices or at all if you need to sell your shares to raise money or otherwise desire to liquidate your shares. When our Ordinary Shares are approved by the OTCQB Market and begin trading on the OTCQB Market, our Ordinary Shares may be "thinly-traded", meaning that the number of persons interested in purchasing our Ordinary Shares at or near bid prices at any given time may be relatively small or non-existent. This situation may be attributable to a number of factors, including the fact that we are relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and might be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares until such time as we became more seasoned. 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. Broad or active public trading market for our Ordinary Shares may not develop or be sustained. Our ordinary share is expected to be considered "a penny stock" and, as a result, it may be difficult to trade a significant number of shares of our ordinary share. The SEC has adopted regulations that generally define "penny stock" to be an equity security that has a market price of less than $5.00 per share, subject to specific exemptions. When our ordinary share becomes eligible for quotation on the OTC markets, we expect the market price of our ordinary share to be less than $5.00 per share. As a result of our forward stock split, we have increased the number of shares outstanding by almost one thousand-fold. Consequently, when our ordinary share becomes eligible for quotation on the OTC markets it is likely that the market price for our ordinary share will remain less than $5.00 per share for the foreseeable future and, therefore, may be a "penny stock" according to SEC rules. This designation requires any broker or dealer selling these securities to disclose certain information concerning the transaction, obtain a written agreement from the purchaser and determine that the purchaser is reasonably suitable to purchase the securities. These rules may restrict the ability of brokers or dealers to sell our ordinary share and may affect the ability of investors hereunder to sell their shares. In addition, because we are seeking to have our ordinary share trade on the OTC markets, investors may find it difficult to obtain accurate quotations of the stock and may experience a lack of buyers to purchase such stock or a lack of market makers to support the share price. The initial public offering price for our Ordinary Shares may not be indicative of prices that will prevail in the trading market and such market prices may be volatile. The initial public offering price does not bear any relationship to our earnings, book value or any other indicia of value. We cannot assure you that the market price of our Ordinary Shares will not decline significantly below the initial public offering price. The financial markets in the United States and other countries have experienced significant price and volume fluctuations in the last few years. Volatility in the price of our Ordinary Shares may be caused by factors outside of our control and may be unrelated or disproportionate to changes in our results of operations. Substantial future sales of our Ordinary Shares or the anticipation of future sales of our Ordinary Shares in the public market could cause the price of our Ordinary Shares to decline. Sales of substantial amounts of our Ordinary Shares in the public market after this offering, or the perception that these sales could occur, could cause the market price of our Ordinary Shares to decline. An aggregate of 9,600,000 Ordinary Shares is outstanding before the consummation of this offering and 12,480,000 Ordinary Shares will be outstanding immediately after the consummation of this offering assuming that maximum amount of shares are sold in the offering. Sales of these shares into the market could cause the market price of our Ordinary Shares to decline. We do not intend to pay dividends for the foreseeable future. We currently intend to retain all available funds and future earnings, if any, for the operation and expansion of our business and do not anticipate declaring or paying any dividends in the foreseeable future. Any future determination related to our dividend policy will be made at the discretion of our board of directors after considering our financial condition, results of operations, capital requirements, contractual requirements, business prospects and other factors the board of directors deems relevant, and subject to the restrictions contained in any future financing instruments. On April 1, 2020, the Company s board of directors approved and declared dividend per share HKD0.3 (US$0.041) to its shareholders, which we refer to as the 2020 Special Dividend. This amount HKD3,045,558 (US$392,909) was paid in full to its shareholders on April 7, 2020. On May 17, 2019 the Company declared dividend per share HKD0.17 (US$0.02) to its shareholders, which we refer to as the 2019 Special Dividend. This amount HKD1,700,000 (US$219,318) was paid in full to its shareholders on July 9, 2019. Other than the 2019 and 2020 Special Dividend, we have not declared or paid any cash dividends on our capital shares. If securities or industry analysts do not publish research or reports about our business, or if the publish a negative report regarding our Ordinary Shares, the price of our Ordinary Shares and trading volume could decline. The trading market for our Ordinary Shares may depend in part on the research and reports that industry or securities analysts publish about us or our business. We do not have any control over these analysts. If one or more of the analysts who cover us downgrade us, the price of our Ordinary Shares would likely decline. If one or more of these 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 the price of our Ordinary Shares and the trading volume to decline. The market price for our Ordinary Shares may be volatile. The initial public offering price for our Ordinary Shares may vary from the market price of our Ordinary Shares following our initial public offering. If you purchase our Ordinary Shares in our initial public offering, you may not be able to resell those shares at or above the initial public offering price. We cannot assure you that the initial public offering price of our Ordinary Shares, or the market price following our initial public offering, will equal or exceed prices in privately negotiated transactions of our shares that have occurred from time to time prior to our initial public offering. The market price for our Ordinary Shares may be volatile and subject to wide fluctuations due to factors such as: the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections; actual or anticipated fluctuations in our quarterly operating results; changes in financial estimates by securities research analysts; negative publicity, studies or reports; our capability to catch up with the technology innovations in the industry; announcements by us or our competitors of acquisitions, strategic partnerships, joint ventures or capital commitments; addition or departure of key personnel; fluctuations of exchange rates between Hong Kong dollar and the U.S. dollar; and general economic or political conditions in Hong Kong, the PRC and greater Asia region. In addition, the securities market has from time to time experienced significant price and volume fluctuations that are not related to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our Ordinary Shares. Because our business is conducted in Hong Kong dollars and the price of our Ordinary Shares is quoted in United States dollars, changes in currency conversion rates may affect the value of your investments. Our business is conducted in Hong Kong, our books and records are maintained in Hong Kong dollars, which is the currency of Hong Kong, and the financial statements that we file with the SEC and provide to our shareholders are presented in United States dollars. Changes in the exchange rate between the Hong Kong dollar and U.S. dollar affect the value of our assets and the results of our operations in United States dollars. The value of the Hong Kong dollar against the United States dollar and other currencies may fluctuate and is affected by, among other things, changes in the Hong Kong s political and economic conditions and perceived changes in the economy of Hong Kong and the United States. Any significant revaluation of the Hong Kong dollar may materially and adversely affect our cash flows, revenue and financial condition. Further, our Ordinary Shares offered by this prospectus are denominated in United States dollars, we will need to convert the net proceeds we receive into Hong Kong dollar in order to use the funds for our business. Changes in the conversion rate between the United States dollar and the Hong Kong dollar will affect that amount of proceeds we will have available for our business. Volatility in our Ordinary Shares price may subject us to securities litigation. The market for our Ordinary Shares may have, when compared to seasoned issuers, significant price volatility and we expect that our share price may continue to be more volatile than that of 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. We have broad discretion in the use of the net proceeds from this offering and may not use them effectively. Our management will have broad discretion in the application of the net proceeds, including for any of the purposes described in the section entitled "Use of Proceeds," and you will not have the opportunity as part of your investment decision to assess whether the net proceeds are being used appropriately. Because of the number and variability of factors that will determine our use of the net proceeds from this offering, their ultimate use may vary substantially from their currently intended use. The failure by our management to apply these funds effectively could harm our business. Our pre-IPO shareholders will be able to sell their shares after completion of this offering subject to restrictions under the Rule 144. Our pre-IPO shareholders, the Beneficial Owners, may be able to sell their Ordinary Shares under Rule 144 after completion of this offering. Because these shareholders have paid a lower price per Ordinary Share than participants in this offering, when they are able to sell their pre-IPO shares under Rule 144, they may be more willing to accept a lower sales price than the IPO price. This fact could impact the trading price of the stock following completion of the offering, to the detriment of participants in this offering. Under rule 144, before our pre-IPO shareholders can sell their shares, in addition to meeting other requirements, they must meet the required holding period. We do not expect any of the ordinary shares to be sold pursuant to Rule 144 during the pendency of this offering. There can be no assurance that we will not be a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for any taxable year, which could result in adverse U.S. federal income tax consequences to U.S. holders of our ordinary shares. A non-U.S. corporation will be a PFIC for any taxable year if either (1) at least 75% of its gross income for such year consists of certain types of "passive" income; or (2) at least 50% of the value of its assets (based on an average of the quarterly values of the assets) during such year is attributable to assets that produce passive income or are held for the production of passive income, or the asset test. Based on our current and expected income and assets (taking into account the expected cash proceeds and our anticipated market capitalization following this offering), we do not presently expect to be a PFIC for the current taxable year or the foreseeable future. However, no assurance can be given in this regard because the determination of whether we are or will become a PFIC is a fact-intensive inquiry made on an annual basis that depends, in part, upon the composition of our income and assets. In addition, there can be no assurance that the Internal Revenue Service, or IRS, will agree with our conclusion or that the IRS would not successfully challenge our position. Fluctuations in the market price of our ordinary shares may cause us to become a PFIC for the current or subsequent taxable years because the value of our assets for the purpose of the asset test may be determined by reference to the market price of our ordinary shares. The composition of our income and assets may also be affected by how, and how quickly, we use our liquid assets and the cash raised in this offering. If we were to be or become a PFIC for any taxable year during which a U.S. Holder holds our ordinary shares, certain adverse U.S. federal income tax consequences could apply to such U.S. Holder and such U.S. Holder may be subject to additional reporting requirements. For a more detailed discussion of the application of the PFIC rules to us and the consequences to U.S. taxpayers if we were or are determined to be a PFIC, see "Taxation— Passive Foreign Investment Company." There is a limited market for our Ordinary Shares, which may make it difficult for holders of our Ordinary Shares to sell their stock. We plan to apply to be listed on OTCQB Market, but there is no assurance that we will be approved for the listing at this point. There is a limited trading market for our Ordinary Shares and at times there is no trading in our Ordinary Shares. Accordingly, there can be no assurance as to the liquidity of any markets that may develop for our Ordinary Shares, the ability of holders of our Ordinary Shares to sell our Ordinary Shares, or the prices at which holders may be able to sell our Ordinary Shares. Further, many brokerage firms will not process transactions involving low price stocks, especially those that come within the definition of a "penny stock." If we cease to be quoted, holders of our Ordinary Shares may find it more difficult to dispose of, or to obtain accurate quotations as to the market value of our Ordinary Shares, and the market value of our Ordinary Shares would likely decline. Political risks associated with conducting business in Hong Kong. While we operate our business globally, our operations are principally based in Hong Kong. Accordingly, our business operation and financial conditions will be affected by the political and legal developments in Hong Kong. During the period covered by the financial information incorporated by reference into and included in this prospectus, we derive substantially all of our revenue from operations in Hong Kong and, specifically, from ALECS. Any adverse economic, social and/or political conditions, material social unrest, strike, riot, civil disturbance or disobedience, as well as significant natural disasters, may affect the market may adversely affect the business operations of ALECS. Hong Kong is a special administrative region of the PRC and the basic policies of the PRC regarding Hong Kong are reflected in the Basic Law, namely, Hong Kong s constitutional document, which provides Hong Kong with a high degree of autonomy and executive, legislative and independent judicial powers, including that of final adjudication under the principle of "one country, two systems". However, there is no assurance that there will not be any changes in the economic, political and legal environment in Hong Kong in the future. Since a substantial part of our operations is based in Hong Kong, any change of such political arrangements may pose immediate threat to the stability of the economy in Hong Kong, thereby directly and adversely affecting our results of operations and financial positions. The Hong Kong protests that begun in 2019 are ongoing protests in Hong Kong (the "Hong Kong Protests") triggered by the introduction of the Fugitive Offenders amendment bill by the Hong Kong government. If enacted, the bill would have allowed the extradition of criminal fugitives who are wanted in territories with which Hong Kong does not currently have extradition agreements, including mainland China. This led to concerns that the bill would subject Hong Kong residents and visitors to the jurisdiction and legal system of mainland China, thereby undermining the region s autonomy and people s civil liberties. Various sectors of the Hong Kong economy have been adversely affected as the protests turned increasingly violent. Most notably, the airline, retail, and real estate sectors have seen their sales decline. Under the Basic Law of the Hong Kong Special Administrative Region of the People s Republic of China, Hong Kong is exclusively in charge of its internal affairs and external relations, while the government of the PRC is responsible for its foreign affairs and defense. As a separate customs territory, Hong Kong maintains and develops relations with foreign states and regions. Based on certain recent development including the Law of the People s Republic of China on Safeguarding National Security in the Hong Kong Special Administrative Region issued by the Standing Committee of the PRC National People s Congress in June 2020, the U.S. State Department has indicated that the United States no longer considers Hong Kong to have significant autonomy from China and President Trump signed an executive order and Hong Kong Autonomy Act, or HKAA, to remove Hong Kong s preferential trade status and to authorize the U.S. administration to impose blocking sanctions against individuals and entities who are determined to have materially contributed to the erosion of Hong Kong s autonomy. The United States may impose the same tariffs and other trade restrictions on exports from Hong Kong that it places on goods from mainland China. These and other recent actions may represent an escalation in political and trade tensions involving the U.S, China and Hong Kong, which could potentially harm our business. Our revenue is susceptible to the ongoing incidents or factors which affect the stability of the social, economic and political conditions in Hong Kong. Any drastic events may adversely affect our business operations. Such adverse events may include changes in economic conditions and regulatory environment, social and/or political conditions, civil disturbance or disobedience, as well as significant natural disasters. Given the relatively small geographical size of Hong Kong, any of such incidents may have a widespread effect on our business operations, which could in turn adversely and materially affect our business, results of operations and financial condition. It is difficult to predict the full impact of the HKAA on Hong Kong and companies with operations in Hong Kong like us. Furthermore, legislative or administrative actions in respect of China-U.S. relations could cause investor uncertainty for affected issuers, including us, and the market price of our ordinary shares could be adversely affected.

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+risk factors below will not occur. These risks could have a material and adverse impact on our business, results of operations, financial condition or prospects. If that were to happen, the trading price of our common stock could decline, and you could lose all or part of your investment. This prospectus also contains 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 faced by us described below and elsewhere in this prospectus. See "Cautionary Note Regarding Forward-Looking Statements" for information relating to these forward-looking statements. Risks Related to our Business If we are unable to timely implement our strategic initiatives and raise sufficient capital on suitable terms, we will likely have insufficient liquidity to operate our business through the next twelve months, or earlier, resulting in a material adverse effect on our business, prospects, financial condition and results of operations, which could result in a need to seek protection under the U.S. Bankruptcy Code. We are engaged in strategic initiatives to reduce our debt levels and provide additional liquidity to operate our business. These initiatives will likely require the prompt sale of certain production assets as well as other capital raising activities. Financing, whether through a sale of production assets or other capital raising activities, may not be available on a timely basis, in sufficient amounts, on terms acceptable to us, or at all. In addition, any equity financing may cause significant dilution to existing stockholders and any debt financing or other financing of securities senior to our common stock will likely include financial and other covenants that will restrict our flexibility, including our ability to pay dividends on our common stock. If we are unable to timely sell production assets or raise additional capital, or both, in sufficient amounts and on suitable terms, if we do not experience a sustained margin improvement, we will likely have insufficient liquidity to operate our business through the next twelve months, or earlier depending on margins, operating cash flows and lender forbearance. A failure to timely implement our strategic initiatives to reduce our debt levels on suitable terms or our inability to satisfy our payment obligations under our various credit facilities will have a material adverse effect on our business, prospects, financial condition and results of operations and could result in a need to idle production at one or more operating facilities and/or seek protection under the U.S. Bankruptcy Code for all or some portion of our production assets and other subsidiaries, at the parent company level, or both. Our plant indebtedness exposes us to many risks that could negatively impact our business, our business prospects, our liquidity and our cash flows and results of operations. Our plants located in the Midwest have significant indebtedness. Unlike traditional term debt, the terms of our plant loans require amortizing payments of principal over the lives of the loans and our borrowing availability under our plant credit facilities periodically and automatically declines through the maturity dates of those facilities. Our plant indebtedness could: make it more difficult to pay or refinance our debts as they become due during adverse economic and industry conditions because any decrease in revenues could cause us to not have sufficient cash flows from operations to make our scheduled debt payments; limit our flexibility to pursue strategic opportunities or react to changes in our business and the industry in which we operate and, consequently, place us at a competitive disadvantage to our competitors who have less debt; require a substantial portion of our cash flows from operations to be used for debt service payments, thereby reducing the availability of our cash flows to fund working capital, capital expenditures, acquisitions, dividend payments and other general corporate purposes; and/or limit our ability to procure additional financing for working capital or other purposes. Our term loans and credit facilities also require compliance with numerous financial and other covenants. In addition, our plant indebtedness bears interest at variable rates. An increase in prevailing interest rates would likewise increase our debt service obligations and could materially and adversely affect our cash flows and results of operations. Our ability to generate sufficient cash to make all principal and interest payments when due, including an aggregate $40.0 million payment due on September 30, 2020 under our PE Pekin and ICP credit facilities, depends on our business performance, which is subject to a variety of factors beyond our control, including the supply of and demand for ethanol and co-products, ethanol and co-product prices, the cost of key production inputs, and many other factors incident to the ethanol production and marketing industry. We cannot provide any assurance that we will be able to timely satisfy such obligations. Our failure to timely satisfy our debt obligations could have a material adverse effect on our business, business prospects, liquidity, cash flows and results of operations. We have incurred significant losses and negative operating cash flow in the past and we may incur losses and negative operating cash flow in the future, which may hamper our operations and impede us from expanding our business. We have incurred significant losses and negative operating cash flow in the past. For the nine months ended September 30, 2019 and 2018, we incurred consolidated net losses of approximately $51.5 million and $33.4 million, respectively. For the years ended December 31, 2018 and 2017, we incurred consolidated net losses of approximately $67.9 million and $38.1 million, respectively. For the nine months ended September 30, 2019, we incurred negative operating cash flows of approximately $27.2 million. We may incur losses and negative operating cash flow in the future. We expect to rely on cash on hand, cash, if any, generated from our operations, borrowing availability under our lines of credit and proceeds from future financing activities, if any, to fund all of the cash requirements of our business. Continued losses and negative operating cash flow may hamper our operations and impede us from expanding our business. Our results of operations and our ability to operate at a profit is largely dependent on managing the costs of corn and natural gas and the prices of ethanol, distillers grains and other ethanol co-products, all of which are subject to significant volatility and uncertainty. Our results of operations are highly impacted by commodity prices, including the cost of corn and natural gas that we must purchase, and the prices of ethanol, distillers grains and other ethanol co-products that we sell. Prices and supplies are subject to and determined by market and other forces over which we have no control, such as weather, domestic and global demand, supply shortages, export prices and various governmental policies in the United States and around the world. As a result of price volatility of corn, natural gas, ethanol, distillers grains and other ethanol co-products, our results of operations may fluctuate substantially. In addition, increases in corn or natural gas prices or decreases in ethanol, distillers grains or other ethanol co-product prices may make it unprofitable to operate. In fact, some of our marketing activities will likely be unprofitable in a market of generally declining ethanol prices due to the nature of our business. For example, to satisfy customer demands, we maintain certain quantities of ethanol inventory for subsequent resale. Moreover, we procure much of our inventory outside the context of a marketing arrangement and therefore must buy ethanol at a price established at the time of purchase and sell ethanol at an index price established later at the time of sale that is generally reflective of movements in the market price of ethanol. As a result, our margins for ethanol sold in these transactions generally decline and may turn negative as the market price of ethanol declines. No assurance can be given that corn or natural gas can be purchased at, or near, current or any particular prices or that ethanol, distillers grains or other ethanol co-products will sell at, or near, current or any particular prices. Consequently, our results of operations and financial position may be adversely affected by increases in the price of corn or natural gas or decreases in the price of ethanol, distillers grains or other ethanol co-products. Over the past several years, the spread between ethanol and corn prices has fluctuated significantly. Fluctuations are likely to continue to occur. A sustained narrow spread, whether as a result of sustained high or increased corn prices or sustained low or decreased ethanol prices, would adversely affect our results of operations and financial position. Further, combined revenues from sales of ethanol, distillers grains and other ethanol co-products could decline below the marginal cost of production, which may force us to suspend production of ethanol, distillers grains and other ethanol co-products at some or all of our plants. Increased ethanol production or higher inventory levels may cause a decline in ethanol prices or prevent ethanol prices from rising, and may have other negative effects, adversely impacting our results of operations, cash flows and financial condition. We believe that the most significant factor influencing the price of ethanol has been the substantial increase in ethanol production. According to the Renewable Fuels Association, domestic ethanol production capacity increased from an annualized rate of 1.5 billion gallons per year in January 1999 to a record 16.1 billion gallons in 2018. In addition, if ethanol production margins improve, we anticipate that owners of ethanol production facilities will increase production levels, thereby resulting in more abundant ethanol supplies and inventories. Any increase in the supply of ethanol may not be commensurate with increases in the demand for ethanol, thus leading to lower ethanol prices. Also, demand for ethanol could be impaired due to a number of factors, including regulatory developments and reduced United States gasoline consumption. Reduced gasoline consumption has occurred in the past and could occur in the future as a result of increased gasoline or oil prices or other factors such as increased automobile fuel efficiency. Any of these outcomes could have a material adverse effect on our results of operations, cash flows and financial condition. The market price of ethanol is volatile and subject to large fluctuations, which may cause our profitability or losses to fluctuate significantly. The market price of ethanol is volatile and subject to large fluctuations. The market price of ethanol is dependent upon many factors, including the supply of ethanol and the price of gasoline, which is in turn dependent upon the price of petroleum which is highly volatile and difficult to forecast. For example, ethanol prices, as reported by the CBOT, ranged from $1.25 to $1.70 per gallon in 2019, $1.20 to $1.53 per gallon during 2018, and $1.26 to $1.67 per gallon during 2017. Fluctuations in the market price of ethanol may cause our profitability or losses to fluctuate significantly Some of our marketing activities will likely be unprofitable in a market of generally declining ethanol prices due to the nature of our business. Some of our marketing activities will likely be unprofitable in a market of generally declining ethanol prices due to the nature of our business. For example, to satisfy customer demands, we maintain certain quantities of ethanol inventory for subsequent resale. Moreover, we procure much of our inventory outside the context of a marketing arrangement and therefore must buy ethanol at a price established at the time of purchase and sell ethanol at an index price established later at the time of sale that is generally reflective of movements in the market price of ethanol. As a result, our margins for ethanol sold in these transactions generally decline and may turn negative as the market price of ethanol declines. Disruptions in production or distribution infrastructure may adversely affect our business, results of operations and financial condition. Our business depends on the continuing availability of rail, road, port, storage and distribution infrastructure. In particular, due to limited storage capacity at our plants and other considerations related to production efficiencies, our plants depend on just-in-time delivery of corn. The production of ethanol and specialty alcohols also requires a significant and uninterrupted supply of other raw materials and energy, primarily water, electricity and natural gas. Local water, electricity and gas utilities may not be able to reliably supply the water, electricity and natural gas that our plants need or may not be able to supply those resources on acceptable terms. In the past, poor weather has caused disruptions in rail transportation, which slowed the delivery of ethanol by rail, the principle manner by which ethanol from our plants located in the Midwest is transported to market. Disruptions in production or distribution infrastructure, whether caused by labor difficulties, earthquakes, storms, other natural disasters or human error or malfeasance or other reasons, could prevent timely deliveries of corn or other raw materials and energy, and could delay transport of our products to market, and may require us to halt production at one or more plants, any of which could have a material adverse effect on our business, results of operations and financial condition. We may engage in hedging transactions and other risk mitigation strategies that could harm our results of operations and financial condition. In an attempt to partially offset the effects of volatility of ethanol prices and corn and natural gas costs, we may enter into contracts to fix the price of a portion of our ethanol production or purchase a portion of our corn or natural gas requirements on a forward basis. In addition, we may engage in other hedging transactions involving exchange-traded futures contracts for corn, natural gas and unleaded gasoline from time to time. The financial statement impact of these activities is dependent upon, among other things, the prices involved and our ability to sell sufficient products to use all of the corn and natural gas for which forward commitments have been made. Hedging arrangements also expose us to the risk of financial loss in situations where the other party to the hedging contract defaults on its contract or, in the case of exchange-traded contracts, where there is a change in the expected differential between the underlying price in the hedging agreement and the actual prices paid or received by us. In addition, our open contract positions may require cash deposits to cover margin calls, negatively impacting our liquidity. As a result, our results of operations and financial condition may be adversely affected by our hedging activities and fluctuations in the price of corn, natural gas, ethanol and unleaded gasoline. Operational difficulties at our plants could negatively impact sales volumes and could cause us to incur substantial losses. Operations at our plants are subject to labor disruptions, unscheduled downtimes and other operational hazards inherent in the ethanol production industry, including equipment failures, fires, explosions, abnormal pressures, blowouts, pipeline ruptures, transportation accidents and natural disasters. Some of these operational hazards may cause personal injury or loss of life, severe damage to or destruction of property and equipment or environmental damage, and may result in suspension of operations and the imposition of civil or criminal penalties. Our insurance may not be adequate to fully cover the potential operational hazards described above or we may not be able to renew this insurance on commercially reasonable terms or at all. Moreover, our plants may not operate as planned or expected. All of these facilities are designed to operate at or above a specified production capacity. The operation of these facilities is and will be, however, subject to various uncertainties. As a result, these facilities may not produce ethanol, specialty alcohols and co-products at expected levels. In the event any of these facilities do not run at their expected capacity levels, our business, results of operations and financial condition may be materially and adversely affected. Future demand for ethanol is uncertain and may be affected by changes to federal mandates, public perception, consumer acceptance and overall consumer demand for transportation fuel, any of which could negatively affect demand for ethanol and our results of operations. Although many trade groups, academics and governmental agencies have supported ethanol as a fuel additive that promotes a cleaner environment, others have criticized ethanol production as consuming considerably more energy and emitting more greenhouse gases than other biofuels and potentially depleting water resources. Some studies have suggested that corn-based ethanol is less efficient than ethanol produced from other feedstock and that it negatively impacts consumers by causing increased prices for dairy, meat and other food generated from livestock that consume corn. Additionally, ethanol critics contend that corn supplies are redirected from international food markets to domestic fuel markets. If negative views of corn-based ethanol production gain acceptance, support for existing measures promoting use and domestic production of corn-based ethanol could decline, leading to reduction or repeal of federal mandates, which could adversely affect the demand for ethanol. These views could also negatively impact public perception of the ethanol industry and acceptance of ethanol as an alternative fuel. There are limited markets for ethanol beyond those established by federal mandates. Discretionary blending and E85 blending are important secondary markets. Discretionary blending is often determined by the price of ethanol versus the price of gasoline. In periods when discretionary blending is financially unattractive, the demand for ethanol may be reduced. Also, the demand for ethanol is affected by the overall demand for transportation fuel. Demand for transportation fuel is affected by the number of miles traveled by consumers and the fuel economy of vehicles. Market acceptance of E15 may partially offset the effects of decreases in transportation fuel demand. A reduction in the demand for ethanol and ethanol co-products may depress the value of our products, erode our margins and reduce our ability to generate revenue or to operate profitably. Consumer acceptance of E15 and E85 fuels is needed before ethanol can achieve any significant growth in market share relative to other transportation fuels. The United States ethanol industry is highly dependent upon certain federal and state legislation and regulation and any changes in legislation or regulation could have a material adverse effect on our results of operations, cash flows and financial condition. The EPA has implemented the RFS pursuant to the Energy Policy Act of 2005 and the Energy Independence and Security Act of 2007. The RFS program sets annual quotas for the quantity of renewable fuels (such as ethanol) that must be blended into motor fuels consumed in the United States. The domestic market for ethanol is significantly impacted by federal mandates under the RFS program for volumes of renewable fuels (such as ethanol) required to be blended with gasoline. Future demand for ethanol will be largely dependent upon incentives to blend ethanol into motor fuels, including the price of ethanol relative to the price of gasoline, the relative octane value of ethanol, constraints in the ability of vehicles to use higher ethanol blends, the RFS, and other applicable environmental requirements. Any significant increase in production capacity above the RFS minimum requirements may have an adverse impact on ethanol prices. Legislation aimed at reducing or limiting the renewable fuel use required by the RFS has been introduced in the United States Congress. On January 3, 2019, a bill (H.R. 104) was introduced into the House of Representatives aiming to repeal certain amendments to the Clean Air Act relating to the expansion of the renewable fuel program, and for other purposes. This bill revises the renewable fuel program, including the RFS. Under current law, the RFS specifies the minimum volume of renewable fuel, such as ethanol, that must be contained in gasoline sold in the United States, except in noncontiguous states or territories. The RFS annually increases until 2022 when a minimum of 36 billion gallons of renewable fuel must be blended into gasoline. This bill decreases the volume of renewable fuel that must be contained in gasoline to 7.5 billion gallons each year. The bill also revises the RFS to eliminate separate volume requirements for the following renewable fuel categories: advanced biofuels, cellulosic biofuel, and biomass-based diesel. The bill was referred to a congressional subcommittee where it awaits further consideration. On May 7, 2019, the Food and Fuel Consumer Protection Act of 2019 (H.R. 2540), was introduced in the House of Representatives. The bill aims to prevent RFS blending obligations from requiring ethanol to make up more than 9.7 percent of the total volume of gasoline projected to be sold or introduced into commerce in the United States for a given calendar year. The bill was referred to a congressional committee, which will consider it before possibly sending the bill to the House of Representatives as a whole. On June 21, 2019, a bill (H.R. 3427) was introduced in the House of Representatives aiming to repeal the EPA s Renewable Fuel Standard program, which requires transportation fuel to contain a minimum volume of renewable fuel. The bill was referred to a congressional committee, which will consider it before possibly sending the bill to the House of Representatives as a whole. On July 25, 2019, a bill (S.2298) was introduced in the United States Senate, to amend the Clean Air Act to eliminate the corn ethanol mandate for renewable fuel. The bill was read twice and referred to the Committee on Environment and Public Works. Our results of operations, cash flows and financial condition could be adversely impacted if any legislation is enacted that reduces or limits the RFS volume requirements. Under the provisions of the Clean Air Act, as amended by the Energy Independence and Security Act of 2007, the EPA has limited authority to waive or reduce the mandated RFS requirements, which authority is subject to consultation with the Secretaries of Agriculture and Energy, and based on a determination that there is inadequate domestic renewable fuel supply or implementation of the applicable requirements would severely harm the economy or environment of a state, region or the United States. Our results of operations, cash flows and financial condition could be adversely impacted if the EPA reduces the RFS requirements from the statutory levels specified in the RFS. The ethanol production and marketing industry is extremely competitive. Many of our significant competitors have greater production and financial resources and one or more of these competitors could use their greater resources to gain market share at our expense. The ethanol production and marketing industry is extremely competitive. Many of our significant competitors in the ethanol production and marketing industry, including Archer-Daniels-Midland Company, POET, LLC, Green Plains, Inc. and Valero Renewable Fuels Company, LLC, have substantially greater production and/or financial resources. As a result, our competitors may be able to compete more aggressively and sustain that competition over a longer period of time. Successful competition will require a continued high level of investment in marketing and customer service and support. Our limited resources relative to many significant competitors may cause us to fail to anticipate or respond adequately to new developments and other competitive pressures. This failure could reduce our competitiveness and cause a decline in market share, sales and profitability. Even if sufficient funds are available, we may not be able to make the modifications and improvements necessary to compete successfully. We also face competition from international suppliers. Currently, international suppliers produce ethanol primarily from sugar cane and have cost structures that are generally substantially lower than our cost structures. Any increase in domestic or foreign competition could cause us to reduce our prices and take other steps to compete effectively, which could adversely affect our business, financial condition and results of operations. Our ability to utilize net operating loss carryforwards and certain other tax attributes may be limited. Federal and state income tax laws impose restrictions on the utilization of net operating loss, or NOL, and tax credit carryforwards in the event that an "ownership change" occurs for tax purposes, as defined by Section 382 of the Internal Revenue Code, or Code. In general, an ownership change occurs when stockholders owning 5% or more of a "loss corporation" (a corporation entitled to use NOL or other loss carryovers) have increased their ownership of stock in such corporation by more than 50 percentage points during any three-year period. The annual base limitation under Section 382 of the Code is calculated by multiplying the loss corporation s value at the time of the ownership change by the greater of the long-term tax-exempt rate determined by the Internal Revenue Service in the month of the ownership change or the two preceding months. As of December 31, 2018, of our $183.2 million of federal NOLs, we had $88.5 million of federal NOLs that are limited in their annual use under Section 382 of the Code beyond 2019. Accordingly, our ability to utilize these NOL carryforwards may be substantially limited. These limitations could in turn result in increased future tax obligations, which could have a material adverse effect on our business, financial condition and results of operations. Our business is not diversified. The high concentration of our sales within the ethanol production and marketing industry could result in a significant reduction in sales and negatively affect our profitability if demand for ethanol declines. Our business is not diversified. Our sales are highly concentrated within the ethanol production and marketing industry. We expect to be substantially focused on the production and marketing of ethanol and its co-products for the foreseeable future. An industry shift away from ethanol, or the emergence of new competing products, may significantly reduce the demand for ethanol. However, we may be unable to timely alter our business focus away from the production and marketing of ethanol to other renewable fuels or competing products. A downturn in the demand for ethanol would likely materially and adversely affect our sales and profitability. We may be adversely affected by environmental, health and safety laws, regulations and liabilities. We are subject to various federal, state and local environmental laws and regulations, including those relating to the discharge of materials into the air, water and ground, the generation, storage, handling, use, transportation and disposal of hazardous materials and wastes, and the health and safety of our employees. In addition, some of these laws and regulations require us to operate under permits that are subject to renewal or modification. These laws, regulations and permits can often require expensive pollution control equipment or operational changes to limit actual or potential impacts to the environment. A violation of these laws and regulations or permit conditions can result in substantial fines, natural resource damages, criminal sanctions, permit revocations and/or facility shutdowns. In addition, we have made, and expect to make, significant capital expenditures on an ongoing basis to comply with increasingly stringent environmental laws, regulations and permits. We may be liable for the investigation and cleanup of environmental contamination at each of our plants and at off-site locations where we arrange for the disposal of hazardous substances or wastes. If these substances or wastes have been or are disposed of or released at sites that undergo investigation and/or remediation by regulatory agencies, we may be responsible under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, or other environmental laws for all or part of the costs of investigation and/or remediation, and for damages to natural resources. We may also be subject to related claims by private parties alleging property damage and personal injury due to exposure to hazardous or other materials at or from those properties. Some of these matters may require us to expend significant amounts for investigation, cleanup or other costs. In addition, new laws, new interpretations of existing laws, increased governmental enforcement of environmental laws or other developments could require us to make significant additional expenditures. Continued government and public emphasis on environmental issues can be expected to result in increased future investments for environmental controls at our plants. Present and future environmental laws and regulations, and interpretations of those laws and regulations, applicable to our operations, more vigorous enforcement policies and discovery of currently unknown conditions may require substantial expenditures that could have a material adverse effect on our results of operations and financial condition. The hazards and risks associated with producing and transporting our products (including fires, natural disasters, explosions and abnormal pressures and blowouts) may also result in personal injury claims or damage to property and third parties. As protection against operating hazards, we maintain insurance coverage against some, but not all, potential losses. However, we could sustain losses for uninsurable or uninsured risks, or in amounts in excess of existing insurance coverage. Events that result in significant personal injury or damage to our property or third parties or other losses that are not fully covered by insurance could have a material adverse effect on our results of operations and financial condition. If we are unable to attract or retain key personnel, our ability to operate effectively may be impaired, which could have a material adverse effect on our business, financial condition and results of operations. Our ability to operate our business and implement strategies depends, in part, on the efforts of our executive officers and other key personnel. Our future success will depend on, among other factors, our ability to retain our current key personnel and attract and retain qualified future key personnel, particularly executive management. If we are unable to attract or retain key personnel, our ability to operate effectively may be impaired, which could have a material adverse effect on our business, financial condition and results of operations. We depend on a small number of customers for the majority of our sales. A reduction in business from any of these customers could cause a significant decline in our overall sales and profitability. The majority of our sales are generated from a small number of customers. During 2018, 2017 and 2016, two customers accounted for an aggregate of approximately $367 million, $447 million and $467 million in net sales, representing 25%, 27% and 29% of our net sales, respectively, for those periods. We expect that we will continue to depend for the foreseeable future upon a small number of customers for a significant portion of our sales. Our agreements with these customers generally do not require them to purchase any specified volume or dollar value of ethanol or co-products, or to make any purchases whatsoever. Therefore, in any future period, our sales generated from these customers, individually or in the aggregate, may not equal or exceed historical levels. If sales to any of these customers cease or decline, we may be unable to replace these sales with sales to either existing or new customers in a timely manner, or at all. A cessation or reduction of sales to one or more of these customers could cause a significant decline in our overall sales and profitability. We incur significant expenses to maintain and upgrade our operating equipment and plants, and any interruption in the operation of our facilities may harm our operating performance. We regularly incur significant expenses to maintain and upgrade our equipment and facilities. The machines and equipment we use to produce our products are complex, have many parts and some are run on a continuous basis. We must perform routine maintenance on our equipment and will have to periodically replace a variety of parts such as motors, pumps, pipes and electrical parts. In addition, our facilities require periodic shutdowns to perform major maintenance and upgrades. These scheduled facility shutdowns result in decreased sales and increased costs in the periods in which a shutdown occurs and could result in unexpected operational issues in future periods as a result of changes to equipment and operational and mechanical processes made during the shutdown period. Our lack of long-term ethanol orders and commitments by our customers could lead to a rapid decline in our sales and profitability. We cannot rely on long-term ethanol orders or commitments by our customers for protection from the negative financial effects of a decline in the demand for ethanol or a decline in the demand for our marketing services. The limited certainty of ethanol orders can make it difficult for us to forecast our sales and allocate our resources in a manner consistent with our actual sales. Moreover, our expense levels are based in part on our expectations of future sales and, if our expectations regarding future sales are inaccurate, we may be unable to reduce costs in a timely manner to adjust for sales shortfalls. Furthermore, because we depend on a small number of customers for a significant portion of our sales, the ramifications of these risks are greater in magnitude than if our sales were less concentrated. As a result of our lack of long-term ethanol orders and commitments, we may experience a rapid decline in our sales and profitability. There are limitations on our ability to receive distributions from our subsidiaries. We conduct most of our operations through subsidiaries and are dependent upon dividends or other intercompany transfers of funds from our subsidiaries to generate free cash flow. Moreover, some of our subsidiaries are limited in their ability to pay dividends or make distributions, loans or advances to us by the terms of their financing arrangements. At September 30, 2019, we had approximately $184.8 million of net assets at our subsidiaries that were not available to be distributed in the form of dividends, distributions, loans or advances due to restrictions contained in their financing arrangements. Risks Relating to Ownership of Our Common Stock and this Offering We have received a delisting notice from The Nasdaq Stock Market. Our common stock may be involuntarily delisted from trading on The Nasdaq Capital Market if we fail to regain compliance with the minimum closing bid price requirement of $1.00 per share. A delisting of our common stock is likely to reduce the liquidity of our common stock and may inhibit or preclude our ability to raise additional financing and may also materially and adversely impact our credit terms with our vendors. The quantitative listing standards of The Nasdaq Stock Market, or Nasdaq, require, among other things, that listed companies maintain a minimum closing bid price of $1.00 per share. We failed to satisfy this threshold for 30 consecutive trading days and on July 17, 2019, we received a letter from Nasdaq stating that the bid price of our common stock for the last 30 consecutive trading days had closed below the minimum $1.00 per share required for continued listing under Nasdaq Listing Rule 5550(a)(2). We were provided an initial period of 180 calendar days, or until January 13, 2020, during which to regain compliance. We failed to regain compliance by January 13, 2020 but we were provided a final additional period of 180 calendar days, or until July 13, 2020, during which to regain compliance. The letter states that Nasdaq will provide written notification that we have achieved compliance if at any time before July 13, 2020, the bid price of our common stock closes at $1.00 per share or more for a minimum of 10 consecutive trading days unless Nasdaq exercises its discretion to extend this 10 day period. If we do not regain compliance by July 13, 2020, Nasdaq will provide written notice that our common stock is subject to delisting. Given the challenging environment in the biofuels industry, we may be unable to regain compliance with the closing bid price requirement by July 13, 2020. A delisting of our common stock is likely to reduce the liquidity of our common stock and may inhibit or preclude our ability to raise additional financing and may also materially and adversely impact our credit terms with our vendors. Our future ability to raise capital may be limited by applicable laws and regulations. Our capital raising activities have benefited from using a "shelf" registration on Form S-3, which typically enables an issuer to raise additional capital on a more timely and cost effective basis than through other means, such as registration of a securities offering under a Form S-1 registration statement. Our current and future ability to raise additional capital through the sale and issuance of our equity securities may be limited by, among other things, current Securities and Exchange Commission, or the SEC, rules and regulations. Under current SEC rules and regulations, to be eligible to use a Form S-3 registration statement for primary offerings without restriction as to the amount of securities to be sold and issued, the aggregate market value of our common equity held by non-affiliates (i.e., our "public float") must be at least $75.0 million at the time we file the Form S-3 (calculated pursuant to the General Instructions to Form S-3). Furthermore, with respect to our effective Form S-3 registration statement, the SEC s rules and regulations require that we periodically re-evaluate the value of our public float (typically when we file our Annual Report on Form 10-K) to determine whether we continue to satisfy the foregoing public float requirement. As of the date of this prospectus, we do not satisfy the $75.0 million public float requirement. As a result, the amount we can raise through primary offerings of our securities in any 12-month period using a Form S-3 registration statement is limited to an aggregate of one-third of our public float. Moreover, the market value of all securities sold by us under our Form S-3 registration statements during the 12-month period prior to any intended sale will be subtracted from that amount to determine the amount we can then raise under our Form S-3 registration statements. If our public float increases to $75.0 million or more, this limitation would cease to apply until we conduct our next re-evaluation. The conversion of convertible securities and the exercise of outstanding options and warrants to purchase our common stock could substantially dilute your investment, impede our ability to obtain additional financing and cause us to incur additional expenses. Our Series B Preferred Stock, which are convertible into our common stock, and outstanding options to acquire our common stock issued to employees, directors and others, and the Warrants to purchase our common stock, allow the holders of these securities an opportunity to profit from a rise in the market price of our common stock such that conversion or exercise of the securities will result in dilution of the equity interests of our common stockholders. The terms on which we may obtain additional financing may be adversely affected by the existence and potentially dilutive impact of our Series B Preferred Stock, options and Warrants. In addition, holders of our Series B Preferred Stock and Warrants have registration rights with respect to the common stock underlying those Series B Preferred Stock and Warrants, the registration of which involves substantial expense. The market price of our common stock and the value of your investment could substantially decline if shares of our Series B Preferred Stock are converted into shares of our common stock and if our options and Warrants are exercised for shares of our common stock and all of these shares of common stock are resold into the market, or if a perception exists that a substantial number of shares of common stock will be issued upon conversion of our Series B Preferred Stock or upon exercise of our Warrants or options and then resold into the market. Sales of a substantial number of shares of common stock issued upon conversion of our Series B Preferred Stock and upon exercise of our Warrants and options, or even the perception that these sales could occur, could adversely affect the market price of our common stock. As a result, you could experience a substantial decline in the value of your investment as a result of both the actual and potential conversion of our outstanding shares of Series B Preferred Stock and exercise of our outstanding Warrants or options. Our stock price is highly volatile, which could result in substantial losses for investors purchasing shares of our common stock and in litigation against us. The market price of our common stock has fluctuated significantly in the past and may continue to fluctuate significantly in the future. The market price of our common stock may continue to fluctuate in response to one or more of the following factors, many of which are beyond our control: fluctuations in the market price of ethanol and its co-products; the cost of key inputs to the production of ethanol, including corn and natural gas; the volume and timing of the receipt of orders for ethanol from major customers; competitive pricing pressures; our ability to timely and cost-effectively produce, sell and deliver ethanol; the announcement, introduction and market acceptance of one or more new alternatives to ethanol; changes in market valuations of companies similar to us; stock market price and volume fluctuations generally; regulatory developments or increased enforcement; fluctuations in our quarterly or annual operating results; additions or departures of key personnel; the timing and results of our strategic initiatives; our inability to obtain financing; our financing activities and future sales of our common stock or other securities, as well as stockholder dilution; and our ability to maintain contracts that are contracts that re critical to our operations. Demand for ethanol could also be adversely affected by a slow-down in overall demand for oxygenate and gasoline additive products. The levels of our ethanol production and purchases for resale will be based upon forecasted demand. Accordingly, any inaccuracy in forecasting anticipated revenues and expenses could adversely affect our business. The failure to receive anticipated orders or to complete delivery in any quarterly period could adversely affect our results of operations for that period. Quarterly results are not necessarily indicative of future performance for any particular period, and we may not experience revenue growth or profitability on a quarterly or an annual basis. 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. 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. In the past, securities class action litigation has often been brought against a company following periods of high stock price volatility. We may be the target of similar litigation in the future. Securities litigation could result in substantial costs and divert management s attention and our resources away from our business. Any of the risks described above could have a material adverse effect on our results of operations, the price of our common stock, or both.

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+RISK FACTORS Investing in the New Notes involves risks. You should carefully read and consider the risks described below as well as the risks described in the sections entitled "Business" and "Risk Factors" in our Annual Report on Form 10-K for the year ended June 30, 2019 and the section entitled "Item 8.01 Other Events Part II Supplemental Risk Factor" in our Current Report on Form 8-K filed on March 9, 2020, each of which is incorporated by reference into this prospectus. You should also carefully read and consider the sections entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K for the year ended June 30, 2019 and in our Quarterly Reports on Form 10-Q for the quarters ended September 30, 2019 and December 31, 2019 and other information contained in the documents incorporated and deemed to be incorporated by reference into this prospectus, including the risks and uncertainties described above under "Cautionary Statement Regarding Forward-Looking Statements" before making a decision to exchange Existing Notes for New Notes. Each of these risks could materially and adversely affect our business, financial condition, results of operations, liquidity and prospects and could result in a partial or complete loss of your investment. Certain capitalized terms used in this "Risk Factors" section and not defined previously in this prospectus are defined under the caption "Description of the New Notes." Risks Related to the Exchange Offer If you choose not to exchange your Existing Notes in the Exchange Offers, the transfer restrictions currently applicable to your Existing Notes will remain in force and the market price and liquidity of your Existing Notes may decline. If you do not exchange your Existing Notes for New Notes in the applicable Exchange Offer, then your Existing Notes will remain outstanding and will continue to accrue interest but will remain subject to the transfer restrictions set forth in the applicable Indenture and in the legend on the certificates evidencing the Existing Notes, as well as the restrictions on transfer arising under the Securities Act and any other applicable securities laws, and you will not be entitled to receive any additional interest on your Existing Notes and will not (subject to possible limited exceptions) be entitled to any registration rights or other rights under the applicable Registration Rights Agreement for your Existing Notes. In general, you may offer or sell your Existing Notes only if: they are offered and sold pursuant to a registration statement which is effective under, and otherwise in compliance with the registration and prospectus delivery requirements of, the Securities Act, or they are offered and sold under an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, subject, in each of the foregoing cases, to compliance with the securities laws of any other applicable jurisdiction and with the procedures specified in the applicable Indenture, including the delivery of any certificate, opinion of counsel or other information that may be required by that Indenture or by the Issuers. The Issuers do not intend to register the Existing Notes under the Securities Act or to make a prospectus available to enable you to sell or otherwise transfer your Existing Notes. Any Existing Notes of a particular series exchanged for New Notes of that series in the applicable Exchange Offer will be cancelled and, as a result, the aggregate principal amount of outstanding Existing Notes of that series will be reduced, which may have a material adverse effect on the market price and liquidity of any Existing Notes of that series that remain outstanding after that Exchange Offer and may increase the volatility of the market price of such Existing Notes. Table of Contents You must follow the Exchange Offer procedures carefully in order to receive the New Notes. If you do not follow the procedures described in this prospectus, you will not receive any New Notes. The New Notes of a particular series will be issued to you in exchange for Existing Notes of the corresponding series only if you properly tender the Existing Notes and deliver all other required documentation (including the Agent's Message, Book-Entry Confirmation related to such tender) to the Exchange Agent in the manner and at the address specified in this prospectus prior to the expiration of the applicable Exchange Offer. If you want to tender your Existing Notes in exchange for New Notes, you should allow sufficient time to ensure timely delivery. No one is under any obligation to notify you of defects or irregularities with respect to tenders of your Existing Notes for exchange or if your Existing Notes or any other required documentation are received by the Exchange Agent. If you are the beneficial holder of Existing Notes that are held through a broker, dealer, bank or other financial institution or nominee and you wish to tender such Existing Notes in any Exchange Offer, you should promptly contact the entity through which you hold your Existing Notes and instruct that entity to tender on your behalf. There are no guaranteed delivery procedures available in connection with any of the Exchange Offers. Accordingly, you must deliver your Existing Notes and all other required documentation to the Exchange Agent in accordance with the procedures described in this prospectus prior to the expiration of the applicable Exchange Offer. Certain persons who participate in the Exchange Offers must deliver a prospectus in connection with resales of the New Notes. If you are participating in any Exchange Offer for the purpose of participating in a distribution (within the meaning of the Securities Act) of the New Notes to be acquired in that Exchange Offer, if you are a broker-dealer who will receive New Notes in any Exchange Offer in exchange for Existing Notes that you acquired from the applicable Issuer for resale pursuant to Rule 144A under the Securities Act or any other available exemption under the Securities Act, or if you fall into one or more of categories (1) through (3) appearing in the first paragraph under "The Exchange Offers Resales of New Notes," you will not be permitted to tender your Existing Notes in the related Exchange Offer and, in the absence of an applicable exemption, you must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any offer, sale or other transfer of your New Notes. Failure to comply with such registration and prospectus delivery requirements may result in liability under the Securities Act and neither the Issuers nor the Guarantors will be responsible for, or indemnify you against, any such liability. In addition, a broker-dealer that receives New Notes for its own account in any Exchange Offer in exchange for Existing Notes that it acquired for its own account as a result of its market making or other trading activities (a "participating broker-dealer") must deliver (or, to the extent permitted by applicable law, make available) a prospectus meeting the requirements of the Securities Act to purchasers and other transferees in connection with any resale or other transfer of New Notes received in exchange for such Existing Notes in the Exchange Offer. Although participating broker-dealers (and not any other broker-dealers) are permitted to use this prospectus, as it may be amended or supplemented from time to time, in connection with the resale or other transfer of any such New Notes, they may do so only if they notify the applicable Issuer or Amcor plc in writing and may only use this prospectus for such purpose for a period of 180 days (subject to our right to suspend use of the prospectus under certain circumstances) after the Settlement Date of the applicable Exchange Offer. Table of Contents Risks Related to the New Notes Since the Issuers and the Guarantors conduct their operations through other subsidiaries, your right to receive payments on the New Notes and Guarantees is dependent on the payment of dividends, interest payments on intercompany loans or other intercompany transfers to the applicable Issuers or Guarantors from their respective subsidiaries. The Issuers and Guarantors conduct their operations through their subsidiaries. Their principal source of income is dividends and interest on intercompany loans they make to their subsidiaries and other intercompany transfers, and their ability to meet their financial obligations is dependent on the level of dividends, loan repayments and other intercompany transfers of funds they receive from their subsidiaries. In addition, the ability of the directors of a subsidiary of the Issuers or Guarantors to declare dividends or the amount of dividends they may pay will depend on that subsidiary's operating results and will be subject to applicable laws which may limit such payments. Therefore, your right to receive payments on the New Notes and Guarantees is dependent on the payment of dividends, interest payments on intercompany loans or other intercompany transfers to the applicable Issuer or Guarantors from their respective subsidiaries. Your right to receive payment under the New Notes will structurally rank behind the creditors of Amcor plc's subsidiaries (other than the Issuers) that are not guaranteeing the New Notes. The New Notes of each series will be guaranteed by Amcor plc, the parent company of the Issuers, and certain of Amcor plc's subsidiaries. However, a significant majority of Amcor plc's current and future subsidiaries will not guarantee the New Notes. In the event that any subsidiary of Amcor plc, other than the Issuers, that does not guarantee the New Notes (such subsidiaries, the "non-guarantor subsidiaries") becomes insolvent, liquidates, reorganizes, dissolves or otherwise winds up, the assets of such subsidiary will be used to satisfy the claims of its creditors. Because the non-guarantor subsidiaries have no direct obligations in respect of the New Notes of any series, you will not have a direct claim against any non-guarantor subsidiary and any claims to enforce payment on your New Notes (including through Amcor plc's Guarantee of the New Notes) will be structurally subordinated to all of the claims of the creditors of the non-guarantor subsidiaries. As of December 31, 2019, the non-guarantor subsidiaries, including joint ventures, had US$84 million of total indebtedness (of which none was secured). For our fiscal half year 2020, the non-guarantor subsidiaries, including joint ventures, represented 93% of Amcor's sales revenue. Because the New Notes and the Guarantees are unsecured, your right to receive payment will be effectively subordinated in right of payment to the applicable Issuer's and the applicable Guarantors' secured indebtedness, and thereby may be adversely affected. The New Notes and the Guarantees will be unsecured obligations of each applicable Issuer and each applicable Guarantor, respectively, and be effectively subordinated to any of the applicable Issuer's or the applicable Guarantor's secured indebtedness to the extent of the value of the assets that secure such indebtedness. Although the Issuers and the Guarantors did not have any secured indebtedness as of December 31, 2019, they may incur such secured indebtedness in the future In addition, to the extent that the Issuers or the Guarantors have granted, or in the future may grant, security interests over their assets, the secured lenders will be entitled to exercise the remedies available to them under applicable laws. Depending on the relevant circumstances and applicable laws, if an Issuer defaults on the applicable New Notes or the Guarantors default on the applicable Guarantees, or after the bankruptcy, liquidation or reorganization of any of them, then any assets that are secured will be used to satisfy the obligations they secure before such assets are available for payments on the applicable New Notes or the applicable Guarantees. There can be no assurance that there will be sufficient assets to pay amounts due on the New Notes or the Guarantees. As a result, you may receive a lower amount proportionately than the lenders of our secured indebtedness. If there Table of Contents is not enough collateral to satisfy the secured indebtedness owed by the applicable Issuer or any Guarantor then, subject to the provisions of applicable laws, the amounts remaining unpaid on such secured indebtedness would share equally with all unsubordinated unsecured indebtedness of such Issuer or such Guarantor (including amounts owing under the applicable New Notes and the applicable Guarantees). If either Issuer defaults on its New Notes, or any Guarantor defaults on its Guarantee, your right to receive payments on the applicable New Notes or Guarantee may be adversely affected by United States, United Kingdom, Jersey and Australian insolvency laws. Bemis is incorporated in Missouri in the United States, AFUI is incorporated in Delaware in the United States and the Guarantors are incorporated under the laws of Jersey, Australia, the United States, and England and Wales and, therefore, insolvency proceedings with respect to the Issuers and Guarantors could proceed under, and be governed by, among others, Jersey, Australian, United States or English insolvency law, as the case may be, and such proceedings may adversely affect your right to receive payments on the applicable New Notes or Guarantees if either Issuer or any Guarantor defaults on its obligations under the applicable series of New Notes or Guarantees, respectively. An insolvency proceeding relating to an Issuer or a Guarantor, even if brought in the United States, may involve proceedings in other jurisdictions. The procedural and substantive provisions of insolvency laws of jurisdictions outside of the United States may differ materially from comparable provisions of United States federal bankruptcy law or the insolvency laws of other jurisdictions with which the holders of the New Notes may be familiar, and may not be as favorable to investors as the laws of the United States or other jurisdictions with which investors are familiar. In particular, the procedures for reorganization (e.g. administration under the Australian Act or under the United Kingdom's Insolvency Act 1986 or analogous procedure under the Companies (Jersey) Law 1991) may be significantly different from Chapter 11 under the United States Bankruptcy Code. The treatment and ranking of holders of the New Notes and the Guarantees, of the Issuers' and the Guarantors' other creditors and the shareholders of the applicable Issuer and the applicable Guarantors under Jersey, Australian and United Kingdom insolvency law, as the case may be, may be different than the resulting treatment and ranking if the applicable Issuer or the applicable Guarantors were subject to the bankruptcy laws of the United States or other jurisdictions and it is not possible to predict with any certainty the outcome of insolvency or similar proceedings. Fraudulent conveyance laws or similar provisions or principles have been enacted or exist for the protection of creditors in a number of jurisdictions, including the United States, Jersey, Australia and the United Kingdom, and Guarantees of the New Notes by the applicable Guarantors may be subject to claims that they should be subordinated or avoided in favor of direct or other creditors of such Guarantors. To the extent that the Guarantee of a Guarantor is voided as a fraudulent conveyance, a preference, a transaction at an undervalue or a fraudulent transaction or otherwise held to be unenforceable or capable of being set aside, your claim against that Guarantor could be lost or limited, and you could be required to return payments previously received from that Guarantor. In particular: Under Jersey law, if a liquidator were to be appointed to Amcor plc (being a Guarantor incorporated under the laws of Jersey), or Amcor plc was declared to be "en d sastre," the liquidator or the Viscount of Jersey, as the case may be, has the power to investigate past transactions entered into by Amcor plc and may seek various court orders, including orders to void certain transactions entered into prior to the winding-up of Amcor plc and for the repayment of money. These transactions are generally known as "voidable transactions" or "vulnerable transactions" and include transactions at an undervalue, preferences, extortionate credit transactions or dispositions with the intention of defrauding creditors. Similarly, under Australian law, if an order to wind-up were to be made against Amcor Pty Ltd (being a Guarantor incorporated under the laws of Australia), and a liquidator were appointed for Table of Contents Amcor Pty Ltd, the liquidator would have the power to investigate the validity of past transactions and may seek various court orders, including orders to void certain transactions entered into prior to the winding up of Amcor Pty Ltd and for the repayment of money. These include transactions entered into within a specified period of the winding up that a court considers uncommercial transactions or transactions entered into when winding up was imminent that had the effect of preferring a creditor or creditors or otherwise defeating, delaying or interfering with the rights of creditors. Further, in England, if a liquidator or administrator were appointed in respect of Amcor UK (being a Guarantor incorporated in England), the liquidator or administrator would also have the power to investigate past transactions and can apply to the court to reverse or set aside certain transactions, or grant other relief that the court considers appropriate. These transactions include, broadly, transactions entered into for no consideration or at an undervalue and transactions which were intended to prefer one or more creditors over one or more other creditors. In addition to the matters described above, under the laws of the jurisdictions where the Guarantors are organized, the Guarantees given by those other Guarantors may be set aside, subordinated or otherwise avoided by the application of fraudulent conveyance, financial assistance, bankruptcy, insolvency and administration, statutory management, equitable subordination principles or other similar provisions or principles existing under the laws of the relevant jurisdiction, including as a result of the application of laws in relation to the duties of directors to act in good faith and for proper purposes. In addition, other debts and liabilities of the applicable Guarantors and of the applicable Issuer, such as certain employee entitlements or amounts owed to tax authorities, may rank ahead of claims under the New Notes and the Guarantees in the event of administration or insolvency or statutory management or similar proceedings. If one or more of the Guarantees are set aside or otherwise avoided, your claim against the applicable Guarantors giving those Guarantees could be lost or limited and it is possible that you will only have a claim against the applicable Issuer and any remaining Guarantors. There is no established trading market for the New Notes, and one may not develop. Prior to this offering, there was no established trading market for the New Notes. There can be no assurance regarding the future development of a market for the New Notes, the ability of holders of the New Notes to sell their New Notes or the price at which such holders may be able to sell their New Notes. If such a market were to develop, the New Notes could trade at prices that may be higher or lower than the price you paid for the Existing Notes that you exchanged for such New Notes depending on many factors, including prevailing interest rates, our operating results and credit ratings and the market for similar securities. The condition of the financial markets and prevailing interest rates have fluctuated in the past and are likely to fluctuate in the future, which could have an adverse effect on the market prices of the New Notes. There can be no assurance as to the liquidity of any trading market for the New Notes or that an active public market for the New Notes will develop. Service of process, enforcement of judgments and bringing of original actions in the United States may be difficult. The Issuers are each incorporated in the United States and the Guarantors are incorporated under the laws of Jersey, Australia, the United States and the United Kingdom, with substantially all of their respective properties and assets located outside of, and the majority of their respective directors and executive officers and the experts named in this prospectus not residents of, the United States. As a result, you may find it difficult to effect service of process within the United States upon such directors, executive officers or experts so that you may enforce judgments of United States courts against them in the United States based on the civil liability provisions of the United States federal securities laws. In addition, there may be doubts as to the enforceability in Australia, in original actions or in actions for Table of Contents enforcement of judgments of United States courts, of civil liabilities based solely on United States federal securities laws. See also "Enforceability of Civil Liabilities." A lowering or withdrawal of the credit ratings assigned to Amcor plc's debt securities by rating agencies may adversely affect the market value of the New Notes, increase Amcor plc's future borrowing costs and reduce its access to capital. Any credit rating assigned to Amcor plc could be lowered or withdrawn entirely by any rating agency if, in that rating agency's judgment, future circumstances relating to the basis of the credit rating, such as adverse changes, so warrant. Real or anticipated changes in Amcor plc's credit ratings will generally affect the market value of the New Notes. Credit ratings are not recommendations to purchase, hold or sell the New Notes. Additionally, credit ratings may not reflect the potential effect of risks relating to the structure or marketing of the New Notes. Any future lowering of Amcor plc's credit ratings likely would make it more difficult or more expensive for it to obtain additional debt financing. If any credit rating initially assigned to the New Notes is subsequently lowered or withdrawn for any reason, you may not be able to resell your New Notes without a substantial discount. The New Notes will initially be held in book-entry form, and therefore you must rely on the procedures of the relevant clearing systems to exercise any rights and remedies. The New Notes will initially only be issued in global certificated form and held through DTC. Interests in the Global Notes will trade in book-entry form only, and New Notes in definitive registered form will be issued in exchange for book-entry interests only in very limited circumstances. Owners of book-entry interests will not be considered owners or holders of New Notes. The nominee for DTC will be the sole registered holder of the Global Notes representing the corresponding New Notes. Payments of principal, interest and other amounts owing on or in respect of the Global Notes representing the corresponding New Notes will be made to Deutsche Bank Trust Company Americas, as paying agent, which will make payments to DTC. Thereafter, these payments will be credited to participants' accounts that hold book-entry interests in the Global Notes representing the corresponding New Notes and credited by such participants to indirect participants. After payment to the nominee of DTC, neither we nor the Trustee or any paying agent for the New Notes will have any responsibility or liability for the payment of interest, principal or other amounts to the owners of book-entry interests. Accordingly, if you own a book-entry interest, you must rely on the procedures of DTC, and if you are not a participant in DTC, on the procedures of the participant through which you own your interest, to exercise any rights and obligations of a holder of New Notes under the applicable Indenture. Unlike the holders of the New Notes themselves, owners of book-entry interests will not have the direct right to act upon our solicitations for consents or our requests for waivers or other actions from holders of the New Notes. Instead, if you own a book-entry interest, you will be permitted to act only to the extent you have received appropriate proxies to do so from DTC. The procedures implemented for the granting of such proxies may not be sufficient to enable you to vote on a timely basis. Similarly, upon the occurrence of an event of default under the applicable Indenture with respect to the New Notes of a particular series, unless and until definitive registered New Notes of that series are issued in respect of all book-entry interests, if you own a book-entry interest, you will be restricted to acting through DTC. The procedures to be implemented through DTC may not be adequate to ensure the timely exercise of rights under the New Notes. Redemption may adversely affect your return on the New Notes. The New Notes are redeemable at the applicable Issuer's option on the conditions set out in the section entitled "Description of the New Notes." Each Issuer may elect to redeem the applicable series Table of Contents of New Notes at times when prevailing interest rates are lower than when you invested. Should this occur, you may not be able to reinvest the redemption proceeds in a comparable security with an effective interest rate equal to or higher than that applicable to the New Notes being redeemed which may adversely affect your return on the New Notes. The Issuers may not be able to repurchase the New Notes upon a change of control. In certain circumstances following a change of control, an Issuer may be required to offer to repurchase all of its outstanding New Notes of a particular series at 101% of their principal amount plus accrued and unpaid interest, if any. The source of funds for any such purchase of the New Notes will be Amcor plc's available cash or cash generated from the operations of its subsidiaries or other sources, including borrowings, sales of assets or sales of equity or debt securities. The applicable Issuer may not be able to repurchase the applicable New Notes upon a change of control because it may not have sufficient financial resources to purchase all of the applicable New Notes that are tendered following a change of control. A failure by an Issuer to repurchase the applicable New Notes upon a change of control could cause a default under the applicable Indenture and could lead to a cross default under Amcor plc's other outstanding indebtedness. Delaware courts have held that a provision similar to the change of control put right that is in the Indentures may not be enforceable if it is used to improperly limit the ability of equity owners to effect a change of control. The Chancery Court of Delaware has held in published opinions that a provision in an indenture requiring a majority of the directors of the issuer be "continuing directors" could breach the fiduciary duties of the directors and be unenforceable if improperly used to prevent shareholders from effecting a change of control of a company. Under the continuing director provision of the Indentures, "continuing director" means, as of any date of determination, any member of the board of directors of Amcor plc who (i) was a member of such board of directors on the date of the issuance of the New Notes or (ii) was nominated for election or elected to such board of directors with the approval of a majority of the continuing directors who were members of such board of directors at the time of such nomination or election. Under the line of Delaware cases noted above, a decision by a board of directors not to approve dissident shareholder nominees as continuing directors and to allow a change of control to occur may be subject to enhanced fiduciary duties typically applied in corporate change of control disputes. If the directors did not properly discharge those fiduciary duties, the change of control put right could be unenforceable by the holders of the New Notes. As a result, the ability of the holders of New Notes to enforce the continuing director provision in situations in which the provision acted to impede a change of control would be subject to the enhanced judicial scrutiny of the actions by Amcor plc's directors not to approve the director nominees whose election caused the provision to be invoked. The Indentures allow us to undertake certain transactions that may have an adverse impact on the holders of the New Notes. Under the terms of each Indenture, we are permitted to undertake certain transactions that may not be favorable to, and may have an adverse impact on, the holders of the New Notes of the applicable series. For instance, in certain circumstances we may incur liens securing indebtedness of other creditors without providing equal security to the applicable New Notes. Additionally, among other exceptions from the covenant restricting secured indebtedness, we are permitted to incur secured indebtedness in a principal amount of up to 10% of our total tangible assets. As such, certain assets that may be owned by us from to time may be secured in favor of creditors other than holders of the applicable New Notes, which would give such creditors priority claims in respect of such assets. Table of Contents Additionally, the terms of each Indenture permit us to incur an unlimited amount of secured indebtedness so long as the New Notes of the applicable series share equally in that security. In certain circumstances, such as a leveraged buyout or leveraged recapitalization, this may allow us to incur a substantial amount of secured indebtedness that, even if the applicable New Notes have the benefit of the same security, may have an adverse impact on the applicable New Notes. Finally, the terms of the Indentures generally permit us to enter into sale and leaseback transactions. Table of Contents

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+RISK FACTORS Investing in our securities involves a high degree of risk. You should consider and read carefully all of the risks and uncertainties described below, as well as other information contained in this prospectus, before making an investment decision with respect to our securities. The occurrence of any of the following risks or those incorporated by reference, or additional risks and uncertainties not presently known to us or that we currently believe to be immaterial could materially and adversely affect our business, financial condition, results of operations or cash flows. In any such case, the trading price of common stock and the trading price of Series A warrants, if any, could decline, and you may lose all or part of your investment. This prospectus also contains forward-looking statements and estimates that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of specific factors, including the risks and uncertainties described below and those incorporated by reference. This offering may cause the price of common stock to decline, and the price may not recover for a substantial period of time, or at all. The subscription price of units in this offering, together with the number of shares of common stock we propose to issue and ultimately will issue in the offering (including the number of additional shares of common stock we propose to issue and ultimately will issue upon exercise of Series A warrants), may result in an immediate decrease in the market value of the common stock. We cannot predict the effect, if any, that the availability of shares for future sale represented by the Series A warrants will have on the market price of common stock from time to time. If the market price of common stock falls, you may have irrevocably committed to buy shares of common stock in this offering at an effective price per share greater than the prevailing market price. Further, if a substantial number of subscription rights are exercised and the exercising rights holders choose to sell some or all of the shares purchased either directly or upon Series A warrant exercises, the resulting sales could depress the market price of common stock. We cannot assure you that the market price of common stock will not decline prior to the expiration of this offering or that, after shares of common stock are issued upon exercise of subscription rights, you will be able to sell shares of common stock purchased in the offering at a price greater than or equal to the effective price paid in the offering. The subscription price determined for this offering may not be indicative of the fair value of common stock. The subscription price was set by the pricing committee of our board of directors, and you should not consider the subscription price as an indication of the fair value of common stock. The subscription price does not necessarily bear any relationship to the book value of our assets, net worth, past operations, cash flows, earnings/losses, financial condition or any other established criteria for fair value. The market price of common stock could decline during or after this offering, and you may not be able to sell shares of common stock purchased in the offering, including shares of common stock issuable upon the exercise of Series A warrants, at a price equal to or greater than the effective price paid in the offering, or at all. Your interest in our company may be diluted as a result of this offering. If you do not fully exercise your basic rights, you will, at the completion of this offering, own a smaller proportional interest in our company on a fully diluted basis than would have been the case if you had fully exercised your basic rights. Based on shares outstanding as of June 30, 2020, after giving effect to this offering (assuming the offering is fully subscribed and the Series A warrants issued in the offering are exercised in full), we would have 24,222,718 shares of common stock outstanding, representing an increase in outstanding shares of 89.3%. The subscription rights are non-transferable. You cannot transfer or sell your subscription rights to anyone else. We therefore do not intend to list the subscription rights on any securities exchange or include them in any automated quotation system and there will be no market for the subscription rights. Holders of Series A warrants issued in this offering will have no rights as holders of common stock until they exercise their Series A warrants and acquire common stock. Until holders of Series A warrants issued in this offering acquire shares of common stock upon exercise of such Series A warrants, they will have no rights with respect to the shares of common stock underlying such TABLE OF CONTENTS Series A warrants. Upon exercise of the Series A warrants, the holders thereof will be entitled to exercise the rights of holders of common stock only as to matters for which the record date occurs after the warrant exercise date. We may be unable to list the Series A warrants on the New York Stock Exchange, which would significantly limit your ability to resell your Series A warrants. There is no established trading market for the Series A warrants to be issued pursuant to this offering, and such Series A warrants may not be widely distributed. Although we have applied to list the Series A warrants for trading on NYSE American, we may not be able to meet the applicable listing standards for reasons that are outside of our control. Among other requirements, in order for the Series A warrants to be listed on NYSE American, at least 100 holders must purchase and hold an aggregate of at least 200,000 Series A warrants. Satisfaction of those listing requirements therefore depends upon the extent to which rights holders elect to purchase units in this offering. We cannot assure you that we will meet these, or other, listing standards of NYSE American with respect to the Series A warrants. If we do not meet such required listing standards, we will endeavor to list the Series A warrants on another suitable securities exchange or recognized trading system. Even if a market for the Series A warrants does develop, the price of the Series A warrants may fluctuate and liquidity may be limited. Holders of Series A warrants may be unable to resell their Series A warrants at a favorable price, or at all. The market price of common stock may never exceed the exercise price of the Series A warrants. The Series A warrants will be exercisable commencing on their date of issuance and expiring on August 1, 2025. The market price of common stock may never exceed the exercise price of the Series A warrants prior to their date of expiration. Any Series A warrants not exercised by their date of expiration will expire without residual value to holders. During the period immediately following the expiration of this offering, you may not be able to resell any shares of common stock that you purchase in the offering or upon exercise of your Series A warrants. If you exercise your subscription rights, you may not be able to resell shares of common stock purchased by exercising your subscription rights, or shares of common stock issued to you upon exercise of your Series A warrants, until you (or your broker or other nominee) have received a stock certificate or book-entry representing those shares. Although we will endeavor to issue the appropriate certificates and book entries promptly, there may be some delay between the expiration date of this offering, or the exercise date of your Series A warrants and the time that we issue the new stock certificates and book entries. In addition, to the extent you are an affiliate, as defined in Rule 144 under the Securities Act, the resale of shares of common stock or Series A warrants by you will be subject to certain restrictions, including volume limitations, under Rule 144. We may have broad discretion in the use of a significant portion of the net proceeds from this offering and may not use those net proceeds effectively. We intend to use the net proceeds to accelerate our restructuring efforts, improve our overall liquidity and reduce our indebtedness, and for other general corporate purposes. We cannot specify with any certainty the particular uses of the net proceeds, if any, that we receive from this offering. Our management will have broad discretion in the application of those additional net proceeds, and we may spend or invest those net proceeds in a way with which shareholders disagree. The failure by management to apply these funds effectively could harm our business and financial condition. Pending their use, we may invest the net proceeds in a manner that does not produce income or that loses value. If we terminate this offering, neither we nor the subscription agent will have any obligation to you except to promptly return your subscription payments. We may terminate this offering at any time. If we do, neither we nor the subscription agent will have any obligation to you with respect to subscription rights that you have exercised, other than to promptly return, without interest or deduction, the subscription payment you delivered to the subscription agent. TABLE OF CONTENTS If you do not act on a timely basis and follow subscription instructions, your exercise of subscription rights may be rejected. Holders of common stock who desire to purchase units in this 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. (Eastern time) on the expiration date, unless this offering is extended. If you are a beneficial owner of shares of common stock and you wish to exercise your subscription rights, you must act promptly to ensure that your broker, custodian bank or other nominee (including any mobile investment platform) acts for you and that all required forms and payments are actually received by your broker, custodian bank or other nominee (including any mobile investment platform) in sufficient time to deliver such forms and payments to the subscription agent in order to exercise your subscription rights by 5:00 p.m. (Eastern time) on the expiration date, unless extended. We will not be responsible if your broker, custodian or nominee (including any mobile investment platform) fails to ensure that all required forms and payments are actually received by the subscription agent in a timely manner. 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 of rights, 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 undertakes to contact you concerning an incomplete or incorrect subscription form or payment, nor are we or the subscription agent 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. If you pay the subscription price by uncertified check, your check may not clear in sufficient time to enable you to exercise your subscription rights. Any uncertified check used to pay for the subscription price in this offering must clear prior to the expiration date of this offering. The clearing process may require five or more business days. If you choose to pay the subscription price, in whole or in part, by uncertified check and your check does not clear prior to the expiration date of this offering, you will not have satisfied the conditions to exercise your rights and you will not receive the units you wish to purchase. You may not receive all of the units for which you subscribe under the over-subscription privilege. Rights holders who fully exercise their basic rights will have the right, pursuant to their over-subscription privileges, to purchase additional units to the extent other rights holders do not exercise their basic rights in full. Over-subscription privileges will be allocated pro rata among rights holders who over-subscribe, based on the number of over-subscription units for which the rights holders have subscribed. We cannot guarantee that you will receive all, or a significant portion, of the units for which you subscribe pursuant to your over-subscription privilege. If the number of units allocated to you is less than your subscription request, the excess funds held by the subscription agent on your behalf will be promptly returned to you, without interest or deduction, after this offering has expired, and we will have no further obligations to you. Your receipt of subscription rights may be treated as a taxable dividend to you. The distribution of subscription rights in this offering should be a non-taxable stock dividend under Section 305(a) of the Internal Revenue Code of 1986. This position is not binding on the Internal Revenue Service or the courts, however. If this offering is part of a disproportionate distribution under Section 305 of the Internal Revenue Code, your receipt of subscription rights may be treated as the receipt of a distribution equal to the fair market value of the rights. Any such distribution treated as a disproportionate distribution would be treated as dividend income to the extent of our current and accumulated earnings and profits, with any excess being treated as a return of basis to the extent thereof and then as capital gain. See Material U.S. Federal Income Tax Considerations. RHK Capital, as dealer-manager, is not acting as an underwriter or placement agent of the subscription rights or the securities underlying the subscription rights. RHK Capital will act as dealer-manager for this offering and, in that capacity, will provide marketing assistance in connection with the offering. RHK is not underwriting or placing any of the subscription rights or the units (or the common stock or Series A warrants comprising the units) and is not making any TABLE OF CONTENTS recommendation with respect to such subscription rights (including with respect to the exercise or expiration of such subscription rights) or shares of common stock or Series A warrants. RHK Capital will not be subject to any liability to us in rendering services to us except for an act involving bad faith, willful misconduct or gross negligence. Because we do not have a standby purchase agreement, backstop commitment or similar arrangement in connection with this offering, the net proceeds we receive from the offering may be less than we intend. We have currently not entered into any standby purchase agreement, backstop commitment or similar arrangement in connection with this offering. We therefore cannot assure you that any of our shareholders will exercise all or any part of their subscription rights. We do not have arrangements under which RHK Capital or any other investment bank, financial advisor or other entity will be obligated to sell securities not purchased in this offering. If rights holders subscribe for fewer units than anticipated, the net proceeds we receive from this offering could be significantly reduced. Regardless of whether this offering is fully subscribed or we do enter into a standby purchase agreement, backstop commitment or similar arrangement, we may need to raise additional capital in the future. We may in the future enter into a standby purchase agreement, backstop commitment or similar arrangement in connection with this offering if we are able to negotiate commercially reasonable terms with a standby purchaser or backstop purchaser. We cannot assure you that such an arrangement will be available on commercially reasonable terms and if we are unable to negotiate commercially reasonable terms for a standby purchase agreement, backstop commitment or similar arrangement in connection with this offering we would not enter into such an arrangement. In the event we enter into a standby purchase agreement, backstop commitment or similar arrangement in connection with this offering we will file a Current Report on Form 8-K with a summary of the terms of such arrangement. We have not paid dividends since mid-2017 and do not expect to pay dividends in the future. Any return on investment may be limited to the value of our common stock. We have not paid cash dividends on our common stock since mid-2017 and do not anticipate doing so in the foreseeable future. The payment of dividends on our common stock will depend on earnings, financial condition and other business and economic factors affecting us at such time as our board of directors may consider relevant. If we do not pay dividends, our common stock may be less valuable because a return on your investment will only occur if our stock price appreciates. Because the Series A warrants are executory contracts, they may have no value in a bankruptcy or reorganization proceeding. In the event a bankruptcy or reorganization proceeding is commenced by or against us, a bankruptcy court may hold that any then-unexercised Series A warrants are executory contracts subject to rejection by us with the approval of a bankruptcy court. As a result, even if we have sufficient funds, holders may not be entitled to receive any consideration for their Series A warrants or may receive an amount less than they would be entitled to if they had exercised their Series A warrants prior to the commencement of any such bankruptcy or reorganization proceeding. Our By-laws designate the state and federal courts sitting in the judicial district of the Commonwealth of Pennsylvania embracing the county in which our principal executive office is located as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our shareholders, which could discourage lawsuits against us and our directors and officers. Our By-laws provide that, unless we otherwise consent in writing, the state and federal courts sitting in the judicial district of the Commonwealth of Pennsylvania embracing the county in which our principal executive office is located will be the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of us, (b) any action asserting a claim of breach of a fiduciary duty owed to us or out shareholders by any director or officer, officer or other employee of ours, (c) any action asserting a claim against us or against any of our directors, officers or other employees arising pursuant to any provision of the Pennsylvania Business Corporation Law of 1988 (or the PBCL) or our Articles of Incorporation or By-laws, (d) any action seeking to interpret, apply, enforce, or determine the validity of the Article of Incorporation or our By-laws, or (e) any action asserting a claim against us or any director or officer or other employee of ours governed by the internal TABLE OF CONTENTS affairs doctrine. This exclusive forum provision does not apply to suits brought to enforce a duty or liability created by the Securities Exchange Act of 1934, as amended or the Securities Act of 1933, as amended, which we refer to as the Securities Act, except to the extent Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rule and regulations thereunder. This exclusive forum provision may limit the ability of our shareholders to bring a claim in a judicial forum that such shareholders find favorable for disputes with us or our directors or officers, which may discourage such lawsuits against us and our directors and officers. Alternatively, if a court outside of Pennsylvania were to find this exclusive forum provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings described above, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, results of operations and financial condition. TABLE OF CONTENTS

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+RISK FACTORS The following are certain risk factors that could affect our business, financial condition and results of operations. You should carefully consider the risks described below, together with the other information contained in this prospectus, including our consolidated financial statements and the related notes thereto. We cannot assure you that any of the events discussed in the risk factors below will not occur. These risks could have a material and adverse impact on our business, results of operations, financial condition, or prospects. If that were to happen, the trading price of our common stock could decline, and you could lose all or part of your investment. Risks Relating to our Business We must raise additional capital in the first quarter of 2020 to fund our operations in order to continue as a going concern. Currently, we do not have sufficient capital to continue our operations after the first three months of 2020. If we are unable to generate additional funds through financings, sales of our products, government grants, loans, or from other sources or transactions, we would exhaust our resources and be unable to maintain our currently planned operations and continue as a going concern. We therefore plan to seek additional financing in the form of debt or equity to fund our cash requirements for the next twelve months. We may also cut operating costs or delay capital spend in order to preserve available cash. There can be no assurance that we will be successful in securing additional financing, and, if we do not, we would not be able to continue as a going concern, and our stockholders would likely lose most or all of their investment in us. 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. Our consolidated financial statements included in this prospectus have been prepared assuming that we will continue as a going concern and do not include any adjustment 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. We have a history of net losses and will likely incur future losses and may not achieve or maintain profitability. Although we were established in 1991, we did not start to develop our current product portfolio until 1996. In the period from incorporation to September 30, 2019, we have incurred net losses of approximately $129 million. These losses reflect our personnel, research and development, and marketing costs. We have constructed a 250-metric-ton annual capacity production facility in Rollo Bay and in 2017 we acquired a facility in Indiana, which has undergone renovations to increase its annual capacity to 1,200 metric tons. We expect more significant revenues in 2020 once our new facilities are in full production. However, our ability to realize revenues and the timing thereof are not certain, and achieving revenues does not assure that we will become profitable. We will need substantial additional capital in the future in order to fund our business. To date we have not generated any profit and expect to incur losses for the foreseeable future and may never become profitable. Therefore, based on our current business plan, we anticipate a need to raise further funds. Any issuance of shares of our common stock could have an effect of depressing the market price of shares of our common stock through dilution of earnings per share or otherwise. The amount and timing of the expenditures needed to achieve our commercialization plans, including the construction of four to five new, land-based RAS farms at a cost of $75 million to $100 million each, will depend on numerous factors, some of which are outside our control. Changes in our plans could also result in the need for additional funds. Our share price and our ability to raise additional funds may depend on our success in growing, or our perceived ability to grow, our AquAdvantage Salmon successfully and profitably at commercial scale. We have not yet demonstrated that we can grow our AquAdvantage Salmon successfully or profitably at commercial scale. If we are unsuccessful in growing our salmon to harvest size and selling the fish in the market at a profit from our commercial-scale facilities, or are perceived as being unable to do so prior to commercial-scale harvest and sale, we may lose credibility with the investor community and other funding sources, which may negatively impact our share price and our ability to raise additional funds. There can be no assurance that additional funds will be available on a timely basis, on favorable terms, or at all, or that such funds, if raised, would be sufficient to enable us to continue to implement our business strategy. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of holders of our common stock will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of holders of our common stock. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends. If we raise additional funds through government or other third-party funding; marketing and distribution arrangements; or other collaborations, strategic alliances, or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs, or product candidates or to grant licenses on terms that may not be favorable to us. Table of Contents Our ability to generate revenue to support our operations depends on maintaining regulatory approvals for AquAdvantage Salmon and our farm sites and obtaining new approvals for farm sites and the sale of our products in other markets, the receipt of which is uncertain. As a bioengineered animal for human consumption, AquAdvantage Salmon required approval from the FDA in the United States and the Ministers of Health and Environment in Canada before it could be produced, sold, or consumed in those countries. Our FDA approval covers the production of our eggs in our hatchery in Canada and the grow-out of our eggs in our facilities in Indiana and Rollo Bay. FDA approvals will be needed for each additional facility we plan to operate. Additionally, we will require local regulatory approvals in other countries in which we hope to operate. There is no guarantee that we will receive or be able to maintain regulatory approvals from the FDA or other regulatory bodies or that there will not be a significant delay before approval. There is also no guarantee that any approvals granted will not be subject to onerous obligations in relation to matters such as production or labeling, or that any regulator will not require additional data prior to approval, which may be costly and time-consuming to acquire. We will be required to continue to comply with FDA and foreign regulations. Even with the approval of our NADA and other regulatory applications for AquAdvantage Salmon, we must continue to comply with FDA and other regulatory requirements not only for manufacturing, but also for labeling, advertising, record keeping, and reporting to the FDA and other regulators of adverse events and other information. Failure to comply with these requirements could subject us to administrative or judicial enforcement actions, including but not limited to product seizures, injunctions, civil penalties, criminal prosecution, refusals to approve new products, or withdrawal of existing approvals, as well as increased product liability exposure, any of which could have a material adverse effect on our business, financial condition, or results of operations. Ethical, legal, and social concerns about bioengineered products could limit or prevent the use of our products and limit our revenues. Our technologies include the use of bioengineering. Public perception about the safety and environmental hazards of, and ethical concerns over, bioengineered products could influence public acceptance of our technologies and products. Activist groups opposing the bioengineering of organisms have in the past pressured a number of retail food outlets and grocery chains to publicly state that they will not carry bioengineered Atlantic salmon. If we are not able to overcome the ethical, legal, and social concerns relating to bioengineering, products using our technologies may not be accepted in the marketplace, and demand for our products could fall short of what we expect. These concerns could also result in increased expenses, regulatory scrutiny, delays, or other impediments to implementation of our business plan. The subject of bioengineered products has received negative publicity, which has aroused public debate. This adverse publicity could lead to greater regulation and trade restrictions on imports of bioengineered products. Further, there is a concern that products produced using our technologies could be perceived to cause adverse events, which could also lead to negative publicity. We may have limited success in gaining consumer acceptance of our products. There is an active and vocal group of opponents to bioengineered products who wish to ban or restrict the technology and who, at a minimum, hope to sway consumer perceptions and acceptance of this technology. Their efforts include regulatory legal challenges and labeling campaigns for bioengineered products, as well as application of pressure to consumer retail outlets seeking a commitment not to carry bioengineered Atlantic salmon. Consumer acceptance could also be adversely affected if AquAdvantage Salmon were believed to grow to a larger final size than conventional Atlantic salmon. We may not be able to overcome the negative consumer perceptions that these organizations have instilled against our products. We or regulatory agencies approving of our products may be sued by non-governmental organizations and others who are opposed to the development or commercialization of bioengineered products. There are many organizations in the United States and elsewhere that are fundamentally opposed to the development of bioengineered products. These groups have a history of bringing legal action against companies attempting to bring new biotechnology products to market. On December 23, 2013, an application was filed by two NGOs with the Canadian Federal Court seeking judicial review to declare invalid the decision by the Canadian Minister of the Environment to publish in the Canadian Gazette a Significant New Activity Notice ( SNAN ) with respect to AquAdvantage Salmon. Though the Canadian Federal Court dismissed this challenge, the petitioners filed an appeal of the ruling, which was subsequently dismissed by the Canadian Federal Court of Appeal on October 21, 2016. In the United States, a coalition of NGOs filed a complaint on March 30, 2016, against the FDA, the United States Fish and Wildlife Service, and related individuals for their roles in the approval of AquAdvantage Salmon, claiming that the FDA had no statutory authority to regulate bioengineered animals, and, if it did, that the agency failed to analyze and implement measures to mitigate ecological, environmental, and socioeconomic risks that could impact wild salmon and the environment, including the risk that AquAdvantage Salmon could escape and threaten endangered wild salmon stocks. Among other things, the claimants are seeking a judgment that the FDA decision to approve AquAdvantage Salmon is not authorized by the Federal Food, Drug, and Cosmetic Act ( FFDCA ), that an injunction be issued requiring the FDA to withdraw its assertion of jurisdiction over bioengineered animals, that Table of Contents the FDA decision to approve AquAdvantage Salmon and its Environmental Assessment ( EA ) and Finding of No Significant Impact ( FONSI ) determinations be declared in violation of the FFDCA, and that the decision to approve the AquAdvantage Salmon NADA be vacated. Though we believe this legal action lacks merit, it is currently ongoing and may take considerable time to resolve, and plaintiffs may seek to have importation or sale of AquAdvantage Salmon in the United States put on hold until such resolution. We may be subject to future litigation brought by one or more of these organizations in their attempt to block the development or sale of our product. In addition, animal rights groups and various other organizations and individuals have attempted to stop bioengineering activities by pressing for legislation and additional regulation in these areas. To the extent the actions of these organizations are successful, commercialization of our product may be restricted, and our business may be adversely affected. Such actions, even if unsuccessful, may distract management from its operational priorities and may cause us to incur significant costs. The term genetically engineered will need to be included as part of the acceptable market name for AquAdvantage Salmon, and bioengineering disclosures will need to be provided at the retail level, in accordance with USDA regulations. These disclosures could negatively impact consumer acceptance. Until the passage of the National Bioengineered Food Disclosure Law in July 2016, which contained the requirement to establish the Disclosure Standard, our AquAdvantage Salmon did not need to be labeled as containing a bioengineered product, because it had been deemed to be substantially equivalent to the conventional product. However, because several states either passed or considered new laws specifying varying requirements for labeling products sold at the retail level that contain bioengineered ingredients, the United States Congress passed the National Bioengineered Food Disclosure Law in July 2016, requiring USDA to establish a mandatory standard for disclosing foods that are or may be bioengineered. USDA issued the National Bioengineered Food Disclosure Standard in December 2018. AquaBounty plans to include the bioengineered logo on its AquAdvantage Salmon packaging, in accordance with the Disclosure Standard. In addition, the 2020 Appropriations Act, which was signed into law in December 2019, contains an amendment that requires that any engineered animal approved by FDA prior to the effective date of the Disclosure Standard shall include the words genetically engineered prior to the existing acceptable market name. While the Company believes that this labeling requirement is unnecessary and redundant to the requirement of the Disclosure Standard, it plans to work with the USDA and the FDA to determine how to comply. Labeling requirements could cause consumers to view the label as either a warning or as an indication that AquAdvantage Salmon is inferior to conventional Atlantic salmon, which could negatively impact consumer acceptance of our product. The markets in which we intend to sell our products are subject to significant regulations. In addition to our FDA approval for the sale and consumption of AquAdvantage Salmon in the United States, we also will be subject to state and local regulations and permitting requirements, which could impact or delay the commercialization and commencement of revenue generation from the sale of AquAdvantage Salmon. International sales also are subject to rules and regulations promulgated by regulatory bodies within foreign jurisdictions. There can be no assurance that foreign, state, or local regulatory bodies will approve the sale and consumption of our product in their jurisdiction. We may incur significant costs complying with environmental, health, and safety laws and regulations, and failure to comply with these laws and regulations could expose us to significant liabilities. Our operations are subject to a variety of federal, state, local, and international laws and regulations governing, among other matters, the use, generation, manufacture, transportation, international shipment, storage, handling, disposal of, and human exposure to our products in both the United States and overseas, including regulation by governmental regulatory agencies, such as the FDA and the U.S. Environmental Protection Agency. We have incurred, and will continue to incur, capital and operating expenditures and other costs in the ordinary course of our business in complying with these laws and regulations. We may become subject to increasing regulation, changes in existing regulations, and review of existing regulatory decisions. Regulations pertaining to bioengineered animals are still developing and could change from their present state. In addition, new legislation could require new regulatory frameworks, changes in existing regulation, or re-evaluation of prior regulatory decisions. For example, despite the FDA s final determination that AquAdvantage Salmon may be sold without being labeled as a bioengineered product, a provision added to the 2016 Omnibus Appropriations Act required the FDA to issue final guidance for such labeling. The FDA was therefore obligated to maintain an Import Alert starting in January 2016 that prohibited import of AquAdvantage Salmon until such guidance was finalized or the provision was no longer effective. On March 8, 2019, several months after the USDA promulgated its final rule establishing the Disclosure Standard, which included disclosure requirements for bioengineered foods, including AquAdvantage Salmon, the FDA lifted the Import Alert. Similarly, in July 2017, a bill was introduced in the United States Senate that could have, had it become law, required labeling unique to, as well as re-examination of the environmental assessments used by the FDA in its 2015 approval of the NADA for, AquAdvantage Salmon. While this bill was reintroduced in January 2019 without the requirement for re-examination of those environmental assessments, any such legislatively imposed review of a completed regulatory process could result in new restrictions on, or delays in, commercialization of our product in the United States. We could be subject to increasing or more onerous regulatory hurdles as we Table of Contents attempt to commercialize our product, which could require us to incur significant additional capital and operating expenditures and other costs in complying with these laws and regulations. Our regulatory burdens could also increase if AquAdvantage Salmon are found, or believed, to grow to a larger final size than conventional Atlantic salmon. In addition, the 2020 Appropriations Act, which was signed into law in December 2019, contains an amendment that requires that any bioengineered animal approved by FDA prior to the effective date of the Disclosure Standard shall include the words genetically engineered prior to the existing acceptable market name. While the Company believes that this labeling requirement is unnecessary and redundant to the requirement of the Disclosure Standard, it plans to work with the USDA and the FDA to determine how to comply. Atlantic salmon farming is restricted in certain states. Concerns regarding the possible environmental impact from AquAdvantage Salmon have led several states to impose legislative and regulatory restrictions or bans on its farming. In addition, some states, such as Alaska, have enacted restrictions on Atlantic salmon farming generally. While we currently believe that many states will offer excellent potential sites for AquAdvantage Salmon production systems, if additional states adopt similar restrictions, or otherwise prohibit the rearing of AquAdvantage Salmon in those states, the number of potential sites available to us for production farms in the United States could be reduced. The loss of AquAdvantage Salmon broodstock could result in the loss of our commercial technology. AquAdvantage Salmon, or more specifically the breeding population of live fish, or broodstock, themselves, is a product of our combined intellectual property, which includes our trade secrets related to creating and maintaining the broodstock. Destruction of AquAdvantage Salmon broodstocks by whatever means would result in the loss of the product of that commercial technology. Live animals are subject to disease that may, in some cases, prevent or cause delay in the export of fish or eggs to customers. Disease organisms may be present undetected and transferred inadvertently. In addition, our broodstock is kept at a limited number of facilities, and damage to or failure of critical systems at any one of those facilities could lead to the loss of a substantial percentage of our broodstock. Such events may cause loss of revenue, increased costs, or both. The broodstock, however, could be reinstated, in whole or in part, using our technology and stored breeding reserves. Atlantic salmon farming is subject to disease outbreaks, which can increase the cost of production and/or reduce production harvests. Salmon farming systems, particularly conventional, open sea-cage systems, are vulnerable to disease introduction and transmission, primarily from the marine environment or adjacent culture systems. The economic impact of disease to these production systems can be significant, as farmers must incur the cost of preventative measures, such as vaccines and antibiotics, and then, if the fish become infected, the cost of lost or reduced harvests. Although we will produce and grow our AquAdvantage Salmon in land-based, closed containment facilities, we will still be at risk for potential disease outbreaks. We have implemented biosecurity measures in our facilities intended to prevent or mitigate disease impact, but there can be no assurance that any measures will be 100% effective. Our ability to compete may be negatively impacted if we do not adequately protect our proprietary technologies or if we lose some of our intellectual property rights. Our success depends in part on our ability to obtain patents and maintain adequate protection of our intellectual property in the United States and abroad for our technologies and resultant products and potential products. We have adopted a strategy of seeking patent protection in the United States and abroad with respect to certain of the technologies used in or relating to our products; however, the patent to the technology covering AquAdvantage Salmon, which we license under a global, perpetual, royalty-free, non-exclusive license from Genesis Group, Inc., an affiliate of Memorial University of Newfoundland, and an affiliate of the Hospital for Sick Children of Toronto, expired in August 2013. We expect to protect our proprietary technology in regards to AquAdvantage Salmon through a combination of in-house know-how and the deterrence of the regulatory process that would need to be completed for a competing product to be commercialized, which we believe would be cost-prohibitive to our competitors. There can be no guarantee that this strategy will be successful. We also rely on trade secrets to protect our technologies, particularly in cases when we believe patent protection is not appropriate or obtainable. However, trade secrets are difficult to protect, and we may not be able to adequately protect our trade secrets or other proprietary or licensed information. While we require our employees, academic collaborators, consultants, and other contractors to enter into confidentiality agreements with us, if we cannot maintain the confidentiality of our proprietary and licensed technologies and other confidential information, our ability and that of our licensor to receive patent protection, and our ability to protect valuable information owned or licensed by us may be imperiled. Enforcing our intellectual property rights may be difficult and unpredictable. Enforcing our intellectual property rights can be expensive and time consuming, and the outcome of such efforts can be unpredictable. If we were to initiate legal proceedings against a third party to enforce a patent covering one of our technologies, the Table of Contents defendant could counterclaim that our patent is invalid and/or unenforceable or assert that the patent does not cover its manufacturing processes, manufacturing components, or products. Furthermore, in patent litigation in the United States, defendant counterclaims alleging both invalidity and unenforceability are commonplace. Although we may believe that we have conducted our patent prosecution in accordance with the duty of candor and in good faith, the outcome following legal assertions of invalidity and unenforceability during patent litigation is unpredictable. With respect to the validity of our patent rights, we cannot be certain, for example, that there is no invalidating prior art, of which we and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, we would not be able to exclude others from practicing the inventions claimed therein. Such a loss of patent protection could have a material adverse impact on our business. Even if our patent rights are found to be valid and enforceable, patent claims that survive litigation may not cover commercially valuable products or prevent competitors from importing or marketing products similar to our own, or using manufacturing processes or manufacturing components similar to those used to produce the products using our technologies. Although we believe that we have obtained assignments of patent rights from all inventors, if an inventor did not adequately assign their patent rights to us, a third party could obtain a license to the patent from such inventor. This could preclude us from enforcing the patent against such third party. We may not be able to enforce our intellectual property rights throughout the world. The laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the United States. Many companies have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, often do not favor the enforcement of patents and other intellectual property protection, particularly those relating to bioengineering. This could make it difficult for us to stop the infringement of our patents or misappropriation of our other intellectual property rights. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business. Accordingly, our efforts to protect our intellectual property rights in such countries may be inadequate. Security breaches and other disruptions could compromise our information, expose us to fraud or liability, or interrupt our operations, which would cause our business and reputation to suffer. In the ordinary course of our business, we use our servers and networks to store sensitive data, including our proprietary business and financial information; general business information regarding our customers, suppliers, and business partners; and personally identifiable information of our employees. The secure storage and maintenance of this information is critical to our operations. Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error or malfeasance. A breach of our security could compromise our networks, and the information stored there could be accessed, manipulated, publicly disclosed, lost, or stolen. Any such access, manipulation, disclosure, or loss of information could result in errors in our records, fraudulent use of our financial information, legal claims or proceedings, liability under laws that protect the privacy of personal information, theft of our intellectual property, or damage to our reputation. In addition, our systems could be the subject of denial of service or other interference, which could disrupt our operations and commercial transactions. Any of the foregoing could adversely affect our business, revenues, and competitive position. Competitors and potential competitors may develop products and technologies that make ours obsolete or garner greater market share than ours. We do not believe that we have a direct competitor for bioengineered, growth-enhanced Atlantic salmon. However, the market for Atlantic salmon is dominated by a group of large, multinational corporations with entrenched distribution channels. Our ability to compete successfully will depend on our ability to demonstrate that AquAdvantage Salmon is superior to and/or less expensive than other products available in the market. Certain of our competitors may benefit from government support and other incentives that are not available to us. As a result, our competitors may be able to develop competing and/or superior products and compete more aggressively and sustain that competition over a longer period of time than we can. As more companies develop new intellectual property in our markets, a competitor could acquire patent or other rights that may limit our ability to successfully market our product. If our technologies or products are stolen, misappropriated, or reverse engineered, others could use the technologies to produce competing technologies or products. Third parties, including our collaborators, contractors, and others involved in our business often have access to our technologies. If our technologies or products were stolen, misappropriated, or reverse engineered, they could be used by other parties that may be able to reproduce our technologies or products using our technologies for their own commercial gain. If this were to occur, it would be difficult for us to challenge this type of use, especially in countries with limited intellectual property protection. Table of Contents If we lose key personnel, including key management personnel, or are unable to attract and retain additional personnel, it could delay our commercialization plans or harm our research and development efforts, and we may be unable to sell or develop our own products. Our success depends substantially on the efforts and abilities or our officers and other key employees. The loss of any key members of our management, or the failure to attract or retain other key employees who possess the requisite expertise for the conduct of our business, could prevent us from developing and commercializing our products and executing on our business strategy. We may not be able to attract or retain qualified employees in the future due to the intense competition for qualified personnel among aquaculture, biotechnology, and other technology-based businesses, or due to the unavailability of personnel with the particular qualifications or experience necessary for our business. If we are not able to attract and retain the necessary personnel to accomplish our business objectives, we may experience staffing constraints that could adversely affect our ability to meet the demands of our customers in a timely fashion, adequately staff existing or new production facilities, or support our internal research and development programs. In particular, our production facilities require individuals experienced in RAS-based aquaculture, and our product development programs are dependent on our ability to attract and retain highly skilled scientists. Competition for experienced production staff, scientists, and other technical personnel from numerous companies and academic and other research institutions may limit our ability to attract and retain such personnel on acceptable terms. We may encounter difficulties managing our growth, which could adversely affect our business. We could face a period of rapid growth following commercial availability of our products, which may place significant pressure on our management, sales, operational, and financial resources. The execution of our business plan and our future success will depend, in part, on our ability to manage current and planned expansion and on our ability to continue to implement and improve our operational management. Any failure to manage the planned growth may have a significant adverse effect on our business, financial condition, trading performance, and prospects. We may pursue strategic acquisitions and investments that could have an adverse impact on our business if they are unsuccessful. If appropriate opportunities become available, we may acquire businesses, assets, technologies, or products to enhance our business in the future. In connection with any future acquisitions, we could: issue additional equity securities, which would dilute our current shareholders; incur substantial debt to fund the acquisitions; or assume significant liabilities. Acquisitions involve numerous risks, including: difficulties integrating the purchased operations, technologies, or products; unanticipated costs and other liabilities; diversion of management s attention from our core business; adverse effects on existing business relationships with current and/or prospective customers and/or suppliers; risks associated with entering markets in which we have no or limited prior experience; and potential loss of key employees. We do not have extensive experience in managing the integration process, and we may not be able to successfully integrate any businesses, assets, products, technologies, or personnel that we might acquire in the future without a significant expenditure of operating, financial, and management resources. The integration process could divert management time from focusing on operating our business, result in a decline in employee morale, or cause retention issues to arise from changes in compensation, reporting relationships, future prospects, or the direction of the business. Acquisitions also may require us to record goodwill and non-amortizable intangible assets that will be subject to impairment testing on a regular basis and potential periodic impairment charges, incur amortization expenses related to certain intangible assets, and incur large and immediate write-offs and restructuring and other related expenses, all of which could harm our operating results and financial condition. In addition, we may acquire companies that have insufficient internal financial controls, which could impair our ability to integrate the acquired company and adversely impact our financial reporting. If we fail in our integration efforts with respect to any of our acquisitions and are unable to efficiently operate as a combined organization, our business and financial condition may be adversely affected. We have entered into agreements that require us to pay a significant portion of our future revenue to third parties. In 2009, we received a grant from the Atlantic Canada Opportunities Agency to fund a research program. A total of C$2.9 million was made available under the grant, and we received the entire amount through December 31, 2015. Once we begin to generate revenue from any of the products from the research program, we must commence repayment of the outstanding loan in the form of a Table of Contents 10% royalty. These payments could negatively impact our ability to support our operations. Revenues from sales of our AquAdvantage Salmon are not subject to the royalty. In February 2013, we entered into an Exclusive Channel Collaboration Agreement ( ECC ) with Intrexon Corporation (renamed Precigen, Inc. as of February 1, 2020; Precigen ), pursuant to which we are permitted to use Precigen s UltraVector and other technology platforms to develop and commercialize additional bioengineered traits in finfish for human consumption. The ECC grants us a worldwide license to use certain patents and other intellectual property of Precigen in connection with the research, development, use, importing, manufacture, sale, and offer for sale of products involving DNA administered to finfish for human consumption. We agreed under the ECC to pay Precigen, on a quarterly basis, 16.66% of the gross profits calculated for each developed product. We also agreed to pay Precigen 50% of the quarterly revenue obtained from a sublicensee in the event of a sublicensing arrangement. In addition, we agreed to reimburse Precigen for the costs of certain services provided by Precigen. While we are winding down the activities under the ECC, and may renegotiate its terms, it remains in effect. These payments could negatively impact our ability to support our operations. Our financial condition or results of operations may be adversely affected by international business risks, including exchange rate fluctuation. The majority of our employees, including our research personnel, are currently located outside of the United States. As a consequence of the international nature of our business, we are exposed to risks associated with international operations. For example, we are based in the United States and present our financial statements in U.S. dollars, and the majority of our cash resources are held in U.S. dollars or in Canadian dollars. Some of our future expenses and revenues are expected to be denominated in currencies other than in U.S. dollars. Other risks include possible governmental restrictions of the movement of funds, limitation of contractual rights, or expropriation of assets without fair compensation. Therefore, movements in exchange rates to translate to foreign currencies and other international operational risks may have a negative impact on our reported results of operations, financial position, and cash flows. We have received government research grants and loans in the past, but such grants and loans may not be available in the future. We have in the past received government assistance in the form of research grants and loans to partially fund various research projects, including projects involving our AquAdvantage Salmon. There can be no assurance that additional government assistance will be available in the future to help offset the cost of our research activities, in which case we would need to fund our research projects entirely from our available cash resources, which may be limited. This could delay progress on future product development and introduction. In addition, we may be subject to audit by the government agencies that provided research assistance to ensure that the funds were used in accordance with the terms of the grant or loan. Any audit of the use of these funds would require the expenditure of funds and result in the diversion of management s attention. Certain members of management and our Board of Directors may hold stock in both Precigen and AquaBounty, and as a result may face actual or potential conflicts of interest. The management and directors of each of Precigen and AquaBounty may own both Precigen common stock and AquaBounty common stock. This ownership overlap could create, or appear to create, potential conflicts of interest when AquaBounty management and directors and Precigen management and directors face decisions that could have different implications for AquaBounty and Precigen. Our ability to use net operating losses and other tax attributes to offset future taxable income may be subject to certain limitations. In general, under Sections 382 and 383 of the U.S. Tax Code (the Code ), a corporation that undergoes an ownership change is subject to limitations on its ability to utilize its pre-change net operating losses ( NOLs ), tax credits, or other tax attributes to offset future taxable income or taxes. For these purposes, an ownership change generally occurs where the aggregate stock ownership of one or more stockholders or groups of stockholders who owns at least 5% of a corporation s stock increases its ownership by more than 50 percentage points over its lowest ownership percentage within a specified testing period. In addition to limitations imposed by the 2017 Tax Cuts and Jobs Act, a portion of our NOLs are subject to substantial limitations arising from previous ownership changes, and, if we undergo another ownership change, our ability to utilize NOLs could be further limited by Sections 382 and 383 of the Code. In addition, future changes in our stock ownership, many of which are outside of our control, could result in an ownership change under Sections 382 and 383 of the Code. Our NOLs may also be impaired under state law. Accordingly, we may not be able to utilize a material portion of our NOLs. Furthermore, our ability to utilize our NOLs is conditioned upon our attaining profitability and generating U.S. federal and state taxable income. Table of Contents Risks Relating to this Offering and our Common Stock TS AquaCulture LLC s significant share ownership position allows it to influence corporate matters. Based solely on a Schedule 13D/A filed on October 31, 2019, by Randal J. Kirk ( Mr. Kirk ), Third Security, LLC ( Third Security ), TS AquaCulture LLC ( TS AquaCulture ), and Precigen, as of issuance, TS AquaCulture owns 8,239,199 shares of our common stock, or approximately 38.1% of our outstanding shares. In addition, entities controlled by Mr. Kirk, including Third Security and its affiliates other than TS AquaCulture, currently hold 837,554 shares of our common stock, or approximately 3.9% of our outstanding shares. TS AquaCulture is managed by Third Security and is successor-in-interest to Precigen under the Relationship Agreement entered into by AquaBounty and Precigen dated as of December 5, 2012 (the Relationship Agreement ). Based on these holdings, Mr. Kirk, Precigen s Executive Chairman and Third Security s Chief Executive Officer and Senior Managing Director, has reported control over approximately 42.0% of our outstanding shares. Given this, and our grant to TS AquaCulture, as successor-in-interest to Precigen under the Relationship Agreement, of certain rights to nominate members of our Board of Directors that are intended to ensure that TS AquaCulture-nominated Board members represent a percentage of our Board that is proportionate to TS AquaCulture s percentage ownership of our common stock, TS AquaCulture will be able to significantly influence who serves on our Board of Directors and the outcome of matters required to be submitted to our shareholders for approval, including decisions relating to the outcome of any proposed merger or consolidation of our company. TS AquaCulture s interests may not be consistent with those of our other shareholders. Furthermore, TS AquaCulture s significant interest in us may discourage third parties from seeking to acquire control of us, which may adversely affect the market price of our common stock. An active trading market for our common stock may not develop or be sustained. Although our common stock is currently traded on the Nasdaq Capital Market, an active trading market for our common stock may not be maintained. If an active market for our common stock is not maintained, it may be difficult for shareholders to sell shares of our common stock. An inactive trading market may 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. The price of our shares of common stock is likely to be volatile. The share price of publicly traded emerging companies can be highly volatile and subject to wide fluctuations. The prices at which our common stock is quoted and the prices which investors may realize will be influenced by a large number of factors, some specific to our company and operations and some that may affect the quoted biotechnology sector, or quoted companies generally. These factors could include variations in our operating results, publicity regarding the process of obtaining regulatory approval to commercialize our products, divergence in financial results from analysts expectations, changes in earnings estimates by stock market analysts, overall market or sector sentiment, legislative changes in our sector, the performance of our research and development programs, large purchases or sales of our common stock, currency fluctuations, legislative changes in the bioengineering environment, and general economic conditions. Certain of these events and factors are outside of our control. Stock markets have from time to time experienced severe price and volume fluctuations, which, if recurring, could adversely affect the market prices for our commons stock. We do not anticipate paying cash dividends in the foreseeable future, and, accordingly, shareholders must rely on stock appreciation for any return on their investment. We have never declared or paid cash dividends on our common stock. We do not anticipate paying cash dividends in the foreseeable future and intend to retain all of our future earnings, if any, to finance the operations, development, and growth of our business. There can be no assurance that we will have sufficient surplus under Delaware law to be able to pay any dividends at any time in the future. As a result, absent payment of dividends, only appreciation of the price of our common stock, which may never occur, will provide a return to shareholders. You may also have to sell some or all of your shares of our common stock in order to generate cash flow from your investment in us. If securities or industry analysts do not publish research or reports, or publish inaccurate or unfavorable research or reports about our business, our share price and trading volume could decline. The U.S. trading market for our shares of common stock depends, in part, on the research and reports that securities or industry analysts publish about us or our business. We do not have any control over these analysts. If we obtain securities or industry analyst coverage, and one or more of the analysts who covers us downgrades our shares of common stock, changes their opinion of our shares, or publishes inaccurate or unfavorable research about our business, our share price would likely decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our shares of common stock could decrease, and we could lose visibility in the financial markets, which could cause our share price and trading volume to decline. Table of Contents We are an emerging growth company, and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our shares of common stock less attractive to investors. We are an emerging growth company, as defined in Section 2(a) of the Securities Act. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including the auditor attestation requirements in the assessment of our internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act, compliance with any new requirements adopted by the PCAOB, disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and the requirements of holding advisory say-on-pay votes on executive compensation and shareholder advisory votes on golden parachute compensation not previously approved. Under the JOBS Act, we will remain an emerging growth company until the earliest of (1) the last day of the fiscal year in which we have more than $1.07 billion in annual revenue; (2) the date we qualify as a large accelerated filer, with at least $700.0 million of equity securities held by non-affiliates; (3) the issuance, in any three-year period, by our company of more than $1.0 billion in non-convertible debt securities; and (4) December 1, 2023, which is the last day of the fiscal year following the fifth anniversary of the date of the first sale of our common stock pursuant to an effective registration statement filed under the Securities Act. We cannot predict if investors will find our shares of common stock to be less attractive because we may rely on these exemptions. If some investors find our shares of common stock less attractive as a result, there may be a less active trading market for our shares of common stock, and our share price may be more volatile. Under the JOBS Act, emerging growth companies also can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected to avail ourselves of this exemption from new or revised accounting standards and, therefore, will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. If we fail to 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. In addition, any testing by us conducted in connection with Section 404 of the Sarbanes-Oxley Act, or any subsequent testing by our independent registered public accounting firm, may reveal 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 financial statements or identify other areas for further attention or improvement. Ineffective 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 may issue preferred stock with terms that could dilute the voting power or reduce the value of our common stock. While we have no specific plan to issue preferred stock, our certificate of incorporation authorizes us to issue, without the approval of our shareholders, one or more series of preferred stock having such designation, relative powers, preferences (including preferences over our common stock respecting dividends and distributions), voting rights, terms of conversion or redemption, and other relative, participating, optional, or other special rights, if any, of the shares of each such series of preferred stock and any qualifications, limitations, or restrictions thereof, as our Board of Directors may determine. The terms of one or more classes or series of preferred stock could dilute the voting power or reduce the value of our common stock. For example, the repurchase or redemption rights or liquidation preferences we could assign to holders of preferred stock could affect the residual value of the common stock. The financial reporting obligations of being a public company in the United States are expensive and time consuming and place significant additional demands on our management. The obligations of being a public company in the United States place additional demands on our management and require significant expenditures, including costs resulting from public company reporting obligations under the Securities Exchange Act of 1934, as amended (the Exchange Act ); the rules and regulations regarding corporate governance practices, including those under the Sarbanes-Oxley Act and the Dodd Frank Wall Street Reform and Consumer Protection Act; and the listing requirements for the Nasdaq Capital Market. Our management and other personnel devote a substantial amount of time to ensure that we comply with all of these requirements. Moreover, despite reforms made possible by the JOBS Act, the reporting requirements, rules, and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly, particularly if we were no longer to qualify as an emerging growth company. Any changes that we make to comply with these obligations may not be sufficient to allow us to satisfy our obligations as a public company on a timely basis, or at all. These rules and regulations make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. These factors also could make it more difficult for us to attract and retain qualified persons to serve on our Board of Directors, particularly to serve on our Audit Committee and Compensation Committee, or as executive officers. Table of Contents There can be no assurance that we will be able to comply with the continued listing standards of the Nasdaq Capital Market. Even though our common stock has been listed on the Nasdaq Capital Market, we cannot assure you that we will be able to comply with standards necessary to maintain a listing of our common stock on the Nasdaq Capital Market. Our failure to meet the continuing listing requirements may result in our common stock being delisted from the Nasdaq Capital Market. If you purchase shares of our common stock in this offering, you will experience substantial and immediate dilution. If you purchase shares of our common stock in this offering, you will experience substantial and immediate dilution in the pro forma net tangible book value per share after giving effect to this offering, based on an assumed public offering price of $1.94 per share, which was the closing sale price of our common stock on the Nasdaq Capital Market on February 7, 2020, because the price that you pay will be substantially greater than the pro forma net tangible book value per share of the common stock that you acquire. This dilution is due in large part to the fact that our earlier investors paid substantially less than the public offering price when they purchased their shares of our capital stock. You will experience additional dilution upon exercise of any warrant, upon exercise of options to purchase common stock under our equity incentive plans, vesting of restricted stock units issued to our employees, if we further issue restricted stock to our employees under our equity incentive plans, or if we otherwise issue additional shares of our common stock. For a further description of the dilution that you will experience immediately after this offering, see the section of this prospectus titled Dilution. Our management will have broad discretion over the use of the proceeds we receive in this offering and might not apply the proceeds in ways that increase the value of your investment. Our management will have broad discretion to use the net proceeds we receive from this offering, and you will be relying on the judgment of our management regarding the application of these proceeds. Our management might not apply the net proceeds that we receive from this offering in ways that increase the value of your investment. We currently intend to use the net proceeds of this offering to complete construction and renovations of our existing facilities in Rollo Bay and Indiana, for working capital and other general corporate purposes. We may also use a portion of the net proceeds for acquisitions of complementary businesses, technologies, or other assets, although we do not currently have any agreements, commitments, or understandings with respect to any such acquisitions. Until we use the net proceeds that we receive from this offering, we plan to invest them, and these investments may not yield a favorable rate of return. If we do not invest or apply the net proceeds we receive from this offering in ways that enhance stockholder value, we may fail to achieve expected financial results, which could cause our stock price to decline. Provisions in our corporate documents and Delaware law could have the effect of delaying, deferring, or preventing a change in control of us, even if that change may be considered beneficial by some of our shareholders. The existence of some provisions of our certificate of incorporation or our bylaws or Delaware law could have the effect of delaying, deferring, or preventing a change in control of us that a shareholder may consider favorable. These provisions include: providing that the number of members of our board is limited to a range fixed by our bylaws; establishing advance notice requirements for nominations of candidates for election to our Board of Directors or for proposing matters that can be acted on by shareholders at shareholder meetings; and authorizing the issuance of blank check preferred stock, which could be issued by our Board of Directors to issue securities with voting rights and thwart a takeover attempt. As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the General Corporation Law of the State of Delaware. Section 203 prevents some shareholders holding more than 15% of our voting stock from engaging in certain business combinations unless the business combination or the transaction that resulted in the shareholder becoming an interested shareholder was approved in advance by our Board of Directors, results in the shareholder holding more than 85% of our voting stock (subject to certain restrictions), or is approved at an annual or special meeting of shareholders by the holders of at least 66 2/3% of our voting stock not held by the shareholder engaging in the transaction. Any provision of our certificate of incorporation or our bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our shareholders to receive a premium for their shares of our common stock and affect the price that some investors are willing to pay for our common stock. Table of Contents

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+RISK FACTORS 
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+ You should carefully consider the risks described below before investing in our securities. Additional risks not presently known to us or that our management currently deems immaterial also may impair our business operations. If any of the risks described below were to occur, our business, financial condition, operating results, and cash flows could be materially adversely affected. In such an event, the trading price of our common stock could decline, and you could lose all or part of your investment. In assessing these risks, you should also refer to the other information contained in this Prospectus, including our consolidated financial statements and related notes. The risks discussed below include forward-looking statements, and our actual results may differ substantially from those discussed in these forward-looking statements.
+ 
+ Risks Related to our Financial Condition and Capital Requirements
+ 
+ We have experienced recurring losses from operations and negative cash flows from operating activities and anticipate that we will continue to incur operating losses in the future.
+ 
+ We have experienced recurring losses from operations and negative cash flows from operating activities. We expect to continue to incur significant expenses related to our ongoing operations and generate operating losses for the foreseeable future. The size of our losses will depend, in part, on the rate of future expenditures and our ability to generate revenues. We incurred a net loss of approximately $1.7 million for the year ended December 31, 2019, and $652,671 for the three months ended June 30, 2020, and our accumulated deficit increased to approximately $7.8 million as of June 30, 2020.
+ 
+ We may encounter unforeseen expenses, difficulties, complications, delays, and other unknown factors that may adversely affect our financial condition. Our prior losses and expected future losses have had, and will continue to have, an adverse effect on our financial condition. If our products do not achieve sufficient market acceptance and our revenues do not increase significantly, we may never become profitable. Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods. Our failure to become and remain profitable would decrease the value of our company and could impair our ability to raise capital, expand our business, diversify our product offerings or continue our operations. A decline in the value of our company could cause you to lose all or part of your investment.
+ 
+ If we are not able to successfully execute on our future operating plans, our financial condition and results of operation may be materially adversely affected, and we may not be able to continue as a going concern.
+ 
+ It is critical that we meet our sales goals and increase sales going forward as our operating plan already reflects prior significant cost containment measures and may make it difficult to achieve top-line growth if further significant reductions become necessary. If we do not meet our sales goals, our available cash and working capital will decrease and our financial condition will be negatively impacted. 
+ 
+ We may need additional financing in the future, which may not be available when needed or may be costly and dilutive.
+ 
+ We will 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 sales goals and otherwise successfully execute our operating plan. We believe it is imperative that we meet these sales objectives in order to lessen our reliance on external financing in the future. We intend to continually monitor and adjust our operating plan as necessary to respond to developments in our business, our markets and the broader economy. 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. If necessary, we may explore strategic transactions that we consider to be in the best interest of the company and our shareholders, which may include, without limitation, public or private offerings of debt or equity securities, a rights offering, and other strategic alternatives; however, these options may not ultimately be available or feasible when needed.
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+ 6
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+ Table of Contents
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+ If we are unable to continue as a going concern, our securities will have little or no value.
+ 
+ Although our audited financial statements for the year ended December 31, 2019, were prepared under the assumption that we would continue our operations as a going concern, the report of our independent registered public accounting firm that accompanies our financial statements for the year ended December 31, 2019, contains a going concern qualification in which such firm expressed substantial doubt about our ability to continue as a going concern, based on the financial statements at that time. Specifically, as noted above, we have experienced recurring losses from operations and negative cash flows from operating activities, and we expect to continue to incur significant expenses and operating losses for the foreseeable future. These prior losses and expected future losses have had, and will continue to have, an adverse effect on our financial condition. In addition, as noted above, continued operations and our ability to continue as a going concern may be dependent on our ability to obtain additional financing in the near future and thereafter, and there are no assurances that such financing will be available to us at all or will be available in sufficient amounts or on reasonable terms. Our financial statements do not include any adjustments that may result from the outcome of this uncertainty. If we are unable to generate additional funds in the future through sales of our products, financings or from other sources or transactions, we will exhaust our resources and will be unable to continue operations. If we cannot continue as a going concern, our shareholders would likely lose most or all of their investment in us.
+ 
+ We have a limited operating history.
+ 
+ The Company, while incorporated in 2007, began carrying on its current beverage business in 2019 and did not generate revenue from the sale of products until that year. We are therefore subject to many of the risks common to early-stage enterprises, including under-capitalization, cash shortages, limitations with respect to personnel, financial, and other resources and lack of revenues. There is no assurance that we will be successful in achieving a return on shareholders investment, and the likelihood of success must be considered in light of the early stage of our beverage operations.
+ 
+ We may incur significant debt to finance our operations. 
+ 
+ There is no assurance that we will not incur debt in the future, that we will have sufficient funds to repay our indebtedness, or that we will not default on our debt, jeopardizing our business viability. Furthermore, we may not be able to borrow or raise additional capital in the future to meet the Company s needs or to otherwise provide the capital necessary to conduct our business.
+ 
+ Risk Factors Relating to Our Business and Industry
+ 
+ We compete in an industry that is brand-conscious, so brand name recognition and acceptance of our products are critical to our success.
+ 
+ Our business is substantially dependent upon awareness and market acceptance of our products and brands by our target market: trendy, young and/or health-conscious consumers looking for a distinctive tonality and/or the perceived benefits of hemp in their beverage choices. In addition, our business depends on acceptance by our independent distributors and retailers of our brands as beverage brands that have the potential to provide incremental sales growth. If we are not successful in the growth of our brand and product offerings, we may not achieve and maintain satisfactory levels of acceptance by independent distributors and retail consumers. In addition, we may not be able to effectively execute our marketing strategies in light of the various closures and event cancellations caused by the COVID-19 outbreak. Any failure of our brands to maintain or increase acceptance or market penetration would likely have a material adverse effect on our revenues and financial results.
+ 
+ Our brand and image are keys to our business and any inability to maintain a positive brand image could have a material adverse effect on our results of operations.
+ 
+ Our success depends on our ability to maintain brand image for our existing products and effectively build up brand image for new products and brand extensions. We cannot predict whether our advertising, marketing and promotional programs will have the desired impact on our products branding and on consumer preferences. In addition, negative public relations and product quality issues, including negative perceptions regarding the hemp industry, whether real or imagined, could tarnish our reputation and image of the affected brands and could cause consumers to choose other products. Our brand image can also be adversely affected by unfavorable reports, studies and articles, litigation, or regulatory or other governmental action, whether involving our products or those of our competitors.
+ 
+ Competition from traditional and large, well-financed non-alcoholic beverage manufacturers may adversely affect our distribution relationships and may hinder development of our existing markets, as well as prevent us from expanding our markets.
+ 
+ The beverage industry is highly competitive. We compete with other beverage companies not only for consumer acceptance but also for shelf space in retail outlets and for marketing focus by our distributors, all of whom also distribute other beverage brands. Our products compete with all non-alcoholic beverages, most of which are marketed by companies with substantially greater financial resources than ours. Some of these competitors are placing severe pressure on independent distributors not to carry competitive hemp brands such as ours. We also compete with regional beverage producers and private label soft drink suppliers.
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+ 7
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+ Table of Contents
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+ Our direct competitors in the sparkling, flavored-water, and energy drink beverage categories include traditional large beverage companies and distributors, and regional premium soft and energy drink companies. These national and international competitors have advantages such as lower production costs, larger marketing budgets, greater financial and other resources and more developed and extensive distribution networks than ours. We may not be able to grow our volumes or maintains our selling prices, whether in existing markets or as we enter new markets.
+ 
+ Increased competitor consolidations, market-place competition, particularly among branded beverage products, and competitive product and pricing pressures could impact our earnings, market share and volume growth. If, due to such pressure or other competitive threats, we are unable to sufficiently maintain or develop our distribution channels, we may be unable to achieve our current revenue and financial targets. As a means of maintaining and expanding our distribution network, we intend to introduce product extensions and additional brands. We may not be successful in doing this, or it may take us longer than anticipated to achieve market acceptance of these new products and brands, if at all. Other companies may be more successful in this regard over the long term. Competition, particularly from companies with greater financial and marketing resources than ours, could have a material adverse effect on our existing markets, as well as on our ability to expand the market for our products.
+ 
+ We compete in an industry characterized by rapid changes in consumer preferences and public perception, so our ability to continue developing new products to satisfy our consumers changing preferences will determine our long-term success.
+ 
+ Failure to introduce new brands, products or product extensions into the marketplace as current ones mature and to meet our consumers changing preferences could prevent us from gaining market share and achieving long-term profitability. Product lifecycles can vary, and consumers preferences and loyalties change over time. Although we try to anticipate these shifts and innovate new products to introduce to our consumers, we may not succeed. Customer preferences also are affected by factors other than taste, such as health and nutrition considerations and obesity concerns, shifting consumer needs, changes in consumer lifestyles, increased consumer information and competitive product and pricing pressures. Sales of our products may be adversely affected by the negative publicity associated with these issues. In addition, there may be a decreased demand for our products as a result of the COVID-19 outbreak. If we do not adequately anticipate or adjust to respond to these and other changes in customer preferences, we may not be able to maintain and grow our brand image and our sales may be adversely affected.
+ 
+ We may experience a reduced demand for some of our products due to health concerns (including obesity) and legislative initiatives against sweetened beverages.
+ 
+ Consumers are concerned about health and wellness; public health officials and government officials are increasingly vocal about obesity and its consequences. There has been a trend among some public health advocates and dietary guidelines to recommend a reduction in sweetened beverages, as well as increased public scrutiny, new taxes on sugar-sweetened beverages (as described below), and additional governmental regulations concerning the marketing and labeling/packing of the beverage industry. Additional or revised regulatory requirements, whether labeling, tax or otherwise, could have a material adverse effect on our financial condition and results of operations. Further, increasing public concern with respect to sweetened beverages could reduce demand for our sweetened beverage products.
+ 
+ Legislative or regulatory changes that affect our products, including new taxes, could reduce demand for products or increase our costs.
+ 
+ Taxes imposed on the sale of certain of our products by federal, state, and local governments in the United States, or other countries in which we operate could cause consumers to shift away from purchasing our beverages. Several municipalities in the United States have implemented or are considering implementing taxes on the sale of certain sugared beverages, including non-diet soft drinks, fruit drinks, energy drinks, teas, and flavored waters to help fund various initiatives. These taxes could materially affect our business and financial results as we current sell flavored water beverages, sparkling beverages, and energy drink beverages.
+ 
+ Our ability to develop and commercialize hemp beverages and comply with laws and regulations governing cannabis, hemp or related products will affect our operational results. 
+ 
+ As of December 31, 2019, approximately forty states authorized industrial hemp programs pursuant to the 2018 farm bill (the Agricultural Improvement Act of 2018, the 2018 Farm Bill ), which legalized the regulated production of hemp. 
+ 
+ The 2018 Farm Bill was signed into law on December 20, 2018. The 2018 Farm Bill removed hemp from the U.S. Controlled Substances Act (the CSA ) and established a federal regulatory framework for hemp production in the United States. Among other provisions, the 2018 Farm Bill: (a) explicitly amends the CSA to exclude all parts of the cannabis plant (including its cannabinoids, derivatives, and extracts) containing a delta-9 THC concentration of not more than 0.3% on a dry weight basis from the CSA s definition of marihuana ; (b) permits the commercial production and sale of hemp; (c) precludes states, territories, and Indian tribes from prohibiting the interstate transport of lawfully-produced hemp through their borders; and (d) establishes the USDA as the primary federal agency regulating the cultivation of hemp in the United States, while allowing states, territories, and Indian tribes to obtain (or retain) primary regulatory authority over hemp activities within their borders after receiving approval of their proposed hemp production plan from the USDA. Any such plan submitted by a state, territory, or Indian tribe to the USDA must meet or exceed minimum federal standards and receive USDA approval. Any state, territory, or Indian tribe that does not submit a plan to the USDA, or whose plan is not approved by the USDA, will be regulated by the USDA; provided that, states retain the ability to prohibit hemp production within their borders.
+ 
+ Marijuana continues to be classified as a Schedule I substance under the CSA. As a result, any cannabinoids (including CBD) derived from marijuana, as opposed to hemp, or any products derived from hemp containing in excess of 0.3% THC on a dry-weight basis, remain Schedule I substances under U.S. federal law. Cannabinoids derived from hemp are indistinguishable from those derived from marijuana, and confusion surrounding the nature of our beverage products containing CBD and any hemp we cultivate and sale in connection with our joint venture with Hervey to cultivate hemp, inconsistent interpretations of the definition of hemp , inaccurate or incomplete testing, farming practices and law enforcement vigilance or lack of education could result in our products being intercepted by federal and state law enforcement as marijuana and could interrupt and/or have a material adverse impact on the Company s business. The Company could be required to undertake processes that could delay shipments, impede sales or result in seizures, proper or improper, that would be costly to rectify or remove and which could have a material adverse effect on the business, prospects, results of operations or financial condition of the Company. If the Company mistakes in processing or labeling and THC in excess of 0.3% on a dry-weight basis was found in our products, the Company could be subject to enforcement and prosecution under local, state, and federal laws which would have a negative impact on the Company s business and operations.
+ 
+ Under the 2018 Farm Bill, states have authority to adopt their own regulatory regimes, and as such, regulations will likely continue to vary on a state-by-state basis. States take varying approaches to regulating the production and sale of hemp and hemp-derived products under state food and drug laws. The variance in state law and that state laws governing hemp production are rapidly changing may increase the chance of unfavorable law enforcement interpretation of the legality of Company s operations as they relate to the cultivation of hemp. Further, such variance in state laws that may frequently change increases the Company s compliance costs and risk of error.
+ 
+ While some states explicitly authorize and regulate the production and sale of hemp products or otherwise provide legal protection for authorized individuals to engage in commercial hemp activities, other states maintain outdated drug laws that do not distinguish between marijuana, hemp and/or hemp-derived CBD, resulting in hemp being classified as a controlled substance under state law. In these states, sale of CBD, notwithstanding origin, is either restricted to state medical or adult-use marijuana program licensees or remains otherwise unlawful under state criminal laws. Variance in hemp regulation across jurisdictions is likely to persist. This patchwork of state laws may, for the foreseeable future, materially impact the Company s business and financial condition, limit the accessibility of certain state markets, cause confusion amongst regulators, and increase legal and compliance costs.
+ 
+ 
+ 8
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+ Table of Contents
+ 
+ There are no express protections in the United States under applicable federal or state law for possessing or processing hemp biomass derived from lawful hemp not exceeding 0.3% THC on a dry weight basis and intended for use in finished product, but that may temporarily exceed 0.3% THC during the interim processing stages. While it is a common occurrence for hemp biomass to have variance in THC content during interim processing stages after cultivation but prior to use in finished products, there is risk that state or federal regulators or law enforcement could take the position that such hemp biomass is a Schedule I controlled substance in violation of the CSA and similar state laws. Further, there is a risk that North Carolina state regulators (where hemp will be cultivated pursuant to our joint venture with Paul Hervey) and/or law enforcement may interpret provisions of North Carolina law prohibiting unlawful marijuana activity to apply to in-process hemp at any joint venture facility so that such activity is considered unlawful under state law.
+ 
+ In the event that the Company s operations are deemed to violate any laws or if we are deemed to be assisting others to violate a state or federal law, the Company could be subject to enforcement actions and penalties, and any resulting liability could cause the Company to modify or cease its operations.
+ 
+ Continued development of the industrial hemp and cannabis industries will be dependent upon new legislative authorization of industrial hemp and cannabis at the state level, and further amendment or supplementation of legislation at the federal level. Any number of events or occurrences could slow or halt progress all together in this space. While progress within the industrial hemp and cannabis industries is currently encouraging, growth is not assured. While there appears to be ample public support for favorable legislative action, numerous factors may impact or negatively affect the legislative process(es) within the various states where we have business interests. Any one of these factors could slow or halt use of industrial hemp and cannabis, which could negatively impact our business and financial results. 
+ 
+ In addition, the general manufacture, labeling and distribution of our beverage products is regulated by various federal, state, and local agencies. These governmental authorities may commence regulatory or legal proceedings, which could restrict the permissible scope of our product claims or the ability to sell products in the future. The FDA regulates our products to ensure that the products are not adulterated or misbranded. In particular, we would be subject to regulation by the federal government and other state and local agencies as a result of the development and commercialization of cannabidiol (CBD) products. The shifting compliance environment and the need to build and maintain robust systems to comply with different compliance in multiple jurisdictions increases the possibility that we may violate one or more of the requirements. If our operations are found to be in violation of any of such laws or any other governmental regulations that apply to our business, we may be subject to penalties, including, without limitation, civil and criminal penalties, damages, fines, the curtailment or restructuring of our operations, any of which could adversely affect the ability to operate our business and its financial results.
+ 
+ International expansion efforts would likely significantly increase our operational expenses. 
+ 
+ We may in the future expand into other geographic areas, which could increase our operational, regulatory, compliance, reputational and foreign exchange rate risks. The failure of our operating infrastructure to support such expansion could result in operational failures and regulatory fines or sanctions. Future international expansion could require us to incur a number of up-front expenses, including those associated with obtaining regulatory approvals, as well as additional ongoing expenses, including those associated with infrastructure, staff and regulatory compliance. We may not be able to successfully identify suitable acquisition and expansion opportunities or integrate such operations successfully with our existing operations.
+ 
+ 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, including non-alcoholic and alcoholic beverages, and our products may represent a small portion of their businesses. The success of our distribution network will depend on the performance of the distributors, retailers, and brokers in our network. There is a risk they 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 beverage 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, including re-stocking the retail shelves with 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.
+ 
+ We incur significant time and expense in attracting and maintaining key distributors, and loss of distributors or retails accounts would harm our business.
+ 
+ Our marketing and sales strategy depends in large part on the availability and performance of our independent distributors. We currently do not have, nor do we anticipate in the future that we will be able to establish, long-term contractual commitments from some of our distributors. We may not be able to maintain our current distribution relationships or establish and maintain successful relationships with distributors in new geographic distribution areas. Moreover, there is the additional possibility that we may have to incur additional expenditures to attract and maintain key distributors in one or more of our geographic distribution areas in order to profitably exploit our geographic markets.
+ 
+ 
+ 9
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+ Table of Contents
+ 
+ If we lose distributors or national or regional retail accounts, our financial condition and results of operations could be adversely affected. While we continually seek to expand and upgrade our distributor network and retail relationships, we may not be able to maintain our distributor or retailer base. The loss of any of our distributors or retail accounts could have adverse effects on our revenues, liquidity and financial results, could negatively impact our ability to retain our relationships with our other distributors and our ability to expand our market, and would place increased dependence on our other independent distributors and national accounts.
+ 
+ We rely on suppliers, manufacturers and contractors, and events adversely affecting them would adversely affect us. 
+ 
+ The Company intends to maintain a full supply chain for the provision of its hemp-based beverage products. Due to the novel and variable regulatory landscape for hemp and CBD production in the United States, the Company s third-party hemp and beverage suppliers, manufacturers and contractors may elect, at any time, to decline or withdraw services necessary for the Company s operations. Loss of these suppliers, manufacturers and contractors, including for non-hemp-based ingredients in the Company s beverage products, may have a material adverse effect on the Company s business, financial condition, results of operations and prospects.
+ 
+ In addition, any significant interruption, negative change in the availability or economics of the supply chain or increase in the prices for the ingredients in the Company s products provided by any such third-party suppliers, manufacturers and contractors could materially impact the Company s business, financial condition, results of operations and prospects. Any inability to secure required supplies or to do so on appropriate terms could have a materially adverse impact on the Company s business, financial condition, results of operations and prospects.
+ 
+ Wholesale price volatility may adversely affect operations. 
+ 
+ The beverage industry is margin-based with gross profits typically dependent on the excess of sales prices over costs. Consequently, profitability is sensitive to fluctuations in wholesale and retail prices caused by changes in supply (which itself depends on other factors such as weather, fuel, equipment and labor costs, shipping costs, economic situation and demand), taxes, government programs and policies for the beverage and hemp industries (including price controls and wholesale price restrictions that may be imposed by government agencies responsible for the regulation of sweetened beverages and hemp), and other market conditions, all of which are factors beyond the control of the Company. The Company s operating income will be sensitive to changes in the price of hemp and other beverage ingredients, and the overall condition of the beverage and hemp industries, as the Company s profitability is directly related to the price of hemp and our other beverage ingredients. There is currently not an established market price for hemp, and the price of hemp is affected by numerous factors beyond the Company s control. Ingredient price volatility may have a material adverse effect on the Company s business, financial condition, and results of operations.
+ 
+ Results of future clinical research could reduce the demand for hemp beverage products. 
+ 
+ To date, there is limited standardization in the research of the effects of hemp and hemp-based CBD, and future clinical research studies may lead to conclusions that dispute or conflict with the Company s understanding and belief regarding the medical benefits, viability, safety, efficacy, dosing and social acceptance of hemp and hemp-based CBD. Research in the United States and internationally regarding the medical benefits, viability, safety, efficacy and dosing of hemp and isolated cannabinoids (such as CBD) remains in relatively early stages.
+ 
+ Future research and clinical trials may draw opposing conclusions to statements in this prospectus or could reach different or negative conclusions regarding the medical benefits, viability, safety, efficacy, dosing or other facts and perceptions related to hemp and CBD, which could adversely affect social acceptance of hemp and CBD products and the demand for the Company s beverage products.
+ 
+ The Company may sustain losses that cannot be recovered through insurance or other preventative measures.
+ 
+ There is no assurance that the Company will not incur uninsured liabilities and losses as a result of the conduct of its business. While the Company currently has some liability insurance coverage, once capital is available to purchase additional liability insurance, the Company plans to increase its comprehensive liability insurance. The Company also intends to evaluate the availability and cost of property casualty and business interruption insurance, neither of which the Company currently has. Should uninsured losses occur, shareholders could lose their invested capital.
+ 
+ The Company may be subject to product liability claims and other claims of our customers and partners.
+ 
+ The sale of beverage products to consumers involves a certain level of risk of product liability claims and the associated adverse publicity. Because consumption of the Company s beverage products could cause injury to consumers if packaging or ingredients are defective, we are subject to a risk of claims for such injuries and damages. We could also be named as co-parties in product liability suits that are brought against manufacturing partners that produce our beverage products, packaging for those products, or the ingredients in those products.
+ 
+ 
+ 10
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+ Table of Contents
+ 
+ In addition, our customers and partners may bring suits against us alleging damages for the failure of our products to meet stated specifications or other requirements. Any such suits, even if not successful, could be costly, disrupt the attention of our management and damage our negotiations with distributors and/or customers. Any attempt by us to limit our product liability in our contracts may not be enforceable or may be subject to exceptions. While we do have product liability insurance, our amounts of coverage may be inadequate to cover all potential liability claims. Insurance coverage, particularly as it relates to products relating to the hemp industry, is expensive, and additional coverage may be difficult to obtain. Also, additional insurance coverage may not be available in the future on acceptable terms and may not be sufficient to cover potential claims. We cannot be sure that our contract manufacturers or manufacturing partners who produce our beverage products, packaging and ingredients will have adequate insurance coverage themselves to cover against potential claims. If we experience a large insured loss, it may exceed any insurance coverage limits we have at that time, or our insurance carrier may decline to cover us or may raise our insurance rates to unacceptable levels, any of which could impair our financial position and potentially cause us to go out of business.
+ 
+ If we encounter product recalls or other product quality issues, our business may suffer.
+ 
+ Product quality issues, real or imagined, or allegations of product contamination, even when false or unfounded, could tarnish our image and could cause consumers to choose other products. In addition, because of changing government regulations or implementation thereof, or allegations of product contamination, we may be required from time to time to recall products entirely or from specific markets. Product recalls could affect our profitability and could negatively affect brand image.
+ 
+ It is difficult to predict the timing and amount of our sales because our distributors are not required to place minimum orders with us.
+ 
+ Our independent distributors and national accounts are not generally required to place minimum monthly orders for our products. In order to reduce their inventory costs, independent distributors typically order products from us on a just in time basis in quantities and at such times based on the demand for the products in a particular distribution area. 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 regional 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 to distributors 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 distributor or 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 inventory spoilage. If we fail to manage our inventory to meet demand, we could damage our relationships with our distributors and retailers and could delay or lose sales opportunities, which would unfavorably impact our future sales and adversely affect our operating results. In addition, if the inventory of our products held by our distributors and retailers is too high, they will not place orders for additional products, which would also unfavorably impact our sales and adversely affect our operating results.
+ 
+ If we fail to maintain relationships with our independent contract manufacturers, our business could be harmed.
+ 
+ We do not manufacture our products but instead outsource the manufacturing process to third-party bottlers and independent contract manufacturers (co-packers). We do not own the manufacturing facilities or the equipment required to manufacture and package our beverage products, and we do not anticipate bringing the manufacturing process in-house in the future. Our ability to maintain effective relationships with contract manufacturers and other third parties for the production and delivery of our beverage products in a particular geographic distribution area is important to the success of our operations within each distribution area. Competition for contract manufacturers business is intense, especially in the United States, and this could make it more difficult for us to obtain new or replacement manufacturers, or to locate back-up manufacturers, in our various distribution areas, and could also affect the economic terms of our agreements with our existing manufacturers. We may not be able to maintain our relationships with current contract manufacturers or establish satisfactory relationships with new or replacement contract manufacturers, whether in existing or new geographic distribution areas. The failure to establish and maintain effective relationships with contract manufacturers for a distribution area could increase our manufacturing costs and thereby materially reduce gross profits from the sale of our products in that area. Poor relations with any of our contract manufacturers could adversely affect the amount and timing of product delivered to our distributors for resale, which would in turn adversely affect our revenues and financial condition. In addition, our agreements with our contract manufacturers are terminable at any time, and any such termination could disrupt our ability to deliver products to our customers.
+ 
+ 
+ 11
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+ Table of Contents
+ 
+ Our dependence on independent contract manufacturers could make management of our manufacturing and distribution efforts inefficient or unprofitable.
+ 
+ We are expected to arrange for our contract manufacturing needs sufficiently in advance of anticipated requirements, which is customary in the contract manufacturing industry for comparably sized companies. Based on the cost structure and forecasted demand for the particular geographic area where our contract manufacturers are located, we must evaluate which of contract manufacturers to use. To the extent demand for our products exceeds available inventory or the production capacity of our contract manufacturing arrangements, or orders are not submitted on a timely basis, we will be unable to fulfill distributor orders on demand. Conversely, we may produce more product inventory than warranted by the actual demand for it, resulting in higher storage costs and the potential risk of inventory spoilage. Our failure to accurately predict and manage our contract manufacturing requirements and our inventory levels may impair relationships with our independent distributors and key accounts, which, in turn, would likely have a material adverse effect on our ability to maintain effective relationships with those distributors and key accounts.
+ 
+ Increases in costs or shortages of raw materials could harm our business and financial results.
+ 
+ The principal raw materials we use or supply to our contract manufacturers include plastic bottles and lids, aluminum cans, labels and cardboard cartons, aluminum closures, hemp, and other beverage ingredients. In addition, certain of our contract manufacturing arrangements allow such contract manufacturers to increase their charges to us based on their own cost increases. These manufacturing and ingredient costs are subject to fluctuation. Substantial increases in the prices of ingredients, raw materials and packaging materials, used to produce our products, to the extent that they cannot be recouped through increases in the prices of finished beverage products, would increase our operating costs and could reduce our profitability. If the supply of these raw materials is impaired or if prices increase significantly, it could affect the affordability of our products and reduce sales.
+ 
+ If we or our contract manufacturers are unable to secure sufficient ingredients or raw materials including glass, sugar, and other key supplies, we might not be able to satisfy demand for our beverage products on a short-term basis. Moreover, in the past there have been industry-wide shortages of concentrates, supplements and sweeteners, and these shortages could occur again from time to time in the future, which could interfere with and delay production of our products and could have a material adverse effect on our business and financial results.
+ 
+ In addition, suppliers could fail to provide ingredients or raw materials on a timely basis, or fail to meet our performance expectations, for a number of reasons, including, for example, disruption to the global supply chain as a result of the COVID-19 outbreak, which could cause a serious disruption to our business, increase our costs, decrease our operating efficiencies and have a material adverse effect on our business, results of operations and financial condition.
+ 
+ Increases in costs of energy and increased regulations may have an adverse impact on our gross margin.
+ 
+ Over the past few years, volatility in the global oil markets has resulted in high fuel prices, which many shipping companies have passed on to their customers by way of higher base pricing and increased fuel surcharges. If fuel prices increase, we expect to experience higher shipping rates and fuel surcharges, as well as energy surcharges on our raw materials. It is hard to predict what will happen in the fuel markets in 2021 and beyond. Due to the price sensitivity of our products, we may not be able to pass such increases on to our customers.
+ 
+ Disruption within our supply chain, contract manufacturing or distribution channels could have an adverse effect on our business, financial condition and results of operations.
+ 
+ Our ability, through our suppliers, business partners, contract manufacturers, independent distributors and retailers, to make, move and sell products is critical to our success. Damage or disruption to our suppliers or to manufacturing or distribution capabilities due to weather, natural disaster, fire or explosion, terrorism, pandemics such as influenza and the novel coronavirus (COVID-19), labor strikes or other reasons, could impair the manufacture, distribution and sale of our products. Many of these events are outside of our control. Failure to take adequate steps to protect against or mitigate the likelihood or potential impact of such events, or to effectively manage such events if they occur, could adversely affect our business, financial condition and results of operations.
+ 
+ If we are unable to attract and retain key personnel, our efficiency and operations would be adversely affected; in addition, staff turnover causes uncertainties and could harm our business.
+ 
+ Our success depends on our ability to attract and retain highly qualified employees in such areas as finance, sales, marketing and product development and distribution. We compete to hire new employees, and, in some cases, must train them and develop their skills and competencies. We may not be able to provide our employees with competitive salaries, and our operating results could be adversely affected by increased costs due to increased competition for employees, higher employee turnover or increased employee benefit costs.
+ 
+ 
+ 12
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+ Table of Contents
+ 
+ Recently, we have experienced significant changes in our sales personnel, and more could occur in the future. Changes to operations, policies and procedures, which can often occur with the appointment of new personnel, can create uncertainty, may negatively impact our ability to execute quickly and effectively, and may ultimately be unsuccessful. In addition, transition periods are often difficult as the new Company personnel gain detailed knowledge of our operations, and friction can result from changes in strategy and management style. Employee turnover inherently causes some loss of institutional knowledge, which can negatively affect strategy and execution. Until we integrate new personnel, and unless they are able to succeed in their positions, we may be unable to successfully manage and grow our business, and our financial condition and profitability may suffer. 
+ 
+ Further, to the extent we experience additional personnel turnover, our operations, financial condition and employee morale could be negatively impacted. If we are unable to attract and retain qualified management and sales personnel, our business could suffer. Moreover, our operations could be negatively affected if employees are quarantined as the result of exposure to a contagious illness such as COVID-19.
+ 
+ If we lose the services of our Chief Executive Officer, our operations could be disrupted and our business could be harmed.
+ 
+ Our business plan relies significantly on the continued services of William Alessi, who we hired as our Chief Executive Officer in February 2018. If we were to lose the services of Mr. Alessi, our ability to execute our business plan could be materially impaired. 
+ 
+ Management cannot guarantee that its relationship with the Company does not create conflicts of interest. 
+ 
+ The relationship of management to the Company could create conflicts of interest. While management has a fiduciary duty to the Company, it also determines its compensation from the Company. Management s compensation from the Company has not been determined pursuant to arm s-length negotiation.
+ 
+ We are required to indemnify our directors and officers.
+ 
+ The Articles of Incorporation and Bylaws provide that we will indemnify its officers and directors to the maximum extent permitted by Nevada law, provided that the officer or director acted in bad faith or breached his or her duty to us or our stockholders, that the officer or director acted in bad faith, or that it is more likely than not that it will ultimately be determined that the officer or director has not met the standards of conduct which make it permissible for under Nevada law for the Company to indemnify the officer or director. If we were called upon to indemnify an officer or director, then the portion of its assets expended for such purpose would reduce the amount otherwise available for the Company s business.
+ 
+ If we fail to protect our trademarks and trade secrets, we may be unable to successfully market our products and compete effectively.
+ 
+ We rely on a combination of trademark and trade secrecy laws, confidentiality procedures and contractual provisions to protect our intellectual property rights. Failure to protect our intellectual property could harm our brand and our reputation, and adversely affect our ability to compete effectively. Further, enforcing or defending our intellectual property rights, including our trademarks and trade secrets, could result in the expenditure of significant financial and managerial resources. We regard our intellectual property, particularly our trademarks and trade secrets, as crucial to our business and our success. However, the steps taken by us to protect these proprietary rights may not be adequate and may not prevent third parties from infringing or misappropriating our trademarks, trade secrets or similar proprietary rights. In addition, other parties may seek to assert infringement claims against us, and we may have to pursue litigation against other parties to assert our rights. Any such claim or litigation could be costly. In addition, any event that would jeopardize our proprietary rights or any claims of infringement by third parties could have a material adverse effect on our ability to market or sell our brands, profitably exploit our products or recoup our associated research and development costs.
+ 
+ Our business is subject to many regulations and noncompliance is costly.
+ 
+ The production, marketing and sale of our beverages, including contents, labels, caps and containers, are subject to the rules and regulations of various federal, provincial, state and local health agencies. If a regulatory authority finds that a current or future product or production batch or run is not in compliance with any of these regulations, we may be fined, or production may be stopped, which would adversely affect our financial condition and results of operations. Similarly, any adverse publicity associated with any noncompliance may damage our reputation and our ability to successfully market our products. Furthermore, the rules and regulations are subject to change from time to time and while we closely monitor developments in this area, we cannot anticipate whether changes in these rules and regulations will impact our business adversely. Additional or revised regulatory requirements, whether labeling, environmental, tax or otherwise, could have a material adverse effect on our financial condition and results of operations.
+ 
+ 
+ 13
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+ Table of Contents
+ 
+ Significant additional labeling or warning requirements may inhibit sales of affected products.
+ 
+ Various jurisdictions may seek to adopt significant additional product labeling or warning requirements relating to the chemical content or perceived adverse health consequences of our beverage products. These types of requirements, if they become applicable to one or more of our products under current or future environmental or health laws or regulations, may inhibit sales of such products. In California, a law requires that a specific warning appear on any product that contains a component listed by the state as having been found to cause cancer or birth defects. This law recognizes no generally applicable quantitative thresholds below which a warning is not required. If a component found in one of our products is added to the list, or if the increasing sensitivity of detection methodology that may become available under this law and related regulations as they currently exist, or as they may be amended, results in the detection of an infinitesimal quantity of a listed substance in one of our beverages produced for sale in California, the resulting warning requirements or adverse publicity could affect our sales.
+ 
+ Litigation or legal proceedings could expose us to significant liabilities and damage our reputation.
+ 
+ We may become party to litigation claims and legal proceedings. Litigation involves significant risks, uncertainties and costs, including distraction of management attention away from our business operations. We evaluate litigation claims and legal proceedings to assess the likelihood of unfavorable outcomes and to estimate, if possible, the amount of potential losses. Based on these assessments and estimates, we establish reserves and disclose the relevant litigation claims or legal proceedings, as appropriate. These assessments and estimates are based on the information available to management at the time and involve a significant amount of management judgment. Actual outcomes or losses may differ materially from those envisioned by our current assessments and estimates. Our policies and procedures require strict compliance by our employees and agents with all U.S. and local laws and regulations applicable to our business operations, including those prohibiting improper payments to government officials. Nonetheless, our policies and procedures may not ensure full compliance by our employees and agents with all applicable legal requirements. Improper conduct by our employees or agents could damage our reputation or lead to litigation or legal proceedings that could result in civil or criminal penalties, including substantial monetary fines, as well as disgorgement of profits.
+ 
+ Climate change may negatively affect our business.
+ 
+ There is growing concern that a gradual increase in global average temperatures may cause an adverse change in weather patterns around the globe resulting in an increase in the frequency and severity of natural disasters. While warmer weather has historically been associated with increased sales of our products, changing weather patterns could have a negative impact on agricultural productivity, which may limit availability or increase the cost of certain key ingredients such as sugar cane, natural flavors and supplements used in our products. Also, increased frequency or duration of extreme weather conditions may disrupt the productivity of our facilities, the operation of our supply chain or impact demand for our products. In addition, the increasing concern over climate change may result in more regional, federal and global legal and regulatory requirements and could result in increased production, transportation and raw material costs. As a result, the effects of climate change could have a long-term adverse impact on our business and results of operations.
+ 
+ Our business and operations would be adversely impacted in the event of a failure or interruption of our information technology infrastructure or as a result of a cybersecurity attack.
+ 
+ The proper functioning of our own information technology (IT) infrastructure is critical to the efficient operation and management of our business. We may not have the necessary financial resources to update and maintain our IT infrastructure, and any failure or interruption of our IT system could adversely impact our operations. In addition, our IT is vulnerable to cyberattacks, computer viruses, worms and other malicious software programs, physical and electronic break-ins, sabotage and similar disruptions from unauthorized tampering with our computer systems. We believe that we have adopted appropriate measures to mitigate potential risks to our technology infrastructure and our operations from these IT-related and other potential disruptions. However, given the unpredictability of the timing, nature and scope of any such IT failures or disruptions, we could potentially be subject to downtimes, transactional errors, processing inefficiencies, operational delays, other detrimental impacts on our operations or ability to provide products to our customers, the compromising of confidential or personal information, destruction or corruption of data, security breaches, other manipulation or improper use of our systems and networks, financial losses from remedial actions, loss of business or potential liability, and/or damage to our reputation, any of which could have a material adverse effect on our cash flows, competitive position, financial condition or results of operations.
+ 
+ Our results of operations may fluctuate from quarter to quarter for many reasons, including seasonality.
+ 
+ Our sales are seasonal, and we experience fluctuations in quarterly results as a result of many factors. We historically have generated a greater percentage of our revenues during the warm weather months of April through September. Timing of customer purchases will vary each year, and sales can be expected to shift from one quarter to another. As a result, management believes that period-to-period comparisons of results of operations are not necessarily meaningful and should not be relied upon as any indication of future performance or results expected for the fiscal year.
+ 
+ 
+ 14
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+ Table of Contents
+ 
+ In addition, our operating results may fluctuate due to a number of other factors including, but not limited to:
+ 
+ 
+ 
+ Our ability to maintain, develop and expand distribution channels for current and new products, develop favorable arrangements with third party distributors of our products and minimize or reduce issues associated with engaging new distributors and retailers, including, but not limited to, transition costs and expenses and down time resulting from the initial deployment of our products in each new distributor s network;
+
+ 
+ 
+ Unilateral decisions by distributors, grocery store chains, specialty chain stores, club stores, mass merchandisers and other customers to discontinue carrying all or any of our products that they are carrying at any time; 
+
+ 
+ 
+ Our ability to manage our resources to sufficiently support general operating activities, promotion allowances and slotting fees, promotion and selling activities, and capital expansion, and our ability to sustain profitability;
+
+ 
+ 
+ Our ability to meet the competitive response by much larger, well-funded and established companies currently operating in the beverage industry, as we introduce new competitive products, and our fountain products; and
+
+ 
+ 
+ Competitive products and pricing pressures and our ability to gain or maintain share of sales in the marketplace as a result of actions by competitors.
+
+ 
+ Due to these and other factors, our results of operations have fluctuated from period to period and may continue to do so in the future, which could cause our operating results in a particular quarter to fail to meet market expectations.
+ 
+ Changes in our effective tax rate may impact our results of operations.
+ 
+ We are subject to taxes in the U.S. and other jurisdictions. Tax rates in these jurisdictions may be subject to significant change due to economic and/or political conditions. A number of other factors may also impact our future effective tax rate including:
+ 
+ 
+ 
+ the jurisdictions in which profits are determined to be earned and taxed;
+
+ 
+ 
+ the resolution of issues arising from tax audits with various tax authorities;
+
+ 
+ 
+ changes in valuation of our deferred tax assets and liabilities;
+
+ 
+ 
+ increases in expenses not deductible for tax purposes, including write-offs of acquired intangibles and impairment of goodwill in connection with acquisitions;
+
+ 
+ 
+ changes in availability of tax credits, tax holidays, and tax deductions;
+
+ 
+ 
+ changes in share-based compensation; and
+
+ 
+ 
+ changes in tax laws or the interpretation of such tax laws and changes in generally accepted accounting principles.
+
+ 
+ In December 2017, enacted legislation in the United States significantly revised the Internal Revenue Code. The enacted federal income tax law, among other things, contained significant changes to corporate taxation, including reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21% beginning in 2018, limitation of the tax deduction for interest expense to 30% of adjusted earnings, limitation of the deduction for net operating losses to 80% of current year taxable income and elimination of net operating loss carrybacks, one time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, immediate deductions for certain new investments instead of deductions for depreciation expense over time, and modifying or repealing many business deductions and credits (including reducing the business tax credit for certain clinical testing expenses incurred in the testing of certain drugs for rare diseases or conditions).
+ 
+ Notwithstanding the reduction in the corporate income tax rate, the overall impact of the new federal tax law remains uncertain and our business and financial condition could be adversely affected. In addition, it is uncertain if and to what extent various states will conform to the newly enacted federal tax law. The impact of this tax reform on holders of our common stock is also uncertain and could be adverse. We urge shareholders to consult with their legal and tax advisors with respect to this legislation and the potential tax consequences of investing in or holding our common stock.
+ 
+ Global economic, political, social and other conditions, including the COVID-19 pandemic, may continue to adversely impact our business and results of operations.
+ 
+ The beverage industry, and particularly those companies selling premium beverages like us, can be affected by macro-economic factors, including changes in national, regional, and local economic conditions, unemployment levels and consumer spending patterns, which together may impact the willingness of consumers to purchase our products as they adjust their discretionary spending. Adverse economic conditions may adversely affect the ability of our distributors to obtain the credit necessary to fund their working capital needs, which could negatively impact their ability or desire to continue to purchase products from us in the same frequencies and volumes as they have done in the past. If we experience similar adverse economic conditions in the future, sales of our products could be adversely affected, collectability of accounts receivable may be compromised and we may face obsolescence issues with our inventory, any of which could have a material adverse impact on our operating results and financial condition.
+ 
+ 
+ 15
+ 
+
+ Table of Contents
+ 
+ Additionally, while the extent of the impact on our business and financial condition is unknown at this time, we may be negatively affected by COVID-19 and actions taken to address and limit the spread of COVID-19, such as travel restrictions, event cancellations, and limitations affecting the supply of labor and the movement of raw materials and finished products. If available manufacturing capacity is reduced as a result of the COVID-19, it could negatively affect the timely supply, pricing and availability of finished products. Moreover, we will also be negatively impacted by current and future closures of restaurants, independent accounts, convenience chains, and retail store chains resulting from the COVID-19 outbreak. The current closures of restaurants and independent accounts will negatively affect our revenues and cash flows, especially with respect to our fountain business, which comprised approximately 9% of the Company s revenues in 2019. Although the current status of retail and convenience chains remains unknown at this time, the future closure of these types of establishments will also adversely impact our business and financial condition. 
+ 
+ Overall, the Company does not yet know the full extent of potential delays or impacts on its business, financing activities, or the global economy as a whole. However, these effects could have a material impact on the Company s liquidity, capital resources, operations and business and those of third parties on which we rely.
+ 
+ Changes in accounting standards and subjective assumptions, estimates and judgments by management related to complex accounting matters could significantly affect our financial results.
+ 
+ The United States generally accepted accounting principles and related pronouncements, implementation guidelines and interpretations with regard to a wide variety of matters that are relevant to our business, such as, but not limited to, stock-based compensation, trade spend and promotions, and income taxes are highly complex and involve many subjective assumptions, estimates and judgments by our management. Changes to these rules or their interpretation or changes in underlying assumptions, estimates or judgments by our management could significantly change our reported results.
+ 
+ If we are unable to maintain effective disclosure controls and procedures and internal control over financial reporting, our stock price and investor confidence could be materially and adversely affected.
+ 
+ We are required to maintain both disclosure controls and procedures and internal control over financial reporting that are effective. Because of their inherent limitations, internal control over financial reporting, however well designed and operated, can only provide reasonable, and not absolute, assurance that the controls will prevent or detect misstatements. Because of these and other inherent limitations of control systems, there is only the reasonable assurance that our controls will succeed in achieving their goals under all potential future conditions. The failure of controls by design deficiencies or absence of adequate controls could result in a material adverse effect on our business and financial results, which could also negatively impact our stock price and investor confidence.
+ 
+ Risk Factors Related to Our Common Stock and This Offering
+ 
+ The price of our common stock may be volatile, and a shareholder s investment in our common stock could suffer a decline in value.
+ 
+ There has been significant volatility in the volume and market price of our common stock, and this volatility may continue in the future. In addition, factors such as quarterly variations in our operating results, litigation involving us, general trends relating to the beverage industry, actions by governmental agencies, national economic and stock market considerations as well as other events and circumstances beyond our control, including the effects of the COVID-19 outbreak, could have a significant impact on the future market price of our common stock and the relative volatility of such market price.
+ 
+ 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. If we are unable to raise the funds required for all of our planned operations and key initiatives, we may be forced to allocate funds from other planned uses, which may negatively impact our business and operations, including our ability to develop new products and continue our current operations.
+ 
+ Any future equity or debt issuances by us may have dilutive or adverse effects on our existing shareholders.
+ 
+ From time to time, we may issue additional shares of common stock or convertible securities. The issuance of these securities could dilute our shareholders ownership in our company and may include terms that give new investors rights that are superior to those of our current shareholders. Moreover, any issuances by us of equity securities may be at or below the prevailing market price of our common stock and in any event may have a dilutive impact on our shareholders ownership interest, which could cause the market price of our common stock to decline.
+ 
+ 
+ 16
+ 
+
+ Table of Contents
+ 
+ Our common stock is traded on the OTC Link ATS, which may have an unfavorable impact on our stock price and liquidity.
+ 
+ Our stock is traded on the OTC Link Alternative Trading System (ATS) operated by OTC Markets Group, Inc. The OTC Link ATS is a significantly more limited market than the national securities exchanges such as the New York Stock Exchange, or Nasdaq stock exchange, and there are lower financial or qualitative standards that a company must meet to have its stock quoted on the OTC Link ATS. The OTC Link ATS is an inter-dealer quotation system much less regulated than the major exchanges, and trading in our common stock may be subject to abuses, volatility and shorting, which 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. The Financial Industry Regulatory Authority ( FINRA ) has adopted rules that require a broker-dealer to have reasonable grounds for believing an investment is suitable for that customer when recommending an investment to a customer. FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for some customers and may make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may result in a limited ability to buy and sell our stock. We currently do not meet applicable listing standards of a market senior to the OTC Link ATS, and we may never apply or qualify for future listing on Nasdaq or a senior market or national securities exchange.
+ 
+ Our common shares are subject to the Penny Stock rules of the SEC, and the trading market in our securities will likely be limited, which makes transactions in our stock cumbersome and may reduce the value of an investment in our stock.
+ 
+ The Securities and Exchange Commission 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 receive from the investor a written agreement to the transaction, setting forth the identity and quality 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 Commission 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.
+ 
+ We do not intend to pay any cash dividends on our shares of common stock in the near future, so our shareholders will not be able to receive a return on their shares unless they sell their shares.
+ 
+ We intend to retain any future earnings to finance the development and expansion of our business. We do not anticipate paying any cash dividends on our common stock in the foreseeable future. There is no assurance that future dividends will be paid, and if dividends are paid, there is no assurance with respect to the amount of any such dividend. Unless we pay dividends, our shareholders will not be able to receive a return on their shares unless they sell such shares.
+ 
+ A small group of Company officers and directors hold a majority of the control of the Company.
+ 
+ As of October 16, 2020, the Company s executive officers and directors owned approximately 65% of the Company s outstanding common stock. By virtue of such stock ownership, the principal shareholders are able to control the election of the members of the Company s Board of Directors and to generally exercise control over the affairs of the Company. Such concentration of ownership could also have the effect of delaying, deterring or preventing a change in control of the Company that might otherwise be beneficial to stockholders. There can be no assurance that conflicts of interest will not arise with respect to such directors or that such conflicts will be resolved in a manner favorable to the Company.
+ 
+ 
+ 17
+ 
+
+ Table of Contents
+ 
+ We have used an arbitrary offering price.

parsed_sections/risk_factors/2020/ASTC_astrotech_risk_factors.txt

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+RISK FACTORS An investment in our securities involves a high degree of risk. This prospectus contains a discussion of the risks applicable to an investment in our securities. Prior to making a decision about investing in our securities, you should carefully consider the specific factors discussed within this prospectus. The risks and uncertainties we have described are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our operations. The occurrence of any of these known or unknown risks might cause you to lose all or part of your investment in the offered securities. We have incurred significant losses since inception and anticipate that we will incur continued losses for the foreseeable future. As of June 30, 2020, we had an accumulated deficit of approximately $199.8 million and a reported net loss of $8.3 million for the fiscal year 2020. We are unable to predict the extent of any future losses or when we will become profitable, if at all. If we are unable to achieve and then maintain profitability, the market value of our common stock will likely experience significant decline. We could face risks related to the potential outcomes of SEC inquiries, including potential regulatory action or private litigation, potential penalties, damages or other remedies that could be imposed on us, substantial legal costs and expenses, significant management distraction, and potential reputational damage that we could suffer as a result of adverse findings resulting from any SEC inquiry. Since April 2020, the staff of the Fort Worth Regional Office of the U.S. Securities and Exchange Commission (the SEC ) has been conducting an investigation relating to certain press releases issued by us in March 2020 regarding the BreathTest-1000 lung disease screening device that we are currently developing. The SEC has advised us that this informal, non-public, fact-finding inquiry should not be construed as an indication that we or anyone else has violated the law or that the SEC has any negative opinion of any person, entity or security. In connection with this inquiry, the SEC staff has requested that we voluntarily provide certain information and documents relating to the development of BreathTest-1000, the common stock offerings completed by us in March 2020, and certain related matters. We have been cooperating with the SEC staff regarding this inquiry and have provided information and documents in response to the SEC staff s request. We do not intend to comment further on this matter unless and until this matter is closed or further action is taken by the SEC that, in our judgment, merits further comment or public disclosure. Our business units are in development stage. They have earned limited revenues and it is uncertain whether they will earn any revenues in the future or whether any of them will ultimately be profitable. Our business units are in an early stage with a limited operating history. Their future operations are subject to all of the risks inherent in the establishment of a new business including, but not limited to, risks related to capital requirements, failure to establish business relationships, and competitive disadvantages against larger and more established companies. These business units will require substantial amounts of funding to continue to commercialize their products. If such funding comes in the form of equity financing, such equity financing may involve substantial dilution to existing shareholders. Even with funding, our products may fail to be effective or attractive to the market or lack the necessary financial or other resources or relationships to be successful. These business units can be expected to experience continued operating losses until they can generate sufficient revenues to cover their operating costs. Furthermore, these business units may not be able to develop, manufacture, or market additional products in the future, that future revenues will be significant, that any sales will be profitable, or that the business units will have sufficient funds available to complete their commercialization efforts. Any products and technologies developed and manufactured by our business units may require regulatory approvals prior to being made, marketed, sold, and used. Regulatory approval of any products may not be obtained. In particular, FDA approval will be required to market the BreathTest-1000 in the United States. Obtaining FDA approval is a complex and lengthy process, and FDA approval for the BreathTest-1000 may not be granted on a timely basis or at all. The commercial success of any of our business units will depend, in part, on obtaining patent and other intellectual property protection for the technologies contained in any products it developed. In addition, our business units may need to license intellectual property to commercialize future products or avoid infringement of the intellectual property rights of others. Licenses may not be available on acceptable terms and conditions, if at all. Our business units may suffer if any licenses terminate, if the licensors fail to abide by the terms of the license or fail to prevent infringement by third parties, if the licensed patents or other rights are found to be invalid, or if our respective business unit is unable to enter into necessary licenses on acceptable terms. If such business unit, or any third-party, from whom it licenses intellectual property, fails to obtain adequate patent or other intellectual property protection for intellectual property covering its products, or if any protection is reduced or eliminated, others could use the intellectual property covering the products, resulting in harm to the competitive business position of this business unit. In addition, patent and other intellectual property protection may not provide our business units with a competitive advantage against competitors that devise ways of making competitive products without infringing any patents that this business unit owns or has rights to. Such competition could adversely affect the prices for any products or the market share of any of our business units and could have a material adverse effect on its results of operations and financial condition. Our cash and cash equivalents may not be sufficient to fund our operating expenses, capital equipment requirements, and other expected liquidity requirements. Our future capital requirements will depend on a number of factors, including our success in developing and expanding markets for our products, payments under possible future strategic arrangements, continued progress of our research and development of potential products, the need to acquire licenses to new technology, costs associated with increasing our manufacturing and development facilities, costs associated with strategic acquisitions including integration costs and assumed liabilities, litigation expense, the status of competitive products, and potential cost associated with both protecting and defending our intellectual property. Additionally, actions taken as a result of the ongoing internal evaluation of our business could result in expenditures that are not currently contemplated. Factors that could affect our capital requirements, in addition to those listed above include continued collections of accounts receivable consistent with our historical experience and our ability to manage product development efforts. We may not be able to successfully develop the BreathTest-1000 or any other new products or services. Our business strategy outlines the use of the decades of experience we have accumulated to expand the services and products we offer to both U.S. government agencies and commercial industries. These services and products are in the development stage and involve new and untested technologies and business models. These technologies and business models may not be successful, which could result in the loss of any investment we make in developing them, including the development of the BreathTest-1000. Furthermore, we are subject to risks including, but not limited to, the following with respect to the development of the BreathTest-1000: the governmental approval process could be lengthy, time consuming and is inherently unpredictable, and we cannot guarantee that the required approvals for our products, including FDA approvals, will be granted on a timely basis or at all or that we will ever have a marketable product; customers must be persuaded that using our products are effective alternatives to other existing detection methods available for COVID-19 in order for our products to be commercially successful; if we fail to comply with healthcare regulations, we could face substantial enforcement actions, including civil and criminal penalties and our business, operations and financial condition could be adversely affected. Product development involves a high degree of risk and uncertainty, and our potential products may not be successfully developed, achieve their intended benefits, receive full market authorization, or be commercially successful. Moreover, as the COVID-19 pandemic persists and further information continues to develop, we are learning of increased risks and uncertainties in developing and commercializing new products and services in these unprecedented and evolving circumstances. We face various risks related to health epidemics, pandemics and similar outbreaks, which may have material adverse effects on our business, financial position, results of operations, and/or cash flows. We face various risks related to health epidemics, pandemics and similar outbreaks, including the global outbreak of COVID-19. The COVID-19 pandemic has significantly reduced airline passenger traffic, which reduces demand for certain of our security screening products and services. To slow and limit the transmission of COVID-19, governments across the world have imposed significant air travel restrictions and businesses and individuals have canceled air travel plans. These restrictions and cancelations have reduced demand for security screening products and related services at airport checkpoints globally as the number of airline passengers requiring screening has fallen. The pandemic has also hampered our ability to meet with our customers and prospective customers. The continued spread of COVID-19 has also led to recent disruption and volatility in the global capital markets, which increases the cost of capital and adversely impacts access to capital. If significant portions of our workforce are unable to work effectively, including because of illness, quarantines, government actions, facility closures or other restrictions in connection with the COVID-19 pandemic, our operations will likely be impacted. We may be unable to perform fully on our contracts and our costs may increase as a result of the COVID-19 outbreak. These costs may not be recoverable or adequately covered by insurance. It is possible that the continued spread of COVID-19 could also further cause disruption in our supply chain; cause delay, or limit the ability of customers to perform, including in making timely payments to us; cause delay in regulatory certification testing of our instruments; and cause other unpredictable events. If any of our supply chain phases were interrupted or terminated, we could experience delays in our product development including the availability of products for clinical testing. The occurrence of one or more of these items could have a material adverse effect on our business, liquidity, financial condition, and/or results of operations. The effects of the COVID-19 pandemic may negatively impact productivity, disrupt our business and delay our clinical programs and timelines, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct our business in the ordinary course. These and similar, and perhaps more severe, disruptions in our operations could negatively impact our business, operating results and financial condition. In addition, any future clinical trials may be affected by the COVID-19 pandemic. Clinical site initiation and patient enrollment may be delayed due to prioritization of hospital resources toward the COVID-19 pandemic. Also, some patients may not be able to comply with clinical trial protocols if quarantines impede patient movement or interrupt healthcare services. Similarly, our ability to recruit and retain patients and principal investigators and site staff who, as healthcare providers, may have heightened exposure to COVID-19 and adversely impact our clinical trial operations. If we fail to comply with the continued listing requirements of The Nasdaq Capital Market LLC, our common stock may be delisted and the price of our common stock and our ability to access the capital markets could be negatively impacted. As previously noted in our Form 10-K for the fiscal year ended June 30, 2020, we were not in compliance with the minimum stockholders equity requirement under Nasdaq Listing Rule 5550(b)(1) for continued listing on The Nasdaq Capital Market because our stockholders equity was below the required minimum of $2.5 million at June 30, 2020. On September 11, 2020, we received a notice from the Listing Qualifications Department of the Nasdaq Stock Market LLC ( Nasdaq ) stating that we were not in compliance with the required stockholder s equity of $2.5 million. The Notice has no immediate effect on our listing on The Nasdaq Capital Market. We have until October 26, 2020 to submit a plan to regain compliance with the minimum stockholders equity requirement. If our plan to regain compliance is accepted, Nasdaq may grant an extension of up to 180 calendar days from the date of the Notice to evidence compliance (the Compliance Period ). We are presently evaluating various courses of action to regain compliance and intend to timely submit a plan to Nasdaq to regain compliance with the Nasdaq minimum stockholders equity requirement. However, there can be no assurance that our plan will be accepted or that if it is, we will be able to regain compliance by the end of the Compliance Period. If our plan to regain compliance is not accepted, or if it is and we do not regain compliance during the Compliance Period, or if we fail to satisfy another Nasdaq requirement for continued listing, Nasdaq could provide notice that our common stock will become subject to delisting. In such event, Nasdaq rules would permit us to appeal the decision to reject our proposed plan to regain compliance or any delisting determination to a Nasdaq Hearings Panel. We cannot be certain that additional financing will be available on reasonable terms when needed, or at all, which could seriously harm our business. We have incurred net losses and negative cash flow from operations in recent prior periods, and we may not achieve or maintain profitability in the future. Our cash on hand at June 30, 2020 is expected to fund our operations into the second quarter of fiscal 2021. As a result, we may need additional financing to execute our business plan. We may pursue additional funding through various financing sources, including additional public offerings, the issuance of debt securities, fees associated with licensing some or all of our technology, joint ventures with capital partners and project type financing. Our ability to obtain additional financing, if and when required, will depend on investor demand, our operating performance, the condition of the capital markets, and other factors. Therefore, we may need to raise additional funds and we cannot assure investors that additional financing will be available to us on favorable terms when required, or at all. If we raise additional funds through the issuance of equity, equity-linked, or debt securities, those securities may have rights, preferences, or privileges senior to the rights of our common stock, and our existing stockholders may experience dilution. If financing is not available on satisfactory terms, we may be unable to further pursue our business plan and we may be unable to continue operations, in which case you may lose some or all of your investment. There is substantial doubt about our ability to continue as a going concern, indicating the possibility that we may not be able to operate in the future. The report of our independent registered public accounting firm also includes an explanatory paragraph about our ability to continue as a going concern. As of June 30, 2020, we had working capital of $0.3 million. For the fiscal year 2020, we reported a net loss of $8.3 million and net cash used in operating activities of $6.9 million. For the fiscal year 2019, we reported a net loss of $7.5 million and net cash used in operating activities of $8.5 million. This raises substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is contingent upon, among other factors, the sale of the shares of our common stock or obtaining alternate financing. On April 14, 2020, we entered into a $542 thousand Paycheck Protection Program Promissory Note and Agreement (the PPP Promissory Note ) with a commercial bank under the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act ) The PPP Promissory Note bears interest at a rate of 1.0% per annum. Payments are due monthly beginning November 10, 2020. The principal amount of the PPP Promissory Note along with any unpaid interest is due on April 1, 2022 The principal and interest may be forgiven if the proceeds are used for forgivable purposes as defined by the terms in the PPP Promissory Note, and we have used the proceeds from the PPP Promissory Note for forgivable purposes as defined by the terms of the PPP Promissory Note. We intend to apply for forgiveness under the provisions of the CARES Act. Forgiveness is subject to the sole approval of the Small Business Administration. We remain resolute in identifying the optimal solution to our liquidity issue. We are currently evaluating several potential sources of additional liquidity. These include, but are not limited to, selling the Company or a portion thereof, debt financing, equity financing, merging, or engaging in a strategic partnership. We are currently evaluating potential offerings of any combination of common stock, preferred stock, debt securities, warrants to purchase common stock, preferred stock or debt securities, or any combination of the foregoing, either individually or as units comprised of one or more of the other securities. However, additional funding may not be available when needed or on terms acceptable to us. If we are unable to generate funding within a reasonable timeframe, we may have to delay, reduce or terminate our research and development programs, limit strategic opportunities, or curtail our business activities. Astrotech s consolidated financial statements as of June 30, 2020 do not include any adjustments that might result from the outcome of this uncertainty. Our success depends significantly on the establishment and maintenance of successful relationships with our customers. Our customer base is limited; therefore, we continue to work on diversifying our customer base, while going to great lengths to satisfy the needs of our current customer base. Due to the limited number of customers, if any of our customers terminate their relationship with us, it could materially harm our business and results of operations. Third parties may claim we are infringing their intellectual property rights, and we could suffer significant litigation or licensing expenses or be prevented from selling products. As we introduce any new and potentially promising product or service, or improve existing products or services with new features or components, companies possessing competing technologies, or other companies owning patents or other intellectual property rights, may be motivated to assert infringement claims in order to generate royalty revenues, delay or diminish potential sales, and challenge our right to market such products or services. Even if successful in defending against such claims, patent and other intellectual property related litigation is costly and time consuming. In addition, we may find it necessary to initiate litigation in order to protect our patent or other intellectual property rights, and even if the claims are well-founded and ultimately successful, such litigation is typically costly and time-consuming and may expose us to counterclaims, including claims for intellectual property infringement, antitrust, or other such claims. Third parties could also obtain patents or other intellectual property rights that may require us to either redesign products or, if possible, negotiate licenses from such third parties. Adverse determinations in any such litigation could result in significant liabilities to third parties or injunctions, or could require us to seek licenses from third parties, and if such licenses are not available on commercially reasonable terms, prevent us from manufacturing, importing, distributing, selling, or using certain products, any one of which could have a material adverse effect on us. In addition, some licenses may be non-exclusive, which could provide our competitors access to the same technologies. Under any of these circumstances, we may incur significant expenses. Our ongoing success is dependent upon the continued availability of certain key employees. We are dependent in our operations on the continued availability of the services of our employees, many of whom are individually key to our current and future success, and the availability of new employees to implement our growth plans. The market for skilled employees is highly competitive, especially for employees in technical fields. While our compensation programs are intended to attract and retain the employees required for us to be successful, ultimately, we may not be able to retain the services of all of our key employees or a sufficient number to execute on our plans. In addition, we may not be able to continue to attract new employees as required. Our operating results may be adversely affected by increased competition. We generally sell our products in industries that have increased competition through frequent new product and service introductions, rapid technological changes, and changing industry standards. Without the timely introduction of new products, services, and enhancements, our products and services will become technologically obsolete over time, in which case our revenue and operating results would suffer. The success of our new products and services will depend on several factors, including our ability to: properly identify customer needs and predict future needs; innovate and develop new technologies, services, and applications; successfully commercialize new technologies in a timely manner; manufacture and deliver our products in sufficient volumes and on time; differentiate our offering from our competitors offerings; price our products competitively; anticipate our competitors development of new products, services, or technological innovations; and control product quantity in our manufacturing process. Our insurance coverage may be inadequate to cover all significant risk exposures. We are exposed to liabilities that are unique to the products and services we provide. We maintain insurance for certain risks, and we believe our insurance coverage is consistent with general practices within our industry. However, the amount of our insurance coverage may not cover all claims or liabilities and we may be forced to bear substantial costs. Increased cybersecurity requirements, vulnerabilities, threats, and more sophisticated and targeted computer crime could pose a risk to our systems, networks, products, services, and data. Increased global cybersecurity vulnerabilities, threats, and more sophisticated and targeted cyber-related attacks pose a risk to the security of our and our customers , suppliers , and third-party service providers products, systems, and networks and the confidentiality, availability, and integrity of our and our customers data. Although we have implemented policies, procedures, and controls to protect against, detect, and mitigate these threats, we remain potentially vulnerable to additional known or unknown threats. We also have access to sensitive, confidential, or personal data or information that is subject to privacy and security laws, regulations, and customer-imposed controls. Despite our efforts to protect sensitive, confidential, or personal data or information, we may be vulnerable to material security breaches, theft, misplaced or lost data, programming errors, employee errors, and/or malfeasance that could potentially lead to the compromising of sensitive, confidential, or personal data or information, improper use of our systems or networks, unauthorized access, use, disclosure, modification, or destruction of information, defective products, production downtimes, and operational disruptions. In addition, a cyber-related attack could result in other negative consequences, including damage to our reputation or competitiveness and remediation or increased protection costs, and could subject us to fines, damages, litigation, and enforcement actions. Our facilities located in Houston are susceptible to damage caused by hurricanes or other natural disasters. Our 1st Detect facilities in Houston are susceptible to damage caused by hurricanes or other natural disasters. Although we insure our properties and maintain business interruption insurance, there can be no guarantee that the coverage would be sufficient or a claim will be fulfilled. A natural disaster could result in a temporary or permanent closure of our business operations, thus impacting our future financial performance. If we are unable to anticipate technological advances and customer requirements in the commercial and governmental markets, our business and financial condition may be adversely affected. Our business strategy employs our personnel s decades of experience to expand the services and products we offer to our customers. We believe that our growth and future financial performance depend upon our ability to anticipate technological advances and customer requirements. We may not be able to achieve the necessary technological advances for us to remain competitive. Our failure to anticipate or respond adequately to changes in technological and market requirements, or delays in additional product development or introduction, could have a material adverse effect on our business and financial performance. Additionally, the cost of capital to fund these businesses will likely require dilution of shareholders. Significant safety concerns could arise for our BreathTest-1000 product, which could have a material adverse effect on our future revenues and financial condition. If the development of the BreathTest-1000 is successfully completed, FDA approval will need to be obtained to market the BreathTest-1000 in the United States. Health care products typically receive regulatory approval based on data obtained in controlled clinical trials of limited duration. Following regulatory approval, these products will be used over longer periods of time in many patients. Investigators may also conduct additional, and perhaps more extensive, studies. If new safety issues are reported, we may be required to amend the conditions of use. For example, we may be required to provide additional warnings on the BreathTest-1000 label or narrow its approved intended use, either of which could reduce the product s market acceptance. If serious safety issues arise with the BreathTest-1000 product, sales of the product could be halted by us or by regulatory authorities. Safety issues affecting suppliers or competitors products also may reduce the market acceptance of our products. We incur substantial upfront, non-reimbursable costs in preparing proposals to bid on contracts or to receive research and development grants that we may not be awarded. Preparing a proposal to bid on a contract or to receive a research and development grant is labor-intensive and results in the incurrence of substantial costs that are generally not retrievable. Additionally, although we may be awarded a contract or grant, work performance does not commence for several months following completion of the bidding process. If funding problems by the party awarding the contract or grant or other matters further delay our commencement of work, these delays may lower the value of the contract or grant, or possibly render it unprofitable. A failure of a key information technology system, process, or site could have a material adverse impact on our ability to conduct business. We rely extensively on information technology systems to interact with our employees and our customers. These interactions include, but are not limited to, ordering and managing materials from suppliers, converting materials to finished products, shipping product to customers, processing transactions, summarizing and reporting results of operations, transmitting data used by our service personnel and by and among our personnel and facilities, complying with regulatory, legal, and tax requirements, and other processes necessary to manage our business. If our systems are damaged or cease to function properly due to any number of causes, ranging from the failures of third-party service providers, to catastrophic events, to power outages, to security breaches, and our business continuity plans do not effectively compensate on a timely basis, we may suffer interruptions in our ability to manage operations which may adversely impact our results of operations and/or financial condition. A sale of a substantial number of shares of the common stock may cause the price of our common stock to decline. If our shareholders sell, or the market perceives that our shareholders intend to sell for various reasons, substantial amounts of our common stock in the public market may make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate. We are a smaller reporting company and, as a result of the reduced disclosure and governance requirements applicable to such companies, our common stock may be less attractive to investors. We are a smaller reporting company, (i.e. a company with less than $250 million of public float) and we are eligible to take advantage of certain exemptions from various reporting requirements applicable to other public companies. We have elected to adopt these reduced disclosure requirements. We cannot predict if investors will find our common stock less attractive as a result of our taking advantage of these exemptions. If some investors find our common stock less attractive as a result of our choices, there may be a less active trading market for our common stock and our stock price may be more volatile. We are required to evaluate the effectiveness of our internal control over financial reporting on an annual basis and publicly disclose any material weaknesses in our controls. Any adverse results from such evaluation could result in a loss of investor confidence in our financial reports and significant expense to remediate, and ultimately could have an adverse effect on our stock price. Section 404 of the Sarbanes-Oxley Act of 2002 requires our management to assess the effectiveness of our internal control over financial reporting and to disclose if such controls were unable to provide assurance that a material error would be prevented or detected in a timely manner. We have an ongoing program to review the design of our internal controls framework in keeping with changes in business needs, implement necessary changes to our controls design, and test the system and process controls necessary to comply with these requirements. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within our Company will have been detected. If we or our independent registered public accounting firm identifies material weaknesses in our internal controls, the disclosure of that fact, even if quickly remedied, may cause investors to lose confidence in our financial statements and our stock price may decline. Remediation of a material weakness could require us to incur significant expenses and, if we fail to remedy any material weakness, our ability to report our financial results on a timely and accurate basis may be adversely affected, our access to the capital markets may be restricted, our stock price may decline, and we may be subject to sanctions or investigation by regulatory authorities, including the SEC or Nasdaq. We may also be required to restate our financial statements from prior periods. Execution of restatements create a significant strain on our internal resources and could cause delays in our filing of quarterly or annual financial results, increase our costs, and cause management distraction. Restatements may also significantly affect our stock price in an adverse manner. We can sell additional shares of common stock without consulting shareholders and without offering shares to existing shareholders, which would result in dilution of shareholders interests in the Company and could depress our stock price. Our Certificate of Incorporation authorizes 50,000,000 shares of common stock, of which 7,844,095 were outstanding as of September 2, 2020, and our Board is authorized to issue additional shares of our common stock. In addition, our Certificate of Incorporation authorizes 2,500,000 shares of blank check preferred stock. Shares of blank check preferred stock may be issued in such series and with such rights, privileges, and limitations as the Board may, in its sole discretion, determine. Our Board has designated 300,000 shares as Series A Junior Preferred Stock, none of which are outstanding. The Board has also designated Series C and Series D Preferred Stock, of which no shares and 280,898 shares are outstanding, respectively, as of September 2, 2020. Although our Board intends to utilize its reasonable business judgment to fulfill its fiduciary obligations to our then existing shareholders in connection with any future issuance of our capital stock, the future issuance of additional shares of our capital stock would cause immediate, and potentially substantial, dilution to our existing shareholders, which could also have a material effect on the market value of the shares. Furthermore, our Board may authorize the issuance of a series of preferred stock that would grant to holders the preferred right to our assets upon liquidation, the right to receive dividend payments before dividends are distributed to the holders of common stock, and the right to the redemption of the shares, together with a premium, prior to the redemption of the common stock. In addition, our Board could authorize the issuance of a series of preferred stock that has greater voting power than the common stock or that is convertible into our common stock, which could decrease the relative voting power of the common stock or result in dilution to our existing shareholders. Our Certificate of Incorporation provides that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for many disputes between us and our stockholders, which could limit stockholders ability to obtain a favorable judicial forum for disputes with us or our directors or officers. Our Certificate of Incorporation provides that unless we consent in writing to the selection of an alternative forum, the Court of Chancery for the State of Delaware is the sole and exclusive forum for claims brought by a stockholder, including claims in the right of the corporation, (i) that are based upon a violation of a duty by a current or former director or officer or stockholder in such capacity or (ii) as to which the Delaware General Corporation Law (the DGCL ) confers jurisdiction upon the Court of Chancery of the State of Delaware. The provision indicates that if the Court of Chancery does not have jurisdiction, then the Superior Court of the State of Delaware, or, if such other court does not have jurisdiction, the United States District Court for the District of Delaware, shall be the exclusive forum for such action. 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 or officers, which may discourage such lawsuits against us and our directors and officers. Alternatively, if a court were to find our choice of forum provision 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. Our products and operations are subject to extensive governmental regulation, and failure to comply with applicable requirements could cause our business to suffer. The medical technology industry is regulated extensively by governmental authorities, principally the FDA, and state regulatory agencies with oversight of various aspects of drug and device distribution, sale, and use. The regulations are very complex, have become more stringent over time, and are subject to rapid change and varying interpretations. Regulatory restrictions or changes could limit our ability to carry on or expand our operations or result in higher than anticipated costs or lower than anticipated sales. The FDA and other federal and state governmental agencies regulate numerous elements of our business, including: product design and development; pre clinical and clinical testing and trials; product safety; establishment registration and product listing; labeling and storage; marketing, manufacturing, sales and distribution; pre market clearance or approval; servicing and post marketing surveillance, including reporting of deaths or serious injuries and malfunctions that, if they recurred, could lead to death or serious injury; advertising and promotion; post market approval studies; product import and export; and recalls and field safety corrective actions. Before we can market or sell a new regulated product or a significant modification to an existing product in the United States, we must obtain either clearance under Section 510(k) of the FDCA, grant of a de novo classification request, or approval of a pre market approval, or PMA, application from the FDA, unless an exemption from pre market review applies. In the 510(k) clearance process, the FDA must determine that a proposed device is substantially equivalent to a legally marketed predicate device (in most cases Class II devices, with a few exceptions), with respect to intended use, technology and safety and effectiveness, in order to clear the proposed device for marketing. Class III devices approved under the PMA process cannot serve as predicates. Clinical data are sometimes required to support substantial equivalence. In the de novo process, the FDA must determine that general and special controls are sufficient to provide reasonable assurance of the safety and effectiveness of a device, which is low to moderate risk and has no predicate (in other words, the applicant must justify the down-classification to Class I or II for a new product type that would otherwise automatically be placed into Class III, but is lower risk). The PMA process requires an applicant to demonstrate the safety and effectiveness of the device based on extensive data, including, but not limited to, technical, preclinical, clinical trial, manufacturing and labeling data. The PMA process is typically required for devices that are deemed to pose the greatest risk, such as life sustaining, life supporting or implantable devices. Products that are approved through a PMA application generally need FDA approval before they can be modified. Similarly, some modifications made to products cleared through a 510(k) may require a new 510(k). The 510(k), de novo, and PMA processes can be expensive and lengthy and require the payment of significant fees, unless an exemption applies. The FDA s 510(k) clearance process usually takes from 3 to 12 months, but may take longer. The FDA s stated goal is to review de novo classification requests within 150 days, 50% of the time, but in reality the process for many applicants generally takes even longer, up to a year or more. The process of obtaining a PMA is much more costly and uncertain than the 510(k) clearance process and generally takes from one to three years, or longer, from the time the application is submitted to the FDA until an approval is obtained. The process of obtaining regulatory clearances, approvals, and emergency use authorization to market a medical device can be costly and time consuming, and we may not be able to obtain these clearances, approvals, or authorizations on a timely basis, or at all for our proposed products. If the FDA requires us to go through a lengthier, more rigorous examination for marketing authorization of the BreathTest-1000 or future modifications to the BreathTest-1000 than we had expected, our product introductions or modifications could be delayed or canceled, which could cause our sales to decline or to not increase in line with our forecasts. In addition, the FDA may determine that future products will require the more costly, lengthy and uncertain PMA process. Although we do not market any devices under PMA, the FDA may demand that we obtain a PMA prior to marketing certain of our future products. Further, even with respect to those future products where a PMA is not required, we cannot assure you that we will be able to obtain the 510(k) clearances with respect to those products. The FDA can delay, limit or deny clearance, approval, or authorization of a device for many reasons, including: we may not be able to demonstrate that our products are safe and effective for their intended users; the data from our clinical trials may be insufficient to support clearance, approval, or authorization; and the manufacturing process or facilities we use may not meet applicable requirements. In addition, the FDA may change its clearance and approval policies, adopt additional regulations or revise existing regulations, or take other actions which may prevent or delay approval or clearance of our products under development. Any delay in, or failure to obtain or maintain, clearance or approval for our products under development could prevent us from generating revenue from these products and adversely affect our business operations and financial results. Additionally, the FDA and other regulatory authorities have broad enforcement powers. Regulatory enforcement or inquiries, or other increased scrutiny on us, could dissuade some customers from using our products and adversely affect our reputation and the perceived safety and efficacy of our product. Failure to comply with applicable regulations could jeopardize our ability to sell our products and result in enforcement actions such as fines, civil penalties, injunctions, warning letters, recalls of products, delays in the introduction of products into the market, refusal of the FDA or other regulators to grant future clearances or approvals, and the suspension or withdrawal of existing clearances or approvals by the FDA or other regulators. Any of these sanctions could result in higher than anticipated costs or lower than anticipated sales and negatively impact our reputation, business, financial condition and operating results. Furthermore, any operations or product applications outside of the United States will subject us to various additional regulatory and legal requirements under the applicable laws and regulations of the international markets we enter. These additional regulatory requirements may involve significant costs and expenditures and, if we are not able to comply with any such requirements, our international expansion and business could be significantly harmed. Failure to obtain clearance or authorization for the BreathTest-1000, or other delays in the development of the BreathTest-1000, would adversely affect our ability to grow our business. Commercialization of the BreathTest-1000 may require an Emergency Use Authorization (EUA), FDA clearance of a 510(k) premarket notification submission, or authorization of a de novo submission. The process for submitting and obtaining FDA clearance of a 510(k), authorization of a de novo submission, or EUA can be expensive and lengthy. The FDA s review process can take several months or longer, and we may not be able to obtain FDA clearance, de novo authorization, or Emergency use Authorization for the BreathTest-1000 on a timely basis, if at all. The FDA s refusal of, or any significant delays in receiving 510(k) clearance, de novo authorization, or Emergency use Authorization of the BreathTest-1000, would have an adverse effect on our ability to expand our business. Thus far, we have not performed any clinical testing of the BreathTest-1000, which will likely be required before the device can be marketed. Even if a clinical trial is completed, there can be no assurance that the data generated during a clinical trial will meet the safety and effectiveness endpoints or otherwise produce results that will lead the FDA to grant marketing clearance, approval, or authorization. In addition, any other delays in the development of the BreathTest-1000, for example, unforeseen issues during product validation, would have an adverse effect on our ability to commercialize the BreathTest-1000. FDA s policy with respect to Emergency Use Authorizations is evolving and may limit the ability for medical products, including the BreathTest-1000, to be eligible for commercialization under an Emergency Use Authorization. We intend to submit an application with the FDA for Emergency Use Authorization (EUA) for the BreathTest-1000. The FDA has the authority to grant an Emergency Use Authorization to allow unapproved medical products to be used in an emergency to diagnose, treat or prevent serious or life-threatening diseases or conditions when there are no adequate, approved and available alternatives. If we are granted an Emergency Use Authorization for the BreathTest-1000 for the diagnosis of COVID-19, we would be able to commercialize the BreathTest-1000 for the diagnosis of COVID-19 prior to FDA clearance or authorization of a 510(k) or de novo submission, respectively. However, the FDA does not have review deadlines with respect to such submissions and, therefore, the timing of any approval of an EUA submission is uncertain. We cannot guarantee that the FDA will review our data in a timely manner, or that the FDA will accept the data when reviewed. The FDA may decide that our data are insufficient for an EUA and require additional pre-clinical, clinical or other studies and refuse to approve our application. In addition, the FDA may revoke an Emergency Use Authorization where it is determined that the underlying health emergency no longer exists or warrants such authorization, and we cannot predict how long, if ever, an Emergency Use Authorization would remain in place. Further, the FDA s policy with respect to EUAs related to COVID-19 is continuously evolving and may in the future limit the ability for medical products, including the BreathTest-1000, to be eligible for an EUA. If we are unsuccessful in obtaining an EUA for the BreathTest-1000 in a timely manner or at all, or if any granted EUA is revoked after a short period of time, it could have a material adverse effect on our future business, financial condition, operating results and cash flows. Modifications to our products may require new 510(k) clearances, de novo submissions, or pre market approvals, or may require us to cease marketing or recall the modified products until clearances are obtained. Any modification to a 510(k) cleared device that could significantly affect its safety or effectiveness, or that would constitute a major change in its intended use, design, or manufacture, requires a new 510(k) clearance or, possibly, a de novo or PMA. The FDA requires every manufacturer to make this determination in the first instance, and provides some guidance on decision making, but the FDA may review any manufacturer s decision at any time. The FDA may not agree with our decisions regarding whether new clearances or approvals are necessary. If the FDA disagrees with our determination and requires us to submit new 510(k) notifications, de novo submissions or PMAs for modifications to our previously cleared or approved products for which we have concluded that new clearances or approvals are unnecessary, we may be required to cease marketing or to recall the modified product until we obtain clearance or approval, and we may be subject to significant regulatory fines or penalties. If we or our third party suppliers fail to comply with the FDA s good manufacturing practice regulations or fail to adequately, timely, or sufficiently respond to an FDA Form 483 or subsequent Warning Letter, this could impair our ability to market our products in a cost effective and timely manner and could result in FDA enforcement action. We and our third party suppliers are required to comply with the FDA s Quality System Regulation, or QSR, and Current Good Manufacturing Practices (cGMP) which covers the methods and documentation of the design, testing, production, control, quality assurance, labeling, packaging, sterilization, storage and shipping of our product. The FDA audits compliance with the QSR, cGMP and related regulations through periodic announced and unannounced inspections of manufacturing and other facilities. The FDA may conduct these inspections or audits at any time. If, during the inspection, FDA identifies issues which, in FDA s judgment, may constitute violations of the Federal Food, Drug, and Cosmetic Act or FDA s regulations, the FDA inspector may issue an FDA Form 483 listing these observations. Note that if an entity does not address observations found in an FDA Form 483 to FDA s satisfaction, the FDA could take enforcement action, including any of the following sanctions: untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties; customer notifications or repair, replacement, refunds, recall, detention or seizure of our product; operating restrictions or partial suspension or total shutdown of production; refusing or delaying our requests for 510(k) clearance or pre market approval of new products or modified products; withdrawing 510(k) clearances or pre market approvals that have already been granted; refusal to grant export approval for our product; or criminal prosecution. Any of the foregoing actions could have a material adverse effect on our reputation, business, financial condition and operating results. A recall of our product, or the discovery of serious safety issues with our product, could have a significant adverse impact on us. The FDA has the authority to require the recall of commercialized products in the event of material deficiencies or defects in design or manufacture or in the event that a product poses an unacceptable risk to health. Manufacturers may, under their own initiative, recall a product if any material deficiency in a device is found. A government mandated or voluntary recall by us or one of our distributors could occur as a result of an unacceptable risk to health, component failures, manufacturing errors, design or labeling defects or other deficiencies and issues. Recalls of our products would divert managerial and financial resources and have an adverse effect on our reputation, financial condition and operating results, which could impair our ability to produce our products in a cost effective and timely manner. Further, under the FDA s medical device reporting, or MDR regulations, we are required to report to the FDA any incident in which our products may have caused or contributed to a death or serious injury or in which our products malfunctioned and, if the malfunction were to recur, would likely cause or contribute to death or serious injury. Repeated product malfunctions may result in a voluntary or involuntary product recall, which could divert managerial and financial resources, impair our ability to manufacture our products in a cost effective and timely manner and have an adverse effect on our reputation, financial condition and operating results. Depending on the corrective action we take to redress a product s deficiencies or defects, the FDA may require, or we may decide, that we will need to obtain new approvals or clearances for the device before we may market or distribute the corrected device. Seeking such approvals or clearances may delay our ability to replace the recalled devices in a timely manner. Moreover, if we do not adequately address problems associated with our devices, we may face additional regulatory enforcement action, including FDA warning letters, product seizure, injunctions, administrative penalties, or civil or criminal fines. We may also be required to bear other costs or take other actions that may have a negative impact on our sales as well as face significant adverse publicity or regulatory consequences, which could harm our business, including our ability to market our products in the future. Any adverse event involving our products could result in future voluntary corrective actions, such as recalls or customer notifications, or regulatory agency action, which could include inspection, mandatory recall or other enforcement action. Any corrective action, whether voluntary or involuntary, will require the dedication of our time and capital, distract management from operating our business and may harm our reputation and financial results. We may be liable if the FDA or other U.S. enforcement agencies determine we have engaged in the off label promotion of our products or have disseminated false or misleading labeling or promotional materials. Our promotional materials and training methods must comply with FDA and other applicable laws and regulations, including laws and regulations prohibiting marketing claims that promote the off label use of our products or that make false or misleading statements. Healthcare providers may use our products off label, as the FDA does not restrict or regulate a physician s choice of treatment within the practice of medicine. FDA also could conclude that a performance claim is misleading if it determines that there are inadequate non clinical and/or clinical data supporting the claim. If the FDA determines that our promotional materials or training promote of an off label use or make false or misleading claims, it could request that we modify our training or promotional materials or subject us to regulatory or enforcement actions, including the issuance of an untitled letter, a warning letter, injunction, seizure, civil fines and criminal penalties. It is also possible that other federal, state or foreign enforcement authorities might take action if they determine that our promotional or training materials promote an unapproved use or make false or misleading claims, which could result in significant fines or penalties. Although our policy is to refrain from statements that could be considered off label promotion of our products or false or misleading, the FDA or another regulatory agency could disagree. Violations of the FDCA may also lead to investigations alleging violations of federal and state health care fraud and abuse laws, as well as state consumer protection laws, which may lead to costly penalties and may adversely impact our business. Recent court decisions have impacted FDA s enforcement activity regarding off-label promotion in light of First Amendment Considerations; however, there are still significant risks in this area, in part due to the potential for False Claims Act exposure. In addition, the off label use of our products may increase the risk of product liability claims. Product liability claims are expensive to defend and could result in substantial damage awards against us and harm our reputation. Legislative or regulatory healthcare reforms may make it more difficult and costly for us to obtain reimbursement for our products or regulatory clearance or approval of our future products, and to produce, market and distribute those products after clearance or approval is obtained. Recent political, economic and regulatory influences are subjecting the healthcare industry to fundamental changes. Both the federal and state governments in the United States and foreign governments continue to propose and pass new legislation and regulations designed to contain or reduce the cost of healthcare. Such legislation and regulations may result in decreased reimbursement for our product, which may further exacerbate industry wide pressure to reduce the prices charged for our product. This could harm our ability to market our products and generate sales. In addition, FDA regulations and guidance are often revised or reinterpreted by the FDA in ways that may significantly affect our business and our current products and future products. Any new regulations or revisions or reinterpretations of existing regulations may impose additional costs or lengthen review times of our products. Delays in receipt of or failure to receive regulatory clearances or approvals for any future products would negatively impact our long term business strategy. In the U.S., there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that restrict or regulate post approval activities, which may affect our ability to profitably sell product candidates for which we obtain marketing approval. Such government adopted reform measures may adversely impact the pricing of healthcare products and services in the United States or internationally and the amount of reimbursement available from third party payors. Our financial performance may be adversely affected by medical device tax provisions in healthcare reform laws. The Patient Protection and Affordable Care Act (the PPACA ) imposed, among other things, an excise tax of 2.3% on any entity that manufactures or imports medical devices offered for sale in the United States. Under these provisions, the Congressional Research Service predicted that the total cost to the medical device industry may be up to $20 billion over a decade. The Internal Revenue Service issued final regulations implementing the tax in December 2012, which required, among other things, bi-monthly payments and quarterly reporting. The Consolidated Appropriations Act, 2016 (Pub. L. 114-113), signed into law in December 2015, included a two-year moratorium on the medical device excise tax. A second two-year moratorium on the medical device excise tax was signed into law in January 2018 as part of the Extension of Continuing Appropriations Act, 2018 (Pub. L. 115-120), extending the moratorium through December 31, 2019. On December 20, 2019, President Trump signed into law a permanent repeal of the medical device tax under the PPACA, but there is no guarantee that Congress or the President will not reverse course in the future. If such an excise tax on sales of our products in the United States is enacted, it could have a material adverse effect on our business, results of operations and financial condition. Risks Related to this Offering and our Common Stock There is no public market for the pre-funded warrants being offered in this offering. There is no established public trading market for the pre-funded warrants being offered in this offering, and we do not expect such a market to develop. In addition, we do not intend to apply to list the pre-funded warrants on any securities exchange or nationally recognized trading system, including Nasdaq. Without an active market, the liquidity of the pre-funded warrants will be limited. Holders of pre-funded warrants purchased in this offering will have no rights as stockholders of shares of common stock until such holders exercise their pre-funded warrants and acquire our shares of common stock, except as set forth in the pre-funded warrants. Except as set forth in the pre-funded warrants, until holders of pre-funded warrants acquire our shares of common stock upon exercise of the pre-funded warrants, holders of pre-funded warrants have no rights with respect to our shares of common stock underlying such pre-funded warrants exercise of the pre-funded warrants, the holders will be entitled to exercise the rights of a stockholder of shares of common stock only as to matters for which the record date occurs after the exercise date. The pre-funded warrants are speculative in nature. The pre-funded warrants offered hereby do not confer any rights of share of common stock ownership on their holders, such as voting rights or the right to receive dividends, but rather merely represent the right to acquire shares of common stock at a fixed price. Specifically, commencing on the date of issuance, holders of the pre-funded warrants may acquire the shares of common stock issuable upon exercise of such warrants at an exercise price of $0.001 per share of common stock. Moreover, following this offering, the market value of the pre-funded warrants is uncertain and there can be no assurance that the market value of the pre-funded warrants will equal or exceed their respective public offering prices. There can be no assurance that the market price of the shares of common stock will ever equal or exceed the exercise price of the pre-funded warrants, and consequently, whether it will ever be profitable for holders of the pre-funded warrants to exercise the pre-funded warrants. This is a best efforts offering, no minimum amount of securities is required to be sold, and we may not raise the amount of capital we believe is required for our business plans. The placement agent has agreed to use its reasonable best efforts to solicit offers to purchase the securities in this offering. The placement agent has no obligation to buy any of the securities from us or to arrange for the purchase or sale of any specific number or dollar amount of the securities. There is no required minimum number of securities or amount of proceeds that must be sold as a condition to completion of this offering. Because there is no minimum number of securities or amount of proceeds required as a condition to the closing of this offering, the actual offering amount, placement agent fees, and proceeds to us are not presently determinable and may be substantially less than the maximum amounts set forth above. We may sell fewer than all of the securities offered hereby, which may significantly reduce the amount of proceeds received by us, and investors in this offering will not receive a refund in the event that we do not sell an amount of securities sufficient to fund for our general corporate purposes, including working capital, and engineering efforts. Thus, we may not raise the amount of capital we believe is required for our operations in the short-term and may need to raise additional funds, which may not be available or available on terms acceptable to us. You will experience immediate dilution in the net tangible book value per share of the common stock you purchase. The public offering price of our common stock is substantially higher than our net tangible book value per share of common stock. Based on the public offering price of $1.58 per share, investors purchasing shares in this offering will, therefore, incur immediate dilution of $0.75 in net tangible book value per share. This dilution figure deducts the estimated fees and estimated offering expenses payable from the public offering price. See "Dilution" on page 28. Because we will have broad discretion and flexibility in how the net proceeds from this offering are used, we may use the net proceeds in ways in which you disagree. We intend to use the net proceeds from the sale of shares for continuing operating expenses and working capital. See "Use of Proceeds" on page 30. We have not allocated specific amounts of the net proceeds from this offering for any of the foregoing purposes. Accordingly, our management will have significant discretion and flexibility in applying the net proceeds of this offering. 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 net proceeds are being used appropriately. It is possible that the net proceeds will be invested in a way that does not yield a favorable, or any, return for us. The failure of our management to use such funds effectively could have a material adverse effect on our business, financial condition, operating results, and cash flow. The market price of our common stock may be volatile and adversely affected by several factors. The market price of our common stock could fluctuate significantly in response to various factors and events, including: the effect of coronavirus on our business model and on the markets in general; our ability to integrate operations, technology, products, and services; our ability to execute our business plan; operating results; our issuance of additional securities, including debt or equity or a combination thereof, which will be necessary to fund our operating expenses; announcements of technological innovations or new products by us or our competitors; loss of any strategic relationship; industry developments, including, without limitation, changes in healthcare policies or practices or third-party reimbursement policies; economic and other external factors; period-to-period fluctuations in our financial results; and whether an active trading market in our common stock is maintained and whether we maintain compliance with Nasdaq Listing Rules. 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.

parsed_sections/risk_factors/2020/BGM_bgm-group_risk_factors.txt

@@ -0,0 +1,2443 @@
+Risk Factors
+ 
+ Investing in these securities
+ involves a high degree of risk. As an investor, you should be able to bear a complete loss of your investment. You should
+ carefully consider the information set forth in the "Risk Factors" section of, and elsewhere in, this prospectus
+ before deciding to invest in our Ordinary Shares.
+
+ Lock-Up
+ 
+ We, our directors and
+ executive officers, and our existing beneficial owners of 5% or more of our outstanding Ordinary Shares have agreed with the
+ underwriters, subject to certain exceptions, not to sell, transfer or otherwise dispose of any Ordinary Shares for a period
+ ending 180 days after the commencement of the trading of the Ordinary Shares. See "Underwriting" for more information.
+
+ 
+
+Unless otherwise indicated, all information in this amendment reflects a 1-for-1.66667
+reverse split of our issued and outstanding Ordinary Shares, effected on October
+16, 2019, and the corresponding adjustment of proposed maximum offering price per share of our Ordinary Shares.
+
+ 
+
+ 11
+
+ 
+
+ 
+
+ 
+
+SELECTED FINANCIAL
+DATA
+
+ 
+
+The following tables set forth selected
+historical statements of operations and balance sheet data for the six months ended March 31, 2020 and 2019, and for the fiscal
+years ended September 30, 2019, and 2018, which have been derived from our audited financial statements for those periods. Our
+historical results are not necessarily indicative of the results that may be expected in the future. You should read this data
+together with our consolidated financial statements and related notes appearing elsewhere in this prospectus as well as "Management s
+Discussion and Analysis of Financial Condition and Results of Operations," appearing elsewhere in the prospectus.
+
+ 
+
+Selected Statements of Operations Information:
+
+ 
+
+Qilian
+International Holding Group Limited and Subsidiaries
+
+CONSOLIDATED STATEMENTS
+OF INCOME AND COMPREHENSIVE INCOME
+
+(Amounts in US$,
+except shares)
+
+ 
+
+ 
+ For
+ the six months ended March 31 
+
+ 
+ 2020 
+ 2019 
+
+ NET REVENUE 
+ $27,758,814 
+ $27,160,302 
+
+ 
+ 
+ 
+
+ COST OF REVENUE 
+ 21,530,973 
+ 19,772,589 
+
+ 
+ 
+ 
+
+ GROSS PROFIT 
+ 6,227,841 
+ 7,387,713 
+
+ 
+ 
+ 
+
+ SELLING, GENERAL AND ADMINISTRATIVE
+ EXPENSES 
+ 1,434,898 
+ 1,732,288 
+
+ 
+ 
+ 
+
+ INCOME FROM OPERATIONS 
+ 4,792,943 
+ 5,655,425 
+
+ 
+ 
+ 
+
+ Other Income (Expenses) 
+ 
+ 
+
+ 
+ 
+ 
+
+ Interest expense 
+ (110,251) 
+ (104,282)
+
+ 
+ 
+ 
+
+ Other income 
+ 215,788 
+ 354,884 
+
+ 
+ 
+ 
+
+ Total Other income
+ (expense) 
+ 105,537 
+ 250,602 
+
+ 
+ 
+ 
+
+ INCOME BEFORE INCOME TAX PROVISION 
+ 4,898,480 
+ 5,906,027 
+
+ 
+ 
+ 
+
+ PROVISION FOR INCOME TAXES 
+ 715,101 
+ 881,726 
+
+ 
+ 
+ 
+
+ NET INCOME 
+ 4,183,379 
+ 5,024,301 
+
+ 
+ 
+ 
+
+ Less: net income attributable to
+ non-controlling interest 
+ 325,249 
+ 732,190 
+
+ 
+ 
+ 
+
+ NET INCOME ATTRIBUTABLE TO QILIAN INTERNATIONAL HOLDING GROUP
+ LIMITED 
+ $3,858,130 
+ $4,292,111 
+
+ 
+ 
+ 
+
+ OTHER COMPREHENSIVE INCOME 
+ 
+ 
+
+ 
+ 
+ 
+
+ Foreign currency translation adjustment 
+ 110,067 
+ 525,626 
+
+ 
+ 
+ 
+
+ COMPREHENSIVE INCOME 
+ 4,293,446 
+ 5,549,927 
+
+ 
+ 
+ 
+
+ Less: comprehensive income attributable to non - controlling
+ interests 
+ 340,536 
+ 828,230 
+
+ 
+ 
+ 
+
+ COMPREHENSIVE INCOME ATTRIBUTABLE
+ TO QILIAN INTERNATIONAL HOLDING GROUP LIMITED 
+ $3,952,910 
+ $4,721,697 
+
+ 
+ 
+ 
+
+ Earnings per common share - basic and diluted 
+ $0.13 
+ $0.14 
+
+ Weighted average shares - basic and diluted 
+ 30,000,000 
+ 30,000,000 
+
+ 
+
+Qilian International Holding Group Limited
+
+CONSOLIDATED STATEMENTS OF INCOME AND
+COMPREHENSIVE INCOME
+
+(Amounts in US$, except shares)
+
+ 
+
+ 
+ 
+ For
+ the years ended September 30,
+ 
+
+ 
+ 
+ 2019
+ 
+ 
+ 2018
+ 
+
+ NET REVENUE
+ 
+ $
+ 46,096,684
+ 
+ 
+ $
+ 50,369,013
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ COST OF REVENUE
+ 
+ 
+ 36,416,772
+ 
+ 
+ 
+ 42,236,773
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ GROSS PROFIT
+ 
+ 
+ 9,679,912
+ 
+ 
+ 
+ 8,132,240
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
+ 
+ 
+ 3,501,374
+ 
+ 
+ 
+ 2,160,873
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ INCOME FROM OPERATIONS
+ 
+ 
+ 6,178,538
+ 
+ 
+ 
+ 5,971,367
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Other Income (Expenses)
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Interest expense
+ 
+ 
+ (223,657
+ )
+ 
+ 
+ (216,187
+ )
+
+ Other income
+ 
+ 
+ 987,038
+ 
+ 
+ 
+ 390,792
+ 
+
+ Total Other
+ income (expense)
+ 
+ 
+ 763,381
+ 
+ 
+ 
+ 174,605
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ INCOME BEFORE INCOME TAX PROVISION
+ 
+ 
+ 6,941,919
+ 
+ 
+ 
+ 6,145,972
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ PROVISION FOR INCOME TAXES
+ 
+ 
+ 1,033,440
+ 
+ 
+ 
+ 943,363
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ NET INCOME
+ 
+ 
+ 5,908,479
+ 
+ 
+ 
+ 5,202,609
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Less: net income attributable
+ to non-controlling interest
+ 
+ 
+ 576,161
+ 
+ 
+ 
+ 33,102
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ NET INCOME ATTRIBUTABLE TO QILIAN INTERNATIONAL
+ HOLDING GROUP LIMITED
+ 
+ $
+ 5,332,318
+ 
+ 
+ $
+ 5,169,507
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ OTHER COMPREHENSIVE INCOME
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Foreign currency translation adjustment
+ 
+ 
+ (858,337
+ )
+ 
+ 
+ (652,232
+ )
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ COMPREHENSIVE INCOME
+ 
+ 
+ 5,050,142
+ 
+ 
+ 
+ 4,550,377
+ 
+
+ Less: comprehensive
+ income attributable to non - controlling interests
+ 
+ 
+ 478,722
+ 
+ 
+ 
+ (35,398
+ )
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ COMPREHENSIVE INCOME ATTRIBUTABLE TO QILIAN
+ INTERNATIONAL HOLDING GROUP LIMITED
+ 
+ $
+ 4,571,420
+ 
+ 
+ $
+ 4,585,775
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Earnings per ordinary share - basic and diluted
+ 
+ $
+ 0.18
+ 
+ 
+ $
+ 0.17
+ 
+
+ Weighted average shares - basic and diluted
+ 
+ 
+ 30,000,000
+ 
+ 
+ 
+ 30,000,000
+ 
+
+ 
+
+ 12
+
+ 
+
+ 
+
+ 
+
+Selected Balance Sheet Information:
+
+ 
+
+Qilian
+International Holding Group Limited and Subsidiaries
+
+CONSOLIDATED BALANCE
+SHEETS
+
+(Amounts in US$,
+except shares)
+
+ 
+
+ 
+ 
+ As of
+ 
+
+ 
+ 
+ March 31
+ 
+ 
+ September 30
+ 
+
+ 
+ 
+ 2020
+ 
+ 
+ 2019
+ 
+
+ ASSETS
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ CURRENT ASSETS:
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Cash
+ 
+ $
+ 11,811,937
+ 
+ 
+ $
+ 4,594,440
+ 
+
+ Accounts receivable, net
+ 
+ 
+ 2,957,586
+ 
+ 
+ 
+ 603,760
+ 
+
+ Accounts receivable - related parties, net
+ 
+ 
+ 9,133
+ 
+ 
+ 
+ -
+ 
+
+ Bank notes receivable
+ 
+ 
+ 3,587,334
+ 
+ 
+ 
+ 5,476,707
+ 
+
+ Inventories, net
+ 
+ 
+ 10,473,104
+ 
+ 
+ 
+ 12,522,884
+ 
+
+ Advances to suppliers, net
+ 
+ 
+ 1,727,232
+ 
+ 
+ 
+ 958,005
+ 
+
+ Other current assets
+ 
+ 
+ 914,640
+ 
+ 
+ 
+ 813,932
+ 
+
+ TOTAL CURRENT ASSETS
+ 
+ 
+ 31,480,966
+ 
+ 
+ 
+ 24,969,728
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Property and equipment, net
+ 
+ 
+ 7,384,553
+ 
+ 
+ 
+ 7,665,322
+ 
+
+ Intangible assets, net
+ 
+ 
+ 1,830,618
+ 
+ 
+ 
+ 1,834,130
+ 
+
+ Long term investment
+ 
+ 
+ 486,442
+ 
+ 
+ 
+ 539,680
+ 
+
+ Right of use assets-lease
+ 
+ 
+ 135,727
+ 
+ 
+ 
+ -
+ 
+
+ Deferred tax assets
+ 
+ 
+ 228,711
+ 
+ 
+ 
+ 259,384
+ 
+
+ TOTAL ASSETS
+ 
+ $
+ 41,547,017
+ 
+ 
+ $
+ 35,268,244
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ CURRENT LIABILITIES:
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Bank loans
+ 
+ $
+ 7,052,584
+ 
+ 
+ $
+ 4,903,128
+ 
+
+ Accounts payable
+ 
+ 
+ 3,608,300
+ 
+ 
+ 
+ 3,570,148
+ 
+
+ Advance from customers
+ 
+ 
+ 244,500
+ 
+ 
+ 
+ 1,911,748
+ 
+
+ Advance from customers - related parties
+ 
+ 
+ -
+ 
+ 
+ 
+ 2,171
+ 
+
+ Deferred government grants-current
+ 
+ 
+ 385,013
+ 
+ 
+ 
+ 391,142
+ 
+
+ Taxes payable
+ 
+ 
+ 1,897,100
+ 
+ 
+ 
+ 347,930
+ 
+
+ Operating lease liabilities, current
+ 
+ 
+ 56,125
+ 
+ 
+ 
+ -
+ 
+
+ Accrued expenses and other payables
+ 
+ 
+ 523,459
+ 
+ 
+ 
+ 531,713
+ 
+
+ TOTAL CURRENT LIABILITIES
+ 
+ 
+ 13,767,081
+ 
+ 
+ 
+ 11,657,980
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ LONG TERM LIABILITIES
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Operating lease liabilities, long term
+ 
+ 
+ 59,291
+ 
+ 
+ 
+ -
+ 
+
+ Deferred government grants - noncurrent
+ 
+ 
+ 789,273
+ 
+ 
+ 
+ 972,338
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ TOTAL LIABILITIES
+ 
+ 
+ 14,615,645
+ 
+ 
+ 
+ 12,630,318
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Commitments and contingencies
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ SHAREHOLDERS' EQUITY:
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Ordinary Shares, $0.00166667 par value, 100,000,000 shares authorized, 30,000,000
+ Ordinary Shares issued and
+
+ outstanding as of March 31, 2020 and September 30, 2019 , respectively
+ 
+ 
+ 50,000
+ 
+ 
+ 
+ 50,000
+ 
+
+ Additional paid-in capital
+ 
+ 
+ 12,252,077
+ 
+ 
+ 
+ 12,252,077
+ 
+
+ Statutory Reserve
+ 
+ 
+ 2,200,488
+ 
+ 
+ 
+ 1,773,817
+ 
+
+ Retained earnings
+ 
+ 
+ 10,992,090
+ 
+ 
+ 
+ 7,560,631
+ 
+
+ Accumulated other comprehensive loss
+ 
+ 
+ (1,648,395
+ )
+ 
+ 
+ (1,743,175
+ )
+
+ Total shareholders equity attributable to Qilian International
+ 
+ 
+ 23,846,260
+ 
+ 
+ 
+ 19,893,350
+ 
+
+ Non-controlling interest
+ 
+ 
+ 3,085,112
+ 
+ 
+ 
+ 2,744,576
+ 
+
+ TOTAL SHAREHOLDERS' EQUITY
+ 
+ 
+ 26,931,372
+ 
+ 
+ 
+ 22,637,926
+ 
+
+ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
+ 
+ $
+ 41,547,017
+ 
+ 
+ 
+ 35,268,244
+ 
+
+ 
+
+Qilian International Holding Group Limited
+
+CONSOLIDATED BALANCE SHEET
+
+(Amounts in US$, except shares)
+
+ 
+
+ 
+ 
+ As of
+ 
+ 
+
+ 
+ 
+ September 30,
+ 
+ 
+ September 30,
+ 
+ 
+
+ 
+ 
+ 2019
+ 
+ 
+ 2018
+ 
+ 
+
+ ASSETS
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ CURRENT ASSETS:
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Cash
+ 
+ $
+ 4,594,440
+ 
+ 
+ $
+ 5,260,788
+ 
+ 
+
+ Restricted cash
+ 
+ 
+ -
+ 
+ 
+ 
+ 363,991
+ 
+ 
+
+ Accounts receivable, net
+ 
+ 
+ 603,760
+ 
+ 
+ 
+ 1,321,085
+ 
+ 
+
+ Accounts receivable - related parties, net
+ 
+ 
+ -
+ 
+ 
+ 
+ 6,185
+ 
+ 
+
+ Bank notes receivable
+ 
+ 
+ 5,476,707
+ 
+ 
+ 
+ 3,518,047
+ 
+ 
+
+ Inventories, net
+ 
+ 
+ 12,522,884
+ 
+ 
+ 
+ 9,586,360
+ 
+ 
+
+ Advances to suppliers, net
+ 
+ 
+ 958,005
+ 
+ 
+ 
+ 1,649,492
+ 
+ 
+
+ Advances to suppliers – related parties, net
+ 
+ 
+ -
+ 
+ 
+ 
+ -
+ 
+ 
+
+ Other current assets
+ 
+ 
+ 813,932
+ 
+ 
+ 
+ 463,218
+ 
+ 
+
+ TOTAL CURRENT ASSETS
+ 
+ 
+ 24,969,728
+ 
+ 
+ 
+ 22,169,166
+ 
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Property and equipment, net
+ 
+ 
+ 7,665,322
+ 
+ 
+ 
+ 8,488,726
+ 
+ 
+
+ Intangible assets, net
+ 
+ 
+ 1,834,130
+ 
+ 
+ 
+ 1,956,008
+ 
+ 
+
+ Long term investment
+ 
+ 
+ 539,680
+ 
+ 
+ 
+ 407,345
+ 
+ 
+
+ Deferred tax assets
+ 
+ 
+ 259,384
+ 
+ 
+ 
+ 318,296
+ 
+ 
+
+ TOTAL ASSETS
+ 
+ $
+ 35,268,244
+ 
+ 
+ $
+ 33,339,541
+ 
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ CURRENT LIABILITIES:
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Bank loans
+ 
+ $
+ 4,903,128
+ 
+ 
+ $
+ 3,639,911
+ 
+ 
+
+ Accounts payable
+ 
+ 
+ 3,570,148
+ 
+ 
+ 
+ 3,757,550
+ 
+ 
+
+ Accounts payable - related parties
+ 
+ 
+ -
+ 
+ 
+ 
+ 3,046
+ 
+ 
+
+ Advance from customers
+ 
+ 
+ 1,911,748
+ 
+ 
+ 
+ 4,222,490
+ 
+ 
+
+ Advance from customers - related parties
+ 
+ 
+ 2,171
+ 
+ 
+ 
+ -
+ 
+ 
+
+ Bank notes payable
+ 
+ 
+ -
+ 
+ 
+ 
+ 582,386
+ 
+ 
+
+ Deferred government grants-current
+ 
+ 
+ 391,142
+ 
+ 
+ 
+ 407,003
+ 
+ 
+
+ Taxes payable
+ 
+ 
+ 347,930
+ 
+ 
+ 
+ 1,196,811
+ 
+ 
+
+ Accrued expenses and other payables
+ 
+ 
+ 531,713
+ 
+ 
+ 
+ 478,557
+ 
+ 
+
+ TOTAL CURRENT LIABILITIES
+ 
+ 
+ 11,657,980
+ 
+ 
+ 
+ 14,287,754
+ 
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ LONG-TERM LIABILITIES
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Deferred government grants - noncurrent
+ 
+ 
+ 972,338
+ 
+ 
+ 
+ 1,330,451
+ 
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ TOTAL LIABILITIES
+ 
+ 
+ 12,630,318
+ 
+ 
+ 
+ 15,618,205
+ 
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Commitments and contingencies
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ SHAREHOLDERS' EQUITY:
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ Ordinary Shares, $0.00166667 par value, 100,000,000 shares authorized, 30,000,000
+ Ordinary Shares issued and outstanding as of September 30, 2019 and 2018, respectively
+ 
+ 
+ 50,000
+ 
+ 
+ 
+ 50,000
+ 
+ 
+
+ Additional paid-in capital
+ 
+ 
+ 12,252,077
+ 
+ 
+ 
+ 12,252,077
+ 
+ 
+
+ Statutory Reserve
+ 
+ 
+ 1,773,817
+ 
+ 
+ 
+ 1,132,636
+ 
+ 
+
+ Retained earnings
+ 
+ 
+ 7,560,631
+ 
+ 
+ 
+ 2,869,494
+ 
+ 
+
+ Accumulated other comprehensive loss
+ 
+ 
+ (1,743,175
+ )
+ 
+ 
+ (982,277
+ ) 
+ 
+
+ Total shareholders equity attributable to Qilian International
+ 
+ 
+ 19,893,350
+ 
+ 
+ 
+ 15,321,930
+ 
+ 
+
+ Non-controlling interest
+ 
+ 
+ 2,744,576
+ 
+ 
+ 
+ 2,399,406
+ 
+ 
+
+ TOTAL SHAREHOLDERS' EQUITY
+ 
+ 
+ 22,637,926
+ 
+ 
+ 
+ 17,721,336
+ 
+ 
+
+ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
+ 
+ $
+ 35,268,244
+ 
+ 
+ 
+ 33,339,541
+ 
+ 
+
+ 
+
+ 13
+
+ 
+
+ 
+
+ 
+
+RISK FACTORS
+
+ 
+
+An investment in our Ordinary Shares
+involves a high degree of risk. Before deciding whether to invest in our Ordinary Shares, you should consider carefully the risks
+described below, together with all of the other information set forth in this prospectus, including the section titled "Management s
+Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and
+related notes. If any of these risks actually occurs, our business, financial condition, results of operations or cash flow could
+be materially and adversely affected, which could cause the trading price of our Ordinary Shares to decline, resulting in a loss
+of all or part of your investment. The risks described below and in the documents referenced above are not the only ones that
+we face. Additional risks not presently known to us or that we currently deem immaterial may also affect our business. You should
+only consider investing in our Ordinary Shares if you can bear the risk of loss of your entire investment.
+
+ 
+
+Risks Related to Our Business
+
+ 
+
+We face significant competition
+in industries experiencing rapid technological change, and there is a possibility that our competitors may achieve regulatory
+approval and develop new product candidates before us, which may harm our financial condition and our ability to successfully
+market or commercialize any of our product candidates.
+
+ 
+
+The development and commercialization
+of new pharmaceutical products and fertilizers is highly competitive, and both industries currently are characterized by rapidly
+changing technologies, significant competition and a strong emphasis on intellectual property. We will face competition with respect
+to our current and future pharmaceutical and fertilizer product candidates from major pharmaceutical and chemical companies in
+China. Potential competitors also include academic institutions, government agencies and other public and private research organizations
+that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing
+and commercialization of pharmaceutical and fertilizer products. For example, competition for improving oxytetracycline strains
+comes from conventional and advanced breeding techniques. Other potentially competitive sources of improvement in oxytetracycline
+yields include improvements in specific biotechnology areas and information management.
+
+ 
+
+We have competitors in China that manufacture
+products similar to ours. These companies sell similar products as ours and some of them may have more assets, resources and a
+larger market share. We believe we are able to compete with these competitors because of our geographical location in Western
+China, our unique combination of products and our products lower prices.
+
+ 
+
+ 14
+
+ 
+
+ 
+
+ 
+
+Some of our current or potential competitors
+may have significantly greater financial resources and expertise in research and development, manufacturing, product testing,
+obtaining regulatory approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical, chemical
+and agricultural industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller
+or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large
+and established companies. These competitors also compete with us in recruiting and retaining qualified scientific and management
+personnel, as well as in acquiring technologies complementary to, or necessary for, our R&D projects. Our commercial opportunity
+could be reduced or eliminated if our competitors develop and commercialize products that are more effective, more convenient
+or are less expensive than any products we develop alone or with collaborators or that would render any such products obsolete
+or non-competitive. Our competitors also may obtain regulatory approval for their products more rapidly than we may obtain approval
+for any that we develop, which could result in our competitors establishing a strong market position before our new products are
+able to enter the market. Additionally, technologies developed by our competitors may render our product candidates uneconomical
+or obsolete, and we or our collaborators may not be successful in marketing any product candidates we may develop against competitors.
+The availability of our competitors products could limit the demand, and the price we are able to charge, for any products
+that we develop alone or with collaborators.
+
+ 
+
+Our pharmaceutical business is subject
+to inherent risks relating to product liability and personal injury claims.
+
+ 
+
+We, as a pharmaceutical company, are exposed
+to risks inherent in the manufacturing and distribution of pharmaceutical products, such as with respect to improper filling of
+prescriptions, labeling of prescriptions, adequacy of warnings, and unintentional distribution of counterfeit drugs. In addition,
+product liability claims may be asserted against us with respect to any of the products we sell and as a distributor, we are required
+to pay for damages for any successful product liability claim against us, although we may have the right under applicable PRC
+laws, rules and regulations to recover from the relevant manufacturer or distributors for compensation we paid to our customers
+in connection with a product liability claim. We may also be obligated to recall affected products. If we are found liable for
+product liability claims, we could be required to pay substantial monetary damages. Furthermore, even if we successfully defend
+ourselves against this type of claim, we could be required to spend significant management, financial and other resources, which
+could disrupt our business, and our reputation as well as our brand name may also suffer. We, like many other similar companies
+in China, do not carry product liability insurance. As a result, any imposition of product liability could materially harm our
+business, financial condition and results of operations. In addition, we do not have any business interruption insurance due to
+the limited coverage of any available business interruption insurance in China, and as a result, any business disruption or natural
+disaster could severely disrupt our business and operations and significantly decrease our revenue and profitability.
+
+ 
+
+We have limited sources of working
+capital and will need substantial additional financing.
+
+ 
+
+The working capital required to implement
+our business plan and R&D efforts will most likely be provided by funds obtained through offerings of our equity, debt, debt-linked
+securities, and/or equity-linked securities, and revenues generated by us. No assurance can be given that we will have revenues
+sufficient to sustain our operations or that we would be able to obtain equity/debt financing in the current economic environment.
+If we do not have sufficient working capital and are unable to generate sufficient revenues or raise additional funds, we may
+delay the completion of or significantly reduce the scope of our current business plan; delay some of our development and clinical
+or marketing efforts; postpone the hiring of new personnel; or, under certain dire financial circumstances, substantially curtail
+or cease our operations.
+
+ 
+
+ 15
+
+ 
+
+ 
+
+ 
+
+We need sufficient financing to implement
+our business plan, which includes expanding the marketing efforts for Gan Di Xin and increasing the manufacturing
+capacities for our oxytetracycline products, fertilizer products and Heparin Sodium Preparations. We will also need sufficient
+financing to materialize our future plan of acquiring traditional Chinese medicine enterprises. We estimate that carrying out
+these business projects will require at least $26 million. Our inability to obtain sufficient additional financing would have
+a material adverse effect on our ability to implement our business plan and, as a result, could require us to significantly curtail
+or potentially cease our operations. As of March 31, 2020, we had cash and cash equivalents of approximately $11,811,937, total
+current assets of $31,480,966 and total current liabilities of $13,767,081. We will need to engage in capital-raising transactions
+in the near future. Such financing transactions may well cause substantial dilution to our shareholders and could involve the
+issuance of securities with rights senior to the outstanding shares. Our ability to complete additional financings depends on,
+among other things, the state of the capital markets at the time of any proposed offering, market reception of the Company and
+the likelihood of the success of its business model and offering terms. There is no assurance that we will be able to obtain any
+such additional capital through asset sales, equity or debt financing, or any combination thereof, on satisfactory terms or at
+all. Additionally, no assurance can be given that any such financing, if obtained, will be adequate to meet our capital needs
+and to support our operations. If we do not obtain adequate capital on a timely basis and on satisfactory terms, our revenues
+and operations and the value of our Ordinary Shares and Ordinary Share equivalents would be materially negatively impacted and
+we may cease our operations.
+
+ 
+
+We depend on certain key personnel
+and loss of these key personnel could have a material adverse effect on our business, financial condition and results of operations.
+
+ 
+
+Our success is, to a certain extent, attributable
+to the management, sales and marketing, and research and development expertise of key personnel. We depend upon the services of
+Mr. Zhanchang Xin, our President, Chief Executive Officer, Chairman of the Board, for the continued growth and operation of our
+Company, due to his industry experience, technical expertise, as well as his personal and business contacts in the PRC. Additionally,
+Mr. Zhanchang Xin, performs key functions in the operation of our business as our Chief Scientific Officer and Chief Operations
+Officer. We may not be able to retain Mr. Zhanchang Xin for any given period of time. Although we have no reason to believe that
+Mr. Zhanchang Xin will discontinue his services with us or Gansu QLS, the interruption or loss of his services would adversely
+affect our ability to effectively run our business and pursue our business strategy as well as our results of operations. We do
+not carry key man life insurance for any of our key personnel, nor do we foresee purchasing such insurance to protect against
+the loss of key personnel.
+
+ 
+
+We may not be able to hire and retain
+qualified personnel to support our growth and if we are unable to retain or hire these personnel in the future, our ability to
+improve our products and implement our business objectives could be adversely affected.
+
+ 
+
+We must attract, recruit and retain a
+sizeable workforce of technically competent employees. Competition for senior management and personnel in the PRC is intense and
+the pool of qualified candidates in the PRC is limited. We may not be able to retain the services of our senior executives or
+personnel, or attract and retain high-quality senior executives or personnel in the future. This failure could materially and
+adversely affect our future growth and financial condition.
+
+ 
+
+A significant portion of our revenue
+is concentrated on a few large customers, and we do not have long-term agreements with our key customers and rely upon our longstanding
+relationship with them. If we lose one or more of our customers, our results of operations may be adversely and materially
+impacted.
+
+ 
+
+Our customers
+consist of qualified distributors, dealers and corporate customers. We have several large customers with whom we generated substantial
+revenue each year, and the composition of our largest customers has changed from year to year. For the six months ended March
+31, 2020, three customers represented approximately 22%, 11% and 11% of the Company s sales, respectively. For the fiscal
+year ended September 30, 2019, one customer represented approximately 15.3% of the Company s sales. For the fiscal year
+ended September 30, 2018, three customers represented approximately 18.8%, 14.7% and 13.7% of the Company s sales, respectively.
+Since we do not have long-term customer supply agreements with such large customers and
+rely primarily upon our goodwill and reputation to sustain the business relationship, our results of operations may be adversely
+and materially impacted if one or more of these customers stop purchasing from us.
+
+ 
+
+We source
+our raw materials used for manufacturing from a limited number of suppliers. If we lose one or more of the suppliers, our operation
+may be disrupted, and our results of operations may be adversely and materially impacted.
+
+ 
+
+For the six months ended March 31, 2020,
+one of our suppliers accounted for 13 % of the total purchases. For the year ended September 30, 2019, two of our suppliers accounted
+for 12.9% and 9.5% of the total purchases, respectively. For the fiscal year ended September 30, 2018, three of our suppliers
+accounted for 19.2%, 14.1%, and 9.4% of the total purchases, respectively. If we lose suppliers and are unable to swiftly engage
+new suppliers, our operations may be disrupted or suspended, and we may not be able to deliver hardware products to our customers
+on time. We may also have to pay a higher price to source from a different supplier on short notice. While we are actively searching
+for and negotiating with new suppliers, there is no guarantee that we will be able to locate appropriate new suppliers or supplier
+merger targets in our desired timeline. As such, our results of operations may be adversely and materially impacted.
+
+ 
+
+If we fail to increase our brand
+name recognition, we may face difficulty in obtaining new customers.
+
+ 
+
+Although our brand is well-respected in
+the Chinese pharmaceutical and chemical industry, we still believe that maintaining and enhancing our brand name recognition in
+a cost-effective manner is critical to achieving widespread acceptance of our current and future products and services and is
+an important element in our effort to increase our customer base. Successful promotion of our brand name will depend largely on
+our marketing efforts and ability to provide reliable and quality products at competitive prices. Brand promotion activities may
+not necessarily yield increased revenue, and even if they do, any increased revenue may not offset the expenses we will incur
+in marketing activities. If we fail to successfully promote and maintain our brand, or if we incur substantial expenses in an
+unsuccessful attempt to promote and maintain our brand, we may fail to attract new customers or retain our existing customers,
+in which case our business, operating results and financial condition, would be materially adversely affected.
+
+ 
+
+Any disruption in the supply chain
+of raw materials and our products could adversely impact our ability to produce and deliver products.
+
+ 
+
+Some products we manufacture are resource-based
+products. Thus, we must manage our supply chain for raw materials and delivery of our products competently. Even though Chengdu
+QLS enjoy considerable advantages resulting from high quality, low cost, and abundant local resources, supply chain fragmentation
+and local protectionism within China may cause disruption risks for some of our other VIE operating entities. Local administrative
+bodies and physical infrastructure built to protect local interests pose transportation challenges for raw material transportation
+as well as product delivery throughout China. In addition, profitability and volume could be negatively impacted by limitations
+inherent within the supply chain, including competitive, governmental, legal, natural disasters, and other events that could affect
+both supply and price. Any of these occurrences could cause significant disruptions to our supply chain, manufacturing capability
+and distribution system that could adversely affect our ability to produce and deliver some of our products.
+
+ 
+
+ 16
+
+ 
+
+ 
+
+ 
+
+Additionally, some of the raw materials
+we use are procured from farmers, who are usually subject to environmental risks outside of their control. Thus, they may not
+have the ability to supply continuously and stably if environmental and climate change adversely affect their business.
+
+ 
+
+Our success depends on our ability
+to protect our intellectual property.
+
+ 
+
+Our success depends on our ability to
+obtain and maintain patent protection for products developed utilizing our technologies, in the PRC and in other countries, and
+to enforce these patents. There is no assurance that any of our existing and future patents will be held valid and enforceable
+against third-party infringement or that our products will not infringe any third-party patent or intellectual property. Although
+we have owned eight valid patents and filed an additional patent application with the Patent Administration Department of the
+PRC, there is no assurance that they will be granted.
+
+ 
+
+Any patents relating to our technologies
+may not be sufficiently broad to protect our products. In addition, our patents may be challenged, potentially invalidated or
+potentially circumvented. Our patents may not afford us protection against competitors with similar technology or permit the commercialization
+of our products without infringing third-party patents or other intellectual property rights.
+
+ 
+
+We also rely on or intend to rely on our
+trademarks, trade names and brand names to distinguish our products from the products of our competitors, and have registered
+or will apply to register a number of these trademarks. However, third parties may oppose our trademark applications or otherwise
+challenge our use of the trademarks. In the event that our trademarks are successfully challenged, we could be forced to rebrand
+our products, which could result in loss of brand recognition and could require us to devote resources to advertising and marketing
+these new brands. Further, our competitors may infringe our trademarks, or we may not have adequate resources to enforce our trademarks.
+
+ 
+
+In addition, we also have trade secrets,
+non-patented proprietary expertise and continuing technological innovation that we shall seek to protect, in part, by entering
+into confidentiality agreements with licensees, suppliers, employees and consultants. These agreements may be breached and there
+may not be adequate remedies in the event of a breach. Disputes may arise concerning the ownership of intellectual property or
+the applicability of confidentiality agreements. Moreover, our trade secrets and proprietary technology may otherwise become known
+or be independently developed by our competitors. If patents are not issued with respect to products arising from research, we
+may not be able to maintain the confidentiality of information relating to these products.
+
+ 
+
+Implementation and enforcement of PRC
+laws relating to intellectual property have historically been deficient and ineffective. Accordingly, protection of intellectual
+property rights in China may not be as effective as in the United States or other developed countries. Furthermore, policing unauthorized
+use of proprietary technology is difficult and expensive. We rely on a combination of patent, copyright, trademark, and trade
+secret laws and restrictions on disclosure to protect our intellectual property rights. Despite our efforts to protect our proprietary
+rights, third parties may attempt to copy or otherwise obtain and use our intellectual property or seek court declarations that
+they do not infringe upon our intellectual property rights. Monitoring unauthorized use of our intellectual property is difficult
+and costly, and we cannot assure you that the steps we have taken or will take will prevent misappropriation of our intellectual
+property. From time to time, we may have to resort to litigation to enforce our intellectual property rights, which could result
+in substantial costs and diversion of our resources.
+
+ 
+
+We face risks related to research
+and the ability to develop new pharmaceutical and chemical products.
+
+ 
+
+Our growth and survival depend on our
+ability to consistently discover, develop and commercialize new products and find new and improved technology. As such, if we
+fail to make sufficient investments in research, be attentive to unmet consumer needs or focus on advancing pharmaceutical and
+chemical product technology, our current and future products could be surpassed by more effective or advanced products of other
+companies.
+
+ 
+
+ 17
+
+ 
+
+ 
+
+ 
+
+Our business requires a number of
+permits and licenses. We cannot assure you that we can maintain all required licenses, permits and certifications to carry on
+our business at all times.
+
+ 
+
+Pharmaceutical companies in China are
+required to obtain certain permits and licenses from various PRC governmental authorities, including Pharmaceutical Product Permits.
+
+ 
+
+We have obtained certificates, permits,
+and licenses required for the operation of a pharmaceutical enterprise and the manufacturing of pharmaceutical products in the
+PRC. The latest amended Drug Administration Law took effect on December 1, 2019 and has vacated the GMP certificate requirements
+for pharmaceutical companies. We do not need to renew our current GMP certificates. However, we cannot assure you that we can
+maintain all the other required licenses, permits and certifications to carry on our business at all times, and in the past from
+time to time we may have not been in compliance with all such required licenses, permits and certifications. Moreover, these licenses,
+permits and certifications are subject to periodic renewal and/or reassessment by the relevant PRC governmental authorities and
+the standards of such renewal or reassessment may change from time to time. We intend to apply for the renewal of these licenses,
+permits and certifications when required by then applicable laws and regulations. Any failure by us to obtain and maintain all
+licenses, permits and certifications necessary to carry on our business at any time could have a material adverse effect on our
+business, financial condition and results of operations. In addition, any inability to renew these licenses, permits and certifications
+could severely disrupt our business and prevent us from continuing to carry on our business. Any changes in the standards used
+by governmental authorities in considering whether to renew or reassess our business licenses, permits and certifications, as
+well as any enactment of new regulations that may restrict the conduct of our business, may also decrease our revenue and/or increase
+our costs and materially reduce our profitability and prospects. Furthermore, if the interpretation or implementation of existing
+laws and regulations changes or if new regulations come into effect requiring us to obtain any additional licenses, permits or
+certifications that were previously not required to operate our existing businesses, we cannot assure you that we will successfully
+obtain such licenses, permits or certifications.
+ 
+
+Our innovative Gan Di Xin in
+China is subject to continuing regulation by the National Medical Products Administration (the "NMPA"). Our innovative
+Ahan Antibacterial Paste is subject to continuing regulation by the National Health and Family Planning Commission. If the
+labeling or manufacturing process of an approved pharmaceutical product is significantly modified, the NMPA may require that we
+obtain a new pre-market approval.
+
+ 
+
+Adverse publicity associated with
+our products, ingredients or network marketing program, or those of similar companies, could harm our financial condition and
+operating results.
+
+ 
+
+The results of our operations may be significantly
+affected by the public s perception of our product and similar companies. This perception depends upon opinions concerning:
+
+ 
+
+ the
+ safety and quality of our products and ingredients;
+
+ the
+ safety and quality of similar products and ingredients distributed by other companies;
+ and
+
+ our
+ downstream distributors and sales forces.
+
+ 
+
+Adverse publicity concerning any actual
+or purported failure to comply with applicable laws and regulations regarding product claims and advertising, good manufacturing
+practices, or other aspects of our business, whether or not resulting in enforcement actions or the imposition of penalties, could
+have an adverse effect on our goodwill and could negatively affect our sales and ability to generate revenue. In addition, our
+consumers perception of the safety and quality of products and ingredients as well as similar products and ingredients
+distributed by other companies can be significantly influenced by media attention, publicized scientific research or findings,
+widespread product liability claims and other publicity concerning our products or ingredients or similar products and ingredients
+distributed by other companies. Adverse publicity, whether or not accurate or resulting from consumers use or misuse of
+our products, that associates consumption of our products or ingredients or any similar products or ingredients with illness or
+other adverse effects, questions the benefits of our or similar products or claims that any such products are ineffective, inappropriately
+labeled or have inaccurate instructions as to their use, could negatively impact our reputation or the market demand for our products.
+
+ 
+
+ 18
+
+ 
+
+ 
+
+ 
+
+We face risks related to natural
+disasters, extreme weather conditions, health epidemics and other catastrophic incidents, which could significantly disrupt our
+operations.
+
+ 
+
+In the past, China has experienced significant
+natural disasters, including earthquakes, extreme weather conditions, as well as health scares related to epidemics, and any similar
+event could materially impact our business in the future. If a disaster or other disruption were to occur in the future that affects
+the regions where we operate our business, our operations could be materially and adversely affected due to loss of personnel,
+damages to our manufacturing facilities and volatile Chinese markets. Even if we are not directly affected, such a disaster or
+disruption could affect the operations or financial condition of our ecosystem participants such as suppliers and distributors,
+which could harm our results of operations.
+
+ 
+
+In general, our business could be affected
+by public health epidemics. If any of our employees or staff members who operates manufacturing facilities or conduct R&D
+activities is suspected of having contracted a contagious disease, we may be required to apply quarantines to our facilities or
+suspend our manufacturing operations entirely. Furthermore, any future outbreak may restrict economic activities in affected regions
+and beyond, resulting in reduced business volume, temporary closure of our factories or other disruptions of our business operations
+and adversely affect our results of operations.
+
+ 
+
+The outbreak of COVID-19 significantly
+affected business and manufacturing activities within China for the most part of 2020, including travel restrictions, widespread
+mandatory quarantines, and suspension of business activities within China. These measures caused severe business disruptions to
+our customers and suppliers, and led to postponement of payment from these parties. Accordingly, our business, results of operations
+and financial condition were adversely affected. As of the date of this prospectus, the virus seems to be under control within
+China.
+
+ 
+
+More specifically, the COVID-19 outbreak
+has negatively impacted our businesses in the following ways:
+
+ 
+
+ 
+ 
+ Our manufacturing activities
+ depend on a wide array of raw materials such as soybeans, corn starch, glycyrrhiza glabra plant, pig intestines, and many
+ others. We have experienced substantive diminutions in raw material supplies due to the COVID-19 outbreak and ensuing lockdowns,
+ and for the nine months ended June 30, 2020, the price of these raw materials has increased by approximately 4%-8% as compared
+ to the same period of last fiscal year. Our overall gross margin decreased from approximately 25% for the nine months ended
+ June 30, 2019 to approximately 18% for the nine months ended June 30, 2020;
+
+ 
+
+ 
+ 
+ Our sales for the three
+ months ended June 30, 2020 decreased by approximately 31% as compared to the same period in 2019, due to the combined effect
+ of (i) the decreased demand of our licorice and TCMD products, (ii) substantive drop in oxytetracycline products prices in
+ April and May 2020, and (iii) our strategic decision to suspend the sales of heparin products. Due to governmental mandates
+ during the COVID-19 outbreak, the general Chinese population was encouraged to receive examinations and treatments in hospitals
+ instead of resorting to over the counter medicines, which include our licorice and TCMD products. Further, the substantive
+ decrease in market price of our oxytetracycline products was caused by border controls and closures in foreign countries,
+ which resulted in general excess supplies of oxytetracycline products. In addition, we strategically suspended the sales of
+ heparin products because of a significant increase in the price of pig small intestine and we predicted that we would incur
+ loss from selling heparin products. We decided to put our sales of heparin products on hold starting in the quarter ended
+ June 30, 2020 until the market price rebounded. In the quarter ended September 30, 2020, we resumed selling heparin products.
+
+ 
+
+Risks Related to Our Corporate Structure
+
+ 
+
+If the PRC government deems that
+our contractual arrangements with our VIE do not comply with PRC regulatory restrictions on foreign investment in the relevant
+industries, or if these regulations or interpretation of existing regulations change in the future, we could be subject to severe
+penalties or be forced to relinquish our interests in those operations. 
+
+ 
+
+Current PRC laws and regulations place
+certain restrictions on foreign ownership of certain areas of businesses. In accordance with the Special Administrative Measures
+on Access of Foreign Investment, promulgated in June 2020 and effective in July 2020, or the Negative List, foreign investors
+are not prohibited nor restricted from investing in our current operations and production. See "Regulations—PRC Laws
+and Regulations on Foreign Investment."
+
+ 
+
+We are a Cayman Islands company and the
+WFOE are considered foreign invested enterprises, or FIEs. To comply with the applicable PRC laws and regulations, we conduct
+certain operations in China through certain PRC entities. For a detailed description of these contractual arrangements, see "Business—Our
+History and Corporate Structure."
+
+ 
+
+We believe that our corporate structure
+and contractual arrangements enable us to: (i) be the exclusive provider of business support,
+technical and consulting services in exchange for a fee; (ii) receive substantially all of the economic benefits and bear the
+obligation to absorb substantially all of the losses of our VIE; (iii) have an irrevocable and exclusive right to purchase, or
+to designate one or more persons to purchase, from the registered shareholders all or any part of their equity interests in our
+VIE at any time and from time to time in our absolute discretion to the extent permitted by PRC laws; (iv) have an irrevocable
+and exclusive right to purchase, or to designate one or more persons to purchase, from our VIE all or any part of its assets at
+any time and from time to time in our absolute discretion to the extent permitted by PRC laws; (v) appoint us, any person authorized
+by us (except the shareholders of our VIE), as exclusive agent and attorney to act on behalf of the shareholders of our VIE on
+all matters concerning our VIE and to exercise all their rights as a registered shareholder of our VIE in accordance with PRC
+laws and the articles of our VIE; and (vi) pledge as first-ranking charge all of the equity interests in our VIE to us as collateral
+security for any and all of the guaranteed debt under the contractual arrangements and to secure performance of the obligations
+under the contractual arrangements. The contractual arrangements allow the results of operations and assets and liabilities of
+our VIE and its subsidiaries to be consolidated into our results of operations and assets and liabilities under U.S. GAAP as if
+they were subsidiaries of our Company. 
+
+ 
+
+Our
+PRC counsel, Dentons Law Offices, LLP, is of the opinion that (i) the ownership structure of WFOE and our VIE does not violate
+applicable PRC laws and regulations currently in effect, and (ii) the contractual arrangements are valid, binding and enforceable
+in accordance with the applicable PRC laws or regulations currently in effect. However, there can be no assurance that the PRC
+government authorities will take a view that is not contrary to or otherwise different from the opinion of our PRC counsel stated
+above. There is also the possibility that the PRC government authorities may adopt new laws, regulations and interpretations that
+may invalidate the contractual arrangements. If the PRC government determines that we are in violation of PRC laws or regulations
+or lack the necessary permits or licenses to operate our business, the relevant PRC regulatory authorities, including the
+PRC National Health Commission, or the NHC, would have broad discretion in dealing with such violations or failures, and measures
+may include, but are not limited to: 
+
+ 
+
+ 
+ 
+ revoking our business and operating licenses; 
+
+ 
+ 
+ 
+
+ 
+ 
+ discontinuing or restricting our operations; 
+
+ 
+ 
+ 
+
+ 
+ 
+ imposing conditions or requirements with which we or WFOE and
+ our VIE may not be able to comply;
+
+ 
+ 
+ 
+
+ 
+ 
+ requiring us, WFOE and our VIE to restructure the relevant ownership
+ structure or operations;
+
+ 
+ 
+ 
+
+ 
+ 
+ restricting or prohibiting our use of the proceeds from our
+ initial public offering and the concurrent private placement or other of our financing activities to finance the business
+ and operations of our VIE and its subsidiaries; or
+
+ 
+ 
+ 
+
+ 
+ 
+ taking other regulatory or enforcement actions that could be
+ harmful to our business.
+
+ 
+
+Any of these actions could cause significant
+disruption to our business operations, and may adversely affect our business, financial condition and results of operations. In
+addition, if the PRC governmental authorities find our legal structure and contractual arrangements to be in violation of PRC
+laws and regulations, it is unclear what impact these actions would have on us and on our ability to consolidate the financial
+results of our VIE and its subsidiaries in our consolidated financial statements. If any penalty results in our inability to direct
+the activities of our VIE and its subsidiaries and such a penalty significantly impacts their economic performance and/or our
+ability to receive economic benefits from our VIE and its subsidiaries, we may not be able to consolidate our VIE and its subsidiaries
+into our consolidated financial statements in accordance with U.S. GAAP.
+
+ 
+
+We rely on contractual arrangements
+with our variable interest entity and its subsidiaries in China for our business operations, which may not be as effective in
+providing operational control or enabling us to derive economic benefits as through ownership of controlling equity interests.
+
+ 
+
+We rely on and expect to continue to rely
+on our wholly owned PRC subsidiary s contractual arrangements with Gansu QLS and its shareholders to operate our business.
+These contractual arrangements may not be as effective in providing us with control over Gansu QLS as ownership of controlling
+equity interests would be in providing us with control over, or enabling us to derive economic benefits from the operations of
+Gansu QLS. Under the current contractual arrangements, as a legal matter, if Gansu QLS or any of its shareholders executing the
+VIE Agreements fails to perform its, his or her respective obligations under these contractual arrangements, we may have to incur
+substantial costs and resources to enforce such arrangements, and rely on legal remedies available under PRC laws, including seeking
+specific performance or injunctive relief, and claiming damages, which we cannot assure you will be effective. For example, if
+shareholders of a variable interest entity were to refuse to transfer their equity interests in such variable interest entity
+to us or our designated persons when we exercise the purchase option pursuant to these contractual arrangements, we may have to
+take a legal action to compel them to fulfill their contractual obligations.
+
+ 
+
+If (i) the applicable PRC authorities
+invalidate these contractual arrangements for violation of PRC laws, rules and regulations, (ii) any variable interest entity
+or its shareholders terminate the contractual arrangements or (iii) any variable interest entity or its shareholders fail to perform
+their obligations under these contractual arrangements, our business operations in China would be materially and adversely affected,
+and the value of your shares would substantially decrease. Further, if we fail to renew these contractual arrangements upon their
+expiration, we would not be able to continue our business operations unless the then current PRC law allows us to directly operate
+businesses in China.
+
+ 
+
+In addition, if any variable interest
+entity or all or part of its assets become subject to liens or rights of third-party creditors, we may be unable to continue some
+or all of our business activities, which could materially and adversely affect our business, financial condition and results of
+operations. If any of the variable interest entities undergoes a voluntary or involuntary liquidation proceeding, its shareholders
+or unrelated third-party creditors may claim rights to some or all of these assets, thereby hindering our ability to operate our
+business, which could materially and adversely affect our business and our ability to generate revenues.
+
+ 
+
+ 19
+
+ 
+
+ 
+
+ 
+
+All of these contractual arrangements
+are governed by PRC law and provide for the resolution of disputes through arbitration in the PRC. The legal environment in the
+PRC is not as developed as in some other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal
+system could limit our ability to enforce these contractual arrangements. In the event we are unable to enforce these contractual
+arrangements, we may not be able to exert effective control over our operating entities and we may be precluded from operating
+our business, which would have a material adverse effect on our financial condition and results of operations.
+
+ 
+
+Gansu QLS s shareholders may
+have potential conflicts of interest with us, which may materially and adversely affect our business and financial condition.
+
+ 
+
+The equity interests of Gansu QLS are
+held by a total of 151 shareholders. Their interests may differ from the interests of our Company as a whole. They may breach,
+or cause Gansu QLS to breach, or refuse to renew the existing contractual arrangements we have with Gansu QLS, which would have
+a material adverse effect on our ability to effectively control Gansu QLS and receive economic benefits from them. For example,
+the shareholders may be able to cause our agreements with Gansu QLS to be performed in a manner adverse to us by, among other
+things, failing to remit payments due under the contractual arrangements to us on a timely basis. We cannot assure you that when
+conflicts of interest arise, any or all of these shareholders will act in the best interests of our Company or such conflicts
+will be resolved in our favor.
+
+ 
+
+Currently, we do not have any arrangements
+to address potential conflicts of interest between these shareholders and our Company, except that we could exercise our purchase
+option under the exclusive option agreement with these shareholders to request them to transfer all of their equity interests
+in Gansu QLS to a PRC entity or individual designated by us, to the extent permitted by PRC laws. If we cannot resolve any conflict
+of interest or dispute between us and the shareholders of Gansu QLS, we would have to rely on legal proceedings, which could result
+in the disruption of our business and subject us to substantial uncertainty as to the outcome of any such legal proceedings.
+
+ 
+
+Contractual arrangements in relation
+to our variable interest entity may be subject to scrutiny by the PRC tax authorities and they may determine that we or our PRC
+variable interest entity owe additional taxes, which could negatively affect our results of operations and the value of your investment.
+
+ 
+
+Under applicable PRC laws and regulations,
+arrangements and transactions among related parties may be subject to audit or challenge by the PRC tax authorities within ten
+years after the taxable year when the transactions are conducted. The PRC enterprise income tax law requires every enterprise
+in China to submit its annual enterprise income tax return together with a report on transactions with its related parties to
+the relevant tax authorities. The tax authorities may impose reasonable adjustments on taxation if they have identified any related
+party transactions that are inconsistent with arm s length principles. We may face material and adverse tax consequences
+if the PRC tax authorities determine that the contractual arrangements between our WFOE, our variable interest entity Gansu QLS
+and the shareholders of Gansu QLS were not entered into on an arm s length basis in such a way as to result in an impermissible
+reduction in taxes under applicable PRC laws, rules and regulations, and adjust Gansu QLS s income in the form of a transfer
+pricing adjustment. A transfer pricing adjustment could, among other things, result in a reduction of expense deductions recorded
+by Gansu QLS for PRC tax purposes, which could in turn increase their tax liabilities without reducing WFOE s tax expenses.
+In addition, if WFOE requests the shareholders of Gansu QLS to transfer their equity interests in Gansu QLS at nominal or no value
+pursuant to these contractual arrangements, such transfer could be viewed as a gift and subject WFOE to PRC income tax. Furthermore,
+the PRC tax authorities may impose late payment fees and other penalties on Gansu QLS for the adjusted but unpaid taxes according
+to the applicable regulations. Our results of operations could be materially and adversely affected if Gansu QLS s tax liabilities
+increase or if they are required to pay late payment fees and other penalties.
+
+ 
+
+If we exercise the option to acquire
+equity ownership of Gansu QLS, the ownership transfer may subject us to certain limitation and substantial costs.
+
+ 
+
+Pursuant to the contractual arrangements,
+WFOE has the exclusive right to purchase all or any part of the equity interests in Gansu QLS from Gansu QLS s shareholders
+for a nominal price, unless the relevant government authorities or then applicable PRC laws request that a minimum price amount
+be used as the purchase price, in such case the purchase price shall be the lowest amount under such request. The shareholders
+of Gansu QLS will be subject to PRC individual income tax on the difference between the equity transfer price and the then current
+registered capital of Gansu QLS. Additionally, if such a transfer takes place, the competent tax authority may require WFOE to
+pay enterprise income tax for ownership transfer income with reference to the market value, in which case the amount of tax could
+be substantial.
+
+ 
+
+ 20
+
+ 
+
+ 
+
+ 
+
+Risks Related to

parsed_sections/risk_factors/2020/BIOE_bio_risk_factors.txt

@@ -0,0 +1,658 @@
+Risks Related to Our Business and Industry 
+
+The herbal, vitamin, and nutraceuticals industry
+is an intensely competitive market.
+
+ 
+
+While there is evidence of strong consumer
+appeal, we cannot assure you that consumers will continue to embrace using herbs, vitamins, or nutraceuticals. Many factors must
+be considered when investing in this industry due to regulations set by both U.S. and international committees that oversee the
+industry. We face significant competition from others in this industry. The herbal, vitamins and nutraceuticals industry is highly
+fragmented with smaller companies offering products to large multi-national corporations, which have large, integrated manufacturing
+lines. These large corporations can produce a more robust supply of herbs, vitamins, and nutraceuticals products. There are other
+companies that may not compete directly with our operations but supply us or provide source product for our end product. These
+companies may in turn help our competitors by providing the same source product for their products.
+
+ 
+
+There are thousands of herbal, vitamin and
+nutraceuticals companies both privately held and publicly traded today. Many have greater financial resources than our company
+and to the extent we compete directly with any given company with said greater financial resources, we may be at a disadvantage.
+Other risks within our industry are outlined within Registration Statement and are related to regulations set forth by industry
+committees and to the extent the Food and Drug Administration ( FDA ) is involved, they could have an effect on what
+source products we use and cannot use. No assurances can be made that any ruling from the FDA or other organization will not ban
+the use of any source product which may hurt our sales.
+
+ 
+
+We may not be able to compete successfully
+against current and future competitors.
+
+ 
+
+While many companies compete directly against
+us for market share, others complement us by providing resource product to produce our end product. Many of our competitors have
+financial resources that extend far beyond ours, which may adversely affect our ability to compete. We cannot make any assurances
+to you that we will be successful in our business endeavors if we (a) are unable to compete with a competitor, (b) lose our ability
+to source product from a competitor or partner, (c) are unable to raise sufficient funds to compete against others, (d) lose our
+employees to a competitor, or (e) lose advantages over our product offerings against a superior competitor due to price, branding,
+marketing, and/or distribution power.
+
+ 
+
+We hold no patents on our products,
+and our business employs proprietary technology (know-how) and information may be difficult to protect and/or infringe on the intellectual
+property rights of third parties.
+
+ 
+
+The Company currently relies on trade secrets,
+proprietary know-how, and technology methods that we seek to protect, in part, by confidentiality agreements. We cannot assure
+you that these agreements will not be breached, that we will have adequate remedies for any breach, or that our trade secrets and
+proprietary know-how will not otherwise become known or be independently discovered by others. We currently do not hold patents
+from the United States Patent and Trademark Office ( USPTO ) or hold any FDA approvals. Management believes that part
+of applying for a patent allows competitors to copy our products and would force the company to file lawsuit against the offending
+parties upon infringement. As a small company, management believes that it is more effective to mitigate this risk by relying on
+our trade secrets than to file a patent and allow others to review our processes. Therefore, our success depends, in part, on our
+ability to keep competitors from reverse engineering our products, methods, know-how and maintain trade secrecy and operate without
+infringing on the proprietary rights of third parties. Additionally, as a herbal, nutraceuticals company, we are not bound by any
+law or rules to obtain FDA approval for any of our products at this time.
+
+ 
+
+We cannot assure you that the patents of
+others will not have an adverse effect on our ability to conduct our business, that any of our trade secrets and applications
+will be protected, that we will develop additional proprietary technology (know-how) or methods that is defensible against
+theft or will provide us with competitive advantages or will not be challenged by third parties.
+
+ 
+
+ 8 
+
+ 
+
+ 
+
+Regulations and oversight by the FDA
+or other governmental entities may adversely affect our business.
+
+ 
+
+We may be subject to regulations or oversight
+implemented by the FDA, which may materially affect our ability to conduct business, including, but not limited to, limit the number
+or types of products we are able to produce. Additionally, regulations may change over time. Added oversight from the FDA or other
+governmental entities may increase the cost associated with operating as an herb, vitamin, and nutraceuticals company, which would
+adversely affect our shareholders.
+
+ 
+
+We offer our products in China
+
+ 
+
+As part of the Company s attempt to broaden
+its customer base, we have begun offering our products to Chinese consumers. Some of the Company s products require permits
+to import, while others are imported through traditional customs inspections. The Company s decision to export products to
+China requires us to comply with Chinese rules, laws, and regulations, as well as certain domestic and international laws relating
+to the import and export of goods to foreign countries. These laws are often changing, and the costs associated with complying
+with these laws and regulations may adversely affect the Company. Additionally, changes in the current laws may make importing
+products to China more difficult, which may also negatively affect our business.
+
+ 
+
+All of our sales to Chinese customers occur
+through internet marketplaces. Currently, we do not offer our products for sale in China, as selling products on mainland China
+subjects companies to additional regulations through the General Administration of Quality Supervision, Inspection and Quarantine
+( AQSIQ ). Our products are not currently inspected, or certified, by the AQSIQ, as internet sales in China do not
+require AQSIQ certification. However, there is a risk that Chinese regulations or laws may require companies selling products online
+in China to apply for certification through AQSIQ. If this occurs, the Company s business would be significantly affected,
+as the Company would be required to apply for additional licenses and certificates to continue offering its products in China. 
+
+ 
+
+Negative media coverage on our industry
+may adversely affect our business and the value of our common stock. 
+
+ 
+
+While we strive to produce high quality products,
+there have been reports of fraud, misrepresentation, and counterfeiting relating to herbs and vitamins in our industry. As a result,
+some regulatory agencies have initiated investigations into these allegations, including investigations into some of our competitors.
+While we are not the target of any investigation, business may diminish or be adversely affected by the negative publicity affecting
+our industry as a whole, which would in turn negatively affect the value of our common stock. Future media coverage or administrative
+investigations may further damage the reputation of our industry, which may harm our reputation and the value of our common stock.
+
+ 
+
+We were acquired in a stock purchase
+transaction via a change of control by the current majority shareholder in the Company.
+
+ 
+
+Our majority shareholder, Jian Yang
+acquired the Company in 2016. We are currently making efforts to develop additional products to grow our business after years of
+stagnation. Our management believes there are strong merits to our business and seek to meet those challenges. However, we have
+not been profitable and there can be no assurance that we will operate profitably or will
+have adequate working capital to meet our obligations as they become due. Investors must consider the risks and difficulties frequently
+encountered by early stage companies, particularly in rapidly evolving markets. Such risks include adequately adapting to a competitive
+market, managing our operations, and expanding our business in a sustainable way.
+
+ 
+
+We cannot be certain that our business
+strategy will be successful or that we will successfully address these risks. In the event that we do not successfully address
+these risks, our business, prospects, financial condition, and results of operations could be materially and adversely affected,
+and we may not have the resources to continue or expand our business operations.
+
+ 
+
+ 9 
+
+ 
+
+ 
+
+We have experienced
+losses, and we may not achieve or sustain profitability in the future
+
+ 
+
+We have suffered net losses of $1,703,406 and
+$1,458,686 in the 2019 and 2018 fiscal years, respectively. For the nine months ended September 30, 2020 and 2019, the Company
+has suffered a net loss of $506,296 and $1,143,466, respectively. These losses are primarily due to expenses incurred by the Company
+related to its operations and are outlined in detail in our audited financial statements. We have no ability to predict if we will
+become profitable. We anticipate that our cost of revenues and operating expenses will increase substantially in the foreseeable
+future as we continue to grow our business and develop our new products. These efforts may prove more expensive than we currently
+anticipate, and we may not succeed in increasing our revenues sufficiently to offset these higher expenses. Many of our efforts
+to generate revenues from our business are new, and any failure to increase our revenues or generate revenues from our products
+could prevent us from attaining or increasing profitability. We do not expect to be profitable in the foreseeable future and we
+cannot be certain that we will be able to attain profitability on a quarterly or annual basis, or if we do, that we will sustain
+profitability.
+
+ 
+
+We have a need to raise additional capital.
+
+ 
+
+The Company may not be able to fully develop
+and implement its objectives without additional capital beyond this offering. We may require additional financing in order to meet
+the milestones and requirements of its plans. Additional funding might be required for staffing, marketing, public relations and
+the necessary research to expand the scope of its business plan on a global scale. The issuance of additional securities could
+dilute existing shareholders. Bio Essence funding plans include selling additional capital stock and/or borrowing to fund the aforementioned
+expenses. We may approach hedge funds, venture capital groups, private investment groups, or other institutional investment groups
+in our efforts to achieve future funding.
+
+ 
+
+There is substantial doubt as to the
+Company s ability to continue as a going concern.
+
+ 
+
+Our auditor's report on our 2019 and 2018 financial
+statements expressed an opinion that substantial doubt exists as to whether we can continue as an ongoing business. The Company
+has suffered recurring losses and generated negative cash flows from operations. These raise substantial doubt about our ability
+to continue as a going concern. The accompanying audited financial statements do not include any adjustments relating to the recoverability
+and classification of asset carrying amounts or the amount and classification of liabilities that might result from the outcome
+of this uncertainty. The Company incurred net losses of $1.70 million and $1.46 million for the years ended December 31, 2019 and
+2018 respectively. The Company also had an accumulated deficit of $6.12 million and working capital deficit of $0.73 million as
+of December 31, 2019. The Company incurred net losses of $0.51 million and $1.14 million for the nine months ended September 30,
+2020 and 2019, respectively. The Company also had an accumulated deficit of $6.62 million and working capital deficit of $1.38
+million as of September 30, 2020.
+
+ 
+
+Because substantial doubt exists as
+to whether the Company can continue as a going concern, it may be more difficult for the company to attract investors. Our future
+is dependent upon our ability to obtain financing to continue operations and attain profitable operations. We will seek additional
+funds through private placements of our common stock. Our financial statements do not include any adjustments relating to the recoverability
+and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event
+we cannot continue in existence
+
+ 
+
+We depend heavily on our management,
+without whose services, our business operations could cease.
+
+ 
+
+At this time our management is wholly
+responsible for the development and execution of our business plan. Our management is under no contractual obligation to remain
+employed by us, although they have no present intent to leave. If our management should choose to leave us for any reason before
+we have hired additional personnel our operations may fail. Even if we are able to find additional personnel, it is uncertain whether
+we could find qualified management who could develop our business along the lines described herein or would be willing to work
+for compensation we could afford. Without such management, we could be forced to cease operations and investors in our common stock
+or other securities could lose their entire investment.
+
+Ms. Yan is Involved
+in other businesses that may occupy her time.
+
+The Company s sole
+officer, Ms. Yan, is involved in operating other businesses that may occupy some of her time. Specifically, Ms. Yin owns two
+real estate brokerages in Nevada and California and is a licensed real estate broker in both states. As a result, Ms.
+Yin s professional obligations to those companies could interfere with her work and duties associated with managing and
+operating the Company. This could have a detrimental effect on the Company s ability to grow, as well as its
+operations. Ms. Yin has represented to the Company that she believes she can associate with these other businesses without
+compromising her duties to the Company.
+
+ 
+
+ 10 
+
+ 
+
+ 
+
+Bio Essence might experience the risk of managing growth.
+
+ 
+
+We are a small company with 11 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 expect to expand our operations by increasing
+its sales and marketing efforts, research into other development opportunities such as functional beverages and TCM products and
+services. The anticipated growth could place a significant strain on our management, and operational and financial resources. Effective
+management of the anticipated growth shall require expanding Bio Essence management and financial controls, hiring additional appropriate
+personnel as required, and developing additional expertise by existing management personnel. However, there can be no assurances
+that these or other measures implemented by Bio Essence shall effectively increase its capabilities to manage such anticipated
+growth or to do so in a timely and cost-effective manner. The failure to effectively manage growth could have a material adverse
+effect on Bio Essence operations.
+
+ 
+
+The requirements of being a public
+company may strain our resources and distract our management, which could make it difficult to manage our business, particularly
+after we are no longer an emerging growth company. 
+
+We are required to comply with various
+regulatory and reporting requirements, including those required by the SEC. Complying with these reporting and other regulatory
+requirements are time-consuming and expensive and could have a negative effect on our business, results of operations and financial
+condition.
+
+As a public company, we are subject to
+the reporting requirements of the Securities Exchange Act of 1934 ( Exchange Act ) and requirements of the Sarbanes-Oxley
+Act of 2002 ( SOX Act ). The cost of complying with these requirements may place a strain on our systems and resources.
+The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition.
+SOX Act requires that we maintain effective disclosure controls and procedures and internal controls over financial reporting.
+To maintain and improve the effectiveness of our disclosure controls and procedures, we must commit significant resources, may
+be required to hire additional staff and need to continue to provide effective management oversight. We will be implementing additional
+procedures and processes for the purpose of addressing the standards and requirements applicable to public companies. Sustaining
+our growth also will require us to commit additional management, operational and financial resources to identify new professionals
+to join the Company and to maintain appropriate operational and financial systems to adequately support expansion. These activities
+may divert management's attention from other business concerns, which could have a material adverse effect on our business, financial
+condition, results of operations and cash flows. We cannot predict or estimate the amount of additional costs we may incur as a
+result of becoming a public company or the timing of such costs.
+
+Regulations, including those contained
+in and issued under the SOX Act and the Dodd Frank Wall Street Reform and Consumer Protection Act of 2010 ( Dodd-Frank ),
+increase the cost of doing business and may make it difficult for us to retain or attract qualified officers and directors, which
+could adversely affect the management of our business and our ability to obtain or retain listing of our common stock.
+
+ 
+
+The current regulatory climate for public
+companies, even small and emerging growth companies such as ours, may make it difficult or prohibitively expensive to attract
+and retain qualified officers, directors and members of board committees required to provide for our effective management in
+compliance with the rules and regulations which govern publicly-held companies, including, but not limited to, certifications
+from executive officers and requirements for financial experts on boards of directors. The perceived increased personal risk
+associated with these recent changes may deter qualified individuals from accepting these roles. For example, the
+enactment of the SOX Act has resulted in the issuance of a series of new rules and regulations and the strengthening of
+existing rules and regulations by the SEC. Further, recent and proposed regulations under Dodd-Frank 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 our business could be adversely affected.
+
+ 11 
+
+ 
+
+ 
+
+If we complete a financing through the
+sale of additional shares of our common stock in the future, or we acquire property through the issuance of shares of our common
+stock in the future, then shareholders will experience dilution.
+
+ 
+
+The most likely source of future financing
+presently available to us is through the sale of shares of our common stock. Any sale of common stock will result in dilution of
+equity ownership to existing shareholders. This means that, if we sell shares of our common stock or issue stock as consideration
+for a purchase, more shares will be outstanding and each existing shareholder will own a smaller percentage of the shares then
+outstanding. To raise additional capital, we may have to issue additional shares, which may substantially dilute the interests
+of existing shareholders. Alternatively, we may have to borrow large sums, and assume debt obligations that require us to make
+substantial interest and capital payments.
+
+ 
+
+As of the date of this filing, we have earned
+revenue. However, we cannot guarantee we will be successful in continuing to generate revenue or be successful in raising funds
+through the sale of shares to pay for the Company's business plan and expenditures. Failure to generate revenue or to raise funds
+could cause us to go out of business, which would result in the complete loss of your investment.
+
+ 
+
+We will be obligated to develop and maintain
+proper and effective internal controls over financial reporting.
+
+ 
+
+We may not complete our analysis of our internal
+controls over financial reporting in a timely manner, or these internal controls may have one or more material weaknesses, which
+may adversely affect investor confidence in our company and, as a result, the value of our common stock.
+
+ 
+
+Ensuring that we have adequate internal financial
+and accounting controls and procedures in place so that we can produce accurate financial statements on a timely basis is a costly
+and time-consuming effort that will need to be evaluated frequently. Section 404 of SOX Act requires public companies to conduct
+an annual review and evaluation of their internal controls and attestations of the effectiveness of internal controls by independent
+auditors. We will be required to perform the annual review and evaluation of our internal controls no later than for the fiscal
+year ending January 31st on any given year. However, we initially expect to qualify as a smaller reporting company and as an emerging
+growth company, and thus, we would be exempt from the auditors' attestation requirement until such time as we no longer qualify
+as a smaller reporting company and an emerging growth company. We would no longer qualify as a smaller reporting company if the
+market value of our public float exceeded $75 million as of the last day of our second fiscal quarter in any fiscal year following
+this offering. We would no longer qualify as an emerging growth company at such time as described in the risk factor immediately
+below.
+
+ 
+
+We are in the early stages of the costly and
+challenging process of compiling the system and processing documentation necessary to evaluate our internal controls needed to
+comply with Section 404. During the evaluation and testing process, if we identify one or more material weaknesses in our internal
+control over financial reporting, we will be unable to assert that our internal controls are effective. If we are unable to assert
+that our internal control over financial reporting is effective, we could lose investor confidence in the accuracy and completeness
+of our financial reports, which would cause the price of our common stock to decline.
+
+The Company does not have a specific
+plan for the use of proceeds raised from this offering.
+
+Proceeds retained by the Company as a result
+of the IPO will be deposited in the Company s operations account and used toward the implementation of the Company s
+business plan. There is no set plan for the use of said proceeds. For example, the Company is not purchasing a specific asset with
+the net proceeds raised by the IPO. This lack of plan may lead to difficulties in raising capital. Additionally, there are inherent
+risks with raising funds without a set plan for the use of proceeds, such as wasteful use or spending. The Company is confident
+in its management to prevent or minimize these risks, but they nonetheless exist and should be considered before investing in the
+Company.
+
+ 12 
+
+ 
+
+ 
+
+There is no minimum offering.
+
+ 
+
+There is no minimum number of shares of common
+stock that must be sold by the Company prior to the closing of the IPO. As a result, there can be no assurance that Bio Essence
+will raise sufficient funds through the IPO to carry out its Business Plan as currently proposed, or that the net proceeds from
+the initial subscriptions for common stock will be in an amount sufficient to enable Bio Essence to continue operations in any
+meaningful manner.
+
+ 
+
+There is no definitive end date to the
+offering
+
+ 
+
+As currently structured, the IPO and Resale
+will continue until the Company s Board of Directors makes the determination to close the offering. There is no set time
+when the offering will close, and no set time as to when the Board of Directors will meet to discuss closing the offering. The
+Board of Directors will make their determination on when to close the offering based on a variety of information, including demand,
+sales of stock, and the time the offering has been pending. Uncertainty regarding the length of the offering may have an adverse
+effect on the Company s ability to sell shares under the IPO, as well as the Selling Shareholder s ability to sell
+shares under the Resale. Potential investors and new shareholders may also be adversely impacted by the uncertainty regarding the
+length of the offering and may adversely affect the value of the Company s shares.
+
+ 
+
+New investors will experience immediate dilution upon investing
+in the Company
+
+As of September 30, 2020,
+we had a net tangible book value of approximately $(465,293) or $(0.014) deficit per share of common stock, based upon 33,209,000
+shares of common stock outstanding on such date. Net tangible book value per share represents the amount of our total assets reduced
+by the amount of our total intangible assets and our total liabilities and divided by the total number of shares of common stock
+outstanding.
+
+Shareholders purchasing
+shares under the IPO and/or Resale will experience an immediate dilution of the value of their investment of at least $0.914 per
+share. In other words, every share purchased at $1.00 under the IPO or Resale will be immediately diluted by $0.914, meaning the
+net tangible book value of the shares will be $0.086. This calculation assumes all shares offered under the IPO are purchased.
+If the Company fails to sell all 5,000,000 shares offered under the IPO, new shareholders will experience larger dilution, and
+the net tangible book value of the Company s shares will be less than the $0.086 per share projected.
+
+Investors should use caution in purchasing
+shares though the IPO or Resale, given that the new investor s stock will experience immediate, significant dilution.
+
+ 
+
+Bio Essence might experience potential fluctuations in operating
+results.
+
+ 
+
+Significant annual and quarterly fluctuations
+in Bio Essence results of operations may be caused by, among other factors, the volume of revenues generated by Bio Essence, the
+timing of new product or service announcements and releases by Bio Essence and its competitors in the marketplace, and general
+economic conditions. There can be no assurances that the level of revenues and profits, if any, achieved by Bio Essence in any
+particular fiscal period shall not be significantly lower than in others, including comparable fiscal periods. Bio Essence expense
+levels are based, in part, on its expectations as to future revenues.
+
+ 
+
+As a result, if future revenues are below expectations,
+net income or loss may be disproportionately affected by a reduction in revenues, as any corresponding reduction in expenses may
+not be proportionate to the reduction in revenues. As a result, Bio Essence believes that period-to-period comparisons of its results
+of operations may not necessarily be meaningful and should not be relied upon as indications of future performance.
+
+ 
+
+A conflict of interest may exist in the
+sale of the Shares.
+
+ 
+
+We are relying on our officers and
+directors to sell the IPO shares. However, these officers and directors may also have shares registered under the Resale, and
+as such, may be put in a position where they have to choose between selling their shares or the Company s shares.
+Specifically, Yin Yan and Jian Yang are the Company s largest shareholders. Both will be tasked with selling the
+Company s IPO shares, but may face a conflict where they could personally benefit from the sale of their own Resale
+Shares. The Company has not entered into any agreement with Yin Yan or Jian Yang that would require them to sell IPO shares
+prior to the selling their shares. Nevertheless, we are confident that its officers and directors will continue working in
+the interest of the Company.
+
+ 
+
+ 13 
+
+ 
+
+ 
+
+We have not developed independent corporate
+governance.
+
+ 
+
+We do not presently have audit, compensation,
+or nominating committees. This lack of independent controls over our corporate affairs may result in conflicts of interest between
+our officers, directors and our stockholders. We presently have no policy to resolve such conflicts. As a result, our directors
+have the ability to, among other things, determine their own level of compensation. Until we comply with such corporate governance
+measures to form audit and other board committees in a manner consistent with rules of a national securities exchange, there is
+no assurance that we will not be subject to any conflicts of interest. As a result, potential investors may be reluctant to provide
+us with funds necessary to expand our operations.
+
+ 
+
+The relative lack of public company
+experience of our management team may put us at a competitive disadvantage.
+
+As a company with a class of securities
+registered under the Exchange Act, we are subject to reporting and other legal, accounting, corporate governance, and regulatory
+requirements imposed by the Exchange Act and rules and regulations promulgated under the Exchange Act. Our management team lacks
+significant public company experience, which could impair our ability to comply with these legal, accounting, and regulatory requirements.
+Such responsibilities include complying with federal securities laws and making required disclosures on a timely basis. Our senior
+management may not be able to implement and effect programs and policies in an effective and timely manner that adequately responds
+to such increased legal and regulatory compliance and reporting requirements. Our failure to do so could lead to the imposition
+of fines and penalties and further result in the deterioration of our business.
+
+Our profitability depends upon
+achieving success in our future operations through implementing our business plan, increasing sales, and expanding our customer
+and distribution bases, for which there can be no assurance given.
+
+Profitability depends upon many factors,
+including the success of the Company s marketing program, the Company s ability to identify and obtain the rights to
+additional products to add to its existing product line, expansion of its distribution and customer base, maintenance or reduction
+of expense levels and the success of the Company s business activities. The Company anticipates that it will continue to
+incur operating losses in the future. The Company s ability to achieve profitable operations will also depend on its ability
+to develop and maintain an adequate marketing and distribution system.
+
+ 
+
+Bio Essence needs to continue to attract and retain professional
+and qualified personnel, which may require the issuance of stock warrants or options.
+
+ 
+
+Bio Essence s ability to realize its
+objectives is dependent on its ability to attract and retain additional, qualified personnel. Competition for such personnel can
+be intense, and there can be no assurance that Bio Essence s results will not be adversely affected by difficulty in attracting
+and/or retaining qualified personnel. To the extent it does enter into employment agreements, there can be no assurance that such
+agreements shall fully protect Bio Essence from competitive injury if any of these individuals leave the company.
+
+ 
+
+One method of attracting talent is issuing
+stock warrants or options. This provides the Company with a way to compensate key personnel. If issued, the warrants and options
+would also have a dilutive effect on the interests of the purchasers of stock, thus triggering the anti-dilution rights of the
+Founders. Moreover, in the event Bio Essence requires additional equity financing pursuant to the shares offered under this IPO,
+purchasers of the additional shares may experience further dilution to the extent that such shares may be issued for a value less
+than the price paid for shares offered hereunder.
+
+ 
+
+ 14 
+
+ 
+
+ 
+
+We will be controlled by existing shareholders after the IPO.
+
+ 
+
+Upon the completion of the IPO, the directors
+and officers currently in place will continue to oversee the Company s operations. Jian Yang, our former director and majority
+shareholder, will likely continue to maintain control of the Company by virtue of owning a majority of the Company s issued
+and outstanding common stock.
+
+ 
+
+As a result, Ms. Yang will likely have a significant
+influence on the affairs and management of the Company, as well as on all matters requiring stockholder approval, including electing
+and removing members of its board of directors, causing the Company to engage in transactions with affiliated entities, causing
+or restricting the sale or merger of the Company and changing the company s dividend policy. Such concentration of ownership
+and control could have the effect of delaying, deferring or preventing a change in control of Bio Essence even when such a change
+of control would be in the best interests of the company s other stockholders.
+
+ 
+
+Notably, all of Ms. Yang s shares are
+being registered under the Resale. As such, there is a possibility that Ms. Yang may divest herself of a majority, or all, of her
+stock in the Company. This would lead to a change in control over the Company. At this time, the Company believes that such a divestiture
+is unlikely. While the results of the Resale are unpredictable, the Company believes that, at the close of the Resale and IPO,
+it will likely remain controlled by Ms. Yang or a small number of shareholders.
+
+ 
+
+Limitations on director and officer liability
+and our indemnification of our officers and directors may discourage stockholders from bringing suit against a director. 
+
+ 
+
+Article IX, Section 4 of the Bylaws provide
+that officers and directors will be indemnified by the Company to the fullest extent of California law. These provisions may discourage
+stockholders from bringing suit against a director for breach of fiduciary duty and may reduce the likelihood of derivative litigation
+brought by stockholders on our behalf against a director. In addition, our Certificate of Incorporation and Bylaws provide for
+mandatory indemnification of directors and officers to the fullest extent permitted by governing state law. 
+
+ 
+
+A downturn in general economic conditions could cause adverse
+consequences for the Company operations.
+
+ 
+
+The financial success of the Company may be
+sensitive to adverse changes in general economic conditions in the United States, and any States in which we do business, such
+as recession, inflation, unemployment, and interest rates. Such changing conditions could reduce demand in the marketplace for
+the Company's services and products. Management believes that the impending growth of the market, mainstream market acceptance
+and the targeted product line of the Company will insulate the Company from excessive reduced demand. Nevertheless, the Company
+has no control over these changes.
+
+ 
+
+Our business relies on international
+commerce and international crises may negatively affect our performance.
+
+ 
+
+While our business is tied to general economic
+conditions, it may also be effective by international turmoil, including pandemics such as the novel coronavirus known as COVID-19
+(discussed specifically below), which has disrupted supply chains and commerce around the world. The Company does not have any
+ability to predict or plan against such international crises and may be negatively affected as a result of the same. The Company
+may also be at risk should future pandemics or international crises interrupt the supply chain or adversely affect the Company s
+business in other ways.
+
+ 
+
+The COVID-19 pandemic has adversely affected
+the Company and may continue to do so in the future
+
+ 
+
+In December
+2019, a novel strain of coronavirus, causing a disease referred to as COVID-19, was reported to have surfaced in Wuhan, China.
+Since then, COVID-19 has spread to multiple countries, including the United States. In March 2020, the World Health Organization
+declared the COVID-19 outbreak a pandemic, and the U.S. government-imposed travel restrictions on travel between the United States,
+China and certain other countries. The state of California, where the Company is headquartered, has been affected by COVID-19.
+The Governor of California has issued a stay-at-home order, which took effect on March 19, 2020; as of this report date, California
+is gradually reopening the counties and business within these counties based on reopening risk tiers.
+
+ 
+
+ 15 
+
+ 
+
+ 
+
+The
+Company s business and services and results of operations have been affected and could continue to be affected by the
+COVID-19 pandemic. Some of the Company s big retail customers decreased or cancelled their orders due to bankruptcy
+and slow-down of their business. Many of the Company s individual customers lost their buying power or reduced their
+consumption towards unnecessary merchandise like the cosmetic-related products due to unemployment. On the other hand, the
+demand for the Company s health care products such as vitamin supplements and Chinese herbs were increased; especially
+many doctors and practitioners increased their purchase orders to stock up the inventory and prepare for the epidemic,
+therefore the impact of Covid-19 on the Company s revenue was mitigated.
+
+ 
+
+The global
+economy has also been materially negatively affected by COVID-19 and there is continued uncertainty about the duration and intensity
+of its impacts. While the potential economic impact brought by, and the duration of, COVID-19 may be difficult to assess or predict,
+a widespread pandemic could result in significant disruption of global financial markets, reducing the Company s ability
+to access capital, which could negatively affect the Company s liquidity.

parsed_sections/risk_factors/2020/BLRX_biolinerx_risk_factors.txt

@@ -0,0 +1 @@
+RISK FACTORS An investment in our securities involves a high degree of risk, you should carefully consider the risk factors set forth in our most recent Annual Report on Form 20-F on file with the SEC and our Form 6-K filed on May 20, 2020, which are incorporated by reference into this prospectus, as well as the following risk factors, which supplement or augment the risk factors set forth in our Annual Report on Form 20-F and our Form 6-K filed on May 20, 2020. Before making an investment decision, you should carefully consider these risks as well as other information we include or incorporate by reference in this prospectus. The risks and uncertainties not presently known to us or that we currently deem immaterial may also materially harm our business, operating results and financial condition and could result in a complete loss of your investment. The sale of a substantial amount of our ordinary shares or ADSs, including resale of the ADSs issuable upon the exercise of the warrants held by the selling shareholders in the public market could adversely affect the prevailing market price of our common stock. We are registering for resale 120,537,030 ordinary shares represented by 8,035,802 ADSs issuable upon the exercise of warrants held by the selling shareholders. Sales of substantial amounts of our ordinary shares or ADSs in the public market, or the perception that such sales might occur, could adversely affect the market price of our ordinary shares, and the market value of our other securities. We cannot predict if and when selling shareholders may sell such shares in the public markets. Furthermore, in the future, we may issue additional ordinary shares or ADSs or other equity or debt securities convertible into ordinary shares or ADSs. Any such issuance could result in substantial dilution to our existing shareholders and could cause our stock price to decline. SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS This prospectus and the documents incorporated herein by reference contain statements and information that involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. In some cases, you can identify forward-looking statements by terms including anticipates, believes, could, estimates, expects, intends, may, plans, potential, predicts, projects, should, will, would and similar expressions intended to identify forward-looking statements, but these are not the only ways these statements are identified. Forward-looking statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. You should not put undue reliance on any forward-looking statements. Unless we are required to do so under U.S. federal securities laws or other applicable laws, we do not intend to update or revise any forward-looking statements. Readers are encouraged to consult the Company s filings made on Form 6-K, which are periodically filed with or furnished to the SEC. Factors that could cause our actual results to differ materially from those expressed or implied in such forward-looking statements include, but are not limited to: the initiation, timing, progress and results of our preclinical studies, clinical trials and other therapeutic candidate development efforts; our ability to advance our therapeutic candidates into clinical trials or to successfully complete our preclinical studies or clinical trials; our receipt of regulatory approvals for our therapeutic candidates, and the timing of other regulatory filings and approvals; the clinical development, commercialization and market acceptance of our therapeutic candidates; our ability to establish and maintain corporate collaborations; our ability to integrate new therapeutic candidates and new personnel; the interpretation of the properties and characteristics of our therapeutic candidates and of the results obtained with our therapeutic candidates in preclinical studies or clinical trials; the implementation of our business model and strategic plans for our business and therapeutic candidates; the scope of protection we are able to establish and maintain for intellectual property rights covering our therapeutic candidates and our ability to operate our business without infringing the intellectual property rights of others; estimates of our expenses, future revenues, capital requirements and our needs for additional financing; risks related to changes in healthcare laws, rules and regulations in the United States or elsewhere; competitive companies, technologies and our industry; risks related to the coronavirus outbreak; and statements as to the impact of the political and security situation in Israel on our business. USE OF PROCEEDS We will not receive any proceeds from the sale of the ordinary shares represented by ADSs by the selling shareholders. All net proceeds from the sale of the ordinary shares represented by ADSs and the warrants and placement agent warrants covered by this prospectus will go to the selling shareholders. We expect that the selling shareholders will sell their ordinary shares represented by ADSs as described under Plan of Distribution. We may receive proceeds from the exercise of the warrants and placement agent warrants and issuance of the warrant ADSs to the extent that these warrants are exercised for cash by the selling shareholders. Warrants, however, are exercisable on a cashless basis under remote circumstances. If all of the warrants mentioned above were exercised for cash in full, the proceeds would be approximately $18.1 million. We intend to use the net proceeds of such warrant exercise, if any, for general corporate purposes, which may include but are not limited to working capital and funding clinical trials. The amounts and timing of our use of the net proceeds will vary depending on a number of factors, including the amount of cash generated or used by our operations, and the rate of growth, if any, of our business. As a result, we will retain broad discretion in the allocation of the net proceeds of this offering CAPITALIZATION The following table presents our capitalization as determined in accordance with International Financial Reporting Standards, or IFRS, as of March 31, 2020: on an actual basis; and on an as adjusted basis, to give effect to (i) the sale of 5,142,859 ADSs representing 77,142,885 ordinary shares at the offering price of $1.75 per ADS in connection with the May 2020 Offering, and the concurrent private placement of warrants and placement agent warrants, assuming such warrants are accounted for and classified as equity, after deducting the placement agent fees and offering expenses payable by us, resulting in net proceeds of $8.1 million, and (ii) the sale of 2,510,286 ADSs representing 37,654,290 ordinary shares at the offering price of $1.75 per ADS in connection with the June 2020 Offering, and the concurrent private placement of warrants and placement agent warrants, assuming such warrants are accounted for and classified as equity, after deducting the placement agent fees and estimated offering expenses payable by us, resulting in net proceeds of $3.9 million. This table should be read in conjunction with our financial statements and the notes thereto incorporated by reference herein and the accompanying prospectus. As of March 31, 2020 Actual As Adjusted (U.S.$ in thousands) Non-Current Liabilities: Warrants $ 182 $ 182 Long-term loans, net of current maturities 5,076 5,076 Lease liabilities 1,639 1,639 Total non-current liabilities $ 6,897 $ 6,897 Shareholders equity: Ordinary shares, NIS 0.1 par value, 500,000,000 authorized; 178,709,725 shares issued and outstanding (actual); and 296,478,252 shares issued and outstanding (as adjusted) $ 4,907 $ 8,173 Share premium 267,140 275,883 Capital reserve 12,488 12,488 Other comprehensive loss (1,416 ) (1,416 ) Accumulated deficit (254,611 ) (254,611 ) Total shareholders equity 28,508 40,517 Total capitalization $ 47,171 $ 59,180 The above table is based on 178,709,725 shares outstanding as of March 31, 2020 and excludes the following: 34,904,449 ordinary shares issuable upon the exercise of outstanding warrants, at a weighted average exercise price of $1.14 per share; 18,785,857 ordinary shares issuable upon the exercise of outstanding options, at a weighted average exercise price of $0.76 per share; 77,142,885 ordinary shares represented by 5,142,859 ADSs issuable upon exercise of unregistered warrants issued to the investors in the May 2020 Private Placement, at an exercise price of $2.25 per ADS; 3,857,145 ordinary shares represented by 257,143 ADSs issuable upon exercise of unregistered warrants issued to the placement agent or its designees as compensation in connection the May 2020 Private Placement, at an exercise price of $2.1875 per ADS; 37,654,290 ordinary shares represented by 2,510,286 ADSs issuable upon exercise of unregistered warrants issued to the investors in the June 2020 Private Placement, at an exercise price of $2.25 per ADS; and 1,882,710 ordinary shares represented by 125,514 ADSs issuable upon exercise of unregistered warrants issued to the placement agent or its designees as compensation in connection with the June 2020 Private Placement, at an exercise price of $2.1875 per ADS. SELLING SHAREHOLDERS The ordinary shares represented by ADSs being offered by the selling shareholders are those ordinary shares represented by ADSs issuable upon exercise of warrants previously issued in connection with our private placements that closed in May 2020 and June 2020. For additional information regarding the issuance of those ADSs and warrants to purchase ADSs, see Prospectus Summary May 2020 Financing and Prospectus Summary June 2020 Financing above. We are registering the ordinary shares represented by ADSs in order to permit the selling shareholders to offer the ordinary shares represented by ADSs for resale from time to time. Other than with respect to H.C. Wainwright & Co. LLC, or H.C. Wainwright, which acted as our placement agent in each of the May 2020 and June 2020 financings, except for the ownership of the warrants and placement agent warrants issued, and the ADSs issued and issuable, pursuant to prior financings, the selling shareholders have not had any material relationship with us within the past three years. The table below lists the selling shareholders and other information regarding the beneficial ownership of the ordinary shares represented by ADSs by each of the selling shareholders. The second column lists the number of ordinary shares represented by ADSs beneficially owned by each selling shareholder, based on its ownership of ADSs and warrants or placement agent warrants to purchase ADSs, as of June 18, 2020, assuming exercise of the warrants or placement agent warrants held by the selling shareholders on that date, without regard to any limitations on conversions or exercises. The third column lists the maximum number of ordinary shares represented by ADSs being offered in this prospectus by the selling shareholders. The fourth and fifth columns list the amount of ordinary shares represented by ADSs owned after the offering, by number of ordinary shares represented by ADSs and percentage of outstanding ordinary shares, assuming in both cases the sale of all of the ordinary shares represented by ADSs offered by the selling shareholders pursuant to this prospectus, and without regard to any limitations on conversions or exercises. Under the terms of the warrants and placement agent warrants issued in the May 2020 and June 2020 financings, a selling shareholder may not exercise the warrants to the extent such exercise would cause such selling shareholder, together with its affiliates, to beneficially own a number of ordinary shares which would exceed 4.99% or 9.99% of our then outstanding ordinary shares following such exercise, excluding for purposes of such determination ordinary shares not yet issuable upon exercise of the warrants and placement agent warrants which have not been exercised. The number of shares does not reflect this limitation. The selling shareholders may sell all, some or none of their ordinary shares represented by ADSs or warrants or placement agent warrants in this offering. See Plan of Distribution. Selling Shareholder Number of Ordinary Shares Owned Prior to Offering Maximum Number of Ordinary Shares to be Sold Pursuant to this Prospectus Number of Ordinary Shares Owned After the Offering Percentage of Ordinary Shares Owned After the Offering Armistice Capital Master Fund, Ltd. (1) 31,888,110 (2) 31,888,110 - - Sabby Volatility Warrant Master Fund, Ltd. (3) 28,060,47 (4) 25,510,470 (5) 2,550,000 (6) * Altium Growth Fund, LP (7) 25,510,485 (8) 25,510,485 - - Intracoastal Capital, LLC (9) 21,682,875 (10) 19,132,860 (11) 2,550,015 (12) * Bigger Capital Fund, LP (13) 5,000,730 (14) 4,285,725 (15) 715,005 (16) * District 2 Capital Fund LP (17) 9,569,520 (18) 8,469,525 (19) 1,099,995 (20) * Michael Vasinkevich (21) 3,680,685 (22) 3,680,685 (22) - - Noam Rubinstein (21) 1,808,055 (23) 1,808,055 (23) - - Craig Schwabe (21) 193,725 (24) 193,725 (24) - - Charles Worthman (21) 57,390 (25) 57,390 (25) - - * Denotes less than 1% (1) Armistice Capital, LLC, the investment manager of Armistice Capital Master Fund Ltd., or Armistice, and Steven J. Boyd, the managing member of Armistice Capital, LLC, hold shared voting and dispositive power over the ordinary shares held by Armistice. The principal business address of Armistice is c/o Armistice Capital, LLC, 510 Madison Avenue, 7th Floor, New York, NY, 10022. (2) Represents (i) 21,428,580 ordinary shares representing 1,428,572 ADSs issuable upon exercise of warrants issued in our May 2020 Private Placement, and (ii) 10,459,530 ordinary shares representing 697,302 ADSs issuable upon exercise of warrants issued in our June 2020 Private Placement. (3) Sabby Management, LLC is the investment manager of Sabby Volatility Warrant Master Fund, Ltd., or Sabby VWMF, and shares voting and investment power with respect to these shares in this capacity. As manager of Sabby Management, LLC, Hal Mintz also shares voting and investment power on behalf of Sabby VWMF. Each of Sabby Management, LLC and Hal Mintz disclaims beneficial ownership over the securities listed except to the extent of their pecuniary interest therein. The address of principal business office of Sabby VWMF is 10 Mountainview Road, Suite 205, Upper Saddle River, New Jersey 07458. (4) Represents (i) 2,550,000 ordinary shares representing 170,000 ADSs issuable upon exercise of previously issued warrants, (ii) 17,142,855 ordinary shares representing 1,142,857 ADSs issuable upon exercise of warrants issued in our May 2020 Private Placement and (iii) 8,367,615 ordinary shares representing 557,841 ADSs issuable upon exercise of warrants issued in our June 2020 Private Placement. (5) Represents (i) 17,142,855 ordinary shares representing 1,142,857 ADSs issuable upon exercise of warrants issued in our May 2020 Private Placement, and (ii) 8,367,615 ordinary shares representing 557,841 ADSs issuable upon exercise of warrants issued in our June 2020 Private Placement. (6) Represents 2,550,000 ordinary shares representing 170,000 ADSs issuable upon exercise of previously issued warrants. (7) Altium Capital Management, LP, the investment manager of Altium Growth Fund, LP, has voting and investment power over these securities. Jacob Gottlieb is the managing member of Altium Capital Growth GP, LLC, which is the general partner of Altium Growth Fund, LP. The address of principal business office of Altium Growth Fund, LP is 152 West 57 Street, FL 20, New York, NY 10019. (8) Represents (ii) 17,142,870 ordinary shares representing 1,142,858 ADSs issuable upon exercise of warrants issued in our May 2020 Private Placement, and (ii) 8,367,615 ordinary shares representing 557,841 ADSs issuable upon exercise of warrants issued in our June 2020 Private Placement. (9) Mitchell P. Kopin, or Mr. Kopin, and Daniel B. Asher, or Mr. Asher, each of whom are managers of Intracoastal Capital, LLC, or Intracoastal, have shared voting control and investment discretion over the securities reported herein that are held by Intracoastal. As a result, each of Mr. Kopin and Mr. Asher may be deemed to have beneficial ownership (as determined under Section 13(d) of Exchange Act) of the securities reported herein that are held by Intracoastal. (10) Represents (i) 2,550,015 ordinary shares representing 170,001 ADSs issuable upon exercise of previously issued warrants, (ii) 12,857,145 ordinary shares representing 857,143 ADSs issuable upon exercise of warrants issued in our May 2020 Private Placement, and (iii) 6,275,715 ordinary shares representing 418,381 ADSs issuable upon exercise of warrants issued in our June 2020 Private Placement. (11) Represents (i) 12,857,145 ordinary shares representing 857,143 ADSs issuable upon exercise of warrants issued in our May 2020 Private Placement, and (ii) 6,275,715 ordinary shares issuable representing 418,381 ADSs upon exercise of warrants issued in our June 2020 Private Placement. (12) Represents 2,550,015 ordinary shares representing 170,001 ADSs issuable upon exercise of previously issued warrants. (13) Michael Bigger has the power to vote or dispose of the shares owned by Bigger Capital Fund, LP. The investor s address is 175 W Carver, Huntington, NY, 11743. (14) Represents (i) 715,005 ordinary shares representing 47,667 ADSs issuable upon exercise of previously issued warrants, and (ii) 4,285,725 ordinary shares representing 285,715 ADSs issuable upon exercise of warrants issued in our May 2020 Private Placement. (15) Represents 4,285,725 ordinary shares representing 285,715 ADSs issuable upon exercise of warrants issued in our May 2020 Private Placement. (16) Represents 715,005 ordinary shares representing 47,667 ADSs issuable upon exercise of previously issued warrants. (17) Michael Bigger has the power to vote or dispose of the shares owned by District 2 Capital Fund LP. The investor s address is 175 W Carver, Huntington, New York 11743. (18) Represents (i) 1,099,995 ordinary shares representing 73,333 ADSs issuable upon exercise of previously issued warrants, (ii) 4,285,710 ordinary shares representing 285,714 ADSs issuable upon exercise of warrants issued in our May 2020 Private Placement, and (iii) 4,183,815 ordinary shares representing 278,921 ADSs issuable upon exercise of warrants issued in our June 2020 Private Placement. (19) Represents (i) 4,285,710 ordinary shares representing 285,714 ADSs issuable upon exercise of warrants issued in our May 2020 Private Placement and (ii) 4,183,815 ordinary shares representing 278,921 ADSs issuable upon exercise of warrants issued in our June 2020 Private Placement. (20) Represents 1,099,995 ordinary shares representing 73,333 ADSs issuable upon exercise of previously issued warrants. (21) Referenced person is affiliated with H.C. Wainwright, a registered broker dealer. H.C. Wainwright is a registered broker-dealer and acted as the placement agent in the May 2020 Private Placement and the June 2020 Private Placement. The address of H.C. Wainwright & Co., LLC, 430 Park Avenue, New York, NY 10022. (22) Represents (i) 2,473,395 ordinary shares representing 164,893 ADSs issuable upon exercise of placement agent warrants issued in connection with our May 2020 Private Placement, and (ii) 1,207,290 ordinary shares representing 80,486 ADSs issuable upon exercise of placement agent warrants issued in our June 2020 Private Placement. (23) Represents (i) 1,215,000 ordinary shares representing 81,000 ADSs issuable upon exercise of placement agent warrants issued in connection with our May 2020 Private Placement, and (ii) 593,055 ordinary shares representing 39,537 ADSs issuable upon exercise of placement agent warrants issued in our June 2020 Private Placement. (24) Represents (i) 130,185 ordinary shares representing 8,679 ADSs issuable upon exercise of placement agent warrants issued in connection with our May 2020 Private Placement, and (ii) 63,540 ordinary shares representing 4,236 ADSs issuable upon exercise of placement agent warrants issued in our June 2020 Private Placement. (25) Represents (i) 38,565 ordinary shares representing 2,571 ADSs issuable upon exercise of placement agent warrants issued in connection with our May 2020 Private Placement, and (ii) 18,825 ordinary shares representing 1,255 ADSs issuable upon exercise of placement agent warrants issued in our June 2020 Private Placement. DESCRIPTION OF SHARE CAPITAL The following description of our share capital summarizes certain provisions of our Articles of Association. Such summaries do not purport to be complete and are subject to, and are qualified in their entirety by reference to, all of the provisions of our Articles of Association, copies of which have been filed as exhibits to the registration statement of which this prospectus forms a part. Ordinary Shares As of June 18, 2020, our authorized share capital consists of NIS 50,000,000 divided into 500,000,000 ordinary shares of a nominal value of NIS 0.1 each, of which 296,478,252 are outstanding. Registration Number and Purposes of the Company Our number with the Israeli Registrar of Companies is 513398750. Our purpose is set forth in Section 3 of our Articles of Association and includes every lawful purpose. Our ordinary shares that are fully paid for are issued in registered form and may be freely transferred under our Articles of Association, unless the transfer is restricted or prohibited by applicable law or the rules of a stock exchange on which the shares are traded. The ownership or voting of our ordinary shares by non-residents of Israel is not restricted in any way by our Articles of Association or the laws of the State of Israel. Pursuant to the Companies Law and our Articles of Association, our Board of Directors may exercise all powers and take all actions that are not required under law or under our Articles of Association to be exercised or taken by our shareholders, including the power to borrow money for company purposes. Our Articles of Association enable us to increase or reduce our share capital. Any such changes are subject to the provisions of the Companies Law and must be approved by a resolution duly passed by our shareholders at a general or extraordinary meeting by voting on such change in the capital. In addition, transactions that have the effect of reducing capital, such as the declaration and payment of dividends in the absence of sufficient retained earnings and profits and an issuance of shares for less than their nominal value (under certain circumstances), require a resolution of our Board of Directors and court approval. At the Annual General Meeting in July 2019, the shareholders approved an increase to our share capital from NIS 25,000,000 divided into 250,000,000 ordinary shares of a nominal value of NIS 0.10 each to NIS 50,000,000 divided into 500,000,000 ordinary shares of a nominal value of NIS 0.10 each, and a corresponding amendment to our Articles of Association. Dividends We may declare a dividend to be paid to the holders of our ordinary shares in proportion to their respective shareholdings. Under the Companies Law, dividend distributions are determined by the board of directors and do not require the approval of the shareholders of a company unless the company s articles of association provide otherwise. Our Articles of Association do not require shareholder approval of a dividend distribution and provide that dividend distributions may be determined by our Board of Directors. Pursuant to the Companies Law, we may only distribute dividends from our profits accrued over the previous two years, as defined in the Companies Law, according to our then last reviewed or audited financial reports, provided that the date of the financial reports is not more than six months prior to the date of distribution, or we may distribute dividends with court approval. In each case, we are only permitted to pay a dividend if there is no reasonable concern that payment of the dividend will prevent us from satisfying our existing and foreseeable obligations as they become due. In the event of our liquidation, after satisfaction of liabilities to creditors, our assets will be distributed to the holders of our ordinary shares in proportion to their shareholdings. This right, as well as the right to receive dividends, may be affected by the grant of preferential dividend or distribution rights to the holders of a class of shares with preferential dividend or distribution rights that may be authorized in the future. Election of Directors Our ordinary shares do not have cumulative voting rights in the election of directors. As a result, the holders of a majority of the voting power represented at a shareholders meeting have the power to elect all of our directors, other than with respect to the special approval requirements for the election of external directors (unless we qualify as an Eligible Company and opt to follow the exemption provided under the Relief Regulations regarding appointment of external directors and composition of the Audit and Compensation Committees) described under Item 6. Directors, Senior Management and Employees Board Practices External Directors of our Form 20-F for the year ended December 31, 2019. Pursuant to our Articles of Association, other than the external directors, for whom special election requirements apply under the Companies Law (unless we qualify as an Eligible Company and opt to follow the exemption provided under the Relief Regulations regarding appointment of external directors and composition of the Audit and Compensation Committees), our directors are elected at a general or extraordinary meeting of our shareholders and serve on the Board of Directors until they are removed by the majority of our shareholders at a general or extraordinary meeting of our shareholders or upon the occurrence of certain events, in accordance with the Companies Law and our Articles of Association. In addition, our Articles of Association allow our Board of Directors to appoint directors (who are not external directors) to fill vacancies on the Board of Directors to serve until the next general meeting or extraordinary meeting, or earlier if required by our Articles of Association or applicable law. We have held elections for each of our non-external directors at each annual meeting of our shareholders since our initial public offering in Israel. Unless we qualify as an Eligible Company and opt to follow the exemption provided under the Amendment to the Relief Regulations regarding appointment of external directors and composition of the Audit and Compensation Committees, external directors are elected for an initial term of three years and may be removed from office pursuant to the terms of the Companies Law. See Item 6. Directors, Senior Management and Employees Board Practices External Directors of our Form 20-F for the year ended December 31, 2019. Shareholder Meetings Under Israeli law, we are required to hold an annual general meeting of our shareholders once every calendar year that must be no later than 15 months after the date of the previous annual general meeting. All meetings other than the annual general meeting of shareholders are referred to as extraordinary meetings. Our Board of Directors may call extraordinary meetings whenever it sees fit, at such time and place, within or outside of Israel, as it may determine. In addition, the Companies Law and our Articles of Association provide that our Board of Directors is required to convene an extraordinary meeting upon the written request of (a) any two of our directors or one quarter of our Board of Directors or (b) one or more shareholders holding, in the aggregate, either (1) 5% of our outstanding shares and 1% of our outstanding voting power or (2) 5% of our outstanding voting power. Subject to the provisions of the Companies Law and the regulations promulgated thereunder, shareholders entitled to participate and vote at general meetings are the shareholders of record on a date to be decided by the board of directors, which may be between four and 40 days prior to the date of the meeting. Furthermore, the Companies Law and our Articles of Association require that resolutions regarding the following matters must be passed at a general meeting of our shareholders: amendments to our Articles of Association; appointment or termination of our auditors; appointment of directors and appointment and dismissal of external directors; approval of acts and transactions requiring general meeting approval pursuant to the Companies Law; director compensation, indemnification and change of the principal executive officer; increases or reductions of our authorized share capital; a merger; and the exercise of our Board of Director s powers by a general meeting, if our board of directors is unable to exercise its powers and the exercise of any of its powers is required for our proper management. The Companies Law requires that a notice of any annual or extraordinary shareholders meeting be provided at least 21 days prior to the meeting and if the agenda of the meeting includes the appointment or removal of directors, the approval of transactions with office holders or interested or related parties, the approval of a compensation policy with respect to office holders or an approval of a merger, notice must be provided at least 35 days prior to the meeting. Pursuant to our Articles of Association, holders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote before the shareholders at a general meeting. Quorum The quorum required for our general meetings of shareholders consists of at least two shareholders present in person, by proxy or written ballot who hold or represent between them at least 25% of the total outstanding voting rights. A meeting adjourned for lack of a quorum is adjourned to the same day in the following week at the same time and place or on a later date if so specified in the summons or notice of the meeting. At the reconvened meeting, any number of our shareholders present in person or by proxy shall constitute a lawful quorum. Resolutions Our Articles of Association provide that all resolutions of our shareholders require a simple majority vote, unless otherwise required by applicable law. Israeli law provides that a shareholder of a public company may vote in a meeting and in a class meeting by means of a written ballot in which the shareholder indicates how he or she votes on resolutions relating to the following matters: an appointment or removal of directors; an approval of transactions with office holders or interested or related parties; an approval of a merger; authorizing the chairman of the board of directors or his relative to act as the company s chief executive officer or act with such authority; or authorize the company s chief executive officer or his relative to act as the chairman of the board of directors or act with such authority; any other matter in respect of which there is a provision in the articles of association providing that decisions of the general meeting may also be passed by written ballot; and other matters which may be prescribed by Israel s Minister of Justice. The provision allowing the vote by written ballot does not apply where the voting power of the controlling shareholder is sufficient to determine the vote. Our Articles of Association provides that our Board of Directors may prevent voting by means of a written ballot and this determination is required to be stated in the notice convening the general meeting. The Companies Law provides that a shareholder, in exercising his or her rights and performing his or her obligations toward the company and its other shareholders, must act in good faith and in a customary manner, and avoid abusing his or her power. This is required when voting at general meetings on matters such as changes to the articles of association, increasing the company s registered capital, mergers and approval of related party transactions. A shareholder also has a general duty to refrain from depriving any other shareholder of its rights as a shareholder. In addition, any controlling shareholder, any shareholder who knows that its vote can determine the outcome of a shareholder vote and any shareholder who, under the company s articles of association, can appoint or prevent the appointment of an office holder, is required to act with fairness towards the company. The Companies Law does not describe the substance of this duty except to state that the remedies generally available upon a breach of contract will also apply to a breach of the duty to act with fairness. Access to Corporate Records Under the Companies Law, all shareholders of a company generally have the right to review minutes of the company s general meetings, its shareholders register and principal shareholders register, articles of association, financial statements and any document it is required by law to file publicly with the Israeli Companies Registrar and the ISA. Furthermore, any of our shareholders may request access to review any document in our possession that relates to any action or transaction with a related party, interested party or office holder that requires shareholder approval under the Companies Law. However, we may deny such a request to review a document if we determine that the request was not made in good faith, that the document contains a trade secret or a patent or that the document s disclosure may otherwise prejudice our interests. Acquisitions under Israeli Law Full Tender Offer A person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the target company s issued and outstanding share capital is required by the Companies Law to make a tender offer to all of the company s shareholders for the purchase of all of the issued and outstanding shares of the company. A person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the issued and outstanding share capital of a certain class of shares is required to make a tender offer to all of the shareholders who hold shares of the same class for the purchase of all of the issued and outstanding shares of the same class. If the shareholders who do not accept the offer hold less than 5% of the issued and outstanding share capital of the company or of the applicable class, all of the shares that the acquirer offered to purchase will be transferred to the acquirer by operation of law (provided that a majority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer except that if the total votes to reject the tender offer represent less than 2% of the company s issued and outstanding share capital, in the aggregate, approval by a majority of the offerees that do not have a personal interest in such tender offer is not required to complete the tender offer). However, a shareholder that had its shares so transferred may petition the court within six months from the date of acceptance of the full tender offer, whether or not such shareholder agreed to the tender, to determine whether the tender offer was for less than fair value and whether the fair value should be paid as determined by the court unless the acquirer stipulated in the tender offer that a shareholder that accepts the offer may not seek appraisal rights. If the shareholders who did not accept the tender offer hold 5% or more of the issued and outstanding share capital of the company or of the applicable class, the acquirer may not acquire shares of the company that will increase its holdings to more than 90% of the company s issued and outstanding share capital or of the applicable class from shareholders who accepted the tender offer. Special Tender Offer The Companies Law provides that an acquisition of shares of a public Israeli company must be made by means of a special tender offer if as a result of the acquisition the purchaser would become a holder of 25% or more of the voting rights in the company, unless one of the exemptions in the Companies Law is met. This rule does not apply if there is already another holder of at least 25% of the voting rights in the company. Similarly, the Companies Law provides that an acquisition of shares in a public company must be made by means of a tender offer if as a result of the acquisition the purchaser would become a holder of 45% or more of the voting rights in the company, if there is no other shareholder of the company who holds 45% or more of the voting rights in the company, unless one of the exemptions in the Companies Law is met. A special tender offer must be extended to all shareholders of a company. A special tender offer may be consummated only if (i) at least 5% of the voting power attached to the company s outstanding shares will be acquired by the offeror and (ii) the number of shares tendered in the offer exceeds the number of shares whose holders objected to the offer. If a special tender offer is accepted, then the purchaser or any person or entity controlling it or under common control with the purchaser or such controlling person or entity may not make a subsequent tender offer for the purchase of shares of the target company and may not enter into a merger with the target company for a period of one year from the date of the offer, unless the purchaser or such person or entity undertook to effect such an offer or merger in the initial special tender offer. Merger The Companies Law permits merger transactions if approved by each party s board of directors and, unless certain requirements described under the Companies Law are met, a majority of each party s shares voted on the proposed merger at a shareholders meeting called with at least 35 days prior notice. For purposes of the shareholder vote, unless a court rules otherwise, the merger will not be deemed approved if, in a company in which the other merging company holds shares, or in which shares are held by any person who either (a) holds 25% or more of the outstanding shares or (b) has the right to appoint 25% or more of the directors of the other merging company (or Controlling Shareholders), the majority of the shareholders voting in such meeting (who are not also shareholders or Controlling Shareholders of the other merging company) vote against the merger. If the aforementioned majority of the shareholders was not obtained, a court may still approve the merger upon the request of holders of at least 25% of the voting rights of a company, if the court holds that the merger is fair and reasonable, taking into account the value of the parties to the merger and the consideration offered to the shareholders. Upon the request of a creditor of either party to the proposed merger, the court may delay or prevent the merger if it concludes that there exists a reasonable concern that, as a result of the merger, the surviving company will be unable to satisfy the obligations of any of the parties to the merger, and may further give instructions to secure the rights of creditors. In addition, a merger may not be completed unless at least 50 days have passed from the date that a proposal for approval of the merger was filed by each party with the Israeli Registrar of Companies and 30 days have passed from the date the merger was approved by the shareholders of each party. Antitakeover Measures The Companies Law allows us to create and issue shares having rights different from those attached to our ordinary shares, including shares providing certain preferred rights, distributions or other matters and shares having preemptive rights. As of the date of this annual report, we do not have any authorized or issued shares other than our ordinary shares. In the future, if we do create and issue a class of shares other than ordinary shares, such class of shares, depending on the specific rights that may be attached to them, may delay or prevent a takeover or otherwise prevent our shareholders from realizing a potential premium over the market value of their ordinary shares. The authorization of a new class of shares will require an amendment to our Articles of Association which requires the prior approval of the holders of a majority of our shares at a general meeting. Shareholders voting in such meeting will be subject to the restrictions provided in the Companies Law as described above. In addition, the Israeli Securities Law and the rules and regulations of the TASE also limit the terms permitted with respect to a new class of shares created by a public company whose shares are traded on the TASE, and prohibit any such new class of shares from having voting rights. Description of American Depositary Shares Each of our ADSs represents 15 of our ordinary shares deposited with the principal Tel Aviv office of either Bank Hapoalim B.M. or Bank Leumi Le-Israel, as Custodian for the Depositary. Our ADSs trade on Nasdaq. The form of the deposit agreement for the ADS and the form of American Depositary Receipt (ADR) that represents an ADS have been incorporated by reference as exhibits to our most recent Annual Report on Form 20-F. Copies of the deposit agreement are available for inspection at the principal office of The Bank of New York Mellon, located at 101 Barclay Street, New York, New York 10286. Charges of Depositary We will pay the fees, reasonable expenses and out-of-pocket charges of the Depositary and those of any registrar only in accordance with agreements in writing entered into between us and the Depositary from time to time. The following charges shall be incurred by any party depositing or withdrawing ordinary shares or by any party surrendering ADRs or to whom ADRs are issued (including, without limitation, issuance pursuant to a stock dividend or stock split declared by us or an exchange of stock regarding the ADRs or deposited ordinary shares or a distribution of ADRs pursuant to the terms of the deposit agreement): taxes and other governmental charges; any applicable transfer or registration fees; certain cable, telex and facsimile transmission charges as provided in the deposit agreement; any expenses incurred in the conversion of foreign currency; a fee of $5.00 or less per 100 ADSs (or a portion thereof) for the execution and delivery of ADRs and the surrender of ADRs, including if the deposit agreement terminates; a fee of $.05 or less per ADS (or portion thereof) for any cash distribution made pursuant to the deposit agreement; a fee for the distribution of securities pursuant to the deposit agreement; in addition to any fee charged for a cash distribution, a fee of $.05 or less per ADS (or portion thereof) per annum for depositary services; a fee for the distribution of proceeds of rights that the Depositary sells pursuant to the deposit agreement; and any other charges payable by the Depositary, any of the Depositary s agents, or the agents of the Depositary s agents in connection with the servicing of ordinary shares or other Deposited Securities. The Depositary may own and deal in our securities and in ADSs. The Depositary collects its fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The Depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The Depositary may collect its annual fee for depositary services by deduction from cash distributions or by directly billing investors or by charging the book-entry system accounts of participants acting for them. The Depositary may collect any of its fees by deduction from any cash distribution payable (or by selling a portion of securities or other property distributable) to ADS holders that are obligated to pay those fees. The Depositary may generally refuse to provide fee-attracting services until its fees for those services are paid. From time to time, the Depositary may make payments to us to reimburse us for costs and expenses generally arising out of establishment and maintenance of the ADS program, waive fees and expenses for services provided to us by the Depositary or share revenue from the fees collected from ADS holders. In performing its duties under the deposit agreement, the Depositary may use brokers, dealers, foreign currency dealers or other service providers that are owned by or affiliated with the Depositary and that may earn or share fees, spreads or commissions. The Depositary may convert currency itself or through any of its affiliates and, in those cases, acts as principal for its own account and not as agent, advisor, broker or fiduciary on behalf of any other person and earns revenue, including, without limitation, transaction spreads, that it will retain for its own account. The revenue is based on, among other things, the difference between the exchange rate assigned to the currency conversion made under the deposit agreement and the rate that the Depositary or its affiliate receives when buying or selling foreign currency for its own account. The Depositary makes no representation that the exchange rate used or obtained in any currency conversion under the deposit agreement will be the most favorable rate that could be obtained at the time or that the method by which that rate will be determined will be the most favorable to ADS holders, subject to the Depositary s obligations under the deposit agreement. The methodology used to determine exchange rates used in currency conversions is available upon request. Liability of Holders for Taxes, Duties or Other Charges Any tax or other governmental charge with respect to ADSs or any deposited ordinary shares represented by any ADS shall be payable by the holder of such ADS to the Depositary. The Depositary may refuse to effect transfer of such ADS or any withdrawal of deposited ordinary shares represented by such ADS until such payment is made, and may withhold any dividends or other distributions or may sell for the account of the holder any part or all of the deposited ordinary shares represented by such ADS and may apply such dividends or distributions or the proceeds of any such sale in payment of any such tax or other governmental charge and the holder of such ADS shall remain liable for any deficiency. Description of the Warrants May 2020 Warrants The following is a brief summary of the investor warrants and placement agent warrants issued in connection with our May 2020 financing and is subject in all respects to the provisions contained in the investor warrants, in the form filed as an exhibit to our Current Report on Form 6-K dated May 28, 2020 and the placement agent warrants, in the form filed as an exhibit to the registration statement, of which this prospectus forms a part. Unless otherwise stated, references to warrants in this section include the investor warrants and placement agent warrants. Exercisability. Holders may exercise warrants at any time after May 28, 2020 until close of business on November 28, 2022. The warrants are exercisable, at the option of each holder, in whole or in part, by delivering to us a duly executed exercise notice accompanied by payment in full for the number of ordinary shares purchased upon such exercise (except in the case of a cashless exercise in limited circumstances discussed below). Cashless Exercise. If at the time after the three-month anniversary of the issue date of the warrants there is no effective registration statement registering the ordinary shares underlying the warrants, the holder may, at its option, exercise its warrants on a cashless basis. When exercised on a cashless basis, a portion of the warrant is cancelled in payment of the purchase price payable in respect of the number of our ordinary shares purchasable upon such exercise. Exercise Price. The exercise price of ordinary shares purchasable upon exercise of the investor warrants is $2.25 per share, and the exercise price of ordinary shares purchasable upon exercise of the placement agent warrants is $2.1875. The exercise price and the number of shares issuable upon exercise of the warrants is subject to appropriate adjustment in the event of recapitalization events, stock dividends, stock splits, stock combinations, reclassifications or similar events affecting our ordinary shares, and also upon any distributions of assets, including cash, stock or other property to our shareholders. Transferability. Subject to certain transfer restrictions, the warrants and all rights thereunder (including, without limitation, any registration rights) may be transferred at the option of the holder upon surrender of the warrants with the appropriate instruments of transfer. In addition, the holder (or permitted assignees under FINRA Rule 5110(g)(1)) of the placement agent warrants may not sell, transfer, assign, pledge, or hypothecate the warrants or the securities underlying these warrants, nor may they engage in any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the warrants or the underlying securities for a period of 180 days from the effective date or commencement of sales of the public offering of the ordinary shares issuable upon exercise of the warrants, subject to limited exceptions. Purchase Rights, Fundamental Transactions and Change of Control. If we sell or grant any rights to purchase shares, warrants or securities or other property to our shareholders on a pro rata basis, we will provide the holders of warrants with the right to acquire, upon the same terms, the securities subject to such purchase rights as though the warrant had been exercised immediately prior to the declaration of such rights. If we consummate any fundamental transaction, as described in the warrants and generally including any consolidation or merger into another corporation, the consummation of a transaction whereby another entity acquires more than 50% of our outstanding ordinary shares, the sale of all or substantially all of our assets, any tender offer or exchange offer or another transaction in which our ordinary shares are converted into or exchanged for other securities or other consideration, the holder of warrants will thereafter receive upon exercise of the warrants the securities or other consideration to which a holder of the number of ordinary shares then deliverable upon the exercise or conversion of such warrants would have been entitled upon such consolidation, merger or other transaction. Exchange Listing. We do not plan on making an application to list the warrants on the Nasdaq Capital Market, any national securities exchange or other nationally recognized trading system. Our ordinary shares underlying the warrants will be listed on the Nasdaq Capital Market and our ordinary shares are traded on the Nasdaq Capital Market. Rights as Shareholder. Except as otherwise provided in the warrants (such as the rights described above of a warrant holder upon our sale or grant of any rights to purchase shares, warrants or securities or other property to our shareholders on a pro rata basis) or by virtue of such holder s ownership of our ordinary shares, the holders of the warrants do not have the rights or privileges of holders of our ordinary shares, including any voting rights, until they exercise their warrants. June 2020 Warrants The following is a brief summary of the investor warrants and placement agent warrants issued in connection with our June 2020 financing and is subject in all respects to the provisions contained in the investor warrants, in the form filed as an exhibit to our Current Report on Form 6-K dated June 3, 2020 and the placement agent warrants, in the form filed as an exhibit to the registration statement, of which this prospectus forms a part. Unless otherwise stated, references to warrants in this section include the investor warrants and placement agent warrants. Exercisability. Holders may exercise warrants at any time after June 3, 2020 until close of business on December 5, 2022. The warrants are exercisable, at the option of each holder, in whole or in part, by delivering to us a duly executed exercise notice accompanied by payment in full for the number of ordinary shares purchased upon such exercise (except in the case of a cashless exercise in limited circumstances discussed below). Cashless Exercise. If at the time after the three-month anniversary of the issue date of the warrants there is no effective registration statement registering the ordinary shares underlying the warrants, the holder may, at its option, exercise its warrants on a cashless basis. When exercised on a cashless basis, a portion of the warrant is cancelled in payment of the purchase price payable in respect of the number of our ordinary shares purchasable upon such exercise. Exercise Price. The exercise price of ordinary shares purchasable upon exercise of the investor warrants is $2.25 per share, and the exercise price of ordinary shares purchasable upon exercise of the placement agent warrants is $2.1875. The exercise price and the number of shares issuable upon exercise of the warrants is subject to appropriate adjustment in the event of recapitalization events, stock dividends, stock splits, stock combinations, reclassifications or similar events affecting our ordinary shares, and also upon any distributions of assets, including cash, stock or other property to our shareholders. Transferability. Subject to certain transfer restrictions, the warrants and all rights thereunder (including, without limitation, any registration rights) may be transferred at the option of the holder upon surrender of the warrants with the appropriate instruments of transfer. In addition, the holder (or permitted assignees under FINRA Rule 5110(g)(1)) of the placement agent warrants may not sell, transfer, assign, pledge, or hypothecate the warrants or the securities underlying these warrants, nor may they engage in any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the warrants or the underlying securities for a period of 180 days from the effective date or commencement of sales of the public offering of the ordinary shares issuable upon exercise of the warrants, subject to limited exceptions. Purchase Rights, Fundamental Transactions and Change of Control. If we sell or grant any rights to purchase shares, warrants or securities or other property to our shareholders on a pro rata basis, we will provide the holders of warrants with the right to acquire, upon the same terms, the securities subject to such purchase rights as though the warrant had been exercised immediately prior to the declaration of such rights. If we consummate any fundamental transaction, as described in the warrants and generally including any consolidation or merger into another corporation, the consummation of a transaction whereby another entity acquires more than 50% of our outstanding ordinary shares, the sale of all or substantially all of our assets, any tender offer or exchange offer or another transaction in which our ordinary shares are converted into or exchanged for other securities or other consideration, the holder of warrants will thereafter receive upon exercise of the warrants the securities or other consideration to which a holder of the number of ordinary shares then deliverable upon the exercise or conversion of such warrants would have been entitled upon such consolidation, merger or other transaction. Exchange Listing. We do not plan on making an application to list the warrants on the Nasdaq Capital Market, any national securities exchange or other nationally recognized trading system. Our ordinary shares underlying the warrants will be listed on the Nasdaq Capital Market and our ordinary shares are traded on the Nasdaq Capital Market. Rights as Shareholder. Except as otherwise provided in the warrants (such as the rights described above of a warrant holder upon our sale or grant of any rights to purchase shares, warrants or securities or other property to our shareholders on a pro rata basis) or by virtue of such holder s ownership of our ordinary shares, the holders of the warrants do not have the rights or privileges of holders of our ordinary shares, including any voting rights, until they exercise their warrants. PLAN OF DISTRIBUTION We are registering the ordinary shares represented by ADSs issuable upon exercise of the warrants and placement agent warrants issued in our May 2020 and June 2020 private placements to permit the resale of these ordinary shares represented by ADSs by the holders of these warrants from time to time after the date of this prospectus. We will not receive any of the proceeds from the sale by the selling shareholders of the ordinary shares represented by ADSs other than proceeds from the cash exercise of the warrants and placement agent warrants. We will bear all fees and expenses incident to our obligation to register the ordinary shares represented by ADSs. The selling shareholders may sell all or a portion of the ordinary shares represented by ADSs beneficially owned by them and offered hereby from time to time directly or through one or more underwriters, broker-dealers or agents. If the ordinary shares represented by ADSs are sold through underwriters or broker-dealers, the selling shareholders will be responsible for underwriting discounts or commissions or agent s commissions. The ordinary shares represented by ADSs may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at varying prices determined at the time of sale, or at negotiated prices. These sales may be effected in transactions, which may involve crosses or block transactions, on any national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale; in the over-the-counter market; in transactions otherwise than on these exchanges or systems or in the over-the-counter market; through the writing of options, whether such options are listed on an options exchange or otherwise; ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction; purchases by a broker-dealer as principal and resale by the broker-dealer for its account; an exchange distribution in accordance with the rules of the applicable exchange; privately negotiated transactions; short sales; sales pursuant to Rule 144; broker-dealers may agree with the selling security holders to sell a specified number of such shares at a stipulated price per share; a combination of any such methods of sale; and any other method permitted pursuant to applicable law. If the selling shareholders effect such transactions by selling ordinary shares represented by ADSs to or through underwriters, broker-dealers or agents, such underwriters, broker-dealers or agents may receive commissions in the form of discounts, concessions or commissions from the selling shareholders or commissions from purchasers of the ordinary shares represented by ADSs for whom they may act as agent or to whom they may sell as principal (which discounts, concessions or commissions as to particular underwriters, broker-dealers or agents may be in excess of those customary in the types of transactions involved). In connection with sales of ordinary shares represented by ADSs or otherwise, the selling shareholders may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the ordinary shares represented by ADSs in the course of hedging in positions they assume. The selling shareholders may also sell ordinary shares represented by ADSs short and deliver ordinary shares represented by ADSs covered by this prospectus to close out short positions and to return borrowed shares in connection with such short sales. The selling shareholders may also loan or pledge ordinary shares represented by ADSs to broker-dealers that in turn may sell such shares. The selling shareholders may pledge or grant a security interest in some or all of the warrants, placement agent warrants or ADSs owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the ordinary shares represented by ADSs from time to time pursuant to this prospectus or any amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933, as amended, amending, if necessary, the list of selling shareholders to include the pledgee, transferee or other successors in interest as selling shareholders under this prospectus. The selling shareholders also may transfer and donate the ordinary shares represented by ADSs in other circumstances in which case the transferees, donees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus. The selling shareholders and any broker-dealer participating in the distribution of the ordinary shares represented by ADSs may be deemed to be underwriters within the meaning of the Securities Act, and any commission paid, or any discounts or concessions allowed to, any such broker-dealer may be deemed to be underwriting commissions or discounts under the Securities Act. At the time a particular offering of the ordinary shares represented by ADSs is made, a prospectus supplement, if required, will be distributed which will set forth the aggregate amount of ordinary shares represented by ADSs being offered and the terms of the offering, including the name or names of any broker-dealers or agents, any discounts, commissions and other terms constituting compensation from the selling shareholders and any discounts, commissions or concessions allowed or reallowed or paid to broker-dealers. Under the securities laws of some states ordinary shares represented by ADSs may be sold in such states only through registered or licensed brokers or dealers. In addition, in some states ordinary shares represented by ADSs may not be sold unless such ordinary shares have been registered or qualified for sale in such state or an exemption from registration or qualification is available and is complied with. There can be no assurance that any selling shareholder will sell any or all of the ordinary shares represented by ADSs registered pursuant to the registration statement, of which this prospectus forms a part. The selling shareholders and any other person participating in such distribution will be subject to applicable provisions of the Exchange Act, and the rules and regulations thereunder, including, without limitation, Regulation M of the Exchange Act, which may limit the timing of purchases and sales of any of the ordinary shares represented by ADSs by the selling shareholders and any other participating person. Regulation M may also restrict the ability of any person engaged in the distribution of the ordinary shares represented by ADSs to engage in market-making activities with respect to the ordinary shares represented by ADSs. All of the foregoing may affect the marketability of the ordinary shares represented by ADSs and the ability of any person or entity to engage in market-making activities with respect to the ordinary shares represented by ADSs. We will pay all expenses of the registration of the ordinary shares represented by ADSs, estimated to be $40,000 in total, including, without limitation, Securities and Exchange Commission filing fees and expenses of compliance with state securities or blue sky laws; provided, however, that a selling shareholder will pay all underwriting discounts and selling commissions, if any, and any related legal expenses incurred by it. Once sold under the registration statement, of which this prospectus forms a part, the ordinary shares represented by ADSs will be freely tradable in the hands of persons other than our affiliates. LEGAL MATTERS McDermott Will & Emery LLP, New York, New York, has passed upon certain legal matters regarding the securities offered hereby under U.S. law, and Yigal Arnon & Co., Jerusalem, Israel, has passed upon certain legal matters regarding the securities offered hereby under Israeli law. If the securities are distributed in an underwritten offering, certain legal matters will be passed upon for the underwriters by counsel identified in the applicable prospectus supplement. EXPERTS The financial statements and management s assessment of the effectiveness of internal control over financial reporting (which is included in Management s Report on Internal Control over Financial Reporting) incorporated in this Prospectus by reference to the Annual Report on Form 20-F for the year ended December 31, 2019 have been so incorporated in reliance on the report of Kesselman & Kesselman, Certified Public Accountants (Isr.), a member firm of PricewaterhouseCoopers International Limited., an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting WHERE YOU CAN FIND MORE INFORMATION We have filed with the SEC a registration statement on Form F-1, including amendments and relevant exhibits and schedules, under the Securities Act covering the ordinary shares represented by ADSs to be sold in this offering. This prospectus, which constitutes a part of the registration statement, summarizes material provisions of contracts and other documents that we refer to in the prospectus. Since this prospectus does not contain all of the information contained in the registration statement, you should read the registration statement and its exhibits and schedules for further information with respect to us and our ordinary shares and the ADSs. Our SEC filings, including the registration statement, are also available to you on the SEC's Web site at http://www.sec.gov. As a foreign private issuer, all documents which were filed after September 24, 2010 on the SEC s EDGAR system are available for retrieval on the SEC s website at www.sec.gov. Our SEC filings are also available to the public on the Israel Securities Authority s, or ISA, Magna website at www.magna.isa.gov.il and from commercial document retrieval services. We also generally make available on our own web site (www.biolinerx.com) our quarterly and year-end financial statements as well as other information. In addition, since our Ordinary Shares are traded on the TASE, in the past we filed Hebrew language periodic and immediate reports with, and furnished information to, the TASE and the ISA, as required under Chapter Six of the Israel Securities Law, 1968. On August 31, 2011, our shareholders approved a transition solely to U.S. reporting standards after listing the ADSs on Nasdaq, in accordance with an applicable exemption under the Israel Securities Law. Copies of our SEC filings and submissions are now submitted to the ISA and the TASE. Such copies can be retrieved electronically through the MAGNA distribution site of the ISA (www.magna.isa.gov.il) and the TASE website (maya.tase.co.il). We maintain a corporate website at www.biolinerx.com. Information contained on, or that can be accessed through, our website does not constitute a part of this prospectus. We have included our website address in this prospectus solely as an inactive textual reference. INCORPORATION OF CERTAIN INFORMATION BY REFERENCE We are allowed to incorporate by reference the information we file with the SEC, which means that we can disclose important information to you by referring to those documents. The information incorporated by reference is considered to be part of this prospectus. We incorporate by reference in this prospectus the documents listed below: (1) Our Annual Report on Form 20-F for the year ended December 31, 2019 filed with the SEC on March 12, 2020; and (2) Our Reports on Form 6-Ks filed with the SEC on May 20, 2020, May 26, 2020, May 27, 2020, May 28, 2020, June 1, 2020 and June 3, 2020 (in each case, to the extent expressly incorporated by reference into our effective registration statements filed by us under the Securities Act). TABLE OF CONTENTS About this Prospectus 1 Prospectus Summary 2 Risk Factors 5

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+Risk factors An investment in our Class A common stock involves a high degree of risk. You should carefully consider the following risks, as well as the other information contained in this prospectus or incorporated by reference herein, including the matters discussed in the information set forth under the sections titled Risk factors, Management s discussion and analysis of financial condition and results of operations, and our financial statements and the related notes included in our Annual Report on Form 10-K for the year ended December 31, 2019, which are incorporated by reference herein, as revised or supplemented by our subsequent Quarterly Reports on Form 10-Q or our subsequent Current Reports on Form 8-K that we have filed with the SEC, all of which are incorporated by reference herein, before deciding whether to purchase shares of our Class A common stock. If any of the following risks below and in the documents incorporated by reference herein actually occurs, our business, financial condition and results of operations may be materially adversely affected. In such an event, the trading price of our Class A common stock could decline and you could lose part or all of your investment. Risks relating to our business The ongoing novel coronavirus (COVID-19) pandemic could result in declines in business and increases in claims that could adversely affect our business, financial condition and results of operations. In December 2019, a novel strain of coronavirus, COVID-19, was reported to have surfaced in Wuhan, China. Since then, COVID-19 has spread to multiple countries, including the United States, and has been declared a pandemic by the World Health Organization. The global outbreak of COVID-19 has created significant volatility, uncertainty and economic disruption and continues to rapidly evolve. The extent to which COVID-19 impacts our business will depend on future developments in the United States, which are highly uncertain and cannot be predicted with confidence, including: the ultimate geographic spread and severity of COVID-19; the duration and scope of the pandemic; business closures, travel restrictions, social distancing and other governmental, business and individuals actions that have been and continue to be taken to contain and treat COVID-19; the effectiveness of actions taken in the United States and other countries to contain and treat the virus; the impact of the pandemic on economic activity and actions taken in response; the ability of our Clients to pay their insurance premiums which could impact our commission and fee revenues for our services; the nature and extent of possible claims that might impact the ability of underwriting enterprises to pay supplemental and contingent commissions; any increase in the incidence or severity of E&O claims against us; and any impairment in value of our tangible or intangible assets which could be recorded as a result of weaker economic conditions. As the COVID-19 outbreak and any associated protective or preventive measures continue to spread in the United States and around the world, we may experience disruptions to our business, including: our Clients choosing to limit purchases of insurance due to declining business conditions, our Clients ceasing their business operations on a temporary or permanent basis, and a reduction in our Client s insurable Table of Contents exposure units (such as headcount, payroll, properties, market values of their assets, and plant, equipment and other asset utilization levels, among other factors), all of which would inhibit our ability to generate commission revenue and other revenue based on premiums placed; a delay in cash payments to us from our Clients or Insurance Company Partners due to COVD-19 (including any delays caused by grace periods on the collection of insurance premiums declared or proposed by governmental entities), which could negatively impact our liquidity and financial condition; travel restrictions and quarantines leading to a lack of in-person meetings, which would hinder our ability to establish relationships or originate new business; and alternative working arrangements, including Colleagues working remotely, which could negatively impact our business should such arrangements remain for an extended period of time. We cannot predict the impact that COVID-19 will have on our Clients, Insurance Company Partners, suppliers or other third party contractors, and any material effect on these parties or their financial condition, could adversely impact us. In addition, if the pandemic continues to create disruptions or turmoil in the credit or financial markets, it could adversely affect our ability to access capital on favorable terms, or at all, and continue to meet our liquidity needs, all of which are highly uncertain and cannot be predicted. These and other developments and disruptions related to COVID-19 could materially and adversely affect our business, financial condition and results of operations. Risks relating to this offering and ownership of our Class A common stock Although we will not be a controlled company within the meaning of the Nasdaq rules upon the completion of this offering, during the phase-in period we may continue to rely on exemptions from certain corporate governance requirements that provide protection to stockholders of other companies. After the completion of the Initial Public Offering, Lowry Baldwin, our Chairman, controlled a majority of our voting power. As a result, we are a controlled company within the meaning of the corporate governance standards of Nasdaq. Under these rules, a company of which more than 50% of the voting power is held by an individual, group or another company is a controlled company and may elect not to comply with certain corporate governance requirements including: the requirement that a majority of the board of directors consist of independent directors; the requirement that we have a nominating/corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee s purpose and responsibilities; and the requirement that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee s purpose and responsibilities. We utilize certain of these exemptions. As a result, we do not have a nominating/corporate governance committee or a fully independent compensation committee. Accordingly, you do not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of Nasdaq. Following this offering, we will no longer be a controlled company under the Nasdaq listing requirements. Under the Nasdaq listing requirements, a company that ceases to be a controlled company must comply with the independent board committee requirements as they relate to the nominating and corporate governance Table of Contents and compensation committees on the following phase-in schedule: (1) one independent committee member at the time it ceases to be a controlled company, (2) a majority of independent committee members within 90 days of the date it ceases to be a controlled company and (3) all independent committee members within one year of the date it ceases to be a controlled company. Additionally, the Nasdaq listing requirements provide a 12-month phase-in period from the date a company ceases to be a controlled company to comply with the majority independent board requirement. During these phase-in periods, our stockholders will not have the same protections afforded to stockholders of companies of which the majority of directors are independent and, if, within the phase-in periods, we are not able to recruit additional directors who would qualify as independent, or otherwise comply with the Nasdaq listing requirements, we may be subject to enforcement actions by Nasdaq. In addition, a change in our board of directors and committee membership may result in a change in corporate strategy and operating philosophies, and may result in deviations from our current growth strategy. Lowry Baldwin, our Chairman, has significant influence over us, including control over decisions that require the approval of stockholders, which could limit your ability to influence the outcome of key transactions, including a change of control, and his interests in our business may be different than yours. We are currently controlled by Lowry Baldwin, our Chairman. Immediately following the completion of this offering, the Voting Group is expected to beneficially own approximately 46% of the voting power of our common stock, or 44% if the underwriters option to purchase additional shares is fully exercised. Because the Voting Group will beneficially own less than 50% of the total voting power of our common stock, we will no longer be a controlled company within the meaning of the Nasdaq listing standards upon completion of this offering. However, Lowry Baldwin, our Chairman, will continue to have a significant effect over fundamental and significant corporate matters and transactions as a result of his significant ownership and voting power with respect to our common stock and our Stockholders Agreement, including the ability to influence decisions in connection with any meeting of our shareholders or any written consent of our shareholders. We expect that our stock price will be volatile, which could cause the value of your investment to decline, and you may not be able to resell your shares for a profit. Securities markets worldwide have experienced, and are likely to continue to experience, significant price and volume fluctuations. This market volatility, as well as general economic, market or political conditions, could reduce the market price of our Class A common stock regardless of our results of operations. The trading price of our Class A common stock is likely to be volatile and subject to wide price fluctuations in response to various factors, including: market conditions in the broader stock market in general, or in our industry in particular; actual or anticipated fluctuations in our quarterly financial and results of operations; introduction of new products and services by us or our competitors; issuance of new or changed securities analysts reports or recommendations; investor perceptions of us and the industries in which we or our clients operate; low trading volumes or sales, or anticipated sales, of large blocks of our Class A common stock, including those by our existing investors; concentration of Class A common stock ownership; Table of Contents additions or departures of key personnel; regulatory or political developments; litigation and governmental investigations; and changing economic and political conditions. These and other factors may cause the market price and demand for shares of our Class A common stock to fluctuate substantially, which may limit or prevent investors from readily selling their shares of Class A common stock and may otherwise negatively affect the liquidity of our Class A common stock. In addition, in the past, when the market price of a stock has been volatile, holders of that stock have sometimes instituted securities class action litigation against the company that issued the stock. If any of our stockholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit. Such a lawsuit could also divert the time and attention of our management from our business, which could significantly harm our profitability and reputation. We may issue a substantial amount of our common stock in the future, which could cause dilution to investors and otherwise adversely affect our stock price. A key element of our growth strategy is to make acquisitions. As part of our acquisition strategy, we may issue shares of our common stock, as well as LLC Units of Baldwin Risk Partners, LLC, as consideration for such acquisitions. These issuances could be significant. To the extent that we make acquisitions and issue our shares of common stock as consideration, your equity interest in us will be diluted. Any such issuance will also increase the number of outstanding shares of common stock that will be eligible for sale in the future. Persons receiving shares of our common stock in connection with these acquisitions may be more likely to sell off their common stock, which may influence the price of our common stock. In addition, the potential issuance of additional shares in connection with anticipated acquisitions could lessen demand for our common stock and result in a lower price than might otherwise be obtained. We may issue common stock in the future for other purposes as well, including in connection with financings, for compensation purposes, in connection with strategic transactions or for other purposes. We have broad discretion in the use of the net proceeds from this offering and may not use them effectively, which could affect our results of operations and cause our stock price to decline. Our management will have broad discretion in the application of the net proceeds from this offering, including for any of the purposes described in the Use of proceeds section of this prospectus and you will not have the opportunity as part of your investment decision to assess whether the net proceeds are being used appropriately. Our management could spend the net proceeds from this offering in ways that do not improve our results of operations or enhance the value of our common stock. The failure by our management to apply these funds effectively could result in financial losses that could have a material adverse effect on our business and cause the price of our common stock to decline. Pending their use, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value. Some provisions of Delaware law and our certificate of incorporation and by-laws may deter third parties from acquiring us and diminish the value of our Class A common stock. Our certificate of incorporation and by-laws provide for, among other things: division of our board of directors into three classes of directors, with each class as equal in number as possible, serving staggered three-year terms; Table of Contents until the Substantial Ownership Requirement is no longer met, BRP s LLC Members may designate a majority of the nominees for election to our board of directors, including the nominee for election to serve as Chairman of our board of directors; at any time after the Majority Ownership Requirement is no longer met, there will be: restrictions on the ability of our stockholders to call a special meeting and the business that can be conducted at such meeting or to act by written consent; supermajority approval requirements for amending or repealing provisions in the certificate of incorporation and by-laws; removal of directors only for cause and by the affirmative vote of holders of 75% of the total voting power of our outstanding shares of common stock, voting together as a single class; and a prohibition on business combinations with interested shareholders under Section 203 of the DGCL; our ability to issue additional shares of Class A common stock and to issue preferred stock with terms that our board of directors may determine, in each case without stockholder approval (other than as specified in our certificate of incorporation); the absence of cumulative voting in the election of directors; and advance notice requirements for stockholder proposals and nominations. These provisions in our certificate of incorporation and by-laws may discourage, delay or prevent a transaction involving a change in control of our company that is in the best interest of our minority stockholders. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our Class A common stock if they are viewed as discouraging future takeover attempts. These provisions could also make it more difficult for stockholders to nominate directors for election to our board of directors and take other corporate actions. We have identified material weaknesses in our internal control over financial reporting. If our remediation of these material weaknesses is not effective, or if we experience additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls in the future, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect investor confidence in us and, as a result, the value of our common stock. In connection with our audit of the fiscal year 2018 consolidated financial statements, we identified four material weaknesses in the design and operation of our internal control over financial reporting. The material weaknesses relate to: (i) a lack of sufficient number of personnel with an appropriate level of accounting knowledge, training and experience to appropriately analyze, record and disclose accounting matters timely and accurately; (ii) insufficient policies and procedures to achieve complete and accurate financial accounting, reporting and disclosures; (iii) insufficient policies and procedures to review, analyze, account for and disclose complex transactions and (iv) failure to design and maintain controls over the operating effectiveness of information technology ( IT ) general controls. These material weaknesses still exist at March 31, 2020. We are continuing the process of planning and implementing a number of steps to enhance our internal control over financial reporting and to address these material weaknesses. We have completed the hiring of key personnel in the accounting department with technical accounting and financial reporting experience and have enhanced our internal review procedures during the financial statement close process. We are continuing to document and improve our processes, implement internal controls procedures and design and implement IT general computer controls. Table of Contents We cannot assure you that the measures we have taken to date, and actions we may take in the future, will be sufficient to remediate the control deficiencies that led to our material weaknesses in our internal control over financial reporting or that they will prevent or avoid potential future material weaknesses. In addition, neither our management nor an independent registered public accounting firm has performed an evaluation of our internal control over financial reporting in accordance with the provisions of the Sarbanes-Oxley Act because no such evaluation has been required. Had we or our independent registered public accounting firm performed an evaluation of our internal control over financial reporting in accordance with the provisions of the Sarbanes-Oxley Act, additional material weaknesses may have been identified. As a public company, we will be required in future years to document and assess the effectiveness of our system of internal control over financial reporting to satisfy the requirements of the Sarbanes-Oxley Act. If we fail to effectively remediate these material weaknesses in our internal control over financial reporting, if we identify future material weaknesses in our internal control over financial reporting or if we are unable to comply with the demands that will be placed upon us as a public company, including the requirements of Section 404 of the Sarbanes-Oxley Act, in a timely manner, we may be unable to accurately report our financial results, or report them within the timeframes required by the SEC. In addition, if we are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, when required, investors may lose confidence in the accuracy and completeness of our financial reports, we may face restricted access to the capital markets and our stock price may be adversely affected. We are an emerging growth company 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 intend to take advantage of certain exemptions from various reporting requirements that are applicable to 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(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation and exemptions from the requirements of holding non-binding advisory votes on executive compensation and golden parachute payments for so long as we remain an emerging growth company. We also intend to take advantage of an exemption that will permit us to comply with new or revised accounting standards within the same time periods as private companies. We cannot predict if investors will find our common stock less attractive if we 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. We expect that our stock price will be volatile, which could cause the value of your investment to decline, and you may not be able to resell your shares for a profit. Securities markets worldwide have experienced, and are likely to continue to experience, significant price and volume fluctuations. This market volatility, as well as general economic, market or political conditions, could reduce the market price of our Class A common stock regardless of our results of operations. The trading price of our Class A common stock is likely to be volatile and subject to wide price fluctuations in response to various factors, including: market conditions in the broader stock market in general, or in our industry in particular; actual or anticipated fluctuations in our quarterly financial and results of operations; introduction of new products and services by us or our competitors; issuance of new or changed securities analysts reports or recommendations; Table of Contents investor perceptions of us and the industries in which we or our clients operate; low trading volumes or sales, or anticipated sales, of large blocks of our Class A common stock, including those by our existing investors; concentration of Class A common stock ownership; additions or departures of key personnel; regulatory or political developments; litigation and governmental investigations; and changing economic and political conditions. These and other factors may cause the market price and demand for shares of our Class A common stock to fluctuate substantially, which may limit or prevent investors from readily selling their shares of Class A common stock and may otherwise negatively affect the liquidity of our Class A common stock. In addition, in the past, when the market price of a stock has been volatile, holders of that stock have sometimes instituted securities class action litigation against the company that issued the stock. If any of our stockholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit. Such a lawsuit could also divert the time and attention of our management from our business, which could significantly harm our profitability and reputation. Our ability to pay dividends to our stockholders may be limited by our holding company structure, contractual restrictions and regulatory requirements. We are a holding company and have no material assets other than our ownership of LLC Units in Baldwin Risk Partners, LLC and we do not have any independent means of generating commissions and fees. We intend to cause Baldwin Risk Partners, LLC to make pro rata distributions to BRP LLC Members and us in an amount at least sufficient to allow us and BRP LLC Members to pay all applicable taxes, to make payments under the Tax Receivable Agreement and to pay our corporate and other overhead expenses. Baldwin Risk Partners, LLC is a distinct legal entity and may be subject to legal or contractual restrictions that, under certain circumstances, may limit our ability to obtain cash from them. If Baldwin Risk Partners, LLC is unable to make distributions, we may not receive adequate distributions, which could materially and adversely affect our dividends and financial position and our ability to fund any dividends. Our board of directors will periodically review the cash generated from our business and the capital expenditures required to finance our global growth plans and determine whether to declare periodic dividends to our stockholders. Our board of directors will take into account general economic and business conditions, including our financial condition and results of operations, capital requirements, contractual restrictions, including restrictions and covenants contained in the Credit Agreement, business prospects and other factors that our board of directors considers relevant. In addition, the Credit Agreement limits the amount of distributions that Baldwin Risk Partners, LLC can make to us and the purposes for which distributions could be made. Accordingly, we may not be able to pay dividends even if our board of directors would otherwise deem it appropriate. Refer to the Liquidity and Capital Resources section under Management s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2019 for additional information. Table of Contents If securities analysts do not publish research or reports about our business or if they publish negative evaluations of our Class A common stock, the price of our Class A common stock could decline. The trading market for our Class A common stock will rely in part on the research and reports that industry or securities analysts publish about us or our business. We currently have research coverage by industry and securities analysts. If no or few analysts continue coverage of us, the trading price of our Class A common stock would likely decrease. If one or more of the analysts covering our business downgrade their evaluations of our Class A common stock, the price of our Class A common stock could decline. If one or more of these analysts cease to cover our Class A common stock, we could lose visibility in the trading market for our Class A common stock, which in turn could cause our Class A common stock price to decline. Table of Contents

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+RISK FACTORS Investing in the New Notes involves risks. You should carefully read and consider the risks described below as well as the risks described in the sections entitled "Business" and "Risk Factors" in our Annual Report on Form 10-K for the year ended June 30, 2019 and the section entitled "Item 8.01 Other Events Part II Supplemental Risk Factor" in our Current Report on Form 8-K filed on March 9, 2020, each of which is incorporated by reference into this prospectus. You should also carefully read and consider the sections entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K for the year ended June 30, 2019 and in our Quarterly Reports on Form 10-Q for the quarters ended September 30, 2019 and December 31, 2019 and other information contained in the documents incorporated and deemed to be incorporated by reference into this prospectus, including the risks and uncertainties described above under "Cautionary Statement Regarding Forward-Looking Statements" before making a decision to exchange Existing Notes for New Notes. Each of these risks could materially and adversely affect our business, financial condition, results of operations, liquidity and prospects and could result in a partial or complete loss of your investment. Certain capitalized terms used in this "Risk Factors" section and not defined previously in this prospectus are defined under the caption "Description of the New Notes." Risks Related to the Exchange Offer If you choose not to exchange your Existing Notes in the Exchange Offers, the transfer restrictions currently applicable to your Existing Notes will remain in force and the market price and liquidity of your Existing Notes may decline. If you do not exchange your Existing Notes for New Notes in the applicable Exchange Offer, then your Existing Notes will remain outstanding and will continue to accrue interest but will remain subject to the transfer restrictions set forth in the applicable Indenture and in the legend on the certificates evidencing the Existing Notes, as well as the restrictions on transfer arising under the Securities Act and any other applicable securities laws, and you will not be entitled to receive any additional interest on your Existing Notes and will not (subject to possible limited exceptions) be entitled to any registration rights or other rights under the applicable Registration Rights Agreement for your Existing Notes. In general, you may offer or sell your Existing Notes only if: they are offered and sold pursuant to a registration statement which is effective under, and otherwise in compliance with the registration and prospectus delivery requirements of, the Securities Act, or they are offered and sold under an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, subject, in each of the foregoing cases, to compliance with the securities laws of any other applicable jurisdiction and with the procedures specified in the applicable Indenture, including the delivery of any certificate, opinion of counsel or other information that may be required by that Indenture or by the Issuers. The Issuers do not intend to register the Existing Notes under the Securities Act or to make a prospectus available to enable you to sell or otherwise transfer your Existing Notes. Any Existing Notes of a particular series exchanged for New Notes of that series in the applicable Exchange Offer will be cancelled and, as a result, the aggregate principal amount of outstanding Existing Notes of that series will be reduced, which may have a material adverse effect on the market price and liquidity of any Existing Notes of that series that remain outstanding after that Exchange Offer and may increase the volatility of the market price of such Existing Notes. Table of Contents You must follow the Exchange Offer procedures carefully in order to receive the New Notes. If you do not follow the procedures described in this prospectus, you will not receive any New Notes. The New Notes of a particular series will be issued to you in exchange for Existing Notes of the corresponding series only if you properly tender the Existing Notes and deliver all other required documentation (including the Agent's Message, Book-Entry Confirmation related to such tender) to the Exchange Agent in the manner and at the address specified in this prospectus prior to the expiration of the applicable Exchange Offer. If you want to tender your Existing Notes in exchange for New Notes, you should allow sufficient time to ensure timely delivery. No one is under any obligation to notify you of defects or irregularities with respect to tenders of your Existing Notes for exchange or if your Existing Notes or any other required documentation are received by the Exchange Agent. If you are the beneficial holder of Existing Notes that are held through a broker, dealer, bank or other financial institution or nominee and you wish to tender such Existing Notes in any Exchange Offer, you should promptly contact the entity through which you hold your Existing Notes and instruct that entity to tender on your behalf. There are no guaranteed delivery procedures available in connection with any of the Exchange Offers. Accordingly, you must deliver your Existing Notes and all other required documentation to the Exchange Agent in accordance with the procedures described in this prospectus prior to the expiration of the applicable Exchange Offer. Certain persons who participate in the Exchange Offers must deliver a prospectus in connection with resales of the New Notes. If you are participating in any Exchange Offer for the purpose of participating in a distribution (within the meaning of the Securities Act) of the New Notes to be acquired in that Exchange Offer, if you are a broker-dealer who will receive New Notes in any Exchange Offer in exchange for Existing Notes that you acquired from the applicable Issuer for resale pursuant to Rule 144A under the Securities Act or any other available exemption under the Securities Act, or if you fall into one or more of categories (1) through (3) appearing in the first paragraph under "The Exchange Offers Resales of New Notes," you will not be permitted to tender your Existing Notes in the related Exchange Offer and, in the absence of an applicable exemption, you must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any offer, sale or other transfer of your New Notes. Failure to comply with such registration and prospectus delivery requirements may result in liability under the Securities Act and neither the Issuers nor the Guarantors will be responsible for, or indemnify you against, any such liability. In addition, a broker-dealer that receives New Notes for its own account in any Exchange Offer in exchange for Existing Notes that it acquired for its own account as a result of its market making or other trading activities (a "participating broker-dealer") must deliver (or, to the extent permitted by applicable law, make available) a prospectus meeting the requirements of the Securities Act to purchasers and other transferees in connection with any resale or other transfer of New Notes received in exchange for such Existing Notes in the Exchange Offer. Although participating broker-dealers (and not any other broker-dealers) are permitted to use this prospectus, as it may be amended or supplemented from time to time, in connection with the resale or other transfer of any such New Notes, they may do so only if they notify the applicable Issuer or Amcor plc in writing and may only use this prospectus for such purpose for a period of 180 days (subject to our right to suspend use of the prospectus under certain circumstances) after the Settlement Date of the applicable Exchange Offer. Table of Contents Risks Related to the New Notes Since the Issuers and the Guarantors conduct their operations through other subsidiaries, your right to receive payments on the New Notes and Guarantees is dependent on the payment of dividends, interest payments on intercompany loans or other intercompany transfers to the applicable Issuers or Guarantors from their respective subsidiaries. The Issuers and Guarantors conduct their operations through their subsidiaries. Their principal source of income is dividends and interest on intercompany loans they make to their subsidiaries and other intercompany transfers, and their ability to meet their financial obligations is dependent on the level of dividends, loan repayments and other intercompany transfers of funds they receive from their subsidiaries. In addition, the ability of the directors of a subsidiary of the Issuers or Guarantors to declare dividends or the amount of dividends they may pay will depend on that subsidiary's operating results and will be subject to applicable laws which may limit such payments. Therefore, your right to receive payments on the New Notes and Guarantees is dependent on the payment of dividends, interest payments on intercompany loans or other intercompany transfers to the applicable Issuer or Guarantors from their respective subsidiaries. Your right to receive payment under the New Notes will structurally rank behind the creditors of Amcor plc's subsidiaries (other than the Issuers) that are not guaranteeing the New Notes. The New Notes of each series will be guaranteed by Amcor plc, the parent company of the Issuers, and certain of Amcor plc's subsidiaries. However, a significant majority of Amcor plc's current and future subsidiaries will not guarantee the New Notes. In the event that any subsidiary of Amcor plc, other than the Issuers, that does not guarantee the New Notes (such subsidiaries, the "non-guarantor subsidiaries") becomes insolvent, liquidates, reorganizes, dissolves or otherwise winds up, the assets of such subsidiary will be used to satisfy the claims of its creditors. Because the non-guarantor subsidiaries have no direct obligations in respect of the New Notes of any series, you will not have a direct claim against any non-guarantor subsidiary and any claims to enforce payment on your New Notes (including through Amcor plc's Guarantee of the New Notes) will be structurally subordinated to all of the claims of the creditors of the non-guarantor subsidiaries. As of December 31, 2019, the non-guarantor subsidiaries, including joint ventures, had US$84 million of total indebtedness (of which none was secured). For our fiscal half year 2020, the non-guarantor subsidiaries, including joint ventures, represented 93% of Amcor's sales revenue. Because the New Notes and the Guarantees are unsecured, your right to receive payment will be effectively subordinated in right of payment to the applicable Issuer's and the applicable Guarantors' secured indebtedness, and thereby may be adversely affected. The New Notes and the Guarantees will be unsecured obligations of each applicable Issuer and each applicable Guarantor, respectively, and be effectively subordinated to any of the applicable Issuer's or the applicable Guarantor's secured indebtedness to the extent of the value of the assets that secure such indebtedness. Although the Issuers and the Guarantors did not have any secured indebtedness as of December 31, 2019, they may incur such secured indebtedness in the future In addition, to the extent that the Issuers or the Guarantors have granted, or in the future may grant, security interests over their assets, the secured lenders will be entitled to exercise the remedies available to them under applicable laws. Depending on the relevant circumstances and applicable laws, if an Issuer defaults on the applicable New Notes or the Guarantors default on the applicable Guarantees, or after the bankruptcy, liquidation or reorganization of any of them, then any assets that are secured will be used to satisfy the obligations they secure before such assets are available for payments on the applicable New Notes or the applicable Guarantees. There can be no assurance that there will be sufficient assets to pay amounts due on the New Notes or the Guarantees. As a result, you may receive a lower amount proportionately than the lenders of our secured indebtedness. If there Table of Contents is not enough collateral to satisfy the secured indebtedness owed by the applicable Issuer or any Guarantor then, subject to the provisions of applicable laws, the amounts remaining unpaid on such secured indebtedness would share equally with all unsubordinated unsecured indebtedness of such Issuer or such Guarantor (including amounts owing under the applicable New Notes and the applicable Guarantees). If either Issuer defaults on its New Notes, or any Guarantor defaults on its Guarantee, your right to receive payments on the applicable New Notes or Guarantee may be adversely affected by United States, United Kingdom, Jersey and Australian insolvency laws. Bemis is incorporated in Missouri in the United States, AFUI is incorporated in Delaware in the United States and the Guarantors are incorporated under the laws of Jersey, Australia, the United States, and England and Wales and, therefore, insolvency proceedings with respect to the Issuers and Guarantors could proceed under, and be governed by, among others, Jersey, Australian, United States or English insolvency law, as the case may be, and such proceedings may adversely affect your right to receive payments on the applicable New Notes or Guarantees if either Issuer or any Guarantor defaults on its obligations under the applicable series of New Notes or Guarantees, respectively. An insolvency proceeding relating to an Issuer or a Guarantor, even if brought in the United States, may involve proceedings in other jurisdictions. The procedural and substantive provisions of insolvency laws of jurisdictions outside of the United States may differ materially from comparable provisions of United States federal bankruptcy law or the insolvency laws of other jurisdictions with which the holders of the New Notes may be familiar, and may not be as favorable to investors as the laws of the United States or other jurisdictions with which investors are familiar. In particular, the procedures for reorganization (e.g. administration under the Australian Act or under the United Kingdom's Insolvency Act 1986 or analogous procedure under the Companies (Jersey) Law 1991) may be significantly different from Chapter 11 under the United States Bankruptcy Code. The treatment and ranking of holders of the New Notes and the Guarantees, of the Issuers' and the Guarantors' other creditors and the shareholders of the applicable Issuer and the applicable Guarantors under Jersey, Australian and United Kingdom insolvency law, as the case may be, may be different than the resulting treatment and ranking if the applicable Issuer or the applicable Guarantors were subject to the bankruptcy laws of the United States or other jurisdictions and it is not possible to predict with any certainty the outcome of insolvency or similar proceedings. Fraudulent conveyance laws or similar provisions or principles have been enacted or exist for the protection of creditors in a number of jurisdictions, including the United States, Jersey, Australia and the United Kingdom, and Guarantees of the New Notes by the applicable Guarantors may be subject to claims that they should be subordinated or avoided in favor of direct or other creditors of such Guarantors. To the extent that the Guarantee of a Guarantor is voided as a fraudulent conveyance, a preference, a transaction at an undervalue or a fraudulent transaction or otherwise held to be unenforceable or capable of being set aside, your claim against that Guarantor could be lost or limited, and you could be required to return payments previously received from that Guarantor. In particular: Under Jersey law, if a liquidator were to be appointed to Amcor plc (being a Guarantor incorporated under the laws of Jersey), or Amcor plc was declared to be "en d sastre," the liquidator or the Viscount of Jersey, as the case may be, has the power to investigate past transactions entered into by Amcor plc and may seek various court orders, including orders to void certain transactions entered into prior to the winding-up of Amcor plc and for the repayment of money. These transactions are generally known as "voidable transactions" or "vulnerable transactions" and include transactions at an undervalue, preferences, extortionate credit transactions or dispositions with the intention of defrauding creditors. Similarly, under Australian law, if an order to wind-up were to be made against Amcor Pty Ltd (being a Guarantor incorporated under the laws of Australia), and a liquidator were appointed for Table of Contents Amcor Pty Ltd, the liquidator would have the power to investigate the validity of past transactions and may seek various court orders, including orders to void certain transactions entered into prior to the winding up of Amcor Pty Ltd and for the repayment of money. These include transactions entered into within a specified period of the winding up that a court considers uncommercial transactions or transactions entered into when winding up was imminent that had the effect of preferring a creditor or creditors or otherwise defeating, delaying or interfering with the rights of creditors. Further, in England, if a liquidator or administrator were appointed in respect of Amcor UK (being a Guarantor incorporated in England), the liquidator or administrator would also have the power to investigate past transactions and can apply to the court to reverse or set aside certain transactions, or grant other relief that the court considers appropriate. These transactions include, broadly, transactions entered into for no consideration or at an undervalue and transactions which were intended to prefer one or more creditors over one or more other creditors. In addition to the matters described above, under the laws of the jurisdictions where the Guarantors are organized, the Guarantees given by those other Guarantors may be set aside, subordinated or otherwise avoided by the application of fraudulent conveyance, financial assistance, bankruptcy, insolvency and administration, statutory management, equitable subordination principles or other similar provisions or principles existing under the laws of the relevant jurisdiction, including as a result of the application of laws in relation to the duties of directors to act in good faith and for proper purposes. In addition, other debts and liabilities of the applicable Guarantors and of the applicable Issuer, such as certain employee entitlements or amounts owed to tax authorities, may rank ahead of claims under the New Notes and the Guarantees in the event of administration or insolvency or statutory management or similar proceedings. If one or more of the Guarantees are set aside or otherwise avoided, your claim against the applicable Guarantors giving those Guarantees could be lost or limited and it is possible that you will only have a claim against the applicable Issuer and any remaining Guarantors. There is no established trading market for the New Notes, and one may not develop. Prior to this offering, there was no established trading market for the New Notes. There can be no assurance regarding the future development of a market for the New Notes, the ability of holders of the New Notes to sell their New Notes or the price at which such holders may be able to sell their New Notes. If such a market were to develop, the New Notes could trade at prices that may be higher or lower than the price you paid for the Existing Notes that you exchanged for such New Notes depending on many factors, including prevailing interest rates, our operating results and credit ratings and the market for similar securities. The condition of the financial markets and prevailing interest rates have fluctuated in the past and are likely to fluctuate in the future, which could have an adverse effect on the market prices of the New Notes. There can be no assurance as to the liquidity of any trading market for the New Notes or that an active public market for the New Notes will develop. Service of process, enforcement of judgments and bringing of original actions in the United States may be difficult. The Issuers are each incorporated in the United States and the Guarantors are incorporated under the laws of Jersey, Australia, the United States and the United Kingdom, with substantially all of their respective properties and assets located outside of, and the majority of their respective directors and executive officers and the experts named in this prospectus not residents of, the United States. As a result, you may find it difficult to effect service of process within the United States upon such directors, executive officers or experts so that you may enforce judgments of United States courts against them in the United States based on the civil liability provisions of the United States federal securities laws. In addition, there may be doubts as to the enforceability in Australia, in original actions or in actions for Table of Contents enforcement of judgments of United States courts, of civil liabilities based solely on United States federal securities laws. See also "Enforceability of Civil Liabilities." A lowering or withdrawal of the credit ratings assigned to Amcor plc's debt securities by rating agencies may adversely affect the market value of the New Notes, increase Amcor plc's future borrowing costs and reduce its access to capital. Any credit rating assigned to Amcor plc could be lowered or withdrawn entirely by any rating agency if, in that rating agency's judgment, future circumstances relating to the basis of the credit rating, such as adverse changes, so warrant. Real or anticipated changes in Amcor plc's credit ratings will generally affect the market value of the New Notes. Credit ratings are not recommendations to purchase, hold or sell the New Notes. Additionally, credit ratings may not reflect the potential effect of risks relating to the structure or marketing of the New Notes. Any future lowering of Amcor plc's credit ratings likely would make it more difficult or more expensive for it to obtain additional debt financing. If any credit rating initially assigned to the New Notes is subsequently lowered or withdrawn for any reason, you may not be able to resell your New Notes without a substantial discount. The New Notes will initially be held in book-entry form, and therefore you must rely on the procedures of the relevant clearing systems to exercise any rights and remedies. The New Notes will initially only be issued in global certificated form and held through DTC. Interests in the Global Notes will trade in book-entry form only, and New Notes in definitive registered form will be issued in exchange for book-entry interests only in very limited circumstances. Owners of book-entry interests will not be considered owners or holders of New Notes. The nominee for DTC will be the sole registered holder of the Global Notes representing the corresponding New Notes. Payments of principal, interest and other amounts owing on or in respect of the Global Notes representing the corresponding New Notes will be made to Deutsche Bank Trust Company Americas, as paying agent, which will make payments to DTC. Thereafter, these payments will be credited to participants' accounts that hold book-entry interests in the Global Notes representing the corresponding New Notes and credited by such participants to indirect participants. After payment to the nominee of DTC, neither we nor the Trustee or any paying agent for the New Notes will have any responsibility or liability for the payment of interest, principal or other amounts to the owners of book-entry interests. Accordingly, if you own a book-entry interest, you must rely on the procedures of DTC, and if you are not a participant in DTC, on the procedures of the participant through which you own your interest, to exercise any rights and obligations of a holder of New Notes under the applicable Indenture. Unlike the holders of the New Notes themselves, owners of book-entry interests will not have the direct right to act upon our solicitations for consents or our requests for waivers or other actions from holders of the New Notes. Instead, if you own a book-entry interest, you will be permitted to act only to the extent you have received appropriate proxies to do so from DTC. The procedures implemented for the granting of such proxies may not be sufficient to enable you to vote on a timely basis. Similarly, upon the occurrence of an event of default under the applicable Indenture with respect to the New Notes of a particular series, unless and until definitive registered New Notes of that series are issued in respect of all book-entry interests, if you own a book-entry interest, you will be restricted to acting through DTC. The procedures to be implemented through DTC may not be adequate to ensure the timely exercise of rights under the New Notes. Redemption may adversely affect your return on the New Notes. The New Notes are redeemable at the applicable Issuer's option on the conditions set out in the section entitled "Description of the New Notes." Each Issuer may elect to redeem the applicable series Table of Contents of New Notes at times when prevailing interest rates are lower than when you invested. Should this occur, you may not be able to reinvest the redemption proceeds in a comparable security with an effective interest rate equal to or higher than that applicable to the New Notes being redeemed which may adversely affect your return on the New Notes. The Issuers may not be able to repurchase the New Notes upon a change of control. In certain circumstances following a change of control, an Issuer may be required to offer to repurchase all of its outstanding New Notes of a particular series at 101% of their principal amount plus accrued and unpaid interest, if any. The source of funds for any such purchase of the New Notes will be Amcor plc's available cash or cash generated from the operations of its subsidiaries or other sources, including borrowings, sales of assets or sales of equity or debt securities. The applicable Issuer may not be able to repurchase the applicable New Notes upon a change of control because it may not have sufficient financial resources to purchase all of the applicable New Notes that are tendered following a change of control. A failure by an Issuer to repurchase the applicable New Notes upon a change of control could cause a default under the applicable Indenture and could lead to a cross default under Amcor plc's other outstanding indebtedness. Delaware courts have held that a provision similar to the change of control put right that is in the Indentures may not be enforceable if it is used to improperly limit the ability of equity owners to effect a change of control. The Chancery Court of Delaware has held in published opinions that a provision in an indenture requiring a majority of the directors of the issuer be "continuing directors" could breach the fiduciary duties of the directors and be unenforceable if improperly used to prevent shareholders from effecting a change of control of a company. Under the continuing director provision of the Indentures, "continuing director" means, as of any date of determination, any member of the board of directors of Amcor plc who (i) was a member of such board of directors on the date of the issuance of the New Notes or (ii) was nominated for election or elected to such board of directors with the approval of a majority of the continuing directors who were members of such board of directors at the time of such nomination or election. Under the line of Delaware cases noted above, a decision by a board of directors not to approve dissident shareholder nominees as continuing directors and to allow a change of control to occur may be subject to enhanced fiduciary duties typically applied in corporate change of control disputes. If the directors did not properly discharge those fiduciary duties, the change of control put right could be unenforceable by the holders of the New Notes. As a result, the ability of the holders of New Notes to enforce the continuing director provision in situations in which the provision acted to impede a change of control would be subject to the enhanced judicial scrutiny of the actions by Amcor plc's directors not to approve the director nominees whose election caused the provision to be invoked. The Indentures allow us to undertake certain transactions that may have an adverse impact on the holders of the New Notes. Under the terms of each Indenture, we are permitted to undertake certain transactions that may not be favorable to, and may have an adverse impact on, the holders of the New Notes of the applicable series. For instance, in certain circumstances we may incur liens securing indebtedness of other creditors without providing equal security to the applicable New Notes. Additionally, among other exceptions from the covenant restricting secured indebtedness, we are permitted to incur secured indebtedness in a principal amount of up to 10% of our total tangible assets. As such, certain assets that may be owned by us from to time may be secured in favor of creditors other than holders of the applicable New Notes, which would give such creditors priority claims in respect of such assets. Table of Contents Additionally, the terms of each Indenture permit us to incur an unlimited amount of secured indebtedness so long as the New Notes of the applicable series share equally in that security. In certain circumstances, such as a leveraged buyout or leveraged recapitalization, this may allow us to incur a substantial amount of secured indebtedness that, even if the applicable New Notes have the benefit of the same security, may have an adverse impact on the applicable New Notes. Finally, the terms of the Indentures generally permit us to enter into sale and leaseback transactions. Table of Contents

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+RISK FACTORS Investing in our securities involves risk. Before making an investment decision, you should carefully consider the risks described under "Risk Factors" in our most recent Annual Report on Form 10-K (as amended), and any updates in our subsequently filed Quarterly Reports on Form 10-Q or Current Reports on Form 8-K, together with all other information appearing in or incorporated by reference into this prospectus and any applicable prospectus supplement, in light of your particular investment objectives and financial circumstances. These risks could materially and adversely affect our business, results of operations and financial condition and could result in a partial or complete loss of your investment. Risks Related to this Offering Our stockholders may be diluted by conversions or exercises of outstanding Notes. As of March 31, 2020, the New Notes and Old Notes were convertible into approximately 209.7 million shares of common stock in the aggregate (without giving effect to any interest subsequently payable in kind pursuant to the terms of the Notes). The initial conversion rates of 2.1939631 shares of common stock per $1.00 principal amount of New Notes and 0.2653 shares of common stock per $1.00 principal amount of Old Notes are each subject to adjustment from time to time pursuant to the terms of the respective indentures governing the Notes. Because the conversion prices of the Notes are subject to downward adjustment, the Notes may be convertible, including in connection with a Fundamental Change (as defined in the respective indentures governing the Notes), into a greater number of shares in the future. In addition, the Company may, in certain circumstances, pay interest on the Notes in kind, which would result in additional Notes outstanding and available for conversion. The conversion of the Notes, including any Notes issued as payment of interest in kind, may result in substantial dilution for our stockholders. The sale of a substantial amount of our common stock, including resale of the shares of common stock issuable upon the conversion of the Notes held by the Selling Stockholders, in the public market could adversely affect the prevailing market price of our common stock. The Selling Stockholders hold, in the aggregate, 69,995,605 shares of our common stock that are eligible for resale pursuant to this prospectus. In addition, as of March 31, 2020, the New Notes and Old Notes were convertible into approximately 209.7 million shares of common stock in the aggregate (of which 203,921,244 shares of our common stock are issuable to the Selling Stockholders and eligible for resale pursuant to this prospectus), at initial conversion rates of 2.1939631 shares of common stock per $1.00 principal amount of New Notes and 0.2653 shares of common stock per $1.00 principle amount of Old Notes. Sales of substantial amounts of shares of our common stock in the public market, or the perception that such sales might occur, could adversely affect the market price of our common stock, and the market value of our other securities. A substantial number of shares of common stock are being offered for resale from time to time by this prospectus, and we cannot predict if and when the Selling Stockholders may sell such shares in the public markets. Furthermore, in the future, we may issue additional shares of common stock or other equity or debt securities convertible into common stock in connection with a financing, acquisition, litigation settlement, employee arrangements, or otherwise. Any such issuance could result in substantial dilution to our existing stockholders and could cause our stock price to decline. The market price of our common stock may decline. Fluctuations in the price of our common stock could contribute to the loss of all or part of your investment. The trading price of our common stock 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 common stock, and our common stock Approximate date of commencement of proposed sale to public: From time to time after this Registration Statement becomes effective. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box: If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company Emerging growth company If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to Section 8(a), may determine. Table of Contents may trade at prices significantly below the price that you paid for them. In such circumstances, the trading price of our common stock 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 impact of the novel Coronavirus (COVID-19) pandemic on our financial results and business; success of competitors; our operating results failing to meet the expectation of securities analysts or investors in a particular period; significant contracts, acquisitions, dispositions, financings, joint ventures or capital commitments by us or our competitors; changes in financial estimates and recommendations by securities analysts concerning us or the markets in which we compete in general; operating and stock price performance of other companies that investors deem comparable to us; changes in laws and regulations affecting our business; commencement of, or involvement in, litigation; changes in our capital structure, such as future issuances of securities or the incurrence of additional debt; the volume of our securities available for public sale; any major change in our board or management team; sales of substantial amounts of securities by our directors, executive officers or significant stockholders or the perception that such sales could occur; developments related to significant claims or proceedings against us; 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 common stock irrespective of our operating performance. The stock market in general and OTCQX 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 common stock, 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 the price of our common stock, regardless of our business, prospects, financial conditions or results of operations. A decline in the market price of our common stock also could adversely affect our ability to issue additional securities and our ability to obtain additional financing in the future. Ownership of our stock is concentrated, which may limit stockholders' ability to influence corporate matters. The Company's ownership is concentrated among a small group of institutional investors and the Company's management team. Certain directors, their affiliates, and/or any other concentrated Table of Contents The information in this prospectus is not complete and may be changed. The Selling Stockholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell securities, and the Selling Stockholders are not soliciting offers to buy these securities, in any state where the offer or sale is not permitted. PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION DATED JULY 10, 2020 A. M. CASTLE & CO. 324,109,660 Shares of Common Stock This prospectus relates to the offer and resale, from time to time, by the selling stockholders listed in this prospectus under the section "Selling Stockholders" (the "Selling Stockholders"), of up to an aggregate of 324,109,660 shares of our common stock, par value $.01 per share, which we refer to as our "common stock," representing: (a) 69,995,605 outstanding shares of common stock, held by the Selling Stockholders named herein; and (b) 254,114,055 shares representing 125% of the number of shares of common stock issuable in respect of up to $92,659,372 aggregate principal amount of 3.00%/5.00% Convertible Senior PIK Toggle Notes due 2024 (the "Notes") as of June 24, 2020, based on an initial conversion rate of 2.1939631 shares of common stock per $1.00 principal amount of Notes. We are registering the offer and resale of our common stock to satisfy registration rights we have granted to the Selling Stockholders. The Selling Stockholders identified in this prospectus may offer and sell the shares of common stock being offered by this prospectus from time to time on terms to be determined at the time of sale through ordinary brokerage transactions or through any other means described in this prospectus under the section "Plan of Distribution." The prices at which the Selling Stockholders may sell the shares will be determined by the prevailing market price for the shares or in negotiated transactions. We are not selling any securities under this prospectus and we will not receive any proceeds from the sale of the shares by the Selling Stockholders. See the section entitled "Use of Proceeds" on page 9 of this prospectus. Our common stock is presently quoted on the OTCQX Best Market tier of the OTC Markets Group, Inc. ("OTCQX") under the symbol "CTAM". On July 8, 2020, the last reported sale price of our common stock on the OTCQX was $0.60 per share. Investing in our securities involves a high degree of risk. See "Risk Factors" beginning on page 5 of this prospectus for a discussion of information that should be considered in connection with an investment in our securities. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. Table of Contents ownership interests may have the voting power to substantially affect or control the outcome of matters requiring a stockholder vote, including the election of directors and the approval of significant corporate matters. Such a concentration of control could adversely affect the market price of our common stock or prevent a change in control or other business combinations that might be beneficial to us. The date of this prospectus is , 2020 Table of Contents

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+RISK FACTORS You should consider carefully all of the information set forth in this prospectus and the documents incorporated by reference herein. The risks included or incorporated by reference into this prospectus are not the only ones we face, but are considered to be the most material. There may be other unknown or unpredictable economic, business, competitive, regulatory or other factors that could have material adverse effects on our future results. If that occurs, the price of our Securities could decline materially and you could lose all or part of your investment. We emerged from bankruptcy under Chapter 11 of the Bankruptcy Code on May 29, 2020. Upon our emergence from bankruptcy, we adopted fresh-start accounting. As a result of the application of fresh-start accounting and the effects of the implementation of the Plan, our condensed consolidated financial statements after the Effective Date are not comparable with the financial condition or results of operations reflected in our consolidated financial statements on or before that date. Additionally, past financial performance may not be a reliable indicator of future performance and historical trends should not be used to anticipate results or trends in future periods. Risks Related to the Convertible Notes The Convertible Notes are effectively subordinated to our senior secured indebtedness, including our senior secured asset-based revolving credit agreement (the ABL Facility ) and our floating rate senior secured notes due 2025 (the Senior Secured Notes ). The Convertible Notes are unsecured senior obligations of the Company. Accordingly, they rank junior in right of payment to any of our secured indebtedness (including all amounts outstanding under the ABL Facility and the Senior Secured Notes) to the extent of the value of the assets securing such indebtedness and structurally junior to all indebtedness and other liabilities of our subsidiaries, including our subsidiaries obligations, whether as borrower or guarantor, under the ABL Facility, the Senior Secured Notes and trade payables. In the event of our bankruptcy, liquidation, reorganization or other winding up, our assets that secure debt ranking senior in right of payment to the Convertible Notes (including all amounts outstanding under the ABL Facility and the Senior Secured Notes) will be available to pay obligations on the Convertible Notes only after the secured debt has been repaid in full from these assets, and the assets of our subsidiaries will be available to pay obligations on the Convertible Notes only after all liabilities of such subsidiaries have been repaid in full (including such subsidiaries guaranty of our obligations under the ABL Facility and the Senior Secured Notes). There may not be sufficient assets remaining to pay amounts due on any or all of the Convertible Notes then outstanding. As of September 30, 2020, our total consolidated principal amount of indebtedness outstanding was $208.8 million, of which $79.0 million was senior secured indebtedness under our Senior Secured Notes. In addition, as of such date we had $10.7 million of borrowing availability under our ABL Facility. Despite our current level of indebtedness, we may still incur significantly more debt, which could exacerbate any or all of the risks described herein. The pay-in-kind interest feature of the Convertible Notes will increase the aggregate amount of debt that must be repaid at maturity. In addition, we may be able to incur other substantial indebtedness in the future. To the extent that we incur additional indebtedness or other obligations, the risks associated with our leverage, including our possible inability to service our debt, would increase. The Convertible Notes Indenture does not restrict our ability to engage in, or to otherwise be a party to, a variety of corporate transactions, circumstances and events that could have an adverse impact on your investment in the Convertible Notes. There are no restrictive covenants contained in the Convertible Notes Indenture to offer holders of the Convertible Notes protection in the event of a highly leveraged or other transaction involving us that may adversely affect such holders, including by increasing the amount of our indebtedness outstanding at such time or otherwise affecting our capital structure or credit ratings, if any, on the Convertible Notes. (ii)To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the Calculation of Registration Fee table in the effective registration statement (iii)To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. 2. That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. 3. To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. 4. That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use. 5. That, for purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424 (b) (1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. 6. That, for the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (b)Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. TABLE OF CONTENTS Page EXPLANATORY NOTEi CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTSi WHERE YOU CAN FIND MORE INFORMATIONii INCORPORATION OF CERTAIN INFORMATION BY REFERENCEiii PROSPECTUS SUMMARY1 RISK FACTORS5

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+RISK FACTORS An investment in the Common Shares involves a high degree of risk and should be considered speculative. An investment in the Common Shares should only be undertaken by those persons who can afford the total loss of their investment. You should carefully consider the risks and uncertainties described below, as well as other information contained in this prospectus. The risks and uncertainties below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we believe to be immaterial may also adversely affect our business. If any of the following risks occur, our business, financial condition and results of operations could be seriously harmed and you could lose all or part of your investment. Further, if we fail to meet the expectations of the public market in any given period, the market price of the Common Shares could decline. We operate in a highly competitive environment that involves significant risks and uncertainties, some of which are outside of our control. Risks Related to our Business We will require additional financing which may not be available to us on acceptable terms, or at all. We will require additional financing in order to continue our research and development program through to completion and take advantage of future opportunities. Our ability to arrange such financing in the future will depend in part upon prevailing capital market conditions, as well as upon our business success. There can be no assurance that we will be successful in our efforts to arrange additional financing on terms satisfactory to us. If additional financing is raised by the issuance of shares or convertible securities from treasury, our control may change and shareholders may suffer additional dilution. If additional funds are raised through strategic partnerships, we may be required to relinquish rights to our products, or to grant licenses on terms that are not favorable to us. If adequate funds are not available, or are not available on acceptable terms, we may not be able to take advantage of opportunities, or otherwise respond to competitive pressures, which may delay or reduce our operations and ability to remain in business and continue as a going concern. We have a history of losses and there is no guarantee that we will be able to achieve profitability. We have a history of losses, and there is no assurance that any of our contemplated products will generate sustainable revenues or earnings, be profitable or provide a return on investment in the future. We have not paid dividends in the past. Our directors will determine our future dividend policy if we generate earnings in the future, based on operational and financial circumstances at that time. We had negative cash flow from operating activities for our fiscal year ended December 31, 2019 and this negative cash flow is expected to continue. We will continue to incur research and development and general and administrative expenses related to our operations. We expect to incur sales and marketing expenses in anticipation of the commercialization of the single-port robotic surgical system if and when FDA clearance and CE marking provides authorization for commercial activities in the corresponding jurisdictions. If the single-port robotic surgical system fails in development or does not gain regulatory clearance or approval, or if it does not achieve market acceptance, we may never generate revenue or free cash flow or become profitable. Even if we generate revenue or free cash flow or achieve profitability in the future, we may not be able to sustain revenues, free cash flow or profitability in subsequent periods. The medical device industry requires significant financial resources, and there is no assurance that future revenues will be sufficient to generate the funds required to continue our business development and marketing activities. If we do not have sufficient capital to fund our operations, we may be required to reduce our research and development efforts or in the future reduce our marketing efforts or forego certain business opportunities. The Note may limit or preclude us from arranging further debt financing. Under the terms of the Note and related Security Agreement (as defined herein), the Corporate Lender (as defined herein) has certain rights and powers that, if exercised, would have a material adverse effect on our business. Due to the senior ranking of the Corporate Lender s security interest in all of our assets under the Security Agreement, we may be limited in, or entirely precluded from, granting a security interest in our assets in support of any further debt financing we may seek from any other lender. In the event that we seek further debt financing and it is not available due to our assets being pledged under the Security Agreement to the Corporate Lender, we will need to seek financing by way of equity financing and there is no assurance that any further equity financing will be available or available on terms acceptable to us. If certain events of default as defined in the Note issued by us to the Corporate Lender were to occur, the Corporate Lender has the power to demand payment in full of the principal, interest and any other amounts owing under the Note and under the Security Agreement to take certain actions such as taking control of our assets including our intellectual property and if this were to happen, this may result in a disruption of our business and operations and we may lose our rights to our intellectual property and other assets. If we were to lose our intellectual property rights, we would effectively be forced to cease our current business operations. There is no assurance that we will receive certain payments from Medtronic pursuant to our Development and License Agreement with Medtronic. Our Development and License Agreement with Medtronic provides Medtronic with certain rights to technology to be developed thereunder, while our separate License Agreement with Medtronic provides Medtronic with certain rights to our existing intellectual property. On June 11, 2020, we received an upfront royalty payment of $10 million pursuant to our Development and Licensing Agreement. Our entitlement to receive up to $31 million pursuant to our Development and Licensing Agreement with Medtronic is conditional upon the completion of certain technology development milestones set forth in the agreement. The technology development described in each of three technology milestones involves complex electromechanical design and development and there is no assurance that the milestones will be satisfied on a timely basis or at all. The technology design and development requires a combination of personnel with experience and expertise in robotic assisted surgical technology and financial resources. The Company will also need to re-engage its existing contractors and suppliers and certain additional contractors and suppliers and there is no assurance that those parties will all be agreeable to re-engage on terms satisfactory to the Company or at all. The Company may require additional financing beyond the proceeds of the Offering in order to carry out work in order to satisfy the technology development milestones and there is no assurance that additional financing will be available on terms satisfactory to the Company or at all. Pursuant to the Development and License Agreement, Medtronic holds certain intellectual property rights to technology to be developed under the agreement. Under the terms of the separate License Agreement, we have granted Medtronic an exclusive license with regard to certain previously developed robotic assisted surgical technologies while we have retained certain rights to the licensed technologies to continue to develop and commercialize those technologies for our own business in single-port robotic assisted surgery. As one of the world s leading medical device companies, Medtronic has substantially greater human and financial resources than we do and it may be in a position to develop and commercialize its robotic assisted surgical technologies earlier and superior to our assisted surgical technologies under development. This may pose a competitive threat to our business and if successful, Medtronic s introduction of its robotic assisted surgical technologies in the market may result in a material adverse effect on our business and prospects. We have a working capital deficiency of approximately $22.9 million as at June 9, 2020 (excluding warrant liability) and we do not have revenue, other than as described above from our agreement with Medtronic, as such we will need to raise funds to pay our liabilities and additional funds to carry on our business through to commercialization. We may seek to raise additional funds through further equity offerings and if that were to happen, it may result in further dilution to existing stockholders. There is no assurance that any further financing will be available on terms acceptable to us or at all. If further financing is not available to us on terms acceptable to us or at all, our existing creditors may take a number of actions against us including commencing proceedings to recover the amounts we owe them and failing our ability to pay our creditors, they may takes steps to enforce their security which may include placing the Company into receivership or bankruptcy and in such event, there is no assurance that our stockholders would receive any amounts in respect of their securities. Furthermore, there is no assurance that we will accept any financing offered to us if we deem the terms of the financing (including the sufficiency and timing of the financing) to be such that the financing would not be in our best interests. We rely on strategic alliances and there can be no assurance that these alliances will achieve their goals. We rely upon, and expect to rely upon, strategic alliances with original equipment manufacturers (if and when our technology is commercialized) and medical technology development firms for development contracts, assistance in product design and development, volume purchase orders and manufacturing and marketing expertise. There can be no assurance that the strategic alliances will achieve their goals. We depend on key personnel and the loss of the service of such personnel could have a negative impact on our business. Our future success and performance depend in part upon the experience of key members of management. If, for any reason, any one or more of such key personnel do not continue to be active in our management, our operations and business prospects could be adversely affected. In particular, the losses of the services of any of our senior management or other key employees integral to the development of our technology and the generation of a functional, commercially viable product, or the inability to attract and retain necessary technical personnel in the future, could have a material adverse effect upon our business, financial condition, prospects, operating results and cash flows. We do not currently maintain key man insurance for any senior management or other key personnel. We expect to increase the size of our management team in the future and our failure to attract and retain new members of our management team could adversely affect our business. We expect that our potential expansion into areas and activities requiring additional expertise, such as manufacturing, sales, marketing and distribution will place additional requirements on our management, operational and financial resources. We expect these demands will require an increase in management and engineering, medical sales, marketing, and technical personnel and the development of additional expertise by existing management personnel. There is currently aggressive competition for employees who have experience in technology engineering, and in particular, surgical robotics. The failure to attract and retain such personnel or to develop such expertise could materially adversely affect our business, financial condition and results of operations. Our trade secrets or other confidential information may be compromised. We rely on trade secrets and confidential information, which we seek to protect, in part, through confidentiality and non-disclosure agreements with our employees, collaborators, suppliers, and other parties. There can be no assurance that these agreements will not be breached, that we would have adequate remedies for any such breach or that our trade secrets and confidential information will not otherwise become known to or independently developed by competitors. We might be involved from time to time in litigation to determine the enforceability, scope and validity of our proprietary rights. Any such litigation could result in substantial cost and divert management s attention from operations. We rely on third parties for a number of important aspects of our business and there are a range of issues that are outside of our direct control. We are and will continue to be dependent on third parties to conduct our preclinical and clinical studies and to provide services for certain important aspects of our business. If these third parties do not perform as contractually required or expected, we may not be able to obtain regulatory clearance for our products, or we may be delayed in doing so. We rely on third parties, such as technology design and development firms, contract research organizations, medical institutions, academic institutions, independent clinical investigators and contract laboratories, to conduct technology development, preclinical testing and feasibility studies, and clinical studies, and we expect to continue to do so in the future. We rely heavily on these parties, but do not control many aspects of their activities. As a result, many important aspects of product development are outside our direct control. If the third parties conducting preclinical or clinical studies do not perform their contractual duties or obligations, do not meet expected patient recruitment or other deadlines, fail to comply with good laboratory practice regulations, do not adhere to protocols or otherwise fail to generate reliable data, development, approval and commercialization of our products may be extended, delayed or terminated or may need to be repeated, and we may not be able to obtain regulatory clearance. Our industry is highly competitive and a number of our competitors have significantly greater financial and human resources than we do. The robotic surgical market is highly competitive with respect to, among other factors: pricing, product and service quality, and the time required to introduce new products and services. Our market is dominated by larger and better capitalized companies with substantially greater resources than we have. New products may be slow to be accepted into the market or may not be accepted at all. We are constantly exposed to the risk that our competitors may implement new technology before we do, or may offer lower prices, additional products or services or other incentives that we cannot and will not offer. We can give no assurances that we will be able to compete successfully against existing or future competitors. Competition in our target market is intense, and we expect competition to increase. The market for robotic surgery technologies is susceptible to price reductions among competitors seeking relationships with the same hospitals and outpatient surgery centers to which we hope to sell our products. Our ability to compete successfully depends on a number of factors, including: the successful development of our first-generation product in a form that is competitive in features, performance and price; the successful identification and development of new products for our core market; our ability to anticipate customer and market requirements and changes in technology and industry standards in a timely manner; our ability to gain access to and use technologies in a cost-effective manner; our ability to introduce cost-effective new products in a timely manner; our ability to differentiate our products from our competitors offerings; our ability to gain customer acceptance of our products; the performance of our products relative to our competitors products; our ability to market and sell our products through effective sales channels; our ability to establish and maintain effective internal financial and accounting controls and procedures; our ability to obtain required regulatory clearances and approvals in a timely manner; the protection of our intellectual property, including our processes, trade secrets and know-how; and our ability to attract and retain qualified technical, executive and sales personnel. Our commercial success depends significantly on our ability to operate without infringing the patents and other proprietary rights of third parties. Our commercial success depends, in part, upon not infringing intellectual property rights of others. A number of medical device and robotic surgery companies and other third parties have been issued patents and other proprietary rights, may have filed applications for patents and other proprietary rights, and may obtain additional patents and other proprietary rights, for technologies similar or identical to those being developed or utilized by us. Accordingly, there may currently exist third party patents, patent applications or other proprietary rights that may require us to alter our technology or proposed products, obtain licenses, or cease certain activities. We may become subject to claims by third parties that our technology or products infringe the third parties intellectual property rights for any reason, including due to the growth of products in target markets, the overlap in functionality of those products and the prevalence of products. We may become subject to these claims either directly by the third parties, or through indemnities against these claims that we may provide to end users, manufacturer s representatives, distributors, value added resellers, system integrators and original equipment manufacturers. Litigation before the courts of jurisdictions, or proceedings before patent offices, may be necessary to determine the scope, enforceability and validity of third-party proprietary rights and our proprietary rights. Some of our competitors have, or are affiliated with companies having, substantially greater resources than us and these competitors may be able to sustain the costs of complex intellectual property litigation and proceedings to a greater degree and for a longer period of time than us. Regardless of their merit, any claims relating to intellectual property scope, enforceability, validity, or infringement could be time consuming to evaluate and defend, result in costly litigation, cause product shipment delays or stoppages, divert management s attention and focus away from the business, subject us to significant liabilities and equitable remedies, including injunctions, require us to enter into costly royalty or licensing agreements and/or require us to modify or stop developing or commercializing certain technologies and products unless we obtain licenses from a third parties. There can be no assurance that we would be able to obtain any such licenses on commercially favorable terms or at all. If we do not obtain such licenses, we could be required to cease the development and sale of certain of our products. If we are unable to obtain and enforce patent protection for our products, our business could be materially harmed. There is no guarantee that the patent applications owned by us will be granted, or, even if allowed to grant, that the patent applications will be granted in their current form or granted with a scope of protection sufficient to protect our commercially valuable technology. The scope of protection, if any, that may be afforded by our patent applications is uncertain. Further, even if patents issue from our pending or future applications, those issued patents and any of our previously assigned patents may be invalid or have a narrower scope of protection, and may be subject to invalidation proceedings commenced by third parties. The validity of an issued patent may be attacked on a number of different grounds, and such invalidation proceedings are inherently unpredictable. If such an invalidation proceeding commenced by a third party in respect of an issued patent owned by us is successful, the subject patent will be ordered invalid and therefore unenforceable. Our success will depend, in part, on our ability to obtain and maintain protection over our technology and products and not infringe the proprietary rights of third parties. Despite precautions, it may be possible for a third party to copy or otherwise obtain and use our technology without authorization. There can be no assurance that any steps taken by us will prevent misappropriation of our technology. Litigation could result in substantial costs and diversion of resources and could have a material adverse effect on our business, operating results and/or financial condition. We may be unable to obtain or maintain our trademarks and may incur substantial costs attempting to defend and enforce our rights in this regard. Although we have registrations and pending applications for certain trademarks, we may not own or license trademark registrations for the marks and names that we are currently using in connection with products under development, or for our name, in any jurisdiction including the proposed principal markets where we plan to market and sell the single-port robotic surgical system following regulatory clearance and commercialization of our surgical system. We may be unable to obtain or maintain trademark registrations for the marks and names we use in one or more countries. It is possible that our use of certain trademarks and trade names, including SPORT , SPORT Surgical System , Titan , Titan Medical or variations thereof, as well as other trademarks, trade names and variations thereof for which registration may be pending, may infringe or contravene the rights, including trademark rights, of other parties in one or more countries. In the event of actual or alleged infringement or contravention of rights, we may be forced to cease using these marks and names. There may be a substantial risk of litigation or other legal proceedings in one or more countries relating to the alleged infringement or contravention of another party s trademark rights. These proceedings may occur even if we cease using these marks and names. We may incur substantial costs to defend and/or enforce our rights, if any, in these marks and names in such legal proceedings. We may not be successful in such legal proceedings, and may be required or agree to cease using these marks and names and pay other parties significant amounts of money. We may incur substantial costs to change the names and marks used by us, including the names and marks used in association with our products. In any such events, our business and operations could be materially adversely affected. Certain of our directors and officers also serve as directors and officers of other companies, creating the possibility that a conflict of interest could arise. Certain of our directors, officers and advisors are also directors, officers, advisors or shareholders of other companies. Such associations may give rise to conflicts of interest from time to time. Our directors will be required by law to act honestly and in good faith with a view to our best interests and to disclose any interest which they may have in any of our projects or opportunities. If a conflict arises at a meeting of our board of directors, any director with a conflict is obligated to disclose their interest and abstain from voting on such matter. In determining whether or not we will participate in any project or opportunity, the director in potential conflict would be required to recuse themselves from voting on the matter, and then the other non-conflicted members of the board will consider the merit of the opportunity and the degree of risk to which we may be exposed, along with our financial position at that time. We are targeting a new and rapidly changing market. It is not clear that surgeons or hospitals will choose our surgical system over those offered by our competitors. The market for our proposed technology is relatively new and is likely to undergo substantial development and changes. The market for our technology may develop more slowly than we anticipate, in which case we may be unable to recover the losses we have incurred in the development of our technology and may never achieve profitability. We cannot guarantee that this market will develop as anticipated or that we will secure market share necessary to achieve profitability and growth. There is no assurance that surgeons or hospitals will choose our surgical system (if and when it is commercialized) over the systems offered by our competitors. There is also no assurance that robotic surgical systems will continue to be used (or their use increased) by potential customers and that robotic surgical technology will be competitive (based on costs and performance factors) with, and preferred over, conventional and well established medical treatment and surgical methods including conventional minimally invasive surgery and open surgery. The introduction of more technologically advanced products could impact our operating and financial results. Existing competitors could advance their products and new competitors could enter the market with superior technology. New and competitive products introduced into the marketplace that are based on or incorporate more advanced technologies, or provide performance similar to our products at a lower cost, may impact our operating and financial results. We may become subject to potential product liability claims, and we may be required to pay damages that exceed our insurance coverage. Our business is subject to a number of risks and hazards including adverse conditions or changes in the regulatory environment. Such occurrences could result in damage to equipment, personal injury or death, monetary losses and possible legal liability. Despite any insurance coverage which we currently have or may secure in the future, the nature of these risks is such that liabilities might exceed policy limits, the liabilities and hazards might not be insurable, or we may elect not to insure against such liabilities due to high premium costs or other reasons, in which event we could incur significant costs that could have a materially adverse effect upon our financial position. Our business exposes us to potential product liability claims that are inherent in the design, testing, manufacture, sale and distribution of our surgical system which we are seeking to introduce to the market. Surgical medical devices involve significant risks of serious complications, including bleeding, nerve injury, paralysis, infection, and even death. Any product liability claim brought against us, with or without merit, could result in the increase of our product liability insurance rates or in our inability to secure coverage in the future on commercially reasonable terms, if at all. In addition, if our product liability insurance proves to be inadequate to pay a damage award, we may have to pay the excess of this award out of our cash reserves, which could significantly harm our financial condition. If longer-term patient results and experience indicate that our products or any component of a product causes tissue damage, motor impairment or other adverse effects, we could be subject to significant liability. A product liability claim, even one without merit, could harm our reputation in the industry, lead to significant legal fees, and result in the diversion of management s attention from managing our business. Our technology may depend on third party licenses for certain functions or procedures. There can be no guarantee that we will be able to secure and maintain those licenses. Our technology may require the use of other existing technologies and processes which are currently, or in the future will be, subject to patents, copyrights, trademarks, trade secrets and/or other intellectual property rights held by other parties. We may need to obtain one or more licenses to use those other existing technologies. If we are unable to obtain licenses on reasonable commercial terms from the holders of such intellectual property rights, we could be required to halt development and manufacturing or redesign our technology, failing which we could bear a substantial risk of litigation for infringement or misappropriation of such intellectual property rights. In any such event, our business and operations could be materially adversely affected. Government regulation controls all aspects of our product and business. Changes in policies and additional regulations may be enacted that could prevent or delay regulatory clearance or approval of our products. The preclinical and clinical testing, manufacturing, sale and distribution of our contemplated products are governed by a number of regulatory bodies in countries where we intend to conduct business, including required clearance to market from the FDA, European CE mark approval, and approval from the Canadian Health Protection Branch. Applications for these approvals and clearances have not been made and there can be no assurances that applications for such approvals and clearances will be filed in a timely manner as planned, or will be received, or will be granted approval or clearance, or if such approvals and clearances are granted, that we will be able to comply with the conditions and requirements of such approvals and clearances. Failure to obtain such approvals and clearances or to comply with such conditions and requirements may have a material adverse effect on our business, financial condition and results of operations. Regulatory authorities can delay, limit or deny clearance or approval of a medical device candidate for many reasons, including: a medical device candidate may not be deemed safe or effective, in the case of a PMA application; a medical device candidate may not be deemed to be substantially equivalent to a device lawfully marketed either as a grandfathered device or one that was cleared through the 510(k) premarket notification process; a medical device candidate may not be deemed to be in conformance with applicable standards and regulations; regulatory officials may not find the data from preclinical and clinical studies sufficient; regulatory authorities might not approve our processes or facilities or those of any of our third-party manufacturers; or regulatory authorities may change clearance or approval policies or adopt new regulations. Regulatory requirements and standards for approval or clearance of medical devices are subject to change and the adaptation of our technology development program to meet the changing requirements and standards may cause us to incur substantial expenditures and may result in substantial delays in the achievement of and changes to the technology development milestones as well as escalations in the corresponding budgets. Such changes may require the performance and collection of extensive human clinical studies and data which could add significant expense and substantially lengthen timelines to commercialization. These changes may have an adverse effect on our ability to commercialize our products and our results of operations and financial condition. Our results may be affected by changes in trade, monetary and fiscal policies, laws and regulations, or other activities of the Canadian, United States and foreign governments, agencies and similar organizations. Our results may be affected by social and economic conditions which impact our operations. Once our products are cleared or approved, modifications to our products may require new regulatory clearances or approvals and may require us to cease marketing or recall the modified products until clearances or approvals are obtained. If we are granted FDA clearance, we may subsequently decide to make certain modifications to our products for a number of reasons including those based on customer feedback. Any modification to a 510(k)-cleared device that could significantly affect its safety or effectiveness, or that would constitute a major change in its intended use, design, or manufacture, requires a new 510(k) clearance. The FDA requires every manufacturer to make this determination in the first instance, but the FDA may review such determinations. The FDA may not agree with our decisions regarding whether new clearances or approvals are necessary. If the FDA disagrees with our determinations for any future changes, or prior changes to previously marketed products, as the case may be, we may be required to cease marketing or to recall the modified products until we obtain clearance or approval, and we may be subject to significant regulatory fines or penalties. Furthermore, the FDA s ongoing review of the 510(k) program may make it more difficult for us to make modifications to our products, either by imposing more strict requirements on when a new 510(k) for a modification to a previously cleared product must be submitted, or applying more onerous review criteria to such submissions. In October 2017, the FDA issued guidance documents addressing when to submit a new 510(k) due to modifications to 510(k) cleared products and the criteria for evaluating substantial equivalence. The interpretation of the guidance document by the FDA staff could lead to instances where the FDA disagrees with our decision regarding a change and could result in warning letters and other enforcement actions. Even after clearance or approval for our products is obtained, we are subject to extensive post-market regulation by the FDA and other regulatory authorities. Our failure to meet strict regulatory requirements could require us to pay fines, incur other costs or even close our facilities. Even after we have obtained the proper regulatory clearance or approval to market a product, the FDA has the power to require us to conduct post-market studies. These studies can be expensive and time-consuming to conduct. Failure to complete such studies in a timely manner could result in the revocation of clearance or approval and the recall or withdrawal of the product, which could prevent us from generating sales from that product in the United States. The FDA has broad enforcement powers, and any regulatory enforcement actions or inquiries, or other increased scrutiny on us, could dissuade surgeons from using our products and adversely affect our reputation and the perceived safety and efficacy of our products. We are also required to comply with the FDA s QSR (Quality System Regulation/Medical Device Good Manufacturing Practice), which covers the methods used in, and the facilities and controls used for, the design, manufacture, quality assurance, labeling, packaging, sterilization, storage, shipping, installation and servicing of our marketed products. The FDA enforces the QSR through periodic announced and unannounced inspections of manufacturing facilities. In addition, in the future, regulatory authorities and/or customers may require specific packaging of sterile products, which could increase our costs and the price of our products. Later discovery of previously unknown problems with our products, including unanticipated adverse events or adverse events of unanticipated severity or frequency, manufacturing problems, or failure to comply with regulatory requirements such as the QSR, may result in changes to labeling, restrictions on such products or manufacturing processes, withdrawal of the products from the market, voluntary or mandatory recalls, a requirement to repair, replace or refund the cost of any medical device we manufacture or distribute, fines, suspension of regulatory approvals, product seizures, injunctions or the imposition of civil or criminal penalties which would adversely affect our business, operating results and prospects. If one of our products, or a malfunction of one of our products, causes or contributes to a death or a serious injury, we will be subject to medical device reporting regulations, which can result in voluntary corrective actions or agency enforcement actions. Under the FDA s medical device reporting, or MDR (Medical Device Reporting), regulations, we are required to report to the FDA any incident in which our product may have caused or contributed to a death or serious injury or in which our product malfunctioned and, if the malfunction were to recur, would likely cause or contribute to death or serious injury. Product malfunctions may result in a voluntary or involuntary product recall, which could divert managerial and financial resources, impair our ability to manufacture our products in a cost-effective and timely manner, and have an adverse effect on our reputation, results of operations and financial condition. We are also required to follow detailed recordkeeping requirements for all firm-initiated medical device corrections and removals, and to report such corrective and removal actions to the FDA if they are carried out in response to a risk to health and have not otherwise been reported under the MDR regulations. All manufacturers bringing medical devices to market in the European Economic Area are legally bound to report any incident that led or might have led to the death or serious deterioration in the state of health of a patient, user or other person, and which the manufacturer s device is suspected to have caused, to the competent authority in whose jurisdiction the incident occurred. In such case, the manufacturer must file an initial report with the relevant competent authority, which would be followed by further evaluation or investigation of the incident and a final report indicating whether further action is required. Any adverse event involving our products could result in future voluntary corrective actions, such as recalls or customer notifications, or agency action, such as inspection or enforcement action. Any corrective action, whether voluntary or involuntary, will require the dedication of our time and capital, distract management from operating our business and may harm our reputation and financial results. A recall of our products, either voluntarily or at the direction of the FDA or another governmental authority, or the discovery of serious safety issues with our products, could have a significant adverse impact on us. The FDA and similar foreign governmental authorities such as the competent authorities of the European Economic Area countries have the authority to require the recall of commercialized products in the event of material deficiencies or defects in design or manufacture or in the event that a product poses an unacceptable risk to health. Manufacturers may, under their own initiative, recall a product if any material deficiency in a device is found. A government-mandated or voluntary recall by us or one of our distributors could occur as a result of an unacceptable risk to health, component failures, manufacturing errors, design or labeling defects or other deficiencies and issues. Any future recalls of any of our products would divert managerial and financial resources and could have an adverse effect on our reputation, results of operations and financial condition, which could impair our ability to produce our products in a cost-effective and timely manner in order to meet our customers demands. We may also be required to bear other costs or take other actions that may have a negative impact on our future sales and our ability to generate profits. Compliance with accounting regulations and tax rules across multiple jurisdictions is time consuming and expensive and could expose us to penalties and fines. We are subject to numerous tax and accounting requirements, and changes in existing accounting or taxation rules or practices, or varying interpretations of current rules or practices, could have a significant adverse effect on our financial results or the manner in which we conduct our business. We have issued our financial statements for the year ended December 31, 2019 in accordance with IFRS as issued by the IASB. In the future, the geographic scope of our business may expand, and such expansion will require us to comply with the tax laws and regulations of multiple jurisdictions. Requirements as to taxation vary substantially among jurisdictions. Complying with the tax laws of these jurisdictions can be time consuming and expensive and could potentially subject us to penalties and fees in the future if we were to inadvertently fail to comply. In the event we were to inadvertently fail to comply with applicable tax laws, this could have a material adverse effect on our business, results of operations, and financial condition. Contingent liabilities could have a negative impact on our financial position. Contingent liabilities for contractual and other claims with customers, development firms, suppliers and former employees to which we may become party in the future may have a material adverse effect on our financial position. The sales cycle for our single-port robotic surgical system is expected to be long and unpredictable, which will make it difficult for us to forecast revenue and it may increase the magnitude of quarterly fluctuations in our operating results. The purchase of a surgical robotic system such as our single-port robotic surgical system represents a capital purchase by hospitals and other potential customers. The capital purchase nature of the transaction, the complexity of our product, the relative newness of surgical robotic systems and the competitive landscape requires us to spend substantial time and effort to assist potential customers and any group purchasing organizations in evaluating our robotic system. We must communicate with multiple surgeons, administrative staff and executives within each potential customer account in order to receive all approvals on behalf of such organizations. We may face difficulty identifying and establishing contact with such decision makers. Even after initial acceptance, the negotiation and documentation processes can be lengthy. Additionally, our customers may have strict limitations on spending depending on the current economic climate or trends in healthcare. Any delay in achieving sales in a particular quarter could cause our operating results to fall below expectations. We also expect such a lengthy sales cycle makes it more difficult for us to accurately forecast revenues in future periods and may cause revenues and operating results to vary significantly in future periods. We currently have very limited marketing, sales and distribution capabilities. There can be no assurance that we will be successful in building our sales capabilities. To the extent that we enter into distribution, co-promotion or other arrangements, our product revenue is likely to be lower than if we directly market or sell our products. In addition, any revenue we receive will depend in whole or in part on the efforts of such third parties, which may not be successful and are generally not within our control. If we are unable to enter into such arrangements on acceptable terms or at all, we may not be able to successfully commercialize our products. There can be no certainty that we will meet our established product development and commercialization milestones. Failure to do so may affect our operational and financial results. We have established product development and commercialization milestones that we use to assess our progress toward developing a commercially viable product. These milestones relate to technology and design improvements as well as to dates for achieving development goals and projected expenditures. To assess progress, we test and evaluate our technology under simulated conditions. If such evaluations indicate technical defects or failure to meet cost or performance goals, our commercialization schedule could be delayed, and potential purchasers of our initial commercial systems may decline to purchase them or they may choose to purchase alternative technologies. Whether or not we meet our milestones, there is no assurance that our technology will be successful in the market. We expect that additional specific milestones could be identified as the development of our single-port robotic surgical system progresses, or existing milestones, budgets and the schedule for completion of each milestone may change depending on a number of factors including the results of our development program, the availability of financing and the ability of development firms engaged by us to complete work assigned to them. We are still in the process of developing our single-port robotic surgical system and there can be no certainty that a commercially viable product will emerge from this process. Our future success is substantially dependent on a continued research and development effort that has thus far been directed by certain of our key managers. In addition to being capital intensive, research and development activities relating to sophisticated technologies such as ours are inherently uncertain as to future success and the achievement of a desired result. If delays or problems occur during our ongoing research and development process, important financial and human resources may need to be diverted toward resolving such delays or problems. Further, there is a material risk that our research and development activities may not result in a functional, commercially viable product or one that is approved by regulatory authorities. Commercial manufacturing of our single-port robotic surgical system is expected to be an extremely detailed and complex process with the potential for delays, interruptions or cost overruns. The manufacture of prototypes and commercial products will involve complex processes and the manufacturers engaged by us may encounter difficulties initiating and maintaining production. In the future, there could be a significant disruption in the supply of services, materials or products from current sources or, in the event of a disruption, we might not be able to locate alternative suppliers of services, materials, components or products of comparable quality at an acceptable price, or at all. In addition, we cannot be certain that our manufacturers will be able to complete the manufacture of prototypes or fill our orders for commercial products, once commercialized, in a timely manner. If we experience significant increased demand, or need to replace an existing manufacturer, there can be no assurance that additional supplies of product or additional manufacturing capacity will be available when required on terms that are acceptable to us, or at all. In addition, even if we are able to expand existing manufacturing or find new manufacturing, we may encounter delays in production. Any delays, interruption or increased costs in the supply of materials or manufacture of our products could have an adverse effect on our ability to meet customer demand for our products and result in lower revenues and net income. Our reliance on external suppliers and development firms for execution of our single-port robotic surgical system development program means that we do not control all aspects of the development. We are dependent on external suppliers and development firms to conduct our technology research and development and manufacturing of evaluation units of our single-port robotic surgical system. If these external firms seek to impose conditions on their obligations to conduct their work in addition to or different from the terms set forth in their engagement agreements and we are unable to satisfy those conditions or they do not otherwise perform as contractually required or expected, we may not be able to complete the development of our single-port robotic surgical system, or we may be delayed in doing so, and the costs for developing our products may significantly increase beyond those forecasted. In the event that external development firms do not resume, or they do not otherwise carry on, the development work on our single-port robotic surgical system, on conditions and in a manner that is agreeable to us, we may engage other firms to take on the development work and in that case, the estimated costs of the development milestones may increase and the schedule for completion of each milestone may be delayed. We rely heavily on external parties for successful execution of our single-port robotic surgical system development program, but do not control many aspects of their activities. As a result, many important aspects (including costs and timing) of product development are outside our direct control. We are responsible for ensuring that our single-port robotic surgical system is being developed to meet the guidelines and requirements of the FDA and other regulatory authorities, applicable laws and regulations and industry standards. Our reliance on third parties does not relieve us of these responsibilities. Additionally, if the external firms conducting preclinical or clinical studies do not perform their contractual duties or obligations, do not meet expected deadlines, fail to comply with good laboratory practice regulations, do not adhere to our study protocols or otherwise fail to generate reliable preclinical or clinical data, development, approval and commercialization of our products may be extended, delayed or terminated or may need to be repeated, costs may significantly increase and we may not be able to obtain regulatory approval within the time frames forecasted, if at all. We currently have payables due to our primary product development supplier (the Primary Supplier ) of approximately $5.5 million relating primarily to work performed prior to November 2019. Our Primary Supplier has stopped all work with regard to the development of the Company s robotic surgical system and there is no assurance that we will have sufficient capital to maintain deposits or prepayments with the Primary Supplier or make payments to the Primary Supplier on satisfactory terms in order to have the Primary Supplier resume work or to maintain our engagement of the Primary Supplier. We have entered into a letter agreement ( Letter Agreement ) with our Primary Supplier for the payment of outstanding payables to the Primary Supplier. Under the terms of the Letter Agreement, and subject to our securing sufficient funding by raising further capital, for which we cannot give any assurances, we plan to pay the Primary Supplier in full satisfaction of the outstanding payables by the end of 2020. Also, under the terms of the Letter Agreement, the Primary Supplier has agreed to resume services with regard to the development of our robotic surgical system subject to our meeting the new payment terms. A product malfunction could result in delays, liability and negative perceptions of the single-port robotic surgical system and ourselves. A malfunction or the inadequate design of our contemplated surgical system could result in product liability or other tort claims. Accidents involving our surgical system could lead to personal injury, death or physical damage. Any liability for damages or injury resulting from malfunctions could be substantial and could adversely affect our business and results of operations. In addition, a well publicized actual or perceived problem could adversely affect the market s perception of our surgical system. This could result in a decline in demand for our products, which would adversely affect our financial condition and results of operations. If our contemplated products are found to be defective, we may be required to redesign or recall the surgical system. This redesign or recall may cause us to incur significant expenses, disrupt sales and adversely affect our reputation and our surgical system, which could adversely impact our revenue, operating results and profitability. Certain reusable instruments, camera components and other accessories require repeated cleaning and sterilization Certain reusable instruments, camera components and other accessories require repeated cleaning and sterilization between surgical procedures. There is no assurance that our product development and manufacturing partners will be successful in producing designs that achieve a predictable number of cleaning and sterilization cycles, or that the specified processes will result in sterile products. If product development efforts are unsuccessful in this regard, our economic model for pricing of reusable devices could become impractical to implement, our potential profit margins (if any) may be adversely affected, or our product offering could be deemed to not be viable for commercial use. Once our products are available for commercial use, there is no assurance that customers will follow the cleaning and sterilization procedures that we recommend for our products. Failure by a customer to perform the appropriate cleaning and sterilization procedures could lead to patient injury or death, in which case we could be subject to litigation and possible regulatory enforcement. Further, even the allegation of the use of nonsterile product by a customer could have a materially adverse effect on our business. As we are a Canadian company, it may be difficult for United States shareholders to effect service on us or to realize on judgments obtained in the United States. We are incorporated under the laws of the Province of Ontario, Canada, a number of our directors and officers are residents of Canada, and most or all of our assets and the assets of such persons are located outside the United States. Consequently, it may be difficult for United States investors to effect service of process within the United States upon us or upon such persons who are not residents of the United States, or to realize in the United States upon judgments of United States courts predicated upon civil liabilities under United States securities laws. A judgment of a United States court predicated solely upon such civil liabilities may be enforceable in Canada by a Canadian court if the United States court in which the judgment was obtained had jurisdiction, as determined by the Canadian court, in the matter. There is substantial doubt whether an original action could be brought successfully in Canada against any of such persons or us predicated solely upon such civil liabilities. We are subject to risks related to additional regulatory burden and controls over financial reporting. We are subject to the continuous and timely disclosure requirements of Canadian securities laws and the rules, regulations and policies of the Toronto Stock Exchange, the Ontario Securities Commission and other Canadian securities regulators, the Nasdaq and the SEC. These rules, regulations and policies relate to, among other things, corporate governance, corporate controls, internal audit, disclosure controls and procedures and financial reporting and accounting systems. We have made, and will continue to make, changes in these and other areas, including our internal controls over financial reporting. However, there is no assurance that these and other measures that we may take will be sufficient to allow us to satisfy our obligations as a public company on a timely basis. In addition, compliance with reporting and other requirements applicable to public companies create additional costs for us and require the time and attention of our management. We cannot predict the amount of the additional costs that we may incur, the timing of such costs or the impact that management s attention to these matters will have on our business. In addition, our inability to maintain effective internal controls over financial reporting could increase the risk of an error in our financial statements. Our management, including our Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives due to our inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is therefore subject to error, improper override or improper application of the internal controls. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis, and although it is possible to incorporate safeguards into the financial reporting process to reduce this risk, they cannot be guaranteed to entirely eliminate it. If we fail to maintain effective internal control over financial reporting, then there is an increased risk of an error in our financial statements that could result in us being required to restate previously issued financial statements at a later date. We are also subject to corporate governance standards that apply to us as a foreign issuer listed on the Nasdaq and registered with the SEC in the United States. Although we substantially comply with the Nasdaq s corporate governance guidelines, we are exempt from certain Nasdaq requirements because we are subject to Canadian corporate governance requirements. We may from time to time seek other relief from corporate governance and exchange requirements and securities laws from the Nasdaq and other regulators. Our operations have been affected by the outbreak of the coronavirus. We are being affected by a pandemic outbreak of an infectious strain of the disease known as COVID-19 or coronavirus. Our operations have been adversely affected to the extent that the coronavirus has harmed the world economy in general and the capital markets in North America in particular. Our operations have experienced disruptions, including the temporary closure of our offices, which may materially and adversely affect our business, financial condition and operational results. The duration of the business disruption and related financial impact cannot be reasonably estimated at this time but may materially affect our ability to operate our business and result in additional costs as such disruptions continue. Such events could impair our ability to raise necessary capital, cause us to incur additional expenses or disrupt the services of our external engineering and medical technology development and manufacturing firms, as well as service providers. The extent to which the coronavirus or other health epidemic may impact our results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact, among others. The global pandemic creates substantial uncertainty as to the willingness and ability of hospitals, HMOs, ambulatory care facilities and other prospective customers to purchase and implement robotic surgical systems. The American College of Surgeons has called for hospitals to minimize, postpone or cancel elective procedures until the coronavirus outbreak slows down. An elective surgical procedure slowdown in the robotic surgical space may result in a substantial negative impact on the market prospects for robotic surgical systems and instruments and related services. There can be no assurance that we will be able to secure and restore relationships with our suppliers and development partners. Our future success is substantially dependent on funding our research and development program and maintaining the support of our research and development and manufacturing service providers and, in some cases, securing new suppliers and service providers. There can be no assurance that we will be successful in accomplishing any of these goals. We may face cyber-security risks and threats. Threats to information technology systems associated with cyber-security risks and cyber incidents or attacks continue to grow. It is possible that our business, financial and other systems or those of the companies, service providers or consultants with which we do business could be compromised, which might not be noticed for some period of time. Risks associated with these threats include, among other things, loss of intellectual property, disruption of business operations and safety procedures, loss or damage to worksite data delivery systems, and increased costs to prevent, respond to or mitigate cyber-security events. Risks Related to Our Common Shares The price of our common shares and listed warrants may fluctuate in response to a number of events. Our common shares and certain warrants trade in Canada on the TSX and the common shares also trade in the United States on the Nasdaq. We cannot predict the extent to which investor interest will lead to the development of an active and liquid trading market in our common shares and warrants and it is possible that an active and liquid trading market will not develop or be sustained. Some companies that have volatile market prices for their securities have had securities class action lawsuits filed against them. If a lawsuit were to be commenced against us, regardless of its outcome, it could result in substantial costs and a diversion of management s attention and resources. The price of common shares and warrants may fluctuate in response to a number of events, including but not limited to: the outcomes of technology development program and the achievement (or lack thereof) of our published milestones; the results of preclinical studies and confirmatory human data assessments; our quarterly operating results; sales of our common shares by a significant shareholder; future announcements concerning our business or of our competitors; the failure of securities analysts to cover us and/or changes in financial forecasts and recommendations by securities analysts; actions of our competitors; actions of our suppliers; actions of any medical technology development firms engaged by us; actions of directors and officers regarding purchases and sales of shares; general market, economic and political conditions; natural disasters, terrorist attacks and acts of war; and the other risks described in this section. Sales by stockholders of substantial amounts of our shares of common stock, the issuance of new shares of common stock by us or the perception that these sales may occur in the future could materially and adversely affect the market price of our common stock. Additional equity financings or other share issuances by us could adversely affect the market price of our shares. Sales by existing shareholders of a large number of our shares in the public market and the sale of shares issued in connection with acquisitions or strategic alliances, or the perception that such additional sales could occur, could cause the market price of our shares to drop. We have a limited history of operations upon which to evaluate our business and our prospects. This may limit an investor s ability to make a comparative evaluation of our business. We are a robotic surgery technology development company with a limited operating history. Future operating results may be difficult to predict. We are in the development stage and have been engaged in research and product development since our inception. There are many regulatory steps that must be completed as part of the development program before our technology can be commercialized and a product is available for the market. These regulatory steps are costly and uncertain. The future success of our business will depend on our ability to complete product development and obtain regulatory approvals and clearances for new products, manufacture and assemble current and future products in sufficient quantities in accordance with applicable regulatory requirements and at lower costs, which we may be unable to do. There is a limited history of operations upon which to evaluate our business and our prospects. Operating expenses have increased since inception due to the magnitude and complexity of the development program. The lack of a significant operating history may limit an investor s ability to make a comparative evaluation of us, our products and our prospects. We have not generated revenue since our inception. Our financial results and results of operations have fluctuated in the past and may continue to be volatile going forward. Our financial results may vary significantly from period to period depending on the level of development activities and the size, frequency and timing of our securities offerings. The financial results may fluctuate as a result of a number of factors that may be outside of our control, which may cause the market price of our common shares to fall. For these reasons, comparing our operating results on a period-to-period basis may not be meaningful, and an investor should not rely on past results as an indication of future performance. Financial results may be negatively affected by any of the risk factors listed in this Risk Factors section. Our results of operations will depend upon numerous factors, including: the successful development and commercialization of the single-port robotic surgical system in a timely manner and in accordance with budgeted expenditures; actions relating to regulatory matters; timing and ability to develop manufacturing and sales and marketing capabilities; demand for robotic surgical systems in general; the extent to which our products gain market acceptance; the progress of surgical training in the use of products; ability to develop, introduce and market new or enhanced versions of our products on a timely basis; product quality problems or alleged product quality problems; ability to protect proprietary rights and defend against third party challenges; and ability to license additional intellectual property rights as required. Fluctuations in foreign currency exchange rates may adversely affect our financial results. We conduct operations principally in the U.S. and Canada, and portions of our expenses, assets and liabilities are denominated in U.S. dollars and Canadian dollars. Since our consolidated financial statements are presented in U.S. dollars, we must translate our expenses, as well as assets and liabilities, into U.S. dollars at exchange rates in effect during or at the end of each reporting period. We have not historically hedged our exposure to foreign currency fluctuations. Accordingly, increases or decreases in the value of the Canadian dollar against the U.S. dollar could affect our operating losses and the value of balance sheet items denominated in foreign currencies. We may not be able to maintain our status as a Foreign Private Issuer . In order to maintain our status as a foreign private issuer, a majority of our Common Shares must be either directly or indirectly owned by non-residents of the U.S. unless we also satisfy one of the additional requirements necessary to preserve this status. We may in the future lose our foreign private issuer status if a majority of our Common Shares are held in the United States and if we fail to meet the additional requirements necessary to avoid loss of our foreign private issuer status. The regulatory and compliance costs under U.S. federal securities laws as a U.S. domestic issuer may be significantly more than the costs incurred as a Canadian foreign private issuer eligible to use the MJDS. If we are not a foreign private issuer, we would not be eligible to use the MJDS or other foreign issuer forms and would be required to file periodic and current reports and registration statements on U.S. domestic issuer forms with the SEC, which are more detailed and extensive than the forms available to a foreign private issuer. In addition, we may lose the ability to rely upon exemptions from Nasdaq corporate governance requirements that are available to foreign private issuers. We are an emerging growth company and cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make it less attractive to investors. We are an emerging growth company as defined in the JOBS Act. We will continue to qualify as an emerging growth company until the earliest to occur of: (a) the last day of the fiscal year during which we had total annual gross revenues of US$1,070,000,000 or more; (b) the last day of our fiscal year following the fifth anniversary of the date of the first sale of our common equity securities pursuant to an effective registration statement under the Securities Act, such as this registration statement; (c) the date on which we, during the previous 3-year period, issued more than US$1,000,000,000 in non-convertible debt; or (d) the date on which we are deemed to be a large accelerated filer. For so long as we continue to qualify as an emerging growth company, we will be exempt from the requirement to include an auditor attestation report relating to internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act in our annual reports filed under the U.S. Exchange Act, as amended, even if we do not qualify as a smaller reporting company, as well as certain other exemptions from various reporting requirements that are applicable to other public companies. 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 shares will depend, in part, on the research and reports that securities or industry analysts publish about us or our business. If one or more of the analysts who cover us were to downgrade our common shares or publish inaccurate or unfavorable research about our business, our share price would likely decline. In addition, if our operating results fail to meet the forecast of analysts, our share price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our common shares could decrease, which might cause our share price and trading volume to decline. We are likely a passive foreign investment company , which may have adverse U.S. federal income tax consequences for U.S. investors. We believe we were classified as a passive foreign investment company or PFIC during the tax year ended December 31, 2019, and based on current business plans and financial expectations, we expect that we may be a PFIC for the current tax year and future tax years. If we are a PFIC for any year during a U.S. taxpayer s holding period of Common Shares, then such U.S. taxpayer generally will be required to treat any gain realized upon a disposition of the Common Shares or any so-called excess distribution received on its Common Shares as ordinary income, and to pay an interest charge on a portion of such gain or distribution. In certain circumstances, the sum of the tax and the interest charge may exceed the total amount of proceeds realized on the disposition, or the amount of excess distribution received, by the U.S. taxpayer. Subject to certain limitations, these tax consequences may be mitigated if a U.S. taxpayer makes a timely and effective QEF Election (as defined below) or a Mark-to-Market Election (as defined below). Subject to certain limitations, such elections may be made with respect to the Common Shares. A U.S. taxpayer who makes a timely and effective QEF Election generally must report on a current basis its share of our net capital gain and ordinary earnings for any year in which we are a PFIC, whether or not we distribute any amounts to our shareholders. However, U.S. taxpayers should be aware that there can be no assurance that we will satisfy the record keeping requirements that apply to a qualified electing fund, or that we will supply U.S. taxpayers with information that such U.S. taxpayers require to report under the QEF Election rules, in the event that we are a PFIC and a U.S. taxpayer wishes to make a QEF Election. Thus, U.S. taxpayers may not be able to make a QEF Election with respect to their Common Shares. A U.S. taxpayer who makes the Mark-to-Market Election generally must include as ordinary income each year the excess of the fair market value of the Common Shares over the taxpayer s basis therein. This paragraph is qualified in its entirety by the discussion below under the heading Certain United States Federal Income Tax Considerations Passive Foreign Investment Company Rules. Each potential investor who is a U.S. taxpayer should consult its own tax advisor regarding the tax consequences of the PFIC rules and the acquisition, ownership, and disposition of the Common Shares.

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+risk factors, including risks relating to our ability to begin to generate revenue, to generate positive cash flow, our relationships with third parties, and many other factors. We will attempt to minimize these impacts, but there can be no assurance that we will be successful in doing so. Risks Related to Our Business and Our Need for Financing Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern. In its audit opinion issued in connection with our consolidated financial statements as of December 31, 2019 and 2018, our independent registered public accounting firm expressed substantial doubt about our ability to continue as a going concern given our limited working capital, recurring net losses and negative cash flows from operations. The accompanying condensed consolidated financial statements at June 30, 2020 have been prepared 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 condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts of liabilities that might be necessary should we be unable to continue in existence. While we have relied principally in the past on external financing to provide liquidity and capital resources for our operations, we can provide no assurance that cash generated from our operations together with cash received in the future from external financing, if any, will be sufficient to enable us to continue as a going concern. Our independent registered public accounting firm has identified material weaknesses in our financial reporting process. At December 31, 2019, our independent registered public accounting firm identified material weaknesses in our internal control over financial reporting. There can be no assurance that we will be able to successfully implement our plans to remediate the material weaknesses in our financial reporting process. Our failure to successfully implement our plans to remediate these material weaknesses could cause us to fail to meet our reporting obligations, to produce timely and reliable financial information, and to effectively prevent fraud. Additionally, such failure, or other weaknesses that we may experience in our financial reporting process or other internal controls, could cause investors to lose confidence in our reported financial information, which could have a negative impact on our financial condition and stock price. We have a history of net losses; we expect to continue to incur net losses and we may never achieve or maintain profitability. Since our formation on February 10, 1987 through the end of our most recent fiscal quarter ended June 30, 2020, we have generated only negligible operating revenues. For the six months ended June 30, 2020, our net loss was $1,762,855 and as of June 30, 2020, we had an accumulated deficit of $168,271,940. We have not generated any revenue from product sales to date, we do not expect to generate revenue in the near term, and it is possible that we will never generate revenues from product sales in the future. Even if we do achieve significant revenues from product sales, we expect to continue to incur significant net losses over the next several years. As with other biopharmaceutical companies, it is possible that we will never achieve profitable operations. We will need additional capital in the near term and the future and, if such capital is not available on terms acceptable to us or available to us at all, we may be unable to continue our business operations. We require additional cash resources for basic operations and will require substantial additional funds to advance our research and development programs and to continue our operations, particularly if we try to independently conduct later-stage clinical testing and apply for regulatory approval of any of our product candidates, and if we try to independently undertake the marketing and promotion of our product candidates if they are approved for commercialization. Additionally, we may require additional funds in the event that we decide to pursue strategic acquisitions of or licenses to use other products or businesses. Our existing cash resources will not be sufficient to meet our requirements for the rest of 2020, and any net cash proceeds that we are able to generate through the exercise of our put right under the Purchase Agreement, by itself, will be insufficient to continue our operations. We also need additional capital in the near term to fund ongoing operations, including basic operations. Additional funds may come from the sale of common equity, preferred equity, convertible preferred equity or equity-linked securities, debt, including debt convertible into equity, or may result from agreements with larger pharmaceutical, biopharmaceutical, biotechnology, specialty pharmaceutical, or other healthcare companies that include the license or rights to the technologies and product candidates that we are currently developing, although there is no assurance that we will secure any such funding or other transaction in a timely manner, or at all. As a result, our outstanding shares of Common Stock may be significantly diluted and/or subject to senior rights of preferred equity holders. Our cash requirements in the future may differ significantly from our current estimates, depending on a number of factors, including: our ability to raise equity or debt capital, or our ability to obtain in-kind services which may be more difficult during the COVID-19 pandemic; the results of any preclinical studies and clinical trials we may conduct; the time and costs involved in obtaining regulatory approvals; the costs of setting up and operating our own marketing and sales organization; the ability to obtain funding under contractual and licensing agreements or grants; the costs involved in obtaining and enforcing patents or engaging in litigation with third parties regarding intellectual property; the costs involved in meeting our contractual obligations including employment agreements; and our success in entering into collaborative relationships with other parties. To finance our future activities, we may seek funds through additional rounds of financing, including private or public equity or debt offerings and collaborative arrangements with corporate partners. We may also seek to exchange or restructure some of our outstanding securities to provide liquidity, strengthen our balance sheet and provide flexibility. We cannot say that any of these measures will be successful, or that we will be able to obtain the additional needed funds on reasonable terms, or at all. The sale of additional equity or convertible debt securities could result in additional and possibly substantial dilution to our stockholders. If we issued preferred equity or debt securities, these securities could have rights superior to holders of our Common Stock, and such instruments entered into in connection with the issuance of securities could contain covenants that will restrict our operations. We might have to obtain funds or in-kind services through arrangements with collaborative partners or others that may require us to relinquish certain or all rights to certain of our technologies, product candidates or products that we otherwise would not relinquish. If adequate funds are not available in the future, as required, we could lose our key employees and might have to further delay, scale back or eliminate one or more of our research and development programs, which would impair our future prospects. In addition, we may be unable to meet our research spending obligations under our existing licensing agreements and may be unable to continue our business operations. Common Stock reserve requirements may restrict our ability to raise capital and continue to operate our business Common Stock reserve requirements may restrict our ability to raise capital and continue to operate our business. We have received temporary waivers of certain of the Common Stock reserve requirements associated with certain of our convertible notes and certain related warrants. These waivers are necessary to ensure that we do not default on such notes or the terms of such warrants while we are seeking to increase the number of authorized shares of our Common Stock. As of September 30, 2020 taking into account the waivers and the transactions effected on that date, the Company was required to reserve 251,011,042 shares of its authorized and unissued Common Stock with respect to such notes and warrants that were not subject to such waivers and after reserving for outstanding options and other outstanding warrants, and had 422,157,997 shares of authorized but unissued shares of Common Stock, including 87,036,986 authorized, unissued and unreserved shares of Common Stock available. If we breach the contractual reserve requirements we will be in default of such contractual obligations which may have material adverse consequences which may make it more difficult to raise additional necessary capital. The Company is seeking stockholder approval over a ten-to-one (10:1) reverse stock split and an increase in our authorized capital stock, both of which would provide the Company additional authorized but unissued and unreserved capital stock available for future issuances. See "Prospectus Summary—Recent Developments." Our product opportunities rely on licenses from research institutions and if we lose access to these technologies or applications, our business could be substantially impaired. Through our acquisition of Pier, we gained access to a pre-existing relationship between Pier and the University of Illinois at Chicago (the "UIC"). Effective in September 2014, the Company entered into an exclusive license agreement (the "UIC License Agreement") with the UIC, which gave the Company certain exclusive rights with respect to certain patents and patent applications in the United States and other countries claiming the use of dronabinol and other cannabinoids for the treatment of sleep-related breathing disorders, including sleep apnea. The UIC License Agreement obligates the Company to comply with various commercialization and reporting requirements and to make various royalty payments, including potential one-time and annual royalty payments, as well as payments upon the achievement of certain development milestones. The Company and UWMRF executed the UWMRF Patent License Agreement effective August 1, 2020 pursuant to which RespireRx licensed the intellectual property identified therein, including with respect to GABAkines. In consideration for the licenses granted, the Company will pay to UWMRF patent filing and prosecution costs, annual license maintenance fees, one-time milestone payments, and annual royalties. If we are unable to comply with the terms of these licenses, such as required payments thereunder, these licenses might be terminated. We may not be able to successfully develop and commercialize our product candidates and technologies. The development of our product candidates is subject to risks commonly experienced in the development of products based upon innovative technologies and the expense and difficulty of obtaining approvals from regulatory agencies. Drug discovery and development is time consuming, expensive and unpredictable. On average, only one out of many thousands of chemical compounds discovered by researchers proves to be both medically effective and safe enough to become an approved medicine. All of our product candidates are in the preclinical or early to mid-clinical stage of development and although we have previously completed certain Phase 2 trials, and although we are planning for additional preclinical and clinical trials, including potentially an advanced-clinical stage trial, we do not have any currently active trials. Accordingly, we will require significant additional funding for research, development and clinical testing of our product candidates, which may not be available on favorable terms or at all, before we are able to submit them to any of the regulatory agencies for clearances for commercial use. The process from discovery to development to regulatory approval can take several years and drug candidates can fail at any stage of the process. Late stage clinical trials often fail to replicate results achieved in earlier studies. We cannot be certain that we will be able to successfully complete any of our research and development activities. Even if we do complete our research and development activities, we may not be able to successfully market any of the product candidates or be able to obtain the necessary regulatory approvals or assure that healthcare providers and payors will accept our product candidates. We also face the risk that any or all of our product candidates will not work as intended or that they will be unsafe, or that, even if they do work and are safe, that our product candidates will be uneconomical to manufacture and market on a large scale. Due to the extended testing and regulatory review process required before we can obtain marketing clearance, we do not expect to be able to commercialize any therapeutic drug for several years, either directly or through our corporate partners or licensees. We may not be able to enter into the strategic alliances necessary to fully develop and commercialize our product candidates and technologies, and we will be dependent on our strategic partners if we do. We are seeking pharmaceutical company and other strategic partners to participate with us in the development of major indications for our cannabinoid and neuromodulator compounds. These relationships may be structured as agreements that would provide us with additional funds or in-kind services in exchange for exclusive or non-exclusive license or other rights to the technologies and products that we are currently developing. Competition between biopharmaceutical companies for these types of arrangements is intense. We cannot give any assurance that our discussions with candidate companies will result in an agreement or agreements in a timely manner, or at all. Additionally, we cannot assure you that any resulting agreement will generate sufficient revenues to offset our operating expenses and longer-term funding requirements. We may not be able to compete with other biopharmaceutical or pharmaceutical companies in research, development or the marketing our products. The pharmaceutical industry is characterized by intensive research efforts, rapidly advancing technologies, intense competition and a strong emphasis on proprietary therapeutics. Our competitors include many companies, research institutes and universities that are working in a number of pharmaceutical or biotechnology disciplines to develop therapeutic products similar to those we are currently investigating. Most of these competitors have substantially greater financial, technical, manufacturing, marketing, distribution or other resources than we do. In addition, many of our competitors have experience in performing human clinical trials of new or improved therapeutic products and obtaining approvals from the FDA and other regulatory agencies. We have no experience in conducting and managing later-stage clinical testing or in preparing applications necessary to obtain regulatory approvals. We expect that competition in this field will continue to intensify. Our patents and patent applications do not cover the entire world, thus limiting the potential exclusive commercialization of our products to those countries in which we have intellectual property protection. We are aware of at least one company that may be developing a product or product similar to one of our prospective products for our proposed indication in countries where we do not have intellectual property protection. Such company or companies may choose to compete with us in countries where we do have intellectual property protection and cause us to expend resources defending our intellectual property. A liberal regulatory environment or unenforced or poorly enforced regulations may encourage competition from non-drug products such as medical marijuana or dietary supplements and similar products containing cannabis-derived molecules making claims that would be competitive with our proposed regulatory-approved claims. Since our target markets are very large, there is a great deal of economic incentive for others to enter and compete in those markets. We must compete with other companies with respect to their research and development efforts and for capital and other forms of funding. An inability to compete would have a material adverse impact on our business operations. If our third-party manufacturers facilities do not follow current good manufacturing practices, our product development and commercialization efforts may be harmed. There are a limited number of manufacturers that operate under the FDA s and European Union s good manufacturing practices regulations and are capable of manufacturing products like those we are developing. Third-party manufacturers may encounter difficulties in achieving quality control and quality assurance and may experience shortages of qualified personnel. A failure of third-party manufacturers to follow current good manufacturing practices or other regulatory requirements and to document their adherence to such practices may lead to significant delays in the availability of products for clinical study or commercial use, the termination of, or the placing of a hold on a clinical study, or may delay or prevent filing or approval of marketing applications for our product candidates. In addition, we could be subject to sanctions, including fines, injunctions and civil penalties. Changing manufacturers may require additional clinical trials and the revalidation of the manufacturing process and procedures in accordance with FDA-mandated current good manufacturing practices and would require FDA approval. This revalidation may be costly and time consuming. If we are unable to arrange for third-party manufacturing of our product candidates, or to do so on commercially reasonable terms, we may not be able to complete development or marketing of our product candidates. We have announced a restructuring plan to facilitate the financing of our business initiatives. We may not achieve some or all of the expected benefits of our restructuring plan and the restructuring may adversely affect our business. As further discussed in the section titled "Management s Discussion and Analysis of Financial Condition and Results of Operations" in this prospectus, the Company is considering an internal restructuring plan that contemplates spinning out our two drug platforms under ResolutionRx and EndeavourRx into separate operating businesses or subsidiaries. The intent of this restructuring is to facilitate financing of the programs and platforms underlying ResolutionRx and EndeavourRx, and to better align our human resources with our clinical development strategy. Implementation of a restructuring plan is costly and disruptive to our business, and we may encounter unexpected costs while implementing the restructuring plan. Even if implemented, may not be successful in attracting the necessary sources of financing or recruiting the necessary human resources to achieve the intended results. As such, we may not be able to obtain the estimated benefits that are initially anticipated in connection with our restructuring in a timely manner or at all. We may need to undertake additional restructurings in the future. As a result of any restructuring, we may experience a loss of continuity, loss of accumulated knowledge and/or inefficiency during transitional periods and may lose momentum in the development of our product candidates. Additionally, reorganization and restructuring can require a significant amount of management and other employees time and focus, which may divert attention from operating and growing our business. Any failure to properly execute the restructuring plans could result in total costs that are greater than expected and cause us not to achieve the expected long-term operational benefits, and might adversely affect our financial condition, operating results and future operations. Our ability to use our net operating loss carry forwards will be subject to limitations upon a change in ownership, which could reduce our ability to use those loss carry forwards following any change in Company ownership. Generally, a change of more than 50% in the ownership of a Company s stock, by value, over a three-year period constitutes an ownership change for U.S. federal income tax purposes. An ownership change may limit our ability to use our net operating loss carry forwards attributable to the period prior to such change. We have sold or otherwise issued shares of our Common Stock in various transactions sufficient to constitute an ownership change. As a result, if we earn net taxable income in the future, our ability to use our pre-change net operating loss carry forwards to offset U.S. federal taxable income will be subject to limitations, which would restrict our ability to reduce future tax liability. Future shifts in our ownership, including transactions in which we may engage, may cause additional ownership changes, which could have the effect of imposing additional limitations on our ability to use our pre-change net operating loss carry forwards. 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 interests and similar matters. We have not adopted any corporate governance measures, since our securities are not yet listed on a national securities exchange and we are not required to do so. We have not adopted corporate governance measures such as separate audit or other independent committees of our Board as we presently have only one independent director. If we expand our board membership in future periods to include additional independent directors, we may seek to establish an audit and other committees of our Board. It is possible that if our Board included additional independent directors and 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. 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. Risks Related to this Offering The Selling Stockholder will pay less than the then-prevailing market price for our Common Stock. Our Common Stock to be sold to the Selling Stockholder pursuant to the Purchase Agreement will be purchased at a price equal to eighty-five percent (85%) of the lowest daily volume weighted average price during a pricing period of five consecutive trading days prior to the date that the Selling Stockholder purchases and pays for such shares. The Selling Stockholder has a financial incentive to sell our Common Stock immediately upon receiving the shares to realize the profit equal to the difference between the discounted price and the market price, and will have the right and ability to sell the shares during the pricing period. If the Selling Stockholder sells the shares, the price of our Common Stock could decrease. Regardless of whether our stock price decreases, the Selling Stockholder may continue to have incentive to sell the shares of our Common Stock that it holds, due to the ongoing discount. These sales may have a further downward impact on our stock price. If the price of our Common Stock falls to par value of $0.001 per share, we may be unable to utilize the put options and access the equity line. We may not be able to access sufficient funds under the Purchase Agreement when needed. Our ability to put shares to the Selling Stockholder and obtain funds under the Purchase Agreement is limited by the terms and conditions in the Purchase Agreement, including restrictions on when we may exercise our put right, restrictions on the amount we may put to the Selling Stockholder at any one time, which is determined in part by the trading volume of our Common Stock, and a limitation on our ability to put shares to the Selling Stockholder to the extent that it would cause the Selling Stockholder to beneficially own more than 4.99% of our outstanding shares. In addition, we do not expect the commitment under the Purchase Agreement to satisfy all of our funding needs, even if we are able and choose to take full advantage of the commitment. The Selling Stockholder may sell a large number of shares under the Purchase Agreement, causing dilution and downward pricing pressure. Although the Purchase Agreement contains a beneficial ownership limitation that provides that the Selling Stockholder is not obligated to purchase shares thereunder to the extent such purchase would result in the Selling Stockholder or its affiliates beneficially owning more than 4.99% of our Common Stock at any one time, such limitation does not prevent the Selling Stockholder from selling shares of our Common Stock received in connection with a put exercise, and then receiving additional shares of our Common Stock in connection with a subsequent put exercise. In this way, the Selling Stockholder could sell more than 4.99% of the outstanding Common Stock in a relatively short time frame while never holding more than 4.99% at one time. Large issuances to the Selling Stockholder under the Purchase Agreement could cause significant dilution, and the resulting high volume of sales by the Selling Stockholder could put further downward pressure on the trading price of our Common Stock. We will, however, have complete control over when, or if, to exercise our put right. Risks Related to the Trading and Ownership of our Common Stock and our Capital Structure Our stock price is volatile and our Common Stock could decline in value. Our Common Stock is currently quoted for public trading on the OTCQB Venture Market. The trading price of our Common Stock has been subject to wide fluctuations and may fluctuate in response to a number of factors, many of which will be beyond our control. The market price of securities of life sciences companies in general has been very unpredictable. Broad market and industry factors may adversely affect the market price of our Common Stock, regardless of our operating performance. In the past, following periods of volatility in the market price of a company s securities, securities class-action litigation has often been instituted. Such litigation, if instituted, could result in substantial costs for us and a diversion of management s attention and resources. The range of sales prices of our Common Stock for the period between January 1, 2020 and September 30, 2020 and the fiscal year ended December 31, 2019, as quoted on the OTCQB, was $0.0033 to $0.1499 and $0.0771 to $0.8500, respectively. The following factors, in addition to factors that affect the market generally, could significantly affect our business, and may cause volatility or a decline in the market price of our Common Stock: competitors announcing technological innovations or new commercial products; competitors publicity regarding actual or potential products under development; regulatory developments in the United States and foreign countries; legal developments regarding cannabinoids and cannabis products in the United States and foreign countries; developments concerning proprietary rights, including patent litigation; public concern over the safety of therapeutic products; changes in healthcare reimbursement policies and healthcare regulations; future issuances and sales of our Common Stock, including pursuant to conversions of our outstanding convertible instruments and this offering; our Common Stock being delisted from the OTCQB; and failure to raise additional needed funds. At times, our Common Stock is thinly traded and you may be unable to sell some or all of your shares at the price you would like, or at all, and sales of large blocks of shares may depress the price of our Common Stock. Our Common Stock has historically been sporadically or "thinly" traded, meaning that the number of persons interested in purchasing shares of our Common Stock at prevailing prices at any given time may be relatively small or non-existent. Recently, our Common Stock has been more "broadly" traded, meaning that it has been trading in higher volumes; however, there can be no assurance that this attribute will continue. As a consequence, there may be periods of several days or more when trading activity in shares of our Common Stock is minimal or non-existent, as compared to a seasoned issuer that has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. This could lead to wide fluctuations in our share price. You may be unable to sell our Common Stock at or above your purchase price, which may result in substantial losses to you. Also, as a consequence of this lack of liquidity, the trading of relatively small quantities of shares by our stockholders may disproportionately influence the price of shares of our Common Stock in either direction. The price of shares of our Common Stock could, for example, decline precipitously in the event a large number of shares of our Common Stock are sold on the market without commensurate demand, as compared to a seasoned issuer which could better absorb those sales with a lesser or no adverse impact on its share price. Future sales could depress the market price for our Common Stock. If we issue additional equity or equity-based securities, the number of shares of our Common Stock outstanding could increase substantially, which could substantially dilute the holdings of existing stockholders, adversely affect the prevailing market price of our Common Stock and make it more difficult for us to raise funds through future offerings of Common Stock. As of September 30, 2020, we had 577,842,003 shares of our Common Stock outstanding, and we are registering the resale of up to 115,000,000 shares of Common Stock under the registration statement of which this prospectus forms a part. As of the date of this prospectus, none of the 115,000,000 shares are included in the number of outstanding shares of Common Stock as of September 30, 2020. If all warrants and options outstanding as of September 30, 2020 were exercised prior to their respective expiration dates, up to 288,093,580 additional shares of our Common Stock could become freely tradable. As of September 30, 2020, there were remaining outstanding convertible notes totaling $538,224 inclusive of accrued interest. Of that amount, $497,009 was convertible into 47,239,857 shares of Common Stock and the remainder into an indeterminate number of shares of Common Stock as such notes may convert, at the option of each note holder, acting separately and independently of the other note holders, into the next exempt private securities offering of equity securities. As is referenced elsewhere in this filing, parties to which we have issued such convertible instruments include Power Up Lending Group Ltd., Crown Bridge Partners, LLC, FirstFire Global Opportunities Fund LLC, EMA Financial, LLC, and the Selling Stockholder. A large percentage of the Company s shares are held by a few stockholders, some of whom are affiliated with members of the Company s management and our board of directors. As these principal stockholders substantially control the Company s corporate actions, our other stockholders may face difficulty in exerting any influence over matters not supported by these principal stockholders. The Company s principal stockholders include (i) the Arnold Lippa Family Trust of 2007 (the "Lippa Trust"), (ii) the Jeff Eliot Margolis 2016 Trust, (iii) the Jeff Eliot Margolis Trust for the Benefit of Matthew Shane Margolis, (iv) Jeff Eliot Margolis Trust for the Benefit of Emily Alexa Margolis, (v) Dawn Gross Margolis 2016 Trust, (vi) Dawn Gross Margolis Trust for the Benefit of Matthew Shane Margolis, and (vii) Dawn Gross Margolis Trust for the Benefit of Emily Alexa Margolis (collectively, (ii), (iii), (iv), (v), (vi) and (vii) the "Margolis Trusts" and with the Lippa Trust, the "Trusts"). The trustee of the Margolis trusts is the spouse of Jeff E. Margolis. Mr. Margolis, the Company s Senior Vice President, Chief Financial Officer, Treasurer and Secretary, is affiliated with the Margolis Trusts and may be deemed to have an indirect beneficial ownership interest in the stock owned by the Trusts. Arnold S. Lippa is neither the trustee nor the beneficiary of the Lippa Trust. In addition, Timothy L. Jones, the Company s President and Chief Executive Officer and a director, owns 4,409,063 shares of Common Stock. As of September 30, 2020, these principal stockholders collectively owned 225,175,088 shares of Common Stock and warrants to purchase an additional 216,100,903 shares of Common Stock. These stockholders, acting individually or as a group, may be able to exert control or significant influence over matters such as electing directors, amending the Certificate of Incorporation or Bylaws, or approving mergers or other business combinations or transactions. In addition, because of the percentage of ownership and voting concentration in these principal stockholders, elections of the directors on the Board may be within the control of these stockholders. While all of the Company s stockholders are entitled to vote on matters submitted to the Company s stockholders for approval, the concentration of shares and voting influence or control presently lies with these principal stockholders. As such, it would be difficult for stockholders to propose and have approved proposals not supported by these principal stockholders. There can be no assurance that matters voted upon by the Company s officers and directors in their capacity as stockholders will be viewed favorably by all stockholders of the Company. The stock ownership of the Company s principal stockholders may discourage a potential acquirer from seeking to acquire shares of the Company s common stock which, in turn, could reduce the Company s stock price or prevent the Company s stockholders from realizing a premium over the Company s stock price. Our Certificate of Incorporation, Series H Preferred Stock and other governing documents may prevent or delay an attempt by our stockholders to replace or remove management. Certain provisions of our Certificate of Incorporation could make it more difficult for a third party to acquire control of our business, even if such change in control would be beneficial to our stockholders. Our Certificate of Incorporation allows the Board to issue up to 5,000,000 shares of preferred stock, with characteristics to be determined by the Board, without stockholder approval. The ability of our Board to issue additional preferred stock may have the effect of delaying or preventing an attempt by our stockholders to replace or remove existing directors and management. Historically, warrants to purchase Common Stock have been issued as compensation for professional services, typically related to fund raising or in connection with the issuance of promissory notes. In addition, certain executive officers, members of the Board and certain vendors have offered to forgive accrued compensation and other amounts due to them, and the Board accepted such offers in exchange for either shares of Common Stock, options to purchase Common Stock, or preferred stock convertible into Common Stock. Specifically, in fiscal year 2020, three officers and directors of the Company exchanged the right to receive payment of accrued compensation in return for shares of Common Stock and for shares of Series H 2% Voting, Non-Participating, Convertible Preferred Stock ("Series H Preferred Stock"), which entitles these officers to that number of votes equal to two times the number of Common Stock into which such holder s Series H Preferred Stock would be convertible. All such outstanding shares of Series H Preferred Stock have been fully converted into shares of Common Stock and warrants to purchase shares of Common Stock. If executive officers offer and if the Board accepts such offers in the future, a significant number of shares of Common Stock or one or more options to purchase, or shares of preferred stock convertible into, a significant number of shares of Common Stock could be issued or granted. The ability of our Board to issue additional shares of Common Stock, options to purchase shares of Common Stock, warrants to purchase shares of Common Stock, or preferred stock convertible into Common Stock may have the effect of delaying or preventing an attempt by our stockholders to replace or remove existing directors and management. Our Common Stock is deemed a "penny stock," which a broker-dealer may find more difficult to trade and an investor may find more difficult to acquire or dispose of in the secondary market. Our Common Stock is subject to the so-called "penny stock" rules. The SEC has adopted regulations that define a "penny stock" to be any equity security that has a market price per share of less than $5.00, subject to certain exceptions, such as any securities listed on a national securities exchange. For any transaction involving a "penny stock," unless exempt, the rules impose additional sales practice requirements on broker-dealers, subject to certain exceptions. If our Common Stock remains a "penny stock," a broker-dealer may find it more difficult to trade our Common Stock and an investor may find it more difficult to acquire or dispose of our Common Stock on the secondary market. Recently, our Common Stock has been trading below a penny. Many broker-dealers do not accept for deposit shares of common stock that trade below a penny, and those that do accept such shares for deposit place limitations on the deposit or charge higher fees associated with the deposit, the transactions in the shares of common stock or with respect to the account in general. Taking these additional factors together, and investor may find it even more difficult to acquire or dispose of our Common Stock. We may issue additional shares of our Common Stock, and investment in our company is likely to be subject to substantial dilution. Investors interests in the Company will be diluted and investors may suffer dilution in their net book value per share when we issue additional shares, including pursuant to this offering. Dilution is the difference between what investors pay for their stock and the net tangible book value per share immediately after the additional shares are purchased. We are authorized to issue up to 1,000,000,000 shares of Common Stock and our Board has authorized an increase to 2,000,000,000, subject to stockholder approval. Our financing activities in the past focused on convertible note financing that requires us to issue shares of Common Stock to satisfy principal, interest and any applicable penalties related to these convertible notes. When required under the terms and conditions of the convertible notes, we issue additional shares of Common Stock that have a dilutive effect on our stockholders. We anticipate that all or at least a substantial portion of our future funding, if any, will be in the form of equity financing from the sale of our Common Stock and so any investment in the Company will likely be diluted, with a resulting decline in the value of our Common Stock. Additional financing may not be available on terms acceptable to us, and our ability to raise capital through equity financing may be limited by the number of authorized shares of our Common Stock. In order to raise significant additional amounts from equity financing, we will need to seek stockholder approval to amend our Certificate of Incorporation to increase the number of authorized shares of our Common Stock, and any such amendment would require the approval of the holders of a majority of the outstanding shares of our Common Stock. If we are unable to obtain needed financing on acceptable terms, we may not be able to implement our business plan, which could have a material adverse effect on our business, financial condition, results of operations and prospects. Our Common Stock may be subject to removal from the OTC Markets OTCQB quotation service if our stock closes at a price below $0.01 for a period of 90 days. Our Common Stock currently trades, and for a period in excess of 30 calendar days has traded, below $0.01 per share on the OTCQB Venture Market. To continue to meet the OTCQB Venture Market Standards for Continued Eligibility for OTCQB as per the OTCQB Standards, Section 2.3(2), our Common Stock must have a closing bid of $0.01 per share for more for 10 consecutive trading days. We have received an extension of time until December 10, 2020 to cure the deficiency. If we do not cure the deficiency, our Common Stock would no longer be eligible to trade on the OTCQB Venture Market. A downgrade to a lower OTC Pink market would likely have a material adverse impact on the trading of our Common Stock because fewer brokerage firms would be making markets in our Common Stock or eligible to transact business in our Common Stock. Stocks that trade on OTC Pink are often considered to be stocks of companies in financial distress, not current or less transparent in their financial reporting. Management believes that strategies are available to bring the Company s stock price back into compliance, including potentially effectuating a reverse share split, although there is no assurance that any of those strategies will have the desired result. The Company is seeking stockholder approval for a ten-to-one (10:1) reverse stock split. See "Prospectus Summary—Recent Developments." Furthermore, we may not issue shares for consideration of less than par value of $0.001, and should the share price of our Common Stock fall below par value, our ability to exercise put options to the Selling Stockholder would be materially impacted, which could render the equity line unavailable to us and impact our operations. Delaware law, our Certificate of Incorporation and our Bylaws provides for the indemnification of our officers and directors at our expense, and correspondingly limits their liability, which may result in a major cost to us and hurt the interests of our shareholders because corporate resources may be expended for the benefit of officers and/or directors. Our Certificate of Incorporation and By-Laws of the Company, as amended (the "Bylaws") include provisions that eliminate the personal liability of our directors for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director s duty of loyalty to the Company or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. These provisions eliminate the personal liability of our directors and our shareholders for monetary damages arising out of any violation of a director of his fiduciary duty of due care, but do not affect a director s liabilities under the federal securities laws or the recovery of damages by third parties. We do not intend to pay cash dividends on any investment in the shares of stock of our Company and any gain on an investment in our Company will need to come through an increase in our stock s price, which may never happen. We have never paid any cash dividends and currently do not intend to pay any cash dividends for the foreseeable future. To the extent that we require additional funding currently not provided for, our funding sources may prohibit the payment of a dividend. Because we do not currently intend to declare dividends, any gain on an investment in our Company will need to come through an increase in our Common Stock s price. This may never happen, and investors may lose all of their investment in our Company. FINRA sales practice requirements may also limit a stockholder s ability to buy and sell our stock. In addition to the "penny stock" rules described above, the Financial Industry Regulatory Authority ("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. 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. Costs and expenses of being a reporting company under the Exchange Act are substantial and prevent us from achieving profitability. We are subject to the reporting requirements of the Exchange Act and aspects of the Sarbanes-Oxley Act. We expect that the requirements of these rules and regulations will continue to comprise a substantial portion of our legal, accounting and financial compliance costs, and to make some activities more difficult, time-consuming and costly, placing significant strain on our personnel, systems and resources. If we fail to remain current on our reporting requirements, we could be removed from the OTCQB, which would limit the ability of broker-dealers to sell our Common Stock and the ability of stockholders to sell their Common Stock in the secondary market. Companies trading on the OTCQB must be reporting issuers under Section 12 of the Exchange Act, and must be current in their filings under the Exchange Act to maintain price quotation privileges on the OTCQB. If we fail to remain current on our reporting requirements, we could be removed from the OTCQB and be forced to be traded on the OTC Pink Sheets, which requires a more challenging stock purchase process. As a result, the liquidity for our Common Stock could be adversely affected by limiting the ability of broker-dealers to sell our common stock and the ability of stockholders to sell their Common Stock in the secondary market. The OTCQB is recognized by the SEC as an established public market. The OTC Pink Sheets is the lowest and most speculative tier of the three marketplaces for the trading of over-the-counter stocks. OTC Pink Sheets shares generally trade thinly and infrequently making it hard to buy or sell when the investor wants to complete a transaction. Accordingly, the market for our Common Stock would be significantly diminished if we were forced to trade on the OTC Pink Sheets market. There could be unidentified risks involved with an investment in our securities. The foregoing risk factors are not a complete list or explanation of the risks involved with an investment in the securities. Additional risks will likely be experienced that are not presently foreseen by the Company. Prospective investors must not construe this the information provided herein as constituting investment, legal, tax or other professional advice. Before making any decision to invest in our securities, you should read this entire prospectus and consult with your own investment, legal, tax and other professional advisors. An investment in our securities is suitable only for investors who can assume the financial risks of an investment in the Company for an indefinite period of time and who can afford to lose their entire investment. The Company makes no representations or warranties of any kind with respect to the likelihood of the success or the business of the Company, the value of our securities, any financial returns that may be generated or any tax benefits or consequences that may result from an investment in the Company.

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+RISK FACTORS Investing in our securities involves a high degree of risk. You should consider carefully the risks and uncertainties described below, and incorporated by reference herein, together with all of the other information in, or incorporated by reference in, this prospectus, including our financial statements and related notes incorporated by reference herein, before making an investment decision. If any of these risks occur, our business, financial condition, results of operations and prospects could be materially and adversely affected. In that event, the trading price of our Common Stock could decline and you could lose part or all of your investment. We have a history of operating losses, and we may not be able to achieve or sustain profitability. In addition, we may be unable to continue as a going concern. We have a limited operating history. We are not profitable and have incurred losses since our inception. Management concluded that substantial doubt exists about our ability to continue as a going concern as a result of anticipated capital needs as well as past recurring losses and an accumulated deficit. Our independent registered public accounting firm also included an explanatory paragraph in its report on our consolidated financial statements as of and for the year ended December 31, 2019 with respect to this uncertainty. Our accumulated deficit was $680.2 million as of March 31, 2020, and our working capital was $26.9 million as of March 31, 2020. We believe that our existing cash and cash equivalents, together with cash received from product and instrument sales and leases will be sufficient to meet our anticipated cash needs into the fourth quarter of 2020. We expect to continue to incur losses for the foreseeable future, and these losses will likely increase as we continue to develop and commercialize our products. We will continue to incur research and development and general and administrative expenses related to our operations, and sales and marketing expenses to support our commercial activities, as restructured. Even if we are successful in reducing our expenses or achieving profitability in the future, we may not be able to sustain profitability in subsequent periods. The coronavirus (COVID-19) pandemic has negatively impacted our operations. We have facilities located in the United States, Israel, Japan, and Italy. All of our facilities are in locations that are subject to, or have been subject to, stay-at-home or shelter-in-place orders. Our employees are working from home wherever possible. Our Senhance Systems are manufactured at a contract manufacturing facility in Milan. With the quarantine in Northern Italy, the assembly of new units has been disrupted. A variety of travel restrictions, have caused a delay in our product installation and training activities in recent weeks, and are expected to continue. Elective surgeries have been halted in the United States and Europe and only limited procedures are being done in Japan. This has significantly impacted our ability to place our Senhance Systems, provide training, and increase the use of the Senhance Systems in place. The global spread of COVID-19 and the various attempts to contain it have created significant volatility, uncertainty and economic disruption. The full extent to which the COVID-19 pandemic and the various responses to it impacts our business, operations and financial results will depend on numerous evolving factors that we may not be able to accurately predict, including: the duration and scope of the pandemic; governmental, business and individuals actions that have been and continue to be taken in response to the pandemic; the availability and cost to access the capital markets; the effect on our customers and customer demand for Senhance systems and the ability to provide training services; and disruptions or restrictions on our employees ability to work and travel. In addition, any preventative or protective actions that governments implement or that we take in respect of COVID-19, such as travel restrictions or stay-at-home orders, may interfere with the ability of our employees, vendors and contract manufacturers to perform their respective responsibilities and obligations relative to the conduct of our business. Such results could have a material adverse effect on our operations, business, financial condition, results of operations, or cash flows. We believe the COVID-19 pandemic will continue to harm our operations and negatively impact our ability to implement our market development efforts, which will have a negative effect on our financial condition. Table of Contents We announced a restructuring plan to reduce our operating expenses prior to the COVID-19 pandemic, and have instituted additional reductions in response to the COVID-19 pandemic. We may not achieve some or all of the expected benefits of our restructuring plan and the restructuring may adversely affect our business. Following the disappointing 2019 commercial results, we restructured our organization to focus on market development and increasing use of the Senhance System, rather than focusing on building our sales team. Our restructuring, which included employee reductions is designed to re-align our commercial organization through re-prioritization of certain geographical markets and to implement operational excellence through strategic reallocation of resources. The COVID-19 pandemic has caused, among other things, a global reduction in elective surgery which has had a significant impact on our market development activities. In addition, we have implemented salary reductions, canceled all 2020 trade show participation and significantly reduced our travel expenses in response to the COVID-19 pandemic s impact on our business. We may continue to encounter unexpected costs while implementing our restructuring and may not be successful in reducing our operating expenses as much as needed. We may undertake additional restructurings in the future. Implementation of a restructuring plan is costly and disruptive to our business, and we may not be able to obtain the estimated cost savings and benefits that were initially anticipated in connection with our restructuring in a timely manner or at all. Additionally, as a result of any restructuring, we may experience a loss of continuity, loss of accumulated knowledge and/or inefficiency during transitional periods. Reorganization and restructuring can require a significant amount of management and other employees time and focus, which may divert attention from operating and growing our business. Any failure to properly execute the restructuring plans could result in total costs that are greater than expected and cause us not to achieve the expected long-term operational benefits and adversely affect our financial condition, operating results and future operations. Under the restructuring plan, we determined that the carrying value of our inventory exceeded the net realizable value due to a decrease in expected sales. The restructuring charges amounted to $8.8 million for the year ended December 31, 2019, of which $7.4 million was an inventory write down based on management s estimates. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates. Significant items subject to such estimates and assumptions include identifiable intangible assets, contingent consideration, warrant liabilities, stock compensation expense, revenue recognition, accounts receivable reserves, excess and obsolete inventory reserves, inventory classification between current and non-current, and deferred tax asset valuation allowances. We cannot assure you that additional write downs or other charges related to any management estimates will not be needed. We will require substantial additional funding in the future, which may not be available to us on acceptable terms, or at all. We do not anticipate that the net proceeds of prior equity financings will be sufficient to support development of our products and product candidates and provide us with the necessary resources to commercialize the Senhance System and other products through the lengthy sales cycle. We intend to advance multiple additional products through clinical and pre-clinical development in the future. We believe we will need to raise substantial additional capital in order to continue our operations and achieve our business objectives. We have an effective shelf registration statement, that was declared effective on February 10, 2020 registering up to $150 million of our securities. As of the date of this prospectus, we had approximately $124 million available for future financings under such shelf registration statement, but we are subject to the rules governing smaller reporting companies and the use of a shelf registration statement. We cannot assure you that we will be successful in obtaining such additional financing on terms acceptable to the Company or at all. Our future funding requirements will depend on many factors, including, but not limited to: the costs of our Senhance System market development, commercialization and development activities; Table of Contents the costs and timing of seeking and obtaining FDA and other non-U.S. regulatory clearances and approvals for our products in development; the costs associated with our manufacturing capabilities; our need to expand our research and development activities; the costs of acquiring, licensing or investing in businesses, products and technologies; the economic and other terms and timing of our existing licensing arrangement and any collaboration, licensing or other arrangements into which we may enter in the future; the effect of competing technological and market developments; our need to implement additional internal systems and infrastructure, including financial and reporting systems, quality systems and information technology systems; and our ability to maintain, expand and defend the scope of our intellectual property portfolio. Until we generate a sufficient amount of revenue to finance our cash requirements, which may never occur, we expect to finance future cash needs primarily through public or private equity offerings, debt financings or strategic collaborations. We do not know whether additional funding will be available on acceptable terms, or at all. If we are not able to secure additional funding when needed, we may have to delay, reduce the scope of or eliminate one or more of our research and development programs. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience significant dilution; and debt financing, if available, may involve restrictive covenants that limit our operations. To the extent that we raise additional funds through collaboration and licensing arrangements, it may be necessary to relinquish some rights to our products or grant licenses on terms that may not be favorable to us. The exercise of our outstanding warrants will dilute stockholders and could decrease our stock price. The existence of our outstanding warrants, including the outstanding remaining Series B Warrants and the Series C Warrants and Series D Warrants, may adversely affect our stock price due to issuances of a large number of shares or the perception that such sales could occur. These factors also could make it more difficult to raise funds through future offerings of Common Stock or warrants, and could adversely impact the terms under which we could obtain additional equity capital. Exercise of outstanding warrants, or any future issuance of additional shares of Common Stock or other equity securities, including but not limited to options, warrants or other derivative securities convertible into our Common Stock, may result in significant dilution to our stockholders and may decrease our stock price. We identified a material weakness in our internal control over financial reporting related to our preparation, documentation and review of the income tax provision in accordance with GAAP. We may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, which may result in material misstatements of our financial statements or cause us to fail to meet our reporting obligations. In connection with the preparation of our consolidated financial statements for the year ended December 31, 2019, we identified a material weakness in our internal control over financial reporting related to our income tax provision and related accounting and disclosures. A material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. As of December 31, 2019, we did not maintain effective controls relating to the income tax accounting and disclosures for the significant components of deferred tax assets and liabilities related to a foreign non-recurring transaction, and such material weakness has not yet been remediated as of March 31, 2020. Based on this finding, management is implementing a remediation plan to address the control deficiency that led to the material weakness. The remediation plan includes implementing specific review procedures, including strengthening our income tax control with improved documentation standards, technical oversight and training. Table of Contents Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. If we are unable to successfully remediate our existing or any future material weakness in our internal control over financial reporting, or identify any additional material weaknesses that may exist, the accuracy and timing of our financial reporting may be adversely affected. Additionally, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports as well as applicable stock exchange listing requirements. We may be unable to prevent fraud, investors may lose confidence in our financial reporting, and our stock price may also decline. Our reporting obligations as a public company could place a significant strain on our management, operational and financial resources and systems for the foreseeable future and may cause us to fail to timely achieve and maintain the adequacy of our internal control over financial reporting. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate. Because of its inherent limitations, internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. As a result, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. We cannot assure you that the measures we are currently undertaking or may take in the future will be sufficient to maintain effective internal controls or to avoid potential future deficiencies in internal control, including material weaknesses. In addition, failing to maintain effective disclosure controls and internal controls over financial reporting could have a material and adverse effect on our business and operating results and could cause a decline in the price of our securities. Table of Contents

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+RISK FACTORS Investing in our securities involves a high degree of risk. You should carefully consider the following risks and uncertainties as well as the risks and uncertainties described in the section entitled "Risk Factors" contained in our Annual Report on Form 10-K for the year ended December 31, 2019, as amended, and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, as well as in our subsequent quarterly and annual reports filed with the SEC, which descriptions are incorporated in this prospectus by reference in their entirety. These risks and uncertainties are not the only risks and uncertainties we face. Additional risks and uncertainties not currently known to us, or that we currently view as immaterial, may also impair our business. If any of the risks or uncertainties described below or in our SEC filings or any additional risks and uncertainties actually occur, our business, financial condition, results of operations and cash flow could be materially and adversely affected. In that case, the trading price of our common stock could decline and you could lose all or part of your investment. You should carefully consider the following information about risks, together with the other information contained in this prospectus, before making an investment in our common stock. RISKS RELATING TO OUR COMMON STOCK, OUR WARRANTS AND THIS OFFERING Even if this offering and any potential debt financing are successful, we may require substantial additional capital in the future, which may not be available on acceptable terms or at all. If we are unable to raise additional capital when needed, we may be forced to delay, reduce and/or eliminate one or more of our commercialization initiatives, research and development programs, or other operations. Even if this offering and any potential debt financing are successful and we refinance our existing indebtedness, we may require substantial additional capital in the future for working capital, debt service, research and development and other needs. Accordingly, we may need to obtain substantial additional funding to maintain our continuing operations. We may attempt to raise additional funds through various sources, including the offering of additional equity securities or the incurrence of debt. Our ability to raise additional capital may be adversely impacted by potential adverse domestic or global economic conditions or disruptions to and volatility in the credit and financial markets, including those resulting from the ongoing COVID-19 pandemic. If we are unable to raise capital when needed or on acceptable terms, we may be forced to delay, reduce or eliminate one or more of our commercialization initiatives, research and development programs, market expansion or commercial partnership opportunities, or other operations. In addition, we may be unable to execute our growth strategy, and operating results may be adversely affected and potentially curtail operations. This is a best efforts offering. We may not raise the amount of capital we believe is required to pay all amounts due under the Convertible Notes (as well as IEH Biopharma's reasonable fees and expenses) and, if required, our 2024 Notes, and we may need to incur substantial indebtedness in order to raise sufficient capital. The Placement Agent has agreed to use its reasonable best efforts to solicit offers to purchase the securities in this offering. The Placement Agent has no obligation to buy any of the securities from us or to arrange for the purchase or sale of any specific number or dollar amount of the securities. Placement Agent fees and proceeds to us are not presently determinable and may be substantially less than the maximum amounts set forth above. We may sell fewer than all of the securities offered hereby, which may significantly reduce the amount of proceeds received by us. Accordingly, we may need to raise additional funds through debt financing, which may not be available or may not be available on terms acceptable to us. We do not intend to complete this offering if we are not able to raise an amount of funds from this offering and any other financing sources sufficient to pay all amounts due under the Convertible Notes (as well as IEH Biopharma's reasonable fees and expenses) and, if required, our 2024 Notes. Table of Contents The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and we are not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. Subject to Completion, dated June 19, 2020 Preliminary Prospectus 154,867,256 Shares of Common Stock Pre-Funded Warrants to Purchase up to 154,867,256 Shares of Common Stock Warrants to Purchase up to 154,867,256 Shares of Common Stock We are offering up to 154,867,256 shares of our common stock, par value $0.001 per share, or the common stock, and warrants to purchase up to 154,867,256 shares of common stock, or the common warrants. Each common warrant will have an exercise price of $ per share, will not be exercisable until we receive stockholder approval of an amendment to our amended and restated certificate of incorporation to increase the number of shares of our authorized common stock so as to permit the exercise in full of the common warrants and such amendment has become effective, and will expire five years from the date on which the common warrants become exercisable. We are also offering to certain purchasers whose purchase of shares of common stock in this offering would otherwise result in the purchaser, together with its affiliates and certain related parties, beneficially owning more than 4.99% (or, at the election of the purchaser, 9.99%) of our outstanding common stock immediately following the consummation of this offering the opportunity to purchase, if any such purchaser so chooses, pre-funded warrants, in lieu of shares of common stock that would otherwise result in such purchaser's beneficial ownership exceeding 4.99% (or, at the election of the purchaser, 9.99%) of our outstanding common stock. Each pre-funded warrant will be exercisable for one share of common stock and will be accompanied by a common warrant to purchase one share of common stock. The purchase price of each pre-funded warrant and the accompanying common warrant will be equal to the price at which a share of common stock and accompanying common warrant are sold to the public in this offering, minus $0.001, and the exercise price of each pre-funded warrant will be $0.001 per share. The pre-funded warrants will be immediately exercisable and may be exercised at any time until all of the pre-funded warrants are exercised in full. The shares of common stock and pre-funded warrants, on the one hand, and the accompanying common warrants, on the other hand, are immediately separable and will be issued separately, but can only be purchased together in this offering. This offering also relates to the shares of common stock issuable upon exercise of any pre-funded warrants sold in this offering. Our common stock is listed on The Nasdaq Global Select Market, or Nasdaq, under the symbol "VVUS." On June 17, 2020, the last reported sale price of our common stock on Nasdaq was $1.13 per share. There is no established trading market for the pre-funded warrants or common warrants, and we do not expect an active trading market to develop. We do not intend to apply to list the pre-funded warrants or common warrants on any securities exchange or other nationally recognized trading system. Without an active trading market, the liquidity of these warrants will be limited. You should read this prospectus, together with the additional information described under the headings "Incorporation of Certain Information by Reference" and "Where You Can Find Additional Information" carefully before you decide to invest in any of our securities. Investing in our securities involves a high degree of risk. See "Risk Factors" beginning on page 8 of this prospectus and in the documents incorporated by reference in this prospectus for a discussion of certain information that you should carefully consider in connection with an investment in our securities. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense. Per Share and Common Warrant Per Pre-Funded Warrant and Common Warrant Total Public offering price $ $ $ Placement Agent's fees(1) $ $ $ Proceeds to us, before expenses(2) $ $ $ Table of Contents If you purchase shares of common stock in this offering, you will experience immediate and substantial dilution in your investment. Since the price per share of our common stock being offered is substantially higher than the net tangible book value per share of our common stock, you will suffer immediate and substantial dilution with respect to the net tangible book value of the common stock you purchase in this offering. Based on the combined assumed public offering price of $1.13 per share of common stock and accompanying warrant being sold in this offering, which is the last reported sale price of our common stock on Nasdaq on June 17, 2020, assuming no sale of any pre-funded warrants and after deducting discounts and commissions and estimated offering expenses payable by us, if you purchase shares of common stock in this offering, you will suffer immediate and substantial dilution of $1.29 per share with respect to the net tangible book value of the common stock. See the section entitled "Dilution" for a more detailed discussion of the dilution you will incur if you purchase common stock in this offering. Our stock price has been and is expected to continue to be volatile. The market price of our common stock has been volatile and is likely to continue to be volatile. In addition, our common stock can trade in small volumes which may make the price of our stock highly volatile. The last reported price of our common stock may not represent the price at which you would be able to buy or sell shares of our common stock. The market prices for the stock of companies comparable to us have been highly volatile. Often, the market prices for the stock of companies comparable to us have experienced significant price and volume fluctuations for reasons that may be related or unrelated to the operating performance of the individual companies. In addition, like our common stock, securities of publicly traded companies generally and in the biotechnology and life science sectors in particular have experienced significant volatility, including for reasons that may be unrelated to the operating performance of the individual companies. Factors giving rise to the past or current and expected future volatility of our common stock may include: our ability to refinance our Convertible Notes and other indebtedness and comply with the terms of the restructuring support agreement with IEH Biopharma; the widespread domestic and global impact of the COVID-19 pandemic, including on our customers, suppliers and other counterparties, employees, and financial markets; our ability and that of our collaboration partners to meet the expectations of investors related to the production and commercialization of Qsymia, PANCREAZE and STENDRA/SPEDRA; our ability to meet the expectations of investors related to the commercialization of the VIVUS Healthcare Platform; our ability to obtain marketing authorization for our products in foreign jurisdictions, including authorization from the European Commission for Qsymia in the European Union; the costs, timing and outcome of post-approval clinical studies which FDA has required us to perform as part of the approval for Qsymia; the cost required to maintain the Risk Evaluation and Mitigation Strategy program for Qsymia; results within the clinical trial programs for Qsymia or other results or decisions affecting the development of our investigational drug candidates; announcements of technological innovations or new products by us or our competitors; approval of, or announcements of, other anti-obesity compounds in development; publication of generic drug combination weight loss data by outside individuals or companies; actual or anticipated fluctuations in our financial results; (1)We have agreed to reimburse H.C. Wainwright & Co., LLC, or the Placement Agent, for certain of its offering-related expenses, including a management fee of 1.0% of the gross proceeds raised in this offering. In addition, we have agreed to issue to designees of the Placement Agent or its affiliates warrants to purchase up to a number of shares of common stock equal to 6.0% of the number of the shares of common stock and pre-funded warrants sold in this offering at an exercise price equal to 125% of the public offering price of the common stock and related warrant. See "Plan of Distribution" for additional information and a description of the compensation payable to the Placement Agent. (2)We estimate the total expenses of this offering payable by us, excluding the Placement Agent's fees, will be approximately $ . We have engaged H.C. Wainwright & Co., LLC as our exclusive Placement Agent to use its reasonable best efforts to solicit offers to purchase the securities in this offering. The Placement Agent has no obligation to buy any of the securities from us or to arrange for the purchase or sale of any specific number or dollar amount of the securities. The actual public offering amount, placement agent fees, and proceeds to us, if any, are not presently determinable and may be substantially less than the total maximum offering amounts set forth above. The securities are expected to be delivered to purchasers on or about , 2020. H.C. Wainwright & Co. The date of this prospectus is , 2020 Table of Contents our ability to obtain needed financing; sales by insiders or major stockholders; economic conditions in the United States and abroad; the volatility and liquidity of the financial markets; comments by or changes in assessments of us or financial estimates by security analysts; negative reports by the media or industry analysts on various aspects of our products, our performance and our future operations; the status of the cardiovascular outcomes trial (CVOT) with respect to Qsymia and our related discussions with FDA; adverse regulatory actions or decisions; any loss of key management; deviations in our operating results from the estimates of securities analysts or other analyst comments; discussions about us or our stock price by the financial and scientific press and in online investor communities; trading activity by highly technical investors utilizing sophisticated algorithms and high frequency trading; investment activities employed by short sellers of our common stock; developments or disputes concerning patents or other proprietary rights; reports of prescription data by us or from independent third parties for our products; licensing, product, patent or securities litigation; and public concern as to the safety or efficacy of our drugs or future investigational drug candidates developed by us. The factors and fluctuations described above, as well as domestic and global macroeconomic, political and other market conditions, including those related to the COVID-19 pandemic, may adversely affect the market price of our common stock. Additionally, volatility or a lack of positive performance in our stock price may adversely affect our ability to retain or recruit key employees, all of whom have been or will be granted equity awards as an important part of their compensation packages. Our warrants are expected to become exercisable for shares of our common stock, which would increase the number of shares eligible for future resale in the public market and result in substantial dilution to stockholders. Each common warrant offered in this offering entitles the holder to purchase one share of our common stock, subject to adjustment, and is expected to become exercisable following our receipt of stockholder approval, if any, of an amendment to our amended and restated certificate of incorporation, or certificate of incorporation, to increase the number of shares of our authorized common stock so as to permit the exercise in full of the common warrants and placement agent's warrants and such amendment has become effective. To the extent such warrants are exercised, additional shares of common stock will be issued, which will result in dilution to the then existing holders of shares of our common stock and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of shares in the public market could adversely affect the market price of our shares of common stock, among other effects. Table of Contents If we issue additional shares of common stock in the future, you may experience immediate and substantial dilution and our stock price may decline. We may from time to time issue additional shares of common stock, or securities convertible into, exchangeable or exercisable for shares of common stock, including at a discount from the current market price of our common stock. Any sales of additional shares, without regard to the price of the shares sold, will result in additional dilution to our stockholders, including investors who purchase shares of common stock (or pre-funded warrants) and accompanying warrants in this offering, and may result in a significant decline in the price of our common stock. We also 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. Investors would experience immediate dilution upon the purchase of any shares of our common stock sold at a discount. In addition, the exercise of outstanding stock options and warrants by the holders of those options and warrants and the vesting of outstanding restricted stock units may result in further dilution of your investment. You will be unable to exercise the common warrants unless we receive stockholder approval and file an amendment to our certificate of incorporation. The common warrants issued in this offering will not be exercisable unless we receive stockholder approval of an amendment to our certificate of incorporation to increase the number of shares of our authorized common stock so as to permit the exercise in full of the common warrants and placement agent's warrants and such amendment has become effective. The common warrants will expire five years from the date on which the common warrants become exercisable. Following the completion of this offering, we expect to file a proxy statement for the solicitation of stockholder approval to amend our certificate of incorporation to increase the number of authorized shares of common stock to permit the exercise in full of the common warrants and placement agent's warrants. If we do not obtain stockholder approval for the increase in our number of authorized shares of common stock, the common warrants and placement agent's warrants will not be exercisable. In such a case, we intend, on a future date, to continue to solicit stockholder approval for the increase the number of authorized shares of common stock. There is no public market for the warrants being offered in this offering. There is no established public trading market for the pre-funded warrants or common warrants being offered in this offering, and we do not expect an active trading market to develop. In addition, we do not intend to apply to list the pre-funded warrants or common warrants on Nasdaq, any other securities exchange or any nationally recognized trading system. Without an active trading market, the liquidity of the pre-funded warrants and common warrants will be limited. Future sales of our common stock, or the possibility that such sales could occur, could adversely affect the market price of our common stock. Future sales in the public market of shares of our common stock, including shares we may offer in the future, as referred to in the foregoing risk factors, or shares issued upon exercise of stock options or warrants, or the perception by the market that these sales could occur, could lower the market price of our common stock or make it difficult for us to raise additional capital. Fluctuations in our operating results could adversely affect the price of our common stock. Our operating results may fluctuate significantly on a quarterly and annual basis and are difficult to predict. Our operating expenses are largely independent of sales in any particular period. We believe Table of Contents that our quarterly and annual results of operations may be negatively affected by a variety of factors. Some of the factors include, but are not limited to, the level of patient demand for Qsymia and PANCREAZE, the ability of our distribution partners to process and ship product on a timely basis, the success of our third-party's manufacturing efforts to meet customer demand, fluctuations in foreign exchange rates, investments in sales and marketing efforts to support the sales of Qsymia and STENDRA/SPEDRA, investments in the research and development efforts, and expenditures we may incur to acquire additional products. Period-to-period comparisons of our historical and future financial results may not be meaningful, and investors should not rely on them as an indication of future performance. Our fluctuating results may fail to meet the expectations of securities analysts or investors. If one or more of the analysts who cover us downgrade our stock, or if our results of operations do not meet their expectations, the trading price of our stock could decline. Holders of warrants purchased in this offering will have no rights as common stockholders until such holders exercise such warrants and acquire our common stock. Until holders of pre-funded warrants or common warrants acquire shares of our common stock upon exercise of such warrants (in the case of the common warrants, after these warrants have become exercisable), holders of pre-funded warrants or common warrants will have no rights with respect to the shares of our common stock underlying such warrants. Upon exercise of the pre-funded warrants or common warrants, the holders will be entitled to exercise the rights of a common stockholder only as to matters for which the record date occurs after the exercise date. Because we have not paid dividends on our common stock since our inception and may never pay dividends, you will benefit from an investment in our common stock only if our common stock appreciates in value. We have not paid any dividends on our common stock since our inception. We do not intend to declare or pay any dividends on our common stock in the foreseeable future and may never pay dividends. In addition, certain of our financing arrangements place restrictions on, and any future financing arrangements may further limit or prohibit, our ability to pay dividends. Any return to stockholders will therefore be limited to the appreciation in value of any shares of our common stock they may own. Significant holders or beneficial holders of our common stock may not be permitted to exercise pre-funded warrants or common warrants that they hold. The pre-funded warrants and common warrants being offered hereby will prohibit a holder from exercising its pre-funded warrants or common warrants if doing so would result in such holder (together with such holder's affiliates and any other persons acting as a group together with such holder or any of such holder's affiliates) beneficially owning more than 4.99% of our common stock outstanding immediately after giving effect to the exercise, provided that, at the election of a holder and notice to us, such beneficial ownership limitation as to such holder shall be up to 9.99% of our common stock outstanding immediately after giving effect to the exercise. As a result, if you hold a significant amount of our securities, you may not be able to exercise your pre-funded warrants or common warrants for shares of our common stock, in whole or in part, at a time when it would be financially beneficial for you to do so. The pre-funded warrants in this offering are speculative in nature. The pre-funded warrants in this offering do not confer any rights of ownership of our common stock on their holders, but rather merely represent the right to acquire shares of our common stock at a fixed price. In addition, following this offering, the market value of the pre-funded warrants, if any, is uncertain and there can be no assurance that the market value of the pre-funded warrants will equal or Table of Contents exceed their imputed offering price. The pre-funded warrants will be not listed or quoted for trading on any market or exchange. RISKS RELATING TO OUR INDEBTEDNESS, RESTRUCTURING AND FINANCIAL CONDITION We may incur substantial additional indebtedness in connection with or following the closing of this offering. Holders of our new and existing debt obligations will have priority over the holders of our common stock with respect to payment in the event of liquidation, dissolution or winding up and with respect to dividends. Such indebtedness could negatively affect the value of our common stock. We are currently in negotiations to refinance our existing debt and we may incur substantial additional indebtedness in connection with or following the closing of this offering. We do not intend to complete this offering if we are not able to raise a sufficient amount from this offering and any potential debt financing to pay all amounts due under the Convertible Notes (as well as IEH Biopharma's reasonable fees and expenses) and, if required, our 2024 Notes. However, we will not know until the completion of this offering how much we will raise through the issuance of common stock and warrants to purchase common stock and how much we will raise through the incurrence of indebtedness. We expect that, following the completion of this offering and any potential debt offering, we may have outstanding more than $125 million in aggregate indebtedness even after we pay our Convertible Notes (as well as IEH Biopharma's reasonable fees and expenses) and our 2024 Notes. If we incur such additional indebtedness, our existing stockholders and investors purchasing securities in this offering will be subject to risks arising in connection with such a substantial amount of indebtedness that may then be outstanding (including those described below). Our incurrence of indebtedness could negatively affect the market price of our common stock. Moreover, upon certain events of default under the terms of our existing and contemplated agreements and indentures governing our indebtedness, debt holders could exercise their rights under such agreements to accelerate the obligations thereunder. If repayment is accelerated, it would be unlikely that we would be able to repay the total then-outstanding amounts of indebtedness, including any interest. If we are unable to pay our debt when due, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional debt or equity capital on terms that may be onerous or highly dilutive. Our ability to restructure or refinance our indebtedness will depend on the condition of the capital markets and our financial condition at such time. We may not be able to undertake any of these alternatives or engage in these activities on acceptable terms, which could result in a default on our debt obligations. In addition, in the event of our insolvency or liquidation, holders of our common stock will not be entitled to receive any payment or other distribution of assets until after all of our obligations to our debt holders have been satisfied and holders of our debt have received any payments and other distributions due to them. If we complete a debt financing that we might enter into in connection with or following this offering, we will have a substantial amount of debt, which could adversely affect our business and financial position and, among other things, our ability to raise additional capital our ability to satisfy our financial obligations. If we complete a potential debt financing in connection with or following this offering, we will have a substantial amount of debt, which could adversely affect, among other things, our business and financial position, our ability to raise additional capital, and our ability to satisfy our financial Table of Contents obligations. Accordingly, the impact of the indebtedness may include, but may not be limited to, the following: make it difficult for us to satisfy our financial obligations, including with respect to any such indebtedness; limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions, or other general business purposes; require us to use a substantial portion of our cash flow from operations to make debt service payments instead of other purposes, thereby reducing the amount of cash flow available for future working capital, capital expenditures, acquisitions, or other general business purposes; limit our flexibility to plan for, or react to, changes in our business and industry; place us at a competitive disadvantage compared with our less-leveraged competitors; increase our vulnerability to the impact of adverse economic, competitive, and industry conditions; and increase our cost of borrowing. In addition, we expect that the agreements governing our potential debt financing will contain restrictive covenants that may limit our ability to engage in activities that may be in our long-term best interest. Our failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of all of our indebtedness outstanding after the completion of this offering and any debt financing. Furthermore, we may be able to incur substantial additional indebtedness in the future. If new indebtedness is added to our indebtedness outstanding after the completion of this offering and any debt financing, the risks relating to indebtedness that we will face could intensify. We may not be able to successfully refinance our debt, and if we are not able to repay our debt in full by June 30, 2020, our restructuring support agreement provides that existing stockholders will receive a pro rata cash payment and lose their entire equity interest in the Company. We do not intend to complete this offering if we are not able to raise an amount of funds from this offering and any other financing sources sufficient to pay all amounts due under the Convertible Notes (as well as IEH Biopharma's reasonable fees and expenses) and, if required, the 2024 Notes. However, if we are not able to complete the refinancing of the Convertible Notes by June 30, 2020, then pursuant to the terms of the restructuring support agreement, we will pursue a restructuring pursuant to a plan of reorganization and file petitions for voluntary relief under chapter 11 of the United States Bankruptcy Code on or before July 13, 2020, as described below. On April 29, 2020, we entered into an agreement with Icahn Enterprises Holdings L.P. (dba IEH Biopharma LLC), or IEH Biopharma, which held a principal amount of approximately $170.2 million of the Convertible Notes. In accordance with the terms of the agreement, we paid IEH Biopharma $3.8 million in accrued and unpaid interest on the Convertible Notes and IEH Biopharma granted us a 30-day grace period for the repayment of the principal amount of the Convertible Notes during which the two parties were to work exclusively to attempt to restructure the outstanding principal amount of the Convertible Notes. In addition, under the agreement, we settled approximately $11 million of outstanding principal amount of the Convertible Notes owed to all holders other than IEH Biopharma and approximately $4 million representing all accrued and unpaid interest payable and due on that date to all holders including IEH Biopharma. On May 31, 2020 we entered into a restructuring support agreement with IEH Biopharma as the sole holder of the Convertible Notes which, among other things, grants an extension of the grace Table of Contents period described above through July 13, 2020, subject to certain termination events. Under the agreement, we have until June 30, 2020 to complete a refinancing to pay in full in cash all amounts due and owing under the Convertible Notes (as well as IEH Biopharma's reasonable fees and expenses). In addition, we will continue to work with IEH Biopharma on an exclusive basis in respect of any restructuring, financing or other material transaction concerning us or our assets, other than such refinancing. In accordance with the terms of the restructuring support agreement, if we are unable to pay in full all amounts due under the Convertible Notes (as well as IEH Biopharma's reasonable fees and expenses) on or before June 30, 2020, we and IEH Biopharma will exclusively pursue, on or before July 13, 2020, an in court plan of reorganization consistent with the restructuring term sheet agreed to as part of the restructuring support agreement. The plan of reorganization remains subject to our filing of petitions for voluntary relief under the United States Bankruptcy Code, solicitation of votes, confirmation of the plan by the applicable bankruptcy court and other closing conditions. In the event certain conditions are satisfied under the plan of reorganization, our existing stockholders will receive (1) a pro rata share of $5 million and (2) a non-transferable contractual contingent value right to earn another $2 per share if certain financial milestones are met in 2021 and 2022. Additionally, IEH Biopharma will take 100% ownership of VIVUS. We have a history of losses and our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern. As of March 31, 2020, our accumulated deficit was approximately $917.2 million and our cash and cash equivalents were $32.9 million, which does not include net proceeds from a registered direct offering of our common stock completed in April 2020 in the amount of approximately $10.5 million. Even if we successfully restructure or refinance our existing debt obligations, we expect to continue to incur operating and net losses for the foreseeable future. Our independent registered public accounting firm's audit report on our consolidated financial statements set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, as amended, includes an explanatory paragraph stating that there is substantial doubt about our ability to continue as a going concern. Although our financial statements raise substantial doubt about our ability to continue as a going concern, they do not reflect any adjustments that might result if we are unable to continue our business. If we cannot continue as a viable entity, our stockholders may lose some or all of their investment in our company. Even if a financial restructuring or refinancing is consummated, whether by means of an out-of-court agreement or restructuring or an in-court restructuring, we will continue to face a number of risks, including our ability to repay our remaining debt, implement our strategic initiatives and bring our products to market. Accordingly, we cannot guarantee that the proposed financial restructuring will achieve our stated goals nor can we give any assurance of our ability to continue as a going concern. As a result of the substantial doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide additional funding to us on commercially reasonable terms or at all. Table of Contents

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+RISK FACTORS Exercising your rights and investing in our common stock involves risks. You should consider carefully the following information about these risks, together with the other information incorporated by reference into this prospectus, before investing in shares of common stock. These risks could have a material adverse effect on our business, financial condition, liquidity and results of operations and the market price of our common stock. You could lose all of your investment in our common stock. Risks Related to this Offering This offering may cause the price of our common stock to decline and it may not recover for a substantial period of time or at all. The subscription price represents a 52% discount to the closing price of our common stock on the OTC market of $0.64 per share from February 5, 2020 (the date we initially filed the registration statement related to this offering with the Securities and Exchange Commission, or the SEC) and a [ ]% discount to the closing price of our common stock on March 4, 2020 the effective date. The subscription price, together with the number of shares of our common stock we propose to issue and ultimately will issue if this offering, and the Backstop Commitment, is completed, may result in an immediate decrease in the market value of our common stock. If the market price of our common stock falls below the subscription price, participants in this offering will have committed to buy shares of our common stock in this offering at a price greater than the prevailing market price. Further, if a substantial number of rights are exercised and the holders of the shares received upon exercise of those rights choose to sell some or all of those shares, the resulting sales could depress the market price of our common stock. We cannot assure you that the market price of our shares of common stock will not decline prior to the expiration of this offering or that, after shares of our common stock are issued upon exercise of rights, a subscribing rights holder will be able to sell shares of our common stock purchased in this offering at a price greater than or equal to the subscription price. A significant number of our stockholders may not exercise their rights and instead elect to sell their shares of our common stock, together with the attached rights, in the market causing the market price of our common stock to fall. A number of our stockholders may elect to sell their shares rather than exercise their rights. The sale of significant blocks of our common stock, together with the attached rights, would likely cause the market price of our common stock to fall as a result of this offering forcing such stockholders to choose between having their ownership stake diluted or increasing their investment in our business. The subscription price determined for this offering and the purchase price under the Backstop Agreement may not be indicative of the fair value of our common stock. The subscription price was set by our board of directors and you should not consider the subscription price as an indication of the value of our common stock. The subscription price does not necessarily bear any relationship to the book value of our assets, net worth, expected cash flows, losses, financial condition or any other established criteria for fair value. The market price of our common stock could decline during or after this offering, and you may not be able to sell shares of our common stock purchased in this offering at a price equal to or greater than the subscription price, or at all. Are there any risks associated with this offering? Stockholders and warrant holders who exercise their rights will incur investment risk on new money invested. The stock market and, in particular, our common stock price, has experienced significant volatility recently. As a result, the market price for our common stock may be volatile. This offering will increase the number of outstanding shares of our common stock (assuming the exercise of the rights in full) by approximately 83% and the trading volume in our common stock may fluctuate more than usual and cause significant price variations to occur. The market price of our common stock will depend on many factors, which may change from time to time, including our financial condition, performance, creditworthiness and prospects, future sales of our securities and other factors. Volatility in the market price of our common stock may prevent you from being able to sell our common stock when you want or at prices you find attractive. You should make your decision based on your assessment of our business and financial condition, our prospects for the future, the terms of this offering and the information contained in, or incorporated by reference into, this prospectus or any free writing prospectus. You should carefully consider the risks, among other things, described under the heading "Risk Factors" and in the documents incorporated by reference into this prospectus before exercising your rights and investing in shares of our common stock. Will the directors and executive officers participate in this offering? All of the members of our board of directors are investors in the Backstop Commitment. If none of the rights are exercised, members of our board of directors are expected to invest approximately $2.41 million, increasing their aggregate ownership of shares of our common stock by approximately 8,035,842 shares of common stock outstanding, representing an increase of approximately 81% of the shares outstanding on the effective date. When will I receive my shares of common stock purchased in this offering? Stockholders whose shares are held of record by Cede & Co., or Cede, the nominee of DTC, or by any other depository or nominee on their behalf or their broker-dealers behalf will have any shares that they acquire credited to the account of Cede or such other depository or nominee. With respect to all other stockholders and warrant holders, you must provide a brokerage account for your shares acquired in this offering, as we will not issue physical certificates for shares purchased in this offering, unless required to do so by law. Whether your shares are held through DTC or directly with our transfer agent American Stock Transfer & Trust Company, shares of common stock acquired in this offering will be issued as soon as possible following the conclusion of the offering. Is there a backstop purchaser? Yes. On January 31, 2020, we entered into the Backstop Agreement with a consortium of investors led by Novelty Capital, which we refer to collectively as the backstop providers, pursuant to which we have agreed to issue and sell to the backstop providers, in a private transaction separate from the rights offering, and the backstop providers (severally and not jointly) agreed to purchase, an aggregate number of shares of our common stock equal to (a) (i) $2.41 million, minus (ii) the aggregate proceeds of this offering which are in excess of $190,000, divided by (b) the subscription price, subject to the terms and conditions of the Backstop Agreement. See "Backstop Agreement" for additional details on the Backstop Commitment, including the fees to be paid by us and our expense reimbursement obligation. Our common stock price may be volatile. The trading price of our common stock may fluctuate substantially. The price of our common stock that will prevail in the market after this 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 securities of our competitors; actual or anticipated changes in our earnings or fluctuations in our operating results or changes in the expectations or recommendations of securities analysts; material announcements by us or our competitors regarding business performance, financings, mergers and acquisitions or other transactions; general economic conditions and trends; legislative or regulatory changes affecting the businesses we invest in; or departures of key personnel. Your interest in us may be diluted as a result of this offering. Stockholders who do not fully exercise their rights should expect that they will, at the completion of this offering and the Backstop Commitment, own a smaller proportional interest in us than would otherwise be the case had they fully exercised their rights. After giving effect to this offering, assuming that it is fully subscribed, we would have approximately 18,621,533 shares of common stock outstanding, representing an increase in outstanding shares of approximately 8,666,667, or approximately 83%. There can be no guarantee that the stock purchase contemplated by the Backstop Agreement will be consummated. The closing of the transactions contemplated by the Backstop Agreement is subject to satisfaction or waiver of conditions, including compliance with covenants and the accuracy of representations and warranties provided in the Backstop Agreement and consummation of this offering. As a result, we cannot guarantee that the transactions contemplated by the Backstop Agreement will be consummated. Failure to consummate the transactions contemplated by the Backstop Agreement could have adverse effects on our business and results of operations and financial condition. You may not revoke your exercise of rights. Once you have exercised your rights, you may not revoke such exercise in whole or in part. Accordingly, any exercise of rights will constitute a binding commitment to purchase and pay for the shares of our common stock issuable upon such exercise, regardless of any changes in the value of such shares, in our business, financial condition, results of operations or future prospects or in your individual circumstances. The rights are not transferable separately from the common stock or warrants to which they are attached and thus there will be no market for them. You cannot transfer or sell your rights to anyone else. We do not intend to list the rights on any securities exchange or include them in any automated quotation system. Therefore, there will be no market for the rights. The rights are attached to your shares of our common stock or warrants so if you sell your shares of common stock or warrants without first exercising your rights, the purchaser of your shares or warrants will be entitled to exercise the rights attached to the shares or warrants you sold. Why are there backstop providers? We obtained the commitment of the backstop providers to act as the backstop purchasers under the Backstop Agreement to increase the likelihood that we would receive at least $2.41 million of gross proceeds, less fees and expenses of this offering and the Backstop Commitment. What effects will this offering have on our outstanding common stock? After giving effect to this offering, assuming that it is fully subscribed, we will have approximately 18,621,533 shares of common stock outstanding, representing an increase of approximately 83% in our outstanding shares as of the effective date. If you fully exercise the rights that we distribute to you, your proportional interest in us will remain the same. If you do not exercise any rights, or you exercise less than all of your rights, your interest in us will be diluted, as you will own a smaller proportional interest in us compared to your interest prior to this offering. If all of our stockholders and warrant holders exercise the rights issued to them, and this offering is therefore fully subscribed, the beneficial ownership percentage of our stockholders will not change. Assuming that no holders exercise their rights in this offering, the backstop providers would acquire approximately 8,035,842 shares of our common stock, following which (1) the backstop providers would beneficially own approximately 51% of our outstanding common stock and (2) all other holders would beneficially own approximately 49% of our outstanding common stock. All ownership percentages described in this paragraph are based upon our outstanding common stock and the beneficial ownership of our holders as of the effective date. The number of shares of our common stock outstanding listed in each case above assumes that (1) all of the other shares of our common stock issued and outstanding on the effective date will remain issued and outstanding and owned by the same persons as of the closing of this offering and (2) we will not issue any shares of common stock in the period between the effective date and the closing of this offering. Are there any conditions to the backstop providers obligations under the Backstop Agreement? Yes. The obligations of the backstop providers to consummate the transactions under the Backstop Agreement are subject to the satisfaction or waiver of specified conditions, including, but not limited to, compliance with covenants and the accuracy of representations and warranties provided in the Backstop Agreement, consummation of this offering, the receipt of all required regulatory approvals, and no material adverse effect with respect to our financial condition, business, properties, assets, liabilities or results of operations. When do the backstop providers obligations under the Backstop Agreement expire? The Backstop Agreement may be terminated by us, on the one hand, or the backstop providers, on the other hand, if the transactions contemplated by the Rights Offering and Backstop Agreement have not been consummated by May 14, 2020. Following the exercise of rights, but prior to the expiration date, shares of our common stock will be tradable in a market that is likely to be illiquid. During the period of the Rights Offering, i.e., following the effective date but prior to the expiration date, our common stock will trade along with the associated rights as a unit under CUSIP 440271 401. Therefore, if you transfer shares of our common stock during the period of the Rights Offering and prior to the exercise of the attached rights, the rights associated with those shares of common stock will transfer along with the shares of common stock. Following the exercise of the rights, the trading unit will terminate and the common stock to which the rights attach will be traded separately from such rights. These shares of common stock that no longer have attached rights will have CUSIP 440271 302 until the expiration of the offering. Similarly, if you transfer our warrants before the expiration date and before exercising the rights attached to the warrants, the rights associated with those warrants will transfer along with warrants. From and after the expiration date, all of our common stock will trade under the CUSIP 440271 302 under the symbol "HPTO." The changes in the ticker symbols of our common stock during the offering may result in reduced trading volume and market interest for such shares prior to the completion of the offering. You may not be able to resell any shares of our common stock that you purchase upon the exercise of rights immediately upon expiration of this offering. If you exercise your rights, you may not be able to resell the common stock purchased by exercising your rights until you (or your broker or other nominee) have received a stock certificate or book-entry representing those shares. Although we will endeavor to issue the appropriate certificates and book-entries as soon as practicable after completion of this offering, there may be some delay between the expiration date and the time that we issue the new stock certificates and book-entries. We have broad discretion in the use of the net proceeds from this offering and may not use them effectively. We will have broad discretion in determining how the net proceeds of this offering will be used. While our board of directors believes the flexibility in application of the net proceeds is prudent, the broad discretion it affords entails increased risks to the investors in this offering. You may not agree with the manner in which we choose to allocate and spend the net proceeds. If we cancel this offering, neither we nor the subscription agent will have any obligation to you except to return your subscription payments. We may withdraw or terminate this offering at any time only with the consent of the backstop providers after the termination of the Backstop Agreement in accordance with its terms. If we withdraw or terminate this offering, neither we nor the subscription agent will have any obligation with respect to rights that have been exercised except to return, without interest or deduction, any subscription payments the subscription agent received from you. How much will we receive from this offering and how will such proceeds be used? Assuming this offering is fully subscribed, we estimate that the net proceeds from this offering and the proceeds of the Backstop Commitment, will be approximately $2.5 million, after deducting expenses related to this offering and the Backstop Commitment. If any rights remain unexercised after the expiration of the rights offering, a consortium of accredited investors including all of our directors and led by Novelty Capital Partners LP, has agreed to purchase, at the subscription price, in a private backstop commitment transaction separate from the rights offering, up to $2.41 million of shares of common stock not subscribed for by rights holders pursuant to the exercise of their subscription rights. As of the effective date, Novelty Capital beneficially owned approximately 14.0% of our common stock. Novelty Capital s Managing Partner, Jonathon R. Skeels, is a member of our board and our Chief Executive Officer and Interim Chief Financial Officer. No fees or other consideration will be paid by us to any of the investors in consideration of the Backstop Commitment. In light of the Backstop Commitment, we anticipate that we will receive gross proceeds of at least $2.41 million if the rights offering is completed, whether or not any of the rights are exercised by rights holders. We intend to use the net proceeds for general corporate purposes, which include investments and acquisitions. If my exercise of rights is not valid or if this offering is not completed, will my subscription payment be refunded to me? Yes. The subscription agent will hold all funds it receives in a segregated bank account until the completion of this offering. If your exercise of rights is deemed not to be valid or this offering is not completed, all subscription payments received by the subscription agent will be returned as soon as practicable following the expiration of this offering, without interest or penalty. If you own shares through a nominee, it may take longer for you to receive your subscription payments because the subscription agent will return payments through the record holder of your shares. What fees or charges apply if I purchase shares in this offering? We are not charging any fee or sales commission to issue rights to you or to issue shares of our common stock to you if you exercise your rights. If you exercise your rights through a broker, dealer, custodian bank or other nominee, you are responsible for paying any fees your nominee may charge you. What are the U.S. federal income tax considerations of exercising my rights? U.S. Holders (as defined herein) generally will not recognize gain or loss on the receipt, exercise or expiration of rights. See "U.S. Federal Income Tax Considerations" for a more complete discussion, including additional qualifications and limitations. In addition, you should consult your own tax advisor as to the tax consequences to you of the receipt, exercise and expiration of the rights in light of your particular circumstances. To whom should I send my forms and payment? If your shares of our common stock are held in the name of a broker, dealer, custodian bank or other nominee, then you should deliver all required subscription documents and subscription payments pursuant to the instructions provided by your nominee. If your shares of our common stock or our warrants are held in your name, then you should send your rights certificate to the subscription agent, and send all other required subscription documents by mail or overnight courier to the appropriate address listed below: If delivering by first class mail: Broadridge Corporate Issuer Solutions, Inc. Attn: BCIS Re-Organization Dept. P.O. Box 1317 Brentwood, New York 11717-0693 If delivering by overnight courier: Broadridge Corporate Issuer Solutions, Inc. Attn: BCIS IWS 51 Mercedes Way Edgewood, New York 11717 You and, if applicable, your nominee are solely responsible for instructing DTC to transfer your rights to the subscription agent or completing delivery to the subscription agent of your rights certificate, as applicable, as well as completing delivery of all other required subscription documents and subscription payments. You should allow sufficient time for delivery of your subscription materials to the subscription agent and clearance of payments before the expiration of this offering. If you hold your shares of our common stock through a broker, dealer, custodian bank or other nominee, your nominee may establish an earlier deadline before the expiration date. Whom should I contact if I have other questions? If you have any questions regarding this offering, completion of the rights certificate or any other subscription documents or submitting payment in this offering, please contact the subscription agent at (888) 789-8409 or by email at shareholder@broadridge.com. If you do not act on a timely basis and follow subscription instructions, your exercise of rights may be rejected. Holders of shares of our common stock who desire to purchase shares of our common stock in this offering must act on a timely basis to ensure that all required forms and payments are actually received by the subscription agent prior to the expiration date, unless extended. If you are a beneficial owner of shares of our common stock and you wish to exercise your rights, you must act promptly to ensure that your broker, custodian bank or other nominee acts for you and that all required forms and payments are actually received by your broker, custodian bank or other nominee in sufficient time to deliver such forms and payments to the subscription agent to exercise the rights granted in this offering that you beneficially own prior to the expiration date, unless extended. We will not be responsible if your broker, custodian or nominee fails to ensure that all required forms and payments are actually received by the subscription agent prior to the expiration date, unless extended. We have not provided for guaranteed delivery which is common in other rights offerings. If your broker does not deliver all required forms and payment by the expiration date, your rights will expire worthless and unexercised even if before the expiration date you gave instruction to your broker to exercise your rights. 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 undertakes 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. This offering may limit our ability to use some or all of our net operating loss carryforwards in the future. As of December 31, 2019, we had net operating loss carryforwards for U.S. federal and state income tax purposes of approximately $70.7 million. Under Section 382 of the Code, a corporation that undergoes an "ownership change" may be subject to limitations on its ability to utilize its pre-change net operating loss carryforwards to offset future taxable income. In general, an ownership change occurs if the aggregate stock ownership of certain stockholders (generally 5% stockholders, applying certain look-through and aggregation rules) increases by more than 50% over such stockholders lowest percentage ownership during the testing period (generally three years). Although we have taken steps intended to preserve our ability to utilize our net operating loss carryforwards, such efforts may not be successful. While we do not believe that this offering and the issuance of shares pursuant to exercised rights will cause an ownership change, the IRS and the courts are not bound by our determination. Also, even if this offering and the issuance of shares pursuant to exercised rights do not cause an ownership change, they could increase the likelihood that we may undergo an ownership change for purposes of Section 382 of the Code in the future. Limitations imposed on our ability to utilize net operating loss carryforwards could cause U.S. federal income taxes to be paid earlier than would be paid if such limitations were not in effect and could cause such net operating loss carryforwards to expire unused, in each case reducing or eliminating the benefit of such net operating loss carryforwards. Members of our board of directors are providing a portion of the Backstop Commitment. The interests of our employees and board of directors in this offering may be different from yours. Members of our board of directors are among the investors providing the Backstop Commitment in connection with this offering. See "The Backstop Agreement." If the Backstop Commitment is fully exercised as a result of no other stockholders electing to participate in this offering, members of our board of directors would own a proportionately larger share of our outstanding common stock upon the closing of this offering and the Backstop Commitment. If none of the rights are exercised, members of our board of directors are expected to invest approximately $2.41 million, increasing their aggregate ownership of shares of our common stock by approximately 8,035,842 shares of common stock outstanding, representing an increase of approximately 81% of the shares outstanding on the effective date. Risks Related to Our Business We have a history of operating and net losses. We have experienced significant operating and net losses since we began operations. After years of losses, any improvement in financial performance could reverse if our GO-Global business, our only source of revenue, declines or if we are unable to maintain control over our expenses. Our revenue is typically generated from a limited number of significant customers. A material portion of our revenue, all of which is currently derived from our GO-Global products, during any reporting period is typically generated from a limited number of significant customers, all of which are unrelated third parties. We categorize our customers into three broad categories for revenue recognition purposes: stocking resellers, non-stocking resellers and direct end users. If any of our significant non-stocking resellers or direct end users reduce their order level or fail to order during a reporting period, our revenue could be materially adversely impacted because we recognize revenue on sales to these customers upon product delivery, assuming all other revenue recognition criteria have been met. Our significant stocking resellers are typically independent software vendors who have bundled our products with theirs to sell as Web-enabled versions of their products. These customers maintain inventories of our products for resale. If these customers decide to maintain a lower level of inventory in the future and/or they are unable to sell their inventory to end users as quickly as they have in the past, business could be materially adversely impacted. If we are unable to develop new products and enhancements to our existing products, our business, results of operations, financial condition, and cash flows could be materially adversely impacted. The market for our products and services is characterized by: frequent new product and service introductions and enhancements; rapid technological change; evolving industry standards; fluctuations in customer demand; and changes in customer requirements. Our future success depends on our ability to continually enhance our current products and develop and introduce new features and capabilities that our customers choose to buy. If we are unable to satisfy our customers demands and remain competitive with other products that could satisfy their needs by introducing new features, capabilities and enhancements, our business, results of operations, financial condition, and cash flows could be materially adversely impacted. Our future success could be hindered by, among other factors: the amount of cash we have available to fund investment in new products and enhancements; the reduced level of research and development resources that the we now have available in the Company to perform the work necessary to develop new features and capabilities delays in our introduction of new features, capabilities and/or enhancements of existing products; delays in market acceptance of new products and/or enhancements of existing products; and a competitor s announcement of new products and/or product enhancements or technologies that could replace or shorten the life cycle of our existing products. For example, sales of our GO-Global Windows Host software could be affected by the announcement from Microsoft of an intended release, and the subsequent actual release, of a new Windows-based operating system, or an upgrade to a previously released Windows-based operating system version. These new or upgraded systems may contain similar features to our products or they could contain architectural changes that would temporarily prevent our products from functioning properly within a Windows-based operating system environment. We are subject to various liquidity risks. We have incurred significant net losses since our inception. As of September 30, 2019, we had an accumulated deficit of $79,950,300 and a working capital surplus of $52,700. Our ability to continue to generate net profits and positive cash flows from operations is dependent on our ability to continue to generate revenue from our legacy GO-Global business, which in turn is subject to a variety of risks. As a very small company, we have limited ability to deploy new revenue increasing opportunities, and limited flexibility to respond to unforeseen adverse developments, such as customer losses, adverse market developments or unanticipated expenses. Although our current operating plan does not call for the raising of new capital, if we need to raise new capital, our ability to do so is extremely limited given our very small market capitalization and the limited volume in the trading of our common stock. If we do need to issue new equity, such issuances may be at a significant discount to market prices, would dilute existing stockholders and may give the purchasers of new capital stock additional rights, preferences and privileges relative to existing stockholders. There can be no assurance that additional capital necessary for any execution of our operations will be available on a timely basis, on reasonable terms or at all. Challenges to develop new business may reverse the improvements in our finances. Our management believes that any significant improvement in our cash flow must result from increases in revenues from existing sources and from new revenue sources. Our ability to develop new revenues depends on many factors not in our control, or only partially in its control, including available capital resources which affect the extent of our marketing activities and our research and development activities, all of which are limited by our small size and revenue base. We cannot assure you that the resources that we can devote to marketing and to research and development will be sufficient to increase its revenues to levels that will enable us to maintain positive operating cash flow in the future. Sales of products within our GO-Global product families are likely to be our only source of revenue during 2020. Sales of products within our GO-Global product families, and related enhancements, were our only source of revenue during 2018 and 2019 and will continue to be our only source of revenue for the foreseeable future. The success, if any, of our new GO-Global releases may depend on a number of factors, including market acceptance of the new GO-Global releases and our ability to manage the risks associated with introducing such releases. Declines in demand for our GO-Global products could occur as a result of, among other factors: lack of success with our strategic partners; new competitive product releases and updates to existing competitive products; decreasing or stagnant information technology spending levels; price competition; technological changes; or general economic conditions in the markets in which we operate. If our customers do not continue to purchase GO-Global products as a result of these or other factors, our revenue would decrease and our results of operations, financial condition, and cash flows would be adversely affected. Our operating results in one or more future periods are likely to fluctuate significantly and may fail to meet or exceed the expectations of investors. Our operating results are likely to fluctuate significantly in the future on a quarterly and annual basis due to a number of factors, many of which are outside our control. Factors that could cause our operating results and therefore our revenues to fluctuate include the following, among other factors: our ability to maximize the revenue opportunities of our patents; variations in the size of orders by our customers; increased competition; and the proportion of overall revenues derived from different sales channels such as distributors, original equipment manufacturers ("OEMs") and others. In addition, our royalty and license revenues are impacted by fluctuations in OEM licensing activity from quarter to quarter, which may involve one-time orders from non-recurring customers, or customers who order infrequently. Our expense levels are based, in part, on expected future orders and sales; therefore, if orders and sales levels are below expectations, our operating results are likely to be materially adversely affected. Additionally, because significant portions of our expenses are fixed, a reduction in sales levels may disproportionately affect our net financial results. Also, we may reduce prices and/or increase spending in response to competition or to pursue new market opportunities. Because of these factors, our operating results in one or more future periods may fail to meet or exceed the expectations of investors. In that event, the trading price of our common stock would likely be adversely affected. We will encounter challenges in recruiting, hiring and retaining new personnel and/or replacements for any members of key management or other personnel who depart. Our success and business strategy is dependent in large part on our ability to attract and retain key management and other personnel in certain areas of our business. If any of these employees were to leave, we would need to attract and retain replacements for them. We have lost employees, including at the officer level and in our new products engineering group, in the past. Without a successful replacement, the loss of the services of one or more key members of our management group and other key personnel could have a material adverse effect on our business. We do not have long-term employment agreements with any of our key personnel and any officer or other employee can terminate their relationship with us at any time. We may also need to add key personnel in the future in order to successfully implement our business strategies. The market for such qualified personnel is highly competitive and it includes other potential employers whose financial resources for such qualified personnel are more substantial than ours. Consequently, we could find it difficult to attract, assimilate or retain such qualified personnel in sufficient numbers to successfully implement our business strategies. We have sought to match our expenses structure with business opportunities, but this creates risks. As a result, our current Chief Executive Officer and Interim Chief Financial Officer does not receive any salary from the Company, which potentially understates our current operating expenses and overstates profitability. We also rely on the considerable expertise of our Board of Directors and the moderate use of professional advisors. You should recognize that this arrangement limits our ability to respond to challenges and develop opportunities. Should we revise our approach to management by hiring additional resources, this too, can create risks to the cost savings we have achieved, if any anticipated business opportunities are not realized. Our failure to adequately protect our proprietary rights may adversely affect us. Our commercial success is dependent, in large part, upon our ability to protect our proprietary rights. We rely on a combination of patent, copyright and trademark laws, as well as trade secrets, confidentiality provisions and other contractual provisions to protect our proprietary rights. These measures afford only limited protection. We cannot assure you that measures we have taken or may take in the future will be adequate to protect us from misappropriation or infringement of our intellectual property. Despite our efforts to protect proprietary rights, it may be possible for unauthorized third parties to copy aspects of our products or obtain and use information that we regard as proprietary. In addition, the laws of some foreign countries do not protect our intellectual property or other proprietary rights as fully as do the laws of the United States. Furthermore, we cannot assure you that the existence of any proprietary rights will prevent the development of competitive products. The infringement upon, or loss of, any proprietary rights, or the development of competitive products despite such proprietary rights, could have a material adverse effect on our business. Our business significantly benefits from strategic relationships and there can be no assurance that such relationships will continue in the future. Our business and strategy relies to a significant extent on our strategic relationships with other companies. There is no assurance that we will be able to maintain or further develop any of these relationships or to replace them if any of these relationships are terminated. In addition, any failure to renew or extend any license between any third party and us may adversely affect our business. We rely on indirect distribution channels for our products and may not be able to retain existing reseller relationships or develop new reseller relationships. Our GO-Global products are primarily sold through several distribution channels. An integral part of our strategy is to strengthen our relationships with resellers such as OEMs, systems integrators, value-added resellers, distributors and other vendors to encourage these parties to recommend or distribute our products and to add resellers both domestically and internationally. We currently invest, and intend to continue to invest, significant resources to expand our sales and marketing capabilities. We cannot assure you that we will be able to attract and/or retain resellers to market our products effectively. Our inability to attract resellers and the loss of any current reseller relationships could have a material adverse effect on our business, results of operations, financial condition, and cash flows. Additionally, we cannot assure you that resellers will devote enough resources to provide effective sales and marketing support to our products. The markets in which we participate are highly competitive and have more established competitors. The markets we participate in with GO-Global are intensely competitive, rapidly evolving and subject to continuous technological changes. We expect competition to increase in each of these markets as other companies introduce additional competitive products. In order to compete effectively, we must continually develop and market new and enhanced products and market those products at competitive prices. As markets for our products continue to develop, additional companies, including companies in the computer hardware, software and networking industries with significant market presence, may enter the markets in which we compete and further intensify competition. A number of our current and potential competitors have longer operating histories, greater name recognition and significantly greater financial, sales, technical, marketing and other resources than we do. We cannot give any assurance that our competitors will not develop and market competitive products that will offer superior price or performance features, or that new competitors will not enter our markets and offer such products. We believe that we will need to invest significant financial resources in research and development to remain competitive in the future in each of the markets in which we compete. Such financial resources may not be available to us at the time or times that we need them, or upon terms acceptable to us, or at all. We cannot assure you that we will be able to establish and maintain a significant market position in the face of our competition and our failure to do so would adversely affect our business. Risks Related to Our Common Stock Our stock is thinly traded and its price has been historically volatile. Our stock is thinly traded. As such, holders of our stock are subject to a high risk of illiquidity, e.g., you may not be able to sell as many shares at the price you would like, or you may not be able to purchase as many shares at the price you would like, due to the low average daily trading volume of our stock. Additionally, the market price of our stock has historically been volatile; it has fluctuated significantly to date. The trading price of our stock is likely to continue to be highly volatile and subject to wide fluctuations. Your investment in our stock could lose some or all of its value. Future sales of our common stock could adversely affect its price and our future capital-raising activities, and could involve the issuance of additional equity securities, which would dilute current stockholder investments in our common stock and could result in lowering the trading price of our common stock. We may sell securities in the public or private equity markets if and when conditions are favorable. Sales of substantial amounts of common stock, or the perception that such sales could occur, could adversely affect the prevailing market price of our common stock and our ability to raise capital. We may issue additional common stock in future financing transactions or as incentive compensation for our management team and other key personnel, consultants and advisors. Issuing any equity securities would be dilutive to the equity interests represented by our then-outstanding shares of common stock. The market price for our common stock could decrease as the market takes into account the dilutive effect of any of these issuances. Furthermore, we may enter into financing transactions and issue securities with rights and preferences senior to the rights and preferences of our common stock, and we may issue securities at prices that represent a substantial discount to the market price of our common stock. A negative reaction by investors and securities analysts to any discounted sale of our equity securities could result in a decline in the trading price of our common stock. We may make acquisitions, which could require significant management attention, disrupt our business, dilute our stockholders, and seriously harm our business. As part of our business strategy, we intend to make acquisitions in the future (although we do not currently have any probable acquisitions). Our ability to acquire and successfully integrate larger or more complex companies, products, and technologies is unproven. In the future, we may not be able to find other suitable acquisition candidates, and we may not be able to complete acquisitions on favorable terms, if at all. In addition, if we fail to successfully close transactions or integrate new teams, or integrate the products and technologies associated with these acquisitions into our company, our business could be seriously harmed. Any integration process may require significant time and resources, and we may not be able to manage the process successfully. We may not successfully evaluate or use the acquired products, technology, and personnel, or accurately forecast the financial impact of an acquisition transaction, including accounting charges. We may also incur unanticipated liabilities that we assume as a result of acquiring companies. We may have to pay cash, incur debt, or issue equity securities to pay for any acquisition, any of which could seriously harm our business. Selling equity to finance any such acquisitions would also dilute our stockholders. Incurring debt would increase our fixed obligations and could also include covenants or other restrictions that would impede our ability to manage our operations. In addition, on average, it is difficult to finalize the purchase price allocation and accounting. Therefore, it is possible that our valuation of an acquisition may change and result in unanticipated write-offs or charges, impairment of our goodwill, or a material change to the fair value of the assets and liabilities associated with a particular acquisition, any of which could seriously harm our business. We are not likely to have the capital to acquire large businesses. Therefore the businesses we acquire may require significant investment in corporate infrastructure, repositioning, incremental sales, marketing or product development. Our acquisition strategy may not succeed if we are unable to remain attractive to target companies or expeditiously close transactions. We have a significant number of outstanding warrants and options, and future sales of these shares could adversely affect the market price of our common stock. As of September 30, 2019, we had outstanding warrants for an aggregate of 481,335 shares of common stock, with an exercise price of $0.01 per share. As of September 30, 2019, we had outstanding options exercisable for an aggregate of 106,077 shares of common stock at a weighted average exercise price of $2.77 per share. The holders may sell the shares exercisable under warrants or options in the public markets from time to time. In addition, if our stock price rises, more outstanding warrants and options will be "in-the-money" and 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. Under a final settlement reached in May 2018 related to previously accrued liquidated damages, the exercise price of 511,801 outstanding warrants mentioned above previously had a weighted average price of $10.77, was reduced to $0.01 per share, and the duration of such warrants, which were to expire between June 17, 2018 and January 7, 2019, were extended to May 21, 2023. If such warrants were to be exercised, as we expect they would, that would result in dilution to existing stockholders who do hold such warrants. Our common stock is quoted on the FINRA OTC Bulletin Board, which may have an unfavorable impact on our stock price and liquidity. Our common stock is currently quoted under the symbol "HPTO" on the OTC Market s OTC Bulletin Board market ("OTCBB") operated by FINRA (Financial Industry Regulatory Authority) and on the OTC Markets Group QB tier ("OTCQB"). Neither the OTCBB nor the OTCQB is a "national securities exchange," and in general, each is a significantly more limited market than the markets operated by the New York Stock Exchange and NASDAQ. The quotation of our shares on the OTCBB and the OTCQB could result in a less liquid market being available for existing and potential stockholders to trade shares of our common stock, which could depress the trading price of our common stock and have a long-term adverse impact on our ability to raise capital in the future. Because of the limited trading market for our common stock, and because of the significant price volatility, investors may not be able to sell their shares of common stock when they want to do so. We may not support any continued trading market for our shares. Our stock may lose access to a viable trading market. Given the increasing cost and resource demands of being a public company, we may decide to "go dark," or discontinue our obligation to make periodic filings with the SEC, by deregistering our securities, for a period of time until our assets and stockholder base are sufficient to warrant public trading again. During such time, there would be a substantial decrease in disclosure by us of our operations and prospects, and a substantial decrease in the liquidity in our common stock even though stockholders may still continue to trade our common stock in the OTC market or "pink sheets." The market s interpretation of a company s motivation for "going dark" varies from cost savings, to negative changes in the firm s prospects, to serving insider interests, which may affect the overall price and liquidity of a company s securities. We have never paid dividends on our common stock, and we do not anticipate paying any cash dividends in the foreseeable future. We have never declared or paid dividends on our common stock, nor do we anticipate paying any cash dividends for the foreseeable future. We currently intend to retain future earnings, if any, to finance the operations and expansion of our business. Any future determination to pay cash dividends will be at the discretion of our Board of Directors and will be dependent upon the earnings, financial condition, operating results, capital requirements and other factors as deemed necessary by our Board of Directors. FINRA s sales practice requirements may also limit your ability to buy and sell our stock. 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. FINRA s 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. Provisions in our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws and our Rights Agreement may prevent or discourage third parties or our stockholders from attempting to replace our management or influencing significant decisions. Provisions in our Amended and Restated Certificate of Incorporation and Second Amended and Restated Bylaws may have the effect of delaying or preventing a change in control of our company or our management, even if doing so would be beneficial to our stockholders. These provisions include, but are not limited to, authorizing our board of directors to issue preferred stock without stockholder approval and limiting the persons who may call special meetings of stockholders and providing that stockholders cannot take action by written consent in lieu of a meeting. In addition, our Rights Agreement, entered into by us and American Stock Transfer & Trust Company, LLC (as rights agent) on February 16, 2018, as amended on November 2, 2018 (the "Rights Agreement"), works by imposing a significant penalty upon any person or group (including a group of persons that are acting in concert with each other) that acquires five percent (5%) or more of our common stock without the approval of our board of directors. As a result, the overall effect of the Rights Agreement and the issuance of the rights thereunder may be to render more difficult or discourage a merger, tender or exchange offer or other business combination involving that is not approved by our board of directors. The Rights Agreement is not intended to interfere with any merger, tender or exchange offer or other business combination approved by our board of directors. Nor does the Rights Agreement prevent the Board from considering any offer that it considers to be in the best interest of its stockholders. The Rights Agreement expires at or prior to the earlier of (i) February 16, 2021 or (ii) the redemption or exchange of the rights thereunder, as provided for in the Rights Agreement. Together, these charter and contractual arrangements could make the removal of management more difficult and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our common stock. Anti-takeover provisions contained in our certificate of incorporation and bylaws, as well as provisions of Delaware law, could impair a takeover attempt. Our certificate of incorporation, bylaws and Delaware law contain provisions that could have the effect of rendering more difficult or discouraging an acquisition deemed undesirable by our board of directors. Our corporate governance documents include provisions: authorizing blank check preferred stock, which could be issued with voting, liquidation, dividend and other rights superior to our common stock; limiting the liability of, and providing indemnification to, our directors and officers; limiting the ability of our stockholders to call and bring business before special meetings and to take action by written consent in lieu of a meeting; requiring advance notice of stockholder proposals for business to be conducted at meetings of our stockholders and for nominations of candidates for election to our board of directors; controlling the procedures for the conduct and scheduling of board of directors and stockholder meetings; providing our board of directors with the express power to postpone previously scheduled annual meetings and to cancel previously scheduled special meetings; limiting the determination of the number of directors on our board of directors and the filling of vacancies or newly created seats on the board to our board of directors then in office; and requiring a supermajority of two-thirds of stockholders to amend certain provisions of our certificate of incorporation or to amend our bylaws. These provisions, alone or together, could delay hostile takeovers and changes in control of our company or changes in our management. As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation Law, which prevents some stockholders holding more than 15% of our outstanding common stock from engaging in certain business combinations without approval of the holders of substantially all of our outstanding common stock. Any provision of our amended and restated certificate of incorporation or bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock.

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+Penny Stock Rules Broker-dealer practices in connection with transactions in penny stocks are regulated by certain penny stock rules adopted by the SEC. Penny stocks generally are equity securities with a price of less than US $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. In addition, the penny stock rules generally require that prior to a transaction in a penny stock, the broker-dealer 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 a stock that becomes subject to the penny stock rules. Our shares may in the future be subject to such penny stock rules in which care our stockholders would, in all likelihood, as a result of the penny stock rules, find it difficult to sell their securities. The Company has not engaged any FINRA member firms to participate in the distribution of securities, except to the extent that certain broker dealers described below shall be selling shareholders in connection with certain warrants and underlying shares of Common Stock received in their capacity as placement agents for earlier private offerings. Broker-dealers engaged by the selling stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated. Each selling stockholders does not expect these commissions and discounts relating to its sales of shares to exceed what are customary in the types of transactions involved. The registration statement of which this prospectus forms a part includes the shares of common stock underlying the warrants held by these firms and certain associated persons listed below. The SEC has indicated that it is their position that any broker-dealer firm that is a selling stockholders is deemed an underwriter and therefore these firms may be deemed an underwriter with respect to the securities being sold by them. We have advised the selling stockholders that the anti-manipulation rules of Regulation M under the Exchange Act may apply to sales of shares in the market and to the activities of the selling stockholders and its affiliates. In addition, we will make copies of this prospectus available to the selling stockholders for the purpose of satisfying the prospectus delivery requirements of the Securities Act. In connection with the sale of our common stock or interests therein, the selling stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the common stock in the course of hedging the positions they assume. The selling stockholders may also sell shares of our common stock short and deliver these securities to close out their short positions, or loan or pledge the common stock to broker-dealers that in turn may sell these securities. The selling stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities which require the delivery to these broker- dealers or other financial institutions of shares offered by this prospectus, which shares these broker-dealers or other financial institutions may resell pursuant to this prospectus (as supplemented or amended to reflect these transactions). The selling stockholders and any broker-dealers or agents that are involved in selling the shares may be deemed to be "underwriters" within the meaning of the Securities Act in connection with these sales. In this event, any commissions received by these broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. Each selling stockholders has informed us that it does not have any agreement or understanding, directly or indirectly, with any person to distribute the common stock. In no event shall any broker-dealer receive fees, commissions and markups which, in the aggregate, would exceed seven percent (7%). We are required to pay certain fees and expenses incurred by us incident to the registration of the shares. We have agreed to indemnify the selling stockholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act. The selling stockholders may agree to indemnify any agent, dealer or broker-dealer that participates in transactions involving sales of the shares against certain liabilities, including liabilities arising under the Securities Act. Because selling stockholders may be deemed to be "underwriters" within the meaning of the Securities Act, it will be subject to the prospectus delivery requirements of the Securities Act. In addition, any securities covered by this prospectus which qualify for sale pursuant to Rule 144 under the Securities Act may be sold under Rule 144 rather than under this prospectus. There is no underwriter or coordinating broker acting in connection with the proposed sale of the shares by the selling stockholders. - 27 - We have not authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses we have prepared. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date and that any information we have incorporated by reference is accurate only as of the date of the document incorporated by reference. For investors outside the United States: We have not done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than the United States. Persons outside of the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of common stock and the distribution of this prospectus outside of the United States. Market and Other Industry Data Unless otherwise indicated, market data and certain industry forecasts used throughout this prospectus were obtained from various sources, including internal surveys, market research, consultant surveys, publicly available information and industry publications and surveys. Industry surveys, publications, consultant surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed. We have not independently verified any of the data from third-party sources nor have we ascertained the underlying economic assumptions relied upon therein. Similarly, internal surveys, industry forecasts and market research, which we believe to be reliable based upon our management s knowledge of the industry, have not been independently verified. The future performance of the industry and markets in which we operate and intend to operate is necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the sections entitled "Risk Factors" and "Special Note Regarding Forward-looking Statements" and elsewhere in this prospectus. These and other factors could cause results to differ materially from those expressed in these publications and reports. - ii - ABOUT THIS PROSPECTUS This prospectus is part of a registration statement that we filed with the Securities and Exchange Commission (the "SEC") using a "shelf" registration process. Under this shelf registration process, the selling stockholders may sell certain shares of our common stock in one or more offerings. When the selling stockholders sell shares of common stock under this shelf registration process, we may provide a prospectus supplement that will contain more specific information about the terms of such offering. The prospectus supplement may add, update or change the information contained or incorporated in this prospectus. The prospectus supplement will supersede this prospectus to the extent it contains information that is different from, or that conflicts with, the information contained or incorporated in this prospectus. We may also authorize one or more free writing prospectuses to be provided to you that may contain material information relating to an offering. You should read and consider all information contained in this prospectus and any accompanying prospectus supplement (and any related free writing prospectus that we may authorize to be provided to you) in making your investment decision. No offer of these securities will be made in any jurisdiction where the offer is not permitted. This prospectus incorporates important business and financial information about us from other documents that are not included in or delivered with this prospectus. The registration statement filed with the SEC includes exhibits that provide more details about the matters discussed in this prospectus. You should carefully read this prospectus, the related exhibits filed with the SEC and any prospectus supplement, together with the additional information described below under the headings "Where you can find more information." The information is available to you without charge upon your request from us at the following address and telephone number: StemGen, Inc. 1 Performance Drive, Suite F Angleton, Texas 77515 832-954-7569 - 1 - PROSPECTUS SUMMARY This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all the information that you should consider before investing in the common stock of StemGen, Inc. (referred to herein as the "Company," "we," "our," and "us"). You should carefully read the entire prospectus, including "Risk Factors," "Management s Discussion and Analysis of Financial Condition and Results of Operations" and the accompanying financial statements and notes before making an investment decision. Company Overview We were incorporated under the laws of the State of Delaware as D3esports on May 1, 2018. We are based in Angleton, TX. D3esports plans to hold monthly time trial format competitions through an eSports platform that allows professional race car drivers and eSport athletes (gamer enthusiasts) to compete for a real experience in a race car and points that can be used to purchase products and services through our partners. As a result of the Acquisition, we will continue as a publicly traded company under the name StemGen, Inc. The existing business operations of D3esports, Inc. will continue as our wholly subsidiary. On January 29, 2019 (the "Closing Date"), we completed and closed the acquisition (the "Acquisition") under an Agreement and Plan of Reorganization (the "Reorganization Agreement"), entered into by and among (i) StemGen, Inc.("StemGen"); (ii) D3esports, Inc., a Wyoming corporation ("D3esports"); and (iii) the shareholders of D3esports ("Sellers") pursuant to which D3esports became a wholly owned subsidiary of ours. Pursuant to the Reorganization Agreement, we acquired from the Sellers all of the issued and outstanding equity interests of D3esports in exchange for 39,631,587 shares of our common stock, par value $0.001 per share and 7,000,000 shares of Preferred Stock, par value $0.001 per share. As a result of the Acquisition, the Sellers, as the former shareholders of D3esports, became the controlling shareholders of the Company. The Acquisition was accounted for as a reverse merger notwithstanding it is legally a reverse acquisition. For accounting purposes, D3esports is the acquiring entity. Current and comparative consolidated financial statements include the accounts of D3esports since inception (May 1, 2018) and StemGen from the date of acquisition (January 29, 2019) (collectively, the "Company"). On the 20th day of May 2019 we incorporated StemGen Connect in the State of Texas and issued 1,000,000 shares (50%) of common stock to The Learning Partnership.com Trading Limited, 500,000 shares (25%) of common stock to D3esports Corp. and 500,000 shares (25%) of common stock to Dawson Racing, Inc. D3esports Corp. is a wholly owned subsidiary of StemGen, Dawson Racing, Inc. is an affiliate of Simon Dawson, the president and CEO of StemGen. D3esports is a Virtual to Real company offering global sports an opportunity to participate in virtual competition. D3esports s focus is professional motorsports because of management s extensive historical experience and personal relationships and connections in the industry. D3esports offers a time trial format competition through our Microsoft license for eSports athletes to compete to win a season of real racing and enhance their experience of motorsports through a virtual platform with a strong link to a real team and real race cars. D3esports was founded in May 2018 and launched at the Dave and Buster Houston flagship store in July 2018. D3esports is building an eSports competition based around Forza 7 Motorsports. D3esports has extensive experience in real motorsports, and recent technological advancements enable virtual motorsports to cross-over to virtual motor sports and attract substantial investment. D3esports currently sells 3 screen Fanatec-operated Logitech Playseats powered by a custom gamer PC built in-house for all enthusiasts, gamers and eSports athletes to gain the best access to win a season of racing. D3esports is also currently positioning and selling sponsorship for naming rights of the championship open and showdown series as well as each month-long racing competition. The Learning Partnership.com Trading Limited is a UK based company engaged in educational leadership, teaching and learner engagement creating a social learning platform division for education, www.DendriteConnect.com. Dendrite Connect empowers students, teachers and parents around the globe to engage in enrichment and collaboration learning environment, programs, challenges, projects and careers. Dendrite Connect enables collaboration between its members through content sharing, chat forums and networks of users and career opportunities tailored to each member as they journey through education. A joint venture agreement was entered into among the shareholders of StemGen Connect to integrate technologies from the three companies, into a single virtual-to-real motorsports-based Science, Technology, Engineering and Mathematics (STEM) enrichment and collaboration learning environment to drive the launch of an esports competition for school networks and their students. There has been no activity in this joint venture or StemGen Connect as of March 31, 2020. - 2 - Risks Related to Our Business Investing in our common stock involves substantial risk. You should carefully consider all of the information in this prospectus before investing in our common stock, including the risks related to this offering and our common stock, our business and industry, our intellectual property, our financial results, and our need for financing, each as described under the section titled "Risk Factors" and elsewhere in this prospectus. The Offering Common stock offered 5,000,000 shares underlying convertible preferred stock and 1,621,600 common shares held by selling stockholders Common stock outstanding 45,429,188 common shares outstanding Preferred stock outstanding 6,000,000 shares of Series A Convertible Preferred Stock; 1,000,000 shares of Series E Preferred Stock; and 1,000,000 shares of Series F Preferred Stock Common stock to be outstanding when all the stock offered is sold 50,429,188 shares Use of Proceeds We will not receive any proceeds upon the sale of shares of common stock by the selling stockholders in this offering. Selling stockholders will receive all the proceeds from the sale of their shares offered by it under this prospectus. Trading symbol OTC Market Group, Inc SGNI Risk Factors The common stock offered hereby involves a high degree of risk and should not be purchased by investors who cannot afford the loss of their entire investment. See "Risk Factors". RISK FACTORS You should carefully consider the risks described below together with all the other information included in this prospectus before making an investment decision with regard to our securities. We believe the following discussion identifies the most significant risks and uncertainties that could adversely affect our business. If any of the following risks were actually to occur, our business, results of operations, cash flows, and financial condition could be materially and adversely affected. Additional risks not currently known to us, or that we currently deem to be immaterial, could also materially adversely affect our business, results of operations, cash flows, and financial condition in future periods. Risks related to our business and industry We have a history of operating losses and expect to continue to realize losses in the near future. Currently our operations are producing inadequate revenue to fund all operating costs, and we rely on investments by third parties to fund our business. Even as our revenue grows, we may not become profitable or be able to sustain profitability. We have reported net losses since inception including a net loss of $165,582 for the nine months ended March 31, 2020. We have not realized adequate revenue in order to support our operations. We expect to continue to incur net losses and negative cash flow from operations, and we will continue to experience losses for at least as long as it takes our company to generate adequate revenue from our Esports virtual to reality gaming systems. To date, we have had only limited operating revenues. There can be no assurance that we will achieve material revenues in the future. Should we achieve a level of revenues that make us profitable, there is no assurance that we can maintain or increase profitability levels in the future. We have a history of late filings of our periodic reports under the Securities and Exchange Act of 1934. Due to our limited staff and resources, we have not met the filing deadlines for our periodic reports under the Securities and Exchange Act of 1934 during the most recent five years. If we fail to improve our financial reporting processes, we may be unable to timely report our financial results , investors could lose confidence in our timely reporting of financial results, the trading price of our common shares could decline and our access to the capital markets or other financing sources could become limited. - 3 - There is substantial doubt as to whether we will continue operations. If we discontinue operations, you could lose your investment. The following factors raise substantial doubt regarding the ability of our business to continue as a going concern: (i) the losses we incurred since our inception; (ii) our lack of significant operating revenues since inception through the date of this prospectus; and (iii) our dependence on the sale of equity or debt securities to continue in operation. We therefore expect to incur significant losses in the foreseeable future. The financial statements do not include any adjustments that might result from the uncertainty about our ability to continue our business. If we are unable to obtain additional financing from outside sources and eventually produce enough revenues, we may be forced to curtail or cease our operations. If this happens, you could lose all or part of your investment. Our lack of any profitable operating history makes it difficult for us to evaluate our future business prospects and make decisions based on those estimates of our future performance. We do not have any substantial operating history, which makes it impossible to evaluate our business based on historical operations. Our business carries both known and unknown risks. Therefore, our past results may not be indicative of future results. Although this is true for any business, it is particularly true for us because of our lacking any profitable operating history. Increased competition in our industry can lead to pricing pressure, reduced margins or the inability of our products and services to achieve market acceptance. Actions by new or existing competitors, including introduction of competing esports games, promotions, combinations with other products or services, or price-cutting may lower sales or require actions to retain and attract customers which could adversely affect our profitability. Increased competition from existing or new competitors could result in price reductions, increased competition for materials, reduced margins or loss of market share, any of which could materially and adversely affect our business and our operating results and financial condition. One of our stockholders has the ability to significantly influence any matters to be decided by the stockholders, which may prevent or delay a change in control of our company. Simon Dawson currently owns approximately 11.40% of our common stock and 100% of our Series F preferred stock. As holder of the Series F preferred stock Simon Dawson. is entitled, voting separately as a single class, to vote double the number of all other voting share resulting in 2/3rds of all votes. As a result, he could exert considerable influence over the outcome of any corporate matter submitted to our stockholders for approval, including the election of directors and any transaction that might cause a change in control, such as a merger or acquisition. Any stockholders in favor of a matter that is opposed by Mr. Dawson cannot overrule his vote. Simon Dawson is our sole director and officer and the loss of Mr. Dawson could adversely affect our business. Since Mr. Dawson is currently our sole director and officer, if he were to die, become disabled, or leave our company, we would be forced to retain individuals to replace him. There is no assurance that we can find suitable persons to replace him if that becomes necessary. We have no "Key Man" life insurance covering Simon Dawson. We are susceptible to general economic conditions, natural catastrophic events and public health crises, and a potential downturn in customer demand could adversely affect our operating results in the near future. Our business is subject to the impact of natural catastrophic events, such as earthquakes, or floods, public health crisis, such as disease outbreaks, epidemics, or pandemics, and all these could result in a decrease or sharp downturn of economies, including our markets and business locations in the current and future periods. The outbreak of the coronavirus (COVID-19) resulted in increased travel restrictions, and shutdown of businesses, which may cause slower recovery of the economy. We may experience impact from quarantines, market downturns and changes in customer behavior related to pandemic fears and impact on our workforce if the virus continues to spread. In addition, one or more of our customers, partners, service providers or suppliers may experience financial distress, delayed or defaults on payment, file for bankruptcy protection, sharp diminishing of business, or suffer disruptions in their business due to the outbreak. The extent to which the coronavirus impacts our results will depend on future developments and reactions throughout the world, which are highly uncertain and will include emerging information concerning the severity of the coronavirus and the actions taken by governments and private businesses to attempt to contain the coronavirus. It is likely to result in a potential material adverse impact on our business, results of operations and financial condition. Wider-spread COVID-19 globally could prolong the deterioration in economic conditions and could negatively impact our short-term ability to grow our revenues. Any decreased collectability of accounts receivable, bankruptcy of small and medium businesses, or early termination of agreements due to deterioration in economic conditions could negatively impact our results of operations. - 4 - Risks related to our common stock We lack an established trading market for our common stock, and you may be unable to sell your common stock at attractive prices or at all. There is currently a limited trading market for our common stock reported by the OTC Market Group, Inc. under the symbol "SGNI." There can be no assurances given that an established public market will be obtained for our common stock or that any public market will last. As a result, we cannot assure you that you will be able to sell your common stock at attractive prices or at all. The market price for our common stock may be highly volatile. The market price for our common stock may be highly volatile. A variety of factors may have a significant impact on the market price of our common stock, including: the publication of earnings estimates or other research reports and speculation in the press or investment community; changes in our industry and competitors; our financial condition, results of operations and prospects; any future issuances of our common stock, which may include primary offerings for cash, and the grant or exercise of stock options from time to time; general market and economic conditions; and any outbreak or escalation of hostilities, which could cause a recession or downturn in our economy. We may be subject to shareholder litigation, thereby diverting our resources that may have a material effect on our profitability and results of operations. As discussed in the preceding risk factors, the market for our common shares is characterized by significant price volatility when 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 become the target of similar litigation. Securities litigation will result in substantial costs and liabilities and will divert management s attention and resources. Our future sales of common stock by management and other stockholders may have an adverse effect on the then prevailing market price of our common stock. In the event a public market for our common stock is sustained in the future, sales of our common stock may be made by holders of our public float or by holders of restricted securities in compliance with the provisions of Rule 144 of the Securities Act of 1933. In general, under Rule 144, a non-affiliated person who has satisfied a six-month holding period in a company registered under the Securities Exchange Act of 1934, as amended, may, sell their restricted common stock without volume limitation, so long as one year has elapsed since January 29, 2019, the issuer is current with all reports under the Exchange Act in order for there to be adequate common public information. Affiliated persons may also sell their common shares held for at least six months, but affiliated persons will be required to meet certain other requirements, including manner of sale, notice requirements and volume limitations. Non-affiliated persons who hold their common shares for at least one year will be able to sell their common stock without the need for there to be current public information in the hands of the public. Future sales of shares of our public float or by restricted common stock made in compliance with Rule 144 may have an adverse effect on the then prevailing market price, if any, of our common stock. Lack of Independent Directors. The Sarbanes-Oxley Act of 2002 requires us as a public corporation to have an audit committee composed solely of independent directors. Currently, we have no independent directors and lack an Audit Committee of the board of directors. Audit committee communications will have to go directly to board members and addressed with the board of directors. We can provide no assurances that we will be able to attract and maintain independent directors on our board or form an Audit Committee in compliance with Sarbanes-Oxley. - 5 - We do not expect to pay cash dividends in the foreseeable future. We do not anticipate paying cash dividends on our common stock in the foreseeable future. We may not have sufficient funds to legally pay dividends. Even if funds are legally available to pay dividends, we may nevertheless decide in our sole discretion not to pay dividends. The declaration, payment and amount of any future dividends will be made at the discretion of our board of directors, and will depend upon, among other things, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors our board of directors may consider relevant. There is no assurance that we will pay any dividends in the future, and, if dividends are paid, there is no assurance with respect to the amount of any such dividend. As a public company, we are subject to complex legal and accounting requirements that will require us to incur significant expenses and will expose us to risk of non-compliance. As a public company, we are subject to numerous legal and accounting requirements that do not apply to private companies. The cost of compliance with many of these requirements is material, not only in absolute terms but, more importantly, in relation to the overall scope of the operations of a small company. Our relative inexperience with these requirements may increase the cost of compliance and may also increase the risk that we will fail to comply. Failure to comply with these requirements can have numerous adverse consequences including, but not limited to, our inability to file required periodic reports on a timely basis, loss of market confidence and/or governmental or private actions against us. We cannot assure you that we will be able to comply with all of these requirements or that the cost of such compliance will not prove to be a substantial competitive disadvantage vis- -vis our privately held and larger public competitors. Compliance with changing regulation of corporate governance and public disclosure will result in additional expenses and pose challenges for our management. Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Dodd-Frank Wall Street Reform and Consumer Protection Act, and the rules and regulations promulgated thereunder, the Sarbanes-Oxley Act and SEC regulations, have created uncertainty for public companies and significantly increased the costs and risks associated with accessing the U.S. public markets. Our management team will need to devote significant time and financial resources to comply with both existing and evolving standards for public companies, which will lead to increased general and administrative expenses and a diversion of management time and attention from revenue generating activities to compliance activities. 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. The extent to which we sell equity or debt securities 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. When we elect to raise additional funds or additional funds are required, we may raise such funds from time to time through public or private equity offerings, debt financings, corporate collaboration and licensing arrangements or other financing alternatives. Additional equity or debt financing or corporate collaboration and licensing arrangements may not be available on acceptable terms, if at all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we will be prevented from pursuing acquisition, licensing, development and commercialization efforts and our ability to generate revenues and achieve or sustain profitability will be substantially harmed. If we raise additional funds by issuing equity securities, our stockholders will experience dilution. Debt financing, if available, would result in increased fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Any debt financing or additional equity that we raise may contain terms, such as liquidation and other preferences, which are not favorable to us or our stockholders. If we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish valuable rights to our technologies, future revenue streams or product candidates or to grant licenses on terms that may not be favorable to us. Should the financing we require to sustain our working capital needs be unavailable or prohibitively expensive when we require it, our business, operating results, financial condition and prospects could be materially and adversely affected and we may be unable to continue our operations. - 6 - We are subject to penny stock regulations and restrictions and you may have difficulty selling shares of our common stock. Our common stock is subject to the provisions of Section 15(g) and Rule 15g-9 of the Securities Exchange Act of 1934 (the "Exchange Act"), commonly referred to as the "penny stock rule." Section 15(g) sets forth certain requirements for transactions in penny stock, and Rule 15g-9(d) incorporates the definition of "penny stock" that is found in Rule 3a51-1 of the Exchange Act. The SEC generally defines a penny stock to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. We are subject to the SEC s penny stock rules. Since our common stock is deemed to be penny stock, trading in the shares of our common stock is subject to additional sales practice requirements on broker-dealers who sell penny stock to persons other than established customers and accredited investors. "Accredited investors" are persons with assets in excess of $1,000,000 (excluding the value of such person s primary residence) or annual income exceeding $200,000 or $300,000 together with their spouse. For transactions covered by these rules, broker-dealers must make a special suitability determination for the purchase of such security and must have the purchaser s written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt the rules require the delivery, prior to the first transaction of a risk disclosure document, prepared by the SEC, relating to the penny stock market. A broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements must be sent disclosing recent price information for the penny stocks held in an account and information to the limited market in penny stocks. Consequently, these rules may restrict the ability of broker-dealer to trade and/or maintain a market in our common stock and may affect the ability of our stockholders to sell their shares of common stock. There can be no assurance that our shares of common stock will qualify for exemption from the Penny Stock Rule. In any event, even if our common stock was exempt from the Penny Stock Rule, we would remain subject to Section 15(b)(6) of the Exchange Act, which gives the SEC the authority to restrict any person from participating in a distribution of penny stock if the SEC finds that such a restriction would be in the public interest. 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 our competitors or ourselves. In addition, the OTC 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. Reporting trading of our common stock on the OTC Markets is limited and sporadic making it difficult for our shareholders to sell their shares or liquidate their investments. Trading in our common stock is currently published on the OTC Market Group, Inc. s OTC Pink Current Information. The trading price of our common stock has been subject to wide fluctuations. Trading prices of our common stock may fluctuate in response to a number of factors, many of which will be beyond our control. The stock market has generally experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of companies with no current business operation. There can be no assurance that trading prices and price earnings ratios previously experienced by our common stock will be matched or maintained. These broad market and industry factors may adversely affect the market price of our common stock, regardless of our operating performance. In the past, following periods of volatility in the market price of a company s securities, securities class-action litigation has often been instituted. Such litigation, if instituted, could result in substantial costs for us and a diversion of management s attention and resources. The issuance of our common stock to the selling stockholders may cause substantial dilution to our existing stockholders and the sale of the shares of common stock acquired by the selling stockholders could cause the price of our common stock to decline. We are registering for sale 6,621,600 shares issued and to be issued to the selling stockholders. It is anticipated that shares registered in this offering will be sold over a period of up to approximately twelve months from the date of this prospectus. The number of shares ultimately offered for sale by the selling stockholders under this prospectus is dependent upon the number of shares the selling stockholders elects to sell from time to time. Depending upon market liquidity at the time, sales of shares of our common stock issued upon conversion of the promissory note may cause the trading price of our common stock to decline. - 8 - The selling stockholders may sell all, some or none of our shares that it holds or comes to hold upon conversion of the promissory note. Sales by the selling stockholders of shares acquired upon conversion of the promissory note and sold under the registration statement, of which this prospectus is a part, 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 the selling stockholders in this offering, or anticipation of such sales, could 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 wish to effect sales.