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parsed_sections/risk_factors/2023/AGSS_ameriguard_risk_factors.txt

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+RISK
+FACTORS
+
+ 
+
+An
+investment in our securities is highly speculative and subject to numerous and substantial risks. These risks are set forth below. You
+should not invest in the Company unless you can afford to lose your entire investment. Readers are encouraged to review these risks carefully
+before making any investment decision.
+
+ 
+
+Risks
+Related to Our Corporate Business:
+
+ 
+
+Concentration
+of Revenue
+
+ 
+
+The
+company receives over 87% of its total revenue from four Federal contracts. These contracts have specific terms, typically five years
+with the opportunity for extension, but there are no assurances they will be extended. Although we have had several extended in the past,
+there is no guarantee this will again happened in the future. However, there are significant direct expenses for each contract that also
+are removed from operations at the end of a contract. As a result, the revenue lost from a completed contract does not affect the bottom-line
+profits in an amount equal to the revenue lost. The actual net income impact depends on the contract. To mitigate this risk the company
+actively pursues additional contracts on an ongoing basis.
+
+ 
+
+Long
+process in acquiring contracts
+
+ 
+
+The
+process required to acquire a government contract takes several months to complete prior to delivery of the proposal to the contracting
+agency. Due to the time span required to prepare a proposal and wining the contract is not guaranteed, the company maintains a department
+of individuals who monitor and write proposals for all government contracts that fit our operating criteria that become open for bid on
+a continuing basis. It is important to the company that new contracts are acquired consistently to maintain and grow annual revenue
+
+ 
+
+The growth of the Company is dependent
+on acquisition opportunities 
+
+ 
+
+With our revenue materially concentrated and our
+timeline to organic growth very drawn out, we are dependent on closing acquisitions over the next eighteen months in order to grow. Failure
+to close on acquisitions, or a lack of synergy with our target companies, could stall growth and, eventually, cause a material decline
+in our financial situation. The Company does not currently have any agreements with potential acquisition targets.
+
+ 
+
+Transitioning
+from carve out contracts to open market contracts
+
+ 
+
+Currently
+the company benefits from several ownership criteria and business size contract qualifications, referred to as contract carveouts, that
+increases the probability of contract awards. The company meets the contracting qualifications of disabled veteran and minority owned
+business. Another aspect of contract opportunities is set aside for small businesses. This is defined as those who have operating revenue
+on average over the past five (5) years under $25.5 million. Currently the company is below this threshold, yet our strategic plan is
+to move past the average revenue limits within the next 24 months. This should not be seen as a negative in that we will only exceed this
+limit once we reach annual revenue of $40 million or more during the next 24 months, putting us in an excellent financial position to
+compete with the much larger companies who operate in the $50-$100 million revenue level. Another aspect of our strategy is to acquire
+similar guard companies who already have small business contracts with the government, which add significantly to our bottom line putting
+us in even a better position to win additional large government contracts.
+
+ 
+
+Currently we have four federal contracts that approximate
+87% of our total guard service revenue for the year ended December 31,2022. All federal contracts are awarded with a term of 5 years,
+with annual renewals. At the end of each contract year the government has the option to renew, cancel or renegotiate. Our four contracts
+and their respective terms are as follows:
+
+ 
+
+ 
+ 
+ 
+ Social Security Administration, NSC
+ 
+ -
+ 
+ September 2022 through September 2027
+
+ Annual Revenue of approx. $3.145M
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ Social security Administration, SSC 
+ 
+ -
+ 
+ June 2022 through June 2027
+
+ Annual Revenue of approx. $4.932M
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ Social Security Administration, WBDOC
+ 
+ -
+ 
+ June 2021 through July 2026
+
+ Annual Revenue of approx. $5.838M
+
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ National Institute of Health- EPA
+ 
+ -
+ 
+ May 2020 through March 2023
+
+ Annual Revenue of approx. $7.514M
+
+ 
+
+ 
+
+ 5
+
+ 
+
+ 
+
+ 
+
+Staffing
+Shortages
+
+ 
+
+The guard industry suffers from staffing
+shortages. This is an ongoing challenge and in its worst case can impact our ability to meet the requirements of the contracts awarded.
+
+ 
+
+Impact
+of COVID
+
+ 
+
+Initially the impact of the COVID pandemic was positive
+for the guard industry. Our industry is considered essential and with less activity at the sites we protect, we were able to meet and
+exceed the contract requirements with fewer staff and little to no overtime. As a result, each contract became more profitable than normal
+full operations. The challenges have actually come after the critical year of 2020. As the government began to require vaccinations for
+all employees and contractors, along with quarantine requirements, staffing became a big problem. Starting in 2021, these policies implemented
+by the federal government have made it very difficult for us to meet the staffing needs. COVID restriction rules on the local, state and
+national levels recruitment results are ending. Moving forward we anticipate any related recruitment issues to end.
+
+ 
+
+Accelerating
+Inflation
+
+ 
+
+All
+industries struggle when operating in times of inflation like we are experiencing in 2022. The results are increased pressure on salaries,
+operational costs increase due to higher fuel prices and the increased cost of all supplies. The one silver lining for the company is
+that federal contacts require that the salary increases that we negotiate with the labor union must be covered by increasing the monthly
+contracted rate. This of course is stipulated by contract that we do not exceed what is customary in the area with related contracts.
+This is significant in that guard salaries account for over 90% of operational costs, reducing the impact of inflation.
+
+ 
+
+Key
+employees are essential to expanding our business.
+
+ 
+
+Lawrence Garcia and other key employees
+are essential to our ability to continue to grow and expand our business. Mr. Garcia, as CEO and majority shareholder, allows the company
+to bid on the restricted contracts that we discussed, in the Transitioning from carve out contracts to open market contract 
+paragraph on the previous page. Other long-term employees have significant impact on the success of operations and understanding of the
+industry. They have established relationships within the industry in which we operate. If Mr. Garcia or any of the long-term employees
+were to leave the company, our growth strategy might be hindered, which could materially affect our business and limit our ability to
+increase revenue. However, we are taking steps to implement process and procedure to insure no single person lost would be detrimental
+to our long- term success.
+
+ 
+
+If
+we are unable to establish appropriate internal financial reporting controls and procedures, it could cause us to fail to meet our reporting
+obligations, result in the restatement of our financial statements, harm our operating results, subject us to regulatory scrutiny and
+sanction, cause investors to lose confidence in our reported financial information and have a negative effect on the market price for
+shares of our Common Stock.
+
+ 
+
+Effective
+internal controls are necessary for us to provide reliable financial reports and to effectively prevent fraud. We maintain a system of
+internal control over financial reporting, which is defined as a process designed by, or under the supervision of, our principal executive
+officer and principal financial officer, or persons performing similar functions, and effected by our board of directors, management and
+other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements
+for external purposes in accordance with generally accepted accounting principles.
+
+ 
+
+As
+a public company, we have significant requirements for enhanced financial reporting and internal controls. We will be required to document
+and test our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, which
+requires annual management assessments of the effectiveness of our internal controls over financial reporting. The process of designing
+and implementing effective internal controls is a continuous effort that requires us to anticipate and react to changes in our business
+and the economic and regulatory environments and to expend significant resources to maintain a system of internal controls that is adequate
+to satisfy our reporting obligations as a public company.
+
+ 
+
+Although
+our management team, CEO and CFO, have not specifically managed a publicly traded company, we do have experience with the issues and requirements
+of Sarbanes-Oxley Act. The company CFO is a California CPA with over 30 years of experience in business operations and has been through
+multiple financial statement audits that required compliance with the Sarbanes-Oxley Act.
+
+ 
+
+ 6
+
+ 
+
+ 
+
+ 
+
+Technology
+innovations in the markets that we serve may create alternatives to our products and result in reduced sales.
+
+ 
+
+Technology
+innovations to which our current and potential customers might have access to, could reduce or eliminate their need for our services.
+New or other disruptive technology that reduces or eliminates the use of one or more of our services could negatively impact the need
+for our services. However, our management team and board of directors are aware of this challenge and are very innovative and forward
+thinking. Yet, our failure to develop, introduce or enhance our services able to compete with new technologies in a timely manner could
+have an adverse effect on our business, results of operation and financial condition. The management team is continually focused on improvements
+and new technology to insure we are not left behind.
+
+ 
+
+We
+may engage in a business combination that causes tax consequences to us and our shareholders.
+
+ 
+
+Federal
+and state tax consequences can be a significant factor in considering any business combination that we may undertake. As a result, such
+transactions may be subject to significant taxation to the buyer and its shareholders under applicable federal and state tax laws. While
+we intend to structure any business combination so as to minimize the federal and state tax consequences to the extent practicable in
+accordance with our business objectives, there can be no assurance that any business combination we undertake will meet the statutory
+or regulatory requirements of a tax-free reorganization or similar favorable treatment or that the parties to such a transaction will
+obtain the tax treatment intended or expected upon a transfer of equity interests or assets. A non-qualifying reorganization, combination
+or similar transaction could result in the imposition of significant taxation, both at the federal and state levels, which may have an
+adverse effect on both parties to the transaction, including our shareholders.
+
+ 
+
+It
+is unlikely that our shareholders will have any opportunity to evaluate or approve a business combination.
+
+ 
+
+Our
+shareholders will not have the opportunity to evaluate and approve the business combination. In most cases, business combinations do not
+require shareholder approval under applicable law, and our Articles of Incorporation and Bylaws do not afford our shareholders with the
+right to approve such a transaction. Further, Mr. Garcia, our Chief Executive Officer and sole director, is the holder of over 86% of
+the voting rights of the Company on a fully diluted basis. Accordingly, our shareholders will be relying almost exclusively on the judgement
+of our board of directors ( Board ) and Chief Executive Officer and any persons on whom they may rely with respect to a potential
+business combination. To develop and implement our business plan, may in the future hire lawyers, accountants, technical experts, appraisers,
+or other consultants to assist with determining the Company s direction and consummating any transactions contemplated thereby.
+We may rely on such persons in making difficult decisions in connection with the Company s future business and prospects. The selection
+of any such persons will be made by our Board, and any expenses incurred, or decisions made based on any of the foregoing could prove
+to be averse to the Company in hindsight, the result of which could be diminished value to our shareholders.
+
+ 
+
+Risks
+Related to Our Stockholders and Purchasing Shares of Common Stock
+
+ 
+
+We
+have not voluntarily implemented various corporate governance measures. 
+
+ 
+
+Federal
+legislation, including the Sarbanes-Oxley Act of 2002, has resulted in the adoption of various corporate governance measures designed
+to promote the integrity of the corporate management and the securities markets. Some of these measures have been adopted in response
+to legal requirements. Others have been adopted by companies in response to the requirements of national securities exchanges, such as
+the NYSE or The NASDAQ Stock Market, on which their securities are listed. Among the corporate governance measures that are required under
+the rules of national securities exchanges are those that address board of directors independence, audit committee oversight and
+the adoption of a Code of Ethics. Our Board of Directors expects to adopt a Code of Ethics at its next Board meeting. The Company has
+not adopted exchange-mandated corporate governance measures and, since our securities are not listed on a national securities exchange,
+we are not required to do so. It is possible that if we were to adopt some or all 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 most independent directors, decisions concerning matters such as compensation packages to our senior officers and recommendations
+for director nominees may be made by most 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.
+
+ 
+
+ 7
+
+ 
+
+ 
+
+ 
+
+We
+may be exposed to potential risks relating to our internal control over financial reporting. 
+
+ 
+
+As
+directed by Section 404 of the Sarbanes-Oxley Act of 2002 ( SOX 404 ), the SEC has adopted rules requiring public companies
+to include a report of management on the Company s internal control over financial reporting in its annual reports. While we expect
+to expend significant resources in developing the necessary documentation and testing procedures required by SOX 404, there is a risk
+that we will not comply with all the requirements imposed thereby. At present, there is no precedent available with which to measure compliance
+adequately. In the event we identify significant deficiencies or material weaknesses in our internal control over financial reporting
+that we cannot remediate in a timely manner, investors and others may lose confidence in the reliability of our financial statements and
+our ability to obtain equity or debt financing could suffer.
+
+ 
+
+We
+have many authorized but unissued shares of our common stock.
+
+ 
+
+We
+have many authorized but unissued shares of common stock, which our management may issue without further stockholder approval, thereby
+causing dilution of your holdings of our common stock. Our management will continue to have broad discretion to issue shares of our common
+stock in a range of transactions, including capital-raising transactions, mergers, acquisitions and other transactions, without obtaining
+stockholder approval, unless stockholder approval is required. If our management determines to issue shares of our common stock from
+the large pool of authorized but unissued shares for any purpose in the future, your ownership position would be diluted without your
+further ability to vote on that transaction.
+
+ 
+
+While we have no preferred shares
+issued and outstanding, we have authorized and designated 10,000,000 shares as Series A-1 Preferred Shares with super-voting and conversion
+rights.
+
+ 
+
+While there are no shares of Preferred stock
+outstanding, the Company has authorized and designated 10,000,000 shares as Series A-1 Preferred Stock, which (i) have preferred equal
+ratable rights to dividends from funds legally available therefore, when, as and if declared by the Board of Directors of the Company;
+(ii) hold distribution preferences upon liquidation, dissolution or winding up of the affairs of the Company (iii) convert into seventy-two
+(72) shares, for each share of Series A-1 Preferred Stock, at the discretion of the holder; and (iv) are entitled to seventy-two (72)
+votes per share of Series A-1 Preferred Stock on all matters on which stock holders may vote. This dual-class structure may render our
+shares ineligible for inclusion in certain stock market indices, and thus adversely affect share price and liquidity, and may adversely
+affect public sentiment. Furthermore, any future issuances of Series A-1 preferred stock may be dilutive to the voting power and value
+of our common stock shareholders.
+
+ 
+
+Shares
+of our common stock may become illiquidity because our shares may begin to be thinly traded and may never become eligible for trading
+on a national securities exchange.
+
+ 
+
+While
+we may at some point be able to meet the requirements necessary for our common stock to be listed on a national securities exchange, we
+cannot assure you that we will ever achieve a listing of our common stock on a national securities exchange. Our shares are currently
+only eligible for quotation on the OTC Pink, which is not an exchange. Initial listing on a national securities exchange is subject to
+a variety of requirements, including minimum trading price and minimum public float requirements, and could also be affected
+by the general scepticism of such markets concerning companies that are the result of mergers with inactive publicly-held companies. There
+are also continuing eligibility requirements for companies listed on public trading markets. If we are unable to satisfy the initial or
+continuing eligibility requirements of any such market, then our stock may not be listed or could be delisted. This could result in a
+lower trading price for our common stock and may limit your ability to sell your shares, any of which could result in you losing some
+or all your investments.
+
+ 
+
+The
+market valuation of our business may fluctuate due to factors beyond our control and the value of your investment may fluctuate correspondingly.
+
+ 
+
+The
+market valuation of smaller reporting companies, such as us, frequently fluctuate due to factors unrelated to the past or present operating
+performance of such companies. Our market valuation may fluctuate significantly in response to several factors, many of which are beyond
+our control, including:
+
+ 
+
+ 
+ 
+ i.
+ changes
+ in securities analysts estimates of our financial performance, although there are currently no analysts covering our stock;
+
+ 
+
+ 
+
+ 8
+
+ 
+
+ 
+
+ 
+
+ 
+ 
+ ii.
+ fluctuations
+ in stock market prices and volumes, particularly among securities of smaller reporting companies;
+
+ 
+
+ 
+
+ 
+ 
+ iii.
+ changes
+ in market valuations of similar companies;
+
+ 
+
+ 
+
+ 
+ 
+ iv.
+ announcements
+ by us or our competitors of significant contracts, new technologies, acquisitions, commercial relationships, joint ventures or capital
+ commitments;
+
+ 
+
+ 
+
+ 
+ 
+ v.
+ variations
+ in our quarterly operating results;
+
+ 
+
+ 
+
+ 
+ 
+ vi.
+ fluctuations
+ in related commodities prices; and
+
+ 
+
+ 
+
+ 
+ 
+ vii.
+ additions
+ or departures of key personnel.
+
+ 
+
+ 
+
+As
+a result, the value of your investment in us may fluctuate.
+
+ 
+
+We
+have never paid dividends on our common stock.
+
+ 
+
+We
+have never paid cash dividends on our common stock and do not presently intend to pay any dividends in the foreseeable future. Investors
+should not look to dividends as a source of income.
+
+ 
+
+In
+the interest of reinvesting initial profits back into our business, we do not intend to pay cash dividends in the foreseeable future.
+Consequently, any economic return will initially be derived, if at all, from appreciation in the fair market value of our stock, and not
+because of dividend payments.
+
+ 
+
+Future
+sales or perceived sales of our common stock could depress our stock price.
+
+ 
+
+This
+resale prospectus covers 3,585,946 shares of common stock. If the holders of these shares were to attempt to sell a substantial amount
+of their holdings at once, the market price of our common stock could decline. Moreover, the perceived risk of this potential dilution
+could cause shareholders to attempt to sell their shares and investors to short the common stock, a practice in which an investor sells
+shares that he or she does not own at prevailing market prices, hoping to purchase shares later at a lower price to cover the sale. As
+each of these events would cause the number of shares of our common stock being offered for sale to increase, our common stock market
+price would likely further decline. All these events could combine to make it very difficult for us to sell equity or equity-related securities
+in the future at a time and price that we deem appropriate.
+
+ 
+
+Due
+to factors beyond our control, our stock price may be volatile. 
+
+ 
+
+Any
+of the following factors could affect the market price of our common stock:
+
+ 
+
+ 
+ 
+ 
+ The
+ continued COVID-19 pandemic and its adverse impact upon the capital markets;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ The
+ loss of one or more members of our management team;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ Our
+ failure to generate material revenues;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ Regulatory
+ changes including new laws and rules which adversely affect companies in our line of business;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ Our
+ public disclosure of the terms of any financing which we consummate in the future;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ An
+ announcement that we have affected a reverse split of our common stock;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ Our
+ failure to become profitable;
+
+ 
+
+ 
+
+ 9
+
+ 
+
+ 
+
+ 
+
+ 
+ 
+ 
+ Our
+ failure to raise working capital;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ Any
+ acquisitions we may consummate;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ Announcements
+ by us or our competitors of significant contracts, new services, acquisitions, commercial relationships, joint ventures or capital commitments;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ Cancellation
+ of key contracts;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ Our
+ failure to meet financial forecasts we publicly disclose;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ Short
+ selling activities; or
+
+ 
+
+ 
+
+ 
+ 
+ 
+ Changes
+ in market valuations of similar companies.
+
+ 
+
+ 
+
+In
+the past, following periods of volatility in the market price of a company s securities, securities class action litigation has
+often been instituted. A securities class action suit against us could result in substantial costs and divert our management s time
+and attention, which would otherwise be used to benefit our business.
+
+ 
+
+Offers
+or availability for sale of a substantial number of shares of our common stock may cause the price of our common stock to decline.
+
+ 
+
+The
+existence of shares of common stock issuable upon conversion of outstanding shares of Preferred Stock, creates a circumstance commonly
+referred to as an overhang which can act as a depressant to our common stock price. The existence of an overhang, whether
+sales have occurred or are occurring, also could make our ability to raise additional financing through the sale of equity or equity-linked
+securities more difficult in the future at a time and price that we deem reasonable or appropriate. If our existing shareholders and investors
+seek to sell a substantial number of shares of our common stock, such selling efforts may cause significant declines in the market price
+of our common stock.
+
+ 
+
+Because
+we may issue preferred stock without the approval of our shareholders and have other anti-takeover defenses, it may be more difficult
+for a third party to acquire us and could depress our stock price. 
+
+ 
+
+In
+general, our Board may issue, without a vote of our shareholders, one or more additional series of preferred stock that have more than
+one vote per share. Additionally, issuance of preferred stock could block an acquisition resulting in both a drop in our stock price and
+a decline in interest of our common stock. This could make it more difficult for shareholders to sell their common stock. This could also
+cause the market price of our common stock shares to drop significantly, even if our business is performing well.
+
+ 
+
+Because
+certain of our stockholders control a significant number of shares of our voting capital stock, they have effective control over actions
+requiring stockholder approval. 
+
+ 
+
+As
+of August 14, 2023, Lawrence Garcia, our Chief Executive Officer, effectively held 86.26% of the Company s issued and outstanding
+common stock. As a result, Mr. Garcia can control the outcome of matters submitted to our stockholders for approval, including the election
+of directors and any merger, consolidation or sale of all or substantially all our assets. In addition, Mr. Garcia can control the management
+and affairs of our company. Accordingly, any investors who purchase shares will be minority shareholders and as such will have little
+to no say in the direction of us and the election of directors. Additionally, this concentration of ownership might harm the market price
+of our common stock by:
+
+ 
+
+ 
+ 
+ 
+ delaying,
+ deferring or preventing a change in corporate control;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ impeding
+ a merger, consolidation, takeover or other business combination involving us; or
+
+ 
+
+ 
+
+ 
+ 
+ 
+ discouraging
+ a potential acquirer from making a tender offer or otherwise attempting to obtain control of us
+
+ 
+
+ 
+
+ 10
+
+ 
+
+ 
+
+ 
+
+Our
+common stock is considered a penny stock. 
+
+ 
+
+The
+SEC has adopted regulations which generally define penny stock to be an equity security that has a market price of less
+than $5.00 per share, subject to specific exemptions. The market price of our common stock is currently less than $5.00 per share and
+therefore may be a penny stock. Brokers and dealers effecting transactions in penny stock must 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 common stock and may affect your ability
+to sell shares.
+
+ 
+
+Shareholders may be limited to a specific
+forum for bringing actions against the Company.
+
+ 
+
+The Company has selected the Eighth Judicial
+District Court of Clark County, Nevada, to be the sole and exclusive forum for each of the following: (a) any derivative action or proceeding
+brought in the name or right of the Corporation or on its behalf, (b) any action asserting a claim for breach of any fiduciary duty owed
+by any director, officer, employee or agent of the Corporation to the Corporation or the Corporation s stockholders, (c) any action
+arising or asserting a claim arising pursuant to any provision of NRS Chapters 78 or 92A or any provision of the Articles of Incorporation
+or these By-laws or (d) any action asserting a claim governed by the internal affairs doctrine, including, without limitation, any action
+to interpret, apply, enforce or determine the validity of the Articles of Incorporation or these By-laws. Any person or entity purchasing
+or otherwise acquiring any interest in shares of capital stock of the corporation shall be deemed to have notice of and consented to this
+provision. This could make it harder for a shareholder to bring an action against the Company or any of the officers or directors of the
+Company.
+
+ 
+
+ 11

parsed_sections/risk_factors/2023/AIRTP_air-t-inc_risk_factors.txt

@@ -0,0 +1 @@
+ABOUT AIR T, INC. AND AIR T FUNDING Air T, Inc. Air T, Inc. (the Company, Air T, we or us or our ) is a holding company with a portfolio of operating businesses and financial assets. Our goal is to prudently and strategically diversify Air T s earnings power and compound its free cash flow per share over time. We currently operate in four industry segments Overnight air cargo, which operates in the air express delivery services industry Ground equipment sales, which manufactures and provides mobile deicers and other specialized equipment products to passenger and cargo airlines, airports, the military and industrial customers Commercial jet engines and parts, which manages and leases aviation assets supplies surplus and aftermarket commercial jet engine components provides commercial aircraft disassembly part-out services sells commercial aircraft engines and parts and, provides procurement services and overhaul and repair services to airlines and commercial aircraft companies and Corporate and other, which acts as the capital allocator and resource for other segments. Each business segment has separate management teams and infrastructures that offer different products and services. Corporate Information Our principal executive office is located at 11020 David Taylor Drive, Suite 305, Charlotte, NC 28262, and our telephone number is (828) 464-8741. Our website address is http www.airt.net. No information found on our website is part of this prospectus. Also, this prospectus may include the names of various government agencies or the trade names of other companies. Unless specifically stated otherwise, the use or display by us of such other parties names and trade names in this prospectus is not intended to and does not imply a relationship with, or endorsement or sponsorship of us by, any of these other parties. Air T Funding We created Air T Funding by the execution of a Trust Agreement and a Certificate of Trust for the Trust that we filed with the Secretary of State of Delaware on September 28, 2018. The Trust Agreement was most recently amended and restated March 4, 2021 and January 28, 2022. The purchasers of the Trust Preferred Securities that the Trust may issue will collectively own a portion of the Trust s Trust Preferred Securities, and we will continue to own all of the Trust s common securities (the Common Securities ). The Common Securities generally will rank equally, and payments will be made ratably, with the Trust Preferred Securities. However, upon the occurrence and during the continuance of an event of default under the Trust Agreement, as amended resulting from an event of default under the Indenture, and any supplemental indenture which contain the terms of the debt securities held by the Trust, our rights as the holder of the Common Securities of that Trust to distributions, liquidation, redemption and other payments from the Trust will be subordinated to the rights to those payments of the holders of the Trust Preferred Securities. The Trust will use the proceeds from the sale of the Trust Preferred Securities and the Common Securities to invest in a series of our debt securities (each, a Junior Subordinated Debenture and, collectively, the Junior Subordinated Debentures ) that we will issue to the Trust. As of the date hereof, the sole debt securities of the Company acquired by the Trust are the Junior Subordinated Debentures. The debt securities will be the Trust s only assets, and the interest we pay on such debt securities and the Agreement as to Expenses and Liabilities entered into by the Company under the Trust Agreement, as amended (the Expense Agreement ) will be the only revenue of the Trust. Unless stated otherwise in the applicable prospectus supplement, the Trust Agreement, as amended does not permit the Trust to acquire any assets other than the specified debt securities or to issue any securities other than the trust securities or to incur any other indebtedness. The Trust will not carry on any active business operations. The Trust s business and affairs are conducted by the trustees. The Trust has a Delaware Trustee (the Delaware Trustee ), two administrative trustees (each, an Administrative Trustee and, collectively, the Administrative Trustees ) and a Property Trustee (the Property Trustee and together with the Delaware Trustee and the Administrative Trustees, collectively, the Trustees ). The Delaware Trustee and the Property Trustee are unaffiliated with us while the Administrative Trustees are employees, officers or affiliates of ours. The Delaware Trustee has its principal place of business in the State of Delaware. Air T, the holder of the Common Securities of the Trust, is entitled generally to appoint, remove or replace any of the trustees and to increase or decrease the number of trustees provided that the number of trustees is at least three and that at least one trustee is a Property Trustee, one trustee is a Delaware Trustee and one trustee is an Administrative Trustee. If a Debenture Event of Default has occurred and is continuing, the Property Trustee and the Delaware Trustee may be removed at such time by the holders of a majority in Liquidation Amount of the outstanding Trust Preferred Securities. In no event, however, will the holders of the Trust Preferred Securities have the right to vote to appoint, remove or replace the Administrative Trustees, which voting rights are vested exclusively in the Company as the holder of the Common Securities. The rights of holders of Trust Preferred Securities, including economic rights, rights to information and voting rights, are set forth in the Trust Agreement, as amended, Delaware law and the Trust Indenture Act. The Trust Agreement, as amended also incorporates by reference the Trust Indenture Act. The Trust is not subject to reporting requirements under the Exchange Act. As of the date of this prospectus, there are $100,000,000 authorized amount of Trust Preferred Securities, par value $25.00, of which 1,240,085 Trust Preferred Securities are outstanding (includes 200,000 shares held by affiliated entities). The rights of the holders of Trust Preferred Securities are described in the applicable Trust Agreement, as amended and the Delaware Statutory Trust Act. The principal executive office of the Issuer Trust is located at the Delaware Trust Company, 251 Little Falls Drive, New Castle, DE 19808, and the telephone number of the trust is (828) 464-8741. RISK FACTORS An investment in our securities involves significant risks. Before making an investment decision, you should carefully read and consider the risk factors incorporated by reference in this prospectus including specifically the Risk Factors included in the Company s Annual Report on Form 10-K filed with the Commission on June 27, 2023, as well as those contained in any applicable prospectus supplement, as the same may be updated from time to time by our future filings with the SEC under the Exchange Act. You should also refer to other information contained in or incorporated by reference in this prospectus and any applicable prospectus supplement, including our financial statements and the related notes incorporated by reference herein or therein. Additional risks and uncertainties not presently known to us at this time or that we currently deem immaterial may also materially and adversely affect our business and operations. Risks Related to the Exchange Offer Your tender of Shares in exchange for the issuance of the Trust Preferred Securities will not be accepted if you fail to follow the Exchange Offer procedures. We will issue you Trust Preferred Securities pursuant to the Exchange Offer only after a timely receipt of your Shares, a properly completed and duly executed Letter of Transmittal and all other required documents. Therefore, if you want to tender your Shares in connection with the Exchange Offer, please allow sufficient time to ensure timely processing of your exchange. If we do not receive your Shares, Letter of Transmittal and other required documents by the Expiration Date, we will not accept your Shares in exchange for the issuance of the Trust Preferred Securities. We are generally under no duty to give notification of defects or irregularities with respect to the delivery of your Shares, Letter of Transmittal and other required documents pursuant to the terms of the Exchange Offer. If there are defects or irregularities with respect to your tender of Shares, we may not accept your tender of Shares pursuant to the terms of the Exchange Offer. Due to the speculative nature of the Trust Preferred Securities, there is no guarantee that the Trust Preferred Securities will ever be profitable for holders of Trust Preferred Securities. The Trust Preferred Securities offered as part of the Exchange Offer do not confer any rights of common stock ownership on their holders, such as voting rights, but rather merely represent an interest in the Trust. There can be no assurance that the market price of the Trust Preferred Securities will ever equal or exceed current market price of the Trust Preferred Securities, and, consequently, whether it will ever be profitable for holders of the Shares to exchange their Shares. If holders of Shares have claims against us resulting from their acquisition or ownership of the Shares, they will give up those claims if they tender their Shares in the Exchange Offer. By tendering the Shares in the Exchange Offer, upon closing of the Exchange Offer, holders of the Shares will be deemed to have released and waived any and all claims they, their successors and their assigns have or may have had against us, our affiliates and their stockholders, and our directors, officers, employees, attorneys, accountants, advisors, agents and representatives, in each case whether current or former, as well as the directors, officers, employees, attorneys, accountants, advisors, agents and representatives of our affiliates and our stockholders, arising from, related to, or in connection with their acquisition or ownership of the Shares, unless those claims arise under federal or state securities laws. Because it is not possible to estimate the likelihood of their success in pursuing any legal claims or the magnitude of any recovery to which they ultimately might be entitled if such claims exist, it is possible that the consideration that the holders of Shares receive in the Exchange Offer will have a value less than what they own today. Moreover, holders who do not tender their Shares in the Exchange Offer will continue to have the right to prosecute any claims, if any, against us. Your ability to sell Trust Preferred Securities may be limited. We cannot assure you as to the liquidity of the market for the Trust Preferred Securities, your ability to sell your Trust Preferred Securities or the price at which you would be able to sell your Trust Preferred Securities. As a holder of the Trust Preferred Securities, you will not be entitled to any rights with respect to our common stock. If you hold only our Trust Preferred Securities, you will not be entitled to any rights with respect to our common stock (including, without limitation, voting rights and rights to receive any dividends or other distributions, if any, on our common stock). Income tax consequences of participation in this Offer to Exchange. We have not obtained and do not intend to obtain a ruling from the Internal Revenue Service, or IRS, regarding the U.S. federal income tax consequences of the tender of Shares pursuant to the Exchange Offer. You should consult with your own tax advisor with regard to the possibility of any federal, state, local or other tax consequences of this Exchange Offer. See Exchange Offer Section 13 Taxation .

parsed_sections/risk_factors/2023/AIXI_xiao-i_risk_factors.txt

@@ -0,0 +1,2760 @@
+Risk Factors
+
+ 
+ 
+ 
+ See Risk Factors starting from page 39 of this prospectus and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in the ADSs.
+
+ 
+ 
+
+ 
+ 
+ Listing
+
+ 
+ 
+ 
+ Xiao-I plans to have the ADSs listed on the Nasdaq Global Market under the symbol AIXI. The ADSs will not be listed on any other stock exchange or traded on any automated quotation system.
+
+ 
+ 
+
+ 
+ 
+ Payment and Settlement
+
+ 
+ 
+ 
+ The ADSs are expected to be delivered against payment on [ ], 2023.
+
+ 
+ 
+
+ 
+ 
+
+ 36
+
+ Table of Contents
+
+ 
+ SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
+
+ In the following summary of consolidated financial and operating data we, us , or our refer to Xiao-I and its subsidiaries and the PRC operating entities on a consolidated basis.
+
+ The following summary consolidated statements of net (loss)/income for the years ended December 31, 2020 and 2021 and summary consolidated balance sheet data as of December 31, 2020 and 2021 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The following summary consolidated statements of net (loss)/income for the six months ended June 30, 2021 and 2022 and summary consolidated balance sheet data as of June 30, 2022 have been derived from our unaudited consolidated financial statements included elsewhere in this prospectus. You should read this Summary Consolidated Financial Data and Operating Data section together with our consolidated financial statements and the related notes and Management s Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this prospectus. Our consolidated financial statements are prepared and presented in accordance with accounting principles generally accepted in the United States, or U.S. GAAP. Our historical results are not necessarily indicative of results expected for future periods.
+
+ 
+
+ 
+ 
+
+ 
+ 
+ 
+ For the year ended 
+December 31,
+
+ 
+ 
+ 
+ For the six months ended 
+June 30,
+
+ 
+ 
+
+ 
+ 
+ 2020
+
+ 
+ 
+ 
+ 2021
+
+ 
+ 
+ 
+ 2021
+
+ 
+ 
+ 
+ 2022
+
+ 
+ 
+
+ 
+ 
+ (Restated)
+
+ 
+ 
+ 
+ (Restated)
+
+ 
+ 
+ 
+ (Unaudited)
+
+ 
+ 
+ 
+ (Unaudited)
+
+ 
+ 
+
+ 
+ 
+ Selected Consolidated Statements of Operations and Comprehensive Loss Data:
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+
+ 
+ 
+ Net revenues
+
+ 
+ 
+ 
+ $
+
+ 
+ 
+ 13,856,734
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+ $
+
+ 
+ 
+ 32,524,013
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+ $
+
+ 
+ 
+ 8,874,070
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+ $
+
+ 
+ 
+ 12,859,481
+
+ 
+ 
+ 
+
+ 
+ 
+
+ 
+ 
+ Cost of revenues
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (7,228,046
+
+ 
+ 
+ )
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (10,885,731
+
+ 
+ 
+ )
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (3,598,319
+
+ 
+ 
+ )
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (3,720,705
+
+ 
+ 
+ )
+
+ 
+ 
+
+ 
+ 
+ Gross profit
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 6,628,688
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 21,638,282
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 5,275,751
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 9,138,776
+
+ 
+ 
+ 
+
+ 
+ 
+
+ 
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+
+ 
+ 
+ Operating expenses:
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+
+ 
+ 
+ Selling expenses
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (4,566,760
+
+ 
+ 
+ )
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (4,620,113
+
+ 
+ 
+ )
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (2,205,736
+
+ 
+ 
+ )
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (2,094,124
+
+ 
+ 
+ )
+
+ 
+ 
+
+ 
+ 
+ General and administrative expenses
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (5,694,785
+
+ 
+ 
+ )
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (6,657,251
+
+ 
+ 
+ )
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (3,598,496
+
+ 
+ 
+ )
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (1,725,928
+
+ 
+ 
+ )
+
+ 
+ 
+
+ 
+ 
+ Research and development expenses
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (4,236,723
+
+ 
+ 
+ )
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (5,363,909
+
+ 
+ 
+ )
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (2,692,321
+
+ 
+ 
+ )
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (3,669,196
+
+ 
+ 
+ )
+
+ 
+ 
+
+ 
+ 
+ Total operating expenses
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (14,498,268
+
+ 
+ 
+ )
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (16,641,273
+
+ 
+ 
+ )
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (8,496,553
+
+ 
+ 
+ )
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (7,489,248
+
+ 
+ 
+ )
+
+ 
+ 
+
+ 
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+
+ 
+ 
+ (Loss)/income from operations
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (7,869,580
+
+ 
+ 
+ )
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 4,997,009
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (3,220,802
+
+ 
+ 
+ )
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 1,649,528
+
+ 
+ 
+ 
+
+ 
+ 
+
+ 
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+
+ 
+ 
+ Other income/(loss):
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+
+ 
+ 
+ Investment losses
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (207,497
+
+ 
+ 
+ )
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (156,630
+
+ 
+ 
+ )
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (97,841
+
+ 
+ 
+ )
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (121,618
+
+ 
+ 
+ )
+
+ 
+ 
+
+ 
+ 
+ Interest expenses
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (1,026,636
+
+ 
+ 
+ )
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (1,866,831
+
+ 
+ 
+ )
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (739,401
+
+ 
+ 
+ )
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (1,202,391
+
+ 
+ 
+ )
+
+ 
+ 
+
+ 
+ 
+ Foreign currency exchange gain/(loss)
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 41,592
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 11,252
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 4,954
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (38,375
+
+ 
+ 
+ )
+
+ 
+ 
+
+ 
+ 
+ Other income and expense, net
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 1,770,225
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 932,557
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 498,833
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 82,535
+
+ 
+ 
+ 
+
+ 
+ 
+
+ 
+ 
+ Total other income/(loss)
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 577,684
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (1,079,652
+
+ 
+ 
+ )
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (333,455
+
+ 
+ 
+ )
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (1,279,849
+
+ 
+ 
+ )
+
+ 
+ 
+
+ 
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+
+ 
+ 
+ (Loss)/Income before income tax expense
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (7,291,896
+
+ 
+ 
+ )
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 3,917,357
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (3,554,257
+
+ 
+ 
+ )
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 369,679
+
+ 
+ 
+ 
+
+ 
+ 
+
+ 
+ 
+ Income tax benefits/(expenses)
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 235,854
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (552,355
+
+ 
+ 
+ )
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 568,713
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 220,820
+
+ 
+ 
+ 
+
+ 
+ 
+
+ 
+ 
+ Net (loss)/income
+
+ 
+ 
+ 
+ $
+
+ 
+ 
+ (7,056,042
+
+ 
+ 
+ )
+
+ 
+ 
+ 
+ $
+
+ 
+ 
+ 3,365,002
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+ $
+
+ 
+ 
+ (2,985,544
+
+ 
+ 
+ )
+
+ 
+ 
+ 
+ $
+
+ 
+ 
+ 590,499
+
+ 
+ 
+ 
+
+ 
+ 
+
+ 
+ 
+
+ 37
+
+ Table of Contents
+
+ 
+ 
+
+ 
+ 
+
+ 
+ 
+ 
+ As of December 31,
+
+ 
+ 
+ 
+ As of June 30,
+2022
+
+ 
+ 
+
+ 
+ 
+ 2020
+
+ 
+ 
+ 
+ 2021
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+ (Restated)
+
+ 
+ 
+ 
+ (Restated)
+
+ 
+ 
+ 
+ (Unaudited)
+
+ 
+ 
+
+ 
+ 
+ Selected Consolidated Balance Sheets Data:
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+
+ 
+ 
+ Cash and cash equivalents
+
+ 
+ 
+ 
+ $
+
+ 
+ 
+ 366,865
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+ $
+
+ 
+ 
+ 1,311,846
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+ $
+
+ 
+ 
+ 1,524,030
+
+ 
+ 
+ 
+
+ 
+ 
+
+ 
+ 
+ Restricted cash
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 460,164
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+
+ 
+ 
+
+ 
+ 
+ Accounts receivable, net
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 8,052,564
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 31,184,779
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 35,498,955
+
+ 
+ 
+ 
+
+ 
+ 
+
+ 
+ 
+ Contract costs
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 1,067,289
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 1,669,519
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 2,589,487
+
+ 
+ 
+ 
+
+ 
+ 
+
+ 
+ 
+ Total Assets
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 25,177,528
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 47,190,411
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 57,634,965
+
+ 
+ 
+ 
+
+ 
+ 
+
+ 
+ 
+ Short-term borrowings
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 13,923,372
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 9,117,158
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 15,709,376
+
+ 
+ 
+ 
+
+ 
+ 
+
+ 
+ 
+ Deferred revenue
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 1,926,373
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 2,953,238
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 5,010,410
+
+ 
+ 
+ 
+
+ 
+ 
+
+ 
+ 
+ Total Liabilities
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 31,807,900
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 50,573,072
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 60,281,998
+
+ 
+ 
+ 
+
+ 
+ 
+
+ 
+ 
+ Total shareholders deficit
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (6,630,372
+
+ 
+ 
+ )
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (3,382,661
+
+ 
+ 
+ )
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (2,647,033
+
+ 
+ 
+ )
+
+ 
+ 
+
+ 
+ 
+
+ 
+ 
+
+ 
+ 
+ 
+ As of December 31,
+
+ 
+ 
+ 
+ As of June 30,
+2022
+
+ 
+ 
+
+ 
+ 
+ 2020
+
+ 
+ 
+ 
+ 2021
+
+ 
+ 
+ 
+
+ 
+ 
+ (Restated)
+
+ 
+ 
+ 
+ (Restated)
+
+ 
+ 
+ 
+ (Unaudited)
+
+ 
+ 
+
+ 
+ 
+ Selected Consolidated Balance Sheets Data:
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+
+ 
+ 
+ Cash and cash equivalents
+
+ 
+ 
+ 
+ $
+
+ 
+ 
+ 366,865
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+ $
+
+ 
+ 
+ 1,311,846
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+ $
+
+ 
+ 
+ 1,524,030
+
+ 
+ 
+ 
+
+ 
+ 
+
+ 
+ 
+ Restricted cash
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 460,164
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+
+ 
+ 
+
+ 
+ 
+ Accounts receivable, net
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 8,052,564
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 31,184,779
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 35,498,955
+
+ 
+ 
+ 
+
+ 
+ 
+
+ 
+ 
+ Contract costs
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 1,067,289
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 1,669,519
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 2,589,487
+
+ 
+ 
+ 
+
+ 
+ 
+
+ 
+ 
+ Total Assets
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 25,177,528
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 47,190,411
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 57,634,965
+
+ 
+ 
+ 
+
+ 
+ 
+
+ 
+ 
+ Short-term borrowings
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 13,923,372
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 9,117,158
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 15,709,376
+
+ 
+ 
+ 
+
+ 
+ 
+
+ 
+ 
+ Deferred revenue
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 1,926,373
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 2,953,238
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 5,010,410
+
+ 
+ 
+ 
+
+ 
+ 
+
+ 
+ 
+ Total Liabilities
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 31,807,900
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 50,573,072
+
+ 
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 60,281,998
+
+ 
+ 
+ 
+
+ 
+ 
+
+ 
+ 
+ Total shareholders deficit
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (6,630,372
+
+ 
+ 
+ )
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (3,382,661
+
+ 
+ 
+ )
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (2,647,033
+
+ 
+ 
+ )
+
+ 
+ 
+
+ 
+ 
+
+ 38
+
+ Table of Contents
+
+ 
+ RISK FACTORS
+
+ You should carefully consider the risks and uncertainties described below and the other information in this prospectus, including our consolidated financial statements and related notes appearing elsewhere in this prospectus and in the section titled Management s Discussion and Analysis of Financial Condition and Results of Operations, before deciding whether to invest in Xiao-I s ADSs. The business, financial condition, results of operations or prospects of Xiao-I, its subsidiaries and the PRC operating entities could be materially and adversely affected if any of these risks occurs, and as a result, the market price of Xiao-I s ADSs could decline and you could lose all or part of your investment. The risks and uncertainties described below are not the only ones Xiao-I, its subsidiaries and the PRC operating entities face. Additional risks and uncertainties not presently known to Xiao-I, its subsidiaries and the PRC operating entities or that they currently believe to be immaterial may also adversely affect their business. This prospectus also contains forward-looking statements that involve risks and uncertainties. See Cautionary Statement Regarding Forward-Looking Statements on page 83 of this prospectus. The actual results could differ materially and adversely from those anticipated in these forward-looking statements as a result of certain factors, including those set forth below.
+
+ An investment in Xiao-I s ADSs involves significant risks. You should carefully consider all of the information in this prospectus, including the risks and uncertainties described below, before making an investment in its ADSs. Any of the following risks could have a material adverse effect on the business, financial condition and results of operations of Xiao-I, its subsidiaries and the PRC operating entities. In any such case, the market price of Xiao-I s ADSs could decline, and you may lose all or part of your investment.
+
+ In the following discussion of risks relating to of our business, operations and financial information, we, us, or our refer to the PRC operating entities except where consolidated financial information is presented in which case we , us or our refer to Xiao-I and its subsidiaries and the PRC operating entities on a consolidated basis.
+
+ Risks Relating to Our Business and Industry
+
+ We have had net losses (except for 2021 and for the six months ended June 30, 2022) and negative cash flows from operating activities in the past, and we may not achieve or sustain profitability.
+
+ We had a net loss of US$7.1 million and negative cash flows from operations of US$3.5 million in 2020 and net income of US$3.4 million and negative cash flows from operations of US$11.9 million in 2021. For the six months ended June 30, 2022, we had net income of US$0.6 million and negative cash flows from operations of US$6.8 million. We cannot assure you that we will be able to generate net profit or positive cash flows from operating activities in the future. Our future revenue growth and profitability will depend on a variety of factors, many of which are beyond our control. These factors include market acceptance of our products, effectiveness of our monetization strategy, our ability to control cost and expenses and to manage our growth effectively, market competition, macroeconomic and regulatory environment. We also expect our costs and expenses to increase in the future as we continue to expand our operations and to increase our investments in research and development, which will place significant demands on our management and our operational and financial resources. Continuous expansion may increase the complexity of our business, and we may encounter various difficulties. We may fail to develop and improve our operational, financial and managerial controls, enhance our financial reporting systems and procedures, recruit, train and retain skilled professional personnel, or maintain customer satisfaction to effectively support and manage our growth. If we invest substantial time and resources to expand our operations but fail to manage the growth of our business and capitalize on our growth opportunities effectively, we may not be able to achieve profitability, and our business, financial condition, results of operations and prospects would be materially and adversely affected.
+
+ If we fail to maintain and grow our customer base, keep our customers engaged through our products and solutions, our business growth may not be sustainable.
+
+ To achieve the sustainable growth of our business, we must continuously attract new customers, retain existing customers and increase their incremental spending on our products and solutions. To keep pace with our customers evolving demands, we need to improve our existing products and solutions, and launch new products and solutions, on a timely basis. If we fail to accurately identify our customers demands or continuously provide them with products and solutions that add value to their businesses, our customers may be reluctant to increase their spending on our platform, and as a result, the growth of our business may be stalled.
+
+ 
+
+ 39
+
+ Table of Contents
+
+ 
+ If we fail to maintain and enhance the functions, performance, reliability, design, security, and scalability of our platforms to meet our customers evolving needs, we may lose our customers.
+
+ The market for AI industry services in China is constantly changing with innovations. Our success has been based on our dedication to the development of innovative and high-quality products and solutions on our platforms. Our ability to continue to attract and retain customers and increase sales depends largely on our ability to continue improving and enhancing the functions, performance, reliability, design, security, and scalability of our platforms.
+
+ We may experience difficulties in developing new technologies as it is costly and time consuming, which in turn could delay or prevent the development, introduction or implementation of new products and solutions. While we have invested a significant amount of time and money in our service development to date, we may not have sufficient resources to invest at the same level going forward. To the extent we are unable to improve and enhance the functions, performance, reliability, design, security, and scalability of our platforms in a manner that timely and effectively responds to our customers evolving needs, we may lose our customers and our business, financial condition, results of operations, and prospects may be materially and adversely affected.
+
+ If our products and solutions do not achieve sufficient market acceptance, our business and competitive position will suffer.
+
+ To meet our customers rapidly evolving demands, we invest substantial resources in research and development to enhance our products and solutions, as well as in improving our platforms. When we develop or acquire new or enhanced products and solutions, we typically incur significant expenses and expend resources upfront to develop, market, promote and sell the new offerings. Therefore, when we develop or acquire and introduce new or enhanced products and solutions, they must achieve high levels of market acceptance in order to justify the amount of our investment in developing and bringing them to market. Our new products and solutions, or enhancements and changes to our existing products and solutions, could fail to attain sufficient market acceptance for many reasons, including, among others:
+
+ failure to predict market demand accurately in terms of functionality and a failure to supply products and solutions that meet this demand in a timely manner;
+
+ defects, errors, or disruptions;
+
+ negative publicity about our platform s performance or effectiveness;
+
+ changes in the legal or regulatory requirements, or increased legal or regulatory scrutiny, adversely affecting our platform;
+
+ emergence of competitors that achieve market acceptance before we do;
+
+ delays in releasing enhancements to our platform to the market; and
+
+ introduction or anticipated introduction of competing products or solutions by our competitors.
+
+ If our new products and solutions, or any enhancements, do not achieve adequate acceptance in the market, or if products and solutions developed by others achieve greater acceptance in the market, our business could be harmed.
+
+ If our expansion into new industries is not successful, our business, prospects and growth momentum may be materially and adversely affected.
+
+ Our products and solutions are specifically designed to address the diversified needs of our customers across different industries. Through our platform resources and years of technology accumulation, we have a track record of successful expansion into and becoming a leader in new industries. We cannot assure you, however, that we will be able to maintain this momentum in the future. Expanding into new industries involves new risks and challenges. Our lack of familiarity with new industries may make it more difficult for us to keep pace with the evolving customer needs and preferences. In addition, there may be one or more existing market leaders in any industry that we decide to expand into. Such companies may be able to compete more effectively than us by leveraging their experience in doing business in that market as well as their deeper industry insight and greater brand recognition among customers. We will need to comply with new laws and regulations applicable to these businesses, the failure of which would adversely affect our reputation, business, results of operations and financial condition. Expansion into any new vertical may place significant strain on our management and resources, and failure to expand successfully could have a material adverse effect on our business and prospects.
+
+ 
+
+ 40
+
+ Table of Contents
+
+ 
+ The market in which we participate is competitive, and if we do not compete effectively, our business, operating results and financial condition could be harmed.
+
+ The AI industry market is competitive and rapidly evolving. The principal competitive factors in our market include research and development capabilities, industry know-how, continuous capital investment, product portfolio, among others. Some of our existing competitors might have substantial competitive advantages, including larger scale, longer operating history, greater brand recognition, more established relationships with customers, suppliers and partners, and greater financial, research and development, marketing and other resources. As a result, our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards or customer requirements. In addition, some competitors may offer products, solutions and services that address one or more number of functions at lower prices, with greater depth than our products, solutions and services or in different geographies. Our existing and potential competitors may develop and market new products, solutions and services with functionality comparable to ours, and this could force us to decrease prices in order to remain competitive. If we are unable to compete successfully against our current or potential competitors, our business, financial condition, and results of operations may be materially and adversely impacted.
+
+ If we fail to adapt and respond effectively to rapidly changing technology, evolving industry standards, changing regulations, and changing customer needs, requirements or preferences, our business may be materially and adversely affected.
+
+ The AI industry market is subject to rapid technological changes, evolving industry standards, regulations and customer needs, requirements and preferences. The success of our business will depend, in part, on our ability to adapt and respond to these changes on an effective and timely basis. If we fail to upgrade products and solutions that satisfy customers and end-users and provide enhancements and new features for existing products that keep pace with rapid technological and industry changes, our business, operating results and financial condition could be adversely affected. If new technologies emerge that are able to deliver competitive products, solutions and services at lower prices, more efficiently, more conveniently or more securely, such technologies could adversely impact our ability to compete effectively.
+
+ Our platforms must integrate with a variety of network, hardware, mobile and software platforms and technologies, and we need to continuously modify and enhance our products and solutions to adapt to changes and innovation in these technologies. Any failure of our products and solutions to function effectively with evolving technologies could reduce the demand for our products and solutions. If we are unable to respond to these changes in a cost-effective and timely manner, our products and solutions may become less marketable and less competitive or obsolete, and our business, operating results and financial condition could be adversely affected.
+
+ To support our business growth, we continue to invest heavily in our research and development efforts, the expenses of which may negatively impact our cash flow, and may not generate the results we expect to achieve.
+
+ Our technological capabilities are critical to our success, and we have been continuously investing heavily in our research and development efforts. Our R&D expenses incurred were US$4.2 million and US$5.4 million, respectively, for the years ended December 31, 2020 and 2021, accounting for 29.2% and 32.2% of our operating expenses for each of the corresponding periods. Our R&D expenses incurred were US$2.7 million and US$3.7 million, respectively, for the six months ended June 30, 2021 and 2022, accounting for 31.7% and 49.0% of our operating expenses for each of the corresponding periods. The industry in which we operate is subject to rapid technological changes and is evolving quickly in terms of technological innovation. We need to invest significant resources, including financial and human resources, in research and development to lead technological advances in order to make our products and solutions innovative and competitive in the market. As a result, we expect that our research and development expenses will continue to increase.
+
+ Furthermore, development activities are inherently uncertain, and we might encounter practical difficulties in commercializing our development results. Our significant expenditures on research and development may not generate corresponding benefits. Given the fast pace with which the technology has been and will continue to be developed, we may not be able to timely upgrade our technologies in an efficient and cost-effective manner, or at all. New technologies in our industry could render our platforms, our products and solutions that we are developing or expect to develop in the future obsolete, not commercially viable or unattractive, thereby limiting our ability to recover related development costs, which could result in a decline in our revenues, profitability and market share.
+
+ 
+
+ 41
+
+ Table of Contents
+
+ 
+ If our platforms experience material errors, defects or security issues, we may lose our customers, fail to honor our obligations in respect of our contract liabilities, and incur significant remedial costs.
+
+ Despite repeated testing, our products and solutions by their nature may contain technical errors, defects or security issues that are difficult to detect and rectify, particularly when first introduced or when new versions or upgrades are implemented. Due to the complexity of our products and solutions, we may not be able to fix these errors, defects and security issues in a timely manner or at all. We may incur significant expenses rectifying any material error or defect and compensating our customers who are affected by such error or defect.
+
+ Given that many of our customers use our products and solutions in critical parts of their businesses, any error, defect or service interruption on our platforms could result in significant losses for our customers. Our customers may seek significant compensation from us for any losses they incur as result of such errors or cease using our products and solutions altogether. Such claims, even if unsuccessful, could be costly, time-consuming and distracting to management, result in a diversion of significant resources, and have an adverse effect on our business, operating results and financial condition. We cannot assure you that the disclaimers limiting our exposure to claims, which we typically include in the agreements with our customers, will be enforceable or give us adequate protections against liabilities. Moreover, our customers may share information about their poor experiences in the community, resulting in negative publicity about us. Such negative publicity could damage our reputation and hurt our future sales.
+
+ Our brand is integral to our success. If we fail to effectively maintain, promote and enhance our brand, our business and competitive advantage may be harmed.
+
+ We believe that maintaining, promoting and enhancing our Xiao-i (Chinese: i ) brand is critical to maintaining and expanding our business. Maintaining and enhancing our brand depend largely on our ability to continue to provide high quality, well-designed, useful, reliable, and innovative products and solutions, which we cannot assure you we will do successfully.
+
+ We believe the importance of brand recognition will increase as competition in our market increases. In addition to our ability to provide reliable and useful AI solutions at competitive prices, the successful promotion of our brand will also depend on the effectiveness of our marketing efforts. We primarily market our products and solutions through our sales and marketing force, and a number of free traffic sources including developers word-of-mouth referrals. Our efforts to market our brand have incurred significant costs and expenses and we intend to continue such efforts. We cannot assure you, however, that our selling and marketing expenses will lead to increasing revenue, and even if they did, such increases in revenue might not be sufficient to offset the expenses incurred.
+
+ Security breaches and attacks against our systems and network, and any failure to otherwise protect personal, confidential and proprietary information, could damage our reputation and negatively impact our business, as well as materially and adversely affect our financial condition and results of operations.
+
+ We have implemented various cybersecurity measures, but such measures may not detect, prevent or control all attempts to compromise our systems, including distributed denial-of-service attacks, viruses, Trojan horses, malicious software, break-ins, phishing attacks, third-party manipulation, security breaches, employee misconduct or negligence or other attacks, risks, data leakage and similar disruptions that may cause service interruptions or jeopardize the security of data stored in and transmitted by our systems or that we otherwise maintain. Breaches of our cybersecurity measures could result in unauthorized access to our systems, misappropriation of information or data, deletion or modification of user information, or a denial-of-service or other interruption to our business operations. As techniques used to obtain unauthorized access to or sabotage systems change frequently and may not be known until launched against us or our third-party service providers, there can be no assurance that we will be able to anticipate, or implement adequate measures to protect against these attacks. If we are unable to avert these attacks and security breaches, we could be subject to significant legal and financial liabilities, our reputation and business would be harmed and we could sustain substantial revenue loss from lost sales and customer dissatisfaction.
+
+ We partially rely on third-party service providers to conduct our business and any interruption or delay in such third parties or our own failure may impair our customers experience.
+
+ We partially rely on third-party service providers with respect to our software and smart city business. For example, we rent an Internet Data Center (IDC) server, which is a complete equipment (including high-speed Internet access bandwidth, high-performance local area network, safe and reliable computer room environment, etc.), professional management, and perfect application service platform, to arrange the software system required by customers. On the basis of this platform, IDC service providers provide customers with Internet basic platform services (server hosting, virtual host, mail cache, 
+
+ 
+
+ 42
+
+ Table of Contents
+
+ 
+ virtual mail, etc.) and various value-added services (site rental services, domain name system services, load balancing systems, database systems, data backup services, etc.). Customers need to be able to access our platforms at any time, without interruption or degradation of performance, and we provide some customers with service-level commitments with respect to uptime. Any limitation on the capacity of our data centers or cloud infrastructure could impede our ability to onboard new customers or expand the usage of our existing customers, host our products or serve our customers, which could adversely affect our business, financial condition and results of operations. In addition, any incident affecting our data centers or cloud infrastructure that may be caused by cyberattacks, natural disasters, fire, flood, severe storm, earthquake, power loss, outbreaks of contagious diseases, telecommunications failures, terrorist or other attacks, or other events beyond our control could negatively affect our platform. A prolonged service disruption affecting our data centers or technology infrastructure for any of the foregoing reasons would negatively impact our ability to serve our customers and could damage our reputation with current and potential customers, expose us to liability, cause us to lose customers or otherwise harm our business. We may also incur significant costs for using alternative providers or taking other actions in preparation for, or in response to, events that damage the third-party hosting services we use.
+
+ Furthermore, these third-party service providers may not continue to be available to us on commercially reasonable terms, or at all. If we lose our right to use any of these service providers, it could lead to significant increase in our expenses or otherwise result in a delay or disruption in our solutions until equivalent technology is developed by us, or obtained from another third party, and integrated into our solutions. If performance of the third parties that we work with proves unsatisfactory, or if any of them violates its contractual obligations to us, we may need to replace such third party and/or take other remedial action, which could result in additional costs and materially and adversely affect our offerings to customers. Moreover, the financial condition of our third-party service providers may deteriorate over the course of our contract term, which may also impact the ability of such third party to continue providing their services to us.
+
+ Our products and solutions rely on the stable performance of servers, and any disruption to our servers due to internal and external factors could diminish demand for our products and solutions, harm our business, our reputation and results of operations and subject us to liability.
+
+ We rely in part upon the stable performance of servers for provision of our products and solutions. Those servers may incur disruptions due to internal and external factors, such as inappropriate maintenance, defects in the servers, cyberattacks, occurrence of catastrophic events or human errors. Such disruptions could result in negative publicity, loss of or delay in market acceptance of our products and solutions, loss of competitive position, lower customer retention or claims by customers for losses sustained by them. In such an event, we may need to expend additional resources to help with recovering. In addition, we may not carry insurance to compensate us for any losses that may result from claims arising from disruption in third-party servers. As a result, our reputation and our brand could be harmed, and our business, results of operations and financial condition may be adversely affected.
+
+ Our and our business partners business operations have been adversely affected by the COVID-19 outbreak, and may in the future continue to be affected by the COVID-19 outbreak.
+
+ On January 30, 2020, the International Health Regulations Emergency Committee of the World Health Organization declared the novel coronavirus disease 2019, or COVID-19, outbreak a public health emergency of international concern, and on March 11, 2020 the World Health Organization declared the global COVID-19 outbreak a pandemic. The COVID-19 virus continues to spread rapidly worldwide, including where our customers, suppliers and other business partners are located and where we have business operations. During the COVID-19 pandemic, government authorities around the world have ordered businesses to close and people to remain at home while imposing significant restrictions on traveling and social gatherings. Our customers and suppliers are also affected by COVID-19 related restrictions and closures. These measures have impacted, and may further impact, our workforce and operations, the operations of our customers and suppliers and other business partners. There continues to be significant uncertainties associated with the COVID-19 pandemic, including with respect to the ultimate spread of the virus, the severity of the disease, the duration of the outbreak, the possibility of successive waves of outbreaks, further actions that may be taken by governmental authorities around the world to contain the virus or to treat its impact, and the scope and length of the resulting economic downturn. Furthermore, we may in the future experience additional disruptions that could materially and adversely impact our business operations, financial condition and results of operations, including but not limited to:
+
+ decrease in number of customers;
+
+ decrease in demand for our products and solutions;
+
+ 
+
+ 43
+
+ Table of Contents
+
+ 
+ delays in the timing of purchasing decisions and sales and implementation cycles of our products and solutions by our existing or prospective customers;
+
+ inefficiencies, delays and additional costs in our product development, sales, marketing and customer service efforts;
+
+ service interruptions or impaired system performance due to failures of or delays in our systems or resources in light of increasing usage of our cloud services;
+
+ delays or failure to collect receivables from our customers impacted by the COVID-19 outbreak;
+
+ negative impact on the operation of other third parties, including but not limited to suppliers, deposit/loan banks, regulatory authorities and financial intermediaries, which may indirectly have a negative impact on our business and the capital market environment;
+
+ the possibility that one or more clusters of COVID-19 cases could occur at one of our locations, affecting our employees or the systems or employees of our customers or other third parties on which we depend; and
+
+ challenges to our systems supporting our remote workforce, due to the higher demand of such systems and the related software and hardware to support such remote working conditions.
+
+ We may also take further actions as may be required by government authorities or as we determine are in the best interests of our employees, customers and business partners which could further adversely impact our business operations.
+
+ Failure to contain the further spread of COVID-19 will prolong and exacerbate the general economic downturn. In addition, while the potential impact and duration of the COVID-19 pandemic on the global economy and our business in particular may be difficult to assess or predict, the pandemic has resulted in, and may continue to result in, significant disruption of global financial markets, which may reduce our ability to access capital or our customers ability to pay us for past or future purchases, which could negatively affect our liquidity. The COVID-19 pandemic could also reduce the demand for our products and solutions. There is no guarantee that the prolonged pandemic will not affect the demands for our products and solutions in the future. In addition, a recession or financial market correction resulting from the spread of COVID-19 could decrease overall technology spending, adversely affecting demand for our products and solutions, our business and the value of the ADSs.
+
+ The global pandemic of COVID-19 continues to rapidly evolve, and we will continue to monitor the COVID-19 situation closely. The ultimate impact of the COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to change. The extent of the impact of the COVID-19 pandemic on our operational and financial performance, including our ability to execute our business strategies and initiatives, will depend on future developments, including, but not limited to, the duration and spread of the pandemic, its severity, the actions to contain the disease or treat its impact, related restrictions on travel, and the duration, timing and severity of the impact on customer spending, including any recession resulting from the pandemic, all of which are uncertain and cannot be predicted. To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also heighten other risks described in this Risk Factors section.
+
+ If the adoption of our products and solutions by our customers are slower than we expected, our business, results of operations and financial condition may be adversely affected.
+
+ Our business has relied on the adoption of our products and solutions by a broad array of customers. Our ability to further increase our customer base, and achieve broader market acceptance of our products and solutions will depend, in part, on our ability to effectively organize, focus and train our sales and marketing personnel. Our ability to achieve significant revenue growth in the future will depend, in part, on our ability to recruit, train and retain a sufficient number of experienced sales professionals. Our recent hires and planned hires may not become as productive and efficient as we expect and we may be unable to hire or retain sufficient numbers of qualified individuals in the future in the markets where we do business.
+
+ As we seek to increase the adoption of our products and solutions by our customers, we may incur higher costs and longer sales cycles. The decision to adopt our products and solutions may require the review and approval of multiple departments including product, human resources, financial and legal departments. In addition, while customers may 
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+ quickly deploy our products and solutions on a limited basis before they will commit to deploying our products and solutions at scale, they often require extensive education about our products and solutions and significant customer support time, engage in protracted pricing negotiations and seek to secure readily available development resources.
+
+ We may fail to conduct our sales and marketing activities in a cost-effective manner and we are subject to limitations in promoting our products and solutions.
+
+ Due to the technical nature of AI solutions, we mainly rely on our sales and marketing forces to conduct marketing activities and drive sales of our products and solutions. If we fail to conduct our sales and marketing activities in a cost-effective way, we may incur considerable marketing expenses, which could adversely affect our business and operating results. Additionally, our brand promotion and marketing activities may not be well received by customers and potential customers, and may not result in the levels of sales that we anticipate. Meanwhile, marketing approaches and tools in the market for AI solutions in China are evolving, which may further require us to enhance our marketing approaches and experiment with new marketing methods to keep pace with industry developments and customer preferences. Failure to introduce new marketing approaches in an efficient and effective manner could reduce our market share and materially and adversely affect our financial condition, results of operations and profitability.
+
+ If we fail to provide high quality customer services, our brand, business, and results of operations may be harmed.
+
+ We believe our focus on customer services and support is critical to attracting new customers, retaining existing customers and growing our business. We have invested in training our customer support team and improving the quality of our customer services. However, our customer services team may not be able to maintain a high standard for themselves going forward for reasons such as budgetary constraints and employee losses, which could adversely affect our reputation and ability to retain and bring in customers. As a result, our brand, business, and results of operations may be harmed.
+
+ We had a concentration of major customers during the years ended December 31, 2020 and 2021 and for the six months ended June 30, 2022 (the Track Record Period ) and if our existing major customers cease to engage our services, we may be unable to find new customers with similar attributable revenue within a reasonable time or at all.
+
+ For the years ended December 31, 2020 and 2021, the percentage of our revenue attributable to our largest customer amounted to 17.7% and 41.2%, respectively, while the percentage of our revenue attributable our five largest customers for the years ended December 31, 2020 and 2021 amounted to 42.8% and 67.1%, respectively. For the six months ended June 30, 2022, the percentage of our revenue attributable to our largest customer amounted to 26.2%, while the percentage of our revenue attributable our five largest customers for the six months ended June 30, 2022 amounted to 71.8%.
+
+ We cannot assure you that there will not be any disputes between our major customers and us, or that we will be able to maintain business relationships with our existing customers. As a substantial amount of revenues were generated from a relatively small number of major customers during the Track Record Period, in the event that these existing major customers cease to engage our services and we are unable to find new customers with similar attributable revenue within a reasonable period of time or at all, our business and profitability may be adversely affected. In addition, if any of such customers default or delay on their payment or settlement of our trade and other receivables, our liquidity, financial condition and results of operations may be adversely affected.
+
+ The intensifying competition, change in sector trend and landscape and government policies may have a direct impact on the industries where our clients operate their businesses, and negatively affect the stability of our clients, which may subsequently have negative impact on our business.
+
+ A significant portion of our revenues were derived from customers engaged in a few industries in China, some of which are emerging and highly competitive, such as the contact center industry. Any change in the competitive landscape, market trend or user behaviors in such sectors may have a negative impact on our customers, thus harm their ability to make payments and maintain and increase the usage of our products and solutions. In addition, some of these industries in China are highly regulated by the PRC government and numerous regulatory authorities of the central PRC government are empowered to issue and implement regulations governing various aspects of these industries. As the laws and regulations are evolving and some of them are relatively new, changes to the current laws and regulations may harm our business and results of operation. In addition, interpretation and enforcement of such laws and regulations involve significant uncertainty. As a result, in certain circumstances, it may be difficult to 
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+ determine what actions or omissions may be deemed to be in violations of applicable laws and regulations. If these laws and regulations or the uncertainty associated with their interpretation negatively impact the industries where our customers operate, our business may be adversely affected as well.
+
+ Our reliance on a limited number of suppliers for certain essential services could adversely affect our ability to manage our business effectively and subsequently harm our business.
+
+ We rely on a limited number of suppliers for certain essential services to operate our network and provide products and solutions to our customers. Due to the limited number of relevant suppliers available in China, we rely on a limited number of suppliers for cloud, internet data center services and hardware. Our purchase from top-three suppliers in aggregate accounted for 62.5% and 79.2% of total purchase for the years ended December 31, 2020 and 2021, respectively. Our purchase from top-three suppliers in aggregate accounted for 91.3% of total purchase for the six months ended June 30, 2022. We may experience shortages in components or delays in delivery as a result of natural disasters, increased demand in the industry or our suppliers lacking sufficient rights to supply the servers or other products or services.
+
+ Our reliance on these suppliers exposes us to risks, including reduced control over costs and constraints based on the then current availability, terms, and pricing of these services. We generally do not have any long-term contracts guaranteeing supply with these suppliers. If our supply of certain services is disrupted or delayed, there can be no assurance that additional supplies or services can serve as adequate replacements or that supplies will be available on terms that are favorable to us, if at all. Moreover, even if we can identify adequate replacements on substantially similar terms, our business could be adversely affected until those efforts were completed. Any disruption or delay in the supply of our hardware may cause delay or other constraints on our operations that could damage our customer relationships.
+
+ We may fail to obtain or maintain all required licenses, permits and approvals to operate our business.
+
+ Our business and operations have been subject to extensive regulations. We are required to obtain and maintain applicable licenses, permits and approvals from different regulatory authorities in order to conduct our existing or future business in connection with smart city services. As we have been continually expanding into new business operations in the area of architectural design AI services, and the interpretation and application of existing PRC laws and regulations and possible new laws and regulations relating to the telecommunication services have created substantial uncertainties regarding the legality of existing and future foreign investments in, and the businesses and activities of telecommunication services in China, including our business, we cannot assure you that we have obtained all the approvals, permits or licenses required for conducting our business in China or areas where we operate, or will be able to maintain our existing approvals, permits or licenses or obtain new ones. The government authorities may require us to obtain additional licenses, permits or approvals so that we can continue to operate our existing or future businesses or otherwise prohibit our operation of the types of businesses to which the new requirements apply. In addition, new regulations or new interpretations of existing regulations may increase our costs of doing business and prevent us from efficiently delivering services and expose us to potential penalties and fines. Lastly, our existing licenses may expire without proper renewal or be revoked due to violations of relevant licensure maintenance requirements. If any of our entities is deemed by governmental authorities to be operating without appropriate permits and licenses or outside of their authorized scopes of business or otherwise fail to comply with relevant laws and regulations, we may be subject to penalties and our business, financial condition, and results of operation may be materially and adversely affected.
+
+ We may fail to obtain, maintain and protect our intellectual property rights and proprietary information or prevent third parties from any unauthorized use of our technologies.
+
+ Our trade secrets, trademarks, copyrights, patents, and other intellectual property rights are critical to our success. We rely on, and expect to continue to rely on, confidentiality agreements and non-compete agreements with our employees and third parties to protect our intellectual properties. However, events beyond our control may pose threats to our intellectual property rights and the integrity of our products and brand. Effective protection of our trademarks, copyrights, domain names, patent rights, and other intellectual property rights is expensive and challenging. While we have taken measures to protect our intellectual property rights, including implementing a set of comprehensive internal policies to establish robust management over our intellectual property rights, and deploying a special team to guide, manage, supervise and monitor our daily work regarding intellectual property rights, we cannot assure you that such efforts are adequate to guard against any potential infringement and misappropriation. In addition, our intellectual property rights may be declared invalid or unenforceable by the courts. We cannot assure you that any of our intellectual property rights applications will ultimately proceed to registration or will result in registration with adequate scope for our business. Some of our pending applications or registrations may be successfully challenged or invalidated by 
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+ others. If our intellectual property rights applications are not successful, we may have to use different intellectual property rights for our affected products or services, or seek to enter into arrangements with any third parties who may have prior registrations, applications or rights, which might not be available on commercially reasonable terms, if at all. If we fail to protect or enforce our intellectual property rights, our competitors may copy or reverse-engineer our products and services without authorization and compete with us. As a result, our customers and partners may devalue our services, and our ability to compete effectively may be impaired, which could have a material adverse effect on our business, financial condition and results of operations.
+
+ Similarly, to protect our unpatented proprietary information and technology, such as trade secrets, we rely on our agreements with employees and third parties that contain restrictions on the use and disclosure of such information or technology. For example, our employees and third parties are required to keep confidential of any unpatented proprietary information and technology during the contract term and after the termination of the employment agreement. In addition, the agreements with our employees and third parties explicitly provide for all rights and obligations regarding the ownership and protection of intellectual property rights. These agreements may be inadequate or may be breached, either of which could potentially result in unauthorized use or disclosure of our trade secrets and other proprietary information to third parties, including our competitors. As a result, we may lose our competitive advantages derived from such intellectual property. Significant impairments on our intellectual property rights may result in a material and adverse effect on our business.
+
+ We may become subject to intellectual property disputes, which are costly and may subject us to significant liability and increased costs of business.
+
+ We compete in markets where there are a large number of patents, copyrights, trademarks, trade secrets, and other intellectual and proprietary rights, as well as disputes regarding infringement of these rights. Our competitors and other third parties may, whether rightly or falsely, bring legal claims against us for infringing on their intellectual property rights. The intellectual property laws in China, which cover the validity, enforceability and scope of protection of intellectual property rights, are evolving, and litigation is becoming a more popular means to resolve commercial disputes. We are exposed to a higher litigation risk. Any intellectual property lawsuits against us, whether successful or not, may harm our brand and reputation.
+
+ Defending intellectual property claims is costly and can impose a significant burden on our management and resources. Any intellectual property litigation to which we become a party may require us to do one or more of the following:
+
+ cease selling, licensing, or using products or features that incorporate the intellectual property rights that we allegedly infringe, misappropriate, or violate;
+
+ make substantial payments for legal fees, settlement payments, or other costs or damages, including indemnification of third parties;
+
+ obtain a license or enter into a royalty agreement, either of which may not be available on reasonable terms or at all, in order to obtain the right to sell or use the relevant intellectual property; or
+
+ redesign the allegedly infringing products to avoid infringement, misappropriation, or violation, which could be costly, time-consuming, or impossible.
+
+ Further, there is no guarantee that we can obtain favorable judgment in all legal cases, in which case we may need to pay damages or be forced to cease using certain technologies or content that are critical to our products and solutions. Any resulting liabilities or expenses or any changes to our products or solutions that we have to make to limit future liabilities may have a material adverse effect on our business, results of operations, and prospects.
+
+ We and our management may from time to time be subject to claims, disputes, lawsuits and other legal and administrative proceedings.
+
+ We are currently not party to any material legal or administrative proceedings. However, in light of the nature of our business, we and our management are susceptible to potential claims or disputes. We and our management have been, and may from time to time in the future be, subject to or involved in various claims, disputes, lawsuits and other legal and administrative proceedings. Lawsuits and litigations may cause us to incur defense costs, utilize a significant portion of our resources and divert management s attention from our day-to-day operations, any of which could harm our business. Claims arising out of actual or alleged violations of law, breach of contract or torts could be asserted against us by customers, business partners, suppliers, competitors, employees or governmental entities in investigations and legal 
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+ proceedings. In particular, according to the PRC Social Insurance Law and the Administrative Measures on Housing Fund, employers are required, together with their employees or separately, to pay the social insurance premiums and housing funds for their employees. Employers that fail to make adequate social insurance and housing fund contributions may be subject to fines and legal sanctions. A few of our PRC operating entities engaged third-party human resources agencies to pay social insurance premium and housing funds for some of their employees. This is because such employees worked outside of the cities where the operating entities are registered and third-party human resources agencies were engaged to pay social insurance premium and housing provident funds for such employees in cities where they worked. If the relevant PRC authorities determine that this third-party agency arrangement does not satisfy the requirements under the relevant PRC laws and regulations, that we shall make supplemental contributions, that we are not in compliance with labor laws and regulations, or that we are subject to fines or other legal sanctions, such as order of timely rectification, and our business, financial condition and results of operation may be adversely affected.
+
+ Changes in laws and regulations related to the internet or changes in the internet infrastructure itself may diminish the demand for our products and solutions and have a negative impact on our business.
+
+ The future success of our business depends upon the continued use of the internet as a primary medium for commerce, communication and business solutions. The PRC government has in the past adopted, and may in the future adopt, laws or regulations affecting the use of the internet as a commercial medium. Changes in these laws or regulations could require us to modify our products in order to comply with these changes. In addition, government agencies may begin to impose taxes, fees or other charges for accessing the internet or e-commerce. These laws and changes could limit the growth of internet-related commerce or communications generally and reduce the demand for internet-based services such as ours.
+
+ In addition, use of the internet as a business tool could be adversely affected. The performance of the internet and its acceptance as a business tool has been adversely affected by viruses, worms and similar malicious programs and the internet has experienced a variety of outages and other delays as a result of damage to portions of its infrastructure. If the use of the internet is adversely affected by the above issues, our business, financial condition, and results of operations could suffer.
+
+ Complying with evolving privacy and other data related laws and requirements may be expensive and force us to make adverse changes to our business, and failure to comply with such laws and requirements could result in substantial harm to our business and results of operations.
+
+ Laws and regulations governing data privacy and protection, the use of the internet as a commercial medium, the use of data in artificial intelligence and machine learning, and data sovereignty requirements are rapidly evolving, extensive, complex, and include inconsistencies and uncertainties. These and other similar legal and regulatory developments could contribute to legal and economic uncertainty, affect how we design, market, sell, and operate our platform, how our customers process and share data, how we process and use data, and how we transfer personal data from one jurisdiction to another, which could negatively impact demand for our platform. We may incur substantial costs to comply with such laws and regulations, to meet the demands of our customers relating to their own compliance with applicable laws and regulations, and to establish and maintain internal compliance policies.
+
+ We have established privacy policies and other documentation regarding our collection, processing, use, and disclosure of personal information or other confidential information. Although we endeavor to comply with our policies, we may at times fail to do so or may be perceived to have failed to do so. Moreover, despite our efforts, we may not be successful in achieving compliance if our employees or vendors fail to comply with our policies. Such failures could subject us to claims and proceedings, which could be costly and time-consuming. Our business, financial condition and results of operations could be adversely affected.
+
+ We are dependent on the continuous services of our senior management and other key employees. If we fail to attract, retain and motivate qualified personnel, our business could be materially and adversely affected.
+
+ Our future performance depends on the continued services and contributions of our senior management to oversee and execute our business plans and to identify and pursue new opportunities and innovations. Any loss of service of our senior management or other key employees can significantly delay or prevent us from achieving our strategic business objectives, and adversely affect our business, financial condition and operating results. From time to time, there may be changes in our senior management team, resulting from the hiring or departure of executives, which could also disrupt our business. Hiring suitable replacements and integrating them into our existing teams also requires significant amount of time, training and resources, and may impact our existing corporate culture.
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+ Future strategic acquisitions and investments may fail and may result in material and adverse impact on our financial condition and results of operations.
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+ We may, in the future, acquire businesses or platforms that we believe can improve our products and solutions, enhance our technological capacities, and expand our customer coverage. Our ability to implement our acquisition strategy will depend on our ability to identify suitable targets, our ability to reach agreements with them on commercially reasonable terms, and within a desired timeframe, and the availability of financing to complete acquisitions, as well as our ability to obtain any required shareholder or government approvals. Our strategic acquisitions and investments could subject us to uncertainties and risks, including high acquisition and financing costs, potential ongoing financial obligations and unforeseen or hidden liabilities, failure to achieve our intended objectives, benefits or revenue-enhancing opportunities, uncertainty of entering into markets in which we have limited or no experience, costs associated with and difficulties in integrating acquired businesses, and diversion of our resources and management attention. Our failure to address these uncertainties and risks may have a material adverse effect on our business, financial condition, and results of operations. Even if we are able to successfully acquire or invest in suitable businesses, we cannot assure you that we will achieve our expected returns on such acquisitions or investments through successful integration. As of the date of this prospectus, we had not identified or pursued any acquisition or investment targets. If we fail to achieve our expected returns on such acquisitions or investments in the future, our business, financial conditions, results of operations and prospects may be materially and adversely affected.
+
+ Acquisitions also pose the risk that we may be exposed to successor liability relating to the actions by an acquired company and its management before and after the acquisition. The due diligence that we conduct in connection with an acquisition or investment may not be sufficient to discover unknown liabilities, and any contractual guarantees or indemnities that we receive from the sellers of the acquired companies or investment target companies or their shareholders may not be sufficient to protect us from, or compensate us for, actual liabilities. A material liability associated with an acquisition or investment could adversely affect our reputation and reduce the benefits of the acquisition or investment. In addition, if the management team or key employees of an acquired company fail to perform as expected, this may affect the business performance of such acquired company and, in turn, have a material adverse effect on our business, financial conditions, and results of operations.
+
+ We may, in the future, grow and expand our international operations, which may expose us to significant risks.
+
+ We may, in the future, further expand our operations and customer base worldwide. We may adapt to and develop strategies to address international markets but there is no guarantee that such efforts will have the desired effect. As a result, we may be required to devote significant management attention and financial resources worldwide. In connection with such expansion, we may face difficulties including costs associated with varying seasonality patterns, potential adverse movement of currency exchange rates, longer payment cycle difficulties in collecting accounts receivable in some countries, tariffs and trade barriers, a variety of regulatory or contractual limitations on our ability to operate, adverse tax events, reduced protection of intellectual property rights in some countries, political risks and a geographically and culturally diverse workforce and customer base. Failure to overcome any of these difficulties could harm our business.
+
+ In some cases, compliance with the laws and regulations of one country could violate the laws and regulations of another country. We cannot assure you that we are able to fully comply with the legal requirements of each foreign jurisdiction and successfully adapt our business models to local market conditions. Due to the complexity involved in our international business expansion, we cannot assure you that we are or will be in compliance with all local laws.
+
+ We may be unable to obtain any additional capital required in a timely manner or on acceptable terms, or at all. Moreover, our future capital needs may require us to sell additional equity or debt securities that may dilute our shareholders shareholdings or subject us to covenants that may restrict our operations or our ability to pay dividends.
+
+ To grow our business and remain competitive, we may require additional capital from time to time for our daily operations. Our ability to obtain additional capital is subject to a variety of uncertainties, including:
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+ our market position and competitiveness in the industries in which we operate;
+
+ our future profitability, overall financial condition, results of operations and cash flows;
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+ general market conditions for capital-raising activities by our competitors in China; and
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+ economic, political and other conditions in China and internationally.
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+ We may be unable to obtain additional capital in a timely manner or on acceptable terms, or at all. In addition, our future capital or other business needs could require us to sell additional equity or debt securities, or to obtain a credit facility. The sale of additional equity or equity-linked securities could dilute our shareholders shareholdings. Any incurrence of indebtedness will also lead to increased debt service obligations, and could result in operating and financing covenants that may restrict our operations or our ability to pay dividends to our shareholders.
+
+ We have not independently verified the accuracy or completeness of data, estimates, and projections in this prospectus that we obtained from third-party sources, and such information involves assumptions and liabilities.
+
+ Certain facts, forecasts, and other statistics contained in this prospectus relating to the industry in which we operate have been derived from various public data sources and industry reports of third-party industry consultants. In deriving the market size of these industries, these industry consultants may have adopted different assumptions and estimates for certain metrics. While we generally believe such reports to be reliable, we have not independently verified the accuracy or completeness of such information. Such reports may not be prepared on a comparable basis or may not be consistent with other sources.
+
+ Industry data and projections involve a number of assumptions and limitations. Our industry data and market share data should be interpreted in light of the industries in which we operate. Any discrepancy in the interpretation of such data could lead to different measurements and projections, and actual results could differ from the projections.
+
+ We have identified two material weaknesses in our internal control over financial reporting. If our remediation of the material weaknesses is not effective, or if we experience additional material weaknesses in the future or otherwise fail to maintain proper and effective internal control over financial reporting, our ability to produce accurate and timely consolidated financial statements could be impaired, investors may lose confidence in our financial reporting and the trading price of the ADSs may decline.
+
+ Pursuant to Section 404 of Sarbanes-Oxley, our management will be required to report upon the effectiveness of our internal control over financial reporting beginning with the annual report for our fiscal year ending December 31, 2025. When we lose our status as an emerging growth company and reach an accelerated filer threshold, our independent registered public accounting firm will be required to attest to the effectiveness of our internal control over financial reporting. The rules governing the standards that must be met for management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation. To comply with the requirements of being a reporting company under the Exchange Act, we will need to upgrade our information technology systems, implement additional financial and management controls, reporting systems and procedures and hire additional accounting and finance staff. If we or, if required, our auditor is unable to conclude that our internal control over financial reporting is effective, investors may lose confidence in our financial reporting and the trading price of the ADSs may decline.
+
+ In connection with the audit of our consolidated financial statements, as of and for the years ended December 31, 2020 and 2021, we and our independent registered public accounting firm identified two material weaknesses in our internal control over the financial statement closing process. 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 consolidated financial statements will not be prevented or detected on a timely basis. The material weakness that have been identified relates to (i) our lack of sufficient and competent financial reporting and accounting personnel with appropriate knowledge of GAAP and reporting requirements set forth by the SEC to address complex GAAP technical accounting issues, and to prepare and review consolidated financial statements and related disclosures in accordance with GAAP and SEC reporting requirements and (ii) our lack of internal file management procedures and effective recognition procedures to recognize revenue and costs timely.
+
+ We are working to remediate these material weaknesses and are taking steps to strengthen our internal control. Specifically, we are working to develop and implement a staffing plan for hiring additional accounting and finance personnel in 2023, hire additional qualified resources with appropriate knowledge and expertise to handle complex accounting issues and effectively prepare financial statements and conduct regular and continuous GAAP accounting and financial reporting training programs for our financial reporting and accounting personnel. In order to maintain and improve the effectiveness 
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+ of our disclosure controls and procedures and internal controls over financial reporting, we will need to expend significant resources and provide significant management oversight. We plan to adopt measures to improve our internal file management procedures and an effective recognition procedure by (i) establishing internal document management policies and systems, (ii) continuing our efforts to implement necessary review and controls at relevant levels and all important documents and contracts will be submitted to the office of our chief administrative officers for retention and review, and (iii) establishing standard procedures to recognize revenue and costs based on the contracts service periods.
+
+ Implementing any appropriate changes to our internal controls may require specific compliance training of our directors and employees, entail substantial costs in order to modify our existing accounting systems, take a significant period of time to complete and divert management s attention from other business concerns. These changes may not, however, be effective in maintaining the adequacy of our internal control.
+
+ We cannot assure you that there will not be additional material weaknesses or any significant deficiencies in our internal control over financial reporting in the future. Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition, results of operations or cash flows. If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines that we have a material weakness or significant deficiency in our internal control over financial reporting once that firm begin its Section 404 reviews, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of the ADSs could decline, and we could be subject to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities. Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets.
+
+ We face risks related to natural disasters, health epidemics and other outbreaks, which could significantly disrupt our business operations.
+
+ Our business could be adversely affected by the effects of epidemics. In recent years, there have been breakouts of epidemics in and outside China. Our business operations could be disrupted if any of our employees is suspected of having H1N1 flu, COVID-19, avian flu or another epidemic, since it could require our employees to be quarantined and/or our offices to be disinfected. In addition, our results of operations could be adversely affected to the extent that the outbreak harms the Chinese or global economy or our business environment in particular. We are also vulnerable to natural disasters and other calamities, which may give rise to server interruptions, breakdowns, system failures, technology platform failures or internet failures, and may adversely affect our ability to provide advertising services through our products. See Risk Factors Risks Relating to Our Business and Industry Our and our business partners business operations have been adversely affected by the COVID-19 outbreak, and may in the future continue to be affected by the COVID-19 outbreak. on page 43 of this prospectus.
+
+ Economic substance legislation of the Cayman Islands may adversely impact us or our operations.
+
+ The Cayman Islands, together with several other non-European Union jurisdictions, have recently introduced legislation aimed at addressing concerns raised by the Council of the European Union as to offshore structures engaged in certain activities which attract profits without real economic activity. With effect from January 1, 2019, the International Tax Co-operation (Economic Substance) Act of the Cayman Islands (the Substance Act ) came into force in the Cayman Islands introducing certain economic substance requirements for in-scope Cayman Islands entities which are engaged in certain relevant activities, which in the case of exempted companies incorporated before January 1, 2019, will apply in respect of financial years commencing July 1, 2019, onwards. As we are a Cayman Islands company, compliance obligations include filing annual notifications for the Company, which need to state whether we are carrying out any relevant activities and if so, whether we have satisfied economic substance tests to the extent required under the Substance Act. As it is a new regime, it is anticipated that the Substance Act will evolve and be subject to further clarification and amendments. We may need to allocate additional resources to keep updated with these developments, and may have to make changes to our operations in order to comply with all requirements under the Substance Act. Failure to satisfy these requirements may subject us to penalties under the Substance Act.
+
+ It is unclear what ramifications, if any, the addition of the Cayman Islands to the FATF grey list will have for us.
+
+ In February 2021, the Cayman Islands was added to the Financial Action Task Force ( FATF ) list of jurisdictions whose anti-money laundering practices are under increased monitoring, commonly referred to as the FATF grey list. When the FATF places a jurisdiction under increased monitoring, it means the country has committed to resolve 
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+ swiftly the identified strategic deficiencies within agreed timeframes and is subject to increased monitoring during that timeframe. It is unclear how long this designation will remain in place and what ramifications, if any, the designation will have for the Company.
+
+ It is unclear how long the designation of the Cayman Islands to the EU AML High-Risk Third Countries List will remain in place and what ramifications, if any, the designation will have for us.
+
+ On March 13, 2022, the European Commission ( EC ) updated its list of high-risk third countries ( EU AML List ) identified as having strategic deficiencies in their anti-money laundering/counter-terrorist financing regimes. The EC has noted it is committed to greater alignment with the FATF listing process and the addition of the Cayman Islands to the EU AML List is a direct result of the inclusion of the Cayman Islands on the FATF grey list in February 2021. It is unclear how long this designation will remain in place and what ramifications, if any, the designation will have for us.
+
+ Risks Relating to Our Corporate Structure
+
+ In the following discussion of risks relating to our corporate structure, we, us, or our refer to Xiao-I.
+
+ If the PRC government finds that the agreements that establish the structure for operating our businesses in China do not comply with PRC regulations on foreign investment in internet and other related businesses, or if these regulations or their interpretation change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations and our ADSs may decline in value dramatically or even become worthless.
+
+ Foreign ownership of internet-based businesses, such as provider of internet data centers services, are subject to restrictions under current PRC laws and regulations. Neither we nor our subsidiaries own any equity interest in Shanghai Xiao-i. Instead, we control and receive the economic benefits of Shanghai Xiao-i s business operation through the VIE Agreements. We, through our WFOE, have the full and exclusive right to manage and direct all cash flow and assets of the VIE and to direct and administrate the financial affairs and daily operation of Shanghai Xiao-i. Shanghai Xiao-i pays service fees to WFOE in an amount determined by WFOE in WFOE s sole discretion. If Shanghai Xiao-i is unable to pay the service fees due to the actual managing situation, with the written consent of WFOE, the unpaid part of the service fees in the previous fiscal year can be deferred to the end of the next year and settled together. During the validity of the VIE Agreements, we will bear all the economic benefits and risks arising from the business of Shanghai Xiao-i and its subsidiaries. WFOE will provide financial support to Shanghai Xiao-i or its subsidiaries in the event of a loss or serious operational difficulties. The VIE structure is used to provide investors with exposure to foreign investment in China-base companies where Chinese law prohibits direct foreign investments in certain industries. The VIE Agreements allow Xiao-I to (i) exercise control over the VIE, (ii) receive all of the economic benefits of the VIE and the VIE s subsidiaries (excluding non-controlling interests) and bears all the economic risks arising from the business of the VIE and the VIE s subsidiaries (excluding non-controlling interests), (iii) provide financial support to the VIE or the VIE s subsidiaries, and (iv) have an exclusive option to purchase all or part of the equity interests and assets in the VIE when and to the extent permitted by PRC law.
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+ As a result of these contractual arrangements, we are regarded as the primary beneficiary of the VIE for accounting purposes and hence consolidate financial results of the VIE and its subsidiaries into our consolidated financial statements under U.S. GAAP. For a detailed discussion of these contractual arrangements, see

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+RISK FACTORS This investment has a high degree of risk. Before you invest you should carefully consider the risks and uncertainties described below and the other information in this prospectus. If any of the following risks actually occur, our business, operating results and financial condition could be harmed, and the value of our stock could go down. This means you could lose all or a part of your investment. Special Information Regarding Forward-Looking Statements Some of the statements in this prospectus are forward-looking statements. These forward-looking statements involve certain known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. These factors include, among others, the factors set forth herein under Risk Factors. The words believe, expect, anticipate, intend, plan, and similar expressions identify forward-looking statements. We caution you not to place undue reliance on these forward-looking statements. We undertake no obligation to update and revise any forward-looking statements or to publicly announce the result of any revisions to any of the forward-looking statements in this document to reflect any future or developments. However, the Private Securities Litigation Reform Act of 1995 is not available to us as a non- reporting issuer. Further, Section 27A(b)(2)(D) of the Securities Act and Section 21E(b)(2)(D) of the Securities Exchange Act expressly state that the safe harbor for forward looking statements does not apply to statements made in connection with an initial public offering. RISKS RELATED TO OUR BUSINESS AND INDUSTRY We have a limited operating history, and our ability to generate revenue sufficient to support our operations is uncertain. We were formed on March 5, 2018 and have only recently begun operations. We have a limited operational history upon which you can evaluate our potential for future success. Additionally, we are subject to additional risks associated with early-stage businesses, many of which will be beyond our control. These risks include uncertainty about our maintain or increase our revenues, our ability to limit our operational expenses, other operational difficulties, lack of sufficient capital, competition from more advanced companies selling similar floor safety products, and unanticipated problems, delays, and expenses relating to the implementation of our business plan. We cannot ensure that we will operate profitably in the future, or that we will have adequate working capital to meet our obligations as they become due. We cannot guarantee continued sales of our products or services. The Company s business is focused on providing digital technology to create Apps and websites. We cannot provide any assurance that our products and services will sell or continue to sell at rates they have historically. Our products and services may become less attractive compared to competing products and services, and our business would be harmed. We may be unable to effectively implement our business model and expand. Our business model and growth and marketing strategy is predicated on its ability to introduce our products and services to the market. We cannot assure that we will be able to execute our business plan, introducing our products and services into new markets, that customers will embrace our products compared to competing products and services already well established in those markets, that any of the target markets will adopt our products and services, or that prospective customers will agree to pay the prices for our products and services in those new markets we plan to charge. In the event prospective customers resist our products and services and paying the prices we will charge, the Company s business, financial condition, and results of operations will be materially and adversely affected. We have not authorized any person to give you any supplemental information or to make any representations for us. You should not rely upon any information about our company that is not contained in this prospectus. Information contained in this prospectus may become stale. You should not assume the information contained in this prospectus or any prospectus supplement is accurate as of any date other than their respective dates, regardless of the time of delivery of this prospectus, any prospectus supplement or of any sale of the shares. Our business, financial condition, results of operations, and prospects may have changed since those dates. The selling stockholders are offering to sell and seeking offers to buy shares of our common stock only in jurisdictions where offers and sales are permitted. In this prospectus, APPlife the Company, we, us, and our refer to APPlife Digital Solutions, Inc., a Nevada corporation. Item 3. SUMMARY INFORMATION, RISK FACTORS, AND RATIO OF EARNINGS TO FIXED CHARGES You should carefully read all information in the prospectus, including the financial statements and their explanatory notes under the Financial Statements prior to making an investment decision. Corporate Background APPlife Digital Solutions, Inc. (the Company ) was formed March 5, 2018, in Nevada and has offices in San Francisco, California and Shanghai, China. Our office in San Francisco, California allows us to take advantage of the marketing opportunities available in the United States as well as keeping close proximity to sources of capital whether it is debt or equity. Our offices in Shanghai, China allows us to take advantage of a high concentration of skilled tech coders and developers at lower capital costs than in more developed countries such as the United States or Europe. The Company s mission is using digital technology to create APPs and websites and to invest in other ecommerce or cloud-based businesses for a share of their revenue. Our goal is to build and invest in projects that make life, business and living easier, more efficient and just smarter. We are a development stage company with a limited operating history, operations, and revenues and we will need to raise capital to implement our planned operations. If we are unable to do so, an entire investment in our stock could be lost. Where You Can Find Us Our offices are currently located at 50 California St., #1500, San Francisco, CA 94111. Our telephone number is (415) 439-5260. GHS Equity Financing Agreement and Registration Rights Agreement Summary of the Offering Shares currently outstanding: 148,543,635 Shares being offered: 50,000,000 Offering Price per share: The selling stockholders may sell all or a portion of the shares being offered pursuant to this prospectus at fixed prices and prevailing market prices at the time of sale, at varying prices or at negotiated prices. Use of Proceeds: We will not receive any proceeds from the sale of the shares of our common stock by the selling stockholder. However, we will receive proceeds from our initial sale of shares to GHS, pursuant to the Financing Agreement. The proceeds from the initial sale of shares will be used for the purpose of working capital and for potential acquisitions. OTC Markets Symbol: ALDS Risk Factors: See Risk Factors and the other information in this prospectus for a discussion of the factors you should consider before deciding to invest in shares of our common stock. Financial Summary The tables and information below are derived from our consolidated financial statements for the twelve months ended June 30, 2022 and 2021. June 30, 2022 June 30, 2021 Cash 189,233 $ 250,073 Total Assets 261,471 34,113 Total Liabilities 1,265,864 1,683,487 Total Stockholder s Equity (Deficit) (1,004,393) (1,350,426) Statement of Operations Year End June 30, 2022 Year End June 30, 2021 Revenue 28,162 4,951 Total Operating Expenses 3,012,414 3,719,355 Net Loss for the Period (3,726,635 ) (4,226,840 ) Net Loss per Share (0.07 ) (0.10 ) RISK FACTORS This investment has a high degree of risk. Before you invest you should carefully consider the risks and uncertainties described below and the other information in this prospectus. If any of the following risks actually occur, our business, operating results and financial condition could be harmed, and the value of our stock could go down. This means you could lose all or a part of your investment. Special Information Regarding Forward-Looking Statements Some of the statements in this prospectus are forward-looking statements. These forward-looking statements involve certain known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. These factors include, among others, the factors set forth herein under Risk Factors. The words believe, expect, anticipate, intend, plan, and similar expressions identify forward-looking statements. We caution you not to place undue reliance on these forward-looking statements. We undertake no obligation to update and revise any forward-looking statements or to publicly announce the result of any revisions to any of the forward-looking statements in this document to reflect any future or developments. However, the Private Securities Litigation Reform Act of 1995 is not available to us as a non- reporting issuer. Further, Section 27A(b)(2)(D) of the Securities Act and Section 21E(b)(2)(D) of the Securities Exchange Act expressly state that the safe harbor for forward looking statements does not apply to statements made in connection with an initial public offering. RISKS RELATED TO OUR BUSINESS AND INDUSTRY We have a limited operating history, and our ability to generate revenue sufficient to support our operations is uncertain. We were formed on March 5, 2018 and have only recently begun operations. We have a limited operational history upon which you can evaluate our potential for future success. Additionally, we are subject to additional risks associated with early-stage businesses, many of which will be beyond our control. These risks include uncertainty about our maintain or increase our revenues, our ability to limit our operational expenses, other operational difficulties, lack of sufficient capital, competition from more advanced companies selling similar floor safety products, and unanticipated problems, delays, and expenses relating to the implementation of our business plan. We cannot ensure that we will operate profitably in the future, or that we will have adequate working capital to meet our obligations as they become due. We cannot guarantee continued sales of our products or services. The Company s business is focused on providing digital technology to create Apps and websites. We cannot provide any assurance that our products and services will sell or continue to sell at rates they have historically. Our products and services may become less attractive compared to competing products and services, and our business would be harmed. We may be unable to effectively implement our business model and expand. Our business model and growth and marketing strategy is predicated on its ability to introduce our products and services to the market. We cannot assure that we will be able to execute our business plan, introducing our products and services into new markets, that customers will embrace our products compared to competing products and services already well established in those markets, that any of the target markets will adopt our products and services, or that prospective customers will agree to pay the prices for our products and services in those new markets we plan to charge. In the event prospective customers resist our products and services and paying the prices we will charge, the Company s business, financial condition, and results of operations will be materially and adversely affected. We may incur significant debt to finance our operations. There is no assurance that the Company will not incur debt in the future, that it will have sufficient funds to repay its indebtedness, or that the Company will not default on its debt, jeopardizing its business viability. Furthermore, the Company 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 its business. The Company is dependent on the performance of certain personnel. The Company s success depends substantially on the performance of its CEO and key employee, Matt Reid. Given the Company s relatively early stage of development, the Company is dependent on its ability to retain and motivate high quality personnel. Although the Company believes it will be able to engage qualified personnel for such purposes, an inability to do so could materially adversely affect the Company s ability to market, sell, and enhance its products. While Mr. Reid is currently devoting his full-time working efforts to the Company, other employees of the Company may only be available to the Company on a part-time basis. The loss of one or more of its key employees or the Company s inability to hire and retain other qualified employees, including but not limited to research and development staff, sales staff, field staff, and corporate office support staff, could have a material adverse effect on the Company s business. The Company has not established consistent methods for determining the consideration paid to management. The consideration being paid by the Company to its CEO, Mr. Reid, has not been determined based on arm s length negotiation. While management believes that Mr. Reid s current compensation arrangement is fair for the work being performed, there is no assurance that the consideration to management reflects the true market value of his services. Additionally, in the future, the Company may grant net profits interests to its executive officers in addition to stock options, which may further dilute shareholders ownership of the Company. There is no guarantee that the Company will pay dividends to its shareholders. The Company does not anticipate declaring and paying dividends to its shareholders in the near future. It is the Company s current intention to apply net earnings, if any, in the foreseeable future to increasing its capital base and marketing. Prospective investors seeking or needing dividend income or liquidity should therefore not purchase the Shares. There can be no assurance that the Company will ever have sufficient earnings to declare and pay dividends to the holders of the Company s Common Stock, and in any event, a decision to declare and pay dividends is at the sole discretion of the Company s Board of Directors. A small group of Company employees and their related parties hold a majority of the control of the Company. As of December 30, 2022, the Company s CEO, Mr. Reid, owns approximately 68.83% of the Company s outstanding Common Stock. By virtue of such stock ownership, Mr. Reid is 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 management or that such conflicts will be resolved in a manner favorable to the Company. Management cannot guarantee that its relationship with the Company does not create conflicts of interest. The relationship of management and its affiliates 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. 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. The Company plans to maintain comprehensive liability and property insurance at customary levels. The Company will also evaluate the availability and cost of business interruption insurance. However, should uninsured losses occur, the Shareholders could lose their invested capital. We may be subject to liabilities that are not readily identifiable at this time. The Company may have liabilities to affiliated or unaffiliated lenders. These liabilities would represent fixed costs we would be required to be pay, regardless of the level of business or profitability experienced by the Company. There is no assurance that the Company will be able to pay all of its liabilities. Furthermore, the Company is always subject to the risk of litigation from customers, suppliers, employees, and others. Litigation can cause the Company to incur substantial expenses and, if cases are lost, judgments, and awards can add to the Company s costs. In the course of business, the Company may incur expenses beyond what was anticipated. Unanticipated costs may force the Company to obtain additional capital or financing from other sources or may cause the Company to lose its entire investment in the Company if it is unable to obtain the additional funds necessary to implement its business plan. There is no assurance that the Company will be able to obtain sufficient capital to implement its business plan successfully. If a greater investment is required in the business because of cost overruns, the probability of earning a profit or a return of shareholder investment in the Company is diminished. The Company will rely on management to execute the business plan and manage the Company s affairs. Under applicable state corporate law and the By-Laws of the Company, the officers and directors of the Company have the power and authority to manage all aspects of the Company s business. Shareholders must be willing to entrust all aspects of the Company s business to its directors and executive officers. There is no assurance the Company will always have adequate capital to conduct its business. The Company will have limited capital available to it. If the Company s entire original capital is fully expended and additional costs cannot be funded from borrowings or capital from other sources, then the Company s financial condition, results of operations and business performance would be materially adversely affected. The Company is required to indemnify its directors and officers. The Company s By-Laws provide that the Company will indemnify its officers and directors to the maximum extent permitted by Nevada law. If the Company 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. We may encounter difficulties managing any growth, and if we are unable to do so, our business, financial condition and results of operations may be adversely affected. If we are able to successfully launch our apps and websites, as our operations grow, the simultaneous management of development, production and commercialization across our target markets will become increasingly complex and may result in less than optimal allocation of management and other administrative resources, increase our operating expenses and harm our operating results. Our ability to effectively manage our operations, growth and various projects across our target markets will require us to make additional investments in our infrastructure to continue to improve our operational, financial and management controls and our reporting systems and procedures and to attract and retain sufficient numbers of talented employees, which we may be unable to do effectively. We may be unable to successfully manage our expenses in the future, which may negatively impact our gross margins or operating margins in any particular quarter. Our success also depends in part on our management s expertise managing a public company, and our management has no expertise in this area. If our management is not able to manage the company properly as a public company, our business would be harmed. Matt Reid, our CEO and director, has no experience in management positions with public companies. If our management is not able to successfully manage the Company as a public company, including complying with various regulatory, disclosure and reporting obligations of public companies, our business would be harmed. Due to the fact that our sole officer and director is located in China, your rights as an investor in the United States may be limited in the following ways. Our sole officer and director, Matt Reid, resides in China and operates the Company from China. As a result, as an investor you may have difficulty with the following: effecting service of process within the United States against our non-U.S. resident officer and director; enforcing U.S. court judgments in the United States based upon the civil liability provisions of the U.S. federal securities laws against the above-referenced foreign person; enforcing U.S. court judgments in a Chinese court based on the civil liability provisions of the U.S. federal securities laws against the above foreign person; and bringing an original action in a Chinese court to enforce liabilities based upon the U.S. federal securities laws against the above foreign person. RISKS RELATED TO OUR INTELLECTUAL PROPERTY We may become involved in intellectual property disputes, which may disrupt our business and require us to pay significant damage awards. Third parties may sue us for intellectual property infringement, which, if successful, could disrupt our business, cause us to pay significant damage awards or require us to pay licensing fees. We may also be required to pay penalties, judgments, royalties or significant settlement costs. If we fail or are unable to develop non-infringing technology our business could suffer. Third parties may misappropriate our proprietary technologies, information, or trade secrets despite a contractual obligation not to do so. Third parties (including joint venture, collaboration, development partners, contract manufacturers, and other contractors and shipping agents) may have custody or control of any proprietary processes and technologies developed by us. If proprietary technologies developed by us were stolen or misappropriated, they could be used by other parties who may be able to use the technologies for their own commercial gain. In the event that any proprietary technologies are developed and then misappropriated, it could be difficult for us to challenge the misappropriation or prevent reverse engineering, especially in countries with limited legal and intellectual property protection. RISKS RELATING TO OUR COMMON STOCK We may, in the future, issue additional common shares, which would reduce investors percent of ownership and may dilute our share value. Our Articles of Incorporation authorize the issuance of 500,000,000 shares of common stock, par value $0.001 per share, of which 148,543,635 shares are issued and outstanding as of December 30, 2022. The future issuance of common stock may result in substantial dilution in the percentage of our common stock held by our then-existing shareholders. We may value any common stock issued in the future on an arbitrary basis. The issuance of common stock for future services or acquisitions or other corporate actions may have the effect of diluting the value of the shares held by our investors and might have an adverse effect on any trading market for our common stock. 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. There is a very limited market for our securities. While our common stock is on the OTC Markets, there has been negligible trading volume. There is no guarantee that an active trading market will develop in our securities and if a trading market does not develop, purchasers of our securities may have difficulty selling their shares. There is currently no established public trading market for our securities, and an active trading market in our securities may not develop, or, if developed, may not be sustained. Accordingly, investors may have a difficult time selling their shares. Our common stock is quoted through the OTC Markets, which may have an unfavorable impact on our stock price and liquidity. The Company s common stock is quoted on the OTC Markets, which is a significantly more limited market than the New York Stock Exchange or NASDAQ. The trading volume may be limited by the fact that many major institutional investment funds, including mutual funds, follow a policy of not investing in OTC Markets stocks and certain major brokerage firms restrict their brokers from recommending OTC Markets stocks because they are considered speculative and volatile. The trading volume of the Company s common stock has been and may continue to be limited and sporadic. As a result, the quoted price for the Company s common stock on the OTC Markets may not necessarily be a reliable indicator of its fair market value. Additionally, the securities of small capitalization companies may trade less frequently and in more limited volume than those of more established companies. The market for small capitalization companies is generally volatile, with wide price fluctuations not necessarily related to the operating performance of such companies. Trading on the OTC Markets may be volatile and sporadic, which could depress the market price of our common stock and make it difficult for our stockholders to resell their shares. Our common stock is quoted on OTC Markets. Trading in stock quoted on OTC Markets is often thin and characterized by wide fluctuations in trading prices due to many factors that may have little to do with our operations or business prospects. This volatility could depress the market price of our common stock for reasons unrelated to operating performance. Moreover, OTC Markets is not a stock exchange, and trading of securities on the OTC Markets is often more sporadic than the trading of securities listed on a quotation system like NASDAQ or a stock exchange like the American Stock Exchange. Accordingly, our shareholders may have difficulty reselling any of their shares. State securities laws may limit secondary trading, which may restrict the states in which and conditions under which you can sell the shares offered by this prospectus. Secondary trading in common stock sold in this offering will not be possible in any state until the common stock is qualified for sale under the applicable securities laws of the state or there is confirmation that an exemption, such as listing in certain recognized securities manuals, is available for secondary trading in the state. If we fail to register or qualify, or to obtain or verify an exemption for the secondary trading of, the common stock in any particular state, the common stock could not be offered or sold to, or purchased by, a resident of that state. In the event that a significant number of states refuse to permit secondary trading in our common stock, the liquidity for the common stock could be significantly impacted thus causing you to realize a loss on your investment. We may issue shares of preferred stock in the future that may adversely impact your rights as holders of our common stock. Because our CEO and director, Mr. Reid, owns a majority of our outstanding common stock, he could authorize our Board of Directors to determine the relative rights and preferences of preferred shares without further stockholder approval. As a result, our Board of Directors could then authorize the issuance of a series of preferred stock that would grant to holders preferred rights to our assets upon liquidation, the right to receive dividends before dividends are declared to holders of our common stock, and the right to the redemption of such preferred shares, together with a premium, prior to the redemption of the common stock. To the extent that we do issue shares of preferred stock, your rights as holders of common stock could be impaired thereby, including, without limitation, dilution of your ownership interests in us. In addition, shares of preferred stock could be issued with terms calculated to delay or prevent a change in control or make removal of management more difficult, which may not be in your interest as a holder of common stock. We may seek to raise additional funds, finance acquisitions or develop strategic relationships by issuing capital stock. We may finance our operations and develop strategic relationships by issuing equity or debt securities, which could significantly reduce the percentage ownership of our existing stockholders. Furthermore, any newly issued securities could have rights, preferences and privileges senior to those of our existing stock. Moreover, any issuances by us of equity securities may be at or below the prevailing market price of our stock and in any event may have a dilutive impact on your ownership interest, which could cause the market price of our stock to decline. There may be deficiencies with our internal controls that require improvements, and if we are unable to adequately evaluate internal controls, we may be subject to sanctions by the SEC. We are exposed to potential risks from legislation requiring companies to evaluate internal controls under Section 404a of the Sarbanes-Oxley Act of 2002. As a smaller reporting company and emerging growth company, we will not be required to provide a report on the effectiveness of our internal controls over financial reporting until our second annual report, and we will be exempt from the auditor attestation requirements concerning any such report so long as we are an emerging growth company or a smaller reporting company. We have not yet evaluated whether our internal control procedures are effective and therefore there is a greater likelihood of undiscovered errors in our internal controls or reported financial statements as compared to issuers that have conducted such evaluations. If we are not able to meet the requirements of Section 404a in a timely manner or with adequate compliance, we might be subject to sanctions or investigation by regulatory authorities, such as the SEC. We are susceptible to general economic conditions, natural catastrophic events and public health crises, and a potential downturn in advertising and marketing spending by advertisers 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 cause decreases in or delays in advertising spending and reduce and/or 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 We are a controlled company within the meaning of the listing rules of Nasdaq and, as a result, can rely on exemptions from certain corporate governance requirements that provide protection to shareholders of other companies. Because our sole officer, Matt Reid, owns a majority of our common stock and will own a majority of our common stock after this offering, we are and will continue to be after the offering a controlled company as defined under the listing rules of Nasdaq. Under Nasdaq listing rules, controlled companies are companies of which more than 50% of the voting power for the election of directors is held by an individual, a group, or another company. For as long as we remain a controlled company, we are permitted to elect to rely on certain exemptions from Nasdaq s corporate governance rules, including the following: an exemption from the rule that a majority of our board of directors must be independent directors; an exemption from the rule that our compensation committee be composed entirely of independent directors; an exemption from the rule that our director nominees must be selected or recommended solely by independent; directors or a nominating committee composed solely of independent directors; If we elected to rely on the controlled company exemptions, a majority of the members of our board of directors might not be independent directors, our nominating and corporate governance and compensation committees might not consist entirely of independent directors, and you would not have the same protection afforded to shareholders of companies that are subject to Nasdaq s corporate governance rules. RISKS RELATED TO THE OFFERING Our existing stockholders may experience significant dilution from the sale of our common stock pursuant to the GHS Financing Agreement. The sale of our common stock to GHS Investments LLC in accordance with the Financing Agreement may have a dilutive impact on our shareholders. As a result, the market price of our common stock could decline. In addition, the lower our stock price is at the time we exercise our put options, the more shares of our common stock we will have to issue to GHS in order to exercise a put under the Financing Agreement. If our stock price decreases, then our existing shareholders would experience greater dilution for any given dollar amount raised through the offering. The perceived risk of dilution may cause our stockholders to sell their shares, which may cause a decline in the price of our common stock. Moreover, the perceived risk of dilution and the resulting downward pressure on our stock price could encourage investors to engage in short sales of our common stock. By increasing the number of shares offered for sale, material amounts of short selling could further contribute to progressive price declines in our common stock. The issuance of shares pursuant to the GHS Financing Agreement may have a significant dilutive effect. Depending on the number of shares we issue pursuant to the GHS Financing Agreement, it could have a significant dilutive effect upon our existing shareholders. Although the number of shares that we may issue pursuant to the Financing Agreement will vary based on our stock price (the higher our stock price, the less shares we have to issue), there may be a potential dilutive effect to our shareholders, based on different potential future stock prices, if the full amount of the Financing Agreement is realized. Dilution is based upon common stock put to GHS and the stock price discounted to GHS s purchase price of 80% of the lowest trading price during the pricing period. GHS Investments LLC will pay less than the then-prevailing market price of our common stock which could cause the price of our common stock to decline. Our common stock to be issued under the GHS Financing Agreement will be purchased at a twenty percent (20%) discount, or eighty percent (80%) of the lowest trading price during the ten (10) consecutive trading days immediately preceding our notice to GHS of our election to exercise our put right. GHS has a financial incentive to sell our shares immediately upon receiving them to realize the profit between the discounted price and the market price. If GHS sells our shares, the price of our common stock may decrease. If our stock price decreases, GHS may have further incentive to sell such shares. Accordingly, the discounted sales price in the Financing Agreement may cause the price of our common stock to decline. We may not have access to the full amount under the Financing Agreement. On December 30, 2022, the lowest traded price of the Company s common stock during the ten (10) consecutive trading day period was $0.0182. At that price we would be able to sell shares to GHS under the Financing Agreement at the discounted price of $0.01456. At that discounted price, the 50,000,000 shares registered for issuance to GHS under the Financing Agreement would, if sold by us to GHS, result in aggregate proceeds of $7280,000. There is no assurance the price of our common stock will remain the same as the market price or increase. Since our common stock is thinly traded it is more susceptible to extreme rises or declines in price, and you may not be able to sell your shares at or above the price paid. Since our common stock is thinly traded its trading price is likely to be highly volatile and could be subject to extreme fluctuations in response to various factors, many of which are beyond our control, including (but not necessarily limited to): the trading volume of our shares; the number of securities analysts, market-makers and brokers following our common stock; new products or services introduced or announced by us or our competitors; actual or anticipated variations in quarterly operating results; conditions or trends in our business industries; announcements by us of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments; additions or departures of key personnel; sales of our common stock; and general stock market price and volume fluctuations of publicly-traded, and particularly microcap, companies. Investors may have difficulty reselling shares of our common stock, either at or above the price they paid for our stock, or even at fair market value. The stock markets often experience significant price and volume changes that are not related to the operating performance of individual companies, and because our common stock is thinly traded it is particularly susceptible to such changes. These broad market changes may cause the market price of our common stock to decline regardless of how well we perform as a company. In addition, there is a history of securities class action litigation following periods of volatility in the market price of a company s securities. Although there is no such litigation currently pending or threatened against us, such a suit against us could result in the incursion of substantial legal fees, potential liabilities and the diversion of management s attention and resources from our business. Moreover, and as noted below, our shares are currently traded on the OTC Link (OTC Pink tier) and, further, are subject to the penny stock regulations. Price fluctuations in such shares are particularly volatile and subject to potential manipulation by market-makers, short-sellers and option traders.

parsed_sections/risk_factors/2023/ALTB_alpine_risk_factors.txt

@@ -0,0 +1,453 @@
+risks to investors. Our WFOE structure is used to provide investors with exposure to foreign investment in China-based
+companies where Chinese law prohibits direct foreign investment in the operating companies. Investors may never hold equity interests
+in the Chinese operating company. The senior management and the shareholders of the domestic company play a very important role in the
+WFOE structure. Chinese regulatory authorities could disallow this structure, which would likely result in a material change in our operations
+and/or a material change in the value of the securities we are registering for sale, including that it could cause the value of such
+securities to significantly decline or become worthless.
+
+ 
+
+The legal and operational risks associated with being based in or having the majority of the Company s operations in China could result in a material change in the value of the securities we are registering for sale or could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless. Please see the Risk Factor titled We are faced with risks and uncertainties as a foreign enterprise under PRC laws on page 18.
+
+ 
+
+Trading securities
+may be prohibited under the Holding Foreign Companies Accountable Act ( HFCAA ), as amended by the Consolidated Appropriations
+Act ( CAA ) of 2023. If the PCAOB determines that it cannot inspect or fully investigate the Company s auditor for
+two consecutive years, and that as a result an exchange may determine to delist your securities. On December 29, 2022, the CAA was signed
+into law by President Biden. The CAA contained, among other things, an identical provision to the AHFCAA, which reduces the number of
+consecutive non-inspection years required for triggering the prohibitions under the HFCA Act from three years to two. Since our current
+registered public accounting firm, Shandong Haoxin Certified Accountants Co., Ltd., is located in the PRC and is currently subject to
+the PCAOB inspections every two years, you may be deprived of the benefits of regular inspections which could result in limitation or
+restriction to our access to the U.S. capital markets and trading of our securities on a national exchange or over-the-counter 
+markets may be prohibited under the HFCAA. On December 24, 2021, the China Securities Regulatory Commission, or the CSRC, issued Provisions
+of the State Council on the Administration of Overseas Securities Offering and Listing by Domestic Companies (Draft for Comments) (the
+ Administration Provisions ), and the Administrative Measures for the Filing of Overseas Securities Offering and Listing
+by Domestic Companies (the Measures ), which were open for public comments by January 23, 2022. The Administration Provisions
+and Measures for overseas listings lay out specific requirements for filing documents and include unified regulation management, strengthening
+regulatory coordination, and cross-border regulatory cooperation. Domestic companies seeking to list abroad must carry out relevant security
+screening procedures if their businesses involve supervisions such as foreign investment security and cyber security reviews. Companies
+endangering national security are among those off-limits for overseas listings. As the Administration Provisions and Measures have not
+yet come into effect, we are currently unaffected by them. However, it is uncertain when the Administration Provision and the Measures
+will take effect or if they will take effect as currently drafted.
+
+ 
+
+ 
+
+ Table of Contents
+
+ 
+
+ 
+
+Regulatory
+Permission
+
+ 
+
+As substantially
+all of our operations are conducted by our PRC Subsidiaries in China, we are subject to the associated legal and operational risks, including
+risks related to the legal, political and economic policies of the Chinese government, the relations between China and the United States,
+or Chinese or United States regulations, which risks could result in a material change in our operations and/or cause the value of our
+ordinary shares to significantly decline or become worthless, and affect our ability to offer or continue to offer securities to investors.
+Recently, the PRC government initiated a series of regulatory actions and made a number of public statements on the regulation of business
+operations in China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision
+over China-based companies listed overseas, and adopting new measures to extend the scope of cybersecurity reviews.
+
+ 
+
+On July 6,
+2021, the relevant PRC government authorities made public the Opinions on Strictly Cracking Down Illegal Securities Activities, which
+provided that the administration and supervision of overseas-listed China-based companies will be strengthened, and the special provisions
+of the State Council on overseas issuance and listing of shares by such companies will be revised, clarifying the responsibilities of
+domestic industry competent authorities and regulatory authorities. However, the Opinions on Strictly Cracking Down Illegal Securities
+Activities were only issued recently, leaving uncertainties regarding the interpretation and implementation of these opinions. It is
+possible that any new rules or regulations may impose additional requirements on us. As of the date of this prospectus, neither we nor
+our PRC Subsidiaries have been subject to any investigation, or received any notice, warning, or sanction from applicable government
+authorities related to this offering. In addition, neither we nor our PRC Subsidiaries have been involved in any review, investigation,
+enquiry, penalty, or other legal proceedings initiated by applicable governmental or regulatory authorities or third parties in relation
+to this offering.
+
+ 
+
+The Regulations
+on Mergers and Acquisitions of Domestic Companies by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory agencies
+in 2006 and amended in 2009, requires an overseas special purpose vehicle formed for listing purposes through acquisitions of PRC domestic
+companies and controlled by PRC companies or individuals to obtain the approval of the China Securities Regulatory Commission, or the
+CSRC, prior to the listing and trading of such special purpose vehicle s securities on an overseas stock exchange. We will not
+be required to submit an application to the CSRC for the approval under the M&A Rules for an offering because (i) the CSRC currently
+has not issued any definitive rule or interpretation concerning whether offerings like ours are subject to this regulation; and (ii)
+we did not acquire any equity interests or assets of a PRC domestic company as such terms are defined under the M&A
+Rules. However, there remains some uncertainty as to how the M&A Rules will be interpreted or implemented in the context of an overseas
+offering and its opinions summarized above are subject to any new laws, rules and regulations or detailed implementations and interpretations
+in any form relating to the M&A Rules.
+
+ 
+
+On December
+28, 2021, the Cyberspace Administration of China (the CAC ) jointly with the relevant authorities formally published Measures
+for Cybersecurity Review (2021) which took effect on February 15, 2022 and replace the former Measures for Cybersecurity Review (2020).
+Measures for Cybersecurity Review (2021) stipulates that operators of critical information infrastructure purchasing network products
+and services, and online platform operator (together with the operators of critical information infrastructure, the Operators )
+carrying out data processing activities that affect or may affect national security, shall conduct a cybersecurity review, any online
+platform operator who controls more than one million users personal information must go through a cybersecurity review by the
+cybersecurity review office if it seeks to be listed in a foreign country. Given that: (i) we do not possess personal information on
+more than one million users in our business operations; and (ii) data processed in our business does not have a bearing on national security
+and thus may not be classified as core or important data by the authorities, this offering would not be required to apply for a cybersecurity
+review under the Measures for Cybersecurity Review (2021). As a result of the nature of the Company s operations and size, the
+Company does not believe that the above is applicable to the Company. Additionally, The Company is of the belief that the expenses of
+engaging PRC counsel would be unduly burdensome on the Company, and thus, the Company has not sought to engage PRC counsel to obtain
+an additional opinion pertaining to the Company s understanding of all required approvals and permission to operate our business.
+
+ 
+
+According
+to the Notice by the General Office of the State Council of Comprehensively Implementing the List-based Management of Administrative
+Licensing Items (No. 2 [2022] of the General Office of the State Council) and its attachment, the List of Administrative Licensing Items
+Set by Laws, Administrative Regulations, and Decisions of the State Council (2022 Edition), as of the date of this prospectus, our PRC
+subsidiary has received from PRC authorities all requisite licenses, permissions or approvals needed to engage in the businesses currently
+conducted in China. As of the date of this prospectus, neither we nor our PRC Subsidiary (i) are required to obtain permissions from
+any PRC authorities to operate or issue our ordinary shares to foreign investors, (ii) are subject to permission requirements from the
+CSRC, the CAC or any other entity that is required to approve our PRC Subsidiary s operations, or (iii) have received or were denied
+such permissions by any PRC authorities.
+
+ 
+
+ 
+
+ Table of Contents
+
+ 
+
+ 
+
+As of the
+date of this prospectus, the only permission required for operations is the business license of the PRC subsidiary. The business license
+in PRC is a permit issued by Market Supervision and Administration that allows the company to conduct specific business within the government s
+geographical jurisdiction. As of the date of this prospectus, our PRC subsidiary has received from PRC authorities all requisite licenses,
+permissions or approvals needed to engage in the businesses currently conducted in China, and no permission or approval has been denied.
+
+ 
+
+We believe
+that we are not currently required to obtain approval from Chinese authorities, including the China Securities Regulatory Commission,
+or CSRC, or Cybersecurity Administration Committee, or CAC, to list or become quoted on U.S. exchanges/quotation servicers or issue securities
+to foreign investors, however, if we were required to obtain approval in the future and were denied permission from Chinese authorities
+to list or become quoted on U.S. exchanges and/or quotation servicers, we will not be able to continue to be quoted or listed on U.S.
+exchanges, which would materially affect the interests of the investors. It is uncertain when and whether the Company will be required
+to obtain permission from the PRC government to list or become quoted on U.S. exchanges in the future, and even when such permission
+is obtained, whether it will be denied or rescinded. Although the Company is currently not required to obtain permission from any of
+the PRC central or local government to obtain such permission and has not received any denial to list or become quoted on the U.S. exchange,
+our operations could be adversely affected, directly or indirectly, by existing or future laws and regulations relating to its business
+or industry; if we inadvertently conclude that such approvals are not required when they are, or applicable laws, regulations, or interpretations
+change and we are required to obtain approval in the future.
+
+ 
+
+On December
+24, 2021, the China Securities Regulatory Commission, or the CSRC, issued Provisions of the State Council on the Administration of Overseas
+Securities Offering and Listing by Domestic Companies (Draft for Comments) (the Administration Provisions ), and the Administrative
+Measures for the Filing of Overseas Securities Offering and Listing by Domestic Companies (the Measures ), which were open
+for public comments by January 23, 2022. The Administration Provisions and Measures for overseas listings lay out specific requirements
+for filing documents and include unified regulation management, strengthening regulatory coordination, and cross-border regulatory cooperation.
+Domestic companies seeking to list abroad must carry out relevant security screening procedures if their businesses involve supervisions
+such as foreign investment security and cyber security reviews. Companies endangering national security are among those off-limits for
+overseas listings. As the Administration Provisions and Measures have not yet come into effect, we are currently unaffected by them.
+However, it is uncertain when the Administration Provision and the Measures will take effect or if they will take effect as currently
+drafted.
+
+ 
+
+On February
+17, 2023, with the approval of the State Council, the CSRC released the Trial Administrative Measures of Overseas Securities Offering
+and Listing by Domestic Companies (the Trial Measures ) and five supporting guidelines, which will come into effect on March
+31, 2023. According to the Trial Measures, among other requirements, (1) domestic companies that seek to offer or list securities overseas,
+both directly and indirectly, should fulfill the filing procedures with the CSRC; if a domestic company fails to complete the filing
+procedures, such domestic company may be subject to administrative penalties; and (2) where a domestic company seeks to indirectly offer
+and list securities in an overseas market, the issuer shall designate a major domestic operating entity responsible for all filing procedures
+with the CSRC, and such filings shall be submitted to the CSRC within three business days after the submission of the overseas offering
+and listing application. On the same day, the CSRC also held a press conference for the release of the Trial Measures and issued the
+Notice on Administration for the Filing of Overseas Offering and Listing by Domestic Companies, which clarifies that (1) on or prior
+to the effective date of the Trial Measures, domestic companies that have already submitted valid applications for overseas offering
+and listing but have not obtained approval from overseas regulatory authorities or stock exchanges may reasonably arrange the timing
+for submitting their filing applications with the CSRC, and must complete the filing before the completion of their overseas offering
+and listing; (2) a six-month transition period will be granted to domestic companies which, prior to the effective date of the Trial
+Measures, have already obtained the approval from overseas regulatory authorities or stock exchanges, but have not completed the indirect
+overseas listing; if domestic companies fail to complete the overseas listing within such six-month transition period, they shall file
+with the CSRC according to the requirements; and (3) the CSRC will solicit opinions from relevant regulatory authorities and complete
+the filing of the overseas listing of companies with contractual arrangements which duly meet the compliance requirements, and support
+the development and growth of these companies.
+
+ 
+
+ 
+
+ Table of Contents
+
+ 
+
+ 
+
+With respect
+to the domestic company, non-compliance with the Trial Measures or an overseas listing completed in breach of it may result in a warning
+or a fine ranging from RMB 1 million to RMB10 million. Furthermore, the directly responsible executives and other directly responsible
+personnel of the domestic company may be warned, or fined between RMB 500,000 and RMB 5 million and the controlling shareholder, actual
+controllers, and other legally appointed persons of the domestic company may be warned, or fined between RMB 1 million and RMB 10 million.
+If, during the filing process, the domestic company conceals important factors or the content is materially false, and securities are
+not issued, they are subject to a fine of RMB1 million to RMB10 million. With respect to the directly responsible executives and other
+directly responsible personnel of the domestic company, they are subject to a warning and fine between RMB 500,000 and RMB 5 million,
+and with respect to the controlling shareholder, actual controllers, and other legally appointed persons of the domestic company, they
+are subject to a warning and fine between RMB 1 million and RMB 10 million.
+
+ 
+
+As of the
+date of this prospectus, the Trial Measures have come into effect. After March 31, 2023, any failure or perceived failure by the domestic
+company or PRC subsidiaries to comply with the above confidentiality and archives administration requirements under the Trial Measures
+and other PRC laws and regulations may result in that the relevant entities would be held legally liable by competent authorities, and
+referred to the judicial organization to be investigated for criminal liability if suspected of committing a crime.
+
+ 
+
+According
+to a translated copy of the current and effective regulations promulgated by the China Securities Regulatory Commission, that is, the
+ Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies Article 2 states, Direct
+overseas offering and listing by domestic companies refers to such overseas offering and listing by joint-stock company incorporated
+domestically. Indirect overseas offering and listing by domestic companies refers to such overseas offering and listing by a company
+in the name of an overseas incorporated entity, whereas the company s major business operations are located domestically and such
+offering and listing is based on the underlying equity, assets, earnings or other similar rights of a domestic company . Accordingly,
+as the Company believes it is not a joint-stock company incorporated domestically, this offering is not a direct overseas offering and
+listing by a domestic company. Article 16 states, Subsequent securities offerings of an issuer in the same overseas market where
+it has previously offered and listed securities shall be filed with the CSRC within 3 working days after the offering is completed. The
+Company is a Nevada Corporation formed on January 10, 1991. As a public company with securities quoted on the OTC Pink Sheets, On February 20,
+2023, the Company entered into an agreement with National Holdings Investment Ltd., a British Virgin Islands corporation ( NHIL ),
+whereunder the Company acquired 100% ownership interest in NHIL. NHIL through its China based subsidiaries, Yinao (Dongguan) Technology
+Co., Ltd., is mainly engaged in the planning and design service consulting business of new energy charging piles. The transaction closed
+effective February 24, 2023 and has been treated as a business combination. Therefore, this offering is classified as Subsequent
+securities offerings of an issuer in the same overseas market where it has previously offered and listed securities . The Company
+does not believe that it is required to seek authorizations from Chinese authorities now, as the offering is not completed. The company
+has taken no actions in regards to the CSRC approval and does not intend to do so, and the company does not believe that this offering
+is contingent upon receipt of approval from the CSRC now.
+
+ 
+
+According
+to a translated copy of the current and effective regulations promulgated by the China Securities Regulatory Commission, that is, the
+ Regulations on Strengthening the Confidentiality and Archives Management Work Related to the Overseas Issuance and Listing of Securities 
+Article 3 states, A domestic company that plans to, either directly or through its overseas listed entity, publicly disclose or
+provide to relevant entities or individuals including securities companies, securities service providers, and overseas regulators, documents
+and materials that contain state secrets or government work secrets, shall first obtain approval from competent authorities according
+to law, and file with the secrecy administrative department at the same level. Where there is ambiguity or dispute over the identification
+of a state secret, a request shall be submitted to the competent secrecy administrative department for determination; where there is
+ambiguity or dispute over the identification of a government work secret, a request shall be submitted to the competent government authority
+for determination. Further, Article 4 states that, A domestic company that plans to, either directly or through its overseas
+listed entity, publicly disclose or provide to relevant entities or individuals including securities companies, securities service providers,
+and overseas regulators, other documents and materials that, if divulged, will jeopardize national security or public interest, shall
+strictly fulfill relevant procedures stipulated by applicable national regulations. Accordingly, as the Company does not believe
+its operations fall into the above legal provisions, the Company does not believe that it is required to seek authorizations from Chinese
+authorities.
+
+ 
+
+ 
+
+ Table of Contents
+
+ 
+
+ 
+
+Article 15
+states, any overseas offering and listing made by an issuer that meets both the following conditions will be determined as indirect:
+(1) 50% or more of the issuer s operating revenue, total profit, total assets or net assets as documented in its audited consolidated
+financial statements for the most recent accounting year is accounted for by domestic companies; and (2) the main parts of the issuer s
+business activities are conducted in the Chinese Mainland, or its main places of business are located in the Chinese Mainland, or the
+senior managers in charge of its business operation and management are mostly Chinese citizens or domiciled in the Chinese Mainland.
+The determination as to whether or not an overseas offering and listing by domestic companies is indirect, shall be made on a substance
+over form basis. Article 34 states, For the purpose of this Measures, domestic companies herein refer to companies incorporated
+within the Chinese Mainland, including domestic join-stock companies whose securities are directly offered and listed overseas and the
+domestic operating entities of companies whose securities are indirectly offered and listed overseas. Accordingly, the Company believes
+this offering is an indirect overseas offering by a domestic company.
+
+ 
+
+However,
+Article 16 states, Subsequent securities offerings of an issuer in the same overseas market where it has previously offered and
+listed securities shall be filed with the CSRC within 3 working days after the offering is completed. The Company is a Nevada Corporation
+formed on January 10, 1991. As a public company with securities quoted on the OTC Pink Sheets, On February 20, 2023, the Company
+entered into an agreement with National Holdings Investment Ltd., a British Virgin Islands corporation ( NHIL ), whereunder
+the Company acquired 100% ownership interest in NHIL. NHIL through its China based subsidiaries, Yinao (Dongguan) Technology Co., Ltd.,
+is mainly engaged in the planning and design service consulting business of new energy charging piles. The transaction closed effective
+February 24, 2023 and has been treated as a business combination. Therefore, this offering is classified as Subsequent securities
+offerings of an issuer in the same overseas market where it has previously offered and listed securities . The Company does not
+believe that it is required to seek pre-authorizations from Chinese authorities now, as the offering is not completed. The Company has
+taken no actions in regard to the CSRC approval and does not intend to do so prior to completion of this offering. The company does not
+believe that this offering is contingent upon receipt of approval from the CSRC now. 
+
+ 
+
+The Company
+will settle amounts owed under the WFOE structure by transferring dividends, or distributions between the holding company and its subsidiaries,
+or to investors, which have not yet occurred. We intend to rely primarily on dividends paid by the WFOE for our cash needs, including
+the funds necessary to pay dividends and other cash distributions, if any, to our shareholders, to service any debt we may incur and
+to pay our operating expenses. The Company has made no such distributions to date nor has it received any distributions from the WFOE
+to date, and the Company has no current cash management policies in place. The Company will look to implement one in the near future.
+The PRC government also imposes controls on the conversion of RMB into foreign currencies and the remittance of currencies out
+of the PRC. Therefore, our WFOE may experience difficulties in completing the administrative procedures necessary to pay distributions
+from its profits, if any. Furthermore, if our WFOE incurs debt on its own in the future, the instruments governing the debt may restrict
+their ability to pay distributions or make other payments. If the Company or our subsidiaries are unable to receive all of the revenues
+from our operations, we may be unable to pay dividends on our Shares.
+
+ 
+
+Cash dividends,
+if any, on the Company s Shares will be paid in U.S. dollars. If the Company is considered a PRC tax resident enterprise for tax
+purposes, any dividends paid to our overseas shareholders may be regarded as China-sourced income and as a result may be subject to PRC
+withholding tax at a rate of up to 10.0%.
+
+ 
+
+There are
+no legal, arbitral or governmental proceedings, regulatory investigations or other governmental decisions, rulings, orders, or actions
+before any Governmental Agencies in progress or pending in the PRC to which the Company or the Material PRC Company is a party or to
+which any assets of the Material PRC Company is a subject.
+
+ 
+
+All dividends declared and payable upon the equity interests in the WFOE may be converted into foreign currency and freely transferred out of the PRC free of any deductions in the PRC, provided that (i) the declaration and payment of such dividends complies with applicable PRC Laws and the constitutional documents of the WFOE, and (ii) the remittance of such dividends out of the PRC complies with the procedures required by the relevant PRC Laws relating to foreign exchange administration.
+
+ 
+
+We face uncertainties
+with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.
+
+ 
+
+ 
+
+ Table of Contents
+
+ 
+
+ 
+
+Adverse changes in economic and political policies of the PRC government could have a material and adverse effect on overall economic growth in China, which could materially and adversely affect our business. General macroeconomic conditions may materially and adversely affect our business, prospects, results of operations and financial position. The PRC government s control over foreign currency conversion may adversely affect our business and results of operations and our ability to remit dividends. PRC regulation of loans to and direct investments in PRC entities by offshore holding companies may delay or prevent us from using the proceeds of this offering to make loans or additional capital contributions to our operating subsidiary in China, which could materially and adversely affect our liquidity and our ability to fund and expand business.
+
+ 
+
+There will
+be no offer, issuance or sale of the Common Shares made, directly or indirectly, within the PRC. Therefore, a prior approval from the
+CSRC is not required for the Offering. However, there are substantial uncertainties regarding the interpretation and application of the
+M&A Rules, other PRC Laws and future PRC laws and regulations, and there can be no assurance that any Governmental Agency will not
+take a view that is contrary to or otherwise different from our opinions stated herein. Subject to any applicable administrative procedures
+required by PRC Laws, and provided that all required Governmental Authorizations have been duly obtained, the due application of the
+net proceeds to be received by the Company from the issue Common Shares as disclosed in the Prospectus under the caption Use of
+Proceeds does not and immediately after the Offering will not contravene any applicable PRC Laws, the articles of association
+or the business licenses of the Material PRC Company.
+
+ 
+
+There
+is no tax or duty payable by or on behalf of the Material PRC Company under applicable PRC Laws in connection with the creation, allotment
+and issuance Common Shares, provided that each person taking the aforementioned actions is not subject to PRC tax by reason of citizenship,
+permanent establishment, residence or otherwise subject to PRC tax imposed on or measured by net income or net profits.
+
+ 
+
+There are no reporting obligations to any Governmental Agency under PRC Laws on those holders of Common Shares who are not deemed to be PRC residents as defined under applicable PRC Laws, to the extent that no reporting obligation is triggered by the purchase or holding of Common Shares under the PRC anti-monopoly laws, rules and regulations.
+
+ 
+
+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 deem relevant, and subject to the restrictions contained in any future financing instruments.
+
+ 
+
+On December 16, 2021, Public Company Accounting Oversight Board (PCAOB) issued a report on its determinations that PCAOB is unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong, a Special Administrative Region of the People s Republic of China (PRC), because of positions taken by PRC authorities in those jurisdictions. The PCAOB made these determinations pursuant to PCAOB Rule 6100, which provides a framework for how the PCAOB fulfils its responsibilities under the Holding Foreign Companies Accountable Act (HFCAA). The report further listed in its Appendix A and Appendix B, Registered Public Accounting Firms Subject to the Mainland China Determination and Registered Public Accounting Firms Subject to the Hong Kong Determination, respectively. The audit report included in this registration statement for the year ended December 31, 2022, was issued by Shandong Haoxin Certified Accountants Co., Ltd. ( HAOXIN ), an audit firm headquartered in PRC, a jurisdiction that the PCAOB has determined that the PCAOB may be unable to conduct inspections or investigate auditors, despite a recent treaty allowing the PCAOB to review the audit papers of firms in the PRC. Our auditors HAOXIN is among those listed by the PCAOB Mainland China Determination, a determination announced by the PCAOB on December 16, 2021 that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered in PRC, because of a position taken by one or more authorities in PRC. As a result, we and investors in our common stock may be deprived of the benefits of such full PCAOB inspections, which could cause investors in our stock to lose confidence in our reported financial information and the quality of our financial statements.
+
+ 
+
+ 
+
+ Table of Contents
+
+ 
+
+ 
+
+In
+addition, under the HFCAA, as amended by the CAA, the Company s securities may be prohibited from trading on the U.S. stock exchanges
+or in the over-the-counter trading market in the U.S. if the Company s auditor is not inspected by the PCAOB for two consecutive
+years, and this ultimately could result in the Company s common stock being delisted. Furthermore, on July 19, 2021, the U.S. Senate
+passed the Accelerating Holding Foreign Companies Accountable Act ( AHFCAA ), which amends the HFCAA and requires the SEC
+to prohibit an issuer s securities from trading on any U.S. stock exchanges or in the over-the-counter trading market in the U.S.
+if its auditor is not subject to PCAOB inspections for two consecutive years. In the future, if we do not engage an auditor that is subject
+to regular inspection by the PCAOB, our common stocks may be delisted. See Risk Factors Risks related to doing business
+in China The audit report included in this Amendment is prepared by an auditor who is not inspected by the Public Company Accounting
+Oversight Board and as such, the Company s investors are deprived of the benefits of such inspection. The Company could be delisted
+if it is unable to timely meet the PCAOB inspection requirements established by the Holding Foreign Companies Accountable Act. 
+
+ 
+
+U.S
+shareholders may face difficulties in effecting service of process against the Company and officers and director, as one is based in
+New Zealand and the other is based in China. Even with proper service of process, the enforcement of judgments obtained in U.S. courts
+or foreign courts based on the civil liability provisions of the U.S. federal securities laws would be extremely difficult. Furthermore,
+there would be added costs and issues with bringing an original action in foreign courts to enforce liabilities based on the U.S. federal
+securities laws against the Company.
+
+ 
+
+Cash
+dividends, if any, on our Shares will be paid in U.S. dollars. If we are considered a PRC tax resident enterprise for tax purposes, any
+dividends we pay to our overseas shareholders may be regarded as China-sourced income and as a result may be subject to PRC withholding
+tax at a rate of up to 10.0%.
+
+ 
+
+The registered capital of the Material PRC Company has been duly paid in accordance with applicable PRC Laws and their respective articles of association, to the extent that such registered capital is required to be paid prior to the date hereof.
+
+ 
+
+All of our business operations are conducted in China. Accordingly, our business, financial condition, results of operations and prospects are affected significantly by economic, political and legal developments in China. Although the PRC economy has been transitioning from a planned economy to a more market-oriented economy since the late 1970s, the PRC government continues to exercise significant control over China s economic growth through direct allocation of resources, monetary and tax policies, and a host of other government policies such as those that encourage or restrict investment in certain industries by foreign investors, control the exchange between the Renminbi and foreign currencies, and regulate the growth of the general or specific market. While the Chinese economy has experienced significant growth in the past 30 years, growth has been uneven, both geographically and among various sectors of the economy. As the PRC economy has become increasingly linked with the global economy, China is affected in various respects by downturns and recessions of major economies around the world. The various economic and policy measures enacted by the PRC government to forestall economic downturns or bolster China s economic growth could materially affect our business. Any adverse change in the economic conditions in China, in policies of the PRC government or in laws and regulations in China could have a material adverse effect on the overall economic growth of China and market demand for our outsourcing services. Such developments could adversely affect our businesses, lead to reduction in demand for our services and adversely affect our competitive position.
+
+ 
+
+The
+PRC legal system is based on written statutes. Prior court decisions may be cited for reference but have limited precedential value.
+Since the late 1970s, the PRC government has been building a comprehensive system of laws and regulations governing economic matters
+in general. The overall effect has been to significantly enhance the protections afforded to various forms of foreign investments in
+China. We conduct our business primarily through our WFOE, the WFOE is established in China. These companies are generally subject to
+laws and regulations applicable to foreign investment in China. However, since these laws and regulations are relatively new and the
+PRC legal system continues to rapidly evolve, the interpretations of many laws, regulations and rules are not always uniform and enforcement
+of these laws, regulations and rules involves uncertainties, which may limit legal protections available to us. In addition, some regulatory
+requirements issued by certain PRC government authorities may not be consistently applied by other government authorities (including
+local government authorities), thus making strict compliance with all regulatory requirements impractical, or in some circumstances impossible.
+For example, we may have to resort to administrative and court proceedings to enforce the legal protection that we enjoy either by law
+or contract.
+
+ 
+
+An
+investment in our securities is highly speculative, involves a high degree of risk and should be considered only by persons who can
+afford the loss of their entire investments. See Risk Factors beginning on page 15 of this prospectus.
+
+ 
+
+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.
+
+ 
+
+Prospectus dated , 2023
+
+ 
+
+ 
+
+ Table of Contents
+
+ 
+
+ 
+
+TABLE OF CONTENTS

parsed_sections/risk_factors/2023/AMTX_aemetis_risk_factors.txt

@@ -0,0 +1 @@
+Risk factors An investment in shares of Common Stock involves a high degree of risk. Please refer to the sections titled "Risk Factors" and "Cautionary Note Regarding Forward-Looking Statements" herein and other information included or incorporated by reference in this prospectus for a discussion of factors you should carefully consider before investing in shares of Common Stock. Nasdaq Global Market symbol AMTX. 2 Table of Contents RISK FACTORS An investment in the Common Stock involves a high degree of risk. Before you decide to invest in shares of Common Stock, you should consider carefully all of the information in this prospectus and the documents incorporated by reference herein and, in particular, the risks described below and the Risk Factors included in any prospectus supplement or amendment, our Annual Report on Form 10-K for the year ended December 31, 2022, and any subsequently filed Quarterly Reports on Form 10-Q and our other filings with the SEC that are incorporated by reference into this prospectus. The risks described in this prospectus or in any document incorporated by reference are not the only ones we face. There may be other unknown or unpredictable economic, business, competitive, regulatory or other factors that could have material adverse effects on our business, prospects, financial condition and results of operations. In any such case, the trading price of shares of Common Stock could decline materially and you could lose all or part of your investment. 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.

parsed_sections/risk_factors/2023/APSI_aqua_risk_factors.txt

@@ -0,0 +1,1787 @@
+RISK FACTORS 
+
+ 
+
+Investing
+in our Common Stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together
+with all of the other information in this prospectus, including our consolidated financial statements and related notes included elsewhere
+in this prospectus, before deciding whether to purchase shares of our Common Stock. If any of the following risks are realized, our business,
+results of operations, financial condition and prospects could be materially adversely affected. In that event, the price of our Common
+Stock could decline, and you could lose part or all of your investment.
+
+ 
+
+COVID-19 RISKS
+
+ 
+
+We
+could be negatively impacted by the COVID-19 outbreak or other similar outbreaks.
+
+ 
+
+Certain
+of our operations and personnel at our headquarters in Angola, Indiana, and other locations have already been working remotely, which
+could disrupt our management, business, finance, and financial reporting teams, and which could intensify over time. We have experienced
+absences and terminations among our driver and non-driver personnel due to the outbreak of COVID-19. Further, our operations, particularly
+in areas of increased COVID-19 infections, could be disrupted. Negative financial results, operational disruptions, driver and
+non-driver absences, uncertainties in the market, and a tightening of credit markets, caused by COVID-19, including its variants, other
+similar outbreaks, or a recession, could have a material adverse effect on our liquidity, reduce credit options available to us, make
+it more difficult to obtain amendments, extensions, and waivers, and adversely impact our ability to effectively meet our short- and
+long-term obligations. Furthermore, government vaccination, testing, and mask mandates could increase our turnover and make recruiting
+more difficult, particularly among our driver and maintenance personnel.
+
+ 
+
+The outbreak
+of COVID-19 has significantly increased uncertainty in the economy. Risks related to a slowdown or recession are described in our risk
+factor titled Our business is subject to economic, business and regulatory factors affecting the truckload industry that are largely
+beyond our control, any of which could have a material adverse effect on our results of operations. 
+
+ 
+
+Developments
+related to COVID-19 have been unpredictable and the extent to which further developments could impact our operations, financial condition,
+liquidity, results of operations, and cash flows is highly uncertain. Such developments may include the duration of the virus, the distribution
+and availability of vaccines, vaccine hesitancy, the severity of the disease and the actions that may be taken by various governmental
+authorities and other third parties in response to the outbreak.
+
+ 
+
+While we
+and most of our customers have returned to normal operations and economic activity continued to increase during the periods presented,
+we continue to monitor ongoing developments with the COVID-19 pandemic. Any future waves or outbreaks of alternative strains of the virus
+could adversely impact our future operations and financial results.
+
+ 
+
+The ultimate
+extent of the pandemic s impact on the Company s financial and operating results, which could be material, will be determined
+by the length of time the pandemic continues, its continued severity, further government regulations imposed in response to the pandemic
+and the pandemic s continued effect on the economy and transportation demand.
+
+ 
+
+The Company
+believes we will be able to continue to finance our near-term needs for working capital over the next twelve months, as well as any planned
+capital expenditures during such period, with cash balances, cash flows from operations, and borrowings believed to be available from
+financing sources.
+
+ 
+
+Natural
+disasters and other events beyond our control could materially adversely affect us.
+
+ 
+
+Natural
+disasters or other catastrophic events may cause damage or disruption to our operations, international commerce and the global economy,
+and thus could have a strong negative effect on us. Our business operations are subject to interruption by natural disasters, fire, power
+shortages, pandemics and other events beyond our control. Although we maintain crisis management and disaster response plans, such events
+could make it difficult or impossible for us to deliver our services to our customers and could decrease demand for our services. In
+the spring of 2020, large segments of the U.S. and global economies were impacted by COVID-19, a significant portion of the U.S. population
+are subject to stay at home or similar requirements. The extent of the impact of COVID-19 on our operational and financial
+performance will depend on certain developments, including the duration and spread of the outbreak, impact on our customers and our sales
+cycles, impact on our customer, employee or industry events, and effect on our vendors, all of which are uncertain and cannot be predicted.
+At this point, the extent to which COVID-19 may impact our financial condition or results of operations is uncertain. To date, the COVID-19
+outbreak, has significantly impacted global markets, U.S. employment numbers, as well as the business prospects of many small businesses
+(our potential clients). To the extent COVID-19 continues to wreak havoc on the markets and limits investment capital or personally impacts
+any of our key employees, it may have significant impact on our results and operations.
+
+ 
+
+ 
+
+ 4 
+
+ 
+
+ 
+
+ 
+
+Risks Generally Related to the Company s
+and Tradition s Business and Industry
+
+ 
+
+We only have one member of our senior
+management team and two members of the board of directors.
+
+ 
+
+Our senior management team consists of our Chief
+Executive Officer, President, Treasurer, and Secretary, Stephen W. Carnes. He also serves as our director with Robert Morris. We would
+benefit from having a larger board of directors that could bring additional perspective and knowledge. Lacking that perspective and experience
+will make it difficult for our Company to grow. If Stephen W. Carnes was to leave the Company, this could adversely affect our business
+and the results of operations. Further, Stephen W. Carnes may not commit full time to our affairs. In addition, potential conflicts of
+interest could create the risk that management may have an incentive to act adversely to the interests of other non-management stockholders,
+if any. A conflict of interest may arise between management s personal pecuniary interest and its fiduciary duty to stockholders.
+
+ 
+
+Stockholders will not receive disclosure
+or information regarding a prospective business.
+
+ 
+
+Management is not required to and will not provide
+shareholders with disclosure or information regarding prospective business opportunities. Moreover, a prospective business opportunity
+may not result in a benefit to shareholders or prove to be more favorable to shareholders than any other investment that may be made by
+shareholders and investors. 
+
+ 
+
+We likely will complete only the acquisition
+of Tradition.
+
+ 
+
+Given our limited financial resources, which have
+mainly been provided by our Chief Executive Officer, our competition with similar companies that are looking for potential acquisitions
+and have more resources than us, and other considerations, it is likely we will only complete only the acquisition of Tradition. Accordingly,
+the prospects for our success may be solely dependent upon the performance of Tradition. In this case, we will not be able to diversify
+our operations or benefit from the possible diversification of risks or offsetting of losses, unlike other entities which may have the
+resources to complete several business transactions or asset acquisitions in different industries or different areas of a single industry
+so as to diversify risks and offset losses.
+
+ 
+
+Tradition s business is subject to
+economic, business and regulatory factors affecting the truckload industry that are largely beyond its control, any of which could have
+a material adverse effect on its results of operations.
+
+ 
+
+The truckload industry is highly cyclical, and
+Tradition s business is dependent on a number of factors that may have a negative impact on its results of operations, many of which
+are beyond its control. Tradition believes that some of the most significant of these factors are economic changes that affect supply
+and demand in transportation markets that could have a material adverse effect, such as:
+
+ 
+
+Economic conditions that decrease shipping demand
+or increase the supply of available tractors and trailers can exert downward pressure on rates and equipment utilization, thereby decreasing
+asset productivity. The risks associated with these factors are heightened when the U.S. economy is weakened. Some of the principal risks
+during such times are as follows:
+
+ 
+
+ 
+ 
+ (i)
+ Tradition may experience low overall freight levels, which may impair Tradition s asset utilization; 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (ii)
+ certain of Tradition s customers may face credit issues and cash flow problems that may lead to payment delays, increased credit risk, bankruptcies and other financial hardships that could result in even lower freight demand and may require us to increase Tradition s allowance for doubtful accounts; 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (iii)
+ freight patterns may change as supply chains are redesigned, resulting in an imbalance between Tradition s capacity and Tradition s customers freight demand;
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (iv)
+ customers may solicit bids for freight from multiple trucking companies or select competitors that offer lower rates from among existing choices in an attempt to lower their costs, and Tradition might be forced to lower its rates or lose freight; and
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (v)
+ Tradition may be forced to accept more loads from freight brokers, where freight rates are typically lower, or may be forced to incur more non-revenue miles to obtain loads.
+
+ 
+ 
+
+ 
+
+ 5 
+
+ 
+
+ 
+
+ 
+
+Tradition is also subject to cost increases outside
+its control that could materially reduce its profitability if Tradition is unable to increase Tradition s rates sufficiently. Such
+cost increases include, but are not limited to, increases in fuel prices, driver and office employee wages, purchased transportation costs,
+interest rates, taxes, tolls, license and registration fees, insurance, revenue equipment and related maintenance, tires and other components
+and healthcare and other benefits for Tradition s employees. Further, Tradition may not be able to appropriately adjust Tradition s
+costs to changing market demands. In order to maintain high variability in Tradition s business model, it is necessary to adjust
+staffing levels to changing market demands. In periods of rapid change, it is more difficult to match Tradition s staffing level
+to its business needs. Further, Tradition may not be able to appropriately adjust its costs to changing market demands.
+
+ 
+
+In addition, events outside Tradition s
+control, such as deterioration of U.S. transportation infrastructure and reduced investment in such infrastructure, strikes or other
+work stoppages at Tradition s facilities or at customer, port, border or other shipping locations, pandemics, armed conflicts or
+terrorist attacks, efforts to combat terrorism, military action against a foreign state or group located in a foreign state or heightened
+security requirements could lead to wear, tear and damage to Tradition s equipment, driver dissatisfaction, reduced economic demand
+and freight volumes, reduced availability of credit, increased prices for fuel or temporary closing of the shipping locations or U.S.
+borders. Such events or enhanced security measures in connection with such events could impair Tradition s operating efficiency
+and productivity and result in higher operating costs.
+
+ 
+
+Regarding Tradition s manufacturing
+business, a downturn in the economy and other factors may affect customer spending, which could harm Tradition s operating results.
+
+ 
+
+In general, Tradition s sales represent
+spending on discretionary items or consumption needs by its customers. This spending is affected by many factors, including, among others:
+
+ 
+
+ 
+ 
+ (i)
+ general business conditions, 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (ii)
+ interest rates, 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (iii)
+ inflation, 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (iv)
+ the availability of consumer credit, 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (v)
+ taxation, 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (vi)
+ fuel prices and electrical power rates, 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (vii)
+ unemployment trends, 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (viii)
+ terrorist attacks and acts of war, and 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (ix)
+ other matters that influence consumer confidence and spending. 
+
+ 
+ 
+
+A downturn or political conflict regionally, nationally,
+or internationally could negatively impact sales.
+
+ 
+
+ 
+
+ 
+
+ 6 
+
+ 
+
+ 
+
+ 
+
+Tradition operates in the highly competitive
+and fragmented truckload carrier industry, and numerous competitive factors could impair its ability to improve its profitability and
+materially adversely affect its results of operations.
+
+ 
+
+Numerous competitive factors could impair Tradition s
+ability to improve its profitability and materially adversely affect its results of operations, including:
+
+ 
+
+ 
+ 
+ (i)
+ Tradition competes with many other truckload carriers of varying sizes and service offerings and, to a lesser extent, with (i) less-than-truckload carriers and (ii) other transportation and brokerage companies, several of which have access to more equipment and greater capital resources than Tradition does; 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (ii)
+ maintaining or expanding Tradition s business or Tradition may be required to reduce its freight rates in order to maintain business and keep its equipment productive; 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (iii)
+ Tradition may increase the size of its fleet during periods of high freight demand during which its competitors also increase their capacity, and Tradition may experience losses in greater amounts than such competitors during subsequent cycles of softened freight demand if Tradition is required to dispose of assets at a loss to match reduced freight demand;
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (iv)
+ Tradition may have difficulty recruiting and retaining drivers because upgrades of its tractor fleet to match or exceed those of its competitors may not increase its cost savings or profitability;
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (v)
+ some of Tradition s larger customers are other transportation companies and/or also operate their own private trucking fleets, and they may decide to transport more of their own freight;
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (vi)
+ some shippers have reduced or may reduce the number of carriers they use by selecting preferred carriers as approved service providers or by engaging dedicated providers, and Tradition may not be selected;
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (vii)
+ consolidation in the trucking industry may create other large carriers with greater financial resources and other competitive advantages, and Tradition may have difficulty competing with them;
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (viii)
+ Tradition s competitors may have better safety records than Tradition or a perception of better safety records;
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (ix)
+ competition from freight brokerage companies may materially adversely affect Tradition s customer relationships and freight rates;
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (x)
+ new digital entrants with cheaper sources of capital could inhibit Tradition s ability to compete;
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (xi)
+ Tradition s competitors may have better technology that may lead to increased operating efficiencies, reduced costs, a better ability to recruit drivers and more demand for their services; and
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (xii)
+ economies of scale that procurement aggregation providers may pass on to smaller carriers may improve such carriers ability to compete with Tradition.
+
+ 
+ 
+
+ Regarding Tradition s manufacturing
+business, Tradition may not be able to compete effectively against its competitors, which could harm its business and operating results.
+
+ 
+
+The industrial, construction, and maintenance
+supply industry, although consolidating, still remains a large, fragmented industry that is highly competitive. Tradition believes that
+sales of industrial, construction, and maintenance industry supplies will become more concentrated over the next few years, which may
+make the industry even more competitive. Tradition s current or future competitors include companies with similar or greater market
+presence, name recognition, and financial, marketing, and other resources, and Tradition believes they will continue to challenge Tradition
+with their product selection, financial resources, and services. Increased competition or the adoption by competitors of aggressive pricing
+strategies and sale methods could cause us to lose market share or to reduce Tradition s prices or increase its spending, thus eroding
+its margins.
+
+ 
+
+ 
+
+ 7 
+
+ 
+
+ 
+
+ 
+
+Tradition may not be able to effectively manage and implement
+its organic growth strategies. 
+
+ 
+
+While Tradition currently believes it can grow
+its profits and cash flows organically through further penetration of existing customers and by expanding its customer base, Tradition
+may not be able to effectively and successfully implement such strategies and realize its stated goals. Tradition s goals may be
+negatively affected by a failure to further penetrate its existing customer base, cross-sell its service offerings, pursue new customer
+opportunities, manage the operations and expenses of new or growing service offerings or otherwise achieve growth of its service offerings.
+Successful execution of Tradition s business strategies may not result in Tradition achieving its current business goals.
+
+ 
+
+Tradition has several major customers, the
+loss of one or more of which could have a material adverse effect on its business.
+
+ 
+
+A significant portion of Tradition s operating
+revenue is generated from a number of major customers, the loss of one or more of which could have a material adverse effect on its business.
+For fiscal year 2021, Tradition s largest customer accounted for approximately 13% of its operating revenue. Economic and capital
+markets conditions may adversely affect Tradition s customers and their ability to remain solvent. Tradition s customers 
+financial difficulties can negatively impact its business and operating results and financial condition. Generally, Tradition does not
+have contractual relationships with its customers that guarantee any minimum volumes, and its customer relationships may not continue
+as presently in effect. Tradition generally does not have long-term contractual relationships with its customers, including its dedicated
+customers, and certain of these contracts contain clauses that permit cancellation on a short-term basis without cause, and accordingly
+any of its customers may not continue to utilize its services, renew its existing contracts or continue at the same volume levels. Despite
+the existence of contract arrangements with Tradition s customers, certain of its customers may nonetheless engage in competitive
+bidding processes that could negatively impact its contractual relationship. In addition, certain of Tradition s major customers
+may increasingly use their own truckload and delivery fleets, which would reduce its freight volumes. A reduction in or termination of
+Tradition s services by one or more of its major customers could have a material adverse effect on Tradition s business and
+operating results.
+
+ 
+
+Tradition s profitability may be materially
+adversely impacted if its capital investments do not match customer demand for invested resources or if there is a decline in the availability
+of funding sources for these investments. 
+
+ 
+
+Tradition s operations require significant
+investments. The amount and timing of capital investments depend on various factors, including anticipated volume levels and the price
+and availability of assets. If anticipated demand differs materially from actual usage, Tradition s capital-intensive Freight Transportation
+segment may have too much or too little capacity. Moreover, across Tradition s reportable segments resource requirements vary with
+customer demand, which may be subject to seasonal or general economic conditions. Tradition s ability to properly select freight
+and adapt to changes in customer transportation requirements is important to efficiently deploy resources and make capital investments
+in trucks, trailers, and containers (with respect to Tradition s Freight Transportation segment) or obtain qualified third-party
+capacity at a reasonable price (with respect to Tradition s Brokerage segment). Although Tradition s business volume is not
+highly concentrated, its customers financial failures or loss of customer business may also affect it.
+
+ 
+
+Tradition may not be able to successfully
+implement its company growth strategy of diversifying its revenue base and expanding its capabilities. 
+
+ 
+
+Tradition s company growth strategy entails
+selectively diversifying its revenue base, as Tradition has done with its service offerings, and venturing into the manufacturing space.
+This strategy involves certain risks, and Tradition may not overcome these risks, in which case Tradition s business, financial
+position and operating results could be materially and adversely affected. In connection with Tradition s company growth strategy,
+Tradition has in the past made selective acquisitions, made new investments in technology and in office, service and warehouse centers,
+increased sales and marketing efforts and hired new drivers and associates. Tradition expects to continue to pursue its company growth
+strategy, and this exposes Tradition to certain risks, including:
+
+ 
+
+ 
+ 
+ (i)
+ making significant capital expenditures, which could require substantial capital and cash flow that Tradition may not have or may not be able to obtain on satisfactory terms;
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (ii)
+ growth may strain Tradition s management, capital resources, information systems and customer service;
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (iii)
+ hiring new managers, drivers and other associates, including in specialty equipment services, may increase training and compliance costs and may result in temporary inefficiencies until those associates become proficient in their jobs; 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (iv)
+ specialty transport of hazardous materials, which subjects Tradition to environmental, health and safety laws and regulations by governmental authorities and, in the event of an accidental release of these commodities, could result in significant loss of life and extensive property damage as well as environmental remediation obligations; and
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (v)
+ expanding Tradition s service offerings may require it to encounter new competitive challenges in markets in which Tradition has not previously operated or with which it is unfamiliar.
+
+ 
+ 
+
+ 
+
+ 8 
+
+ 
+
+ 
+
+ 
+
+Fluctuations in the price or availability
+of fuel or surcharge collection may increase Tradition s costs of operations, which could materially adversely affect its profitability.
+
+ 
+
+Fuel is one of Tradition s largest operating
+expenses. Diesel fuel prices fluctuate greatly due to factors beyond Tradition s control, such as supply and demand, political events,
+terrorist activities, armed conflicts, commodity futures trading, depreciation of the dollar against other currencies, weather events
+and other natural disasters, which could increase in frequency and severity due to climate change, as well as other man-made disasters,
+each of which may lead to an increase in the cost of fuel. Fuel prices also are affected by the rising demand for fuel in developing countries,
+including China, and could be materially adversely affected by the use of crude oil and oil reserves for purposes other than fuel production
+and by diminished drilling activity. Such events may lead not only to increases in fuel prices, but also to fuel shortages and disruptions
+in the fuel supply chain. Because Tradition s operations are dependent upon diesel fuel, significant diesel fuel cost increases,
+shortages, rationings, or supply disruptions would materially adversely affect Tradition s business, financial condition and results
+of operations.
+
+ 
+
+Increases in fuel costs, to the extent not offset
+by rate per mile increases or fuel surcharges, have a material adverse effect on Tradition s operations and profitability. While
+Tradition has fuel surcharge programs in place with a majority of Tradition s customers, which historically have helped Tradition
+offset the majority of the negative impact of rising fuel prices associated with loaded or billed miles, Tradition also incurs fuel costs
+that cannot be recovered even with respect to customers with which Tradition maintains fuel surcharge programs, such as those associated
+with non-revenue generating miles, the time when Tradition s engines are idling and fuel for refrigeration units on Tradition s
+refrigerated trailers. Moreover, the terms of each customer s fuel surcharge program vary, and certain customers have sought to
+modify the terms of their fuel surcharge programs to minimize recoverability for fuel price increases. In addition, because Tradition s
+fuel surcharge recovery lags behind changes in fuel prices, Tradition s fuel surcharge recovery may not capture the increased costs
+Tradition pays for fuel, especially when prices are rising. This could lead to fluctuations in Tradition s levels of reimbursement,
+which have occurred in the past. During periods of low freight volumes, shippers can use their negotiating leverage to impose fuel surcharge
+policies that provide a lower reimbursement of Tradition s fuel costs. There is no assurance that Tradition s fuel surcharge
+program can be maintained indefinitely or will be sufficiently effective. Tradition s results of operations would be negatively
+affected to the extent Tradition cannot recover higher fuel costs or fail to improve Tradition s fuel price protection through its
+fuel surcharge program.
+
+ 
+
+Regarding Tradition s manufacturing
+business, increases in energy costs and the cost of raw materials used in its products could impact its cost of goods and distribution
+and occupancy expenses, which may result in lower operating margins. 
+
+ 
+
+Costs of raw materials used in Tradition s
+products (e.g., steel) and energy costs have been rising during the last several years, which has resulted in increased production costs
+for Tradition s vendors. Those vendors typically look to pass their increased costs along to Tradition through price increases.
+The fuel costs of Tradition s distribution operation have risen as well. While Tradition typically tries to pass increased vendor
+prices and fuel costs through to its customers or to modify Tradition s activities to mitigate the impact, Tradition may not be
+successful. Failure to fully pass these increased prices and costs through to Tradition s customers or to modify its activities
+to mitigate the impact would have an adverse effect on Tradition s operating margins.
+
+ 
+
+Difficulties attracting and retaining qualified
+drivers, including through owner-operators, could materially adversely affect Tradition s profitability and ability to maintain
+or grow its fleet. 
+
+ 
+
+Like many truckload carriers, from time to time
+Tradition may experience difficulty in attracting and retaining sufficient numbers of qualified drivers, including through owner-operators,
+and driver shortages may recur in the future. Tradition s challenge with attracting and retaining qualified drivers stems from intense
+market competition and Tradition s driver quality standards, which subjects Tradition to increased payments for driver compensation
+and owner-operator contracted rates. Failure to recruit high-quality, safe drivers that meet Tradition s testing standards could
+diminish the safety of its fleet and could have a materially adverse effect on its customer relationships and its business.
+
+ 
+
+ 
+
+ 9 
+
+ 
+
+ 
+
+ 
+
+Tradition s company drivers are generally
+compensated on a per-mile basis, and the rate per-mile generally increases with the drivers length of service. Owner-operators
+contracting with Tradition are generally compensated on a percentage of revenue basis. The compensation Tradition offers its drivers and
+owner-operators is also subject to market conditions and labor supply. Tradition may in future periods increase company driver and owner-operator
+compensation, which will be more likely to the extent that economic conditions improve and industry regulation exacerbates driver shortages
+forcing driver compensation higher. The average trucking company will have a turnover rate of roughly 95% annually. Tradition s
+turnover rate, one-hundred and twenty-four percent (124%), in the last twelve (12) months, requires Tradition to continually recruit a
+substantial number of company drivers in order to operate Tradition s revenue-producing fleet equipment, including trucks and specialty
+equipment. If Tradition is unable to continue to attract and retain a sufficient number of high-quality company drivers, and contract
+with suitable owner-operators, Tradition could be required to adjust its compensation packages, or operate with fewer trucks and face
+difficulty meeting shipper demands, all of which could adversely affect Tradition s profitability and ability to maintain its size
+or grow.
+
+ 
+
+Tradition s use of owner-operators
+to provide a portion of its truck fleet exposes it to different risks than it faces with its owned trucks. 
+
+ 
+
+Tradition may contract with more owner-operators
+and use more owner-operator trucks than some of its competitors. Tradition is therefore more dependent on owner-operator trucks than some
+of its competitors. Failure to maintain owner-operator business and relationships and increased industry competition for owner-operators
+could have a materially adverse effect on Tradition s operating results.
+
+ 
+
+During times of increased economic activity, Tradition
+faces heightened competition for owner-operators from other carriers. To the extent Tradition s turnover increases, Tradition may
+be required to increase owner-operator compensation or take other measures to remain an attractive option for owner-operators. If Tradition
+cannot attract sufficient owner-operators, or it becomes economically difficult for owner-operators to survive, Tradition may not be able
+to maintain the percentage of Tradition s fleet provided by owner-operators or maintain Tradition s delivery schedules.
+
+ 
+
+Tradition provides financing to certain qualified
+owner-operators who qualify for financing in order to lease trucks from Tradition. If Tradition is unable to provide such financing in
+the future, due to liquidity constraints or other restrictions, Tradition may experience a decrease in the number of owner-operators available
+to fully operate its assets. Further, if owner-operators operating the trucks Tradition finance default under or otherwise terminate the
+financing arrangement and Tradition is unable to find a replacement owner-operator, Tradition may incur losses on amounts owed to Tradition
+with respect to the truck in addition to any losses Tradition may incur as a result of the idling of the truck.
+
+ 
+
+Tradition s lease contracts with owner-operators
+are governed by federal and other leasing regulations, which impose specific requirements on us and owner-operators. It is possible that
+Tradition could face lawsuits alleging the violation of leasing obligations or failure to follow the contractual terms, which could result
+in liability.
+
+ 
+
+Tradition utilizes owner-operators to complete
+its services. These owner-operators are subject to similar regulation requirements, such as the electronic on-board recording and driver
+Hours of Service (HOS) requirements that apply to larger carriers, which may have a more significant impact on their operations, causing
+them to exit the transportation industry. Aside from when these third parties may use Tradition s trailing equipment to fulfill
+loads, Tradition does not own the revenue equipment or control the drivers delivering these loads. The inability to obtain reliable third-party
+owner-operators could have a material adverse effect on Tradition s operating results and business growth.
+
+ 
+
+Tradition depends on third-party service
+providers, particularly in Tradition s Brokerage segment, and service instability from these providers could increase Tradition s
+operating costs and reduce its ability to offer brokerage services, which could materially adversely affect its revenue, business, financial
+condition, results of operations and customer relationships.
+
+ 
+
+Tradition s Brokerage Services segment is
+dependent upon the services of third-party carriers, including other truckload carriers. For this business, Tradition does not own or
+control the transportation assets that deliver to Tradition s customers freight and Tradition does not employ the providers
+directly involved in delivering the freight. These third-party providers may seek other freight opportunities and/or require increased
+compensation in times of improved freight demand or tight truckload capacity. If Tradition is unable to secure the services of these third
+parties or if Tradition becomes subject to increases in the prices Tradition must pay to secure such services, its business, financial
+condition and results of operations may be materially adversely affected, and Tradition may be unable to serve its customers on competitive
+terms. Tradition s ability to secure sufficient equipment or other transportation services may be affected by many risks beyond
+Tradition s control, including equipment shortages, increased equipment prices, new entrants with different business models, interruptions
+in service due to labor disputes, driver shortage, changes in regulations impacting transportation and changes in transportation rates.
+
+ 
+
+ 
+
+ 10 
+
+ 
+
+ 
+
+ 
+
+Difficulty in obtaining materials, equipment,
+goods and services from Tradition s vendors and suppliers could adversely affect Tradition s Freight Transportation, Brokerage,
+and Equipment Leasing segments.
+
+ 
+
+Tradition primarily use Love s Travel Stops
+& Country Stores, Inc. s network for fueling and on road repairs, and Tradition is dependent upon its suppliers for certain
+products and materials, including Tradition s tractors and trailers. If Tradition fails to maintain favorable relationships with
+its vendors and suppliers, or if its vendors and suppliers are unable to provide the products and materials Tradition needs or undergo
+financial hardship, Tradition could experience difficulty in obtaining needed goods and services because of production interruptions,
+limited material availability or other reasons, or Tradition may not be able to obtain favorable pricing or other terms. As a result,
+Tradition s business and operations could be adversely affected.
+
+ 
+
+Furthermore, a decrease in vendor output may have
+a materially adverse effect on Tradition s ability to purchase a quantity of new revenue equipment that is sufficient to sustain
+Tradition s desired growth rate and to maintain a late-model fleet. Tractor and trailer vendors may reduce their manufacturing output
+in response to lower demand for their products in economic downturns or shortages of component parts. Currently, tractor and trailer manufacturers
+are experiencing significant shortages of semiconductor chips and other component parts and supplies, including steel, forcing many manufacturers
+to curtail or suspend their production, which has led to a lower supply of tractors and trailers, higher prices, and lengthened trade
+cycles, which could have a material adverse effect on Tradition s business, financial condition, and results of operations, particularly
+Tradition s maintenance expense and driver retention.
+
+ 
+
+If Tradition is unable to recruit, develop
+and retain its key associates, its business, financial condition and operating results could be adversely affected. 
+
+ 
+
+Tradition is highly dependent upon the services
+of certain key employees, including its team of executive officers and managers. The loss of any of their services could negatively impact
+Tradition s operations and future profitability. Inadequate succession planning or unexpected departure of key executive officers
+could cause substantial disruption to Tradition s business operations, deplete its institutional knowledge base and erode its competitive
+advantage. Additionally, Tradition must continue to recruit, develop and retain skilled and experienced managers if Tradition is to realize
+its goal of expanding its operations and continuing its growth. Failure to recruit, develop and retain a core group of managers could
+have a materially adverse effect on Tradition s business.
+
+ 
+
+Developments in labor and employment law
+and any unionizing efforts by employees could have a material adverse effect on Tradition s results of operations.
+
+ 
+
+Tradition faces the risk that Congress, federal
+agencies or one or more states could approve legislation or regulations significantly affecting its businesses and its relationship with
+its employees which would have substantially liberalized the procedures for union organization. None of Tradition s employees are
+currently covered by a collective bargaining agreement, but any attempt by its employees to organize a labor union could result in increased
+legal and other associated costs. Additionally, given the National Labor Relations Board s speedy election rule, Tradition s
+ability to timely and effectively address any unionizing efforts would be difficult. If Tradition entered into a collective bargaining
+agreement with its employees, the terms could materially adversely affect its costs, efficiency and ability to generate acceptable returns
+on the affected operations.
+
+ 
+
+Insurance and claims expenses could significantly
+reduce Tradition s earnings. 
+
+ 
+
+Tradition s future insurance and claims
+expense might exceed historical levels, which could reduce its earnings. Estimating the number and severity of claims, as well as related
+judgment or settlement amounts is inherently difficult.
+
+ 
+
+Tradition believes its aggregate insurance limits
+should be sufficient to cover reasonably expected claims, it is possible that the amount of one or more claims could exceed Tradition s
+aggregate coverage limits. If any claim were to exceed Tradition s coverage, Tradition would bear the excess. Insurance carriers
+have raised premiums for many businesses, including transportation companies. As a result, Tradition s insurance and claims expense
+could increase, or Tradition could raise its deductible when its policies are renewed or replaced. Tradition s operating results
+and financial condition could be materially and adversely affected if (i) cost per claim, premiums, or the number of claims significantly
+exceeds its estimates, (ii) Tradition experiences a claim in excess of its coverage limits, (iii) Tradition s insurance carriers
+fail to pay on its insurance claims or (iv) Tradition experiences a claim for which coverage is not provided.
+
+ 
+
+ 
+
+ 11 
+
+ 
+
+ 
+
+ 
+
+Tradition operates in a highly regulated
+industry, and increased direct and indirect costs of compliance with, or liability for violations of, existing or future regulations could
+have a material adverse effect on its business.
+
+ 
+
+Tradition, its drivers, and its equipment are
+regulated by the DOT, the EPA, the DHS and other agencies in states in which it operates. For further discussion of the laws and regulations
+applicable to Tradition, its drivers, and its equipment, please see Regulation . Future laws and regulations may be more stringent,
+require changes in Tradition s operating practices, influence the demand for transportation services or require Tradition to incur
+significant additional costs. Higher costs incurred by Tradition, or by Tradition s suppliers who pass the costs onto Tradition
+through higher supplies and materials pricing, or liabilities Tradition may incur related to its failure to comply with existing or future
+regulations could adversely affect its results of operations.
+
+ 
+
+If the independent contractors Tradition
+contracts with are deemed by regulators or judicial process to be employees, its business, financial condition and results of operations
+could be materially adversely affected.
+
+ 
+
+Tax and other regulatory authorities, as well
+as independent contractors themselves, have increasingly asserted that independent contractor drivers in the trucking industry are employees
+rather than independent contractors. Companies that use lease-purchase independent contractor programs, such as Tradition, have been more
+susceptible to reclassification lawsuits. If the independent contractors with whom Tradition contracts are determined to be employees,
+Tradition would incur additional exposure under federal and state tax, workers compensation, unemployment benefits, labor, employment
+and tort laws, including for prior periods, as well as potential liability for employee benefits and tax withholdings, and Tradition s
+business, financial condition and results of operations could be materially adversely affected. For further discussion of legislation
+regarding independent contractors, please see Regulation .
+
+ 
+
+Safety-related evaluations and rankings
+under CSA could materially adversely affect Tradition s profitability and operations, its ability to maintain or grow its fleet
+and its customer relationships.
+
+ 
+
+Under the CSA program, fleets are evaluated and
+ranked against their peers based on certain safety-related standards. As a result, Tradition s fleet could be ranked poorly as compared
+to peer carriers, which could have an adverse effect on its business, financial condition and results of operations. The occurrence of
+future deficiencies could affect driver recruitment by causing high-quality drivers to seek employment with other carriers or limit the
+pool of available drivers or could cause Tradition s customers to direct their business away from Tradition and to carriers with
+higher fleet safety rankings, either of which would materially adversely affect Tradition s business, financial condition and results
+of operations. In addition, future deficiencies could increase Tradition s insurance expenses. Further, Tradition may incur greater
+than expected expenses in its attempts to improve unfavorable scores.
+
+ 
+
+None of Tradition s subsidiaries are currently
+exceeding the established intervention thresholds in the seven CSA safety-related categories. If Tradition were to receive unfavorable
+ratings, Tradition may be prioritized for an intervention action or roadside inspection, either of which could materially adversely affect
+Tradition s business, financial condition and results of operations. In addition, customers may be less likely to assign loads to
+Tradition. For further discussion of the CSA program, please see Regulation .
+
+ 
+
+Receipt of an unfavorable DOT safety rating
+could have a material adverse effect on Tradition s operations and profitability.
+
+ 
+
+Tradition currently has a satisfactory DOT safety
+rating, which is the highest available rating under the current safety rating scale. If Tradition were to receive a conditional or unsatisfactory
+DOT safety rating, it could materially adversely affect Tradition s business, financial condition and results of operations as customer
+contracts may require a satisfactory DOT safety rating, and a conditional or unsatisfactory rating could materially adversely affect or
+restrict its operations. For further discussion of the DOT safety rating system, please see Regulation .
+
+ 
+
+ 
+
+ 12 
+
+ 
+
+ 
+
+ 
+
+Changes in U.S. tax laws and regulations
+may impact Tradition s effective tax rate and may adversely affect its business, financial condition and operating results. 
+
+ 
+
+Significant reform of the U.S. tax laws, including
+significant changes related to federal tax rates, interest expense deductions, capital expenditure deductions and the taxation of business
+entities, could adversely affect Tradition. Tradition benefits from certain tax provisions relating to capital expenditure deductions.
+Reform could have a material adverse effect on Tradition s growth opportunities, business and results of operations.
+
+ 
+
+Changes to trade regulation, quotas, duties
+or tariffs, caused by the changing U.S. and geopolitical environments or otherwise, may increase Tradition s costs and materially
+adversely affect its business.
+
+ 
+
+The imposition of additional tariffs or quotas
+or changes to certain trade agreements, including tariffs applied to goods traded between the United States and China, could harm Tradition s
+Warehouse Leasing and Equipment Leasing service segments, and among other things, increase the costs of the materials used by Tradition s
+suppliers to produce new revenue equipment or increase the price of fuel. Such cost increases for Tradition s revenue equipment
+suppliers would likely be passed on to Tradition, and to the extent fuel prices increase, Tradition may not be able to fully recover such
+increases through rate increases or its fuel surcharge program, either of which could have a material adverse effect on Tradition s
+business.
+
+ 
+
+Tradition s operations are subject
+to various environmental laws and regulations, the violation of which could result in substantial fines or penalties. 
+
+ 
+
+Tradition is subject to various environmental
+laws and regulations dealing with the hauling and handling of hazardous materials, waste and other oil, fuel storage tanks, air emissions
+from Tradition s vehicles and facilities, engine idling and discharge and retention of storm water. Tradition s truck terminals
+often are located in industrial areas where groundwater or other forms of environmental contamination could occur. Tradition s operations
+involve the risks of fuel spillage or seepage, environmental damage and hazardous waste disposal, among others. Certain of Tradition s
+facilities have waste oil or fuel storage tanks and fueling islands. If Tradition is involved in a spill or other accident involving hazardous
+substances, if there are releases of hazardous substances Tradition transports, if soil or groundwater contamination is found at Tradition s
+facilities or results from its operations, or if Tradition is found to be in violation of applicable environmental laws or regulations,
+Tradition could owe cleanup costs and incur related liabilities, including substantial fines or penalties or civil and criminal liability,
+any of which could have a materially adverse effect on Tradition s business and operating results.
+
+ 
+
+EPA regulations limiting exhaust emissions became
+more restrictive in 2010. In 2010, an executive memorandum was signed directing the NHTSA and the EPA to develop new, stricter fuel efficiency
+standards for heavy trucks. In 2011, the NHTSA and the EPA adopted final rules that established the first-ever fuel economy and greenhouse
+gas standards for medium-and heavy-duty vehicles. These standards apply to model years 2014 to 2018, which are required to achieve an
+approximate 20 percent reduction in fuel consumption by model year 2018, and equates to approximately four gallons of fuel for every 100
+miles traveled. In June 2015, the EPA and NHTSA jointly proposed new stricter standards that would apply to trailers beginning with model
+year 2018 and tractors beginning with model year 2021.
+
+ 
+
+In October 2016, the EPA and NHTSA formally published
+the Final Rule for Phase 2 of the GHG emissions and fuel efficiency standards for medium and heavy-duty engines and vehicles. On August
+5, 2021, U.S. EPA announced an update to the Cleaner Trucks Initiative called the Clean Trucks Plan. The Clean Trucks Plan plans to reduce
+GHG and other harmful air pollutants from heavy-duty trucks through a series of rulemakings over the next three years. Further, the EPA
+is targeting 2027 for these new standards to take effect and is also working on enacting more stringent greenhouse gas emission standards
+(beginning with model year 2030 vehicles) by the end of 2024. For further discussion of the laws and regulations applicable to Tradition,
+its drivers, and its equipment, please see Regulation .
+
+ 
+
+Tradition is subject to various claims and
+lawsuits in the ordinary course of business, and increases in the amount or severity of these claims and lawsuits could adversely affect
+us. 
+
+ 
+
+Tradition is exposed to various claims and litigation
+related to commercial disputes, personal injury, property damage, environmental liability and other matters. Developments in regulatory,
+legislative or judicial standards, material changes to litigation trends, or a catastrophic accident or series of accidents, involving
+any or all of property damage, personal injury, and environmental liability could have a material adverse effect on Tradition s
+operating results, financial condition and liquidity.
+
+ 
+
+ 
+
+ 13 
+
+ 
+
+ 
+
+ 
+
+Tradition has significant ongoing capital
+requirements that could affect its profitability if Tradition is unable to generate sufficient cash from operations or obtain financing
+on favorable terms. 
+
+ 
+
+The truckload industry generally, and Tradition s
+Equipment Leasing and Warehouse Leasing services segments, are capital intensive and asset heavy. Tradition expects to pay for projected
+capital expenditures with cash flows from operations, proceeds from equity sales or financing available under its existing debt instruments.
+Tradition s total capital expenditures in its fiscal year ended December 31, 2021 were $21,950,374. If Tradition were unable to
+generate sufficient cash from operations, Tradition would need to seek alternative sources of capital, including financing, to meet its
+capital requirements. In the event that Tradition is unable to generate sufficient cash from operations or obtain financing on favorable
+terms in the future, Tradition may have to limit its fleet size, enter into less favorable financing arrangements or operate its revenue
+equipment for longer periods, any of which could have a materially adverse effect on its profitability.
+
+ 
+
+The seasonal pattern generally experienced
+in the trucking industry may affect Tradition s periodic results during traditionally slower shipping periods and winter months.
+
+ 
+
+In the trucking industry, revenue generally follows
+a seasonal pattern which may affect Tradition s operating results. Tradition typically experiences a seasonal surge in sales during
+the fourth quarter of Tradition s fiscal year as a result of holiday sales. After the December holiday season and during the remaining
+winter months, Tradition s freight volumes are typically lower because some customers reduce shipment levels. Tradition s
+operating expenses have historically been higher in the winter months because of cold temperatures and other adverse winter weather conditions
+which result in decreased fuel efficiency, increased cold weather-related maintenance costs of revenue equipment and increased insurance
+and claims costs. Revenue can also be affected by adverse weather conditions, holidays and the number of business days during a given
+period because revenue is directly related to the available working days of shippers. From time to time, Tradition may also suffer short-term
+impacts from severe weather and similar events, such as tornadoes, hurricanes, blizzards, ice storms, floods, fires, earthquakes, and
+explosions that could harm Tradition s results of operations or make its results of operations more volatile.
+
+ 
+
+Tradition is increasingly dependent on data
+networks and systems, including tracking and communications systems, and significant systems disruptions, including those caused by cybersecurity
+breaches, could adversely affect Tradition s business. 
+
+ 
+
+Tradition s policy of increasingly using
+technology to improve productivity and reduce costs means that its business is reliant on the efficient, stable and uninterrupted operation
+of its data networks and systems, including tracking and communications systems. Tradition s computer systems are used in various
+aspects of its business, including load planning and receiving, dispatch of drivers and third-party capacity providers, freight and container
+tracking, customer billing and account monitoring, automation of tasks, producing financial and other reports and other general functions
+and purposes. Tradition is currently dependent on two vendors, Transport Pro, for fleet and transportation management software, and Camelot
+Software, for warehouse management systems. Tradition is in the process of converting its transportation management software from Transport
+Pro to TMW by Trimble Transportation Enterprise Solutions, Inc. ( Trimble ) and will be dependent on Trimble, once the conversion
+process is complete. If the stability or capability of such vendors is compromised, it could adversely affect Tradition s revenue,
+customer service, driver turnover rates and data preservation. Additionally, if any of Tradition s critical information or communications
+systems fail or become unavailable, Tradition could have to perform certain functions manually, which could temporarily affect the efficiency
+and effectiveness of its operations.
+
+ 
+
+Tradition s operations and those of its
+technology and communications service providers are vulnerable to interruption by fire, earthquake, power loss, telecommunications failure,
+terrorist attacks, internet failures, computer viruses, malware, hacking and other events beyond Tradition s control. More sophisticated
+and frequent cyber-attacks within the United States in recent years have also increased security risks associated with information technology
+systems. In the event of a cyber-attack, breach or other such event, Tradition s business and operations could be adversely affected
+in the event of a system failure, disruption or security breach that causes a delay, or interruption or impairment of Tradition s
+services and operations.
+
+ 
+
+ 
+
+ 14 
+
+ 
+
+ 
+
+ 
+
+Tradition may not make acquisitions in the
+future, which could impede growth, or if it does, Tradition may not be successful in integrating any acquired businesses, either of which
+could have a material adverse effect on Tradition s business.
+
+ 
+
+Historically, a key component of Tradition s
+growth strategy has been to pursue acquisitions of complementary businesses and/or assets. As discussed in Karr Transportation
+Asset Purchase and EDSCO Purchase and Sale, in BusIness .
+Tradition acquired assets in two separate deals in 2022. The EDSCO Purchase and Sale is complimentary, but different to Tradition s
+core business, and Tradition cannot assure that it will be successful in integrating all of or portions of the aforementioned acquisitions.
+Further, Tradition may not be successful in identifying, negotiating or consummating any future acquisitions. If Tradition succeeded in
+consummating future acquisitions, any acquisitions Tradition undertakes could involve numerous risks that could have a materially adverse
+effect on Tradition s business and operating results, including:
+
+ 
+
+ 
+ 
+ (i)
+ difficulties in integrating the acquired company s operations and in realizing anticipated economic, operational and other benefits in a timely manner that could result in substantial costs and delays or other operational, technical or financial problems; 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (ii)
+ challenges in achieving anticipated revenue, earnings or cash flows; 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (iii)
+ assumption of liabilities that may exceed Tradition s estimates or what was disclosed to Tradition; 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (iv)
+ the diversion of Tradition s management s attention from other business concerns; 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (v)
+ the potential loss of customers, key associates and drivers of the acquired company; 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (vi)
+ difficulties operating in markets in which Tradition has had no or only limited direct experience; 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (vii)
+ the incurrence of additional indebtedness; and 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (viii)
+ the issuance of additional shares of APSI s common stock, which would dilute your ownership in APSI. 
+
+ 
+ 
+
+Tradition s existing and future indebtedness
+could limit its flexibility in operating its business or adversely affect its business and our liquidity position. 
+
+ 
+
+As of December 31, 2021, Tradition had $11,834,070
+in aggregate principal amount of indebtedness for borrowed money outstanding, consisting of $6,303,914 notes payable to its new primary
+bank, payable in various monthly installments through July 2026, $5,006,853 outstanding under Tradition s installment notes payable
+to various financial institutions through October 2026, and $523,303 payable in varying monthly installments through May 2026 in obligations
+outstanding under capital leases. Tradition also has an outstanding promissory note to Robin C. Montel, in the amount of $2,050,000 without
+interest, payments to begin February 1, 2023 and end January 15, 2028.
+
+ 
+
+Tradition s indebtedness may increase from
+time to time in the future for various reasons, including fluctuations in operating results, capital expenditures and potential acquisitions.
+
+ 
+
+Any indebtedness Tradition incurs and restrictive
+covenants contained in the agreements related thereto could:
+
+ 
+
+ 
+ 
+ (i)
+ make it difficult for Tradition to satisfy its obligations, including making interest payments on its debt obligations; 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (ii)
+ limit its ability to obtain additional financing to operate its business; 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (iii)
+ require it to dedicate a substantial portion of its cash flow to payments on its debt, reducing its ability to use its cash flow to fund capital expenditures and working capital and other general operational requirements; 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (iv)
+ limit its flexibility to plan for and react to changes in its business; 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (v)
+ place it at a competitive disadvantage relative to some of Tradition s competitors that have less, or less restrictive, debt than Tradition; 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (vi)
+ limit its ability to pursue acquisitions; and 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (vii)
+ increase its vulnerability to general adverse economic and industry conditions, including changes in interest rates or a downturn in Tradition s business or the economy. 
+
+ 
+ 
+
+ 
+
+ 15 
+
+ 
+
+ 
+
+ 
+
+The occurrence of any one of these events could
+have a material adverse effect on Tradition s business, financial condition and operating results or cause a significant decrease
+in Tradition s liquidity and impair Tradition s ability to pay amounts due on Tradition s indebtedness. Significant
+repayment penalties may limit its flexibility.
+
+ 
+
+Tradition and/or APSI may need to obtain
+additional financing which may not be available or, if it is available, may result in a reduction in the percentage ownership of APSI s
+then-existing shareholders. 
+
+ 
+
+Tradition and/or APSI may need to raise additional
+funds in order to:
+
+ 
+
+ 
+ 
+ (i)
+ finance unanticipated working capital requirements or refinance existing indebtedness; 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (ii)
+ develop or enhance Tradition s technological infrastructure and our existing products and services; 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (iii)
+ fund strategic relationships; 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (iv)
+ respond to competitive pressures; and 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (v)
+ acquire complementary businesses, technologies, products or services. 
+
+ 
+ 
+
+Additional financing may not be available on terms
+favorable to Tradition and/or APSI, or at all. If adequate funds are not available or are not available on acceptable terms, Tradition s
+ability to fund its expansion strategy, Tradition and/or APSI s ability to take advantage of unanticipated opportunities or acquisitions,
+Tradition s ability to develop or enhance technology or services or otherwise respond to competitive pressures could be significantly
+limited. Because there are companies similar to Tradition and APSI with more capital, if Tradition and APSI cannot obtain additional financing,
+Tradition and APSI s business opportunities will be severely limited and prevent Tradition s and APSI s growth. If APSI
+raises additional funds by issuing equity or convertible debt securities, the percentage ownership of APSI s then-existing shareholders
+may be reduced, and holders of these securities may have rights, preferences or privileges senior to those of APSI s then-existing
+shareholders.
+
+ 
+
+The requirements of APSI remaining a public
+company may strain Tradition s resources and distract Tradition s management, which could make it difficult to manage Tradition s
+business.
+
+ 
+
+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 Tradition s business, results of operations and financial condition.
+We are required to comply with certain provisions of Section 404 of the Sarbanes-Oxley Act of 2002, as amended (the Sarbanes-Oxley
+Act ) including maintaining internal controls over financial reporting, and if we fail to continue to comply, Tradition s
+business could be harmed, and the price of our securities could decline.
+
+ 
+
+Tradition could be negatively impacted by
+the COVID-19 outbreak or other similar outbreaks.
+
+ 
+
+Covid-19 has had a considerable effect on Tradition s
+industry and its business. The first two weeks of the Covid-19 pandemic created uncertainty, which affected Tradition s operations,
+but Tradition adapted by cleaning work facilities more often, and making sure its drivers have the support and facilities to efficiently
+do their job. Tradition s operations, particularly in areas of increased COVID-19 infections, could be further disrupted. Negative
+financial results, operational disruptions, driver and non-driver absences, uncertainties in the market, and a tightening of credit markets,
+caused by COVID-19, including its variants, other similar outbreaks, or a recession, could have a material adverse effect on Tradition s
+liquidity, reduce credit options available to Tradition, make it more difficult to obtain amendments, extensions, and waivers, and adversely
+impact Tradition s ability to effectively meet its short- and long-term obligations. Furthermore, government vaccination, testing,
+and mask mandates could increase Tradition s turnover and make recruiting more difficult, particularly among its driver and maintenance
+personnel.
+
+The outbreak of COVID-19 has significantly increased
+uncertainty in the economy. Risks related to a slowdown or recession are described in Tradition s risk factor titled Tradition s
+business is subject to economic, business and regulatory factors affecting the truckload industry that are largely beyond its control,
+any of which could have a material adverse effect on its results of operations. 
+
+ 
+
+ 
+
+ 16 
+
+ 
+
+ 
+
+ 
+
+Developments related to COVID-19 have been unpredictable
+and the extent to which further developments could impact Tradition s operations, financial condition, liquidity, results of operations,
+and cash flows is highly uncertain. Such developments may include the duration of the virus, the distribution and availability of vaccines,
+vaccine hesitancy, the severity of the disease and the actions that may be taken by various governmental authorities and other third parties
+in response to the outbreak.
+
+ 
+
+Risks Related to the Ownership of APSI s
+Capital Stock
+
+ 
+
+Stephen W. Carnes is the Chief Executive
+Officer and a director of APSI and has a controlling interest in APSI, which gives him the right to direct APSI.
+
+ 
+
+Stephen W. Carnes has a controlling equity interest
+of 96.6% of the total voting stock of APSI through his ownership of 500,000 Series B Preferred Shares, each of which has voting rights
+of 1,000 votes per share. Mr. Carnes has the ability, through his ownership of Series B Preferred Shares, to elect directors of his choosing
+and thus, is able to control the direction of APSI. Mr. Carnes interests may diverge from those of the other stockholders and this
+divergence may have a significant impact on APSI. The loss of Mr. Carnes may also have a significant impact on the direction of APSI s
+business and the shareholders of APSI. Mr. Carnes ownership and control of Series B Preferred Shares may also have the effect of
+delaying or preventing a future change in control, impeding a merger, consolidation, takeover or other business combination or discourage
+a potential acquirer from making a tender offer. If you acquire our Shares, you will have no effective voice in the management of our
+Company. Such concentrated control of our Company may adversely affect the price of our Shares. Such concentrated control may also make
+it difficult for our shareholders to receive a premium for their Shares in the event that we merge with a third party or enter into different
+transactions, which require shareholder approval. These provisions could also limit the price that investors might be willing to pay in
+the future for our Shares.
+
+ 
+
+If we fail to maintain proper and effective
+internal controls, our ability to produce accurate and timely financial statements could be impaired, which could harm our operating results,
+Tradition s ability to operate Tradition s business and investors views of us. 
+
+ 
+
+We are required to comply with Section 404 of
+the Sarbanes-Oxley Act. Section 404 of the Sarbanes-Oxley 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. 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. Our failure to maintain the effectiveness of our internal
+controls in accordance with the requirements of the Sarbanes-Oxley Act could have a material adverse effect on our business. We could
+lose investor confidence in the accuracy and completeness of our financial reports, which could have an adverse effect on the price of
+APSI s common stock. In addition, if our efforts to comply with new or changed laws, regulations, and standards differ from the
+activities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities may initiate legal
+proceedings against us and Tradition s business may be harmed.
+
+ 
+
+Rule 144 Related Risk
+
+ 
+
+Per Rule 144 promulgated under the Securities
+Act, which permits the resale of the shares of Common Stock, subject to various terms and conditions, will generally not apply to APSI s
+common stock until one year after APSI ceases to be a shell company under SEC regulations and all Form 10 required information
+has been filed with the SEC. APSI exited shell company status as of the December 28th 2022 Acquisition, and APSI has filed
+the required Form 10 in a current report, dated . The one year waiting period before Rule 144 began as of the filing of such Current
+Report. As a result, your ability to sell your shares may be limited.
+
+ 
+
+Provisions of APSI s Certificate of
+Incorporation, as amended, and Bylaws may delay or prevent a take-over which may not be in the best interests of our shareholders.
+
+ 
+
+Provisions of APSI s Certificate of Incorporation
+and Bylaws may be deemed to have anti-takeover effects, which include, among others, when and by whom special meetings of APSI s
+shareholders may be called, and may delay, defer or prevent a takeover attempt. In addition, APSI s Certificate of Incorporation
+authorizes the issuance of shares of preferred stock with such rights and preferences as may be determined from time to time by APSI s
+board of directors in their sole discretion. APSI s board of directors may, without shareholder approval, issue shares of preferred
+stock with dividends, liquidation, conversion, voting or other rights that could adversely affect the voting power or other rights of
+the holders of APSI s common stock.
+
+ 
+
+ 
+
+ 17 
+
+ 
+
+ 
+
+ 
+
+The application of the penny stock 
+rules could adversely affect the market price of APSI s common shares and increase your transaction costs to sell those shares.
+
+ 
+
+The SEC has adopted Rule 3a51-1, which establishes
+the definition of a penny stock, for the purposes relevant to us, as any equity security that has a market price of less
+than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving
+a penny stock, unless exempt, Rule 15g-9 requires:
+
+ 
+
+ 
+ 
+ (i)
+ that a broker or dealer approve a person s account for transactions in penny stocks, and
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (ii)
+ the broker or dealer receives from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. 
+
+ 
+ 
+
+In order to approve a person s account for
+transactions in penny stocks, the broker or dealer must:
+
+ 
+
+ 
+ 
+ (i)
+ obtain financial information and investment experience objectives of the person;
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (ii)
+ 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;
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (iii)
+ the broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form sets forth the basis on which the broker or dealer made the suitability determination and;
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ (iv)
+ the broker or dealer must receive 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.
+
+ 
+
+The market price for our common stock is
+particularly volatile which could lead to wide fluctuations in our share price. You may be unable to sell your common stock shares at
+or above your purchase price, or at all, which may result in substantial losses to you.
+
+ 
+
+The market for our common stock 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. As a consequence of this enhanced risk, more risk-adverse investors may, under the fear
+of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on
+the market more quickly and at greater discounts than would be the case with the stock of a seasoned issuer. Many of these factors are
+beyond our control and may decrease the market price of our common shares, regardless of our operating performance. We cannot make any
+predictions or projections as to what the prevailing market price for our common stock shares will be at any time, or if our common stock
+shares will ever be able to trade, or as to what effect the sale of shares or the availability of common stock shares for sale at any
+time will have on the prevailing market price.
+
+ 
+
+APSI has never paid dividends on our common
+stock and has no plans to do so in the future.
+
+ 
+
+Holders of shares of APSI s common stock
+are entitled to receive such dividends as may be declared by APSI s board of directors. To date, APSI has paid no cash dividends
+on APSI s shares of common stock and APSI does not expect to pay cash dividends on APSI common stock in the foreseeable future.
+APSI intends to retain future earnings, if any, to provide funds for operations of our business. Therefore, any return investors in APSI s
+common stock may have will be in the form of appreciation, if any, in the market value of their shares of common stock.
+
+ 
+
+ 
+
+ 18 
+
+ 
+
+ 
+
+ 
+
+Our common stock is currently deemed a penny
+stock, which makes it more difficult for our investors to sell their shares.
+
+ 
+
+The SEC has adopted Rule 15g-9 which establishes
+the definition of a penny stock, for the purposes relevant to us, as any equity security that has a market price of less
+than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require that
+a broker or dealer approve a person s account for transactions in penny stocks, and the broker or dealer receive from the investor
+a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.
+
+ 
+
+In order to approve a person s account for
+transactions in penny stocks, the broker or dealer must obtain financial information and investment experience objectives of the person
+and make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge
+and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
+
+ 
+
+The broker or dealer must also deliver, prior
+to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight
+form sets forth the basis on which the broker or dealer made the suitability determination, and that the broker or dealer received a signed,
+written agreement from the investor prior to the transaction.
+
+ 
+
+Generally, brokers may be less willing to execute
+transactions in securities subject to the penny stock rules. This may make it more difficult for investors to dispose of
+our common stock if and when such shares are eligible for sale and may cause a decline in the market value of its 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 stock.
+
+ 
+
+As an issuer of a penny stock, 
+the protection provided by the federal securities laws relating to forward-looking statements does not apply to us.
+
+ 
+
+Although federal securities laws provide a safe
+harbor for forward-looking statements made by a public company that files reports under the federal securities laws, this safe harbor
+is not available to issuers of penny stocks. As a result, we will not have the benefit of this safe harbor protection in the event of
+any legal action based upon a claim that the material provided by us contained a material misstatement of fact or was misleading in any
+material respect because of our failure to include any statements necessary to make the statements not misleading. Such an action could
+hurt our financial condition.
+
+ 
+
+Our Certificate of Incorporation and Bylaws limit the liability
+of, and provide indemnification for, our officers and directors.
+
+ 
+
+Our Certificate of Incorporation generally limits
+our officers and directors personal liability to the Company and its stockholders for breach of a fiduciary duty as an officer
+or director except for breach of the duty of loyalty or acts or omissions not made in good faith or which involve intentional misconduct
+or a knowing violation of law. Our Certificate of Incorporation and Bylaws, provide indemnification for our officers and directors to
+the fullest extent authorized by the Nevada Business Corporation Act against all expense, liability, and loss, including attorney s fees,
+judgments, fines excise taxes or penalties and amounts to be paid in settlement reasonably incurred or suffered by an officer or director
+in connection with any action, suit or proceeding, whether civil or criminal, administrative or investigative (hereinafter a Proceeding )
+to which the officer or director is made a party or is threatened to be made a party, or in which the officer or director is involved
+by reason of the fact that he is or was an officer or director of the Company, or is or was serving at the request of the Company whether
+the basis of the Proceeding is an alleged action in an official capacity as an officer or director, or in any other capacity while serving
+as an officer or director. Thus, the Company may be prevented from recovering damages for certain alleged errors or omissions by the officers
+and directors for liabilities incurred in connection with their good faith acts for the Company. Such an indemnification payment
+might deplete the Company s assets. Stockholders who have questions regarding the fiduciary obligations of the officers and directors
+of the Company should consult with independent legal counsel. It is the position of the SEC that exculpation from and indemnification
+for liabilities arising under the Securities Act and the rules and regulations thereunder is against public policy and therefore unenforceable.
+
+ 
+
+ 
+
+ 
+
+ 19 
+
+ 
+
+ 
+
+ 
+
+SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
+
+ 
+
+This prospectus
+contains forward-looking statements, which involve risks and uncertainties. These forward-looking statements are generally identified
+by the use of forward-looking terminology, including the terms anticipate, believe, continue, could, 
+ design, estimate, expect, forecast, foresee, goal, hope, 
+ intend, likely, may, might, plan, potential, predict, 
+ project, seek, should, target, will, would and, in each case,
+their negative or other various or comparable terminology. All statements other than statements of historical facts contained in this
+prospectus, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs,
+prospects, plans, objectives of management and expected market growth are forward-looking statements. The forward-looking statements
+are included throughout this prospectus, including in the sections entitled

parsed_sections/risk_factors/2023/ATON_alphaton_risk_factors.txt

@@ -0,0 +1,456 @@
+Risk factors:
+ You should read the "Risk Factors" section of this prospectus for a discussion of factors to consider carefully before deciding to invest in these securities.
+
+ 
+ 
+ 
+
+ 
+ Nasdaq Capital Market symbol:
+ "PRTG"
+
+ 
+ 
+
+1 The number of ordinary shares to be outstanding after this
+offering is based on 17,786,290 ordinary shares outstanding as of June 30, 2023, plus 1,970,000 of our ordinary shares and Pre-Funded
+Warrants to purchase up to 1,187,895 ordinary shares issued in the Registered Direct Offering and excludes:
+
+ 
+
+ Restricted stock units with respect to 378,740 ordinary shares outstanding as of June 30, 2023, which
+vested immediately on the date of grant and are subject to certain restrictions;
+
+ 
+
+ 6,833 ordinary shares earned for services rendered in July and August 2023, accrued at August 31, 2023
+but not yet issued;
+
+ 
+
+ 1,963,420 ordinary shares issuable upon the exercise of options outstanding as of June 30, 2023 at a weighted-average
+exercise price of $10.53 per share; and
+
+ 
+
+ 538,832 ordinary shares available for future issuance under our Amended and Restated 2021 Equity Incentive
+Plan as of June 30, 2023.
+
+ 
+
+Unless otherwise indicated, all information in this prospectus assumes
+full exercise of the Pre-Funded Warrants issued in the Registered Direct Offering, full exercise of all the Series A Warrants, Series
+B Warrants and Series C Warrants issued the Private Placement and full exercise of all the Placement Agent Warrants issued to the designees
+of the Placement Agent as compensation in connection with the Registered Direct Offering and the Private Placement. 
+
+ 
+
+ 
+
+ 8 
+
+ 
+
+ 
+
+RISK FACTORS
+
+ 
+
+Investing in our securities involve a high degree of risk. Before investing
+in our securities, you should carefully consider the risks, uncertainties and assumptions described below, in the section under the heading
+"Risk Factors" included in our Annual Report on Form 20-F for our most recent fiscal year, our Reports of Foreign Private
+Issuer on Form 6-K, any amendments or updates thereto reflected in subsequent filings with the SEC,
+and in other reports we file with the SEC that are incorporated by reference herein, before making an investment decision. Our
+business, financial condition, results of operations and future growth prospects could be materially and adversely affected by any of
+these risks. In these circumstances, the market price of our ordinary shares could decline, and you may lose all or part of your investment.
+
+ 
+
+Risks Related to this Offering
+
+ 
+
+We will have future capital needs, and there are uncertainties as
+to our ability to raise additional funding.
+
+ 
+
+Our current cash resources will not cover all of our operational costs
+and the needs of our subsidiaries to progress towards and through clinical trials. Additional capital will be needed to continue to test
+product candidates in human trials, obtain regulatory approvals and ultimately to commercialize such product candidates if approved.
+
+ 
+
+In addition, our future cash requirements may vary materially from those
+now expected. For example, our future capital requirements may increase if:
+
+ 
+
+ we experience scientific progress sooner than expected in our future discovery, research and development
+projects, if we expand the magnitude and scope of these activities, or if we modify our focus as a result of our discoveries;
+
+ we experience setbacks in our progress with pre-clinical studies and clinical trials are delayed;
+
+ we experience delays or unexpected increased costs in connection with obtaining regulatory approvals,
+particularly in light of the current inflationary environment;
+
+ we are required to perform additional pre-clinical studies and/or clinical trials;
+
+ we experience unexpected or increased costs relating to preparing, filing, prosecuting, maintaining, defending
+and enforcing patent claims; or
+
+ we elect to develop, acquire or license new technologies and products.
+
+ 
+
+We have incurred, and we expect to continue to incur substantial costs
+related to the development of our product candidates, including costs related to the clinical trials for our iNKT platform and adenosine
+platform. If sufficient capital is not available, we may be required to delay, reduce the scope of, eliminate or divest of one or more
+of our research or development projects, any of which could have a material adverse effect on our business, financial condition, prospects
+or results of operations.
+
+ 
+
+Furthermore, under General Instruction I.B.5 to Form F-3 (the "Baby
+Shelf Rule"), the amount of funds we can raise through primary public offerings of securities in any 12-month period using our
+registration statement on Form F-3 is limited to one-third of the aggregate market value of the ordinary shares held by our non-affiliates,
+which limitation may change over time based on our stock price, number of ordinary shares outstanding and the percentage of ordinary shares
+held by non-affiliates. We therefore are limited by the Baby Shelf Rule as of the filing of this prospectus, until such time as our non-affiliate
+public float exceeds $75 million.
+
+ 
+
+Our need for future financing may result in the issuance of additional
+securities which may cause our shareholders to experience dilution.
+
+ 
+
+Our cash requirements may vary from those now planned depending upon numerous
+factors, including the results of future research and development activities. We expect our expenses to increase if and when we initiate
+and conduct additional clinical trials, and seek marketing approval for our product candidates. Accordingly, we will need to obtain substantial
+additional funding in connection with our continuing operations. Our securities may be offered to investors at a price lower than the
+price per share paid by existing shareholders, or upon terms which may be deemed more favorable than those of existing shareholders. In
+addition, the issuance of securities in any future financing may dilute the equity ownership of existing shareholders and may have the
+effect of depressing the market price for our securities, including the ordinary shares. Moreover, we may issue derivative securities,
+including options and/or warrants, from time to time, which may further dilute the equity ownership of our shareholders. No assurance
+can be given as to our ability to procure additional financing, if required, and on terms deemed favorable to us. To the extent additional
+capital is required and cannot be raised successfully, we may then have to limit our then current operations and/or may have to curtail
+certain, if not all, of our business objectives and plans.
+
+ 
+
+ 9 
+
+ 
+
+ 
+
+We have a history of operating losses and may never achieve profitability
+in the future.
+
+ 
+
+Historically, we have generated only a limited amount of business income,
+notwithstanding a highly valued asset distribution to our shareholders of share ownership of Biohaven Pharmaceuticals Holding Company
+Ltd. ("Biohaven").
+
+ 
+
+Our objective is to enable research and development so as to create early-
+to mid-stage, first- and best-in-class therapies for a variety of cancers, by providing funding, strategic business and clinical counsel,
+and shared services, with the goal of creating viable products that may be monetized through licensing, manufacturing and distribution
+or outright sale. Our principal activities are engaging in research and development to identify and validate new drug targets that could
+become marketed drugs in the future. For this, we will require significant financial resources without any income, and we expect to continue
+incurring operating losses for the foreseeable future.
+
+ 
+
+Our ability to generate revenue in the future or achieve profitable operations
+is largely dependent upon our ability to attract and maintain experienced management and know-how to develop new drug candidates and to
+partner with major pharmaceutical companies to successfully commercialize any successful drug candidates. It takes many years and significant
+financial resources to successfully develop pre-clinical or early clinical drug candidates into marketable drugs, and we cannot assure
+you that we will be able to achieve these objectives. Although, we were successful in achieving significant value growth in an investment
+made in Biohaven, which resulted in the distribution of Biohaven shares as an asset dividend to our shareholders with a then market value
+of approximately $153 million in fiscal 2018, we cannot guarantee that we will be able to achieve any similar success in our future business
+activities.
+
+ 
+
+Our share price has fluctuated in the past, has recently been volatile
+and may be volatile in the future, and as a result, investors in our ordinary shares could incur substantial losses.
+
+ 
+
+Our share price has fluctuated in the past, has recently been volatile,
+and may be volatile in the future. The stock market in general and the market for biotechnology companies in particular has experienced
+volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, investors
+may experience losses on their investment in our ordinary shares. The market price for our ordinary shares may be influenced by many factors,
+including, but not limited to, the following:
+
+ 
+
+ investor reaction to our business strategy;
+
+ our ability or inability to raise additional capital and the terms on which we raise it;
+
+ the success of competitive products or technologies;
+
+ results of clinical trials or future product candidates or those of our competitors;
+
+ regulatory or legal developments, especially changes in laws or regulations applicable to our product
+candidates;
+
+ introductions and announcements of new product candidates by us, results of clinical trials, our commercialization
+partners, or our competitors, and the timing of these introductions or announcements;
+
+ actions taken by regulatory agencies with respect to our clinical studies, manufacturing process or sales
+and marketing terms;
+
+ variations in our financial results or those of companies that are perceived to be similar to us;
+
+ the success of our efforts to acquire or in-license additional products or product candidates;
+
+ developments concerning our collaborations;
+
+ announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures
+or capital commitments;
+
+ 
+
+ 10 
+
+ 
+
+ 
+
+ 
+
+ developments or disputes concerning patents or other proprietary rights, including patents, litigation
+matters and our ability to obtain patent protection for our products;
+
+ the recruitment or departure of key personnel;
+
+ market conditions in the pharmaceutical and biotechnology sectors;
+
+ declines in the market prices of publicly traded stocks generally;
+
+ actual or anticipated changes in earnings estimates or changes in stock market analyst recommendations
+regarding our ordinary shares, other comparable companies, or our industry generally;
+
+ trading volume of our ordinary shares;
+
+ sales of our ordinary shares by us or our shareholders;
+
+ general economic, industry and market conditions;
+
+ other events or factors, including those resulting from such events, or the prospect of such events, including
+war, terrorism and other international conflicts, public health issues including health epidemics or pandemics such as COVID-19, and natural
+disasters such as fire, hurricanes, earthquakes, tornados or other adverse weather and climate conditions, whether occurring in the United
+States or elsewhere, could disrupt our operations, disrupt the operations of our suppliers or result in political or economic instability;
+and
+
+ the other risks described in this "Risk Factors" section and the "Risk Factors"
+sections included in the documents incorporated by reference in this prospectus.
+
+ 
+
+We have additional ordinary shares available for issuance, which,
+if issued, could adversely affect the rights of the holders of our ordinary shares.
+
+ 
+
+Our Memorandum and Articles of Association (as amended from time to time,
+"Memorandum and Articles") authorize the issuance of an unlimited number of ordinary shares, upon resolution of our
+board of directors, without shareholder approval. Any future issuances of ordinary shares would further dilute the percentage ownership
+of us held by holders of our ordinary shares. In addition, the issuance of additional ordinary shares may be used as an "anti-takeover"
+device without further action on the part of our shareholders, and may adversely affect the holders of our ordinary shares.
+
+ 
+
+As of April 1, 2024, we may no longer qualify as a foreign private
+issuer, which will result in significant additional costs and expenses and subject us to increased regulatory requirements.
+
+ 
+
+As a foreign private issuer, we are not required to comply with certain
+provisions of the Securities Exchange Act of 1934, as amended (the "Exchange Act") that are applicable to U.S. domestic
+public companies, including (1) the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in
+respect of a security registered under the Exchange Act, (2) the sections of the Exchange Act requiring insiders to file public reports
+of their share ownership and trading activities and liability for insiders who profit from trades made in a short period of time and (3)
+all of the periodic disclosure and current reporting requirements of the Exchange Act applicable to domestic issuers.
+
+ 
+
+In accordance with Nasdaq Listing Rule 5615(a)(3), we have also elected
+to follow home country corporate governance practices rather than those of Nasdaq. For example, British Virgin Islands law does not require
+that a majority of our board of directors consist of independent directors or that our board committees consist of entirely independent
+directors. In addition, we are not subject to Nasdaq Listing Rule 5605(b)(2), which requires that independent directors must regularly
+have scheduled meetings at which only independent directors are present. We also are exempt from the Nasdaq listing rules so as to follow
+the quorum rules for shareholder meetings under British Virgin Islands law. We also are exempt from the Nasdaq listing rules so as to
+not be required to obtain shareholder approval for certain issuance of securities, shareholder approval of share option plans and change
+of control transactions under the Nasdaq Listing Rule 5635.
+
+ 
+
+The determination of foreign private issuer status is made annually on
+the last business day of an issuer s most recently completed second fiscal quarter. We are assessing whether, as of September 30,
+2023, we satisfied the requirements for retaining our foreign private issuer status as of such date. Assuming we did not satisfy the requirements
+to remain a foreign private issuer as of September 30, 2023, we would cease to be a foreign private issuer and cease to be eligible for
+the foregoing exemptions and privileges effective April 1, 2024.
+
+ 
+
+ 11 
+
+ 
+
+ 
+
+As a result of losing foreign private issuer status, we would be required
+to file with the SEC periodic reports and registration statements on U.S. domestic issuer forms, which are more detailed and extensive
+than the forms available to a foreign private issuer. We would be required to begin preparing our financial statements in accordance with
+U.S. GAAP, which would result in financial statements that are different than our historical financial statements and may make it difficult
+for investors to compare our financial performance over time. We would also have to mandatorily comply with U.S. federal proxy requirements,
+and our officers, directors and principal shareholders would become subject to the reporting and short-swing profit disclosure and recovery
+provisions of Section 16 of the Exchange Act. In addition, we would lose our ability to rely upon exemptions from certain corporate governance
+requirements under the listing rules of Nasdaq. As a U.S. listed public company that is not a foreign private issuer, we would expect
+to incur significant additional legal, accounting and other expenses that we have not incurred as a foreign private issuer. We would also
+expect that complying with the rules and regulations applicable to U.S. domestic issuers will make it more difficult and expensive for
+us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher
+costs to obtain coverage. These rules and regulations could also make it more difficult for us to attract and retain qualified members
+of our management team.
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 12 
+
+ 
+
+ 
+
+USE OF PROCEEDS
+
+ 
+
+The net proceeds from any disposition of Shares covered by this prospectus
+will be received by the Selling Shareholders. We will not receive any of the proceeds from any such ordinary shares offered by this prospectus.
+We will, however, receive the net proceeds of any Warrants exercised for cash. We intend to use any such net proceeds to fund the development
+of our product candidates, other research and development activities and for general working capital purposes.
+
+ 
+
+DIVIDEND POLICY
+
+ 
+
+We do not plan on declaring any cash dividends on our ordinary shares in
+the foreseeable future. We expect to retain all available cash funds and future earnings, if any, to fund the development and growth of
+our business. Any future determination to pay dividends, if any, on our ordinary shares will be at the discretion of our board of directors
+and will depend on, among other factors, our results of operations, financial condition, capital requirements and contractual restrictions.
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 
+
+ 13 
+
+ 
+
+ 
+
+SELLING SHAREHOLDERS
+
+ 
+
+The Shares being offered by the Selling Shareholders consists of Shares
+issuable to the Selling Shareholders upon exercise of the Warrants. For additional information regarding the issuances of the Shares and
+Warrants, see "Recent Developments" in the section entitled "

parsed_sections/risk_factors/2023/ATXG_addentax_risk_factors.txt

@@ -0,0 +1,606 @@
+Risk Factors" and other sections of this prospectus, which address
+additional facts that could cause our actual results to differ from those set forth in the forward-looking statements. We caution investors
+not to place significant reliance on the forward-looking statements contained in this prospectus. We undertake no obligation to publicly
+update or review any forward-looking statements, whether as a result of new information, future developments or otherwise, except as
+otherwise required by law.
+
+ 
+
+ 10
+
+ 
+
+ 
+
+ 
+
+RISK
+FACTORS
+
+ 
+
+Investing
+in our securities involves a high degree of risk. In addition to the other information contained in this prospectus and in the documents
+we incorporate by reference herein, you should carefully consider the risks discussed below and under the heading "Risk Factors"
+in our Annual Report on Form 10-K for the fiscal year ended March 31, 2022 as well as any amendment or update to our risk factors reflected
+in subsequent filings with the SEC, before making a decision about investing in our securities. The risks and uncertainties discussed
+below and in the documents incorporated by reference are not the only ones facing us. Additional risks and uncertainties not presently
+known to us, or that we currently see as immaterial, may also harm our business. If any of these risks occur, our business, financial
+condition and operating results could be harmed, the trading price of our common stocks could decline and you could lose part or all
+of your investment.
+
+ 
+
+General
+Risks Associated with Business Operations in China
+
+ 
+
+The
+PRC government may intervene or influence our business operations at any time or may exert more control over offerings conducted overseas
+and foreign investment in China based issuers, which could result in a material change in our business operations and/or the value of
+our securities. Additionally, the governmental and regulatory interference could significantly limit or completely hinder our ability
+to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless.
+
+ 
+
+Recent
+statements by the Chinese government have indicated an intent to exert more oversight and control over offerings that are conducted overseas
+and/or foreign investments in China-based issuers. For example, the PRC has proposed new rules that would require companies collecting
+or holding large amounts of data to undergo a cybersecurity review prior to listing in foreign countries, a move that would significantly
+tighten oversight over China based internet giants. The Cybersecurity Review Measures that took effect from February 15, 2022 stipulates
+that an internet platform operator who possesses more than 1 million users personal information must report to the Office of Cybersecurity
+Review for a cybersecurity review when seeking listings in other nations.
+
+ 
+
+On
+April 2, 2022, the CSRC released the Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering
+and Listing by Domestic Companies (Draft for Comments), which provide that a domestic company that seeks to offer and list its securities
+in a overseas market shall strictly abide by applicable PRC laws and regulations, enhance legal awareness of keeping state secrets and
+strengthening archives administration, institute a sound confidentiality and archives administration system, and take necessary measures
+to fulfill confidentiality and archives administration obligations. In the event that the above proposed provisions and rules are enacted,
+the relevant filing procedures of the CSRC and other governmental authorities may be required in connection with this offering. On
+July 7, 2022, CAC promulgated the Measures for the Security Assessment of Data Cross-border Transfer, effective on September 1, 2022,
+which requires the data processors to apply for data cross-border security assessment coordinated by the CAC under the following circumstances:
+(i) any data processor transfers important data to overseas; (ii) any critical information infrastructure operator or data processor
+who processes personal information of over 1 million people provides personal information to overseas; (iii) any data processor who provides
+personal information to overseas and has already provided personal information of more than 100,000 people or sensitive personal information
+of more than 10,000 people to overseas since January 1st of the previous year; and (iv) other circumstances under which the data
+cross-border transfer security assessment is required as prescribed by the CAC.
+
+ 
+
+Since
+the majority of our operations are located in the PRC, our business may be subject to PRC laws relating to the collection, use, sharing,
+retention, security, and transfer of confidential and private information, such as personal information and other data. As of the date
+of this prospectus, these new laws and guidelines have not impacted the Company s ability to conduct its business, accept foreign
+investments, or list and trade on a U.S. or other foreign exchange. Further, based on our understanding of the PRC laws and regulations,
+we are not be subject to the cybersecurity review by the CAC for this offering, given that: (i) our products and services are offered
+not directly to individual users but through our institutional customers; (ii) we do not possess a large amount of personal information
+in our business operations; and (iii) data processed in our business does not have a bearing on national security and thus may not be
+classified as core or important data by the authorities. However, there remains uncertainty as to how the Cybersecurity Review Measures
+will be interpreted or implemented and whether the PRC regulatory agencies, including the CAC, may adopt new laws, regulations, rules,
+or detailed implementation and interpretation related to the Cybersecurity Review Measures. If any such new laws, regulations, rules,
+or implementation and interpretation comes into effect, we will take all reasonable measures and actions to comply and to minimize the
+adverse effect of such laws on us. Any non-compliance could result in penalties or other significant legal liabilities.
+
+ 
+
+We
+cannot assure you that PRC regulatory agencies, including the CAC, would take the same view as we do, and there is no assurance that
+we can fully or timely comply with such laws. In the event that we are subject to any mandatory cybersecurity review and other specific
+actions required by the CAC, we face uncertainty as to whether any clearance or other required actions can be timely completed, or at
+all. Given such uncertainty, we may be further required to suspend our relevant business, shut down our website, or face other penalties,
+which could materially and adversely affect our business, financial condition, and results of operations. Any future action by the PRC
+government and companies whose foreign securities offerings are subject to review by the CSRC or the CAC could significantly limit or
+completely hinder our ability to offer or continue to offer securities to investors and could cause the value of such securities to significantly
+decline or be worthless.
+
+ 
+
+Our
+independent registered public accounting firm s audit documentation related to their audit reports included in this prospectus
+include audit documentation located in the PRC. Our Common Stocks may be delisted or prohibited from being traded over-the-counter under
+the HFCAA if the PCAOB is unable to inspect our audit documentation located in mainland China and, as such, you may be deprived of the
+benefits of such inspection which could result in limitations or restrictions to our access to the U.S. capital markets. The delisting
+or the cessation of trading of our Common Stocks, or the threat of their being delisted or prohibited from being traded, may materially
+and adversely affect the value of your investment.
+
+ 
+
+Our
+independent registered public accounting firm issued an audit opinion on the financial statements included in our Annual Report on Form
+10-K for the fiscal year ended March 31, 2022. As an auditor of companies that are traded publicly in the United States and
+a firm registered with the PCAOB, our auditor is required by the laws of the United States to undergo regular inspections by the
+PCAOB.
+
+ 
+
+Our
+auditor is headquartered in Lakewood, Colorado, and has been inspected by the PCAOB on a regular basis with the last inspection in November
+and December of 2021. However, recent developments with respect to audits of PRC and Hong Kong based companies, such as us, create
+uncertainty about the ability of our auditor to fully cooperate with the PCAOB s request for audit workpapers without the approval
+of the Chinese authorities. As a result, our investors may be deprived of the benefits of PCAOB s oversight of our auditors through
+such inspections.
+
+ 
+
+Inspections
+of certain other firms that the PCAOB has conducted outside of China have identified deficiencies in those firms audit procedures
+and quality control procedures, which may be addressed as part of the inspection process to improve future audit quality. The PCAOB is
+currently able to conduct inspections of audit firms located in mainland China and Hong Kong and conduct inspections of U.S. audit
+firms where audit work papers are located in mainland China. The audit workpapers for our PRC operations are located in the PRC.
+
+ 
+
+ 11
+
+ 
+
+ 
+
+ 
+
+In
+addition, as part of a continued regulatory focus in the United States on access to audit and other information currently protected
+by national law, in particular China s, in June 2019, a bipartisan group of lawmakers introduced bills in both houses of Congress
+that would require the SEC to maintain a list of issuers for which the PCAOB is not able to inspect or investigate an auditor report
+issued by a foreign public accounting firm. The Ensuring Quality Information and Transparency for Abroad-Based Listings on our Exchanges
+(EQUITABLE) Act prescribes increased disclosure requirements for such issuers and, beginning in 2025, the delisting from national securities
+exchanges such as Nasdaq of issuers included for three consecutive years on the SEC s list. On May 20, 2020, the U.S. Senate
+passed S. 945, the HFCAA. The HFCAA was approved by the U.S. House of Representatives on December 2, 2020. On December 18,
+2020, the former U.S. president signed into law the HFCAA. In essence, the HFCAA requires the SEC to prohibit foreign companies
+from listing securities on U.S. securities exchanges if a company retains a foreign accounting firm that cannot be inspected by
+the PCAOB for three consecutive years, beginning in 2021. The enactment of the HFCAA and any additional rulemaking efforts to increase
+U.S. regulatory access to audit information could cause investor uncertainty for affected issuers, including us, and the market
+price of our securities could be adversely affected, and we could be delisted if it is unable to cure the situation to meet the PCAOB
+inspection requirement in time. On March 24, 2021, the SEC adopted interim final rules relating to the implementation of certain
+disclosure and documentation requirements of the HFCAA. We will be required to comply with these rules if the SEC identifies it
+as having a "non-inspection" year under a process to be subsequently established by the SEC. The SEC is assessing how
+to implement other requirements of the HFCAA, including the listing and trading prohibition requirements described above.
+
+ 
+
+Furthermore,
+on June 22, 2021, the U.S. Senate passed the AHFCAA and on December 29, 2022, the Consolidated Appropriations Act was signed
+into law by President Biden, which contained, among other things, an identical provision to AHFCAA and amended the HFCAA by requiring
+the SEC to prohibit an issuer s securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB
+inspections for two consecutive years instead of three, thus reducing the time before your securities may be prohibited from trading
+or delisted. On September 22, 2021, the PCAOB adopted a final rule implementing the HFCAA, which provides a framework for the PCAOB
+to use when determining, as contemplated under the HFCAA, whether the Board is unable to inspect or investigate completely registered
+public accounting firms located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction.
+On December 2, 2021, the SEC issued amendments to finalize rules implementing the submission and disclosure requirements in the
+HFCAA. The rules apply to registrants that the SEC identifies as having filed an annual report with an audit report issued by a
+registered public accounting firm that is located in a foreign jurisdiction and that PCAOB is unable to inspect or investigate completely
+because of a position taken by an authority in foreign jurisdictions. 
+
+ 
+
+On
+December 2, 2021, the SEC adopted amendments to finalize rules implementing the submission and disclosure requirements in the HFCAA. The
+rules apply to registrants that the SEC identifies as having filed an annual report with an audit report issued by a registered public
+accounting firm that is located in a foreign jurisdiction and that the PCAOB is unable to inspect or investigate completely because of
+a position taken by an authority in a foreign jurisdiction.
+
+ 
+
+On
+December 16, 2021, the PCAOB issued a report on its determinations that it is unable to inspect or investigate completely PCAOB-registered
+public accounting firms headquartered in mainland China and in Hong Kong because of positions taken by mainland China and Hong Kong
+authorities in those jurisdictions, and identifies the registered public accounting firms in mainland China and Hong Kong that are
+subject to such determinations. The PCAOB has made such designations as mandated under the HFCAA. Pursuant to each annual determination
+by the PCAOB, the SEC will, on an annual basis, identify issuers that have used non-inspected audit firms and thus are at risk of such
+suspensions in the future. The auditor of the Company, Marcum Asia CPAs LLP, is not among the auditor firms listed on the determination
+list issued by the PCAOB, which notes all of the auditor firms that the PCAOB is not able to inspect.
+
+ 
+
+On
+August 26, 2022, the CSRC, the Ministry of Finance of the PRC, and the PCAOB signed a Statement of Protocol, or the Protocol, governing
+inspections and investigations of audit firms based in China and Hong Kong. The Protocol remains unpublished and is subject to further
+explanation and implementation. Pursuant to the fact sheet with respect to the Protocol disclosed by the SEC, the PCAOB shall have independent
+discretion to select any issuer audits for inspection or investigation and has the unfettered ability to transfer information to the
+SEC. On December 15, 2022, the PCAOB Board determined that the PCAOB was able to secure complete access to inspect and investigate
+registered public accounting firms headquartered in mainland China and Hong Kong and voted to vacate its previous determinations
+to the contrary. However, should PRC authorities obstruct or otherwise fail to facilitate the PCAOB s access in the future, the
+PCAOB Board will consider the need to issue a new determination.
+
+ 
+
+On
+December 29, 2022, the Consolidated Appropriations Act was signed into law by President Biden, which contained, among other things, an
+identical provision to AHFCAA and amended the HFCAA by requiring the SEC to prohibit an issuer s securities from trading on any
+U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead of three.
+
+ 
+
+Should
+the PCAOB be unable to fully conduct inspections of our auditors work papers in the PRC, it will make it more difficult to evaluate
+the effectiveness of our auditor s audit procedures or quality control procedures and you may be deprived of the benefits of such
+inspection, which could result in limitation or restriction to our access to the U.S. capital markets, and our securities may be
+delisted or prohibited from trading if the PCAOB determines that it cannot inspect or investigate completely our auditor under the HFCAA.
+Investors may consequently lose confidence in our reported financial information and procedures and the quality of our financial statements,
+which would adversely affect us.
+
+ 
+
+ 12
+
+ 
+
+ 
+
+ 
+
+To
+the extent cash in the business is in the PRC or a PRC entity, the funds may not be available to fund operations or for other use outside
+of the PRC due to interventions in or the imposition of restrictions and limitations on the ability of our Company or our subsidiaries
+by the PRC government to transfer cash.
+
+ 
+
+Relevant
+PRC laws and regulations permit the companies in the PRC to pay dividends only out of their retained earnings, if any, as determined
+in accordance with PRC accounting standards and regulations. Additionally, each of the companies in the PRC are required to set aside
+at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered
+capital. The companies in the PRC are also required to further set aside a portion of their after-tax profits to fund the employee welfare
+fund, although the amount to be set aside, if any, is determined at their discretion. These reserves are not distributable as cash dividends.
+In order for us to pay dividends to our stockholders, we will rely on the distribution of dividends, through the WFOE, to Yingxi HK from
+our PRC Subsidiaries.
+
+ 
+
+Our
+cash dividends, if any, will be paid in U.S. dollars. If we are considered a tax resident enterprise of the PRC for tax purposes, any
+dividends we pay to our overseas shareholders may be regarded as China-sourced income and as a result may be subject to PRC withholding
+tax. See "Risk Factors – General Risks Associated with Business Operation in China - We may be treated as a resident enterprise
+for PRC tax purposes under the PRC Enterprise Income Tax Law, and we may therefore be subject to PRC income tax on our global income"
+in our Annual Report on Form 10-K for the fiscal year ended March 31, 2022.
+
+ 
+
+The
+PRC government also imposes controls on the convertibility of RMB into foreign currencies and, in certain cases, the remittance of currency
+out of the PRC. The majority of our income is received in RMB and shortages in foreign currencies may restrict our ability to pay
+dividends or other payments, or otherwise satisfy our foreign currency denominated obligations, if any. Under existing PRC foreign exchange
+regulations, payments of current account items, including profit distributions, interest payments and expenditures from trade-related
+transactions, can be made in foreign currencies without prior approval from SAFE as long as certain procedural requirements are met.
+Approval from appropriate government authorities is required if RMB is converted into foreign currency and remitted out of the PRC to
+pay capital expenses such as the repayment of loans denominated in foreign currencies. The PRC government may, at its discretion, impose
+restrictions on access to foreign currencies for current account transactions and if this occurs in the future, we may not be able to
+pay dividends in foreign currencies to our shareholders.
+
+ 
+
+As
+a result of the above, to the extent cash in the business is in the PRC or a PRC entity, such funds or assets may not be available to
+fund operations or for other use outside of the PRC, due to interventions in or the imposition of restrictions and limitations on the
+ability of us, or our subsidiaries by the PRC government to transfer cash.
+
+ 
+
+Risks
+Related to This Offering and our Common Stock
+
+ 
+
+The
+issuances of our Common Stock to the Selling Stockholders or the Placement Agent upon conversion of Warrants or exercise of the Notes,
+as the case may be, will cause dilution to our existing stockholders, and the sale of the shares of Common Stock acquired by the Selling
+Stockholders or the Placement Agent, or the perception that such sales may occur, could cause the price of our Common Stock to fall.
+
+ 
+
+Depending
+on market liquidity at the time, issuances and any subsequent sales of our Common Stock may cause the trading price of our Common Stock
+to fall.
+
+ 
+
+The
+197,227,433 shares of our common stock being registered for resale by the selling stockholders consist of:
+
+ 
+
+ 
+ 
+ 
+ Up
+ to 164,373,089 PIPE Stocks, consisting of (i) 82,186,544 shares of common stock issuable upon the conversion of our Notes issued
+ to the selling stockholders pursuant to the PIPE Securities Purchase Agreement, and (ii) 82,186,544 additional shares of common stock
+ that we are required to register pursuant to a registration rights agreement between us and certain selling stockholders obligating
+ us to register 200% of the maximum number of shares of common stock issuable upon conversion of the Notes;
+
+ 
+ 
+ 
+ Up
+ to 32,154,344 PIPE Warrant Stocks, consisting of (i) 16,077,172 shares of our common stock issued or issuable upon the exercise of
+ the PIPE Warrants, and (ii) 16,077,172 additional shares of common stock that we are required to register pursuant to a registration
+ rights agreement between us and certain selling stockholders obligating us to register 200% of the maximum number of shares of common
+ stock issuable upon exercise of the PIPE Warrant Stocks; and
+
+ 
+ 
+ 
+ Up
+ to 700,000 Placement Agent Warrant Stocks issued or issuable upon the exercise of the Placement Agent Warrants that were issued to
+ the placement agent pursuant to the PIPE Placement Agency Agreement.
+
+ 
+ 
+
+If
+and when the selling stockholders or placement agent convert and/or exercise their warrants or Notes, as the case may be, after the selling
+stockholders or the placement agents has acquired the shares, the selling stockholders or the placement agent may resell all, some, or
+none of those shares at any time or from time to time in its discretion. Therefore, issuances to the selling stockholders or the placement
+agent upon exercise of their warrants or conversion of the Notes could result in substantial dilution to the interests of other holders
+of our Common Stock. Even though the current trading price is significantly below our IPO price, the selling shareholders or the placement
+agent may have an incentive to sell because they will still profit because of the lower price that they acquired their shares than the
+retail investors. Additionally, the issuance of a substantial number of shares of our Common Stock to the selling stockholders or the
+placement agent, or the anticipation of such issuances, 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.
+
+ 
+
+You
+may experience future dilution as a result of future equity offerings and other issuances of our securities.
+
+ 
+
+In
+order to raise additional capital, we may in the future offer additional common stocks or other securities convertible into or exchangeable
+for our common stocks at prices that may not be the same as the price per share paid by the investors in this offering. We may not 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 the investors in this offering, and investors purchasing shares or other securities in the future could have rights superior
+to existing stockholders. The price per share at which we sell additional common stocks or securities convertible into common stocks
+in future transactions may be higher or lower than the price per share paid to the selling stockholders. Our stockholders will incur
+dilution upon exercise of any outstanding stock options, warrants or other convertible securities or upon the issuance of common stocks
+under our share incentive programs.
+
+ 
+
+We
+expect to require additional capital in the future in order to develop our business operations. If we do not obtain any such additional
+financing, it may be difficult to effectively realize our long-term strategic goals and objectives.
+
+ 
+
+Any
+additional capital raised through the sale of equity or equity-backed securities may dilute our stockholders ownership percentages
+and could also result in a decrease in the market value of our equity securities.
+
+ 
+
+The
+terms of any securities issued by us in future capital transactions may be more favorable to new investors, and may include preferences,
+superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders
+of any of our securities then outstanding.
+
+ 
+
+In
+addition, we may incur substantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting
+fees, securities law compliance fees, printing and distribution expenses and other costs. We may also be required to recognize non-cash
+expenses in connection with certain securities we issue, such as convertible notes and warrants, which may adversely impact our financial
+condition.
+
+ 
+
+ 13
+
+ 
+
+ 
+
+ 
+
+Future
+sales of substantial amounts of the shares of common stock by existing stockholders could adversely affect the price of our common stock.
+
+ 
+
+If
+we or our existing stockholders, our directors or their affiliates or certain of our executive officers, sell a substantial number of
+our common stocks in the public market, including the Resale Shares once issuable upon exercise of the PIPE Warrants and the Placement
+Agent Warrants, the market price of our common stocks could decrease significantly. The perception in the public market that we or our
+stockholders might sell our common stocks could also depress the market price of our common stocks and could impair our future ability
+to obtain capital, especially through an offering of equity securities.
+
+ 
+
+The
+market price of our common stocks may be subject to fluctuation and you could lose all or part of your investment.
+
+ 
+
+Our
+common stocks were first offered publicly in our IPO in August 2022 at a price of $5.00 per share, and our common stocks have subsequently
+traded as high as $656.54 per share and as low as $0.975 per share through March 1, 2023. The market price of our common stocks
+on the Nasdaq Capital Market may fluctuate as a result of a number of factors, some of which are beyond our control, including, but not
+limited to:
+
+ 
+
+ 
+ 
+ variations
+ in our actual and perceived operating results; 
+
+ 
+ 
+ 
+
+ 
+ 
+ news
+ regarding gains or losses of customers or partners by us or our competitors; 
+
+ 
+ 
+ 
+
+ 
+ 
+ news
+ regarding gains or losses of key personnel by us or our competitors; 
+
+ 
+ 
+ 
+
+ 
+ 
+ announcements
+ of competitive developments, acquisitions or strategic alliances in our industry by us or our competitors; 
+
+ 
+ 
+ 
+
+ 
+ 
+ changes
+ in earnings estimates or buy/sell recommendations by financial analysts;
+
+ 
+ 
+ 
+
+ 
+ 
+ potential
+ litigation; 
+
+ 
+ 
+ 
+
+ 
+ 
+ the
+ imposition of fines or penalties related to our activities in the PRC and failure to comply with applicable rules and regulations;
+ 
+
+ 
+ 
+ 
+
+ 
+ 
+ general
+ market conditions or other developments affecting us or our industry; and 
+
+ 
+ 
+ 
+
+ 
+ 
+ the
+ operating and stock price performance of other companies, other industries and other events or factors beyond our control. 
+
+ 
+ 
+
+These
+factors and any corresponding price fluctuations may materially and adversely affect the market price of our common stocks and result
+in substantial losses being incurred by our investors. In the past, following periods of market volatility, public company stockholders
+have often instituted securities class action litigation. If we were involved in securities litigation, it could impose a substantial
+cost upon us and divert the resources and attention of our management from our business .
+
+ 
+
+ 14
+
+ 
+
+ 
+
+ 
+
+PRIVATE
+PLACEMENT OF NOTES AND WARRANTS
+
+ 
+
+On
+January 4, 2023, the Company entered into the PIPE Securities Purchase Agreement with the Purchasers, pursuant to which the Company received
+net proceeds of $15,000,000 in consideration of the issuance of:
+
+ 
+
+ Notes
+ in the aggregate original principal amount of $16,666,666.66; 
+
+ PIPE
+ Warrants to purchase up to 16,077,172 shares of our common stock of the Company until on
+ or prior to 11:59 p.m. (New York time) on the five year anniversary of the closing date at
+ an exercise price of $1.25 per share.
+
+ 
+
+The
+transactions contemplated under the PIPE Securities Purchase Agreement closed on January 4, 2023. The Company intends to use the proceeds
+from the issuance of the Notes and the PIPE Warrants for general corporate purposes.
+
+ 
+
+The
+Notes bear interest at an interest rate of 5% per annum payable on each installment date commencing on the original date of issuance.
+If an Event of Default (as defined in the Notes) has occurred and is continuing, interest would accrue at the rate of 18% per annum,
+compounding monthly. The Notes are convertible into shares of our common stock, beginning after the original date of issuance at an initial
+conversion price of $1.25 per share. The conversion price is subject to customary adjustments for stock dividends, stock splits, reclassifications
+and the like, and subject to price-based adjustment, on a "full ratchet" basis, in the event of any issuances of shares of
+our common stock, or securities convertible, exercisable or exchangeable for, shares of our common stock at a price below the then-applicable
+conversion price (subject to certain exceptions).
+
+ 
+
+The
+PIPE Warrants contain provisions permitting cashless exercise subject to certain conditions.
+
+ 
+
+The
+Notes and the PIPE Warrants contain conversion limitations providing that a holder thereof may not convert the Notes or exercise the
+PIPE Warrants to the extent (but only to the extent) that, if after giving effect to such conversion or exercise, the holder or any of
+its affiliates would beneficially own in excess of 4.99% the common stocks immediately after giving effect to such conversion
+or exercise. A holder may increase or decrease its beneficial ownership limitation upon notice to the Company provided that in no event
+such limitation exceeds 9.99%, and that any increase shall not be effective until the 61st day after such notice.
+
+ 
+
+The
+Company has also entered into the Registration Rights Agreement to file with the SEC a Registration Statement covering the resale of
+all of the registrable securities under the Registration Rights Agreement.
+
+ 
+
+The
+Notes will rank senior to all outstanding and future indebtedness of the Company and its Subsidiaries (as defined in the PIPE Securities
+Purchase Agreement), and will be secured by a first priority perfected security interest in all of the existing and future assets of
+the Company and each Subsidiary Guarantor (as defined in the Security and Pledge Agreement), as evidenced by (i) a security and pledge
+agreement to be entered into at closing (the "Security and Pledge Agreement"), (ii) account control agreements to be entered
+into at closing with respect to certain accounts described in the Note and the Security and Pledge Agreement, and (iii) a guaranty to
+be executed by certain subsidiaries of the Company (the "Guaranty") pursuant to which each of them will guaranty the obligations
+of the Company under the Notes and the other transaction documents (as defined in the PIPE Securities Purchase Agreement).
+
+ 
+
+Pursuant
+to the PIPE Securities Purchase Agreement, the Company agreed to seek the approval of its stockholders for the issuance of all shares
+of our common stock issuable upon conversion of the Notes, in compliance with the rules of the Nasdaq Capital Market (the "Stockholder
+Approval"). It is a condition to the closing that the Company enter into voting agreements with certain significant stockholders
+of the Company (each, a "Stockholder"), pursuant to which each Stockholder will agree, with respect to all of the voting
+securities of the Company that such Stockholder beneficially owns as of the date thereof or thereafter, to vote in favor of the Stockholder
+Approval.
+
+ 
+
+Pursuant
+to an placement agency agreement dated January 4, 2023 between the Company and Univest Securities LLC (the "Placement Agent"),
+the Company engaged the Placement Agent to act as the Company s placement agent in connection with the PIPE Securities Purchase
+Agreement and agreed to pay the Placement Agent (i) a cash fee equal to 7% of the gross proceeds raised by the Company from the sale
+of the securities at the closing of

parsed_sections/risk_factors/2023/AUID_authid-inc_risk_factors.txt

@@ -0,0 +1,1499 @@
+RISK FACTORS
+
+ 
+
+An investment in our securities involves a
+high degree of risk. This prospectus contains 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 under the heading Risk Factors 
+in 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.
+
+ 
+
+Risks Related to our Business
+
+ 
+
+We have a history of losses and we may not be able to achieve profitability
+going forward.
+
+ 
+
+We have an accumulated deficit of approximately
+$156.0 million as of June 30, 2023 and incurred a loss of approximately $24.2 million for the year ended December 31, 2022 and a loss
+of approximately $15.9 million for the six months ended June 30, 2023. We have had net losses in most of our quarters since our inception.
+We expect that we will continue to incur net losses in 2023. We may incur losses in the future for a number of reasons, including the
+other risks described in this report, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown
+events. Accordingly, we may not be able to achieve or maintain profitability. Our management is developing plans and executing certain
+programs to alleviate the negative trends and conditions described above, however there is no guarantee that such plans will be successfully
+implemented. Our ability to curtail our operating losses or generate a profit may be further impacted by the fact that our business plan
+is largely unproven. There is no assurance that even if we successfully implement our business plan, that we will be able to curtail
+our losses. If we incur significant additional operating losses, our stock price may decline, perhaps significantly and the Company will
+need to raise substantial additional capital in order to be able to continue to operate, which will dilute the existing stockholders
+and such dilution may be significant. Additional capital may not be available on terms acceptable to the Company, or at all.
+
+ 
+
+We have yet to achieve positive cash flow and, given our projected
+funding needs, our ability to generate positive cash flow is uncertain.
+
+ 
+
+We have had negative cash flow from operating
+activities of approximately $12.8 million and approximately $8.8 million for the years ended December 31, 2022 and 2021, respectively.
+We anticipate that we will continue to have negative cash flows from operating activities, as we expect to continue to incur research
+and development, sales and marketing, and general and administrative expenses and our revenues are currently insufficient to cover our
+expenses. Our business will require significant amounts of working capital to support our growth, particularly as we seek to introduce
+our new offered products. An inability to generate positive cash flow from operations may adversely affect our ability to raise needed
+capital for our business on reasonable terms, if at all. It may also diminish supplier or customer willingness to enter into transactions
+with us, and have other adverse effects that may impact our long-term viability. There can be no assurance we will achieve positive cash
+flows in the foreseeable future.
+
+ 
+
+We need access to additional financing, which
+may not be available to us on acceptable terms, or at all. If we cannot access additional financing when we need it and on acceptable
+terms, our business, prospects, financial condition, operating results and ability to continue as a going concern will be adversely affected.
+
+ 
+
+Our
+growth-oriented business plan to offer products to our customers will require continued capital investment. Our research and development
+activities will also require continued investment. We raised approximately $8.2 million, $22.5 million and $11.1 million in 2023, 2022
+and 2021, respectively, through equity and debt financing at varying terms. 
+
+ 
+
+On February 14, 2023, the Board of Directors
+of authID resolved to implement a revised budget for 2023 in order to reduce expenses and cash requirements and as part of such revised
+budget decided to re-balance staffing levels to better align with the evolving needs of the Company (the Labor Reduction Plan ).
+Under the Labor Reduction Plan 12 employees and 6 contractors have been given notice of their termination. The Company has also given
+termination notice to certain vendors and contractors that provide services to the Company. As a result, the Company s revised
+budget is expected to reduce the Company s monthly net cash used in operating activities, which reduces the expenses and cash requirements
+for the continued operation of the business. In order to implement and grow our operations through December 31, 2024, and achieve an
+expected annual revenue stream from our products, we expect that we will need to raise additional capital or finance facilities. There
+is no guarantee that our current business plan will not change, and as a result of such change, we will need additional capital to implement
+such business plan. Further, assuming we achieve our expected growth plan, of which there is no guarantee, we will need additional capital
+to implement growth beyond our current business plan.
+
+ 
+
+ 
+4
+
+ 
+ 
+
+ 
+
+ 
+
+Our limited 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 have a limited operating history and have
+generated limited revenue. As we look to further expand our existing products it is difficult, if not impossible, to forecast our future
+results based upon our historical data. Because of the uncertainties related to our lack of historical operations, we may be hindered
+in our ability to anticipate and timely adapt to increases or decreases in revenues or expenses. If we make poor budgetary decisions
+as a result of unreliable historical data, we could be less profitable or incur losses, which may result in a decline in our stock price.
+
+ 
+
+There can be no assurance that we will successfully
+commercialize our products that are currently in development or that our existing products will sustain market acceptance.
+
+ 
+
+There is no assurance that we will ever successfully
+commercialize our platform and related solutions that are under development or that we will experience market reception for our products
+in development or increased market reception for our existing products. There is no guarantee that we will be able to successfully implement
+our new products utilizing the acquired technology, products, and customer base. There is no assurance that our existing products or
+solutions will achieve market acceptance or that our new products or solutions will achieve market acceptance. Further, there can be
+no guarantee that we will not lose business to our existing or potential new competitors.
+
+ 
+
+We depend upon key personnel and need additional
+personnel.
+
+ 
+
+On March 9, 2023, our CEO Tom Thimot gave notice
+of his resignation to the Board of Directors and his successor Rhon Daguro was appointed March 23, 2023. Our success depends on the continued
+services of our new CEO and of certain other members of the current management team. Our executive team is incentivized by stock compensation
+grants that align the interests of investors with the executive team and certain executives have employment retention agreements. The
+loss of key management, engineering employees or third- party contractors could have a material and adverse effect on our business operations.
+Additionally, the success of our operations will largely depend upon our ability to successfully attract and maintain competent and qualified
+key management personnel. As with any company with limited resources, there can be no guarantee that we will be able to attract such
+individuals or that the presence of such individuals will necessarily translate into profitability for our company. If we are successful
+in attracting and retaining such individuals, it is likely that our payroll costs and related expenses will increase significantly and
+that there will be additional dilution to existing stockholders as a result of equity incentives that may need to be issued to such management
+personnel. Our inability to attract and retain key personnel may materially and adversely affect our business operations. Any failure
+by our management to effectively anticipate, implement, and manage personnel required to sustain our growth would have a material adverse
+effect on our business, financial condition, and results of operations.
+
+ 
+
+The market for our products is characterized
+by changing technology, requirements, standards and products, and we may be adversely affected if we do not respond promptly and effectively
+to these changes.
+
+ 
+
+The market for our verified products is characterized
+by evolving technologies, changing industry standards, changing political and regulatory environments, frequent new product introductions
+and rapid changes in customer requirements. The introduction of products embodying new technologies and the emergence of new industry
+standards and practices can render existing products obsolete and unmarketable. Our future success will depend on our ability to enhance
+our existing products and to develop and introduce, on a timely and cost-effective basis, new products and product features that keep
+pace with technological developments and emerging industry standards and address the increasingly sophisticated needs of our customers.
+In the future:
+
+ 
+
+ we
+ may not be successful in developing and marketing new products or product features that respond
+ to technological change or evolving industry standards;
+
+ 
+
+ 
+ 
+ 
+ we may experience difficulties
+ that could delay or prevent the successful development, introduction and marketing of these new products and features; or
+
+ 
+
+ 
+
+ 
+ 
+ 
+ our new products and product
+ features may not adequately meet the requirements of the marketplace and achieve market acceptance.
+
+ 
+
+ 
+
+ 
+5
+
+ 
+ 
+
+ 
+
+ 
+
+If we are unable to respond promptly and effectively
+to changing technologies and market requirements, we will be unable to compete effectively in the future.
+
+ 
+
+There can be no assurance that we will successfully
+identify new product opportunities and develop and bring new products to market in a timely manner, or that the products and technologies
+developed by others will not render our products or technologies obsolete or noncompetitive. The failure of our new product development
+efforts could have a material adverse effect on our business, results of operations and future growth.
+
+ 
+
+If our technology and solutions are not adopted
+and used by customer organizations, we will not be able to grow our business and our operations will be negatively affected.
+
+ 
+
+Our ability to grow depends significantly on
+whether organizations of various types and sizes adopt our technology and solutions as part of their new standards. If these organizations
+do not adopt our technology, we may not be able to penetrate some of the new markets we are targeting, or we may lose some of our existing
+customer base.
+
+ 
+
+In order for us to achieve our growth objectives,
+our identity verification and authentication technologies and solutions must be adapted to and adopted in a variety of areas including,
+among others, computer and online systems access control, and identity verification for transaction authentication purposes.
+
+ 
+
+We cannot accurately predict the future growth
+rate, if any, or the ultimate size of these markets. The growth of the market for our products and services depends on a number of factors
+such as the cost, performance and reliability of our products and services compared to the products and services of our competitors,
+customer perception of the benefits of our products and solutions, public perception of the intrusiveness of these solutions and the
+manner in which organizations use the information collected, customer satisfaction with our products and services and marketing efforts
+and publicity for our products and services. Our products and services may not adequately address market requirements and may not gain
+wide market acceptance. If our solutions or our products and services do not gain wide market acceptance, our business and our financial
+results will suffer.
+
+ 
+
+We have sought in the past and may seek in
+the future to enter into contracts with governments, as well as state and local governmental agencies and municipalities, which subjects
+us to certain risks associated with such types of contracts.
+
+ 
+
+Most contracts with governments or with state
+or local agencies or municipalities, or Governmental Contracts, are awarded through a competitive bidding process, and some of the business
+that we expect to seek in the future will likely be subject to a competitive bidding process. Competitive bidding presents a number of
+risks, including:
+
+ 
+
+ 
+ 
+ 
+ the frequent need to compete
+ against companies or teams of companies with more financial and marketing resources and more experience than we have in bidding on
+ and performing major contracts;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ the substantial cost and
+ managerial time and effort necessary to prepare bids and proposals for contracts that may not be awarded to us;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ the need to accurately
+ estimate the resources and cost structure that will be required to service any fixed-price contract that we are awarded; and
+
+ 
+
+ 
+
+ 
+ 
+ 
+ the expense and delay that
+ may arise if our competitors protest or challenge new contract awards made to us pursuant to competitive bidding or subsequent contract
+ modifications, and the risk that any of these protests or challenges could result in the resubmission of bids on modified specifications,
+ or in termination, reduction or modification of the awarded contract.
+
+ 
+
+ 
+
+ 
+6
+
+ 
+ 
+
+ 
+
+ 
+
+We may not be afforded the opportunity in the
+future to bid on contracts that are held by other companies and are scheduled to expire, if the governments, or the applicable state
+or local agency or municipality determines to extend the existing contract. If we are unable to win particular contracts that are awarded
+through the competitive bidding process, we may not be able to operate in the market for the products and services that are provided
+under those contracts for a number of years. If we are unable to win new contract awards or retain those contracts, if any, that we are
+awarded over any extended period, our business, prospects, financial condition and results of operations will be adversely affected.
+
+ 
+
+In addition, Governmental Contracts subject us
+to risks associated with public budgetary restrictions and uncertainties, actual contracts that are less than awarded contract amounts,
+the requirement for posting a performance bond and the related cost and cancellation at any time at the option of the governmental agency.
+Any failure to comply with the terms of any Governmental Contracts could result in substantial civil and criminal fines and penalties,
+as well as suspension from future contracts for a significant period of time, any of which could adversely affect our business by requiring
+us to pay significant fines and penalties or prevent us from earning revenues from Governmental Contracts during the suspension period.
+Cancellation of any one of our major Governmental Contracts could have a material adverse effect on our financial condition.
+
+ 
+
+Governments may be in a position to obtain greater
+rights with respect to our intellectual property than we would grant to other entities. Governmental agencies also have the power, based
+on financial difficulties or investigations of their contractors, to deem contractors unsuitable for new contract awards. Because we
+will engage in the government contracting business, we will be subject to additional regulatory and legal compliance requirements, as
+well as audits, and may be subject to investigation, by governmental entities. Compliance with such additional regulatory requirements
+are likely to result in additional operational costs in performing such Governmental Contracts which may impact our profitability. Failure
+to comply with the terms of any Governmental Contract could result in substantial civil and criminal fines and penalties, as well as
+suspension from future contracts for a significant period of time, any of which could adversely affect our business by requiring us to
+pay the fines and penalties and prohibiting us from earning revenues from Governmental Contracts during the suspension period.
+
+ 
+
+Furthermore, governmental programs can experience
+delays or cancellation of funding and suspension of appropriations has occurred, for example the partial United States government shutdown
+in 2018/19, which can be unpredictable; this may make it difficult to forecast our revenues on a quarter-by-quarter basis.
+
+ 
+
+We rely in part on third-party software to develop and provide
+our solutions.
+
+ 
+
+We rely in part on software licensed from third
+parties to develop and offer some of our solutions. Any loss of the right to use any such software or other intellectual property required
+for the development and maintenance of our solutions, or any defects or other issues with such software could result in problems or delays
+in the provision of our solutions until equivalent technology is either developed by us, or, if available from others, is identified,
+obtained, and integrated, which could harm our business.
+
+ 
+
+We have historically depended upon a small
+number of large system sales ranging from $50,000 to $1,500,000 and we may fail to achieve one or more large contract sales in the future,
+or fail to successfully transition to new products generating recurring revenues.
+
+ 
+
+Historically, we have derived a substantial portion
+of our revenues from a small number of sales of large, relatively expensive systems, typically ranging in price from $50,000 to $1,500,000.
+While the Company has discontinued the sale of such legacy systems in favor of a Software as a Service, or SaaS model, if we fail to
+receive orders for these large contracts in a given sales cycle on a consistent basis, our business could be significantly harmed. We
+are trying to reduce such dependence by developing a range of products and solutions, which are in a lower price range and intended to
+generate recurring revenue from a large number of customers using our SaaS platform. We have invested heavily in developing and launching
+such products but there is no guarantee that such efforts will be successful and that a satisfactory return on such investment will be
+achieved. Further, our quarterly results are difficult to predict because we cannot predict in which quarter, if any, large sales will
+occur in a given year, nor when (if at all), or at what rate the ramp in sales of new products will occur. As a result, we believe that
+quarter-to-quarter comparisons of our results of operations are not a good indication of our future performance. In some future quarters,
+our operating results may be below the expectations of securities analysts and investors, in which case the market price of our Common
+Stock may decrease significantly.
+
+ 
+
+ 
+7
+
+ 
+ 
+
+ 
+
+ 
+
+Our efforts to expand our international operations are subject
+to a number of risks, any of which could adversely reduce our future international sales and increase our losses.
+
+ 
+
+Most of our revenues historically to date are
+attributable to sales and business operations in jurisdictions other than the United States, although we are now focusing our efforts
+in generating more United States based revenues. Our international operations could be subject to a number of risks, any of which could
+adversely affect our future international sales and operating results, including:
+
+ 
+
+ trade
+restrictions;
+
+ 
+
+ 
+ 
+ 
+ export duties
+ and tariffs;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ export regulations
+ or restrictions including sanctions;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ uncertain political,
+ regulatory and economic developments;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ labor and social
+ unrest;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ inability to
+ protect our intellectual property rights;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ highly aggressive
+ competitors;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ currency issues,
+ including currency exchange risk;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ difficulties
+ in staffing, managing and supporting foreign operations;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ longer payment
+ cycles;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ increased collection
+ risks; and
+
+ 
+
+ 
+
+ 
+ 
+ 
+ impact of the
+ Coronavirus or other pandemics;
+
+ 
+
+ 
+
+Negative developments in any of these areas in
+one or more countries could result in a reduction in demand for our products, the cancellation or delay of orders already placed, difficulty
+in collecting receivables, and a higher cost of doing business, any of which could adversely affect our business, results of operations
+or financial condition.
+
+ 
+
+We are exposed to risks in operating in foreign markets, which
+may make operating in those markets difficult and thereby force us to curtail our business operations.
+
+ 
+
+In conducting our business in foreign countries,
+we are subject to political, economic, legal, operational and other risks that are inherent in operating in other countries. Risks inherent
+to operating in other countries range from difficulties in settling transactions in emerging markets to possible nationalization, expropriation,
+price controls and other restrictive governmental actions. We also face the risk that exchange controls or similar restrictions imposed
+by foreign governmental authorities may restrict our ability to convert local currency received or held by us in their countries into
+U.S. dollars or other currencies, or to take those dollars or other currencies out of those countries.
+
+ 
+
+It is possible that countries in which we do
+or intend to do business, or companies and their principals become subject to sanctions under U.S. law. This would prevent us from doing
+business with those countries or with those entities or individuals. We could be exposed to fines and penalties in the event of breach
+any applicable sanctions legislation or orders. In addition, we might be required to suspend or terminate existing contracts in order
+to comply with such sanctions legislation or orders, which would adversely impact our future revenues and cash flows.
+
+ 
+
+Additionally, we are subject to the U.S. Foreign
+Corrupt Practices Act, or the FCPA, and other laws in the United States and elsewhere that prohibit improper payments or offers of payments
+to foreign governments and their officials and political parties for the purpose of obtaining or retaining business. We have operations
+in and deal with governments and officials in foreign countries. Our activities in these countries create the risk of unauthorized payments
+or offers of payments by one of our employees, contractors or customers that could be in violation of various laws, including the FCPA,
+even though these parties are not always subject to our control. We have implemented safeguards to discourage these practices by our
+employees, consultants and customers. However, our existing safeguards and any future improvements may prove to be less than effective,
+and our employees, contractors or customers may engage in conduct for which we might be held responsible. Violations of the FCPA or similar
+laws may result in severe criminal or civil sanctions and we may be subject to other liabilities, which could adversely affect our business,
+financial condition and results of operations.
+
+ 
+
+ 
+8
+
+ 
+ 
+
+ 
+
+ 
+
+Breaches of network or information technology
+security, presentation attacks, natural disasters or terrorist attacks could have an adverse effect on our business.
+
+ 
+
+Cyber-attacks or other breaches of network or
+information technology (IT) security, natural disasters, terrorist acts or acts of war may cause equipment failures or disrupt our systems
+and operations. We may be subject to attempts to breach the security of our networks and IT infrastructure through cyber-attack, presentation
+attacks to biometric data capture systems, malware, computer viruses and other means of unauthorized access. While we regularly review
+our security policies, protocols, controls and systems to determine their effectiveness for detection and prevention of such attacks,
+and to make improvements and fix any known vulnerabilities where necessary, new means and methods for such attacks are constantly being
+developed by bad actors and we may not become aware of such new attacks or vulnerabilities prior to being subject to such an attack.
+There is no guarantee that we can prevent all such attacks, even if we become aware of their potential. While we maintain insurance coverage
+for some of these events, the potential liabilities associated with these events could exceed the insurance coverage we maintain. A failure
+to protect the privacy of customer and employee confidential data against breaches of network or IT security could result in damage to
+our reputation. To date, we have not been subject to cyber-attacks or other cyber incidents that we are aware of which, individually
+or in the aggregate, resulted in a material impact to our operations or financial condition.
+
+ 
+
+For us to further penetrate the marketplace,
+the marketplace must be confident that we provide effective security protection for national and other secured identification documents
+and cards and other personally identifiable information or protected personal information, or PII. Although we are not aware that we
+have experienced any act of sabotage or unauthorized access by a third party of our software or technology to date, if an actual or perceived
+breach of security occurs in our internal systems or those of our customers, regardless of whether we caused the breach, it could adversely
+affect the market s perception of our products and services. This could cause us to lose customers, resellers, alliance partners
+or other business partners, thereby causing our revenues to decline. If we or our customers were to experience a breach of our internal
+systems, our business could be severely harmed by adversely affecting the market s perception of our products and services.
+
+ 
+
+Most recently, we have considered the impact
+of the coronavirus pandemic (COVID-19) on our overall operations. The continuing impact of this disease or any other disease which may
+give rise to a pandemic in the United States and worldwide are unknown, and the widespread growth in infections, or travel restrictions,
+quarantines or site closures imposed as a result of disease, is among other things, impacting the ability of our employees, sub-contractors,
+or our customers employees and sub-contractors to attend places of work, to meet with potential customers, or undertake implementations
+at our customer s locations. In addition, the disease could lead to disruptions in our supply chain, causing shortages or unavailability
+of software updates, or necessary equipment. Any of these outcomes could have a material adverse effect on our business, financial condition,
+results of operations, and cash flows.
+
+ 
+
+War in Ukraine may impact the business of
+the Company, the markets in which it operates and the financial markets, in which the Company needs to raise capital.
+
+ 
+
+The war in Ukraine may impact the Company and
+its operations in a number of different ways, which are yet to be fully assessed and are therefore uncertain. The Company s principal
+concern is for the safety of the personnel who support from that region. The Company works with third party sub- contractors for outsourced
+services, including software engineering and development, some of whom are based in Eastern Europe, including Ukraine. The Company also
+works with outsourced engineers and developers and third-party providers in other parts of the world, including the United States, Europe,
+and Pakistan. While the continuing impact of this conflict and the response of the United States and other countries to it by means of
+trade and economic sanctions, or other actions is still unknown, it could disrupt our ability to work with certain contractors. The Company
+has taken steps to diversify its sub-contractor base, which may in the short term give rise to additional costs and delays in delivering
+software and product upgrades.
+
+ 
+
+The uncertainty impacting and potential interruption
+in energy and other supply chains resulting from military hostilities in Europe and the response of the United States and other countries
+to it by means of trade and economic sanctions, or other actions, may give rise to increases in costs of goods and services generally
+and may impact the market for our products as prospective customers reconsider additional capital expenditure, or other investment plans
+until the situation becomes clearer. On the other hand the threat of increased cyber-attacks from Russia and other countries may prompt
+enterprises to adopt additional security measures such as those offered by the Company.
+
+ 
+
+For so long as the hostilities continue and perhaps
+even thereafter as the situation in Europe unfolds, we may see increased volatility in financial markets and a flight to safety by investors,
+which may impact our stock price and make it more difficult for the Company to raise additional capital at the time when it needs to
+do so, or for financing to be available upon acceptable terms. All or any of these risks separately, or in combination could have a material
+adverse effect on our business, financial condition, results of operations, and cash flows.
+
+ 
+
+ 
+9
+
+ 
+ 
+
+ 
+
+ 
+
+Interruptions, delays in service or defects in our systems could
+impair the delivery of our services and harm our business.
+
+ 
+
+We depend on the efficient and uninterrupted
+operation of our computer network systems, software, telecommunications networks, and processing centers, as well as the systems and
+services of third parties, in order to provide services to our customers. Almost all of our network systems are hosted in the
+cloud by internationally recognized third party service providers such as Microsoft Azure and Amazon Web Services. Our systems
+and data centers are vulnerable to damage or interruption from, among other things, fire, natural disaster, power loss, telecommunications
+failure, terrorist acts, war, unauthorized entry, human error, and computer viruses or other defects. They may also be subject to break-ins,
+sabotage, intentional acts of vandalism and similar misconduct. We have security, backup and recovery systems in place, and business
+continuity plans that will be designed to ensure our systems will not be inoperable. However, there is still a risk that a system outage
+or data loss may occur which would not only damage our reputation but could also require the payment of penalties or damages to our clients
+if our systems do not meet certain operating standards. Despite precautions taken at these facilities, the occurrence of a natural disaster
+or an act of sabotage or terrorism, a decision to close the facilities without adequate notice or other unanticipated problems at these
+facilities could result in lengthy interruptions in our service. Our property and business interruption insurance may not be applicable
+or adequate to compensate us for all losses or failures that may occur.
+
+ 
+
+Any damage to, failure of, or defects, bugs or
+errors in our systems or those of third parties, errors or delays in the processing of payment or other transactions, telecommunications
+failures or other difficulties could result in loss of revenue, loss of customers, loss of customer and consumer data, harm to our business
+or reputation, exposure to fraud losses or other liabilities, negative publicity, additional operating and development costs, and diversion
+of technical and other resources.
+
+ 
+
+Third parties could obtain access to our proprietary
+information or could independently develop similar technologies.
+
+ 
+
+Our success depends in part on our ability to
+protect our core technology and intellectual property. To date, we have relied primarily on a combination of patents, patent applications,
+trade secret and copyright laws, as well as nondisclosure and other contractual restrictions on copying, reverse engineering and distribution
+to protect our proprietary technology. There can be no assurance that any of our patent applications will result in the issuance of a
+patent or that the examination process will not require us to narrow our claims in any application. In addition, any patents may be contested,
+circumvented, found unenforceable or invalid and we may not be able to prevent third parties from infringing on them.
+
+ 
+
+Despite the precautions we take, third parties
+may copy or obtain and use our technologies, ideas, know-how and other proprietary information without authorization or may independently
+develop technologies similar or superior to our technologies. In addition, the confidentiality and non-competition agreements between
+us and most of our employees, distributors and clients may not provide meaningful protection of our proprietary technologies or other
+intellectual property in the event of unauthorized use or disclosure. If we are not able to successfully defend our industrial or intellectual
+property rights, we may lose rights to technologies that we need to develop our business, which may cause us to lose potential revenues,
+or we may be required to pay significant license fees for the use of such technologies.
+
+ 
+
+Our current patents and any patents that we may
+register in the future may provide only limited protection for our technology and may not be sufficient to provide competitive advantages
+to us. For example, competitors could be successful in challenging any issued patents or, alternatively, could develop similar or more
+advantageous technologies on their own or design around our patents. Any inability to protect intellectual property rights in our technology
+could enable third parties to compete more effectively with us.
+
+ 
+
+In addition, the laws of certain foreign countries
+may not protect our intellectual property rights to the same extent as do the laws of the United States. Our means of protecting our
+intellectual property rights in the United States or any other country in which we operate may not be adequate to fully protect our intellectual
+property rights.
+
+ 
+
+Third parties may assert that we are infringing
+their intellectual property rights; IP litigation could require us to incur substantial costs even when our efforts are successful.
+
+ 
+
+We may face intellectual property litigation,
+which could be costly, harm our reputation, limit our ability to sell our products, force us to modify our products or obtain appropriate
+licenses, and divert the attention of management and technical personnel. Our products employ technology that may infringe on the proprietary
+rights of others, and, as a result, we could become liable for significant damages and suffer other harm to our business.
+
+ 
+
+ 
+10
+
+ 
+ 
+
+ 
+
+ 
+
+We have not been subject to material intellectual
+property litigation to date. Litigation may be necessary in the future to enforce any patents we have or may obtain and/or any other
+intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others,
+or to defend against claims of infringement or invalidity, and we may not prevail in any such future litigation. Litigation, whether
+or not determined in our favor or settled, could be costly, could harm our reputation and could divert the efforts and attention of our
+management and technical personnel from normal business operations. In addition, adverse determinations in litigation could result in
+the loss of our proprietary rights, subject us to significant liabilities, require us to seek licenses from third parties, prevent us
+from licensing our technology or selling or manufacturing our products, or require us to expend significant resources to modify our products
+or attempt to develop non-infringing technology, any of which could seriously harm our business.
+
+ 
+
+Our products may contain technology provided
+to us by third parties. Because we did not develop such technology ourselves, we may have little or no ability to determine in advance
+whether such technology infringes the intellectual property rights of any other party. Our suppliers and licensors may not be required
+to indemnify us in the event that a claim of infringement is asserted against us, or they may be required to indemnify us only with respect
+to intellectual property infringement claims in certain jurisdictions, and/or only up to a maximum amount, above which we would be responsible
+for any further costs or damages. In addition, we have indemnification obligations to certain parties with respect to any infringement
+of third-party patents and intellectual property rights by our products. If litigation were to be filed against these parties in connection
+with our technology, we would be required to defend and indemnify such parties.
+
+ 
+
+Our officers, directors and holders of 5%
+of outstanding shares together beneficially own a significant portion of our Common Stock and, as a result, can exercise control over
+stockholder and corporate actions.
+
+ 
+
+Our officers and directors and the holders of
+at least 5% of the outstanding shares of the Company currently beneficially own approximately 20.5% of our outstanding Common Stock,
+and 26.7% on a fully diluted basis assuming the exercise of both vested and unvested options and warrants. As such, they have a significant
+influence over most matters requiring approval by stockholders, including the election of directors and approval of significant corporate
+transactions. This concentration of ownership may also have the effect of delaying or preventing a change in control, which in turn could
+have a material adverse effect on the market price of the Company s Common Stock or prevent stockholders from realizing a premium
+over the market price for their Shares.
+
+ 
+
+We face competition. Some of our competitors
+have greater financial or other resources, longer operating histories and greater name recognition than we do and one or more of these
+competitors could use their greater resources and/or name recognition to gain market share at our expense or could make it very difficult
+for us to establish market share.
+
+ 
+
+authID offers its Verified Identity Authentication
+platform allowing the Company to on-board customers who wish to deploy our services and solutions in order to eliminate passwords and
+know with biometric certainty the user who is engaging with their systems. authID s solutions include the ability to verify the
+identity of a user, via remote identity verification, then enable device and transaction authentication using both device and cloud biometrics
+and, all digitally signed by the user s identity. The Company s platform allows our customers users to engage with
+the Verified platform using commodity, consumer grade mobile or desktop devices via a web-browser or corresponding Android or iOS smartphone
+app.
+
+ 
+
+In 2022, we exited the payment processing and
+smart card products manufacturing and printing businesses and accordingly these are not discussed here.
+
+ 
+
+The Company s proprietary, patented Verified
+platform allows our customers to establish trust in identity, authenticate and verify an identity without a password but with both device
+and biometric certainty, and not with phishable passwords or one-time pin codes. authID.ai s Verified platform has several identity
+verification and authentication products each facing different competitors and incumbent technologies we can replace.
+
+ 
+
+For onboarding users, employees or customers
+remotely, Verified delivers seamless identity verification with quick, online identity document verification and facial biometric matching
+of a selfie to the identity credential photo with iBeta-certified liveness confirmation. Our FIDO2 strong customer authentication and
+passwordless login product leverages strong identity verification during device authenticator registration to create a digital chain
+of trust between biometrically verified individuals, their accounts, and their devices. Our FIDO2 authentication service also eliminates
+the risks and costs of legacy passwords and phishable MFA such as one-time pin codes. Rooted to a trusted biometric identity obtained
+during the identity verification and onboarding process, our Verified biometric multi-factor authentication offers high-assurance, biometric,
+cloud-based, multi-factor authentication to secure selected transactions.
+
+ 
+
+ 
+11
+
+ 
+ 
+
+ 
+
+ 
+
+In reviewing the competitors that exist for the
+Company s current and planned platform products relating to the three main elements of identity management: the establishing of
+identity, use of identity through device-based biometric authentication, and use of identity through cloud-based biometric verification,
+the Company considers a number of factors. authID s platform utilizes an Identity as a Service (IDaaS) approach which combines
+the three elements into a single fast, secure, and fully automated, platform. authID believes that this full stack platform approach
+is exceptional in that it offers documentary identity verification, FIDO device authentication, and cloud based, biometric, multi-factor
+verification covering digital account access and transaction confirmation use cases for both consumer and workforce applications. The
+competitive landscape includes several companies that mainly address only one element, with some addressing multiple elements independently
+without a seamless integration between them.
+
+ 
+
+In looking further at our competition, the Company
+does not consider providers which are major conglomerates with vertically integrated cybersecurity companies, due to the vast array of
+services which they offer. Furthermore, some of the competitors which do offer solutions for digital use cases, are major legacy providers
+offering hardware heavy solutions principally for governmental users. These include Idemia, NEC, Thales, and Supercom. This is in contrast
+to authID s Identity authentication platform approach which is based on offering app and browser-based software products which
+are usable on mobile and desktop computing devices without additional hardware requirements.
+
+ 
+
+To further breakdown the competitive landscape
+into companies that provide identity proofing we consider the following competitors: Jumio, Au10Tix, OnFido, Mitek, Trulioo, Daon, Stripe,
+ID.me, Veriff, Incode, SumSub, and Acuant. Companies that provide only a single solution may be seeking to combine with authentication
+and biometric verification technology providers to expand their ID proofing solutions capabilities. authID offers Identity Verification,
+which is used once at enrollment, whereas our authentication service is used over and over in a recurring revenue model. In appropriate
+cases we may decide to cooperate with these entities and yield the one-time revenue to gain the recurring authentication revenue.
+
+ 
+
+Another aspect of the competitive landscape is
+device-based authentication products using the FIDO2 passwordless standard. Companies that are believed to be competing with authID in
+this area are: HYPR, Strongkey, Daon, Trusona, Duo, Keyless, 1Kosmos, Beyond Identity, Yubico, and Transmit Security.
+
+ 
+
+authID believes that the added security of combining
+integrated cloud biometric authentication with device based FIDO2 authentication with integrated cloud biometric authentication meets
+the Zero Trust mandates for unphishable authentication that provides both device and identity signals of a user. Further the simplicity
+of looking at your phone to trust your selfie should compete well against these incumbents, and offer a more adoptable,
+ubiquitous, and cost-effective solution without dedicated hardware.
+
+ 
+
+Finally, looking at the competitive landscape
+for cloud-based biometric identity authentication applications the companies that are believed to be competing with authID in this area
+are Jumio, Incode, OnFido, Aware, Acuant, Au10Tix, and 1Kosmos.
+
+ 
+
+There are new entrants into each of these markets
+continually. Each competitor may have a different offering or approach to solve similar problems, which overlap with those of the Company.
+Some competitors also include manufacturers who provide systems, or platform solutions to third party operators and, therefore, do not
+directly compete with the Company, which operates its own systems.
+
+ 
+
+The resources available to our competitors to
+develop new products and introduce them into the marketplace exceed the resources currently available to us. As a result, our competitors
+may be able to compete more aggressively and sustain that competition over a longer period of time that we can. This intense competitive
+environment may require us to make changes in our products, pricing, licensing, services, distribution, or marketing to develop a market
+position. Each of these competitors has the potential to capture market share in our target markets which could have an adverse effect
+on our position in our industry and on our business and operating results.
+
+ 
+
+Government regulation could negatively impact the business.
+
+ 
+
+We do not have or require any approval from government
+authorities or agencies in order to operate our regular business and operations. However, data protection legislation in various countries
+in which the Company does business (including Colombia and the United Kingdom) may require it to register its databases with governmental
+authorities in those countries and to comply with additional disclosure and consent requirements with regard to the collection, storage
+and use of personal information of individuals resident in those countries. To the extent that our business is based on Governmental
+Contracts, the relevant government authorities will need to approve us as a supplier and the terms of those contracts. However, it is
+possible that any proposed expansion to our business and operations in the future would require government approvals. Due to the security
+applications and biometric technology associated with our products and platforms the activities and operations of our company are or
+could become subject to license restrictions and other regulations, such as (without limitation) export controls and other security regulation
+by government agencies. As indicated in We are exposed to risks in operating in foreign markets above, the imposition of
+sanctions on particular countries, entities or individuals would prevent us from doing business with such countries, entities or individuals.
+If our existing and proposed products become subject to licensing, export control and other regulations, we may incur increased costs
+necessary to comply with existing and newly adopted or amended laws and regulations or penalties for any failure to comply. Our operations
+could be adversely affected, directly or indirectly, by existing or future laws and regulations (and amendments thereto) relating to
+our business or industry.
+
+ 
+
+ 
+12
+
+ 
+ 
+
+ 
+
+ 
+
+Some states in the United States have adopted
+legislation governing the collection, use of, and storage of biometric information and other states are considering such legislation.
+Specifically, several states are considering adopting a Biometric Information Privacy Act, or BIPA modelled on the Illinois statute,
+which governs the collection, processing, storage and distribution of biometric information such as facial biometric templates and fingerprints.
+Several of these new statutes give individuals rights of action to sue violators, which have resulted in a number of class action lawsuits.
+The widespread adoption of such legislation could result in restrictions on our current or proposed business activities, or we may incur
+increased costs to comply with such regulations. In addition, a new privacy law took effect in California at the beginning of 2020, and
+in Maine in July 2020, and other states, such as New York are considering additional legislation. Specifically, several states have adopted
+or are considering adopting a Biometric Information Privacy Act, or BIPA modelled on the Illinois statute, which governs the collection,
+processing, storage and distribution of biometric information such as facial biometric templates and fingerprints. Several of these new
+statutes give individuals rights of action to sue violators, which have resulted in a number of class action law suits. These regulations
+could have a significant impact on our businesses.
+
+ 
+
+Our business is subject to changing regulations
+regarding corporate governance, disclosure controls, internal control over financial reporting and other compliance areas that will increase
+both our costs and the risk of noncompliance. If we fail to comply with these regulations, we could face difficulties in preparing and
+filing timely and accurate financial reports.
+
+ 
+
+We are subject to the reporting requirements
+of the Securities Exchange Act of 1934, as amended, or the Exchange Act, the Sarbanes-Oxley Act and the Dodd-Frank Act. We are also subject
+to the corporate governance and other listing rules of the Nasdaq Stock Market. Maintaining compliance with these rules and regulations,
+particularly after we cease to be an emerging growth company, will increase our legal, accounting and financial compliance costs, will
+make some activities more difficult, time-consuming and costly and may also place increased strain on our personnel, systems and resources.
+
+ 
+
+The Sarbanes-Oxley Act requires, among other
+things, that we maintain effective disclosure controls and procedures and at the time we cease to be an emerging growth company and a
+smaller reporting company, we will be required to provide attestation that we maintain effective disclosure controls and procedures by
+our registered public accounting firm. Any failure to develop or maintain effective controls, or any difficulties encountered in their
+implementation or improvement, could harm our operating results or cause us to fail to meet our reporting obligations. Any failure to
+implement and maintain effective internal control also could adversely affect the results of periodic management evaluations regarding
+the effectiveness of our internal control over financial reporting that are required to include in our periodic reports filed with the
+SEC, under Section 404(a) of the Sarbanes-Oxley Act or the annual auditor attestation reports regarding effectiveness of our internal
+controls over financial reporting that we will be required to include in our periodic reports filed with the SEC upon our ceasing to
+be an emerging growth company and a smaller reporting company, unless, under the JOBS Act, we meet certain criteria that would require
+such reports to be included prior to then, under Section 404(b) of the Sarbanes-Oxley Act. 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 shares of our Common Stock.
+
+ 
+
+In order to maintain the effectiveness of our
+disclosure controls and procedures and internal control over financial reporting going forward, we will need to expend significant resources
+and provide significant management oversight. There is a substantial effort involved in continuing to implement appropriate processes,
+document our system of internal control over relevant processes, assess their design, remediate any deficiencies identified and test
+their operation. As a result, management s attention may be diverted from other business concerns, which could harm our business,
+operating results and financial condition. These efforts will also involve substantial accounting-related costs. We may experience difficulty
+in meeting these reporting requirements in a timely manner.
+
+ 
+
+As disclosed in our Quarterly Report on Form
+10-Q for the period ended June 30, 2023, we had a material weakness in our control over financial reporting as of June 30, 2023. 
+Management has taken action to implement a plan to remediate the various elements of this material weakness, with immediate effect in
+relation to the financial statement for the quarter ending September 30, 2023. The remediation plan is to undertake a review of
+the Company s activities during each quarter in order to identify any potential complex accounting matters and then to engage a
+CPA advisory firm to review the proposed accounting treatment on any complex accounting matters that may arise in the future.
+
+ 
+
+If we are unable to appropriately implement and
+maintain this remediation plan and maintain any other necessary controls currently in place or that we implement in the future and pending
+such implementation, or if any difficulties are encountered in their implementation or improvement, (1) our management might not be able
+to certify, and our independent registered public accounting firm might not be able to report on, the adequacy of our internal control
+over financial reporting, which would cause us to fail to meet our reporting obligations, (2) misstatements in our financial statements
+may occur that may not be prevented or detected on a timely basis and (3) we may be deemed to have significant deficiencies or material
+weaknesses, any of which could adversely affect our business, financial condition and results of operations.
+
+ 
+
+ 
+13
+
+ 
+ 
+
+ 
+
+ 
+
+Implementing any appropriate changes to our internal
+controls may require specific compliance training of our directors, officers and employees, entail substantial costs in order to modify
+our existing accounting systems, and take a significant period of time to complete. Such changes may not, however, be effective in maintaining
+the adequacy of our internal controls, and any failure to maintain that adequacy, or consequent inability to produce accurate financial
+statements on a timely basis, could increase our operating costs and could materially impair our ability to operate our business. In
+the event that we are not able to demonstrate compliance with Section 404 of the Sarbanes-Oxley Act in a timely manner, our internal
+controls are perceived as inadequate or that we are unable to produce timely or accurate financial statements, our stock price could
+decline and we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional
+financial and management resources.
+
+ 
+
+Our amended and restated bylaws designate
+certain courts 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 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 exclusive forum for:
+(i) any derivative action or proceeding brought on behalf of the Company; (ii) any action asserting a claim for breach of a fiduciary
+duty owed by any director, officer, employee, or agent of ours to us or our stockholders; (iii) any action asserting a claim arising
+pursuant to any provision of the Delaware General Corporation Law, the Certificate of Incorporation, or the bylaws; and (iv) any action
+asserting a claim governed by the internal affairs doctrine (the Delaware Forum Provision ). In addition, our amended and
+restated bylaws 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 Delaware Forum Provision.
+
+ 
+
+Section 27 of the Securities Exchange Act of
+1934, as amended (the Exchange Act ), creates exclusive federal jurisdiction over all suits brought to enforce any duty
+or liability created by the Exchange Act or the rules and regulations thereunder. As a result, the Delaware Forum Provision will not
+apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which the federal courts have
+exclusive jurisdiction. We note, however, that there is uncertainty as to whether a court would enforce this provision and that investors
+cannot waive compliance with the federal securities laws and the rules and regulations thereunder.
+
+ 
+
+We recognize that the Delaware Forum Provision
+in our amended and restated bylaws may impose additional litigation costs on stockholders in pursuing any such claims, particularly if
+the stockholders do not reside in or near the State of Delaware. Additionally, the Delaware Forum Provision may limit our stockholders 
+ability to bring a claim in a forum that they find favorable for disputes with us or our directors, officers or employees, which may
+discourage such lawsuits against us and our directors, officers and employees even though an action, if successful, might benefit our
+stockholders. The Court of Chancery of the State of Delaware may also reach different judgments or results than would other courts, including
+courts where a stockholder considering an action may be located or would otherwise choose to bring the action, and such judgments may
+be more or less favorable to us than our stockholders.
+
+ 
+
+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 expect to take advantage of certain exemptions and relief from various reporting requirements that
+are applicable to other public companies that are not emerging growth companies. In particular, while we are an emerging
+growth company (1) we will not be required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley
+Act, (2) we will be exempt from any rules that may be adopted by the Public Company Accounting Oversight Board requiring mandatory audit
+firm rotations or a supplement to the auditor s report on financial statements, (3) we will be subject to reduced disclosure obligations
+regarding executive compensation in our periodic reports and proxy statements and (4) we will not be required to hold nonbinding advisory
+votes on executive compensation or stockholder approval of any golden parachute payments not previously approved.
+
+ 
+
+In addition, we are eligible to delay the adoption
+of new or revised accounting standards applicable to public companies until those standards apply to private companies, and as a result,
+we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for
+non-emerging growth companies. The Company has adopted and will be adopting all standards as they become effective for public companies.
+
+ 
+
+We also take advantage of reduced disclosure
+requirements, including regarding executive compensation. If we remain an emerging growth company in the future, we may
+take advantage of other exemptions, including the exemptions from the advisory vote requirements and executive compensation disclosures
+under the Dodd-Frank Wall Street Reform and Customer Protection Act, and the exemption from the provisions of Section 404(b) of the Sarbanes-Oxley
+Act. We may take advantage of these provisions at least until December 31, 2024. However, if certain events occur prior to such date,
+including if we are deemed a large accelerated filer under the Exchange Act, our annual gross revenues exceed $1.07 billion
+or we issue more than $1.0 billion of non- convertible debt in any three-year period, we may cease to be an emerging growth company prior
+to such date.
+
+ 
+
+The exact implications of the JOBS Act are still
+subject to interpretations and guidance by the SEC and other regulatory agencies, and we cannot assure you that we will be able to take
+advantage of all of the benefits of the JOBS Act. In addition, investors may find our Common Stock less attractive if we rely on the
+exemptions and relief granted by the JOBS Act. 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 decline and/or become more volatile.
+
+ 
+
+ 
+14
+
+ 
+ 
+
+ 
+
+ 
+
+There can be no assurance that we will be
+able to comply with the continued listing standards of the Nasdaq Capital Market. Our failure to meet the continued listing requirements
+of the Nasdaq Capital Market could result in a de-listing of our Common Stock.
+
+ 
+
+On January 25, 2023 the Company received a notice
+letter from the Listing Qualifications staff of the NASDAQ Stock Market LLC ( Nasdaq ) that it was not in compliance with
+the Nasdaq Listing Rule 5550(a)(2) that the Company maintain a bid price for the Company s common stock above $1.00 per share (the
+ Bid Price Requirement ). On April 4, 2023, the Company received a notice letter from the Listing Qualifications staff of
+Nasdaq indicating that the Company was not in compliance with Nasdaq Listing Rule 5550(b)(1) ( Rule 5550(b)(1) ) as the Company s
+stockholders equity of $283,536, as reported on the Company s Annual Report on Form 10-K for the period ended December 31,
+2022, was below $2.5 million, which is the minimum stockholders equity required for compliance with Rule 5550(b)(1). Further,
+as of April 3, 2023, the Company did not meet the alternative compliance standards relating to the market value of listed securities,
+or net income from continuing operations. As a result of the closing of the Offering and the Note Exchange in May 2023, the Company s
+total stockholder equity is approximately $9.6 million, as reported on the Company s Form 10-Q for the period ended June 30, 2023.
+On May 30, 2023, the Company received notice from Nasdaq, that Nasdaq Staff has determined, that the Company complies with Rule 5550(b)(1),
+subject to its review of the aforementioned quarterly report on Form 10-Q. As a result of the 1 for 8 reverse stock split effective July
+7, 2023, the Company received notice on July 24, 2023 from Nasdaq that the Company is now in compliance with the Bid Price Requirement
+and the matter raised by their letter of January 25, 2023 is now closed.
+
+ 
+
+We cannot assure you that we will be able to
+comply with the continuing listing requirements that we are required to meet in order to maintain a listing of our Common Stock on the
+Nasdaq Capital Market. If we fail to satisfy the continued listing requirements of the Nasdaq Capital Market, such as the corporate governance
+requirements or the minimum stockholder s equity requirement, the Nasdaq Capital Market may take steps to de-list our Common Stock.
+Such a de-listing would likely have a negative effect on the price of our Common Stock and would impair our stockholders ability
+to sell or purchase our Common Stock when they wish to do so. In the event of a de-listing, we would take actions to restore our compliance
+with the Nasdaq Capital Market s listing requirements, but we can provide no assurance that any action taken by us would result
+in our Common Stock becoming listed again, or that any such action would stabilize the market price or improve the liquidity of our Common
+Stock.
+
+ 
+
+Sales of a substantial number of shares of
+our Common Stock in the public market by our existing stockholders could cause our share price to fall.
+
+ 
+
+Sales of a substantial number of shares of our
+Common Stock in the public market, or the perception that these sales might occur, could depress the market price of our Common Stock
+and could impair our ability to raise capital through the sale of additional equity securities. We are unable to predict the effect that
+sales may have on the prevailing market price of our Common Stock.
+
+ 
+
+We may be subject to securities litigation,
+which is expensive and could divert management attention.
+
+ 
+
+In the past, companies that have experienced
+volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type
+of litigation in the future. Litigation of this type could result in substantial costs and diversion of management s attention
+and resources, which could seriously hurt our business. Any adverse determination in litigation could also subject us to significant
+liabilities.
+
+ 
+
+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 Common Stock, our stock price and trading volume could decline.
+
+ 
+
+The trading market for our Common Stock will
+be influenced by the research and reports that industry or securities analysts may publish about us, our business, our 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 stock price would likely decline. If any analysts who may cover us were
+to cease coverage of the Company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which
+in turn could cause our stock price or trading volume to decline.
+
+ 
+
+ 
+15
+
+ 
+ 
+
+ 
+
+ 
+
+The market price of our common stock has been
+volatile and your investment in our stock could suffer a decline in value.
+
+ 
+
+The market price of our common stock has experienced
+significant price and volume fluctuations. For example, during the three year period ended December 31, 2022 and through June 30, 2023,
+the closing price of our common stock ranged from $2.40 to $141.44. In addition, the stock market has from time to time experienced significant
+price and volume fluctuations that have particularly affected the market prices for the common stock of technology companies and that
+have often been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect
+the market price of our common stock. You may not be able to resell your shares at or above the price you paid for them due to fluctuations
+in the market price of our stock caused by changes in our operating performance or prospects and other factors.
+
+ 
+
+Some specific factors, in addition to the other
+risk factors identified above, that may have a significant effect on the price of our stock, many of which we cannot control, include
+but are not limited to:
+
+ 
+
+ our
+ announcements or our competitors announcements of technological innovations;
+
+ 
+
+ 
+ 
+ 
+ quarterly variations in
+ operating results;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ changes in our product
+ pricing policies or those of our competitors;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ claims of infringement
+ of intellectual property rights or other litigation;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ the public s reaction
+ to our press releases, our other public announcements and our filings with the SEC;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ changes in accounting standards, policies,
+ guidance, interpretations or principles;
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ changes in our growth rate
+ or our competitors growth rates;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ developments regarding
+ our patents or proprietary rights or those of our competitors;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ our inability to raise
+ additional capital as needed;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ changes in financial markets
+ or general economic conditions;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ sales of stock by us or
+ members of our management team or Board; and
+
+ 
+
+ 
+
+ 
+ 
+ 
+ changes in stock market
+ analyst recommendations or earnings estimates regarding our stock, other comparable companies or our industry generally
+
+ 
+
+ 
+
+We do not anticipate paying any cash dividends
+in the foreseeable future.
+
+ 
+
+We have never declared or paid cash dividends,
+and we do not anticipate paying cash dividends in the foreseeable future. Therefore, investors should not rely on an investment in our
+Common Stock as a source for any future dividend income. Our board of directors has complete discretion as to whether to distribute dividends.
+Even if our board of directors decides to declare and pay dividends, the timing, amount and form of future dividends, if any, will depend
+on our future results of operations and cash flow, our capital requirements and surplus, our financial condition, contractual restrictions
+and other factors deemed relevant by our board of directors.
+
+ 
+
+There has been a limited public market for
+our Common Stock, and we do not know whether one will develop to provide investors adequate liquidity. Furthermore, the trading price
+for our Common Stock, should an active trading market develop, may be volatile and could be subject to wide fluctuations in per-share
+price.
+
+ 
+
+Our Common Stock is listed on the Nasdaq Capital
+Market under the trading symbol AUID. . We cannot assure investors that an active trading market for our Common Stock will
+develop or be sustained on the Nasdaq Capital Market. The liquidity of any market for the shares of our Common Stock will depend on a
+number of factors, including:
+
+ 
+
+ the
+ number of stockholders;
+
+ 
+
+ our
+ operating performance and financial condition;
+
+ 
+
+ the
+ market for similar securities;
+
+ 
+
+ the
+ extent of coverage of us by securities or industry analysts; and
+
+ 
+
+ the
+ interest of securities dealers in making a market in the shares of our Common Stock.
+
+ 
+
+ 
+16
+
+ 
+ 
+
+ 
+
+ 
+
+Even
+if an active trading market further develops, the market price for our Common Stock may continue to be highly volatile and could be subject
+to wide fluctuations. In addition, the price of our Common Stock could decline significantly if our future operating results fail to
+meet or exceed the expectations of market analysts and investors and actual or anticipated variations in our quarterly operating results
+could negatively affect our share price.
+
+ 
+
+The
+volatility of the price of our Common Stock may also be impacted by the risks discussed under this Risk Factors section,
+in addition to other factors, including:
+
+ 
+
+ developments
+ in the financial markets and worldwide or regional economies;
+
+ 
+
+ announcements
+ of innovations or new products or services by us or our competitors;
+
+ 
+
+ announcements
+ by the government relating to regulations that govern our industry;
+
+ 
+
+ significant
+ sales of our Common Stock or other securities in the open market;
+
+ 
+
+ variations
+ in interest rates;
+
+ 
+
+ changes
+ in the market valuations of other comparable companies; and
+
+ 
+
+ changes
+ in accounting principles.
+
+ 
+
+Financial Industry Regulatory Authority ( FINRA )
+sales practice requirements may also limit a stockholder s ability to buy and sell our common stock, which could depress the price
+of our common stock.
+
+ 
+
+FINRA has adopted rules that require a broker-dealer
+to have reasonable grounds for believing that the investment is suitable for that customer before recommending an investment to a customer.
+Prior to recommending 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. Thus, the FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our Common
+Stock, which may limit their ability to buy and sell our shares of Common Stock, have an adverse effect on the market for our shares
+of Common Stock, and thereby depress our price per share of Common Stock.
+
+ 
+
+If securities or industry analysts do not
+publish research or reports about our business, or if they issue an adverse or misleading opinion regarding our stock, our stock price
+and trading volume could decline.
+
+ 
+
+The trading market for our Common Stock may be
+influenced by the research and reports that industry or securities analysts publish about us or our business. We do not currently have,
+and may never obtain, research coverage by securities and industry analysts. If no or few securities or industry analysts commence coverage
+of us, the trading price for our Common Stock may be negatively affected. In the event that we receive securities or industry analyst
+coverage, if any of the analysts who cover us issue an adverse or misleading opinion regarding us, our business model, our intellectual
+property or our stock performance, or if our operating results fail to meet the expectations 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, we could lose visibility in
+the financial markets, which in turn could cause our stock price or trading volume to decline.
+
+ 
+
+ 
+17
+
+ 
+ 
+
+ 
+
+ 
+
+USE OF PROCEEDS
+
+ 
+
+The Selling Stockholders will
+receive all of the proceeds from the sale of the Shares offered by them pursuant to this prospectus. We will not receive any proceeds
+from the sale of the Shares by the Selling Stockholders.
+
+ 
+
+MARKET FOR OUR COMMON STOCK AND

parsed_sections/risk_factors/2023/AUMN_golden_risk_factors.txt

@@ -0,0 +1 @@
+RISK FACTORS A purchase of our securities involves a high degree of risk, including the risks described below. Before making an investment decision, you should carefully consider the risk factors set forth below, as well as all other information contained in this prospectus and incorporated by reference, including our consolidated financial statements and the related notes and the risks described under Risk Factors in our most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q as filed with the SEC, and any free-writing prospectus that we have authorized for use in connection with this offering. Our business, financial condition or results of operations could be materially adversely affected by any of these risks. Those risks and uncertainties are not the only risks and uncertainties we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations. If any of these risks actually occur, our business, results of operations and financial condition could suffer. The trading price of shares of our common stock could decline due to any of these risks, and you may lose all or part of your investment. Risks Related to this Offering We need to raise capital in this offering to support our operations. If we are unable to raise capital in this offering, our financial position will be materially adversely impacted. We believe that current cash on hand, prior to the receipt of any proceeds from this offering, is not sufficient to fund operations beyond the fourth quarter of 2023. In order to commence and maintain production at the Velarde a Properties, we anticipate that we require approximately $3 to $3.5 million of capital inflows over the first five months of production. In addition, in order to satisfy the Company s projected general, administrative, exploration and other expenses through September 30, 2024 we will need approximately $4 to $5 million in capital inflows. If we receive the estimated net proceeds in this offering, and if we raise the additional capital described above through other financing activities, asset sales, collection of VAT receivable or otherwise, we believe that we will have sufficient capital to restart production at the Velarde a Properties and meet our capital needs through the end of December 2024. In addition, the report of our independent registered public accounting firm on our financial statements for the year ended December 31, 2022 contains explanatory language that we have stated that substantial doubt exists about our ability to continue as a going concern. We have no additional committed sources of capital and may find it difficult to raise money on terms favorable to us or at all. The failure to obtain sufficient capital to support our operations would have a material adverse effect on our business, financial condition and results of operations. If such sufficient financing is not received timely, we would then need to pursue a plan to seek to be acquired by another entity or cease operations and wind-up our activities. Purchasers who purchase our securities in this offering pursuant to a securities purchase agreement may have rights not available to purchasers that purchase without the benefit of a securities purchase agreement. In addition to rights and remedies available to all purchasers in this offering under federal securities and state law, the purchasers that enter into a securities purchase agreement will also be able to bring claims of breach of contract against us. The ability to pursue a claim for breach of contract provides those investors with the means to enforce the covenants uniquely available to them under the securities purchase agreement including: (i) timely delivery of shares; (ii) agreement to not enter into variable rate financings for one year from closing, subject to certain exceptions; (iii) agreement to not enter into any equity financings for 60 days from closing, subject to certain exceptions; and (iv) indemnification for breach of contract. 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, including our near-term 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 that must be sold as a condition to completion of this offering. Because there is no minimum offering amount 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 herein. We may sell fewer than all of the securities offered hereby, TABLE OF CONTENTS 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 support our continued operations, including our near-term continued operations. 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 to complete such short-term operations. Such additional fundraises may not be available or available on terms acceptable to us. Our stockholders may suffer additional dilution to their equity and voting interests as a result of future financing transactions. We could require additional funding to support our business, including for general and administrative costs and other working capital needs to fund our continuing business activities as currently conducted. Although we are evaluating various alternatives, including debt financing and production-based financing such as streaming and royalty financing, it is likely that we will need to seek additional equity financing in the future. If we were to engage in any type of equity financing in the future, the current ownership interest of our stockholders would be diluted. Management will have broad discretion as to the use of the net proceeds from this offering, and we may not use these proceeds effectively. We currently intend to allocate the net proceeds we will receive from the offering as described under Use of Proceeds on page 13 of this prospectus. However, management will have considerable discretion in the actual application of the net proceeds, and we may elect to allocate proceeds differently from that described under Use of Proceeds on page 13 of this prospectus if we believe it would be in our best interests to do so. Accordingly, you will be relying on the judgment of our management with regard to the use of these net proceeds, and you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. Our failure to apply these funds effectively could have an adverse effect on our business and cause the price of our common stock to decline. The market price of our common stock may fluctuate significantly. The market price of our common stock has fluctuated and could fluctuate substantially in the future. This volatility may subject our stock price to material fluctuations due to the factors in this prospectus and the documents incorporated herein by reference, and other factors including market reaction to the estimated fair value of our portfolio; rumors or dissemination of false information; changes in coverage or earnings estimates by analysts; our ability to meet analysts or market expectations; and sales of common stock by existing stockholders. You may experience immediate and substantial dilution in the net tangible book value per share of the common stock you purchase in the offering. 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. After giving effect to the sale of our common stock in the maximum aggregate offering amount of $5.0 million at an assumed offering price of $1.72 per share (the reported sale price of our common stock on the NYSE American on October 24, 2023), and after deducting estimated offering commissions and expenses payable by us, you would suffer immediate decrease of $0.78 per share in the net tangible book value of the common stock compared to the book value of the common stock as of June 30, 2023. The exercise of outstanding stock options or warrants could result in further dilution of your investment. See the section below entitled Dilution on page 14 for a more detailed illustration of the dilution you may incur if you participate in this offering. The exercise of outstanding common stock purchase warrants will have a dilutive effect on the percentage ownership of our capital stock by existing stockholders. As of September 30, 2023, we had outstanding warrants to acquire 1,819,742 shares of our common stock, not including the pre-funded warrants that were issued in our June 2023 registered direct offering. All of our outstanding warrants have exercise prices above our common stock s recent trading prices, but in certain TABLE OF CONTENTS circumstances the holders have the right to effect a cashless exercise of such warrants. If a significant number of such warrants are exercised by the holders, the percentage of our common stock owned by our existing stockholders will be diluted. There is no public market for the common warrants or pre-funded warrants to purchase shares of our common stock being offered by us in this offering. There is no established public trading market for the common warrants or pre-funded warrants to purchase shares of our common stock that are being offered as part of this offering, and we do not expect a market to develop. In addition, we do not intend to apply to list the common warrants or pre-funded warrants on any national securities exchange or other nationally recognized trading system, including the NYSE American. Without an active market, the liquidity of the common warrants and pre-funded warrants will be limited. TABLE OF CONTENTS

parsed_sections/risk_factors/2023/BEATW_heartbeam_risk_factors.txt

@@ -0,0 +1,301 @@
+Risk Factors
+
+ 
+ 
+ 
+ You should carefully consider the information set forth in this prospectus and, in particular, the specific factors set forth in the Risk Factors section beginning on page 15 of this prospectus before deciding whether or not to invest in our Common Stock.
+
+ 
+ 
+
+ 
+ 
+ _________
+
+ (1) The number of shares of Common Stock outstanding is based on shares of Common Stock issued and outstanding as of December 31, 2022 and excludes the following:
+
+ 2,196,798 shares of Common Stock issuable upon the exercise of outstanding stock options having a weighted average exercise price of $1.76 per share;
+
+ 253,970 shares of Common Stock issuable upon vesting of RSUs;
+
+ 3,908,276 shares of Common Stock issuable upon the exercise of outstanding warrants having a weighted average exercise price of $5.42 per share;
+
+ 747,364 shares of Common Stock reserved for future issuance under the Company s 2022 Equity Incentive Plan (the 2022 Equity Plan );
+
+ Except as otherwise indicated herein, all information in this prospectus reflects or assumes:
+
+ no exercise of the outstanding options described above;
+
+ excludes shares of Common Stock underlying the Placement Agent Warrants to be issued to the placement agent in connection with this offering.
+
+ 
+ 
+
+ 
+ 
+
+ 13
+
+ Table of Contents
+
+ 
+ 
+
+ 
+ 
+
+ Lock-up
+
+ 
+ 
+ 
+ Our officers and directors have agreed to be subject to a lock-up period of 180 days following the closing of this offering. This means that, during the applicable lock-up period, those persons may not offer for sale, contract to sell, sell, distribute, grant any option, right or warrant to purchase, pledge, hypothecate or otherwise dispose of, directly or indirectly, any shares of our common stock or any securities convertible into, or exercisable or exchangeable for, shares of our common stock. Certain limited transfers are permitted during the lock-up period if the transferee agrees to these lock-up restrictions, including the right to sell any shares of common stock received on the exercise of a restricted stock unit. The Company is subject to a one year lock-up on its being able to sell shares of common stock or securities convertible into common stock without the permission of the placement agent and filing any registration statement relating to the offering of shares of capital stock. It is also restricted for the same one year period in its use of the current at-the-market offering arrangement it has with A.G.P./Alliance Global Partners, subject to approval of any puts by the placement agent and certain minimum market standards. The Company is permitted to issue stock under certain other transactions and stock options or stock awards to directors, officers and employees under our existing plans. Public Ventures may, in its sole discretion and without notice, waive the terms of any of these lock-up agreements.
+
+ 
+ 
+
+ 
+ 
+
+ 14
+
+ Table of Contents
+
+ 
+ RISK FACTORS
+
+ An investment in our securities involves substantial risks. In addition to other information in this prospectus, you should carefully consider the following risks and the risks described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 under the caption Item 1A. Risk Factors, as well as other information and data set forth in this prospectus and the documents incorporated by reference herein, before making an investment decision with respect to our securities. The occurrence of any of the following risks could materially and adversely affect our business, prospects, financial condition, and our results of operations, which could cause you to lose all or a part of your investment in our securities. Some statements in this prospectus, including statements in the following risk factors, constitute forward-looking statements. See Forward-Looking Statements. 
+
+ Risks Related To Our Common Stock
+
+ The price of our Common Stock may be subject to wide fluctuations.
+
+ A consistently active trading market for our Common Stock does not exist and may not develop or be maintained. You may not be able to sell your shares quickly or at the current market price if trading in our stock is not active. You may lose all or a part of your investment. The market price of our Common Stock may be highly volatile and subject to wide fluctuations in response to a variety of factors and risks, many of which are beyond our control. In addition to the risks noted elsewhere in this prospectus, some of the other factors affecting our stock price may include:
+
+ variations in our operating results;
+
+ announcements by us or our competitors of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments;
+
+ announcements by third parties of significant claims or proceedings against us;
+
+ future sales of our Common Stock;
+
+ any delay in our regulatory filings for our product and any adverse development or perceived adverse development with respect to the applicable regulatory authority s review of such filings, including without limitation the FDA s issuance of a refusal to file letter or a request for additional information;
+
+ adverse results or delays in clinical trials;
+
+ our decision to initiate a clinical trial, not to initiate a clinical trial or to terminate an existing clinical trial;
+
+ adverse regulatory decisions, including failure to receive regulatory approval of our product;
+
+ changes in laws or regulations applicable to our products, including but not limited to clinical trial requirements for approvals;
+
+ adverse developments concerning our manufacturers;
+
+ our inability to obtain adequate product supply for any approved product or inability to do so at acceptable prices;
+
+ our inability to establish collaborations if needed;
+
+ additions or departures of key scientific or management personnel;
+
+ introduction of new products or services offered by us or our competitors;
+
+ announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our competitors;
+
+ our ability to effectively manage our growth;
+
+ the size and growth of our initial target markets;
+
+ 
+
+ 15
+
+ Table of Contents
+
+ 
+ our ability to successfully treat additional types of indications or at different stages;
+
+ actual or anticipated variations in quarterly operating results;
+
+ our cash position;
+
+ our failure to meet the estimates and projections of the investment community or that we may otherwise provide to the public;
+
+ publication of research reports about us or our industry, or positive or negative recommendations or withdrawal of research coverage by securities analysts;
+
+ changes in the market valuations of similar companies;
+
+ overall performance of the equity markets;
+
+ sales of our Common Stock by us or our stockholders in the future;
+
+ trading volume of our Common Stock;
+
+ changes in accounting practices;
+
+ ineffectiveness of our internal controls;
+
+ disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our or our licensee s technologies;
+
+ significant lawsuits, including patent or stockholder litigation;
+
+ general political and economic conditions; and
+
+ other events or factors, many of which are beyond our control.
+
+ The offering price of our Common Stock may not be indicative of the value of our assets or the price at which shares can be resold. The offering price of the Shares may not be an indication of our actual value.
+
+ The offering price of per share of our Common Stock was determined based upon negotiations between the Company and the placement agent. Factors taken into consideration include the trading volume of our Common Stock prior to this offering, the historical prices at which our shares of Common Stock have recently traded, the history and prospects of our Company, the stage of development of our business, our business plans for the future and the extent to which they have been implemented, an assessment of our management, general conditions of the securities markets at the time of the offering, and such other factors as were deemed relevant. No assurance can be given that the securities underlying our Common Stock can be resold at the public offering price.
+
+ For these reasons, comparing our operating results on a period-to-period basis may not be meaningful, and you should not rely on past results as an indication of future performance. In the past, following periods of volatility in the market price of a public company s securities, securities class action litigation has often been instituted against the public company. Regardless of its outcome, this type of litigation could result in substantial costs to us and a likely diversion of our management s attention. You may not receive a positive return on your investment when you sell your shares and you may lose the entire amount of your investment.
+
+ 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. If one or more of the analysts who covers us downgrades our stock or publishes inaccurate or unfavorable research about our business, our stock price may decline. If one or more of these analysts ceases coverage of our Company or fails to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and trading volume to decline.
+
+ 
+
+ 16
+
+ Table of Contents
+
+ 
+ We may, in the future, issue additional shares of Common Stock, Warrants or Preferred Stock, which would reduce investors percent of ownership and dilute our share value
+
+ Our Certificate of Incorporation authorizes the issuance of 100,000,000 shares of Common Stock and 10,000,000 shares of Preferred Stock. As of December 31, 2022, there are outstanding 8,009,743 shares of Common Stock and zero shares of Preferred Stock.
+
+ Our need for future financing may result in the issuance of additional securities which will cause investors to experience dilution.
+
+ Our cash requirements may vary from those now planned which depend upon numerous factors, including the result of future research and development activities, our ability to estimate future expenses and acceptance of our products in the market.
+
+ There are no significant commitments for future financing of the commercial phase of our telehealth Product and other future products. In the future, our securities may be offered to other investors at a price lower than the price per share paid by our investors, or upon terms which may be deemed more favorable than previously offered. In addition, the issuance of securities in any future financing using our securities may dilute an investor s equity ownership. Moreover, we may issue other equity securities with derivative features to procure qualified personnel or for other business reasons. The issuance of any such derivative securities, which is at the discretion of our board of directors, may further dilute the equity ownership of our stockholders, including the investors in this offering. No assurance can be given as to our ability to procure additional financing, if required, and on terms deemed favorable to us. To the extent additional capital is required and cannot be raised successfully, we may then have to limit our then current operations and/or may have to curtail certain, if not all, of our business objectives and plans.
+
+ If our shares become subject to the penny stock rules, it would become more difficult to trade our shares.
+
+ The SEC has adopted regulations, which generally define penny stock to be an equity security that has a market price of less than $5.00 per share, subject to specific exemptions. The market price of our Common Stock is less than $5.00 per share and therefore may be a penny stock. Brokers and dealers effecting transactions in penny stock must 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 Common Stock and may affect your ability to sell shares of our Common Stock in the future.
+
+ Liability of directors for breach of duty is limited under Delaware law.
+
+ Our certificate of incorporation limits the liability of directors to the maximum extent permitted by Delaware law. Delaware law provides that directors of a corporation will not be personally liable for monetary damages for breach of their fiduciary duties as directors, except for liability for any:
+
+ breach of their duty of loyalty to us or our stockholders;
+
+ act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;
+
+ unlawful payments of dividends or unlawful stock repurchases, or redemptions as provided in Section 174 of the Delaware General Corporation Law; or
+
+ transaction from which the directors derived an improper personal benefit.
+
+ These limitations of liability do not apply to liabilities arising under the federal or state securities laws and do not affect the availability of equitable remedies such as injunctive relief or rescission.
+
+ Our bylaws provide that we will indemnify for our directors and officers to the fullest extent permitted by law and may indemnify employees and other agents. Our bylaws also provide that we are obligated to advance expenses incurred by a director or officer in advance of the final disposition of any action or proceeding.
+
+ We entered into separate indemnification agreements with our directors and officers. These agreements, among other things, require us to indemnify our directors and officers for any and all expenses (including reasonable attorneys fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees) judgments, fines and amounts paid in settlement 
+
+ 
+
+ 17
+
+ Table of Contents
+
+ 
+ actually and reasonably incurred by such directors or officers or on his or her behalf in connection with any action or proceeding arising out of their services as one of our directors or officers, or any of our subsidiaries or any other company or enterprise to which the person provides services at our request provided that such person follows the procedures for determining entitlement to indemnification and advancement of expenses set forth in the indemnification agreement. We believe that these bylaw provisions and indemnification agreements are necessary to attract and retain qualified persons as directors and officers.
+
+ The limitation of liability and indemnification provisions in our certificate of incorporation and bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against directors and officers, even though an action, if successful, might provide a benefit to us and our stockholders. Our results of operations and financial condition may be harmed to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions.
+
+ In so far as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us, we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
+
+ At present, there is no pending litigation or proceeding involving any of our directors or officers as to which indemnification is required or permitted, and we are not aware of any threatened litigation or proceeding that may result in a claim for indemnification.
+
+ We do not anticipate paying any cash dividends on our Common Stock in the foreseeable future and, as such, capital appreciation, if any, of our Common Stock will be your sole source of gain for the foreseeable future.
+
+ We do not anticipate paying any cash dividends on our Common Stock in the foreseeable future. We currently intend to retain all available funds and any future earnings to fund the development and growth of our business. In addition, and any future loan arrangements we enter into may contain, terms prohibiting or limiting the amount of dividends that may be declared or paid on our Common Stock. As a result, capital appreciation, if any, of our Common Stock will be your sole source of gain for the foreseeable future.
+
+ Risks Related to this Offering
+
+ We are an emerging growth company, and any decision on our part to comply with certain reduced disclosure requirements applicable to emerging growth companies could make our Common Stock less attractive to investors.
+
+ We are an emerging growth company as defined in the JOBS Act, and, for as long as we continue to be an emerging growth company, we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, not being required to comply with any new requirements adopted by the Public Company Accounting Oversight Board (the PCAOB ), requiring mandatory audit firm rotation or a supplement to the auditor s report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer, not being required to comply with any new audit rules adopted by the PCAOB after April 5, 2012 unless the SEC determines otherwise, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We could remain an emerging growth company until the earlier of: (i) the last day of the fiscal year in which we have total annual gross revenues of $1.235 billion or more; (ii) the last day of our fiscal year following the fifth anniversary of the date of our first sale of common equity securities pursuant to an effective registration statement; (iii) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer. We cannot predict if investors will find our Common Stock less attractive if we choose to rely on these exemptions. If some investors find our Common Stock less attractive as a result of any choices to reduce future disclosure, there may be a less active trading market for our Common Stock and our stock price may be more volatile. Further, as a result of these scaled regulatory requirements, our disclosure may be more limited than that of other public companies and you may not have the same protections afforded to shareholders of such companies.
+
+ 
+
+ 18
+
+ Table of Contents
+
+ 
+ Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the Securities Act ), for complying with new or revised accounting standards. We have opted for taking advantage of the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the Jobs Act.
+
+ We have identified weaknesses in our internal controls, and we cannot provide assurances that these weaknesses will be effectively remediated or that additional material weaknesses will not occur in the future.
+
+ As a public company, we are subject to the reporting requirements of the Exchange Act, and the Sarbanes-Oxley Act. We expect that the requirements of these rules and regulations will continue to increase our legal, accounting and financial compliance costs, make some activities more difficult, time consuming and costly, and place significant strain on our personnel, systems and resources.
+
+ The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures, and internal controls over financial reporting.
+
+ We do not yet have effective disclosure controls and procedures, or internal controls over all aspects of our financial reporting. We are continuing to develop and refine our internal controls over financial reporting. Our management is responsible for establishing and maintaining adequate internal control over our financial reporting, as defined in Rule 13a-15(f) under the Exchange Act. We will be required to expend time and resources to further improve our internal controls over financial reporting, including by expanding our staff. However, we cannot assure you that our internal control over financial reporting, as modified, will enable us to identify or avoid material weaknesses in the future.
+
+ We have identified material weaknesses in our internal control over financial reporting. 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 financial statements will not be prevented or detected on a timely basis. The material weaknesses identified to date include (i) lack of formal risk assessment under COSO framework (ii) policies and procedures which are not adequately documented, (iii) lack of proper approval processes, review processes and documentation for such reviews, (iv) insufficient GAAP experience regarding complex transactions and ineffective review processes over period end financial disclosure and reporting and (v) insufficient segregation of duties.
+
+ We will be required to expend time and resources to further improve our internal controls over financial reporting. However, we cannot assure you that our internal control over financial reporting, as modified, will enable us to identify or avoid material weaknesses in the future.
+
+ Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business. Further, weaknesses in our disclosure controls or our internal control over financial reporting may be discovered in the future. Any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement, 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 could also adversely affect the results of management reports and independent registered public accounting firm audits of our internal control over financial reporting that we will eventually 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 market price of our common stock.
+
+ Our independent registered public accounting firm is not required to audit the effectiveness of our internal control over financial reporting until after we are no longer an emerging growth company as defined in the JOBS Act and meet other requirements. At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our internal control over financial reporting is documented, designed or operating. Any failure to maintain effective disclosure controls and internal control over financial reporting could have a material and adverse effect on our business and operating results, and cause a decline in the market price of our common stock.
+
+ 
+
+ 19
+
+ Table of Contents
+
+ 
+ Future sales of a substantial number of our Common Stock by our existing shareholders could cause our stock price to decline.
+
+ Prior to the consummation of this offering, as of December 31, 2022 we have 8,009,743 shares of our Common Stock outstanding. Upon consummation of this offering, we have agreed to issue up to 16,666,666 shares of our Common Stock, assuming the full amount of the shares being offered are sold. We have also filed a registration statement for $13 million under an ATM as a stand-alone. All of the shares sold in this offering will be eligible for sale in the public markets upon closing. It is conceivable that many shareholders may wish to sell some or all of their shares. If our shareholders sell substantial amounts of our Common Stock in the public market at the same time, the market price of our Common Stock could decrease significantly due to an imbalance in the supply and demand of our Common Stock. Even if they do not actually sell the Common Stock, the perception in the public market that our shareholders might sell significant Common Stock could also depress the market price of our Common Stock.
+
+ Future sales and issuances of our Common Stock or rights to purchase Common Stock, including pursuant to our equity incentive plans and outstanding warrants could result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to fall.
+
+ We expect that significant additional capital may be needed in the future to continue our planned operations, including conducting clinical trials, commercialization efforts, expanded research and development activities and costs associated with operating a public company. To raise capital, we may sell Common Stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. If we sell Common Stock, convertible securities or other equity securities, investors may be materially diluted by subsequent sales. Such sales may also result in material dilution to our existing stockholders, and new investors could gain rights, preferences and privileges senior to the holders of our Common Stock, including shares of Common Stock sold in this offering. Initially, the aggregate number of shares of our Common Stock that may be issued pursuant to stock awards under our 2022 Equity Plan is 1,900,000 shares, and as of December 31, 2022, 747,364 were available for issuance. Increases in the number of shares available for future grant or purchase may result in additional dilution, which could cause our stock price to decline.
+
+ The Company will have broad discretion in the use of the net proceeds from this offering and may fail to apply these proceeds effectively.
+
+ The Company s management will have broad discretion in the application of the net proceeds of this offering, including using the proceeds to conduct operations, expand the Company s business lines and for general working capital. The Company may also use the net proceeds of this offering to acquire or invest in complementary businesses, products, or technologies, or to obtain the right to use such complementary technologies. We have no commitments with respect to any acquisition or investment; however, we seek opportunities and transactions that management believes will be advantageous to the Company and its operations or prospects. We cannot specify with certainty the actual uses of the net proceeds of this offering. You may not agree with the manner in which our management chooses to allocate and spend the net proceeds. We may invest the net proceeds from this offering in a manner that does not produce income or that loses value. The failure by our management to apply these funds effectively could harm our business, financial condition and results of operations.
+
+ Although our Common Stock is listed on the Nasdaq Capital Market, the exchange may subsequently delist our Common Stock if we fail to comply with ongoing listing standards.
+
+ Although our Common Stock is listed on the Nasdaq Capital Market, the exchange will require us to meet certain financial, public float, bid price and liquidity standards on an ongoing basis in order to continue the listing of our Common Stock. If we fail to meet these continued listing requirements, our Common Stock may be subject to delisting. If our Common Stock are delisted and we are not able to list such Common Stock on another national securities exchange, we expect our securities would be quoted on an over-the-counter market; however, if this were to occur, our stockholders could face significant material adverse consequences, including limited availability of market quotations for our Common Stock and reduced liquidity for the trading of our securities. In addition, in the event of such delisting, we could experience a decreased ability to issue additional securities and obtain additional financing in the future. Even though our Common Stock are listed on the Nasdaq Capital Market, there can be no assurance that an active trading market for our Common Stock will develop or be sustained after our initial listing.
+
+ 
+
+ 20
+
+ Table of Contents
+
+ 
+ Our failure to maintain compliance with Nasdaq s continued listing requirements could result in the delisting of our common stock and/or our warrants.
+
+ On March 20, 2023, we received a letter from The Nasdaq Stock Market LLC ( Nasdaq ) indicating that we are not in compliance with Nasdaq Listing Rule 5550(b)(1), which requires companies listed on The Nasdaq Stock Market to maintain a minimum of $2,500,000 in stockholders equity for continued listing. In our annual report on Form 10-K for the period ended December 31, 2022, we reported stockholders equity of approximately $2,374,000, which does not currently satisfy Listing Rule 5550(b)(1).
+
+ Nasdaq s letter has no immediate impact on the listing of our common stock or warrants, which will continue to be listed and traded on Nasdaq, subject to our compliance with the other continued listing requirements. Nasdaq s letter provides us with 45 calendar days, or until May 4, 2023, to submit a plan to regain compliance. If the plan is accepted, we can be granted up to 180 calendar days from March 20, 2023 (or September 18, 2023), to evidence compliance.
+
+ We intend to regain compliance with the applicable continued listing requirements of Nasdaq prior to the end of the compliance period set forth in the letter. However, until Nasdaq has reached a final determination that the Company has regained compliance with all of the applicable continued listing requirements, there can be no assurances regarding the continued listing of our common stock or warrants on Nasdaq. The delisting of our common stock and warrants from Nasdaq would have a material adverse effect on our access to capital markets, and any limitation on market liquidity or reduction in the price of its common stock as a result of that delisting would adversely affect our ability to raise capital on terms acceptable to the Company, if at all.
+
+ This letter from Nasdaq does not affect our business, operations or reporting requirements with the Securities and Exchange Commission.
+
+ You will experience immediate and substantial dilution as a result of this offering and may experience additional dilution in the future.
+
+ If you purchase shares of Common Stock in this offering, the value of your shares based on our actual book value will immediately be less than the price you paid. This reduction in the value of your equity is known as dilution. This dilution occurs in large part because our existing stockholders paid less than the assumed public offering price when they acquired their shares of Common Stock. Based upon the issuance and sale of 16,666,666 shares of Common Stock by us in this offering at a public offering price of $1.50 per share, you will incur immediate dilution of in the net tangible book value per share of Common Stock. If outstanding options to purchase our Common Stock are exercised, investors will experience additional dilution. For more information, see Dilution. 
+
+ This is a commercially reasonable best efforts offering. We may sell fewer than all the securities offered hereby which may not be enough to properly fund the current financial requirements of the Company.
+
+ The placement agent has agreed to use its commercial 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 that must be sold as a condition to completion of this offering. As there is no minimum offering amount 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. Investors in this offering will not receive a refund in the event that we do not sell an amount of securities sufficient to pursue the business goals outlined in this prospectus. Also, any proceeds from the sale of securities offered by us will be available for our immediate use, despite uncertainty about whether we would be able to use such funds to effectively implement our business plan.
+
+ Subscriptions by investors are irrevocable during the offering period.
+
+ Investors will make their subscriptions during the offering period that will end on May 18, 2023, unless extended to a date not later than May 25, 2023. Once the subscription agreement for the purchase of the securities offered hereby is submitted to the placement agent and the purchase price is paid to the escrow agent, the subscription is irrevocable. Subscription funds will only be returned to the investor if the offering is terminated prior to the closing by the Company in its sole discretion. The return of subscription funds, if that occurs, will be without interest or deduction, made by the escrow agent.
+
+ 
+
+ 21
+
+ Table of Contents

parsed_sections/risk_factors/2023/BOWN_bowen_risk_factors.txt

@@ -0,0 +1,1341 @@
+Risk Factors — Risks Related to Acquiring and Operating
+a Business Outside of the United States — The PRC governmental authorities may take the view now or in the future that an approval
+from them is required for an overseas offering by a company affiliated with Chinese businesses or persons or a business combination with
+a target business based in and primarily operating in China."
+
+ 
+
+Transfer
+of Cash to and from Our Post-Combination Organization If We Acquire a Company Based in China
+
+ 
+
+We
+are a blank check company with no subsidiaries and no operations of our own except organizational activities, the preparation of this
+offering and, following the closing of this offering, searching for a suitable target to consummate an initial business combination.
+As of the date of this prospectus, we have not made any transfers, dividends or distributions to any person or entity.
+
+ 
+
+The
+PRC government may impose controls on the conversion of RMB into foreign currencies and the remittance of currencies out of the PRC.
+Therefore, we may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency
+for the payment of dividends from our post-combination entity s profits, if any. If subsidiaries of our post-combination organization
+in the PRC incur debt on their own in the future, the instruments governing the debt may restrict their ability to pay dividends or make
+other payments.
+
+ 
+
+ 10
+
+ 
+
+ 
+
+ 
+
+We
+may retain all of our available funds and any future earnings following an initial business combination to fund the development and growth
+of our business. As a result, we may not pay any cash dividends in the foreseeable future. If we were to consummate an initial business
+combination with a China-based target, we will be permitted under PRC laws and regulations to make loans or capital contributions to
+our PRC subsidiaries through intermediate holding companies, and only if we satisfy the applicable government registration and approval
+requirements. See "Risk Factors— Risks Related to Acquiring and Operating a Business Outside of the United States —
+If we merge with a China-based operating company, then PRC regulation on loans to, and direct investment in, PRC entities by offshore
+holding companies and governmental control in currency conversion may delay or prevent us from making loans to or making additional capital
+contributions to the PRC entity, if any, which could materially and adversely affect our liquidity and our ability to fund and expand
+our business."
+
+ 
+
+If
+we were to consummate an initial business combination with a China-based target, a 10% PRC tax is applicable to dividends payable to
+investors that are non-resident enterprises, which will be withheld if such gain is regarded as income derived from sources within the
+PRC. Any gain realized on the transfer of securities by such investors is also subject to PRC tax at a current rate of 10%. See also
+"Risk Factors – Risks Related to Acquiring and Operating a Business Outside of the United States – If we merge with
+a China-based operating company, then there are significant uncertainties under the PRC Enterprise Income Tax Law relating to the withholding
+tax liabilities of the PRC entity, and dividends payable by the PRC entity to our offshore entity may not qualify for certain treaty
+benefits."
+
+ 
+
+Enforcement
+of Civil Liabilities
+
+ 
+
+Our
+Chairwoman of the Board, Na Gai, and one of our directors, Jun Zhang, are residents of China. PRC courts may only recognize and enforce
+foreign judgments in accordance with the requirements of the PRC Civil Procedures Law based either on treaties between China and the
+country where the judgment is made or on principles of reciprocity between jurisdictions. This is reflected in a number of bilateral
+treaties signed by China, which provide that lack of jurisdiction of the judgment court can be a ground for refusal to enforce the foreign
+judgment. Further, a foreign judgment cannot be recognized and enforced in China if a Chinese court has rendered a judgment on the same
+subject matter or recognized and enforced another foreign judgment or arbitral award on the same subject matter. In addition, according
+to the PRC Civil Procedures Law, the PRC courts will not enforce a foreign judgment against us or our directors and officers if they
+decide that the judgment violates the basic principles of PRC laws or national sovereignty, security, or public interest. China has no
+treaties or other forms of written arrangement with the United States that provide for the reciprocal recognition and enforcement of
+foreign judgments. As a result, it may be difficult for investors to effect service of process within the United States upon us or our
+officers or directors who are residents of China, or to enforce judgments in China (including Hong Kong and Macau) that are obtained
+in U.S. courts against us or such individuals, including judgments predicated upon the civil liability provisions of the securities laws
+of the United States or any state in the United States. Even with proper service of process, the enforcement of judgments obtained in
+U.S. courts or foreign courts based on the civil liability provisions of the U.S. federal securities laws would be extremely difficult
+given the PRC Civil Procedures Law and the lack of a treaty or principles of reciprocity providing for the recognition and enforcement
+of U.S. judgments. Furthermore, there would be added costs and issues with bringing an original action in foreign courts to enforce liabilities
+based on the U.S. federal securities laws against us or our officers and directors, and they still may be fruitless.
+
+ 
+
+Corporate
+Information
+
+ 
+
+Our
+executive office is located at 420 Lexington Avenue, Room 2446, New York NY 10170 and our telephone number is (347) 627-0058.
+
+ 
+
+We
+are a Cayman Islands exempted company. Exempted companies are Cayman Islands companies conducting business mainly outside the Cayman
+Islands and, as such, are exempted from complying with certain provisions of the Companies Act.
+
+ 
+
+We
+are an "emerging growth company," as defined in Section 2(a) of the Securities Act of 1933, as amended, or the Securities
+Act, as modified by the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As such, we are eligible 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 of 2002, or 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. If some investors find our securities less attractive as a result, there may
+be a less active trading market for our securities and the prices of our securities may be more volatile.
+
+ 
+
+In
+addition, Section 107 of the JOBS Act also provides that an "emerging growth company" can take advantage of the extended
+transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other
+words, an "emerging growth company" can delay the adoption of certain accounting standards until those standards would otherwise
+apply to private companies. We intend to take advantage of the benefits of this extended transition period.
+
+ 
+
+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 this offering, (b) in which we have total annual gross revenue of at least $1.235 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 securities
+during the prior three-year period. References herein to "emerging growth company" shall have the meaning associated with
+it in the JOBS Act.
+
+ 
+
+Additionally,
+we are a "smaller reporting company" as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take
+advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements.
+We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our ordinary shares
+held by non-affiliates exceeds $250 million as of the end of that year s second fiscal quarter, or (2) our annual revenues exceeded
+$100 million during such completed fiscal year and the market value of our ordinary shares held by non-affiliates exceeds $700 million
+as of the end of that year s second fiscal quarter. To the extent we take advantage of such reduced disclosure obligations, it
+may also make comparison of our financial statements with other public companies difficult or impossible.
+
+ 
+
+ 11
+
+ 
+
+ 
+
+ 
+
+The
+Offering
+
+ 
+
+In
+making your decision on whether to invest in our securities, you should take into account not only the backgrounds of the members of
+our management team and advisors, but also the special risks we face as a blank check company and the fact that this offering is not
+being conducted in compliance with Rule 419 promulgated under the Securities Act. You will not be entitled to protections normally afforded
+to investors in Rule 419 blank check offerings. You should carefully consider these and the other risks set forth in the section of this
+prospectus entitled "Risk Factors."
+
+ 
+
+ 
+ Securities offered
+ 
+ 6,000,000 units,
+ at $10.00 per unit (or 6,900,000 units if the underwriters option to purchase additional units is exercised in full), each
+ unit consisting of:
+
+ 
+ 
+
+ 
+ 
+ 
+ one ordinary share; and
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ one right.
+
+ 
+ 
+
+ 
+ Proposed NASDAQ symbols
+ 
+ Units: "BOWNU"
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ Ordinary Shares: "BOWN"
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ Rights: "BOWNR"
+
+ 
+ 
+ 
+ 
+
+ 
+ Trading commencement and separation of ordinary shares
+ and rights
+ 
+ The
+ units will begin trading on or promptly after the date of this prospectus. The ordinary shares and rights comprising the units will
+ begin separate trading on the 90th day following the date of this prospectus unless the representative informs us of its
+ decision to allow earlier separate trading, subject to our having filed the Current Report on Form 8-K described below and having
+ issued a press release announcing when such separate trading will begin. Once the ordinary shares and rights commence separate trading,
+ holders will have the option to continue to hold units or separate their units into the component securities. Holders will need to
+ have their brokers contact our transfer agent in order to separate the units into ordinary shares and rights. No fractional shares
+ will be issued upon separation of the units and only whole shares will trade. Accordingly, unless you purchase rights in multiples
+ of ten, you will not be able to receive or trade a whole share underlying the right.
+
+ 
+
+ Additionally,
+ the units will automatically separate into their component parts and will not be traded after completion of our initial business
+ combination.
+
+ 
+ 
+ 
+ 
+
+ 
+ Separate trading of ordinary shares and rights is prohibited
+ until we have filed a Current Report on Form 8-K
+ 
+ In no event will the ordinary
+ shares and rights be traded separately until we have filed a Current Report on Form 8-K with the SEC containing an audited balance
+ sheet reflecting our receipt of the gross proceeds at the closing of this offering. We will file the Current Report on Form 8-K promptly
+ after the closing of this offering. If the underwriters over-allotment option is exercised following the initial filing of
+ such Current Report on Form 8-K, a second or amended Current Report on Form 8-K will be filed to provide updated financial information
+ to reflect the exercise of the underwriters over-allotment option.
+
+ 
+ 
+ 
+
+ Units:
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ Number outstanding before this offering
+ 
+ 0 units
+
+ 
+ 
+
+ 12
+
+ 
+
+ 
+
+ 
+
+ 
+ Number outstanding after this offering
+ and private placement
+ 
+ 6,330,000
+ units(1)(2)
+
+ 
+ 
+ 
+ 
+
+ 
+ Ordinary
+ Shares:
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ Number outstanding before this offering
+ 
+ 1,905,000 shares(3)
+
+ 
+ 
+ 
+ 
+
+ 
+ Number outstanding after this offering and private
+ placement
+ 
+ 8,010,000(1)(4) 
+
+ 
+ 
+ 
+ 
+
+ 
+ Rights:
+ 
+ 
+
+ 
+ 
+ 
+ 
+
+ 
+ Number outstanding before this offering
+ 
+ 0 rights
+
+ 
+ 
+ 
+ 
+
+ 
+ Number outstanding after this offering and private
+ placement
+ 
+ 6,330,000
+ rights(1)(5)
+
+ 
+ 
+
+ 
+ (1)
+ Assumes no exercise of
+ the underwriters over-allotment option.
+
+ 
+ 
+ 
+
+ 
+ (2) 
+ Represents
+ 6,000,000 public units and 330,000 private units.
+
+ 
+ 
+ 
+
+ 
+ (3) 
+ Represents 1,725,000 founder
+ shares and 180,000 EBC founder shares. The founder shares include up to 225,000 founder shares that are subject to forfeiture by
+ our sponsors depending on the extent to which the underwriters over-allotment option is exercised.
+
+ 
+ 
+ 
+
+ 
+ (4)
+ Represents
+ 1,500,000 founder shares, 180,000 EBC founder shares, 6,000,000 public shares and 330,000 private shares.
+
+ 
+ 
+ 
+
+ 
+ (5)
+ Represents
+ 6,000,000 public rights and 330,000 private rights.
+
+ 
+ 
+
+ 
+ Term of rights:
+ 
+ Except in cases
+ where we are not the surviving company in an initial business combination, each holder of a right will automatically receive one-tenth
+ (1/10) of one ordinary share upon consummation of our initial business combination. In the event we will not be the surviving company
+ upon completion of our initial business combination, each holder of a right will be required to affirmatively convert his, her or
+ its rights in order to receive the one-tenth (1/10) of an ordinary share of the new entity underlying each right upon consummation
+ of the initial business combination. We will not issue fractional shares in connection with an exchange of rights. Fractional shares
+ will either be rounded down to the nearest whole share or otherwise determined by the board of directors as provided by Cayman Islands
+ laws. As a result, you must hold rights in multiples of ten in order to receive shares for all of your rights upon closing of an
+ initial business combination. If we are unable to complete an initial business combination within the required time period and we
+ redeem the public shares for the funds held in the trust account, holders of rights will not receive any of such funds for their
+ rights and the rights will expire worthless.
+
+ 
+ 
+
+ 13
+
+ 
+
+ 
+
+ 
+
+ 
+ Founder shares and EBC founder shares
+ 
+ On February
+ 27, 2023, Bowen Holding LP acquired an aggregate of 1,725,000 ordinary shares for an aggregate purchase price of $25,000. Bowen Holding
+ LP thereafter transferred an aggregate of 1,155,750 ordinary shares to Createcharm Holdings Ltd, our other sponsor. Prior to the
+ initial investments in the company by our sponsors, the company had no assets, tangible or intangible. The number of founder shares
+ issued was determined based on the expectation that the founder shares would represent 20% of our issued and outstanding shares after
+ this offering (excluding the private shares and the EBC founder shares).
+
+ 
+ 
+ 
+
+ 
+ 
+
+ We
+ also issued to EBC 180,000 EBC founder shares for an aggregate purchase price of $2,520 on March 15, 2023.
+
+ 
+
+ The
+ founder shares and EBC founder shares are identical to the ordinary shares included in the public units, except that:
+
+ 
+
+ 
+ 
+ 
+ the founder shares and
+ EBC founder shares are subject to certain transfer restrictions, as described in more detail below;
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ the
+ holders of the founder shares (but not the holders of the EBC founder shares) have agreed to vote any founder shares and private
+ shares held by them and any public shares purchased in or after this offering in favor of our initial business combination. As a
+ result, in addition to our initial shareholders founder shares, we would need (i) 1,995,001 or 33.3%, of the
+ 6,000,000 public shares sold in this offering to be voted in favor of an initial business combination in order to have our initial
+ business combination approved (assuming all outstanding shares are voted, including the EBC founder shares and private shares,
+ the EBC founder shares and private shares are voted in favor of the proposed initial business combination (although they are not
+ required to do so) and the over-allotment option is not exercised), or (ii) none of the 6,000,000 public shares sold in
+ this offering, to be voted in favor of an initial business combination in order to have our initial business combination approved
+ (assuming that only the minimum number of shares representing a quorum are voted but of those shares, the EBC founder shares and
+ private shares are voted in favor of the proposed initial business combination (although they are not required to do so), and
+ the over-allotment option is not exercised); and
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ our
+ founders have entered into a letter agreement with us, pursuant to which they have agreed (i) to waive their redemption rights with
+ respect to any founder shares, private shares and any public shares held by them in connection with the completion of our initial
+ business combination, (ii) waive their redemption rights with respect to their founder shares, private shares and public shares in
+ connection with a shareholder vote to approve an amendment to our amended and restated memorandum and articles of association (A)
+ to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or to
+ redeem 100% of our public shares if we do not complete our initial business combination within 15 months from the closing
+ of this offering (or up to 18 months, if we extend the time to complete an initial business combination as described in this prospectus)
+ or (B) with respect to any other provision relating to shareholders rights or pre-initial business combination activity and
+ (iii) to waive their rights to liquidating distributions from the trust account with respect to any founder shares and private shares
+ held by them if we fail to complete our initial business combination within 15 months from the closing of this offering (or
+ up to 18 months, if we extend the time to complete a an initial business combination as described in this prospectus), although they
+ will be entitled to liquidating distributions from the trust account with respect to any public shares they hold if we fail to complete
+ our initial business combination within the prescribed time frame. If we submit our initial business combination to our shareholders
+ for a vote, we will complete our initial business combination only if a majority of the outstanding ordinary shares voted are voted
+ in favor of the initial business combination; and
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ the holders of the founder
+ shares and EBC founder shares have certain registration rights.
+
+ 
+ 
+
+ 14
+
+ 
+
+ 
+
+ 
+
+ 
+ Transfer restrictions on founder
+ shares and EBC founder shares
+ 
+ On
+ the date of closing of this offering, the founder shares will be placed into an escrow account maintained by Continental Stock Transfer
+ & Trust Company acting as escrow agent. The founder shares will not be transferred, assigned, sold or released from escrow until
+ six months after the date of the consummation of our initial business combination (except as described herein under the section of
+ this prospectus entitled "Principal Shareholders—Restrictions on Transfers of Founder Shares, EBC Founder Shares, and
+ Private Units"), or earlier, if, subsequent to our initial business combination, we consummate a subsequent liquidation, merger,
+ stock exchange or other similar transaction which results in all of our shareholders having the right to exchange their shares for
+ cash, securities or other property.
+
+ 
+
+ The
+ EBC founder shares will not be transferred, assigned or sold (except to the same permitted transferees as the founder shares and
+ provided the transferees agree to the same terms and restrictions as the permitted transferees of the founder shares must agree to,
+ each as described herein) until the consummation of an initial business combination.
+
+ 
+
+ We
+ refer to such transfer restrictions throughout this prospectus as the lock-up.
+
+ 
+ 
+ 
+ 
+
+ 
+ Private Units
+ 
+ Our
+ sponsors and EBC have agreed that they and/or their designees will purchase from us an aggregate of 330,000 private units
+ (312,000 private units to be purchased by our sponsors and 18,000 private units to be purchased by EBC and/or its designees)
+ at a price of $10.00 per unit for a total purchase price of $3,300,000 in a private placement that will close simultaneously
+ with the closing of this offering. Our sponsors and EBC have also agreed that if the over-allotment option is exercised by the underwriters
+ in full or in part, they and/or their designees will purchase from us up to an additional 31,500 private units on a pro rata
+ basis (29,782 private units to be purchased by our sponsors and 1,718 private units to be purchased by EBC and/or its
+ designees) at a price of $10.00 per unit in an amount that is necessary to maintain in the trust account $10.10 per unit sold
+ to the public in this offering. The private units are identical to the units sold in this offering, subject to limited exceptions.
+
+ 
+ 
+ 
+
+ 
+ 
+ The
+ purchase price of the private units will be added to the net proceeds from this offering to be held in the trust account. If we do
+ not complete our initial business combination within 15 months from the closing of this offering (or up to 18 months, if we
+ extend the time to complete an initial business combination as described in this prospectus), the funds held in the trust account
+ will be used to fund the redemption of our public shares (subject to the requirements of applicable law).
+
+ 
+ 
+ 
+ 
+
+ 
+ Transfer restrictions on
+ private units
+ 
+ The private units (including
+ private shares and private rights included in the private units, and the ordinary shares underlying the private rights) will not
+ be transferable, assignable or saleable until the completion of our initial business combination, except as described under the section
+ of this prospectus entitled "Principal Shareholders — Restrictions on Transfers of Founder Shares, EBC Founder Shares,
+ and Private Units."
+
+ 
+ 
+ 
+ 
+
+ 
+ Proceeds to be held in
+ trust account
+ 
+ The
+ rules of NASDAQ provide that at least 90% of the gross proceeds from this offering and the sale of the private units be deposited
+ in a trust account. Of the net proceeds of this offering and the sale of the private units, $10.10 per unit sold in this
+ offering will be placed into a U.S.-based trust account with Continental Stock Transfer & Trust Company, acting as trustee.
+
+ 
+ 
+
+ 15
+
+ 
+
+ 
+
+ 
+
+ 
+ 
+ 
+ Except
+ with respect to interest earned on the funds held in the trust account that may be released to us to pay our tax obligations, the
+ proceeds from this offering and the sale of the private units that are deposited in the trust account will not be released from the
+ trust account until the earliest of (a) the completion of our initial business combination, (b) the redemption of any public shares
+ properly submitted in connection with a shareholder vote to amend our amended and restated memorandum and articles of association
+ (i) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or
+ to redeem 100% of our public shares if we do not complete our initial business combination within 15 months from the closing
+ of this offering (or up to 18 months, if we extend the time to complete an initial business combination as described in this prospectus)
+ or (ii) with respect to any other provision relating to shareholders rights or pre-initial business combination activity and
+ (c) the redemption of our public shares if we are unable to complete our initial business combination within 15 months from
+ the closing of this offering (or up to 18 months, if we extend the time to complete an initial business combination as described
+ in this prospectus), subject to applicable law. The proceeds deposited in the trust account could become subject to the claims of
+ our creditors, if any, which could have priority over the claims of our public shareholders.
+
+ 
+ 
+ 
+ 
+
+ 
+ Anticipated
+ expenses and funding sources
+ 
+ Except as described above
+ with respect to the payment of taxes, unless and until we complete our initial business combination, no proceeds held in the trust
+ account will be available for our use. The proceeds held in the trust account will be held in demand deposit or cash accounts or
+ invested only in U.S. government securities with a maturity of 185 days or less or in money market funds meeting certain conditions
+ under Rule 2a-7 under the Investment Company Act which invest only in direct U.S. government treasury obligations. We will disclose
+ in each quarterly and annual report filed with the SEC prior to our initial business combination whether the proceeds deposited in
+ the trust account are invested in U.S. government treasury obligations or money market funds or a combination thereof. Based upon
+ an assumed interest rate of __%, we expect the trust account to generate approximately $____ of interest annually.
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ Unless and until we complete
+ our initial business combination, we may pay our expenses only from:
+
+ 
+ 
+
+ 
+ 
+ 
+ the net proceeds
+ of this offering and the sale of the private units not held in the trust account, which will be approximately $650,000 in working
+ capital after the payment of approximately $550,000 in expenses (excluding underwriting commissions) relating to this offering; and
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ any loans or additional
+ investments from our initial shareholders or their affiliates, although they are under no obligation to advance funds or invest in
+ us, and provided that any such loans will not have any claim on the proceeds held in the trust account unless such proceeds are released
+ to us upon completion of our initial business combination.
+
+ 
+ 
+
+ 16
+
+ 
+
+ 
+
+ 
+
+ 
+ Conditions to completing our initial
+ business combination
+ 
+ 
+
+We will have up to 15 months from the closing
+of this offering to consummate an initial business combination. However, if we anticipate that we may not be able to consummate our initial
+business combination within 15 months, we may, by resolution of our Board of Directors, if requested by our sponsors, extend the
+period of time we will have to consummate an initial business combination by an additional three months (for a total of up to 18 months
+from the closing of this offering), provided that, pursuant to the terms of our amended and restated memorandum and articles of association
+and the trust agreement to be entered into between us and Continental Stock Transfer & Trust Company on the date of this prospectus,
+in order for the time available for us to consummate our initial business combination to be extended, our sponsors or their affiliates
+or designees, upon five days advance notice prior to the deadline, must deposit into the trust account $600,000, or $690,000 if
+the over-allotment option is exercised in full (or $0.10 per share) for the extension, on or prior to the date of the deadline.
+Our public shareholders will not be entitled to vote or redeem their shares in connection with any such extension.
+
+ 
+
+ Our
+ initial business combination must occur with one or more target businesses that together have an aggregate fair market value of at
+ least 80% of our assets held in the trust account (excluding interest income earned on the trust account that is released to pay
+ taxes) at the time of the agreement to enter into the initial business combination. If our board is not able to independently determine
+ the fair market value of the target business or businesses, we will obtain an opinion from an independent investment banking firm
+ or another independent entity that commonly renders valuation opinions.
+
+ 
+
+ We
+ anticipate structuring our initial business combination so that the post-transaction company in which our public shareholders own
+ shares will own or acquire 100% of the equity interests or assets of the target business or businesses. We may, however, structure
+ our initial business combination such that the post-transaction company owns or acquires less than 100% of such interests or assets
+ of the target business in order to meet certain objectives of the target management team or shareholders or for other reasons. However,
+ we will only complete such initial business combination if the post-transaction company owns or acquires 50% or more of the outstanding
+ voting securities of the target or otherwise acquires an interest in the target sufficient for the post-transaction company not to
+ be required to register as an investment company under the Investment Company Act. Even if the post-transaction company owns or acquires
+ 50% or more of the voting securities of the target, our shareholders prior to the initial business combination may collectively own
+ a minority interest in the post business combination company, depending on valuations ascribed to the target and us in the initial
+ business combination transaction.
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ If less than 100% of the
+ equity interests or assets of a target business or businesses are owned or acquired by the post-transaction company, the portion
+ of such business or businesses that is owned or acquired is what will be valued for purposes of the 80% fair market value test, provided
+ that in the event that the initial business combination involves more than one target business, the 80% fair market value test will
+ be based on the aggregate value of all of the target businesses and we will treat the target businesses together as the initial business
+ combination for purposes of a tender offer or for seeking shareholder approval, as applicable.
+
+ 
+ 
+
+ 17
+
+ 
+
+ 
+
+ 
+
+ 
+ Permitted purchases of public shares
+ by our affiliates
+ 
+ If we seek
+ shareholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business
+ combination pursuant to the tender offer rules, our initial shareholders or their affiliates may purchase shares in privately negotiated
+ transactions or in the open market either prior to or following the completion of our initial business combination. There is no limit
+ on the number of shares our initial shareholders or their affiliates may purchase in such transactions, subject to compliance with
+ applicable law and the rules of NASDAQ. However, they have no current commitments, plans or intentions to engage in such transactions
+ and have not formulated any terms or conditions for any such transactions. If they engage in such transactions, they will not make
+ any such purchases when they are in possession of any material non-public information not disclosed to the seller or if such purchases
+ are prohibited by Regulation M under the Securities Exchange Act of 1934, as amended, or the Exchange Act. We do not currently anticipate
+ that such purchases, if any, would constitute a tender offer subject to the tender offer rules under the Exchange Act or a going-private
+ transaction subject to the going-private rules under the Exchange Act; however, if the purchasers determine at the time of any such
+ purchases that the purchases are subject to such rules, the purchasers will comply with such rules.
+
+ 
+ 
+ 
+ 
+
+ 
+ Redemption rights for public shareholders upon completion
+ of our initial business combination
+ 
+ We
+ will provide our public shareholders with the opportunity to redeem all or a portion of their public shares upon the completion of
+ our initial business combination at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust
+ account as of two business days prior to the consummation of our initial business combination, including interest earned on the funds
+ held in the trust account and not previously released to us to pay our taxes, divided by the number of then outstanding public shares,
+ subject to the limitations described herein. The amount in the trust account is initially anticipated to be $10.10 per public
+ share. There will be no redemption rights upon the completion of our initial business combination with respect to our rights. Our
+ initial shareholders and EBC have agreed to waive their redemption rights with respect to any founder shares, EBC founder shares
+ and private shares held by them and, in the case of our initial shareholders, any public shares our initial stockholders may acquire
+ in or after this offering in connection with the completion of our initial business combination or otherwise and to waive their redemption
+ rights with respect to their founder shares, EBC founder shares private shares and, in the case of our initial stockholders, public
+ shares in connection with a shareholder vote to approve an amendment to our amended and restated memorandum and articles of association
+ (A) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or
+ to redeem 100% of our public shares if we do not complete our initial business combination within 15 months from the closing
+ of this offering (or up to 18 months, if we extend the time to complete an initial business combination as described in this prospectus)
+ or (B) with respect to any other provision relating to shareholders rights or pre-initial business combination activity.
+
+ 
+ 
+
+ 18
+
+ 
+
+ 
+
+ 
+
+ 
+ Manner of conducting redemptions
+ 
+ We will provide
+ our public shareholders with the opportunity to redeem all or a portion of their public shares upon the completion of our initial
+ business combination either (i) in connection with a shareholder meeting called to approve the initial business combination or (ii)
+ by means of a tender offer. The decision as to whether we will seek shareholder approval of a proposed initial business combination
+ or conduct a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors such as the timing
+ of the transaction and whether the terms of the transaction would require us to seek shareholder approval under applicable law or
+ stock exchange listing requirements. Asset acquisitions and stock purchases would not typically require shareholder approval, while
+ direct mergers with our company and any transactions where we issue more than 20% of our outstanding ordinary shares or seek to amend
+ our amended and restated memorandum and articles of association would require shareholder approval. 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ If a shareholder vote is
+ not required and we do not decide to hold a shareholder vote for business or other legal reasons, we will, pursuant to our amended
+ and restated memorandum and articles of association:
+
+ 
+ 
+
+ 
+ 
+ 
+ conduct the
+ redemptions pursuant to Rule 13e-4 and Regulation 14E under the Exchange Act, which regulate issuer tender offers, and
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ file tender offer documents
+ with the SEC prior to completing our initial business combination which contain substantially the same financial and other information
+ about the initial business combination and the redemption rights as is required under Regulation 14A under the Exchange Act, which
+ regulates the solicitation of proxies.
+
+ 
+ 
+
+ 
+ 
+ 
+ Upon the public
+ announcement of our initial business combination, if we elect to conduct redemptions pursuant to the tender offer rules, we or our
+ initial shareholders will terminate any plan established in accordance with Rule 10b5-1 under the Exchange Act to purchase our ordinary
+ shares in the open market, in order to comply with Rule 14e-5 under the Exchange Act.
+
+ 
+ 
+
+ 19
+
+ 
+
+ 
+
+ 
+
+ 
+ 
+ 
+ In the event
+ that we conduct redemptions pursuant to the tender offer rules, our offer to redeem will remain open for at least 20 business days,
+ in accordance with Rule 14e-1(a) under the Exchange Act, and we will not be permitted to complete our initial business combination
+ until the expiration of the tender offer period. In addition, the tender offer will be conditioned on public shareholders not tendering
+ more than a specified number of public shares, which number will be based on the requirement that we will only redeem our public
+ shares so long as (after such redemption) our net tangible assets will be at least $5,000,001 either immediately prior to or upon
+ consummation of our initial business combination and after payment of underwriters fees and commissions (so that we are not
+ subject to the SEC s "penny stock" rules) or any greater net tangible asset or cash requirement which may be contained
+ in the agreement relating to our initial business combination. If public shareholders tender more shares than we have offered to
+ purchase, we will withdraw the tender offer and not complete the initial business combination.
+
+ 
+ 
+
+ 
+ 
+ 
+ If, however,
+ shareholder approval of the transaction is required by law or stock exchange listing requirements, or we decide to obtain shareholder
+ approval for business or other legal reasons, we will:
+
+ 
+ 
+
+ 
+ 
+ 
+ conduct the
+ redemptions in conjunction with a proxy solicitation pursuant to Regulation 14A under the Exchange Act, which regulates the solicitation
+ of proxies, and not pursuant to the tender offer rules, and
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ file proxy materials with the SEC.
+
+ 
+ 
+
+ 
+ 
+ 
+ If
+ we seek shareholder approval, we will complete our initial business combination only if a majority of the outstanding ordinary shares
+ voted are voted in favor of the initial business combination. Each ordinary shares will have one vote on all matters submitted to
+ shareholders. A quorum for such meeting will consist of the holders present in person or by proxy of outstanding share of the company
+ representing a majority of the voting power of all outstanding shares of the company entitled to vote at such meeting. Our initial
+ shareholders will count towards this quorum and have agreed to vote their founder shares, private shares and any public shares purchased
+ in or after this offering in favor of our initial business combination. For purposes of seeking approval of the majority of our outstanding
+ ordinary shares voted, non-votes will have no effect on the approval of our initial business combination once a quorum is obtained.
+ As a result, in addition to our initial shareholders founder shares, we would need (i) 1,995,001 or 33.3%, of the 6,000,000
+ public shares sold in this offering to be voted in favor of an initial business combination in order to have our initial business
+ combination approved (assuming all outstanding shares are voted, including the EBC founder shares and private shares, the EBC
+ founder shares and private shares are voted in favor of the proposed initial business combination (although they are not required
+ to do so) and the over-allotment option is not exercised), or (ii) none of the 6,000,000 public shares sold in this offering,
+ to be voted in favor of an initial business combination in order to have our initial business combination approved (assuming that
+ only the minimum number of shares representing a quorum are voted but of those shares, the EBC founder shares and private shares
+ are voted in favor of the proposed business combination (although they are not required to do so), and the over-allotment option
+ is not exercised).
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ We
+ intend to give approximately 20 days (but not less than 5 clear days) prior written notice of any such
+ meeting, if required, at which a vote shall be taken to approve our initial business combination. The quorum and voting thresholds,
+ and the voting agreements of our initial shareholders, may make it more likely that we will consummate our initial business combination.
+ Each public shareholder may elect to redeem its public shares irrespective of whether it votes for or against the proposed transaction.
+
+ 
+ 
+
+ 20
+
+ 
+
+ 
+
+ 
+
+ 
+ 
+ 
+ We may require
+ our public shareholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in "street
+ name," to either tender their certificates to our transfer agent prior to the date set forth in the tender offer documents
+ mailed to such holders, or up to two business days prior to the vote on the proposal to approve the initial business combination
+ in the event we distribute proxy materials, or to deliver their shares to the transfer agent electronically. We believe that this
+ will allow our transfer agent to efficiently process any redemptions without the need for further communication or action from the
+ redeeming public shareholders, which could delay redemptions and result in additional administrative cost. If the proposed initial
+ business combination is not approved and we continue to search for a target company, we will promptly return any certificates delivered,
+ or shares tendered electronically, by public shareholders who elected to redeem their shares.
+
+ 
+ 
+ 
+
+ 
+ 
+ Our amended
+ and restated memorandum and articles of association provides that we will only redeem our public shares so long as (after such redemption)
+ our net tangible assets will be at least $5,000,001 either immediately prior to or upon consummation of our initial business combination
+ and after payment of underwriters fees and commissions (so that we are not subject to the SEC s "penny stock"
+ rules) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to our initial business
+ combination. For example, the proposed initial business combination may require: (i) cash consideration to be paid to the target
+ or its owners, (ii) cash to be transferred to the target for working capital or other general corporate purposes or (iii) the retention
+ of cash to satisfy other conditions in accordance with the terms of the proposed initial business combination. In the event the aggregate
+ cash consideration we would be required to pay for all ordinary shares that are validly submitted for redemption plus any amount
+ required to satisfy cash conditions pursuant to the terms of the proposed initial business combination exceed the aggregate amount
+ of cash available to us, we will not complete the initial business combination or redeem any shares, and all ordinary shares submitted
+ for redemption will be returned to the holders thereof.
+
+ 
+ 
+ 
+ 
+
+ 
+ Limitation on redemption rights of shareholders holding
+ 15% or more of the shares sold in this offering if we hold shareholder vote
+ 
+ Notwithstanding the foregoing
+ redemption rights, if we seek shareholder approval of our initial business combination and we do not conduct redemptions in connection
+ with our initial business combination pursuant to the tender offer rules, our amended and restated memorandum and articles of association
+ provides that a public shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder
+ is acting in concert or as a "group" (as defined under Section 13 of the Exchange Act), will be restricted from redeeming
+ its shares with respect to more than an aggregate of 15% of the shares sold in this offering. We believe the restriction described
+ above will discourage shareholders from accumulating large blocks of shares, and subsequent attempts by such holders to use their
+ ability to redeem their shares as a means to force us or our management to purchase their shares at a significant premium to the
+ then-current market price or on other undesirable terms. By limiting our shareholders ability to redeem to no more than 15%
+ of the shares sold in this offering, we believe we will limit the ability of a small group of shareholders to unreasonably attempt
+ to block our ability to complete our initial business combination, particularly in connection with an initial business combination
+ with a target that requires as a closing condition that we have a minimum net worth or a certain amount of cash. However, we would
+ not be restricting our shareholders ability to vote all of their shares (including all shares held by those shareholders that
+ hold more than 15% of the shares sold in this offering) for or against our initial business combination.
+
+ 
+ 
+
+ 21
+
+ 
+
+ 
+
+ 
+
+ 
+ Redemption rights in connection
+ with proposed amendments to our amended and restated memorandum and articles of association
+ 
+ Our
+ amended and restated memorandum and articles of association provides that any of its provisions (including without limitation, the
+ provisions related to pre-business combination activity (including the requirement to deposit proceeds of this offering and the private
+ placement of units into the trust account and not release such amounts except in specified circumstances, and to provide redemption
+ rights to public shareholders as described herein)) may be amended if approved by holders of two-thirds of our ordinary shares entitled
+ to vote thereon, subject to applicable provisions of the Cayman Islands law, or the Companies Act, or applicable stock exchange rules,
+ and corresponding provisions of the trust agreement governing the release of funds from our trust account may be amended if approved
+ by holders of two-thirds of our ordinary shares entitled to vote thereon. We may not issue additional securities that can vote on
+ amendments to our amended and restated memorandum and articles of association or on our initial business combination or that would
+ entitle holders to receive funds from the trust account. Our initial shareholders, who will collectively beneficially own 20% of
+ our ordinary shares upon the closing of this offering (excluding the private shares and the EBC founder shares and assuming they
+ do not purchase any units in this offering), will participate in any vote to amend our amended and restated memorandum and articles
+ of association and/or trust agreement and will have the discretion to vote in any manner they choose. Our initial shareholders have
+ agreed, pursuant to a letter agreement with us (filed as an exhibit to the registration statement of which this prospectus forms
+ a part), that they will not propose any amendment to our amended and restated memorandum and articles of association (i) that would
+ modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or to redeem
+ 100% of our public shares if we do not complete our initial business combination within 15 months from the closing of this
+ offering (or up to 18 months, if we extend the time to complete an initial business combination as described in this prospectus)
+ or (ii) with respect to any other material provision relating to shareholders rights or pre-initial business combination activity,
+ unless we provide our public shareholders with the opportunity to redeem their ordinary shares upon approval of any such amendment
+ at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest (which
+ interest shall be net of taxes payable) divided by the number of then outstanding public shares. They have also agreed to waive their
+ redemption rights with respect to any founder shares, private shares and any public shares held by them in connection with the completion
+ of our initial business combination and to waive their redemption rights with respect to their founder shares, private shares and
+ public shares in connection with a shareholder vote to approve an amendment to our amended and restated memorandum and articles of
+ association described above.
+
+ 
+ 
+
+ 22
+
+ 
+
+ 
+
+ 
+
+ 
+ Release of funds in trust account
+ on closing of our initial business combination
+ 
+ On the completion
+ of our initial business combination, all amounts held in the trust account will be released to us. We will use these funds to pay
+ amounts due to any public shareholders who exercise their redemption rights as described above under "Redemption rights for
+ public shareholders upon completion of our initial business combination," to pay EBC the fee payable pursuant to the Business
+ Combination Marketing Agreement described under the heading "Underwriting," to pay all or a portion of the consideration
+ payable to the target or owners of the target of our initial business combination and to pay other expenses associated with our initial
+ business combination. If our initial business combination is paid for using equity or debt instruments, or not all of the funds released
+ from the trust account are used for payment of the consideration in connection with our initial business combination, we may apply
+ the balance of the cash released to us from the trust account for general corporate purposes, including for maintenance or expansion
+ of operations of post-transaction businesses, the payment of principal or interest due on indebtedness, to fund the purchase of other
+ assets, companies or for working capital.
+
+ 
+ 
+ 
+ 
+
+ 
+ Redemption of public shares and distribution and liquidation
+ if no initial business combination
+ 
+ Our
+ amended and restated memorandum and articles of association provides that we will have only 15 months from the closing of
+ this offering (or up to 18 months, if we extend the time to complete a business combination as described in this prospectus) to complete
+ our initial business combination. If we are unable to complete our initial business combination within such time period, we will:
+ (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business
+ days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in
+ the trust account including interest earned on the funds held in the trust account and not previously released to us to pay our taxes
+ (less up to $100,000 of interest to pay liquidation and dissolution expenses), divided by the number of then outstanding public shares,
+ which redemption will completely extinguish public shareholders rights as shareholders (including the right to receive further
+ liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption,
+ subject to the approval of our remaining shareholders and our board of directors, dissolve and liquidate, subject in each case to
+ our obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law. There will
+ be no redemption rights or liquidating distributions with respect to our rights, which will expire worthless if we fail to complete
+ our initial business combination within the 15-month time period (or 18-month time period, as applicable).
+
+ 
+ 
+
+ 23
+
+ 
+
+ 
+
+ 
+
+ 
+ 
+ 
+ Our
+ initial shareholders have waived their rights to liquidating distributions from the trust account with respect to any founder shares
+ or private shares held by them if we fail to complete our initial business combination within 15 months from the closing of
+ this offering (or up to 18 months, if we extend the time to complete an initial business combination as described in this prospectus).
+ However, if our initial shareholders acquire public shares in or after this offering, they will be entitled to liquidating distributions
+ from the trust account with respect to such public shares if we fail to complete our initial business combination within the allotted
+ time period.
+
+ 
+ 
+ 
+
+ Limited payments to insiders
+ 
+ There will
+ be no finder s fees, reimbursements or cash payments made to our initial shareholders or their affiliates, for services rendered
+ to us prior to or in connection with the completion of our initial business combination although we may consider cash or other compensation
+ to officers or advisors we may hire subsequent to this offering to be paid either prior to or in connection with our initial business
+ combination. In addition, the following payments will be made to our initial shareholders or their affiliates, none of which will
+ be made from the proceeds of this offering held in the trust account prior to the completion of our initial business combination:
+
+ 
+ 
+
+ 
+ 
+ 
+ Repayment of
+ an aggregate of up to $300,000 in loans made to us by our sponsors.
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ Repayment of any extension
+ loans.
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ Reimbursement for any out-of-pocket
+ expenses related to identifying, investigating and completing an initial business combination.
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ Repayment of non-interest
+ bearing loans which may be made by our initial shareholders or their affiliates to finance transaction costs in connection with an
+ intended initial business combination. Up to $1,500,000 of such loans may be convertible into units, or working capital units, at
+ a price of $10.00 per unit at the option of the lender. The working capital units would be identical to the private units sold in
+ the private placement. Other than as described above, no terms have been determined with respect to such loans and no written agreements
+ have been entered into with respect to any such loans.
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ Payment to Bowen Holding
+ LP of $10,000 per month for office space, secretarial and administrative services.
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ Payment to TenX Global Capital LP, an affiliate of Na Gai, our Chairwoman
+of the Board, of (i) $20,000 for consulting and advisory services including, but not limited to, assisting with preparing our audited
+financial statements and other financial-related disclosures included in this prospectus, maintaining our accounting systems and assisting
+with the preparation of the balance sheet to be filed by us upon consummation of this offering in a Current Report on Form 8-K and (ii)
+$5,250 per quarter following this offering to assist us with our quarterly and annual filings with the Securities and Exchange Commission. 
+
+ 
+ 
+
+ 
+ 
+ 
+ Our audit committee
+ will review on a quarterly basis all payments that were made to our initial shareholders or their affiliates.
+
+ 
+ 
+
+ 24
+
+ 
+
+ 
+
+ 
+
+ 
+ Audit Committee
+ 
+ We will establish
+ and maintain an audit committee, which will be composed entirely of independent directors to, among other things, monitor compliance
+ with the terms described above and the other terms relating to this offering. If any noncompliance is identified, then the audit
+ committee will be charged with the responsibility to promptly take all action necessary to rectify such noncompliance or otherwise
+ to cause compliance with the terms of this offering. For more information, see the section of this prospectus entitled "Management
+ — Committees of the Board of Directors — Audit Committee."
+
+ 
+ 
+ 
+
+ Conflicts of Interest
+ 
+ Although we
+ do not believe any conflict currently exists between us and our initial shareholders or their affiliates, our initial shareholders
+ or their affiliates may compete with us for acquisition opportunities. If such entities decide to pursue an opportunity, we may be
+ precluded from procuring such opportunity. None of our initial shareholders or their respective affiliates will have any obligation
+ to present us with any opportunity for a potential initial business combination of which they become aware, unless presented to such
+ member specifically in his or her capacity as an officer or director of the Company. Our management team, in their capacities as
+ employees or affiliates of our initial shareholders or in their other endeavors, may be required to present potential business combinations
+ to future initial shareholders affiliates or third parties, before they present such opportunities to us.
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ Our
+ officers have agreed that they will not become an officer or director of any other special purpose acquisition company that publicly
+ files a registration statement for its initial public offering unless and until we enter into a definitive agreement regarding our
+ initial business combination or we have failed to complete our initial business combination within 15 months from the closing
+ of this offering (or up to 18 months, if we extend the time to complete an initial business combination as described in this prospectus).
+
+ 
+ 
+ 
+ 
+
+ 
+ Indemnity
+ 
+ Our
+ sponsors have agreed that they will be liable to us if and to the extent any claims by a third party for services rendered or products
+ sold to us, or by a prospective target business with which we have discussed entering into a transaction agreement, reduce the amount
+ of funds in the trust account to below (i) $10.10 per public share or (ii) such lesser amount per public share held in the
+ trust account as of the date of the liquidation of the trust account due to reductions in the value of the trust assets. This liability
+ will not apply with respect to any claims by a third party who executed a waiver of any and all rights to seek access to the trust
+ account and except as to any claims under our indemnity of the underwriters of this offering against certain liabilities, including
+ liabilities under the Securities Act. Moreover, in the event that an executed waiver is deemed to be unenforceable against a third
+ party, then our sponsors will not be responsible to the extent of any liability for such third-party claims. We have not independently
+ verified whether our sponsors have sufficient funds to satisfy their indemnity obligations and believe that our sponsors only
+ assets are securities of our company. We have not asked our sponsors to reserve for such indemnification obligations. Accordingly,
+ we believe it is unlikely that our sponsors will be able to satisfy any indemnification obligations that may arise. None of our officers
+ or directors are required to indemnify us for claims by third parties including, without limitation, claims by vendors and prospective
+ target businesses.
+
+ 
+ 
+
+ 25
+
+ 
+
+ 
+
+ 
+
+Risk
+Factors

parsed_sections/risk_factors/2023/CBSTF_cannabist_risk_factors.txt

@@ -0,0 +1 @@
+RISK FACTORS An investment in the Company s securities involves certain risks, including those set forth below and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022. When evaluating the Company and its business, investors should carefully review the information set out in this prospectus. The risks and uncertainties described are not the only ones the Company faces. Additional risks and uncertainties, including those that the Company is unaware of or that are currently deemed immaterial, may also adversely affect the Company and its business. Prospective investors should carefully consider these risks, in addition to the information contained and incorporated by reference herein and in the prospectus supplement relating to an offering and the information incorporated by reference therein, before purchasing Securities. Some of the risk factors described herein and in the documents incorporated by reference herein (including subsequently filed documents incorporated by reference herein), including the applicable prospectus supplement are interrelated and, consequently, investors should treat such risk factors as a whole. If any of the events identified in these risks and uncertainties were to actually occur, it could have a material adverse effect on the business, assets, financial condition, results of operations or prospects of the Company. These are not the only risks and uncertainties that the Company faces. Additional risks and uncertainties not presently known to the Company or that are currently considered immaterial may also have a material adverse effect on the business, assets, financial condition, results of operations or prospects of the Company. The Company cannot assure you that it will successfully address any or all of these risks. There is no assurance that any risk management steps taken will avoid future loss due to the occurrence of the risks described in this prospectus or the applicable prospectus supplement or the documents incorporated by reference herein and therein or other unforeseen risks. You may experience future dilution as a result of future equity offerings. The Company may need to raise additional financing in the future through the issuance of additional equity securities or convertible debt securities. If the Company raises additional funding by issuing additional equity securities or convertible debt securities, such financings may substantially dilute the interests of shareholders of the Company and reduce the value of their investment and the value of the Company s securities. There may not be an active, liquid market for the Common Shares. There may not be an active, liquid market for the Common Shares. There is no guarantee that an active trading market for the Common Shares will be maintained on Cboe and/or the OTCQX. Investors may not be able to sell their Common Shares quickly or at the latest market price if trading in the Common Shares is not active. Return on securities is not guaranteed. There is no guarantee that the Common Shares will earn any positive return in the short term or long term. A holding of any such security is speculative and involves a high degree of risk and should be undertaken only by holders whose financial resources are sufficient to enable them to assume such risks and who have no need for immediate liquidity in their investment. An investment in the Common Shares is appropriate only for holders who have the capacity to absorb a loss of some or all of their investment. Future offerings of debt or preferred equity securities, which would rank senior to our Common Shares, may adversely affect the market price of our Common Shares. If, in the future, we decide to issue debt or preferred equity securities that may rank senior to our Common Shares, it is likely that such securities will be governed by an indenture or other instrument containing covenants restricting our operating flexibility. Any convertible or exchangeable securities that we issue in the future may have rights, preferences and privileges more favorable than those of our Common Shares and may result in dilution to owners of our Common Shares. We and, indirectly, our shareholders, will bear the cost of issuing and Table of Contents servicing such securities. Because our decision to issue debt or equity securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, holders of our Common Shares will bear the risk of our future offerings reducing the market price of our Common Shares and diluting the value of their stock holdings in us. Future sales by our Shareholders may adversely affect our share price and our ability to raise funds in new share offerings. Sales of our Common Shares in the public market following any prospective offering could lower the market price of our Common Shares. Sales may also make it more difficult for us to sell equity securities or equity-related securities in the future at a time and price that our management deems acceptable. The price of our Common Shares is subject to volatility and you could lose all or part of your investment as a result. There is no guarantee that our Common Shares will appreciate in value or maintain the price at which our shareholders have purchased their shares. Securities of mining companies have experienced substantial volatility and downward pressure in the recent past, often based on factors unrelated to the financial performance or prospects of the companies involved. These factors include macroeconomic conditions in North America and globally, and market perceptions of the attractiveness of particular industries. Other factors unrelated to our performance that may have an effect on the price of our securities include the following: the extent of research coverage available to investors concerning our business may be limited if investment banks with research capabilities do not follow our securities; lessening in trading volume and general market interest in our securities may affect an investor s ability to trade significant numbers of our securities; the size of our public float and the exclusion from market indices may limit the ability of some institutions to invest in our securities; and a substantial decline in the price of our securities that persists for a significant period of time could cause our securities to be delisted from an exchange, further reducing market liquidity. Our exclusion from certain market indices may reduce market liquidity or the price of our securities. If an active market for our securities does not continue, the liquidity of an investor s investment may be limited and the price of our securities may decline. If an active market does not exist, investors may lose their entire investment. As a result of any of these factors, the market price of our securities at any given point in time may not accurately reflect our long-term value. Securities class-action litigation often has been brought against companies in periods of volatility in the market price of their securities, and following major corporate transactions or mergers and acquisitions. We may in the future be the target of similar litigation. Securities litigation could result in substantial costs and damages and divert management s attention and resources. The Company is subject to taxation in both Canada and the United States. The Company is treated as a U.S. domestic corporation for U.S. federal income tax purposes under Section 7874(b) of the IRC. Consequently, the Company is subject to U.S. federal income tax on its worldwide taxable income. Since the Company is a resident of Canada for purposes of the Tax Act, the Company is also subject to Canadian income tax. Consequently, the Company is liable for both U.S. and Canadian income tax, which could have a material adverse effect on its financial condition and results of operations, and could inhibit efficient use of its capital. Proposed legislation in the U.S. Congress, including changes in U.S. tax law and the Inflation Reduction Act of 2022, may adversely impact the Company and the value of the Common Shares. There can be no assurance that the Canadian and U.S. federal income tax treatment of the Company or an investment in the Company will not be modified, prospectively or retroactively, by legislative, judicial or administrative action, in a manner adverse to the Company or holders of the Common Shares. Table of Contents In recent years, many changes to U.S. federal income tax laws have been proposed and made, and additional changes to U.S. federal income tax laws are likely to continue to occur in the future. The U.S. Congress is currently considering numerous items of legislation which may be enacted prospectively or with retroactive effect, which legislation could adversely impact the Company s financial performance and the value of the Common Shares. Additionally, states in which the Company operates or owns assets may impose new or increased taxes. If enacted, most of the proposals would be effective for the current or later years. The proposed legislation remains subject to change, and its impact on the Company and purchasers of the Common Shares is uncertain. In addition, the Inflation Reduction Act of 2022 includes provisions that will impact the U.S. federal income taxation of corporations. Among other items, this legislation includes provisions that will impose a minimum tax on the book income of certain large corporations and an excise tax on certain corporate stock repurchases that would be imposed on the corporation repurchasing such stock. It is unclear how this legislation will be implemented by the U.S. Department of the Treasury and the Company cannot predict how this legislation or any future changes in tax laws might affect the Company or purchasers of the Common Shares. Table of Contents

parsed_sections/risk_factors/2023/CETI_cyber_risk_factors.txt

@@ -0,0 +1 @@
+4 CETI also uses downhole monitoring through multiple down hole sensors. This is leveraged by being able to control hundreds of wells simultaneously and remotely through a neuro network on a cell phone or other electronic devices CETI wells operate off of a solar platform and ultimately by taking methane gas trapped in water and extracting the gas to use for power. Combined, this will enable CETI to reduce power which would result in overall lower production costs. Target Markets - Our target markets include some of the largest water contamination industries in the world which include the oil & gas industry. When funds permit, the company will review mining, agriculture, meat packing, dairy farms & feedlots and rural municipalities for the use of its water filtration system. Initial Target Market CETI s board has identified the oil & gas industry as its initial target market for rollout and execution of the Companies technologies. The reason for this is 3-fold: 1) The high level of contaminants found in oil production wastewater which will validate the capabilities of CETI s water filtration technologies. 2) The recurring revenue generated monthly to the Company from producing oil wells, and 3) The substantial increase in the price of oil. CETI s water filtration technology will assist both the Railroad Commission of Texas (RRC) and EPA to manage the 2021 regulatory EPA mandates for the injection of contaminated oil well water back into the ground. This could potentially reduce the water sourcing needed to clean the contaminated water. How The Water Filtration Industry and The Oil & Gas Industry are Related? High Water Usage: For every barrel of oil there is between 3 to 8 barrels of water produced out of the well. This is expected to increase up to 25 to 1 by 2025. Highly Contaminated Well Water: Oil well water typically contains extremely high levels of brine, Barium and Strontium which contains radioactive isotopes among many other lethal chemicals. Laws enacted in 2021: Recently established laws mandated by the Texas Railroad Commission and the EPA require contaminated oil well water to be cleaned before injecting it back into the ground. Costly To Truck Water: The alternative of trucking the contaminated water out of the field to be cleaned and trucking clean water back to the field can add significant expense to the cost of production. Fluid Dynamics: All fluids extracted downhole from a well must be replaced under Texas law. Additionally, the water injected back into the ground is what maintains field pressure for continued production. For its Pilot Project, CETI has acquired the oil & gas mineral rights to the Alvey Oil Field (a 479-acre Pilot oil field located in West Texas and is the registered operator of record with the Railroad Commission of Texas. The purpose for this Pilot oil field is to demonstrate CETI s oil & gas water filtration system, downhole pump and related technologies and to create recurring revenue to ensure Company overhead, operational costs, profit and investor return are covered on an ongoing basis. Revenue Model CETI has identified 5 revenue streams to the company within the oil & gas industry which are as follows: 1) CETI Retains Ownership of Producing Assets CETI has acquired the mineral right to a 479-acre oil field in West Texas. Not only will CETI benefit from the recurring revenue produced from said wells, but has the ability to add an additional 250 new wells. An independent geological report estimated recoverable inground reserves between 44.8MM to 57.6MM barrels of oil. 2) Income Sharing with Industry Field Operator Partners CETI intends to incorporate its downhole pump technologies with other small and medium oil field Operators. All increases in production and savings from lower lift costs resulting from our technologies will be split on an estimated 80% CETI 20% Operator basis. 5 3) Equipment Service Agreements (SLA s) CETI will enter into an SLA to service every water filtration system sold. This will create an additional revenue stream to the company and enable it to ensure the longevity, productivity and stability of each system sold and operating in the field. 4) Sales of Water Filtration Systems CETI will be outsourcing the production of its water filtration systems. However, the Company intends to generate revenues from its retail sales net margins. At this time CETI has not entered into any outsourcing agreements with third parties. 5) Equipment Leasing Ultimately, CETI will incorporate an in-house/private label equipment leasing program. This will create recurring revenue to the company, control of its technology, and ultimately create an asset base to the Company when the equipment comes off lease. Independent Auditor Explanatory Paragraph CETI s independent auditors have added an explanatory paragraph to their report of our audited financial statements for the calendar year 2022, stating that our net operating loss of $481,708, minimal revenues and dependence on our ability to raise additional capital to continue our business, raise substantial doubt about our ability to continue as a going concern. For the nine months ending September 30, 2023 the net loss from operations was $2,298,654 and minimal sales so there still is substantial doubt about our ability to continue as a going concern. Our financial statements and their explanatory notes included as part of this prospectus do not include any adjustments that might result from the outcome of this uncertainty. There is no guarantee that we will be able to raise funds through stock sales, debt instruments, or private financing. While we are pursuing a number of financing avenues, currently we have no agreements in place to raise money through debt instruments or private financing. If we fail to obtain additional financing, we may be forced to cease our planned business operations altogether. There is no assurance that the Company will be able to obtain any bank loans or private financing. We expect to continue to incur losses for at least the next 6 months since we expect that the revenue we generate, is insufficient to cover our expenses. Our current cash levels can carry us for 3 months or more but we do not have sufficient cash or cash equivalents to execute our plan of operations during the period of anticipated losses. While we are close to producing more revenue in our Pilot oil field project, we will need to obtain additional financing through equity security sales, debt instruments or private financing, to conduct our day-to-day operations, and to fully execute our business plan. We plan to raise the capital necessary to fund our business through the sale of equity securities, debt securities, debt instruments or private financing. (See MD&A section later in this document). DESCRIPTION OF PROPERTY Our corporate office is located at 6991 E. Camelback Road, Suite D-300, Scottsdale, Arizona 85251. We lease office space from an Executive office leasing company (Regis) in which we have access to private offices, conference rooms, training rooms and other corporate facilities on an as needed basis. There are currently no proposed programs for renovation, improvement or development of the facility currently in use. The company pays $125 a month on a month-to-month lease. PRINCIPAL OPERATIONS AND PRODUCTS OF THE COMPANY In the General Introduction above, it covered much of our principal operations and current products. However, to provide a brief summary: CETI is an oil and water technology company that designs water purification solutions for commercial applications and industries. CETI has aggregated technologies to produce water filtration system that can clean contaminated industrial wastewater. Pilot Project is in the Alvey Oil Field in West Texas. We are our own first client in that we are the operator of record and leaseholder of an oil field to demonstrate both our water filtration technology as well as our unique oil production processes and related technologies. Our principal purpose is to engage in environmentally friendly projects involving commercial water filtration and our initial project is in the oil industry, a heavy user of contaminated water. 6 RISK FACTORS The Company's financial condition, business, operations and prospects involve a high degree of risk. You are urged to carefully read and consider the risks and uncertainties beginning on page 9 of this prospectus entitled Risk Factors as well as the other information in this report before deciding to invest in our Company. All known materials risks are discussed in the Risk Factors section of this prospectus. If any of the risks beginning on page 9 of this Prospectus entitled Risk Factors are realized, our business, operating results and financial condition could be harmed and the value of our stock could go down. This means that our stockholders could lose all or a part of their investment THE OFFERING We have 125,818,142 shares of common stock issued and outstanding as of November 27, 2023. Through this offering we will register 8,397,721 shares held by existing shareholders (Selling Stockholders). We will not receive any of the proceeds from the 8,397,721 shares held by Selling Stockholders. Selling Stockholders Common stock offered by Selling Stockholders 8,397,721 shares of common stock. This number represents approximately 7% of our current outstanding common stock (1). Common stock outstanding before the offering (1) 125,818,142 shares of common stock as of November 27, 2023. Terms of the Offering The present Selling Security Holders will determine when and how they will sell the common stock offered in this prospectus. Use of proceeds, existing Security Holders Cyber Enviro Tech will not receive any of the proceeds of the offering from the existing Security Holders. The Selling Security Holders will receive all of the proceeds. Plan of Distribution The selling stockholders may sell all or a portion of the shares of common stock beneficially owned by them and offered hereby from time to time directly or through one or more underwriter, broker-dealers or agents. Registration of the common stock covered by this prospectus does not mean, however , that such shares necessarily will be offered or sold. See Plan of Distribution. 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 beginning on page 9. (1) Based on 125,818,142 shares of common stock outstanding as of November 27, 2023. This prospectus relates to the sale of up to 8,397,721 shares of our common stock by the selling shareholders identified in the section of this prospectus entitled Selling Stockholders. The number of common shares offered by this prospectus represents up to approximately 7% of the total common stock outstanding before the offering. We have never declared or paid any cash dividends or distributions on our capital stock. We currently intend to retain our future earnings, if any, to support operations and to finance expansion and therefore we do not anticipate paying any cash dividends on our common stock in the foreseeable future. The Company has no equity compensation plans and individual compensation arrangements except as noted in section Market for Common Equity and Related Shareholder Matters and does not intend to enter into any additional equity compensation plans and individual compensation arrangements in the future. Information regarding the Selling Stockholders (8,397,721 shares), the common shares being offered to sell under this prospectus, and the times and manner in which they may offer and sell those shares, is provided in the sections of this prospectus entitled "Selling Stockholders" and "Plan of Distribution." CETI will not receive any of the proceeds from the sale of the (22) Selling Stockholders 8,397,721 shares. The registration of common shares pursuant to this prospectus does not necessarily mean that any of those shares will ultimately be offered or sold by the Selling Stockholders. 7 SUMMARY OF FINANCIAL STATEMENTS The following table provides summary financial statement data for the nine months ending September 30, 2023 as well as for the periods ended December 31, 2022 and 2021. The results of operations for past accounting periods are not necessarily indicative of the results to be expected for any future accounting period. The data set forth below should be read in conjunction with Management s Discussion and Analysis of Financial Condition and Results of Operations, our financial statements and the related notes included in this prospectus. The following tables set forth a summary of the historical financial data of Cyber Enviro-Tech, Inc.as at and for the years ended December 31, 2022 and 2021. The historical summary financial data set forth in the following tables has been derived from the Company s financial statements included elsewhere in this prospectus. You should read this data together with the Company s financial statements and the related notes appearing elsewhere in this prospectus and the information included under the caption Management s Discussion and Analysis of Financial Condition and Results of Operations. The Company s historical results are not necessarily indicative of our future results. Statements of Operation Nine Months Ending Year Ending Year Ending Seotember 30, 2023 December 31, 2022 December 31, 2021 Total revenue $13,897 $85,356 $14,332 Cost of Sales (3,709) (21,904) (3,395) Total operating expenses (2,081,563) (545,160) (325,378) Loss from operations (2,071,375) (481,708) (314,441) Total other income (expense) (227,279) 1,961,070 (3,435,226) Net Gain (Loss) (2,298,654) 1,479,362 (3,749,667) Gain (Loss) per share, basic and diluted (0.02) 0.01 (0.04) Diluted Weighted average number of shares used in per share calculation-basic 117,689,997 108,094,441 102,908,507 Balance Sheet As of As of As of September 30, 2023 December 31, 2022 December 31, 2021 Total current assets 765,864 392,820 347,454 Total assets 4,886,135 2,871,855 1,475,858 Current liabilities 617,333 440,637 359,037 Total Liabilities 2,786,324 1,010,992 4,054,743 Common stock 121,255 115,915 104,205 Additional paid in capital 5,937,382 4,368,442 1,141,328 Common stock to be issued 1,223,939 0 154,164 Unearned stock compensation (384,891) (124,274) 0 Treasury stock, at cost (66,400) (66,400) (66,400) Accumulated deficit (4,731,474) (2,432,820) (3,912,182) Total Shareholder equity 2,099,811 1,860,863 (2,578,885) Total liabilities and shareholder s equity 4,886,135 2,871,855 1,475,858 8 RISK FACTORS An investment in our securities involves a high degree of risk. You should carefully consider the following information about these risks, together with the other information contained in this prospectus, including the matters addressed in the section entitled Caution Regarding Forward-Looking Statements, beginning on page 3 of this prospectus, before making an investment decision. Our business, prospects, financial condition, and results of operations may be materially and adversely affected as a result of any of the following risks. The value of our securities could decline as a result of any of these risks. You could lose all or part of your investment in our securities. Some of the statements in Risk Factors are forward-looking statements. The following risk factors are not the only risk factors facing our Company. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our business, prospects, financial condition, and results of operations and it is not possible to predict all risk factors, nor can we assess the impact of all factors on us or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in or implied by any forward-looking statements.

parsed_sections/risk_factors/2023/CETY_clean_risk_factors.txt

@@ -0,0 +1,1616 @@
+RISK
+FACTORS
+
+ 
+
+Investing
+in our common stock involves a high degree of risk. Before investing in our common stock, you should carefully consider the risks described
+below, as well as the other information in this prospectus, including our consolidated financial statements and the related notes. In
+addition, we may face additional risks and uncertainties not currently known to us, or which as of the date of this registration statement
+we might not consider significant, which may adversely affect our business. If any of the following risks occur, our business, financial
+condition and results of operations could be materially adversely affected. In such case the trading price of our common stock could
+decline due to any of these risks or uncertainties, and you may lose part or all of your investment.
+
+ 
+
+Risks
+Related to Our Business and Industry
+
+ 
+
+OUR
+INDEPENDENT ACCOUNTANTS HAVE ISSUED A GOING CONCERN OPINION AND IF WE CANNOT OBTAIN ADDITIONAL FINANCING AND/OR REDUCE OUR OPERATING
+COSTS SUFFICIENTLY, WE MAY HAVE TO CURTAIL OPERATIONS AND MAY ULTIMATELY CEASE TO EXIST.
+
+ 
+
+Our
+financial statements for the fiscal years ended December 31, 2020 and 2021 have been prepared on a going concern basis, which contemplates
+continuity of operations, realization of assets and liquidation of liabilities in the normal course of business. The Company had a total
+stockholder s deficit of $1,702,653 and a working capital deficit of $4,274,383 and an accumulated deficit of $17,423,930 as of
+December 31, 2021 and used $2,552,547 in net cash from operating activities for the year ended December 31, 2021. Therefore, there
+is doubt about the ability of the Company to continue as a going concern. There can be no assurance that the Company will achieve its
+goals and reach profitable operations and is still dependent upon its ability (1) to obtain sufficient debt and/or equity capital and/or
+(2) to generate positive cash flow from operations.
+
+ 
+
+For
+the year ended December 31, 2021, we had a net profit of $278,492 compared to a net loss of $3,435,764 for the same period in
+2020. The increase in the net profit in 2021 was mainly due to the change in derivative liability associated with the convertible debt
+and lower interest expense from 2021 to 2020.
+
+ 
+
+WE
+HAVE AN ACCUMULATED DEFICIT AND MAY INCUR ADDITIONAL LOSSES; THEREFORE, WE MAY NOT BE ABLE TO OBTAIN THE ADDITIONAL FINANCING NEEDED
+FOR WORKING CAPITAL, CAPITAL EXPENDITURES AND TO MEET OUR DEBT SERVICE OBLIGATIONS.
+
+ 
+
+As
+of December 31, 2021, we had current liabilities of $6,865,123. The Company has been able to raise additional capital of approximately
+$4.78 million and repaid approximately $2.0 million of debt in 2021. Our outstanding debt could limit our ability to obtain additional
+financing for working capital, capital expenditures, debt service requirements, or other purposes in the future, as needed; to plan for,
+or react to, changes in technology and in our business and competition; and to react in the event of an economic downturn.
+
+ 
+
+In addition,
+we may not be able to meet our debt service obligations. The total outstanding balance of indebtedness as of the end of September
+30, 2022 was 6,372,817. Some of these outstanding debts bear a high interest rate. For example, the interest rate for debts
+due to Nations Interbanc with an outstanding balance of $1,058,127 is 26% per annum as of September 30, 2022. If we are
+unable to generate sufficient cash flow or obtain funds for required payments, or if we fail to comply with covenants in our revolving
+lines of credit, we will be in default.
+
+ 
+
+WE
+ARE IN DEFAULT IN OUR OBLIGATIONS TO A MAJOR CREDITOR
+
+ 
+
+Currently,
+we are in default of our notes payable to Cybernaut Zfounder Ventures ( Cybernaut ), which have aggregate outstanding principal
+and interest of approximately $317,319 as of September 30, 2022. Cybernaut has agreed to pay the prepayment amounts of certain
+convertible promissory notes on behalf of the company, and as a result, Cybernaut acquired the rights of the original note holder under
+the notes. The default interest on the notes is 14% per annum. The notes can convert into the common stock of the Company at the variable
+discount rate of 35%.
+
+ 
+
+OUR
+BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION MAY BE ADVERSELY AFFECTED BY PUBLIC HEALTH EPIDEMICS, INCLUDING THE COVID-19.
+
+ 
+
+A
+public health epidemic, including the COVID-19, poses the risk that we or our employees, contractors, suppliers, customers and other
+business partners may be prevented from conducting business activities for an indefinite period of time, due to factors such as shutdowns
+that may be requested or mandated by governmental authorities. The COVID-19 pandemic continues to rapidly evolve. At this time, there
+continues to be significant volatility and uncertainty relating to the full extent to which the COVID-19 pandemic and the various responses
+to it will impact our business, operations and financial results.
+
+ 
+
+The
+extent to which the COVID-19 pandemic may impact our results will depend on future developments, which are highly uncertain and cannot
+be predicted as of the date of this prospectus, including the effectiveness of vaccines and other treatments for COVID-19, and other
+new information that may emerge concerning the severity of the pandemic and steps taken to contain the pandemic or treat its impact,
+among others. The pandemic and the current financial, economic and capital markets environment, and future developments in the global
+supply chain and other areas present material uncertainty and risk with respect to our performance, financial condition, results of operations
+and cash flows.
+
+ 
+
+ 9
+
+ 
+
+ 
+
+ 
+
+To
+the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many
+of the other risks described in this Risk Factors section.
+
+ 
+
+WE
+HAVE NOT MADE A PAYMENT UNDER A MATERIAL CONTRACT, WHICH COULD RESULT IN ADVERSE IMPACTS ON OUR OPERATIONS AND FINANCIAL RESULTS.
+
+ 
+
+As
+of the date of this prospectus, we have not made a payment of the principal of $1,200,000 with the accrued interest of $325,843 which
+comprised the balance of the purchase price pursuant to our asset purchase agreement with General Electric International ( GE ),
+under which we acquired all assets of Heat Recovery Solutions business unit from General Electric International. In addition, we have
+not paid GE an amount of $972,233 in accrued transitional fees. We believe that the outstanding amounts should have been an offset to
+purchase price we paid due to a misrepresentation of the values of the disclosed assets as reflected in the principal amount of the outstanding
+note and in the transition agreements. CETY stopped making payments and informed GE that it had encountered difficulties because of the
+valuations of the assets that were acquired from GE. Given that the values of the assets were different than GE s internal reports
+and as we discussed at the time of the transaction with GE s management, we proposed a change in the amount the Company owes GE
+under the purchase agreement, but GE was non-responsive and GE s entire distributed power vertical has been divested.
+
+ 
+
+Based
+on the California Statute of Limitations, the Nevada Statute of Limitations, and the New York Statute of Limitations it is the view of
+our legal counsel that the above referenced debt is no longer an enforceable obligation. under California law, Nevada law, and New York
+law, as it became past due no later than November 3, 2016, more than Six (6) years ago and last payment made on the debt was on November
+3, 2016, which is more than Six (6) years ago.
+
+ 
+
+IF
+DEMAND FOR THE PRODUCTS AND SERVICES THAT THE COMPANY OFFERS SLOWS, OUR BUSINESS WOULD BE MATERIALLY AFFECTED.
+
+ 
+
+Demand
+for products which it intends to sell depends on many factors, including:
+
+ 
+
+ 
+ 
+ 
+ the
+ economy, and in periods of rapidly declining economic conditions, customers may defer purchases or may choose alternate products;
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ the
+ cost of oil, gas and solar energy;
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ the
+ competitive environment in the heat to power sectors may force us to reduce prices below our desired pricing level or increase promotional
+ spending; and
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ our
+ ability to maintain efficient, timely and cost-effective production and delivery of the products and services.
+
+ 
+ 
+
+All
+of these factors could result in immediate and longer term declines in the demand for the products and services that we offer, which
+could adversely affect our sales, cash flows and overall financial condition.
+
+ 
+
+WE
+OPERATE IN A HIGHLY COMPETITIVE MARKET. IF WE DO NOT COMPETE EFFECTIVELY, OUR PROSPECTS, OPERATING RESULTS, AND FINANCIAL CONDITION COULD
+BE ADVERSELY AFFECTED.
+
+ 
+
+The
+markets for our products and services are highly competitive, with companies offering a variety of competitive products and services.
+We expect competition in our markets to intensify in the future as new and existing competitors introduce new or enhanced products and
+services that are potentially more competitive than our products and services. We believe many of our competitors and potential competitors
+have significant competitive advantages, including longer operating histories, ability to leverage their sales efforts and marketing
+expenditures across a broader portfolio of products and services, larger and broader customer bases, more established relationships with
+a larger number of suppliers, contract manufacturers, and channel partners, greater brand recognition, and greater financial, research
+and development, marketing, distribution, and other resources than we do and the ability to offer financing for projects. Our competitors
+and potential competitors may also be able to develop products or services that are equal or superior to ours, achieve greater market
+acceptance of their products and services, and increase sales by utilizing different distribution channels than we do. Some of our competitors
+may aggressively discount their products and services in order to gain market share, which could result in pricing pressures, reduced
+profit margins, lost market share, or a failure to grow market share for us. If we are not able to compete effectively against our current
+or potential competitors, our prospects, operating results, and financial condition could be adversely affected.
+
+ 
+
+ 10
+
+ 
+
+ 
+
+ 
+
+WE
+MAY LOSE OUT TO LARGER AND BETTER-ESTABLISHED COMPETITORS.
+
+ 
+
+The
+alternative power industry is intensely competitive. Most of our competitors have significantly greater financial, technical, marketing
+and distribution resources as well as greater experience in the industry than we have. Our products may not be competitive with other
+technologies, both existing at the current time and in the future. If this happens, our sales and revenues will decline, or fail to develop
+at all. In addition, our current and potential competitors may establish cooperative relationships with larger companies to gain access
+to greater development or marketing resources. Competition may result in price reductions, reduced gross margins and loss of market share.
+
+ 
+
+OUR
+INTERNATIONAL OPERATIONS SUBJECT US TO RISKS, WHICH COULD ADVERSELY AFFECT OUR OPERATING RESULTS.
+
+ 
+
+Our
+international operations are exposed to the following risks, several of which are out of our control:
+
+ 
+
+ 
+ 
+ 
+ political
+ and economic instability, international terrorism and anti-American sentiment, particularly in emerging markets;
+
+ 
+ 
+ 
+ preference
+ for locally branded products, and laws and business practices favoring local competition;
+
+ 
+ 
+ 
+ unusual
+ or burdensome foreign laws or regulations, and unexpected changes to those laws or regulations;
+
+ 
+ 
+ 
+ |import
+ and export license requirements, tariffs, taxes and other barriers;
+
+ 
+ 
+ 
+ costs
+ of customizing products for foreign countries;
+
+ 
+ 
+ 
+ increased
+ difficulty in managing inventory;
+
+ 
+ 
+ 
+ less
+ effective protection of intellectual property; and
+
+ 
+ 
+ 
+ difficulties
+ and costs of staffing and managing foreign operations.
+
+ 
+ 
+
+Any
+or all of these factors could adversely affect our ability to execute any geographic expansion strategies or have a material adverse
+effect on our business and results of operations.
+
+ 
+
+OUR
+PRODUCTS MAY BE DISPLACED BY NEWER TECHNOLOGY.
+
+ 
+
+The
+alternative power industry is undergoing rapid and significant technological change. Third parties may succeed in developing or marketing
+technologies and products that are more effective than those developed or marketed by us, or that would make our technology obsolete
+or non-competitive. Accordingly, our success will depend, in part, on our ability to respond quickly to technological changes. We may
+not have the resources to do this.
+
+ 
+
+WE
+MUST HIRE QUALIFIED ENGINEERING, DEVELOPMENT AND PROFESSIONAL SERVICES PERSONNEL.
+
+ 
+
+We
+cannot be certain that we can attract or retain a sufficient number of highly qualified mechanical engineers, industrial technology and
+manufacturing process developers and professional services personnel. To deploy our products quickly and efficiently, and effectively
+maintain and enhance them, we will require an increasing number of technology developers. We expect customers that license our technology
+will typically engage our professional engineering staff to assist with support, training, consulting and implementation. We believe
+that growth in sales depends on our ability to provide our customers with these services and to attract and educate third-party consultants
+to provide similar services. As a result, we plan to hire professional services personnel to meet these needs. New technical and professional
+services personnel will require training and education and it will take time for them to reach full productivity. To meet our needs for
+engineers and professional services personnel, we also may use costlier third-party contractors and consultants to supplement our own
+staff. Competition for qualified personnel is intense, particularly because our technology is specialized and only a limited number of
+individuals have acquired the needed skills. Our business may be harmed if we are unable to attract or retain an adequate number of qualified
+personnel.
+
+ 
+
+ 11
+
+ 
+
+ 
+
+ 
+
+WE
+MAY BE ADVERSELY AFFECTED BY SHORTAGES OF REQUIRED COMPONENTS. IN ADDITION, WE DEPEND ON A LIMITED NUMBER OF SUPPLIERS TO PROCURE OUR
+PARTS FOR PRODUCTION WHICH IF AVAILABILITY OF PRODUCTS BECOMES COMPROMISED IT COULD ADD TO OUR COST OF GOODS SOLD AND AFFECT OUR REVENUE
+GROWTH.
+
+ 
+
+At
+various times, there have been shortages of some of the components that we use, as a result of strong demand for those components or
+problems experienced by suppliers. These unanticipated component shortages have resulted in curtailed production or delays in production,
+which prevented us from making scheduled shipments to customers in the past and may do so in the future. Our inability to make scheduled
+shipments could cause us to experience a reduction in our sales and an increase in our costs and could adversely affect our relationship
+with existing customers as well as prospective customers. Component shortages may also increase our cost of goods sold because we may
+be required to pay higher prices for components in short supply and redesign or reconfigure products to accommodate substitute components.
+
+ 
+
+OUR
+PRINCIPAL SHAREHOLDERS, DIRECTORS AND EXECUTIVE OFFICERS, IN THE AGGREGATE, BENEFICIALLY OWN MORE THAN 50% OF OUR OUTSTANDING COMMON
+STOCK AND THESE SHAREHOLDERS, IF ACTING TOGETHER, WILL BE ABLE TO EXERT SUBSTANTIAL INFLUENCE OVER ALL MATTERS REQUIRING APPROVAL OF
+OUR SHAREHOLDERS.
+
+ 
+
+Our
+principal shareholders, directors and executive officers in the aggregate, beneficially own more than 50% our outstanding common stock
+on a fully diluted basis. These shareholders, if acting together, will be able to exert substantial influence over all matters requiring
+approval of our shareholders, including amendments to our Articles of Incorporation, fundamental corporate transactions such as mergers,
+acquisitions, the sale of the company, and other matters involving the direction of our business and affairs and specifically the ability
+to determine the members of our board of directors. (See Security Ownership of Certain Beneficial Owners and Managements ).
+
+ 
+
+IF
+WE LOSE KEY SENIOR MANAGEMENT PERSONNEL OUR BUSINESS COULD BE NEGATIVELY AFFECTED. FURTHER, WE WILL NEED TO RECRUIT AND RETAIN ADDITIONAL
+SKILLED MANAGEMENT PERSONNEL AND IF WE ARE NOT ABLE TO DO SO, OUR BUSINESS AND OUR ABILITY TO CONTINUE TO GROW COULD BE HARMED.
+
+ 
+
+Our
+success depends to a large extent upon the continued services of our executive officers. We could be seriously harmed by the loss of
+any of our executive officers. In order to manage our growth, we will need to recruit and retain additional skilled management personnel
+and if we are not able to do so, our business and our ability to continue to grow could be harmed. Although a number of companies in
+our industry have implemented workforce reductions, there remains substantial competition for highly skilled employees.
+
+ 
+
+WE
+ARE SUBJECT TO ENVIRONMENTAL COMPLIANCE RISKS AND UNEXPECTED COSTS THAT WE MAY INCUR WITH RESPECT TO ENVIRONMENTAL MATTERS MAY RESULT
+IN ADDITIONAL LOSS CONTINGENCIES, THE QUANTIFICATION OF WHICH CANNOT BE DETERMINED AT THIS TIME.
+
+ 
+
+We
+are subject to various federal, state, local and foreign environmental laws and regulations, including those governing the use, storage,
+discharge and disposal of hazardous substances in the ordinary course of our manufacturing process. If more stringent compliance or cleanup
+standards under environmental laws or regulations are imposed, or the results of future testing and analyses at our current or former
+operating facilities indicate that we are responsible for the release of hazardous substances, we may be subject to additional remediation
+liability. Further, additional environmental matters may arise in the future at sites where no problem is currently known or at sites
+that we may acquire in the future. Currently unexpected costs that we may incur with respect to environmental matters may result in additional
+loss contingencies, the quantification of which cannot be determined at this time.
+
+ 
+
+OUR
+SALES AND CONTRACT FULFILLMENT CYCLES CAN BE LONG, UNPREDICTABLE AND VARY SEASONALLY, WHICH CAN CAUSE SIGNIFICANT VARIATION IN REVENUES
+AND PROFITABILITY IN A PARTICULAR QUARTER.
+
+ 
+
+The
+timing of our sales and related customer contract fulfillment is difficult to predict. Many of our customers are large enterprises, whose
+purchasing decisions, budget cycles and constraints and evaluation processes are unpredictable and out of our control. Further, the timing
+of our sales is difficult to predict. The length of our sales cycle, from initial evaluation to payment for our products and services,
+can range from several months to well over a year and can vary substantially from customer to customer. Our sales efforts involve significant
+investment in resources in field sales, marketing and educating our customers about the use, technical capabilities and benefits of our
+products and services. Customers often undertake a prolonged evaluation process. As a result, it is difficult to predict exactly when,
+or even if, we will make a sale to a potential customer or if we can increase sales to our existing customers. Large individual sales
+have, in some cases, occurred in quarters subsequent to those we anticipated, or have not occurred at all. In addition, the fulfillment
+of our customer contracts is partially dependent on other factors related to our customers businesses that are not in our control.
+as with the sales cycle, this can also cause revenues and earnings to fluctuate from quarter to quarter. If our sales and/or contract
+fulfillment cycles lengthen or our substantial upfront investments do not result in sufficient revenue to justify our investments, our
+operating results could be adversely affected.
+
+ 
+
+ 12
+
+ 
+
+ 
+
+ 
+
+We
+have experienced seasonal and end-of-quarter concentration of our transactions and variations in the number and size of transactions
+that close in a particular quarter, which impacts our ability to grow revenue over the long term and plan and manage cash flows and other
+aspects of our business and cost structure. Our transactions vary by quarter, with the fourth quarter typically being our largest. If
+expectations for our business turn out to be inaccurate, our revenue growth may be adversely affected over time and we may not be able
+to adjust our cost structure on a timely basis and our cash flows may suffer.
+
+ 
+
+OUR
+OPERATING MARGINS MAY DECLINE AS A RESULT OF INCREASING PRODUCT COSTS.
+
+ 
+
+Our
+business is subject to significant pressure on pricing and costs caused by many factors, including competition, the cost of components
+used in our products, labor costs, constrained sourcing capacity, inflationary pressure, pressure from customers to reduce the prices
+we charge for our products and services, and changes in consumer demand. Costs for the raw materials used in the manufacture of our products
+are affected by, among other things, energy prices, consumer demand, fluctuations in commodity prices and currency, and other factors
+that are generally unpredictable and beyond our control. Increases in the cost of raw materials used to manufacture our products or in
+the cost of labor and other costs of doing business in the United States and internationally could have an adverse effect on, among other
+things, the cost of our products, gross margins, operating results, financial condition, and cash flows.
+
+ 
+
+OUR
+PROPOSED JOINT VENTURE WITH SHENZHEN GAS MAY NOT BE SUCCESSFUL.
+
+ 
+
+Our
+proposed joint venture with Shenzhen Gas (as defined below) is subject to risks that we may not be able to control and therefor may not
+be successful. CETY Hong Kong has entered into a framework agreement for a future joint venture with the overseas investment arm of Shenzhen
+Gas. CETY Hong Kong will hold a 49% interest in the joint venture in accordance with the framework agreement. Once established, the joint
+venture will acquire municipal natural gas operators in China with funds provided by Shenzhen Gas. The framework agreement is not binding
+upon the parties until definitive agreements are executed, there is no guarantee the joint venture will be established. Further, the
+joint venture is dependent on both CETY and Shenzhen Gas contributing funds to the joint venture. Shenzhen Gas will be required to loan
+funds to the joint venture once established. If Shenzhen Gas does not provide capital for the acquisitions of the natural gas operators
+as planned, we will not be able to execute the business plan and it may result in a loss of our capital investment, if any. The acquisitions
+are dependent upon the price of gas, our ability to source acquisition targets for the joint venture, successful price negotiations and
+the profitable operations of the acquired companies. There can be no assurances that we will be able to successfully acquire companies
+through the joint venture and execute on its business plan.
+
+ 
+
+OUR
+WASTE TO ENERGY BUSINESS, INCLUDING OUR BIOMASS PROJECT IN THE U.S., IS IN AT AN EARLY STAGE AND WE DO NOT MAKE ANY ASSURANCES OF ITS
+SUCCESS OR ABILITY TO OPERATE PROFITABLY.
+
+ 
+
+We are
+entering into the waste to energy business based on new technology. While the HTAP has not been installed and qualified by an
+independent engineering study by an engineering, procurement and construction organization for an existing facility in United
+States or Europe. As a result, we cannot be assured that the equipment or technology will be accepted or adopted by the firms who
+are typically responsible for developing and building locally based waste to energy facilities. In addition, it is more difficult to
+obtain standard financing for our projects using HTAP technology until qualified. While we have established our first pilot project for
+our proposed biomass facility, there can be no assurances we will be able to obtain sufficient financing to complete the project or that
+once established it will operate profitably.
+
+ 
+
+OUR NEW OPERATIONS
+FOR HTAP TECHNOLOGY HAVE BEEN RELOCATED TO A NEW OFFICE IN TURKEY FOR SALES AND ENGINEERING AND FOR MANUFACTURING OUTSIDE OF RUSSIA.
+WE CAN NOT MAKE ANY ASSURANCES THAT THE OPERATIONS FOR THE SALES AND MANUFACTURING OF THE HTAP TECHNLOGY WILL BE SUCCESSFUL.
+
+ 
+
+As
+a result of the recent war between Russia and the Ukraine, we have terminated our agreements with ENEX and have established an office
+in Turkey to run the engineering and sales efforts for the HTAP waste to energy products in Europe. The inventor and owner of ENEX has
+moved out of Russia, purchased an apartment in Antalya, Turkey, and has applied for permanent citizenship in Turkey. In addition, ENEX
+is in the process of redomiciling to Turkey and will run its operations out of Antalya to complete its remaining projects in Kazakhstan
+at which time the operations of ENEX are expected to be wound down. Upon the ENEX owner s receipt of Turkish citizenship, CETY
+plans to retain the former owner of ENEX to develop and patent new technology relating the ablative processing of waste material and,
+after ENEX redomiciles to Turkey, transfer any requisite intellectual property rights to CETY in order to develop new patents on the
+technology. The former operations in Russia primarily consisted of assembling third party components and engineering modifications on
+the system required to meet our customer s needs. We will need to relocate personnel and equipment and obtain an office and manufacturing
+facility in Turkey to properly establish new manufacturing operations. In addition, we will need to establish relationships with third
+party manufacturers who are not located in Russia in order to obtain components for the HTAP systems. We cannot assure you that the transition
+of ENEX from Russia to Turkey will be successful as will require adding new engineers from outside of Russia and developing new material
+sources and supply chains.
+
+ 
+
+ 13
+
+ 
+
+ 
+
+ 
+
+WE
+CAN NOT ASSURE THAT OUR HTAP TECHNOLOGY WILL BE ABLE TO BE MODIFIED TO ACCOMMODATE THE NEEDS OF OUR CUSTOMERS OR TO PRODUCE ALL OF THE
+BIOFULES WHICH WE BELIEVE IT IS CAPABLE OF PRODUCING.
+
+ 
+
+Our
+HTAP Technology will need to be modified to burn certain types of fuels, depending on our customer s needs, and to produce certain
+types of biofuels that we expect to produce, such as hydrogen. We cannot assure you that we will be able to successfully modify our HTAP
+systems to accommodate the needs of our customers or to produce all of the biofuels we believe it is capable of producing. While HTAP
+technology has been used in various waste to energy projects using high temperature ablative technology clients have varying needs with
+respect to their waste products. For example, some types of sewage waste require pre-treatment and processing before it can be incinerated
+at high temperatures under pressurized conditions. Additionally, some customers will want to produce different types of biofuels based
+on their needs and the market. While our HTAP technology has produced biogas and biofuel, we cannot assure you that we will be able to
+modify and produce equipment that will provide output products that our customers desire. For example, we believe that hydrogen will
+be used in the future to power electrical generators feeding the grid. Our HTAP system will need to be modified to produce hydrogen and
+we can make no assurances that we will be able to successfully make such modifications.
+
+ 
+
+OUR
+HTAP TECHNOLOGY FACES MANY COMPETING NEW AND EXISTING TECHNOLOGIES, AND WE CANNOT ASSURE YOU THAT OUR HIGH TEMPERATURE ABLATIVE PROCESS
+WILL BE ADOPTED BY THE MARKET.
+
+ 
+
+Our
+HTAP technology is an alternative to existing incineration technology which we believe is more efficient and will produce a wider variety
+of biofuels than existing methods at a more cost-effective price. While processes such as thermal on grate are widespread, we believe
+that they produce more damaging pollution than our ablative pressurized incineration technology. Systems using thermal on grate have
+implemented pollution remediation systems reducing the environmental impact of their byproducts. These remediation technologies may improve
+and become more cost effective thereby reducing the competitiveness of our product. There are also many new technologies that will compete
+with our HTAP process at a lower cost or with more efficiency that could become the new standard for waste to energy productions. For
+example, some technologies produce energy by using enzymes to break down organic wastes. Others will grow biological materials that when
+exposed to sunlight create energy. While these and other technologies are at early stages, we cannot assure you that they will not be
+developed into commercially viable products that can produce clean energy more efficiently than our product and, in fact, become an industry
+standard making our technology less attractive.
+
+ 
+
+IF
+WE FAIL TO DEVELOP AND MAINTAIN AN EFFECTIVE SYSTEM OF INTERNAL CONTROL OVER FINANCIAL REPORTING, WE MAY BE UNABLE TO ACCURATELY REPORT
+OUR FINANCIAL RESULTS OR PREVENT FRAUD.
+
+ 
+
+As
+a public company, we have been subject to the Section 404 of the Sarbanes-Oxley Act, or SOX 404, which requires that we include a report
+from management on the effectiveness of our internal control over financial reporting in our annual report on Form 10-K.
+
+ 
+
+ 14
+
+ 
+
+ 
+
+ 
+
+Our
+reporting obligations as a public company place a significant strain on our management and operational and financial resources and systems.
+Effective internal controls, particularly those related to revenue recognition, are necessary for us to produce reliable financial reports
+and are important to prevent fraud. As a result, our failure to achieve and maintain effective internal controls over financial reporting
+may result in the loss of investor confidence in the reliability of our financial statements, which in turn may harm our business and
+negatively impact the trading price of our stock. Furthermore, we anticipate that we will continue to incur considerable costs and use
+significant management time and other resources in an effort to comply with Section 404 and other requirements of the Sarbanes-Oxley
+Act.
+
+ 
+
+In
+connection with the auditing of our consolidated financial statements as of and for the years ended December 31, 2020 and 2021, we identified
+the following material weaknesses in our internal control over financial reporting:
+
+ 
+
+ 
+ 
+ 
+ Inadequate
+ segregation of duties consistent with control objectives due to a small number of employees;
+
+ 
+ 
+ 
+ Lack
+ of formal policies and procedures, but there are integrated systems in place and the procedure are being documented;
+
+ 
+ 
+ 
+ Lack
+ of a functioning audit committee to oversee financial reporting responsibilities, which is being addressed by adding qualified CPA
+ board members; and
+
+ 
+ 
+ 
+ Lack
+ of risk assessment procedures on internal controls to detect financial reporting risks on a timely manner, currently being implemented
+ as part of new procedures and policies.
+
+ 
+ 
+
+As
+defined in the rules and regulations adopted by the SEC, a material weakness is a deficiency, or combination of deficiencies,
+in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual
+or interim financial statements will not be prevented or detected on a timely basis.
+
+ 
+
+Management
+has been implementing and will continue to implement measures designed to ensure that control deficiencies contributing to the material
+weakness are remediated, such that these controls are designed, implemented, and operating effectively. The remediation actions planned
+include:
+
+ 
+
+ 
+ 
+ 
+ Continue
+ to search for and evaluate qualified independent outside directors;
+
+ 
+ 
+ 
+ Identify
+ gaps in our skills base and the expertise of our staff required to meet the financial reporting requirements of a public company;
+ and
+
+ 
+ 
+ 
+ Continue
+ to develop policies and procedures on internal control over financial reporting and monitor the effectiveness of operations on existing
+ controls and procedures.
+
+ 
+ 
+
+We
+have also engaged a third-party financial consulting firm during the year to assist with the preparation of SEC reporting. We are committed
+to maintaining a strong internal control environment and believe that these remediation efforts will deliver improvements in our control
+environment. Our management will continue to monitor and evaluate the relevance of our risk-based approach and the effectiveness of our
+internal controls and procedures over financial reporting on an ongoing basis and is committed to taking further action and implementing
+additional enhancements or improvements, as necessary and as funds allow.
+
+ 
+
+However,
+the implementation of these measures may not fully address these weaknesses in our internal control over financial reporting, and we
+cannot conclude that they have been fully remedied. Our failure to correct these weakness and deficiencies or our failure to discover
+and address any other weakness and deficiencies could result in our inability to accurately report our financial results, prevent or
+detect fraud or provide timely and reliable financial and other information pursuant to the reporting obligations we have as a public
+company, which could have a material adverse effect on our business, financial condition and results of operations. Further, it could
+cause our investors to lose confidence in the information we report, which could adversely affect the price of our shares.
+
+ 
+
+ 15
+
+ 
+
+ 
+
+ 
+
+WE
+HAVE ENGAGED IN TRANSACTIONS WITH RELATED PARTIES, AND SUCH TRANSACTIONS PRESENT POSSIBLE CONFLICTS OF INTEREST THAT COULD HAVE AN ADVERSE
+EFFECT ON OUR BUSINESS AND RESULTS OF OPERATIONS.
+
+ 
+
+We
+have entered into certain transactions with our officers, directors and certain shareholders. See Certain Relationships and
+Related Party Transactions. We believe the terms obtained or consideration that we paid or received, as applicable, in connection
+with these transactions were comparable to terms available or the amounts that would be paid or received, as applicable, in arm s-length
+transactions.
+
+ 
+
+We
+may in the future enter into additional transactions in which any of our directors, officers or certain shareholders, or any members
+of their immediate family, have a direct or indirect material interest. Such transactions present potential for conflicts of interest,
+as the interests of these entities and their shareholders may not align with the interests of the Company and our unaffiliated shareholders
+with respect to the negotiation of, and certain other matters related to, our purchases from and other transactions with such entities.
+Conflicts of interest may also arise in connection with the exercise of contractual remedies under these transactions, such as for events
+of default.
+
+ 
+
+Our
+Board of Directors intends to authorize the Audit Committee consisting of independent directors upon its formation to review and approve
+all material related party transactions. Nevertheless, we may have achieved more favorable terms if such transactions had not been entered
+into with related parties. These transactions, individually or in the aggregate, may have an adverse effect on our business and results
+of operations or may result in litigation or enforcement actions by the SEC or other agencies.
+
+ 
+
+OUR
+CFO AND DIRECTOR, MR. CALVIN PANG, HOLDS A CONTROLLING INTEREST IN US THROUGH AN ENTITY HE CONTROLS WHICH MAY POSE CONFLICTS OF INTERESTS
+AS A RELATED PARTY.
+
+ 
+
+Mr.
+Calvin Pang is the beneficial owner of 64.7% of our common stock, or 24,044,101 shares, as of March 17, 2023. While many of Mr.
+Pang s interests are aligned with our business and operations, we cannot assure you that the interests of the Company and Mr. Pang
+will always be the same. Under Nevada laws, all directors, including Mr. Pang as a director, owe fiduciary duties to our corporation.
+In addition, the Company has taken steps to exclude Mr. Pang from voting as a director on issues that he may be a related party. Further,
+our Board of Directors intends to authorize the Audit Committee upon its formation to review and approve all material related party transactions.
+Nevertheless, Mr. Pang can exert significant influence on the board and the actions of the Company as being a majority shareholder and
+your and other minority shareholders ability to influence significant corporate decisions will be limited. 
+
+ 
+
+THE
+COMPANY DEPENDS ON A LIMITED NUMBER OF CUSTOMERS FOR A LARGE PORTION OF ITS NET SALES.
+
+ 
+
+A
+limited number of customers account for a large percentage of the Company s net sales. The Company s three largest customers,
+Aries Clean Energy, San Giorgio, and Greenverse and its domestic and international affiliated companies, accounted for approximately
+75% of the Company s net sales during fiscal year 2021 and the company s three largest customers, Ekonams, CEF, and Corycos,
+accounted for approximately 96% of the Company s net sales during fiscal year 2020. The Company expects that a significant portion
+of its revenues will continue to be derived from a small number of customers and that these percentages may increase with the growth
+of its waste to energy products and services. In addition, the Company s business is based primarily upon individual sales orders,
+and the Company typically does not enter into long-term contracts with its customers. Accordingly, these customers could reduce their
+purchasing levels or cease buying products from the Company at any time and for any reason. In addition, since the Company is project
+driven, the Company s sales can be delayed due to the time it takes for its customers with the approval and financing process of
+their project which can reduce the sales of the Company s products and it may have a material adverse effect on the Company s
+business, financial condition and results of operations.
+
+ 
+
+WE
+MAY INCUR LIABILITIES THAT ARE NOT COVERED BY INSURANCE.
+
+ 
+
+While
+we seek to maintain appropriate levels of insurance, not all claims are insurable and we may experience major incidents of a nature that
+are not covered by insurance or not covered adequately by insurance. Furthermore, insurance companies in China currently do not offer
+as extensive an array of insurance products for our PRC subsidiaries as insurance companies in more developed economies. In some cases,
+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. We maintain an amount of insurance protection that we believe is
+adequate, but there can be no assurance that such insurance will continue to be available on acceptable terms or that our insurance coverage
+will be sufficient or effective under all circumstances and against all liabilities to which we may be subject. If we were to incur substantial
+losses or liabilities due to fire, explosions, floods, other natural disasters or accidents or business interruption, our results of
+operations could be materially and adversely affected. We could, for example, be subject to substantial claims for damages upon the occurrence
+of several events within one calendar year. In addition, our insurance costs may increase over time in response to any negative development
+in our claims history or due to material price increases in the insurance market in general.
+
+ 
+
+ 16
+
+ 
+
+ 
+
+ 
+
+A
+SIGNIFICANT INTERRUPTION IN THE OPERATIONS OF OUR THIRD-PARTY SUPPLIERS COULD POTENTIALLY DISRUPT OUR OPERATIONS.
+
+ 
+
+We
+have limited control over the operations of our third-party suppliers and other business partners and any significant interruption in
+their operations may have an adverse impact on our operations. For example, a significant interruption in the operations of our supplier s
+manufacturing facilities could cause delay or termination of shipment of the raw materials to our subsidiaries, which may cause delay
+or termination of shipment of our products to our customers, thus resulting in penalties or fines due to our breach of contract. If we
+could not solve the impact of the interruptions of operations of our third-party suppliers, our business operations and financial results
+may be materially and adversely affected.
+
+ 
+
+WE
+HAVE A SIGNIFICANT AMOUNT OF ACCOUNTS RECEIVABLE, WHICH COULD BECOME UNCOLLECTIBLE.
+
+ 
+
+As
+of December 31, 2021, we had approximately $693,032 in accounts receivable and $684,770 in long term financing receivables. Our accounts
+receivable primarily include balance due from customers when our products are sold and delivered to customers. Our customers are required
+to make full payment within three to five months from delivery date, although our industry typical payment term is 180 days from delivery.
+As a result of the COVID-19 outbreak in January 2020, collection activities from some of our customers affected by the pandemic resulted
+in longer payment terms. We impliedly granted extended payment terms until their projects are commissioned and they collect from their
+end users. Deteriorating conditions in, bankruptcies, or financial difficulties of a customer or within their industries generally may
+impair the financial condition of our customers and hinder their ability to pay us on a timely basis or at all, and accounts receivable
+are written off against allowances only after exhaustive collection efforts. The failure or delay in payment by one or more of our customers
+could reduce our cash flows and adversely affect our liquidity and results of operations.
+
+ 
+
+OUR
+SALES AND PROFITABILITY ARE DEPENDENT ON THE PRICE OF OIL, NATURAL GAS AND ELECTRICITY, WHICH HAS BEEN SIGNIFICANTLY VOLATILE RECENTLY.
+
+ 
+
+Our
+Waste Heat Recovery products and Waste to Energy products are dependent on the prices of traditional energy sources. We believe our products
+reuse wasted heat and create electricity with zero emission and have potential for receiving clean energy incentives. The process of
+converting waste heat to power is referred to as organic Rankine cycle. Our waste to energy products converts organic waste into power
+and biochar through a process referred to pyrolysis. As the price of energy increases, the economic justification for our products increases.
+At the same time, as the price for traditional fuel decreases, there is less incentive for customers to purchase our products and it
+may impair our ability to sell our products.
+
+ 
+
+IF
+THE SPOT PRICE OF NG IN CHINA DROPS BELOW THE PURCHASE PRICE OUR TRADERS NEGOTIATE WITH OUR SUPPLIERS, WE MAY NOT BE ABLE TO SELL OUR
+NG OR MAY HAVE TO SELL IT AT A LOSS.
+
+ 
+
+Our traders
+at JHJ purchase NG at a fixed price in large volumes. If the spot prices for NG in China drop below our purchase price, we may not be
+able to sell our NG to our customers or may have to sell the NG at a substantial loss. We do not purchase a sufficient volume of NG to
+be able to hedge against price declines of this commodity. If we believe that NG prices are too high and we are unable to purchase because
+we believe that prices will drop, we will not have sufficient supply of NG to conduct trading operations until the market pricing returns
+to a level at which we can conduct operations.
+
+ 
+
+ 17
+
+ 
+
+ 
+
+ 
+
+WE
+MAY NOT HAVE SUFFICIENT FUNDS TO CONDUCT OUR TRADING OPERATIONS IN THE PRC.
+
+ 
+
+We
+are funding our trading operations through cash flow generated by JHJ and from funds provided by our parent. If we or JHJ does not have
+sufficient funds, we may not be able to conduct trading operations.
+
+ 
+
+OUR
+WASTE TO ENERGY PRODUCTS FROM ENEX HAVE NOT BEEN TESTED IN THE UNITED STATES.
+
+ 
+
+ENEX s
+HTAP 5 and 10 have not been installed in the United States. In order to commence sales, our purchasers will need to review data
+that they may not deem reliable. As a result, we may be required to post large bonds or find an EPC that will guarantee performance of
+the ENEX systems. We can not give any assurances that we will be able to finance the bonds or find an EPC willing to guaranty performance.
+
+ 
+
+THE
+IMPLEMENTATION OF OUR WASTE TO ENERGY JOINT VENTURES DEPENDS ON US FINDING FUNDING FOR THE PROJECTS.
+
+ 
+
+In
+order to implement the ENEX system in our waste to energy joint ventures, we will need to finance directly or obtain third party financing
+for these projects. We cannot give any assurances that we will be able to directly finance these projects or be able to find a third
+party to provide financing to them. If we are not able to finance the projects we will not be able to implement our business plan in
+this sector.
+
+ 
+
+WE
+MAY NEED TO RAISE ADDITIONAL CAPITAL REQUIRED TO GROW OUR BUSINESS, AND WE MAY NOT BE ABLE TO RAISE CAPITAL ON TERMS ACCEPTABLE TO US
+OR AT ALL.
+
+ 
+
+Growing
+and operating our business will require significant cash outlays and capital expenditures and commitments. We have utilized cash on hand
+and cash generated from operations as sources of liquidity. If such cash is not sufficient to meet our cash requirements, we will need
+to seek additional capital, potentially through equity or debt financing, to fund our growth. Our ability to access the credit and capital
+markets in the future as a source of liquidity, and the borrowing costs associated with such financing, are dependent upon market conditions.
+
+ 
+
+In
+addition, any equity securities we issue, including any preferred stock, may be on terms that are dilutive or potentially dilutive to
+our stockholders, and the prices at which new investors would be willing to purchase our securities may be lower than the offering price
+per share of our Common Stock. The holders of any equity securities we issue, including any preferred stock, may also have rights, preferences
+or privileges which are senior to those of existing holders of Common Stock. If new sources of financing are required, but are insufficient
+or unavailable, we will be required to modify our growth and operating plans based on available funding, if any, which would harm our
+ability to grow our business.
+
+ 
+
+OUR
+REVENUE GROWTH RATE DEPENDS PRIMARILY ON OUR ABILITY TO EXECUTE OUR BUSINESS PLAN.
+
+ 
+
+We
+may not be able to identify and maintain the necessary relationships with customers and labor within our industry. Our ability to execute
+our business plan also depends on other factors, including the ability to:
+
+ 
+
+ 
+ 
+ 
+ Negotiate
+ and maintain contracts and agreements with acceptable terms;
+
+ 
+ 
+ 
+ Hire
+ and train qualified personnel;
+
+ 
+ 
+ 
+ Maintain
+ marketing and development costs at affordable rates; and
+
+ 
+ 
+ 
+ Maintain
+ an affordable labor force.
+
+ 
+ 
+
+CHINA S
+ECONOMIC, POLITICAL AND SOCIAL CONDITIONS, AS WELL AS GOVERNMENTAL POLICIES, COULD AFFECT THE BUSINESS ENVIRONMENT IN CHINA AND OUR ABILITY
+TO OPERATE OUR BUSINESS.
+
+ 
+
+A
+portion of our operations are conducted in China. Accordingly, our business, results of operations, financial condition and prospects
+may be influenced to a degree by economic, political, legal and social conditions in China. China s economy differs from the economies
+of other countries in many respects, including with respect to the amount of government involvement, level of development, growth rate,
+control of foreign exchange and allocation of resources. In recent years, the Chinese government has implemented measures emphasizing
+market forces for economic reform, the reduction of state ownership of productive assets and the establishment of sound corporate governance
+in business enterprises. However, a significant portion of productive assets in China are still owned by the Chinese government. The
+Chinese government continues to play a significant role in regulating industrial development. It also exercises significant control over
+China s economic growth through the allocation of resources, controlling payment of foreign currency-denominated obligations, setting
+monetary policies, restricting the inflow and outflow of foreign capital and providing preferential treatment to particular industries
+or companies. More generally, if the business environment in China deteriorates from the perspective of domestic or international investment,
+the portion of our operations in China may also be adversely affected.
+
+ 
+
+ 18
+
+ 
+
+ 
+
+ 
+
+As
+the Chinese economy has become increasingly linked with the global economy, China is affected in various respects by downturns and recessions
+of major economies around the world. The various economic and policy measures enacted by the Chinese government to forestall economic
+downturns or bolster China s economic growth could materially affect our business. Any adverse change in the economic conditions
+in China, policies of the Chinese government or laws and regulations in China could have a material adverse effect on the overall economic
+growth of China and, in turn, the portion of our business in China.
+
+ 
+
+UNCERTAINTIES
+IN THE CHINA LEGAL SYSTEM COULD MATERIALLY AND ADVERSELY AFFECT US.
+
+ 
+
+In
+1979, the Chinese government began to promulgate a comprehensive system of laws and regulations governing economic matters in general.
+The overall effect of legislation over the past four decades has significantly enhanced the protections afforded to various forms of
+foreign investments in China. However, China has not developed a fully integrated legal system, and recently enacted laws and regulations
+may not sufficiently cover all aspects of economic activities in China. In particular, the China legal system is based on written statutes
+and prior court decisions have limited value as precedents. Since these laws and regulations are relatively new and the China legal system
+continues to rapidly evolve, the interpretations of many laws, regulations and rules may not be uniform and enforcement of these laws,
+regulations and rules involves uncertainties. These uncertainties may affect our judgment on the relevance of legal requirements and
+our ability to enforce our contractual rights or tort claims. In addition, the regulatory uncertainties may be exploited through unmerited
+or frivolous legal actions or threats in attempts to extract payments or benefits from us. Furthermore, the China legal system is based
+in part on government policies and internal rules, some of which are not published on a timely basis or at all and may have a retroactive
+effect. As a result, we may not be aware of our violation of any of these policies and rules until sometime after the violation. In addition,
+any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources and management
+attention.
+
+ 
+
+PRC
+REGULATION OF LOANS TO AND DIRECT INVESTMENT IN PRC ENTITIES BY OFFSHORE HOLDING COMPANIES AND GOVERNMENTAL CONTROL OF CURRENCY CONVERSION
+MAY DELAY OR PREVENT US FROM MAKING LOANS OR ADDITIONAL CAPITAL CONTRIBUTIONS TO OUR CHINESE SUBSIDIARIES.
+
+ 
+
+We
+are a U.S. based company conducting a portion of our operations in China. We may make loans to our PRC subsidiaries subject to the approval,
+registration, and filing with governmental authorities and limitation of amount, or we may make additional capital contributions to our
+subsidiaries in China and Hong Kong. Any loans to our wholly foreign-owned subsidiaries in mainland China, which are treated as foreign-invested
+enterprises under PRC law, are subject to foreign exchange loan registrations
+
+ 
+
+In
+light of the various requirements imposed by PRC regulations on loans to and direct investment in PRC entities by offshore holding companies,
+we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals
+or filings on a timely basis, if at all, with respect to future loans by us to our Hong Kong or PRC subsidiaries or with respect to future
+capital contributions by us to our Hong Kong or PRC subsidiaries. If we fail to complete such registrations or obtain such approvals,
+our ability to use the proceeds from this Underwritten Offering and to capitalize or otherwise fund our Chinese operations may be negatively
+affected.
+
+ 
+
+ 19
+
+ 
+
+ 
+
+ 
+
+FLUCTUATIONS
+IN EXCHANGE RATES COULD HAVE AN EFFECT ON THE RESULTS OF OPERATIONS OF OUR HONG KONG AND CHINA SUBSIDIARIES.
+
+ 
+
+The
+value of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political
+and economic conditions in China and by China s foreign exchange policies. Since June 2010, the Renminbi has fluctuated against
+the U.S. dollar, at times significantly and unpredictably. In the fourth quarter of 2016, the Renminbi has depreciated significantly
+in the backdrop of a surging U.S. dollar and persistent capital outflows of China. This depreciation halted in 2017, and the RMB appreciated
+approximately 7% against the U.S. dollar during this one-year period. With the development of the foreign exchange market and progress
+towards interest rate liberalization and Renminbi internationalization, the PRC government may in the future announce further changes
+to the exchange rate system, and we cannot assure you that the Renminbi will not appreciate or depreciate significantly in value against
+the U.S. dollar in the future which may impact the profitability of our operations in China.
+
+ 
+
+WE
+MAY BE SUBJECT TO GOVERNMENT LAWS AND REGULATIONS PARTICULAR TO OUR OPERATIONS WITH WHICH WE MAY BE UNABLE TO COMPLY.
+
+ 
+
+We
+may not be able to comply with all current and future government regulations which are applicable to our business. Our business operations
+are subject to all government regulations normally incident to conducting business (e.g., occupational safety and health acts, workmen s
+compensation statutes, unemployment insurance legislation, income tax, and social security laws and regulations, environmental laws and
+regulations, consumer safety laws and regulations, etc.) as well as to governmental laws and regulations applicable to small public companies
+and their capital formation efforts. Although we will make every effort to comply with applicable laws and regulations, we can provide
+no assurance of our ability to do so, nor can we predict the effect of those regulations on our proposed business activities. Our failure
+to comply with material regulatory requirements would likely have an adverse effect on our ability to conduct our business and could
+result in our cessation of active business operations.
+
+ 
+
+COMPLIANCE
+WITH CHANGING REGULATION OF CORPORATE GOVERNANCE AND PUBLIC DISCLOSURE WILL RESULT IN ADDITIONAL EXPENSES.
+
+ 
+
+Changing
+laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002 and
+related SEC regulations, have created uncertainty for public companies and significantly increased the costs and risks associated with
+accessing the public markets and public reporting. Our management team will need to invest significant management 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.
+
+ 
+
+Risks
+Related to This Offering and Ownership of Our Common Stock
+
+ 
+
+OUR
+OPERATING RESULTS AND SHARE PRICE MAY BE VOLATILE AND THE MARKET PRICE OF OUR COMMON STOCK AFTER THIS OFFERING MAY DROP BELOW THE PRICE
+YOU PAY.
+
+ 
+
+Our
+quarterly operating results have in the past fluctuated and are likely to do so in the future. As a result, the trading price of the
+shares of our common stock following this offering is likely to be highly volatile and could be subject to wide fluctuations in response
+to various factors, some of which are beyond our control. In addition to the factors discussed in this Risk Factors section
+and elsewhere in this prospectus, these factors include:
+
+ 
+
+ 
+ 
+ 
+ the
+ success of competitive products or technologies;
+
+ 
+ 
+ 
+ actual
+ or anticipated changes in our growth rate relative to our competitors;
+
+ 
+ 
+ 
+ announcements
+ by us or our competitors of significant acquisitions, strategic partnerships, joint ventures, collaborations or capital commitments;
+
+ 
+ 
+ 
+ regulatory
+ or legal developments in the United States and other countries in which we operate;
+
+ 
+ 
+ 
+ the
+ recruitment or departure of key personnel;
+
+ 
+ 
+ 
+ the
+ level of expenses;
+
+ 
+ 
+ 
+ changes
+ in our backlog in a given period;
+
+ 
+ 
+
+ 20
+
+ 
+
+ 
+
+ 
+
+ 
+ 
+ 
+ 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;
+
+ 
+ 
+ 
+ fluctuations
+ in the valuation of companies perceived by investors to be comparable to us;
+
+ 
+ 
+ 
+ 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;
+
+ 
+ 
+ 
+ market
+ conditions in the clean energy sector; and
+
+ 
+ 
+ 
+ general
+ economic, industry and market conditions.
+
+ 
+ 
+
+These
+and other factors, many of which are beyond our control, may cause our operating results and the market price and demand for our shares
+to fluctuate substantially. While we believe that operating results for any particular quarter are not necessarily a meaningful indication
+of future results, fluctuations in our quarterly operating results could limit or prevent investors from readily selling their shares
+and may otherwise negatively affect the market price and liquidity of our shares. In addition, the stock market in general, and companies
+in our markets in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate
+to the operating performance of these companies. Broad market and industry factors may negatively affect the market price of our common
+stock, regardless of our actual operating performance. The realization of any of these risks or any of a broad range of other risks,
+including those described in these Risk Factors, could have a dramatic and material adverse impact on the market price
+of the shares of our common stock.
+
+ 
+
+WE
+HAVE ISSUED A SUBSTANTIAL AMOUNT OF CONVERTIBLE SECURITIES WHICH IF CONVERTED WILL SUBSTANTIALLY DILUTE ALL OF OUR STOCKHOLDERS.
+
+ 
+
+So
+far we have issued a substantial number of convertible securities, including warrants, which, if converted or exercised, would result
+in substantial dilution to our stockholders. See Note 9 of the Notes to the consolidated financial statements for the three and nine
+months ended September 30, 2022 included in this prospectus for further information on our outstanding convertible notes.
+Our ability to meet pay interest and repay principal for our substantial level of outstanding convertible notes depends on, among other
+things, our operating results and financial market conditions. Our cash flow may not be sufficient to allow us to pay principal and interest
+on our outstanding convertible notes and meet our other obligations. Our level of indebtedness could have other important consequences.
+In addition, conversion of our convertible notes and exercise of warrants could result in significant dilution to our existing stockholders
+and cause the market price of our common stock to decline.
+
+ 
+
+WE
+HAVE CONSIDERABLE DISCRETION AS TO THE USE OF THE NET PROCEEDS FROM THIS UNDERWRITTEN OFFERING AND WE MAY USE THESE PROCEEDS IN WAYS
+WITH WHICH YOU MAY NOT AGREE.
+
+ 
+
+Our
+management will have broad discretion in the way that we use the net proceeds of this Underwritten Offering. Pending the final application
+of the net proceeds of this Underwritten Offering, we intend to use the net proceeds of this Underwritten Offering primarily to enhance
+and expand our business operations and for general corporate purposes. However, the proceeds may not be invested effectively or in a
+manner that yields a favorable or any return, and consequently, this could result in financial losses that could have a material adverse
+effect on our business, financial condition and results of operations. There can be no assurance that the Company will utilize the net
+proceeds in a manner that enhances value of the Company. If the Company fails to spend the proceeds effectively, the Company s
+business and financial condition could be harmed, and there may be the need to seek additional financing sooner than expected.
+
+ 
+
+ 21
+
+ 
+
+ 
+
+ 
+
+WE
+ARE A SMALLER REPORTING COMPANY, AND WE CANNOT BE CERTAIN IF THE REDUCED REPORTING REQUIREMENTS APPLICABLE TO US WILL MAKE OUR COMMON
+STOCK LESS ATTRACTIVE TO INVESTORS.
+
+ 
+
+We
+are a smaller reporting company, meaning that the market value of our shares held by non-affiliates is less than $700 million
+and our annual revenue was less than $100 million during the most recently completed fiscal year. We may continue to be a smaller reporting
+company after this offering if either (i) the market value of our shares held by non-affiliates is less than $250 million or (ii) our
+annual revenue was less than $100 million during the most recently completed fiscal year and the market value of our shares held by non-affiliates
+is less than $700 million. As a smaller reporting company, we may rely on exemptions from certain disclosure requirements that are available
+to smaller reporting companies. Specifically, as a smaller reporting company, we may choose to present only the two most recent fiscal
+years of audited financial statements in our annual report on Form 10-K and we have reduced disclosure obligations regarding executive
+compensation. 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.
+
+ 
+
+CERTAIN
+PROVISIONS OF NEVADA LAW AND IN THE COMPANY S CHARTER AND BYLAWS MAY HAVE A NEGATIVE EFFECT ON ACQUISITION OF OUR COMPANY.
+
+ 
+
+Certain
+provisions of Nevada law and our bylaws, may have the effect of delaying, deferring or discouraging another person from acquiring control
+of us. It is possible that these provisions could make it more difficult to accomplish or could deter transactions that stockholders
+may otherwise consider to be in their best interest or in our best interests, including transactions that might result in a premium over
+the market price for our shares. These provisions expected to discourage coercive takeover practices and inadequate takeover bids. These
+provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with our board of directors. We
+believe that the benefits of increased protection of our potential ability to negotiate with the proponent of an unfriendly or unsolicited
+proposal to acquire or restructure us outweigh the disadvantages of discouraging these proposals because negotiation of these proposals
+could result in an improvement of their terms.
+
+ 
+
+OUR
+ISSUANCE OF ADDITIONAL CAPITAL STOCK IN CONNECTION WITH FINANCINGS, ACQUISITIONS, INVESTMENTS, OUR EQUITY INCENTIVE PLANS, OR OTHERWISE
+WILL DILUTE ALL OTHER STOCKHOLDERS.
+
+ 
+
+We
+expect to issue additional capital stock in the future that will result in dilution to all other stockholders. We expect to grant equity
+awards to employees, directors, and consultants under our equity incentive plans. We may also raise capital through equity financings
+in the future. As part of our business strategy, we may acquire or make investments in complementary companies, products, or technologies,
+and issue equity securities to pay for any such acquisition or investment. Any such issuances of additional capital stock may cause stockholders
+to experience significant dilution of their ownership interests and the per share value of our common stock to decline.
+
+ 
+
+WE
+MAY MAKE ACQUISITIONS THAT ARE DILUTIVE TO EXISTING STOCKHOLDERS. IN ADDITION, OUR LIMITED EXPERIENCE IN ACQUIRING OTHER BUSINESSES,
+PRODUCT LINES AND TECHNOLOGIES MAY MAKE IT DIFFICULT FOR US TO OVERCOME PROBLEMS ENCOUNTERED IN CONNECTION WITH ANY ACQUISITIONS WE MAY
+UNDERTAKE.
+
+ 
+
+We
+intend to evaluate and explore strategic opportunities as they arise, including business combinations, strategic partnerships, and the
+purchase, licensing or sale of assets. In connection with any such future transaction, we could issue dilutive equity securities, incur
+substantial debt, reduce our cash reserves or assume contingent liabilities.
+
+ 
+
+Our
+experience in acquiring other businesses, product lines and technologies is limited. Our inability to overcome problems encountered in
+connection with any acquisitions could divert the attention of management, utilize scarce corporate resources and otherwise harm our
+business. Any potential future acquisitions also involve numerous risks, including:
+
+ 
+
+ 
+ 
+ 
+ problems
+ assimilating the purchased operations, technologies or products;
+
+ 
+ 
+ 
+ costs
+ associated with the acquisition;
+
+ 
+ 
+ 
+ adverse
+ effects on existing business relationships with suppliers and customers;
+
+ 
+ 
+ 
+ risks
+ associated with entering markets in which we have no or limited prior experience;
+
+ 
+ 
+ 
+ potential
+ loss of key employees of purchased organizations; and
+
+ 
+ 
+ 
+ potential
+ litigation arising from the acquired company s operations before the acquisition.
+
+ 
+ 
+
+ 22
+
+ 
+
+ 
+
+ 
+
+Furthermore,
+acquisitions may require material charges and could result in adverse tax consequences, substantial depreciation, deferred compensation
+charges, in-process research and development charges, the amortization of amounts related to deferred compensation and identifiable purchased
+intangible assets or impairment of goodwill, any of which could negatively affect our results of operations.
+
+ 
+
+WE
+MAY BE SUBJECT TO SECURITIES LITIGATION, WHICH IS EXPENSIVE AND COULD DIVERT MANAGEMENT ATTENTION.
+
+ 
+
+The
+market price of the shares of our common stock may be volatile, and in the past companies that have experienced volatility in the market
+price of their securities have been subject to securities class action litigation. We may be the target of this type of litigation in
+the future. 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.
+
+ 
+
+IF
+YOU PURCHASE SHARES OF COMMON STOCK IN THIS Underwritten OFFERING, YOU WILL INCUR IMMEDIATE
+AND SUBSTANTIAL DILUTION IN THE BOOK VALUE OF THE SHARES OF OUR COMMON STOCK.
+
+ 
+
+The
+proposed public offering price of the shares of our common stock in the Underwritten Offering is substantially higher than the net tangible
+book value per share of our common stock after giving effect to the Underwritten Offering. Investors purchasing shares of common stock
+in this Underwritten Offering will pay a price per share that substantially exceeds the book value of our tangible assets after subtracting
+our liabilities. As a result, investors purchasing shares of common stock in this Underwritten Offering will incur immediate dilution.
+
+ 
+
+Further,
+because we may need to raise additional capital to fund our anticipated level of operations, we may in the future sell substantial amounts
+of common stock or securities convertible into or exchangeable for common stock. These future issuances of equity or equity-linked securities,
+together with the exercise of outstanding convertible notes and warrants and any additional shares issued in connection with future acquisitions,
+if any, may result in further dilution to investors. See Dilution .
+
+ 
+
+WE
+DO NOT INTEND TO PAY DIVIDENDS IN THE FORESEEABLE FUTURE; THEREFORE, YOU MAY NEVER SEE A RETURN ON YOUR INVESTMENT.
+
+ 
+
+We
+do not anticipate the payment of cash dividends on our common stock in the foreseeable future. We anticipate that any profits from our
+operations will be devoted to our future operations. Any decision to pay dividends will depend upon our profitability at the time, cash
+available and other factors.
+
+ 
+
+General
+Risk Factors
+
+ 
+
+NATURAL
+DISASTERS AND OTHER CATASTROPHIC EVENTS BEYOND OUR CONTROL COULD ADVERSELY AFFECT OUR BUSINESS OPERATIONS AND FINANCIAL PERFORMANCE.
+
+ 
+
+The
+occurrence of one or more natural disasters, such as fires, hurricanes, tornados, tsunamis, floods and earthquakes; geo-political events,
+such as civil unrest in a country in which our suppliers are located or terrorist or military activities disrupting transportation, communication
+or utility systems; or other highly disruptive events, such as nuclear accidents, pandemics, unusual weather conditions or cyber-attacks,
+could adversely affect our operations and financial performance. Such events could result, among other things, in operational disruptions,
+physical damage to or destruction or disruption of one or more of our properties or properties used by third parties in connection with
+the supply of products or services to us, the lack of an adequate workforce in parts or all of our operations and communications and
+transportation disruptions. These factors could also cause consumer confidence and spending to decrease or result in increased volatility
+in the United States and global financial markets and economy. Such occurrences could have a material adverse effect on us and could
+also have indirect consequences such as increases in the costs of insurance if they result in significant loss of property or other insurable
+damage.
+
+ 
+
+ 23
+
+ 
+
+ 
+
+ 
+
+INCREASES
+IN COSTS, DISRUPTION OF SUPPLY OR SHORTAGE OF MATERIALS COULD HARM OUR BUSINESS.
+
+ 
+
+We
+may experience increases in the cost or a sustained interruption in the supply or shortage of materials. Any such increase, supply interruption
+or shortage could materially and negatively impact our business, prospects, financial condition and operating results. We use various
+materials in our business from suppliers.
+
+ 
+
+The
+prices for these materials fluctuate, and their available supply may be unstable, depending on market conditions and global demand for
+these materials, and could adversely affect our business and operating results.
+
+ 
+
+These
+risks include:
+
+ 
+
+ 
+ 
+ 
+ an
+ increase in the cost, or decrease in the available supply, of materials used; 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ disruption
+ in the supply of materials due to quality issues or recalls by manufacturers; 
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ tariffs
+ on the materials we source; and
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ increases
+ in global shipping costs have gone up due to shipping container shortages and delays at both shipping and receiving ports due to
+ COVID and lack of appropriate workforce. 
+
+ 
+ 
+
+Substantial
+increases in the prices for our materials or prices charged to us would increase our operating costs, and could reduce our margins if
+we cannot recoup the increased costs through increased prices. Any attempts to increase prices in response to increased material costs
+could result in cancellations of orders for our products and services and therefore materially and adversely affect our brand, image,
+business, prospects and operating results.
+
+ 
+
+Any
+of the above-mentioned factors could affect our business, prospects, financial condition, and operating results. The extent and
+duration of the military action, sanctions and resulting market disruptions are impossible to predict, but could be substantial. Any
+such disruptions may also magnify the impact of other risks described in this registration statement.
+
+ 
+
+WE
+MAY EXPERIENCE IN THE FUTURE, DELAYS OR OTHER COMPLICATIONS IN THE MANUFACTURE AND SUPPLY OF PRODUCTS WE USE IN OUR SYSTEMS WHICH COULD
+HARM OUR BRAND, BUSINESS, PROSPECTS, FINANCIAL CONDITION AND OPERATING RESULTS.
+
+ 
+
+We
+may encounter unanticipated challenges, such as supply chain or logistics constraints, that lead to delays in producing products we use
+in our projects. Any significant delay or other complication in the production of such products, including complications associated with
+expanding our supply chain or obtaining or maintaining regulatory approvals, and/or coronavirus impacts, could materially damage our
+brand, business, prospects, financial condition and operating results.
+
+ 
+
+ 24
+
+ 
+
+ 
+
+ 
+
+CHANGES
+IN OUR SUPPLY CHAIN MAY RESULT IN INCREASED COST. IF WE ARE UNSUCCESSFUL IN OUR EFFORTS TO CONTROL SUPPLIER COSTS, OUR OPERATING RESULTS
+MAY SUFFER.
+
+ 
+
+There
+is no assurance that our suppliers will ultimately be able to meet our cost, quality and volume needs, or do so at the times needed.
+Furthermore, as the scale of our business increases, we will need to accurately forecast, purchase, warehouse and transport components
+at much higher volumes than we have experience with. If we are unable to accurately match the timing and quantities of components purchases
+to our actual needs, or successfully implement automation, inventory management and other systems to accommodate the increased complexity
+in our supply chain, we may incur unexpected disruption, storage, transportation and write-off costs, which could have a material adverse
+effect on our financial condition and operating results.

parsed_sections/risk_factors/2023/CIK0000038723_1st_risk_factors.txt

@@ -0,0 +1 @@
+RISK FACTORS Investing in the Senior Demand Notes involves risks. You should carefully consider the risks described below, as well as the risk factors related to the Company included and discussed in our annual report on Form 10-K for the year ended December 31, 2022, which is incorporated herein by reference, before deciding whether to invest in the Senior Demand Notes. If any of the situations described in any of these risks actually occur, or if any risks or uncertainties not presently known to us arises or occurs, our business, financial condition or results of operations could be materially adversely affected. In any of these events, you may lose part or all of your investment. RISK FACTORS RELATING TO THE SENIOR DEMAND NOTES The Senior Demand Notes may not be a suitable investment for you. The Senior Demand Notes may not be a suitable investment for you, and we advise you to consult your investment, tax and other professional advisors prior to deciding whether to invest in Senior Demand Notes. The characteristics of the Senior Demand Notes, including features such as the variable interest rate and our ability to call the Senior Demand Notes, may not satisfy your investment objectives. The Senior Demand Notes also may not be a suitable investment for you based on your ability to withstand a loss of interest or principal or other aspects of your financial situation, including your income, net worth, financial needs, investment risk profile, return objectives, investment experience and other factors. Before deciding whether to invest in Senior Demand Notes, you should consider your investment allocation with respect to the amount of your contemplated investment in the Senior Demand Notes in relation to your other investment holdings and the diversity of those holdings. Because the Senior Demand Notes will have no sinking fund, security, insurance or guarantee, you may lose all or part of your investment in the Senior Demand Notes if we do not have the necessary liquidity to pay amounts due under the Senior Demand Notes. There is no sinking fund, security, insurance or guarantee of our obligation to make payments on the Senior Demand Notes. The Senior Demand Notes are not secured by any of our assets. We will not contribute funds to a separate account, commonly known as a sinking fund, to make any interest or principal payments on the Senior Demand Notes. The Senior Demand Notes are not certificates of deposit or similar obligations of, and are not guaranteed or insured by, any depository institution, the Federal Deposit Insurance Corporation, the Securities Investor Protection Corporation, or any other federal or state agency. Therefore, if you invest in the Senior Demand Notes, you will have to rely only on our cash flow from operations and other sources of funds for repayment or redemption and for payment of interest when due. If our cash flow from operations and other sources of funds are not sufficient to pay the Senior Demand Notes, then you may lose all or part of your investment. The Senior Demand Notes will be effectively subordinated to our secured indebtedness. The Senior Demand Notes will be unsecured, and therefore will be effectively subordinated to our secured indebtedness to the extent of the value of the assets securing such indebtedness. The Senior Demand Notes do not place any restrictions on our ability to incur any secured indebtedness. In the event we become subject to a bankruptcy, liquidation, dissolution, reorganization or similar preceding, the holders of any secured indebtedness would be entitled to proceed against the collateral that secures the secured indebtedness, and that collateral, to the extent not sufficient to provide for the repayment of all such secured indebtedness may not be available for satisfaction of any amounts owed under the Senior Demand Notes. We could incur significant additional indebtedness that is secured or equal in priority with respect to the right of repayment to the Senior Demand Notes, which could impair our ability to repay the Senior Demand Notes may be impaired. 1ST FRANKLIN FINANCIAL CORPORATION $900,000,000 SENIOR DEMAND NOTES _________________________________________________ 1st Franklin Financial Corporation (the "Company" or "1st Franklin") is offering to sell Senior Demand Notes on a continuous basis. The Senior Demand Notes will have the following principal terms and features: General: The Senior Demand Notes will be senior, unsecured obligations of the Company and will be issued under an Indenture, as amended, between us and U.S. Bank Trust Company, National Association (as successor to U.S. Bank National Association), as Trustee. Principal amount: The principal amount of each Senior Demand Note held by an investor at any time will be equal to all amounts invested in such Senior Demand Note, together with accrued and unpaid interest, less redemptions. Denominations: Senior Demand Notes will be issued and sold in initial denominations of $25.00 or more, and in any amounts thereafter. Redemption: Senior Demand Notes will be payable or redeemable at any time upon request. We will honor partial redemption requests for redemption so long as the remaining outstanding balance is at least $1.00. In certain instances, a holder of Senior Demand Notes will be able to redeem all or a part of the holder's Senior Demand Notes by writing drafts against such balances. Interest rate: The interest rate payable on Senior Demand Notes will be a variable rate, compounded daily, and will depend upon a holder s then-current daily balance of Senior Demand Notes. We may establish, in our discretion, separate interest rates for Senior Demand Notes with daily balances from $1.00 to $2,499.99; $2,500.00 to $9,999.99; $10,000.00 to $49,999.99; $50,000.00 to $99,999.99; and $100,000.00 and over. When an interest rate is established for a range of balances, it will become effective for and applied to all Senior Demand Notes with a current daily balance within that range, whether existing or newly issued. These interest rates may be the same or different for each range of balances, and we may increase or decrease the interest rate for any range independently of the others without notice after the date of investment. A holder of Senior Demand Notes will not be expressly notified of changes in any applicable interest rate; then-current interest rates will be available by calling or visiting our executive offices, and on our website. Maturity: The Senior Demand Notes will have no stated maturity. They will be payable in whole or in part at any time upon the request of a holder, and will be callable by the Company upon written notice at any time without premium. We will publish the most recently determined and then applicable interest rate for each balance range in a newspaper of general circulation in Toccoa, Georgia, the location of the Company s principal place of business, and on our web site at http://www.1ffc.com. The information on our website is not a part of, or incorporated by reference into, this prospectus. You can also obtain a list of the most recently determined interest rates by calling or visiting our executive offices in Toccoa, Georgia. A prospectus supplement setting forth the most recently determined interest rates will be filed with the SEC, as appropriate. We are offering the Senior Demand Notes on a continuous basis, until such time as all of the Senior Demand Notes being offered hereunder have been sold, or until the registration statement relating hereto ceases to be effective with the SEC. The Senior Demand Notes will be offered directly to the public by us, without an underwriter. We cannot assure you that all or any portion of the Senior Demand Notes we are offering will be sold. We do not have to sell any minimum amount of Senior Demand Notes to accept and use the proceeds of this offering. Proceeds from the sale of the Senior Demand Notes will be placed in our general treasury when received. We have not made any arrangement to place any of the proceeds from this offering in an escrow, trust or similar account. Therefore, you cannot be guaranteed of the return of your investment. The Senior Demand Notes are not and will not be listed on any securities exchange and there is no and will be no public trading market for the Senior Demand Notes. We have the right to reject any subscription for Senior Demand Notes, in whole or in part, for any reason. You should carefully read this prospectus and any applicable prospectus supplement, including the information incorporated by reference, before you decide whether to invest in Senior Demand Notes. Investing in Senior Demand Notes involves risks. See Risk Factors beginning on page 5 for a description of these risks. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the Senior Demand Notes, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. 1st FRANKLIN FINANCIAL CORPORATION IS NOT A BANK. THE SENIOR DEMAND NOTES ARE NOT BANK DEPOSITS OR SIMILAR OBLIGATIONS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR THE SECURITIES INVESTOR PROTECTION CORPORATION OR ANY OTHER FEDERAL OR STATE AGENCY. The Trustee has not provided or approved any information in this prospectus, takes no responsibility for any information contained in this prospectus and makes no representations as to the contents of this prospectus. Price to Public Underwriting Discounts and Commissions (1) Proceeds to Company (2) Per Senior Demand Note 100% None 100% Total $900,000,000 None $900,000,000 (1) The Senior Demand Notes are not being offered or sold pursuant to any underwriting or similar agreement, and no commissions or other remuneration will be paid in connection with their sale. The Senior Demand Notes will be sold at face value. (2) Before deduction of our expenses, estimated at $158,826. THE DATE OF THIS PROSPECTUS IS ____ __, 2023 You should rely only on the information contained or incorporated by reference in this prospectus and any applicable prospectus supplement. We have not authorized anyone to provide you with any different information. You should not assume that the information contained or incorporated by reference in this prospectus or any prospectus supplement is accurate as of any date other than as of the date of this prospectus, the applicable prospectus supplement or the date the documents incorporated by reference were filed with the SEC. We are offering to sell, and seeking offers to buy, the securities registered by this prospectus only in jurisdictions where these offers and sales are permitted. TABLE OF CONTENTS PROSPECTUS SUMMARY 3 RISK FACTORS 6

parsed_sections/risk_factors/2023/CIK0000837332_athene_risk_factors.txt

@@ -0,0 +1 @@
+Company Related Risk Factors Risks Relating to Business Operations The Company s financial condition depends, in part, on the accuracy of management s assumptions and estimates, and the Company s financial condition could be adversely affected if these assumptions and estimates differ significantly from actual results. The Company makes and relies on certain assumptions and estimates regarding many items related to its business, including interest rates, investment returns, expenses and operating costs, tax assets and liabilities, business mix, surrender activity, mortality and contingent liabilities. The Company also uses these assumptions and estimates to make decisions crucial to its business operations, such as establishing pricing, target returns and expense structures for its products determining the amount of reserves it is required to hold for its policy liabilities determining the price it will pay to acquire or reinsure business determining the hedging strategies to manage risks to its business and operations and determining the amount of regulatory and rating agency capital it must hold to support its business. The factors influencing these assumptions and estimates cannot be calculated or predicted with certainty, and if these assumptions and estimates differ significantly from actual outcomes and results, the Company s financial condition may be adversely affected. In particular, the Company s financial condition may be significantly affected by the accuracy of the Company s assumptions and estimates regarding its insurance products and liabilities, determinations of fair value, hedging strategies and financial statements. Insurance Products and Liabilities. Pricing of the Company s annuity and other insurance products, whether issued by the Company or acquired through reinsurance or acquisitions, is based upon assumptions about factors such as persistency (how long insurance products remain in force), mortality (how long insureds live) and rates of election (the rates at which optional guaranteed benefits under insurance products are elected). If emerging or actual experience deviates from the Company s assumptions, such deviations could have a significant effect on the financial condition of the Company. For example, a significant portion of the Company s in-force and newly-issued products contain riders that offer guaranteed lifetime income or death benefits. These riders expose the Company to mortality, longevity and policyholder behavior risks. If actual utilization of certain rider benefits is adverse when compared to the Company s estimates used in setting its reserves for future policy benefits, these reserves may prove to be inadequate and the Company may be required to increase such reserves. More generally, deviations from the Company pricing expectations could result in the Company earning less of a spread between the investment income earned on the Company's assets and the interest credibted to such products and other costs incurred in servicing the products, or may require the Company to make more payments under certain products than it had projected. The Company has limited experience to date on policyholder behavior for its guaranteed benefit products. As a result, future experience could deviate significantly from the Company s assumptions. Determination of Fair Value. The Company holds securities, derivative instruments and other assets and liabilities that must be, or at the Company's election are, measured at fair value. Fair value Table of Contents Athene s conflicts committee or applicable disinterested directors have previously approved the existing transactions described above that are required to be approved by the terms of Athene s conflicts committee charter. While the Company does not maintain written policies and procedures separate from those of Athene described above, transactions of the type that would be required to be reported herein, but that are not covered by the Athene policy described above, namely those transactions between the Company, on the one hand, and Athene or other subsidiaries of Athene, on the other hand, are generally approved by the Company s board of directors. The existing transactions described above under Other Related Party Transactions and Relationships were approved by the Company s board of directors. Company Related Risk Factors Risks Relating to Business Operations The Company s financial condition depends, in part, on the accuracy of management s assumptions and estimates, and the Company s financial condition could be adversely affected if these assumptions and estimates differ significantly from actual results. The Company makes and relies on certain assumptions and estimates regarding many items related to its business, including interest rates, investment returns, expenses and operating costs, tax assets and liabilities, business mix, surrender activity, mortality and contingent liabilities. The Company also uses these assumptions and estimates to make decisions crucial to its business operations, such as establishing pricing, target returns and expense structures for its products determining the amount of reserves it is required to hold for its policy liabilities determining the price it will pay to acquire or reinsure business determining the hedging strategies to manage risks to its business and operations and determining the amount of regulatory and rating agency capital it must hold to support its business. The factors influencing these assumptions and estimates cannot be calculated or predicted with certainty, and if these assumptions and estimates differ significantly from actual outcomes and results, the Company s financial condition may be adversely affected. In particular, the Company s financial condition may be significantly affected by the accuracy of the Company s assumptions and estimates regarding its insurance products and liabilities, determinations of fair value, hedging strategies and financial statements. Insurance Products and Liabilities. Pricing of the Company s annuity and other insurance products, whether issued by the Company or acquired through reinsurance or acquisitions, is based upon assumptions about factors such as persistency (how long insurance products remain in force), mortality (how long insureds live) and rates of election (the rates at which optional guaranteed benefits under insurance products are elected). If emerging or actual experience deviates from the Company s assumptions, such deviations could have a significant effect on the financial condition of the Company. For example, a significant portion of the Company s in-force and newly-issued products contain riders that offer guaranteed lifetime income or death benefits. These riders expose the Company to mortality, longevity and policyholder behavior risks. If actual utilization of certain rider benefits is adverse when compared to the Company s estimates used in setting its reserves for future policy benefits, these reserves may prove to be inadequate and the Company may be required to increase such reserves. More generally, deviations from the Company pricing expectations could result in the Company earning less of a spread between the investment income earned on the Company's assets and the interest credibted to such products and other costs incurred in servicing the products, or may require the Company to make more payments under certain products than it had projected. The Company has limited experience to date on policyholder behavior for its guaranteed benefit products. As a result, future experience could deviate significantly from the Company s assumptions. Determination of Fair Value. The Company holds securities, derivative instruments and other assets and liabilities that must be, or at the Company's election are, measured at fair value. Fair value Table of Contents represents the anticipated amount that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction. The determination of fair value involves the use of various assumptions and estimates, and considerable judgment may be required to estimate fair value. Accordingly, estimates of fair value are not necessarily indicative of the amounts that could be realized in a current or future market exchange. As such, changes in, or deviations from, the assumptions used in such valuations can significantly affect the Company s financial condition and results of operation. During periods of market disruption, including periods of rapidly changing credit spreads or illiquidity, if trading becomes less frequent or market data becomes less observable, it has been and will likely continue to be difficult to value certain of the Company s investments. Further, rapidly changing credit and equity market conditions could materially impact the valuation of investments as reported within the Company's financial statements, and the period-to-period changes in value could vary significantly. Even if the Company s assumptions and valuations are accurate at the time that they are made, the market value of the Company s investments could subsequently decline, which could adversely impact the financial condition of the Company. Hedging Strategies. The Company uses, and may in the future use, derivatives and reinsurance contracts to hedge risks related to current or future changes in the fair value of its assets and liabilities current or future changes in cash flows changes in interest rates, equity markets and credit spreads the occurrence of credit defaults currency fluctuations and changes in mortality and longevity. The Company uses equity derivatives to hedge the liabilities associated with its fixed indexed annuities. The Company s hedging strategies rely on assumptions and projections regarding the Company s assets and liabilities, as well as general market factors and the creditworthiness of the Company s counterparties, any or all of which may prove to be incorrect or inadequate. Accordingly, the Company s hedging activities may not have the desired impact. The Company may also incur significant losses on hedging transactions. Financial Statements. The preparation of the financial statements of the Company, including the notes thereto, requires management to make various estimates and assumptions that affect the amounts reported in the financial statements. These estimates include, but are not limited to, the fair value of investments, impairment of investments and valuation allowances, the valuation of derivatives, future policy benefit reserves and valuation allowances on deferred tax assets and stock-based compensation. The assumptions and estimates required for these calculations involve judgment and by their nature are imprecise and subject to changes and revisions over time. Accordingly, the Company s financial results may be adversely affected from time to time by actual results differing from assumptions. Any of these inaccuracies could result in material adjustments to the Company s financial statements. The Company relies significantly on third parties for various services, and the Company may be held responsible for obligations that arise from the acts or omissions of third parties under the third parties respective agreements with the Company if the third parties are deemed to have acted on the Company s behalf. The Company relies significantly on third parties to provide various services that are important to the Company s business, including investment, distribution and administrative services. As such, the Company s business may be affected by the performance of those parties. Additionally, the Company s operations are dependent on various technologies, some of which are provided or maintained by certain key outsourcing partners and other parties. Many of the Company s products and services are sold through third-party intermediaries. In particular, the Company is reliant on such intermediaries to describe and explain these products and services to potential customers, and although the Company takes precautions to avoid this result, such intermediaries may be deemed to have acted on its behalf. If that occurs, the intentional or unintentional misrepresentation of the Company s products and services in advertising materials or other external communications, or inappropriate activities by an intermediary or personnel employed by an intermediary could result in liability for the Company and have an adverse effect on its reputation and business prospects, as well as lead to potential regulatory actions or litigation involving or against the Table of Contents represents the anticipated amount that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction. The determination of fair value involves the use of various assumptions and estimates, and considerable judgment may be required to estimate fair value. Accordingly, estimates of fair value are not necessarily indicative of the amounts that could be realized in a current or future market exchange. As such, changes in, or deviations from, the assumptions used in such valuations can significantly affect the Company s financial condition and results of operation. During periods of market disruption, including periods of rapidly changing credit spreads or illiquidity, if trading becomes less frequent or market data becomes less observable, it has been and will likely continue to be difficult to value certain of the Company s investments. Further, rapidly changing credit and equity market conditions could materially impact the valuation of investments as reported within the Company's financial statements, and the period-to-period changes in value could vary significantly. Even if the Company s assumptions and valuations are accurate at the time that they are made, the market value of the Company s investments could subsequently decline, which could adversely impact the financial condition of the Company. Hedging Strategies. The Company uses, and may in the future use, derivatives and reinsurance contracts to hedge risks related to current or future changes in the fair value of its assets and liabilities current or future changes in cash flows changes in interest rates, equity markets and credit spreads the occurrence of credit defaults currency fluctuations and changes in mortality and longevity. The Company uses equity derivatives to hedge the liabilities associated with its fixed indexed annuities. The Company s hedging strategies rely on assumptions and projections regarding the Company s assets and liabilities, as well as general market factors and the creditworthiness of the Company s counterparties, any or all of which may prove to be incorrect or inadequate. Accordingly, the Company s hedging activities may not have the desired impact. The Company may also incur significant losses on hedging transactions. Financial Statements. The preparation of the financial statements of the Company, including the notes thereto, requires management to make various estimates and assumptions that affect the amounts reported in the financial statements. These estimates include, but are not limited to, the fair value of investments, impairment of investments and valuation allowances, the valuation of derivatives, future policy benefit reserves and valuation allowances on deferred tax assets and stock-based compensation. The assumptions and estimates required for these calculations involve judgment and by their nature are imprecise and subject to changes and revisions over time. Accordingly, the Company s financial results may be adversely affected from time to time by actual results differing from assumptions. Any of these inaccuracies could result in material adjustments to the Company s financial statements. The Company relies significantly on third parties for various services, and the Company may be held responsible for obligations that arise from the acts or omissions of third parties under the third parties respective agreements with the Company if the third parties are deemed to have acted on the Company s behalf. The Company relies significantly on third parties to provide various services that are important to the Company s business, including investment, distribution and administrative services. As such, the Company s business may be affected by the performance of those parties. Additionally, the Company s operations are dependent on various technologies, some of which are provided or maintained by certain key outsourcing partners and other parties. Many of the Company s products and services are sold through third-party intermediaries. In particular, the Company is reliant on such intermediaries to describe and explain these products and services to potential customers, and although the Company takes precautions to avoid this result, such intermediaries may be deemed to have acted on its behalf. If that occurs, the intentional or unintentional misrepresentation of the Company s products and services in advertising materials or other external communications, or inappropriate activities by an intermediary or personnel employed by an intermediary could result in liability for the Company and have an adverse effect on its reputation and business prospects, as well as lead to potential regulatory actions or litigation involving or against the Table of Contents Company. In addition, the Company relies on third-party administrators ( TPAs ) to administer a portion of its annuity contracts. Some of the Company s reinsurers also use TPAs to administer business which the Company reinsures to them. To the extent any of these TPAs do not administer such business appropriately, the Company has and may in the future experience customer complaints, regulatory intervention and other adverse impacts, which could affect its future growth and profitability. If any of these TPAs or their employees are found to have made material misrepresentations to the Company s policyholders, violated applicable insurance, privacy or other laws and regulations or otherwise engaged in misconduct, the Company could be held liable for their actions and be subject to regulatory scrutiny, which could adversely affect the Company s reputation, business prospects, financial condition, results of operations, liquidity and cash flows. Additionally, past or future misconduct by the Company s agents that distribute their products or employees of their vendors could result in violations of law by the Company, regulatory sanctions and or serious reputational or financial harm and the precautions the Company takes to prevent and detect this activity may not be effective in all cases. Although the Company employs controls and procedures designed to monitor associates business decisions and to prevent the Company from taking excessive or inappropriate risks, associates may take such risks in circumvention of such controls and procedures. Interruption or other operational failures in telecommunications, information technology and other operational systems or a failure to maintain the security, integrity, confidentiality or privacy of sensitive data residing on those systems, including as a result of human error, could have a material adverse effect on the Company s business. The Company is highly dependent on automated and information technology systems to record and process its internal transactions and transactions involving its customers, as well as to calculate reserves, value its investment portfolios and complete certain other components of its financial statements. The Company could experience a failure of one of these systems, the Company s employees or agents could fail to monitor and implement enhancements or other modifications to a system in a timely and effective manner or its employees or agents could fail to complete all necessary data reconciliation or other conversion controls when implementing a new software system or modifications to an existing system. Additionally, anyone who is able to circumvent the Company s security measures and penetrate the Company s information technology systems could access, view, misappropriate, alter or delete information in the systems, including personally identifiable customer information and proprietary business information. Information security risks also exist with respect to the use of portable electronic devices, such as laptops, which are particularly vulnerable to loss and theft. The Company retains personally identifiable information and other confidential information in its information technology systems and those of the Company's business partners. Despite the Company's security and back-up measures, including periodic testing and its business continuity plan, its information technology systems and those of its business partners may be vulnerable to physical or electronic intrusions, viruses or other attacks, programming errors and similar disruptions. The Company may also be subject to disruptions of any of these systems arising from events that are wholly or partially beyond its control (for example, natural disasters, acts of terrorism, epidemics, computer viruses and electrical telecommunications outages). All of these risks are also applicable where the Company relies on outside vendors to provide services to the Company and its customers. The failure of any one of these systems for any reason, or errors made by the Company s employees or agents, could in each case cause significant interruptions to its operations, which could harm its reputation, adversely affect its internal control over financial reporting or have a material and adverse effect on the Company s business, financial condition and results of operations. The Company is also subject to data privacy and security laws applicable to its business in relevant jurisdictions. Any compromise of the security of the Company s information technology systems that results in inappropriate disclosure or use of personally identifiable customer information could damage the reputation of the Company s brand in the marketplace, deter purchases of the Company s products, subject the Company to heightened regulatory scrutiny or significant civil and criminal liability and require it to incur significant technical, legal and other expenses. Table of Contents Company. In addition, the Company relies on third-party administrators ( TPAs ) to administer a portion of its annuity contracts. Some of the Company s reinsurers also use TPAs to administer business which the Company reinsures to them. To the extent any of these TPAs do not administer such business appropriately, the Company has and may in the future experience customer complaints, regulatory intervention and other adverse impacts, which could affect its future growth and profitability. If any of these TPAs or their employees are found to have made material misrepresentations to the Company s policyholders, violated applicable insurance, privacy or other laws and regulations or otherwise engaged in misconduct, the Company could be held liable for their actions and be subject to regulatory scrutiny, which could adversely affect the Company s reputation, business prospects, financial condition, results of operations, liquidity and cash flows. Additionally, past or future misconduct by the Company s agents that distribute their products or employees of their vendors could result in violations of law by the Company, regulatory sanctions and or serious reputational or financial harm and the precautions the Company takes to prevent and detect this activity may not be effective in all cases. Although the Company employs controls and procedures designed to monitor associates business decisions and to prevent the Company from taking excessive or inappropriate risks, associates may take such risks in circumvention of such controls and procedures. Interruption or other operational failures in telecommunications, information technology and other operational systems or a failure to maintain the security, integrity, confidentiality or privacy of sensitive data residing on those systems, including as a result of human error, could have a material adverse effect on the Company s business. The Company is highly dependent on automated and information technology systems to record and process its internal transactions and transactions involving its customers, as well as to calculate reserves, value its investment portfolios and complete certain other components of its financial statements. The Company could experience a failure of one of these systems, the Company s employees or agents could fail to monitor and implement enhancements or other modifications to a system in a timely and effective manner or its employees or agents could fail to complete all necessary data reconciliation or other conversion controls when implementing a new software system or modifications to an existing system. Additionally, anyone who is able to circumvent the Company s security measures and penetrate the Company s information technology systems could access, view, misappropriate, alter or delete information in the systems, including personally identifiable customer information and proprietary business information. Information security risks also exist with respect to the use of portable electronic devices, such as laptops, which are particularly vulnerable to loss and theft. The Company retains personally identifiable information and other confidential information in its information technology systems and those of the Company's business partners. Despite the Company's security and back-up measures, including periodic testing and its business continuity plan, its information technology systems and those of its business partners may be vulnerable to physical or electronic intrusions, viruses or other attacks, programming errors and similar disruptions. The Company may also be subject to disruptions of any of these systems arising from events that are wholly or partially beyond its control (for example, natural disasters, acts of terrorism, epidemics, computer viruses and electrical telecommunications outages). All of these risks are also applicable where the Company relies on outside vendors to provide services to the Company and its customers. The failure of any one of these systems for any reason, or errors made by the Company s employees or agents, could in each case cause significant interruptions to its operations, which could harm its reputation, adversely affect its internal control over financial reporting or have a material and adverse effect on the Company s business, financial condition and results of operations. The Company is also subject to data privacy and security laws applicable to its business in relevant jurisdictions. Any compromise of the security of the Company s information technology systems that results in inappropriate disclosure or use of personally identifiable customer information could damage the reputation of the Company s brand in the marketplace, deter purchases of the Company s products, subject the Company to heightened regulatory scrutiny or significant civil and criminal liability and require it to incur significant technical, legal and other expenses. Table of Contents Even in the absence of a compromise in the security of the Company s information technology systems, inappropriate disclosure or use of confidential information, including personally identifiable customer information may occur in the event of a compromise in the security of the information technology systems of the Company s third-party advisors or business partners with whom the Company shares such data. Any such inappropriate disclosure or use could likewise damage the Company s reputation in the marketplace, deter purchases of the Company s insurance products, subject the Company to heightened regulatory scrutiny or significant civil and criminal liability and require the Company to incur significant technical, legal and other expenses. The Company may be the target or subject of, and may be required to defend against or respond to, litigation or regulatory investigations or enforcement actions. The Company operates in an industry in which various practices are subject to potential litigation (including class action litigation) and regulatory scrutiny. The Company, like other financial services companies, is involved in litigation and arbitration in the ordinary course of business and may be the subject of regulatory proceedings (including investigations and enforcement actions). Plaintiffs may seek large or indeterminate amounts of damages in litigation and regulators may seek large fines in enforcement actions. Given the large or indeterminate amounts sometimes sought and the inherent unpredictability of litigation and enforcement actions, it is possible that an unfavorable resolution of one or more matters could have an adverse effect on the Company s business, financial condition, results of operations, liquidity and cash flows. Even if the Company ultimately prevails in any litigation or receives positive results from investigations, the Company could incur material legal costs or its reputation could be materially adversely affected. We are subject to risks associated with public health crises, such as pandemics and epidemics, including the COVID-19 pandemic which has caused severe disruptions in the US and global economy and could continue to impact the Company s business, financial condition and results of operations. The Company is subject to risks associated with public health crises, such as pandemics and epidemics, including the COVID-19 pandemic. The COVID-19 pandemic and the responses to the pandemic have adversely impacted global commercial activity and contributed to significant volatility in financial markets. It is uncertain how long this volatility in the financial markets created by the COVID-19 pandemic will continue. While many countries around the world have removed or reduced the restrictions taken in response to the COVID-19 pandemic, the emergence of new variants of the SARS-CoV-2 virus may result in new governmental lockdowns, quarantine requirements or other restrictions to slow the spread of the virus. The effects of the COVID-19 outbreak on the economy and the public have been severe and have exacerbated, and may continue to exacerbate, other pre-existing political, social, economic, market and financial risks. The COVID-19 pandemic and the responses to the pandemic could adversely affect the Company s business in a number of ways, including by adversely impacting the valuations of the Company s investments, which are generally correlated to the performance of the relevant equity and debt markets increasing volatility in the financial markets preventing the Company from capitalizing on certain market opportunities causing prolonged asset price inflation and hampering its ability to deploy capital or to deploy capital as profitably interrupting global or regional supply chains straining the Company s liquidity increasing the rate at which policyholders of its insurance products withdraw their policies and reducing its ability to understand and foresee trends and changes in the markets in which we operate. The scope and duration of any future public health crisis, including the potential emergence of new variants of the SARS-CoV-2 virus, the pace at which government restrictions are imposed and lifted, the scope of additional actions taken to mitigate the spread of disease, global vaccination and booster rates, the speed and extent to which global markets fully recover from the disruptions caused by such a public health crisis, and the impact of these factors on its business, financial condition and results of operations, will depend on future developments that are highly uncertain and cannot be predicted with confidence. Changes to the method of determining the LIBOR or the selection of a replacement for LIBOR may affect the value of investments held by or due to the Company and could affect its results of operations and financial results. Table of Contents Even in the absence of a compromise in the security of the Company s information technology systems, inappropriate disclosure or use of confidential information, including personally identifiable customer information may occur in the event of a compromise in the security of the information technology systems of the Company s third-party advisors or business partners with whom the Company shares such data. Any such inappropriate disclosure or use could likewise damage the Company s reputation in the marketplace, deter purchases of the Company s insurance products, subject the Company to heightened regulatory scrutiny or significant civil and criminal liability and require the Company to incur significant technical, legal and other expenses. The Company may be the target or subject of, and may be required to defend against or respond to, litigation or regulatory investigations or enforcement actions. The Company operates in an industry in which various practices are subject to potential litigation (including class action litigation) and regulatory scrutiny. The Company, like other financial services companies, is involved in litigation and arbitration in the ordinary course of business and may be the subject of regulatory proceedings (including investigations and enforcement actions). Plaintiffs may seek large or indeterminate amounts of damages in litigation and regulators may seek large fines in enforcement actions. Given the large or indeterminate amounts sometimes sought and the inherent unpredictability of litigation and enforcement actions, it is possible that an unfavorable resolution of one or more matters could have an adverse effect on the Company s business, financial condition, results of operations, liquidity and cash flows. Even if the Company ultimately prevails in any litigation or receives positive results from investigations, the Company could incur material legal costs or its reputation could be materially adversely affected. We are subject to risks associated with public health crises, such as pandemics and epidemics, including the COVID-19 pandemic which has caused severe disruptions in the US and global economy and could continue to impact the Company s business, financial condition and results of operations. The Company is subject to risks associated with public health crises, such as pandemics and epidemics, including the COVID-19 pandemic. The COVID-19 pandemic and the responses to the pandemic have adversely impacted global commercial activity and contributed to significant volatility in financial markets. It is uncertain how long this volatility in the financial markets created by the COVID-19 pandemic will continue. While many countries around the world have removed or reduced the restrictions taken in response to the COVID-19 pandemic, the emergence of new variants of the SARS-CoV-2 virus may result in new governmental lockdowns, quarantine requirements or other restrictions to slow the spread of the virus. The effects of the COVID-19 outbreak on the economy and the public have been severe and have exacerbated, and may continue to exacerbate, other pre-existing political, social, economic, market and financial risks. The COVID-19 pandemic and the responses to the pandemic could adversely affect the Company s business in a number of ways, including by adversely impacting the valuations of the Company s investments, which are generally correlated to the performance of the relevant equity and debt markets increasing volatility in the financial markets preventing the Company from capitalizing on certain market opportunities causing prolonged asset price inflation and hampering its ability to deploy capital or to deploy capital as profitably interrupting global or regional supply chains straining the Company s liquidity increasing the rate at which policyholders of its insurance products withdraw their policies and reducing its ability to understand and foresee trends and changes in the markets in which we operate. The scope and duration of any future public health crisis, including the potential emergence of new variants of the SARS-CoV-2 virus, the pace at which government restrictions are imposed and lifted, the scope of additional actions taken to mitigate the spread of disease, global vaccination and booster rates, the speed and extent to which global markets fully recover from the disruptions caused by such a public health crisis, and the impact of these factors on its business, financial condition and results of operations, will depend on future developments that are highly uncertain and cannot be predicted with confidence. Changes to the method of determining the LIBOR or the selection of a replacement for LIBOR may affect the value of investments held by or due to the Company and could affect its results of operations and financial results. Table of Contents As a result of the expected discontinuation of certain unsecured benchmark interest rates, including LIBOR and other Interbank Offered Rates (IBORs), regulators and market participants in various jurisdictions have been working to identify alternative reference rates that are compliant with the International Organization of Securities Commission's standards for transaction-based benchmarks. In the US, the Alternative Reference Rates Committee (ARRC), a group of market and official sector participants, identified SOFR as its recommended alternative benchmark rate. Other alternative reference rates have been recommended in other jurisdictions. The transition from LIBOR to another reference rate could result in financial market disruption and significant increases or volatility in risk-free benchmark rates. Should such disruption occur, it may adversely affect, among other things, (1) the trading market for LIBOR-based securities, including those held in the Company s investment portfolio and (2) the market for derivative instruments, including those that the Company uses to achieve its hedging objectives. The Company s most significant LIBOR exposure area as it relates to legacy contracts is the Company portfolio of floating rate investments tied to LIBOR. As a result, the transition from LIBOR could have a direct or indirect adverse effect on its business, results of operations and financial condition. In addition, as Athene s asset manager, Apollo manages the relationship with relevant market participants, including investees and trustees negotiates and maintains the relevant investment documentation and inputs key information, such as interest rates, into systems integrated with its financial reporting system. Athene and the Company are therefore reliant upon Apollo to complete important functions in the LIBOR transition process as it relates to its investment portfolio, including negotiating for relevant fallbacks, where appropriate, and inputting the appropriate replacement interest rates into the applicable information systems in advance of LIBOR's transition. Should Apollo fail to timely complete all of its responsibilities prior to the discontinuation of LIBOR, it could have an adverse impact on the Company s results of operations and ability to timely report accurate financial information. Risks Relating to Market Risk The Company is dependent on certain reinsurance arrangements with AADE and AARe. The Company has entered into a coinsurance agreement with AADE and has also entered into certain Modco Agreements with AARe. Pursuant to the coinsurance agreement, the Company cedes to AADE a 50% quota share of its retail annuity business issued on or after January 1, 2018. Effective January 1, 2022, the Company and AADE agreed to terminate that coinsurance agreement for new business, with the intention that new policies issued on and after that date will be reinsured to AARe pursuant to a new Modco Agreement effective January 1, 2022. Pursuant to the Modco Agreements, the Company cedes to AARe 80% to 100% of its remaining business. The Company expects to cede to AARe, on a modified coinsurance basis, 80% of all liabilities arising out of the Contract. Under each Modco Agreement, the Company is required to fund a Modco Account at the inception of the reinsurance relationship with assets equal to the gross statutory reserves corresponding to the ceded business (the Reserves ). Payments on the liabilities ceded by the Company are made from the applicable Modco Account when due. To the extent that the assets maintained in a Modco Account are less than the corresponding Reserves, AARe is required to transfer assets to the Company to be deposited into the applicable Modco Account upon settlement. Should AARe fail to make any such transfer, the Company s ability to make payments on a ceded liability could be adversely affected. Due to the Modco Agreements, the amount of capital and surplus that the Company is required to maintain is less than what would be required if the insurance liabilities were not ceded to AARe. Therefore, the Company may have fewer assets available to make payments under its insurance liabilities in the event of a default by AARe. In addition, the Company remains primarily liable for the policies ceded to AADE and may experience similar challenges in the event of a default by AADE. AARe and or AADE, on the one hand, and the Company, on the other hand, may agree to modify or terminate any of the Modco Agreements or the coinsurance agreement without the consent of policyholders, and such modification or termination may be detrimental to the interests of such policyholders and the Company s ability to satisfy its financial obligations may be adversely affected. Interest rate fluctuations could adversely affect the Company's business, financial condition, results of operations, liquidity and cash flows. Table of Contents As a result of the expected discontinuation of certain unsecured benchmark interest rates, including LIBOR and other Interbank Offered Rates (IBORs), regulators and market participants in various jurisdictions have been working to identify alternative reference rates that are compliant with the International Organization of Securities Commission's standards for transaction-based benchmarks. In the US, the Alternative Reference Rates Committee (ARRC), a group of market and official sector participants, identified SOFR as its recommended alternative benchmark rate. Other alternative reference rates have been recommended in other jurisdictions. The transition from LIBOR to another reference rate could result in financial market disruption and significant increases or volatility in risk-free benchmark rates. Should such disruption occur, it may adversely affect, among other things, (1) the trading market for LIBOR-based securities, including those held in the Company s investment portfolio and (2) the market for derivative instruments, including those that the Company uses to achieve its hedging objectives. The Company s most significant LIBOR exposure area as it relates to legacy contracts is the Company portfolio of floating rate investments tied to LIBOR. As a result, the transition from LIBOR could have a direct or indirect adverse effect on its business, results of operations and financial condition. In addition, as Athene s asset manager, Apollo manages the relationship with relevant market participants, including investees and trustees negotiates and maintains the relevant investment documentation and inputs key information, such as interest rates, into systems integrated with its financial reporting system. Athene and the Company are therefore reliant upon Apollo to complete important functions in the LIBOR transition process as it relates to its investment portfolio, including negotiating for relevant fallbacks, where appropriate, and inputting the appropriate replacement interest rates into the applicable information systems in advance of LIBOR's transition. Should Apollo fail to timely complete all of its responsibilities prior to the discontinuation of LIBOR, it could have an adverse impact on the Company s results of operations and ability to timely report accurate financial information. Risks Relating to Market Risk The Company is dependent on certain reinsurance arrangements with AADE and AARe. The Company has entered into a coinsurance agreement with AADE and has also entered into certain Modco Agreements with AARe. Pursuant to the coinsurance agreement, the Company cedes to AADE a 50% quota share of its retail annuity business issued on or after January 1, 2018. Effective January 1, 2022, the Company and AADE agreed to terminate that coinsurance agreement for new business, with the intention that new policies issued on and after that date will be reinsured to AARe pursuant to a new Modco Agreement effective January 1, 2022. Pursuant to the Modco Agreements, the Company cedes to AARe 80% to 100% of its remaining business. The Company expects to cede to AARe, on a modified coinsurance basis, 80% of all liabilities arising out of the Contract. Under each Modco Agreement, the Company is required to fund a Modco Account at the inception of the reinsurance relationship with assets equal to the gross statutory reserves corresponding to the ceded business (the Reserves ). Payments on the liabilities ceded by the Company are made from the applicable Modco Account when due. To the extent that the assets maintained in a Modco Account are less than the corresponding Reserves, AARe is required to transfer assets to the Company to be deposited into the applicable Modco Account upon settlement. Should AARe fail to make any such transfer, the Company s ability to make payments on a ceded liability could be adversely affected. Due to the Modco Agreements, the amount of capital and surplus that the Company is required to maintain is less than what would be required if the insurance liabilities were not ceded to AARe. Therefore, the Company may have fewer assets available to make payments under its insurance liabilities in the event of a default by AARe. In addition, the Company remains primarily liable for the policies ceded to AADE and may experience similar challenges in the event of a default by AADE. AARe and or AADE, on the one hand, and the Company, on the other hand, may agree to modify or terminate any of the Modco Agreements or the coinsurance agreement without the consent of policyholders, and such modification or termination may be detrimental to the interests of such policyholders and the Company s ability to satisfy its financial obligations may be adversely affected. Interest rate fluctuations could adversely affect the Company's business, financial condition, results of operations, liquidity and cash flows. Table of Contents Interest rate risk is a significant market risk for the Company. The Company defines interest rate risk as the risk of an economic loss due to changes in interest rates. This risk arises from the Company s holdings in interest rate-sensitive assets (e.g., fixed income assets) and liabilities (e.g., fixed deferred and immediate annuities). Substantial and sustained increases or decreases in market interest rates can adversely affect the Company s business, financial condition, results of operations, liquidity and cash flows, including the following Significant changes in interest rates expose the Company to the risk of not realizing anticipated spreads between overall net investment earned rates and its cost of funds. Changes in interest rates may negatively affect the value of the Company s assets and the Company s ability to realize gains or avoid losses from the sale of those assets. Significant volatility in interest rates may have a larger adverse impact on certain assets in the Company s investment portfolio that are highly structured or have limited liquidity. Changes in interest rates may cause changes in prepayment rates on fixed-income assets in the Company s investment portfolio. For instance, falling interest rates may accelerate the rate of prepayment on mortgage loans, while rising interest rates may decrease such prepayments below the level of the Company s expectations. At the same time, falling interest rates may result in the lengthening of duration for policies and liabilities due to the guaranteed benefits contained in the Company s products, while rising interest rates could lead to increased policyholder withdrawals and a shortening of duration for liabilities. In either case, the Company could experience a mismatch in its assets and liabilities and potentially incur economic losses. During periods of declining interest rates or a prolonged period of low interest rates, annuity products may be relatively more attractive to existing policyholders than other investment opportunities available to them. This may cause the Company s assumptions regarding persistency to prove inaccurate as the Company s policyholders opt to not surrender or take withdrawals from their products, which may result in the Company experiencing greater claim costs than it had anticipated and or cash flow mismatches between assets and liabilities. Certain securitized financial assets are accounted for based on expectations of future cash flows. To the extent future interest rates are lower than the Company has projected, the Company will experience slower accretion of discounts on these assets and will have a lower yield on its portfolio. An extended period of declining interest rates or a prolonged period of low interest rates may cause the Company to decrease the crediting rates of its products, thereby reducing their attractiveness. During periods of declining interest rates, the Company may have to reinvest the cash it receives as interest or return of principal on its investments into lower-yielding high-grade instruments or seek potentially higher-yielding, but higher-risk instruments in an effort to achieve returns comparable with those attained during more stable interest rate environments. In periods of rapidly increasing interest rates, withdrawals from and or surrenders of annuity contracts may increase as policyholders choose to seek higher investment returns elsewhere. Obtaining cash to satisfy these obligations may require the Company to liquidate fixed-income investments at a time when market prices for those assets are depressed. This may result in realized investment losses. An increase in market interest rates could reduce the value of certain of the Company's investments held as collateral under reinsurance agreements and require us to provide additional capital, thereby reducing its available capital and potentially creating a need for additional capital which may not be available to us on favorable terms, or at all. The Company is subject to the credit risk of its counterparties, including ceding companies, reinsurers, plan sponsors and derivative counterparties. The Company may cede certain risks by entering into reinsurance agreements. Under such agreements, the Company will be liable for losses relating to insurance risks if the applicable reinsurer fails to perform under its reinsurance agreement with the Company. In connection with the acquisition of the Company by Athene, the Table of Contents Interest rate risk is a significant market risk for the Company. The Company defines interest rate risk as the risk of an economic loss due to changes in interest rates. This risk arises from the Company s holdings in interest rate-sensitive assets (e.g., fixed income assets) and liabilities (e.g., fixed deferred and immediate annuities). Substantial and sustained increases or decreases in market interest rates can adversely affect the Company s business, financial condition, results of operations, liquidity and cash flows, including the following Significant changes in interest rates expose the Company to the risk of not realizing anticipated spreads between overall net investment earned rates and its cost of funds. Changes in interest rates may negatively affect the value of the Company s assets and the Company s ability to realize gains or avoid losses from the sale of those assets. Significant volatility in interest rates may have a larger adverse impact on certain assets in the Company s investment portfolio that are highly structured or have limited liquidity. Changes in interest rates may cause changes in prepayment rates on fixed-income assets in the Company s investment portfolio. For instance, falling interest rates may accelerate the rate of prepayment on mortgage loans, while rising interest rates may decrease such prepayments below the level of the Company s expectations. At the same time, falling interest rates may result in the lengthening of duration for policies and liabilities due to the guaranteed benefits contained in the Company s products, while rising interest rates could lead to increased policyholder withdrawals and a shortening of duration for liabilities. In either case, the Company could experience a mismatch in its assets and liabilities and potentially incur economic losses. During periods of declining interest rates or a prolonged period of low interest rates, annuity products may be relatively more attractive to existing policyholders than other investment opportunities available to them. This may cause the Company s assumptions regarding persistency to prove inaccurate as the Company s policyholders opt to not surrender or take withdrawals from their products, which may result in the Company experiencing greater claim costs than it had anticipated and or cash flow mismatches between assets and liabilities. Certain securitized financial assets are accounted for based on expectations of future cash flows. To the extent future interest rates are lower than the Company has projected, the Company will experience slower accretion of discounts on these assets and will have a lower yield on its portfolio. An extended period of declining interest rates or a prolonged period of low interest rates may cause the Company to decrease the crediting rates of its products, thereby reducing their attractiveness. During periods of declining interest rates, the Company may have to reinvest the cash it receives as interest or return of principal on its investments into lower-yielding high-grade instruments or seek potentially higher-yielding, but higher-risk instruments in an effort to achieve returns comparable with those attained during more stable interest rate environments. In periods of rapidly increasing interest rates, withdrawals from and or surrenders of annuity contracts may increase as policyholders choose to seek higher investment returns elsewhere. Obtaining cash to satisfy these obligations may require the Company to liquidate fixed-income investments at a time when market prices for those assets are depressed. This may result in realized investment losses. An increase in market interest rates could reduce the value of certain of the Company's investments held as collateral under reinsurance agreements and require us to provide additional capital, thereby reducing its available capital and potentially creating a need for additional capital which may not be available to us on favorable terms, or at all. The Company is subject to the credit risk of its counterparties, including ceding companies, reinsurers, plan sponsors and derivative counterparties. The Company may cede certain risks by entering into reinsurance agreements. Under such agreements, the Company will be liable for losses relating to insurance risks if the applicable reinsurer fails to perform under its reinsurance agreement with the Company. In connection with the acquisition of the Company by Athene, the Table of Contents Company entered into reinsurance agreements with affiliates of Global Atlantic pursuant to which the Company effectuated a transfer of substantially all of the Company s life insurance business. Because these agreements involve reinsurance of an entire business segment, the agreements collectively cover a much larger volume of business than traditional reinsurance agreements. Additionally, although the applicable affiliates of Global Atlantic are obligated to maintain assets in trust or custody accounts for the Company s benefit to support substantially all of such affiliates financial obligations under their reinsurance agreements with the Company, as Global Atlantic s affiliates are the only counterparties under the agreement, the Company faces a heightened risk of default with respect to Global Atlantic in particular. In addition, the Company does not have a security interest in the assets in the custody accounts supporting the reinsurance agreements. Therefore, in the event of an insolvency of the relevant Global Atlantic affiliated insurance company acting as reinsurer, the Company s claims would be subordinated to those of such insurance company s policyholders and the assets in the relevant custody accounts may be available to satisfy the claims of such insurance company s general creditors in addition to the Company. As with any other reinsurance agreement, the Company remains liable to its policyholders if the applicable Global Atlantic affiliate fails to perform. Although each agreement provides that the applicable Global Atlantic affiliate agrees to indemnify the Company for losses sustained in connection with its respective performance of each agreement, such indemnification may not be adequate to compensate the Company for losses actually incurred in the event that such Global Atlantic affiliate is either unable or unwilling to perform according to the applicable agreement s terms. In addition to possible losses that could be incurred if the Company is forced to recapture these blocks, the Company may also face a substantial shortfall in capital to support the recaptured business, possibly resulting in material declines to its RBC ratio and or creditworthiness. The Company also assumes liabilities from other insurance companies. Changes in the ratings, creditworthiness or market perception of such ceding companies or in the administration of policies reinsured to the Company could cause policyholders of contracts reinsured to the Company to surrender or lapse their policies in unexpected amounts. In addition, to the extent such ceding companies do not perform under their reinsurance agreements with the Company, the Company may not achieve the results it intended and could suffer unexpected losses. In either case, the Company has exposure to its reinsurance counterparties which could adversely affect the Company s financial condition. The Company assumes pension obligations from plan sponsors, including obligations in respect of current employees of the plan sponsor. The transfer of these obligations expose it to the credit risk of the plan sponsor. If the plan sponsor were to experience financial distress that resulted in bankruptcy or significant terminations or otherwise experienced substantial turnover of employees active under the plan, such employees might be entitled to rights under the pension plan, such as lump sum payments. To the extent that a plan sponsor experienced a significant turnover event, the Company may not achieve the targeted return expected at the time the PRT transaction was priced and its financial position, results of operations, liquidity and cash flow may be adversely affected. In addition, the Company is exposed to credit loss in the event of nonperformance by its counterparties on derivative agreements. The Company seeks to reduce the risk associated with such agreements by entering into such agreements with large, well-established financial institutions. There can be no assurance that the Company will not suffer losses in the event a counterparty on a derivative agreement fails to perform or fulfill its obligations. Risks Relating to Liquidity and Regulatory Capital The amount of statutory capital that the Company has, or that it is required to hold, can vary significantly from time to time and is sensitive to a number of factors outside of the Company s control. The Company is subject to state regulations that provide for minimum capitalization requirements based on risk-based capital ( RBC ) formulas for life insurance companies, relating to insurance, business, asset, interest rate and certain other risks. In any particular year, the Company s capital ratios and or statutory surplus amounts may increase or decrease depending on a variety of factors, most of which are outside of the Company s control, including, but not limited to, the following Table of Contents Company entered into reinsurance agreements with affiliates of Global Atlantic pursuant to which the Company effectuated a transfer of substantially all of the Company s life insurance business. Because these agreements involve reinsurance of an entire business segment, the agreements collectively cover a much larger volume of business than traditional reinsurance agreements. Additionally, although the applicable affiliates of Global Atlantic are obligated to maintain assets in trust or custody accounts for the Company s benefit to support substantially all of such affiliates financial obligations under their reinsurance agreements with the Company, as Global Atlantic s affiliates are the only counterparties under the agreement, the Company faces a heightened risk of default with respect to Global Atlantic in particular. In addition, the Company does not have a security interest in the assets in the custody accounts supporting the reinsurance agreements. Therefore, in the event of an insolvency of the relevant Global Atlantic affiliated insurance company acting as reinsurer, the Company s claims would be subordinated to those of such insurance company s policyholders and the assets in the relevant custody accounts may be available to satisfy the claims of such insurance company s general creditors in addition to the Company. As with any other reinsurance agreement, the Company remains liable to its policyholders if the applicable Global Atlantic affiliate fails to perform. Although each agreement provides that the applicable Global Atlantic affiliate agrees to indemnify the Company for losses sustained in connection with its respective performance of each agreement, such indemnification may not be adequate to compensate the Company for losses actually incurred in the event that such Global Atlantic affiliate is either unable or unwilling to perform according to the applicable agreement s terms. In addition to possible losses that could be incurred if the Company is forced to recapture these blocks, the Company may also face a substantial shortfall in capital to support the recaptured business, possibly resulting in material declines to its RBC ratio and or creditworthiness. The Company also assumes liabilities from other insurance companies. Changes in the ratings, creditworthiness or market perception of such ceding companies or in the administration of policies reinsured to the Company could cause policyholders of contracts reinsured to the Company to surrender or lapse their policies in unexpected amounts. In addition, to the extent such ceding companies do not perform under their reinsurance agreements with the Company, the Company may not achieve the results it intended and could suffer unexpected losses. In either case, the Company has exposure to its reinsurance counterparties which could adversely affect the Company s financial condition. The Company assumes pension obligations from plan sponsors, including obligations in respect of current employees of the plan sponsor. The transfer of these obligations expose it to the credit risk of the plan sponsor. If the plan sponsor were to experience financial distress that resulted in bankruptcy or significant terminations or otherwise experienced substantial turnover of employees active under the plan, such employees might be entitled to rights under the pension plan, such as lump sum payments. To the extent that a plan sponsor experienced a significant turnover event, the Company may not achieve the targeted return expected at the time the PRT transaction was priced and its financial position, results of operations, liquidity and cash flow may be adversely affected. In addition, the Company is exposed to credit loss in the event of nonperformance by its counterparties on derivative agreements. The Company seeks to reduce the risk associated with such agreements by entering into such agreements with large, well-established financial institutions. There can be no assurance that the Company will not suffer losses in the event a counterparty on a derivative agreement fails to perform or fulfill its obligations. Risks Relating to Liquidity and Regulatory Capital The amount of statutory capital that the Company has, or that it is required to hold, can vary significantly from time to time and is sensitive to a number of factors outside of the Company s control. The Company is subject to state regulations that provide for minimum capitalization requirements based on risk-based capital ( RBC ) formulas for life insurance companies, relating to insurance, business, asset, interest rate and certain other risks. In any particular year, the Company s capital ratios and or statutory surplus amounts may increase or decrease depending on a variety of factors, most of which are outside of the Company s control, including, but not limited to, the following Table of Contents the amount of statutory income or losses generated by the Company the amount of additional capital the Company must hold to support its business growth changes in reserve requirements applicable to the Company changes in market value of certain securities in the Company s investment portfolio recognition of write-downs or other losses on investments held in the Company s investment portfolio changes in the credit ratings of investments held in the Company s investment portfolio the value of certain derivative instruments changes in interest rates credit market volatility changes in corporate tax rates changes in policyholder behavior and changes to the RBC formulas and interpretations of the National Association of Insurance Commissioners ( NAIC ) instructions with respect to RBC calculation methodologies. Further to NAIC activities with respect to RBC calculation methodologies, the NAIC is pursuing a variety of reforms to its RBC framework, which could increase the capital requirements for our US insurance subsidiaries. Two examples include the following (1) a principles-based bond project is underway, which includes consideration of factors to determine whether an investment in asset-backed securities qualifies for reporting on an insurer s statutory financial statement as a bond on Schedule D-1 as opposed to Schedule BA (other long-term invested assets), the latter of which could result, among other things, in the capital charge treatment of the investment being less favorable and (2) a process to review capital charges on structured securities has commenced, which could increase the level of capital required to be held against these assets. Nationally recognized statistical ratings organizations ( NRSROs ) may also implement changes to their internal models, which differ from the RBC capital models, that have the effect of increasing or decreasing the amount of statutory capital the Company must hold in order to maintain its current ratings. For example, on December 6, 2021, S P Global Ratings published a Request for Comment ( RFC ) on its methodology and assumptions for analyzing the risk-based capital adequacy of insurers and reinsurers. On May 9, 2022, S P withdrew its proposed approach due to some of the comments and concerns received. S P has stated that they plan to issue a new RFC once they have finished reviewing the feedback from the initial RFC. To the extent that the Company's solvency or capital ratio is deemed to be insufficient by one or more NRSROs to maintain its current ratings, the Company may take actions either to increase its capitalization or to reduce the capitalization requirements. If the Company is unable to accomplish such actions, NRSROs may view this as a reason for a ratings downgrade. Regulatory developments, including the NAIC's adoption of amendments to its Insurance Holding Company System Regulatory Act and Model Regulation requiring, subject to certain exceptions, the filing of a confidential annual group capital calculation (and likely the results of an annual liquidity stress test) with the IID, may increase the amount of capital that the Company is required to hold and could result in it being subject to increased regulatory requirements. On October 1, 2013, Athene and the Company entered into a net worth maintenance agreement (the Net Worth Maintenance Agreement ), pursuant to which AHL agreed to cause, at all times on and after October 1, 2013, the Company to have and maintain its total adjusted capital ( TAC ) at a minimum of 200% Company Action Level ( CAL ) RBC, as those terms are defined by the insurance laws in the State of Iowa. The Net Worth Maintenance Agreement also prohibits the Company from paying a dividend if such payment would cause its TAC to fall below 200% of its CAL RBC unless approved by the IID. The Net Worth Maintenance Agreement remains in effect unless terminated by the Company and Athene with the approval of the IID. If the IID provides consent or approval to the termination of the Net Worth Maintenance Agreement, Athene and the Company may terminate it. Table of Contents the amount of statutory income or losses generated by the Company the amount of additional capital the Company must hold to support its business growth changes in reserve requirements applicable to the Company changes in market value of certain securities in the Company s investment portfolio recognition of write-downs or other losses on investments held in the Company s investment portfolio changes in the credit ratings of investments held in the Company s investment portfolio the value of certain derivative instruments changes in interest rates credit market volatility changes in corporate tax rates changes in policyholder behavior and changes to the RBC formulas and interpretations of the National Association of Insurance Commissioners ( NAIC ) instructions with respect to RBC calculation methodologies. Further to NAIC activities with respect to RBC calculation methodologies, the NAIC is pursuing a variety of reforms to its RBC framework, which could increase the capital requirements for our US insurance subsidiaries. Two examples include the following (1) a principles-based bond project is underway, which includes consideration of factors to determine whether an investment in asset-backed securities qualifies for reporting on an insurer s statutory financial statement as a bond on Schedule D-1 as opposed to Schedule BA (other long-term invested assets), the latter of which could result, among other things, in the capital charge treatment of the investment being less favorable and (2) a process to review capital charges on structured securities has commenced, which could increase the level of capital required to be held against these assets. Nationally recognized statistical ratings organizations ( NRSROs ) may also implement changes to their internal models, which differ from the RBC capital models, that have the effect of increasing or decreasing the amount of statutory capital the Company must hold in order to maintain its current ratings. For example, on December 6, 2021, S P Global Ratings published a Request for Comment ( RFC ) on its methodology and assumptions for analyzing the risk-based capital adequacy of insurers and reinsurers. On May 9, 2022, S P withdrew its proposed approach due to some of the comments and concerns received. S P has stated that they plan to issue a new RFC once they have finished reviewing the feedback from the initial RFC. To the extent that the Company's solvency or capital ratio is deemed to be insufficient by one or more NRSROs to maintain its current ratings, the Company may take actions either to increase its capitalization or to reduce the capitalization requirements. If the Company is unable to accomplish such actions, NRSROs may view this as a reason for a ratings downgrade. Regulatory developments, including the NAIC's adoption of amendments to its Insurance Holding Company System Regulatory Act and Model Regulation requiring, subject to certain exceptions, the filing of a confidential annual group capital calculation (and likely the results of an annual liquidity stress test) with the IID, may increase the amount of capital that the Company is required to hold and could result in it being subject to increased regulatory requirements. On October 1, 2013, Athene and the Company entered into a net worth maintenance agreement (the Net Worth Maintenance Agreement ), pursuant to which AHL agreed to cause, at all times on and after October 1, 2013, the Company to have and maintain its total adjusted capital ( TAC ) at a minimum of 200% Company Action Level ( CAL ) RBC, as those terms are defined by the insurance laws in the State of Iowa. The Net Worth Maintenance Agreement also prohibits the Company from paying a dividend if such payment would cause its TAC to fall below 200% of its CAL RBC unless approved by the IID. The Net Worth Maintenance Agreement remains in effect unless terminated by the Company and Athene with the approval of the IID. If the IID provides consent or approval to the termination of the Net Worth Maintenance Agreement, Athene and the Company may terminate it. Table of Contents If the Company s RBC ratios reach certain minimum levels, the Company could be subject to further examination or corrective action imposed by its insurance regulator. Corrective actions may include limiting the Company s ability to write additional business, increased regulatory supervision, or seizure or liquidation of the Company s business, each of which could materially and adversely affect the Company s business, financial condition, results of operations, liquidity, cash flows and prospects. As a financial services company, the Company is exposed to liquidity risk, which is the risk that the Company is unable to meet near-term obligations as they come due. Liquidity risk is a manifestation of events that are driven by other risk types (e.g. market, policyholder behavior, operational). A liquidity shortfall may arise in the event of insufficient funding sources or an immediate and significant need for cash or collateral. In addition, it is possible that expected liquidity sources, such as the Company's credit agreements, may be unavailable or inadequate to satisfy the liquidity demands described below. In particular, the spread of COVID-19, the war between Russia and Ukraine and inflation and the responses by the US Federal Reserve continue to contribute to volatility in the financial markets and may restrict the liquidity sources available to the Company and further may result in an increase of the Company's liquidity demands. The Company primarily have liquidity exposure through our collateral market exposure, asset liability mismatch, dependence on the financial markets for funding and funding commitments. If a material liquidity demand is triggered and the Company is unable to satisfy the demand with the sources of liquidity readily available to us, it may have a material adverse impact on the Company's business, financial condition, results of operations, liquidity and cash flows. General Risk Factors The Company s industry is highly regulated and the Company is subject to significant legal restrictions, and these restrictions may have an adverse effect on the Company s business, financial condition, results of operations, liquidity, cash flows and prospects. The Company is subject to a complex and extensive array of laws and regulations that are administered and enforced by many regulators, including state insurance regulators, state securities administrators, state banking authorities, the SEC, the Financial Industry Regulatory Authority, Inc. ( FINRA ), the DOL, the IRS and the Office of the Comptroller of the Currency. Failure to comply with these laws and regulations could subject the Company to administrative penalties imposed by a particular governmental or self-regulatory authority, unanticipated costs associated with remedying such failure or other claims, harm to the Company s reputation, revocation of the Company s certificate of incorporation or interruption of the Company s operations, any of which could have a material and adverse impact on its business, financial position, results of operations, liquidity and cash flows. In addition to the foregoing risks, the financial services industry is the focus of increased regulatory scrutiny as various state and federal governmental agencies and self-regulatory organizations conduct inquiries and investigations into the products and practices of the companies within this industry. Governmental authorities in the United States and worldwide have become increasingly interested in potential risks posed by the insurance industry as a whole and to commercial and financial activities and systems in general, as indicated by the recent adoption of the revised global insurance capital standard by the IAIS to be applicable to internationally active insurance groups ( IAIGs ), as well as the U.S. NAIC's adoption of the group capital calculation ( GCC ) and liquidity stress test ( LST ). The IID has adopted the GCC and LST amendments, and those will be applicable to the Company this year. In the event that Athene or Apollo becomes and IAIG, the Company expects to be subject to the relevant capital standard that the US applies to IAIGs.The Company cannot predict with certainty the impact (if any) on the Company s capital position and capital structure and any other burdens being named an IAIG may impose on the Company and other insurer affiliates. While the Company cannot predict the exact nature, timing or scope of possible governmental initiatives, there may be increased regulatory intervention in the insurance and financial services industry in the future. Table of Contents If the Company s RBC ratios reach certain minimum levels, the Company could be subject to further examination or corrective action imposed by its insurance regulator. Corrective actions may include limiting the Company s ability to write additional business, increased regulatory supervision, or seizure or liquidation of the Company s business, each of which could materially and adversely affect the Company s business, financial condition, results of operations, liquidity, cash flows and prospects. As a financial services company, the Company is exposed to liquidity risk, which is the risk that the Company is unable to meet near-term obligations as they come due. Liquidity risk is a manifestation of events that are driven by other risk types (e.g. market, policyholder behavior, operational). A liquidity shortfall may arise in the event of insufficient funding sources or an immediate and significant need for cash or collateral. In addition, it is possible that expected liquidity sources, such as the Company's credit agreements, may be unavailable or inadequate to satisfy the liquidity demands described below. In particular, the spread of COVID-19, the war between Russia and Ukraine and inflation and the responses by the US Federal Reserve continue to contribute to volatility in the financial markets and may restrict the liquidity sources available to the Company and further may result in an increase of the Company's liquidity demands. The Company primarily have liquidity exposure through our collateral market exposure, asset liability mismatch, dependence on the financial markets for funding and funding commitments. If a material liquidity demand is triggered and the Company is unable to satisfy the demand with the sources of liquidity readily available to us, it may have a material adverse impact on the Company's business, financial condition, results of operations, liquidity and cash flows. General Risk Factors The Company s industry is highly regulated and the Company is subject to significant legal restrictions, and these restrictions may have an adverse effect on the Company s business, financial condition, results of operations, liquidity, cash flows and prospects. The Company is subject to a complex and extensive array of laws and regulations that are administered and enforced by many regulators, including state insurance regulators, state securities administrators, state banking authorities, the SEC, the Financial Industry Regulatory Authority, Inc. ( FINRA ), the DOL, the IRS and the Office of the Comptroller of the Currency. Failure to comply with these laws and regulations could subject the Company to administrative penalties imposed by a particular governmental or self-regulatory authority, unanticipated costs associated with remedying such failure or other claims, harm to the Company s reputation, revocation of the Company s certificate of incorporation or interruption of the Company s operations, any of which could have a material and adverse impact on its business, financial position, results of operations, liquidity and cash flows. In addition to the foregoing risks, the financial services industry is the focus of increased regulatory scrutiny as various state and federal governmental agencies and self-regulatory organizations conduct inquiries and investigations into the products and practices of the companies within this industry. Governmental authorities in the United States and worldwide have become increasingly interested in potential risks posed by the insurance industry as a whole and to commercial and financial activities and systems in general, as indicated by the recent adoption of the revised global insurance capital standard by the IAIS to be applicable to internationally active insurance groups ( IAIGs ), as well as the U.S. NAIC's adoption of the group capital calculation ( GCC ) and liquidity stress test ( LST ). The IID has adopted the GCC and LST amendments, and those will be applicable to the Company this year. In the event that Athene or Apollo becomes and IAIG, the Company expects to be subject to the relevant capital standard that the US applies to IAIGs.The Company cannot predict with certainty the impact (if any) on the Company s capital position and capital structure and any other burdens being named an IAIG may impose on the Company and other insurer affiliates. While the Company cannot predict the exact nature, timing or scope of possible governmental initiatives, there may be increased regulatory intervention in the insurance and financial services industry in the future. Table of Contents Climate change and regulatory and other efforts to reduce climate change, as well as environmental, social and governance requirements could adversely affect the Company s business. The Company faces a number of risks associated with climate change including both transition and physical risks. The transition risks that could impact the Company and its investment portfolio include those risks related to the impact of US and foreign climate and ESG-related legislation and regulation, as well as risks arising from climate-related business trends. Moreover, the Company s investments are subject to risks stemming from the physical impacts of climate change. New climate change-related regulations or interpretations of existing laws may result in enhanced disclosure obligations that could negatively affect the Company s investments and also materially increase its regulatory burden. The Company also faces business trend-related climate risks. Certain investors are increasingly taking into account ESG factors, including climate risks, in determining whether to invest in Athene s preferred shares, debt securities and FABN program. The Company s reputation and investor relationships could be damaged as a result of its involvement in certain industries, investments or transactions associated with activities perceived to be causing or exacerbating climate change, as well as any decisions the Company makes to continue to conduct or change its activities in response to considerations relating to climate change. Furthermore, the Company s financial and operational results could be impacted by emerging risk and changes to the regulatory landscape in areas like environmental, social and governance (ESG) matters. Changes and uncertainty in US and non-US legislation, policy or regulation regarding ESG practices may result in higher regulatory costs, compliance costs and increased capital expenditures, and changes in regulations may impact asset prices, resulting in realized or unrealized losses on the Company s investments. Undertaking initiatives to address ESG practices, including those related to human capital management such as talent attraction and development, DEI and employee health and safety, could increase the Company s cost of doing business and actual or perceived failure to adequately address ESG expectations of the Company s various stakeholders could lead to a tarnished reputation and loss of customers. Financial markets have been subject to inflationary pressures, and continued rising inflation may adversely impact the Company's business and results of operations. Financial markets have been subject to inflationary pressures, and the Company cannot predict the extent to which rising inflation may be transitory. Certain of the Company's products are sensitive to inflation rate fluctuations, and a sustained increase in the inflation rate may adversely affect the Company's business and results of operations. For example, failure to accurately anticipate higher inflation and factor it into the Company's product pricing assumptions may result in mispricing of its products, which could materially and adversely impact its results of operations. Inflation also impacts the Company's investment portfolio and nature of its liability profile, thereby impacting the Company's investment portfolio s rate of investment return and corresponding investment income. Continued rising inflation could adversely impact returns on the Company's investment portfolio and results of operations.

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+Risk factors:
+ 
+ You should read the Risk Factors section of this prospectus as well as all other information included in this prospectus, including the information in the documents incorporated by reference into this prospectus, for a discussion of certain of the factors to consider carefully before deciding to purchase any securities in this offering.
+
+ 
+ 
+ 
+ 
+
+ 
+ Lock-up:
+ 
+ We and each of our officers and directors have agreed, subject to certain exceptions, not to offer, issue, sell, contract to sell, encumber, grant any option for the sale of or otherwise dispose of any shares of our common stock or other securities convertible into or exercisable or exchangeable for shares of our common stock for a period of 90 days after this offering is completed without the prior written consent of the underwriter.
+
+ 
+ 
+ 
+ 
+
+ 
+ Transfer agent:
+ 
+ The transfer agent and registrar for our common stock is Continental Stock Transfer & Trust Company.
+
+ 
+ 
+ 
+ 
+
+ 
+ Nasdaq Capital Market Symbol:
+ 
+ Our
+ common stock trades on The Nasdaq Capital Market under the symbol TTNP. 
+
+ 
+
+ 
+
+The number of shares of our common stock outstanding before and after this offering is based on 15,016,295 shares of common stock outstanding as of the date of this prospectus and excludes, as of such date, (i) up to 9,826,881 shares to be issued upon exercise of outstanding common stock warrants, (ii) up to 679 shares to be issued upon exercise of outstanding stock options pursuant to our 2014 Stock Plan, (iii) up to 910,568 shares to be issued upon exercise of outstanding stock options pursuant to our 2015 Stock Plan, (iv) 1,025,000 shares to be issued upon exercise of stock options subject to shareholder approval of an amendment to increase the number of shares reserved for issuance under our 2015 Stock Plan, and (v) 89,432 shares available for future issuance under our 2015 Stock Plan.
+
+ 
+ 
+
+ 
+
+ 6
+
+ Table of Content
+
+ 
+
+ 
+
+RISK FACTORS
+
+ 
+
+Investing in our securities involves a high degree of risk. You should carefully consider the risks described below, together with the other information contained in this prospectus, including our financial statements and the related notes, which are incorporated herein by reference, before making your decision to invest in our securities. 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 and cash flows, and our future prospects would likely be materially and adversely affected. If that were to happen, the trading price of our common stock could decline, and you could lose all or part of your investment. In addition, you should carefully consider the other risks described under the heading Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2022 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, which are incorporated herein by reference, as updated by annual, quarterly and other reports and documents we file with the SEC after the date of this prospectus and that are incorporated by reference herein.
+
+ 
+
+Risks Related to this Offering
+
+ 
+
+We have significant discretion over the use of the net proceeds from this offering.
+
+ 
+
+Our net proceeds from this offering are expected to be approximately $ . We intend to use the net proceeds of this offering to pursue strategic alternatives and fund potential acquisitions, and for working capital and other general corporate purposes. Our management will have broad discretion as to the application of such proceeds. As is the case with any business, it should be expected that certain expenses unforeseeable to management at this juncture will arise in the future. There can be no assurance that management s use of proceeds generated through this offering will prove optimal or translate into revenue or profitability for us. Investors are urged to consult with their personal investment advisors, attorneys and accountants prior to making any decision to invest in us.
+
+ 
+
+Even if this offering is successful, we will need to raise additional capital in the future to continue operations, which may not be available on acceptable terms, or at all. Failure to obtain this necessary capital if needed may have an adverse impact on our business and operations.
+
+ 
+
+As described further below, we have incurred net losses in almost every year since our inception. We may incur additional net losses from operations in the future, and we may experience quarter-to-quarter fluctuations in revenues, expenses and losses, some of which may be significant.
+
+ 
+
+We estimate that we will receive net proceeds of approximately $ from the sale of common stock offered by us in this offering, based on the assumed public offering price of $ per share, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. In the event of a decrease in the net proceeds to us from this offering as a result of a decrease in the assumed public offering price per share or the number of shares offered by us, we may need to scale back or eliminate certain of our business plans or raise additional capital sooner than we anticipate. However, we may not be able to raise additional funds on acceptable terms, or at all. Conditions in the capital markets may make equity and debt financing more difficult to obtain, and may negatively impact our ability to complete financing transactions. Any debt financing, if available, may involve restrictive covenants, such as limitations on our ability to incur additional indebtedness and other operating restrictions that could adversely impact our ability to conduct our business.
+
+ 
+
+An investment in our securities is speculative and there can be no assurance of any return on any such investment.
+
+ 
+
+An investment in our securities is speculative and there is no assurance that investors will obtain any return on their investment. Investors will be subject to a high degree of risk involved in an investment in us, including the risk of losing their entire investment.
+
+ 
+
+ 7
+
+ Table of Content
+
+ 
+
+ 
+
+You may experience dilution if we issue additional equity or equity-linked securities in the future.
+
+ 
+
+If we issue additional shares of common stock, or securities convertible into or exchangeable or exercisable for shares of common stock, our stockholders, including investors who purchase shares of common stock in this offering, may experience dilution, and any such issuances may result in downward pressure on 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. If we issue additional equity securities, employee stock grants vest, or there are any issuances and subsequent exercises of stock options issued in the future, you will experience additional dilution. See the section entitled Dilution for a more detailed discussion of the net tangible book value per share of our common stock as impacted by this offering.
+
+ 
+
+Resales of our common stock in the public market by our stockholders as a result of this offering may cause the market price of our common stock to fall.
+
+ 
+
+Sales of a substantial number of shares of our common stock in the public market could occur at any time. The issuance of new shares of our common stock could result in resales of our common stock by our current stockholders concerned about the potential ownership dilution of their holdings. In turn, these resales could have the effect of depressing the market price for our common stock.
+
+ 
+
+As a smaller reporting company, we are subject to scaled disclosure requirements that may make it more challenging for investors to analyze and compare our results of operations and financial prospects.
+
+ 
+
+Currently, we are a smaller reporting company, as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the Exchange Act ). As a smaller reporting company, we are able to provide simplified executive compensation disclosures in our filings and have certain other decreased disclosure obligations in our filings with the SEC, including being required to provide only two years of audited financial statements in annual reports. Consequently, it may be more challenging for investors to analyze our results of operations and financial prospects.
+
+ 
+
+Furthermore, we are a non-accelerated filer as defined by Rule 12b-2 of the Exchange Act, and, as such, are not required to provide an auditor attestation of management s assessment of internal control over financial reporting, which is generally required for SEC reporting companies under Section 404(b) of the Sarbanes-Oxley Act. Because we are not required to, and have not, had our auditor provide an attestation of our management s assessment of internal control over financial reporting, a material weakness in internal controls may remain undetected for a longer period.
+
+ 
+
+If securities or industry analysts do not publish research or reports about our business, or if they issue an adverse or misleading opinion regarding our stock, the price and trading volume of our securities could decline.
+
+ 
+
+The trading market for our securities will be influenced by the research and reports that industry or securities analysts publish about us or our business. We do not currently have and may never obtain research coverage by securities and industry analysts. If no or few securities or industry analysts commence coverage of us, the trading price for our securities would be negatively impacted. In the event we obtain securities or industry analyst coverage, if any of the analysts who cover us issue an adverse or misleading opinion regarding us, our business model, our intellectual property or our stock performance, or if our clinical trials and operating results fail to meet the expectations of analysts, the price of our securities would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause the price or trading volume of our securities to decline.
+
+ 
+
+ 8
+
+ Table of Content
+
+ 
+
+ 
+
+Risks Related to our Financial Condition and Need for Additional Capital
+
+ 
+
+We have incurred net losses in almost every year since our inception, which losses will continue for the foreseeable future and raise substantial doubt about our ability to continue as a going concern.
+
+ 
+
+We
+have incurred net losses in almost every year since our inception. Our financial statements have been prepared assuming that we will
+continue as a going concern. For the years ended December 31, 2022 and 2021 and for the three months ended March 31, 2023,
+we had net losses of approximately $10.2 million, $8.8 million and $1.7 million, respectively, and had net cash used in operating
+activities of approximately $8.2 million, $7.9 million and $1.9 million, respectively. These net losses and negative cash flows have
+had, and will continue to have, an adverse effect on our stockholders equity and working capital, which have declined in the
+past year. As of March 31, 2023, we had cash and cash equivalents of approximately $1.1 million. We expect to continue to incur
+net losses and negative operating cash flow for the foreseeable future as we explore and evaluate possible strategic alternatives
+and continue development of ProNeura based products. The amount of future net losses will depend, in part, on the rate of future
+growth of our expenses and our ability to obtain government or third-party funding for our development programs. Our history of
+losses raises substantial doubt about our ability to continue as a going concern.
+
+ 
+
+We will require additional proceeds to fund our product development programs and working capital requirements.
+
+ 
+
+We currently estimate that our available cash and cash equivalents will be sufficient to fund our working capital needs and product development efforts into the second quarter of 2023. We will require substantial additional funds to advance our kappa opioid agonist program beyond the proof-of-concept stage, and to fund our ProNeura development programs, including nalmefene, into the clinic and to complete the regulatory approval process necessary to commercialize any products we might develop. Investment in pharmaceutical product development is highly speculative because it entails substantial upfront capital expenditures and significant risk that a product candidate will fail to gain regulatory approval or become commercially viable. While we are currently evaluating the alternatives available to us, including the possible sale of our Probuphine assets, government grants, third-party collaborations for one or more of our ProNeura programs and potential merger opportunities, our efforts to address our liquidity requirements may not be successful. Furthermore, there can be no assurance that any source of capital will be available to us on acceptable terms or will not involve substantial dilution to our stockholders. Our failure to obtain substantial funds in the next several months would likely result in the cessation of one or more of our development programs or the wind-down of our business.
+
+ 
+
+Our net operating losses and research and development tax credits may not be available to reduce future federal and state income tax payments.
+
+ 
+
+At December 31, 2022, we had federal net operating loss and tax credit carryforwards of approximately $237.4 million and approximately $6.8 million, respectively, and state net operating loss and tax credit carryforwards of approximately $115.2 million and approximately $9.2 million, respectively, available to offset future taxable income, if any. Current federal and state tax laws include substantial restrictions on the utilization of net operating loss and tax credits in the event of an ownership change and we cannot assure you that our net operating loss and tax carryforwards will continue to be available.
+
+ 
+
+ 9
+
+ Table of Content
+
+ 
+
+ 
+
+Risks Related to Our Business and Industry
+
+ 
+
+Our ProNeura development programs are at very early stages and will require substantial additional resources that may not be available to us.
+
+ 
+
+To date, other than our work on Probuphine in opioid use disorder and our work on nalmefene, we have conducted only limited research and development activities assessing our ProNeura delivery system s applicability in other potential indications. While the nalmefene program has been funded in large part by NIDA, there is no assurance that NIDA will continue to provide the necessary funding to complete the regulatory approval process for this product candidate. We will also require substantial additional funds to advance our kappa opioid agonist program beyond the proof-of-concept stage and to support further research and development activities, including the anticipated costs of nonclinical studies and clinical trials, regulatory approvals, and eventual commercialization of any therapeutic based on our ProNeura platform technology. If we are unable to obtain substantial government grants or enter into third-party collaborations to fund our ProNeura programs, we will need to seek additional sources of financing, which may not be available on favorable terms, if at all. If we are unsuccessful in obtaining the requisite funding for our ProNeura programs, we could be forced to discontinue product development. Furthermore, funding arrangements with collaborative partners or others may require us to relinquish rights to technologies, product candidates or products that we would otherwise seek to develop or commercialize ourselves or license rights to technologies, product candidates or products on terms that are less favorable to us than might otherwise be available.
+
+ 
+
+Our ability to successfully develop any future product candidates based on our ProNeura drug delivery technology is subject to the risks of failure and delay inherent in the development of new pharmaceutical products, including: delays in product development, clinical testing, or manufacturing; unplanned expenditures in product development, clinical testing, or manufacturing; failure to receive regulatory approvals; emergence of superior or equivalent products; inability to manufacture on our own, or through any others, product candidates on a commercial scale; and failure to achieve market acceptance. Because of these risks, our research and development efforts may not result in any commercially viable products and our business, financial condition, and results of operations could be materially harmed.
+
+ 
+
+Clinical trials required for new product candidates are expensive and time-consuming, and their outcome is uncertain.
+
+ 
+
+Conducting clinical trials is a lengthy, time-consuming, and expensive process. The length of time may vary substantially according to the type, complexity, novelty, and intended use of the product candidate, and often can be several years or more per trial. Delays associated with products for which we are directly conducting clinical trials may cause us to incur additional operating expenses. The commencement and rate of completion of clinical trials may be delayed by many factors, including, for example:
+
+ 
+
+ 
+ 
+ 
+ inability to manufacture sufficient quantities of qualified materials under cGMP for use in clinical trials;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ slower than expected rates of patient recruitment;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ failure to recruit a sufficient number of patients; modification of clinical trial protocols;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ changes in regulatory requirements for clinical trials;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ the lack of effectiveness during clinical trials;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ the emergence of unforeseen safety issues;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ delays, suspension, or termination of the clinical trials due to the institutional review board responsible for overseeing the study at a particular study site; and
+
+ 
+
+ 
+
+ 
+ 
+ 
+ government or regulatory delays or clinical holds requiring suspension or termination of the trials.
+
+ 
+
+ 
+
+ 10
+
+ Table of Content
+
+ 
+
+ 
+
+The results from early clinical trials are not necessarily predictive of results obtained in later clinical trials. Accordingly, even if we obtain positive results from early clinical trials, we may not achieve the same success in future clinical trials. Clinical trials may not demonstrate statistically significant safety and effectiveness to obtain the requisite regulatory approvals for product candidates. The failure of clinical trials to demonstrate safety and effectiveness for the desired indications could cause us to abandon a product candidate and could delay development of other product candidates. Any delay in, or termination of, our clinical trials could materially harm our business, financial condition, and results of operations.
+
+ 
+
+We face risks associated with third parties conducting preclinical studies and clinical trials of our products.
+
+ 
+
+We depend on third-party laboratories and medical institutions to conduct preclinical studies and clinical trials for our products and other third-party organizations to perform data collection and analysis, all of which must maintain both good laboratory and good clinical practices. We also depend upon third-party manufacturers for the production of any products we may successfully develop to comply with cGMP of the FDA, which are similarly outside our direct control. If third-party laboratories and medical institutions conducting studies of our products fail to maintain both good laboratory and clinical practices, the studies could be delayed or have to be repeated.
+
+ 
+
+We face risks associated with product liability lawsuits that could be brought against us.
+
+ 
+
+The testing, manufacturing, marketing and sale of human therapeutic products entail an inherent risk of product liability claims. We currently have a limited amount of product liability insurance, which may not be sufficient to cover claims that may be made against us in the event that the use or misuse of our product candidates causes, or merely appears to have caused, personal injury or death. In the event we are forced to expend significant funds on defending product liability actions, and in the event those funds come from operating capital, we will be required to reduce our business activities, which could lead to significant losses. Adequate insurance coverage may not be available in the future on acceptable terms, if at all. If available, we may not be able to maintain any such insurance at sufficient levels of coverage and any such insurance may not provide adequate protection against potential liabilities. Whether or not a product liability insurance policy is obtained or maintained in the future, any claims against us, regardless of their merit, could severely harm our financial condition, strain our management and other resources or destroy the prospects for commercialization of the product which is the subject of any such claim.
+
+ 
+
+We may be unable to protect our patents and proprietary rights.
+
+ 
+
+Our future success will depend to a significant extent on our ability to:
+
+ 
+
+ 
+ 
+ 
+ obtain and keep patent protection for our products, methods and technologies on a domestic and international basis;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ enforce our patents to prevent others from using our inventions;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ maintain and prevent others from using our trade secrets; and
+
+ 
+
+ 
+
+ 
+ 
+ 
+ operate and commercialize products without infringing on the patents or proprietary rights of others.
+
+ 
+
+ 
+
+We cannot assure you that our patent rights will afford any competitive advantages, and these rights may be challenged or circumvented by third parties. Further, patents may not be issued on any of our pending patent applications in the United States or abroad. Because of the extensive time required for development, testing and regulatory review of a potential product, it is possible that before a potential product can be commercialized, any related patent may expire or remain in existence for only a short period following commercialization, reducing or eliminating any advantage of the patent. If we sue others for infringing our patents, a court may determine that such patents are invalid or unenforceable. Even if the validity of our patent rights is upheld by a court, a court may not prevent the alleged infringement of our patent rights on the grounds that such activity is not covered by our patent claims.
+
+ 
+
+ 11
+
+ Table of Content
+
+ 
+
+ 
+
+In addition, third parties may sue us for infringing their patents. In the event of a successful claim of infringement against us, we may be required to:
+
+ 
+
+ 
+ 
+ 
+ pay substantial damages;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ stop using our technologies and methods;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ stop certain research and development efforts;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ develop non-infringing products or methods; and
+
+ 
+
+ 
+
+ 
+ 
+ 
+ obtain one or more licenses from third parties.
+
+ 
+
+ 
+
+If required, we cannot assure you that we will be able to obtain such licenses on acceptable terms, or at all. If we are sued for infringement, we could encounter substantial delays in development, manufacture and commercialization of our product candidates. Any litigation, whether to enforce our patent rights or to defend against allegations that we infringe third-party rights, will be costly, time consuming, and may distract management from other important tasks.
+
+ 
+
+We also rely in our business on trade secrets, know-how and other proprietary information. We seek to protect this information, in part, through the use of confidentiality agreements with employees, consultants, advisors and others. Nonetheless, we cannot assure you that those agreements will provide adequate protection for our trade secrets, know-how or other proprietary information and prevent their unauthorized use or disclosure. To the extent that consultants, key employees or other third parties apply technological information independently developed by them or by others to our proposed products, disputes may arise as to the proprietary rights to such information, which may not be resolved in our favor.
+
+ 
+
+We must comply with extensive government regulations.
+
+ 
+
+The research, development, manufacture, labelling, storage, record-keeping, advertising, promotion, import, export, marketing and distribution of pharmaceutical products are subject to an extensive regulatory approval process by the FDA in the United States and comparable health authorities in foreign markets. The process of obtaining required regulatory approvals for drugs is lengthy, expensive and uncertain. Approval policies or regulations may change, and the FDA and foreign authorities have substantial discretion in the pharmaceutical approval process, including the ability to delay, limit or deny approval of a product candidate for many reasons. Despite the time and expense invested in clinical development of product candidates, regulatory approval is never guaranteed. Regulatory approval may entail limitations on the indicated usage of a drug, which may reduce the drug s market potential. Even if regulatory clearance is obtained, post-market evaluation of the products, if required, could result in restrictions on a product s marketing or withdrawal of the product from the market, as well as possible civil and criminal sanctions. Of the large number of drugs in development, only a small percentage successfully complete the regulatory approval process and are commercialized. For further information, you should refer to the information included under the heading Business Government Regulation in our Annual Report on Form 10-K for the year ended December 31, 2022, which is incorporated herein by reference.
+
+ 
+
+We face intense competition that could make our products or technologies non-competitive or obsolete.
+
+ 
+
+We face competition with respect to our product development programs from numerous companies that currently market, or are developing, products for the treatment of the diseases and disorders we have targeted, many of which have significantly greater research and development capabilities, experience in obtaining regulatory approvals and manufacturing, marketing, financial and managerial resources than we have. We also compete with universities and other research institutions in the development of products, technologies and processes, as well as the recruitment of highly qualified personnel. Our competitors may succeed in developing technologies or products that are more effective than the ones we have under development or that render our proposed products or technologies non-competitive or obsolete. In addition, our competitors may achieve product commercialization or patent protection earlier than we will.
+
+ 
+
+ 12
+
+ Table of Content
+
+ 
+
+ 
+
+We depend on a small number of employees and consultants that could substantially impair our ongoing commercialization efforts.
+
+ 
+
+We are highly dependent on the services of a limited number of personnel and the loss of one or more of such individuals could substantially impair our ongoing commercialization efforts. We compete in our hiring efforts with other pharmaceutical and biotechnology companies, and it may be difficult and could take an extended period of time because of the limited number of individuals in our industry with the range of skills and experience required and because of our limited resources.
+
+ 
+
+In addition, we retain scientific and clinical advisors and consultants to assist us in all aspects of our business. Competition to hire and retain consultants from a limited pool is intense. Further, because these advisors are not our employees, they may have commitments to, or consulting or advisory contracts with, other entities that may limit their availability to us, and typically they will not enter into non-compete agreements with us. If a conflict of interest arises between their work for us and their work for another entity, we may lose their services. In addition, our advisors may have arrangements with other companies to assist those companies in developing products or technologies that may compete with ours.
+
+ 
+
+We face potential liability related to the privacy of health information we obtain from clinical trials sponsored by us or our collaborators, from research institutions and our collaborators, and directly from individuals.
+
+ 
+
+Numerous federal and state laws, including state security breach notification laws, state health information privacy laws, and federal and state consumer protection laws, govern the collection, use, and disclosure of personal information. In addition, most health care providers, including research institutions from which we or our collaborators obtain patient health information, are subject to privacy and security regulations promulgated under the Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act. Although we are not directly subject to HIPAA, we could potentially be subject to criminal penalties if we, our affiliates, or our agents knowingly obtain or disclose individually identifiable health information maintained by a HIPAA-covered entity in a manner that is not authorized or permitted by HIPAA.
+
+ 
+
+Rising inflation and interest rates could negatively impact our revenues, profitability and borrowing costs. In addition, if our costs increase and we are not able to correspondingly adjust our commercial relationships to account for this increase, our net income would be adversely affected, and the adverse impact may be material.
+
+ 
+
+Inflation rates, particularly in the United States, have increased recently to levels not seen in years. Increased inflation may result in decreased demand for our products, increased operating costs (including our labor costs), reduced liquidity, and limitations on our ability to access credit or otherwise raise debt and equity capital. In addition, the United States Federal Reserve has raised, and may again raise, interest rates in response to concerns about inflation. Increases in interest rates have had, and could continue to have, a material impact on our borrowing costs. In an inflationary environment, we may be unable to raise the sales prices of our products at or above the rate at which our costs increase, which could reduce our profit margins and have a material adverse effect on our financial results and net income. We also may experience lower than expected sales if there is a decrease in spending on products in our industry in general or a negative reaction to our pricing. A reduction in our revenue would be detrimental to our profitability and financial condition and could also have an adverse impact on our future growth.
+
+ 
+
+We are increasingly dependent on information technology systems, infrastructure and data. Cybersecurity breaches could expose us to liability, damage our reputation, compromise our confidential information or otherwise adversely affect our business.
+
+ 
+
+We are increasingly dependent upon information technology systems, infrastructure and data. Our computer systems may be vulnerable to service interruption or destruction, malicious intrusion and random attack. Security breaches pose a risk that sensitive data, including intellectual property, trade secrets or personal information may be exposed to unauthorized persons or to the public. Cyber-attacks are increasing in their frequency, sophistication and intensity, and have become increasingly difficult to detect. Cyber-attacks could include the deployment of harmful malware, denial-of service, social engineering and other means to affect service reliability and threaten data confidentiality, integrity and availability. Our key business partners face similar risks, and a security breach of their systems could adversely affect our security posture. While we continue to invest in data protection and information technology, there can be no assurance that our efforts will prevent service interruptions, or identify breaches in our systems, that could adversely affect our business and operations and/or result in the loss of critical or sensitive information, which could result in financial, legal, business or reputational harm.
+
+ 
+
+ 13
+
+ Table of Content
+
+ 
+
+ 
+
+Risks Related to our Common Stock
+
+ 
+
+Our share price may be volatile, which could prevent you from being able to sell your shares at or above your purchase price.
+
+ 
+
+The market price of shares of our common stock has been and may continue to be subject to wide fluctuations in response to many risk factors listed in this section, and others beyond our control, including:
+
+ 
+
+ 
+ 
+ 
+ results of our product development efforts;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ regulatory actions with respect to our products under development or our competitors products;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ actual or anticipated fluctuations in our financial condition and operating results;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ actual or anticipated fluctuations in our competitors operating results or growth rate;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ announcements by us, our potential future collaborators or our competitors of significant acquisitions, strategic collaborations, joint ventures, or capital commitments;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ issuance of new or updated research or reports by securities analysts;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ fluctuations in the valuation of companies perceived by investors to be comparable to us;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ inconsistent trading volume levels of our shares;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ additions or departures of key personnel;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ disputes or other developments related to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ announcement or expectation of additional financing efforts;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ sales of our common stock by us, our insiders or our other stockholders;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ market conditions for biopharmaceutical stocks in general; and
+
+ 
+
+ 
+
+ 
+ 
+ 
+ general economic and market conditions.
+
+ 
+
+ 
+
+The stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market and industry fluctuations, as well as general economic, political and market conditions such as recessions, interest rate changes or international currency fluctuations, may negatively impact the market price of shares of our common stock and could subject us to securities class action litigation.
+
+ 
+
+If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our share price and trading volume could decline.
+
+ 
+
+The trading market for our common stock will depend 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. There can be no assurance that analysts will cover us or provide favorable coverage. If one or more of the analysts who cover us downgrade our stock or change their opinion of our stock, our share price 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 our share price or trading volume to decline.
+
+ 
+
+ 14
+
+ Table of Content
+
+ 
+
+ 
+
+Provisions in our corporate charter documents and under Delaware law could make an acquisition of our company, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.
+
+ 
+
+Provisions in our Amended and Restated Certificate of Incorporation and Bylaws may discourage, delay or prevent a merger, acquisition or other change in control of our company that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. In addition, because our Board is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our Board. Among other things, these provisions provide that:
+
+ 
+
+ 
+ 
+ 
+ the authorized number of directors can be changed only by resolution of our Board;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ our bylaws may be amended or repealed by our Board or our stockholders;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ stockholders may not call special meetings of the stockholders or fill vacancies on the Board;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ our Board is authorized to issue, without stockholder approval, preferred stock, the rights of which will be determined at the discretion of the Board and that, if issued, could operate as a poison pill to dilute the stock ownership of a potential hostile acquirer to prevent an acquisition that our Board does not approve;
+
+ 
+
+ 
+
+ 
+ 
+ 
+ our stockholders do not have cumulative voting rights, and therefore our stockholders holding a majority of the shares of common stock outstanding will be able to elect all of our directors; and
+
+ 
+
+ 
+
+ 
+ 
+ 
+ our stockholders must comply with advance notice provisions to bring business before or nominate directors for election at a stockholder meeting.
+
+ 
+
+ 
+
+If we cannot satisfy The Nasdaq Capital Market continued listing standards and other Nasdaq rules, our common stock could be delisted, which would harm our business, the trading price of our common stock, our ability to raise additional capital and the liquidity of the market for our common stock.
+
+ 
+
+Our
+common stock trades on The Nasdaq Capital Market ( Nasdaq ). The listing standards of Nasdaq require that a company
+maintain stockholders equity of at least $2,500,000 and a minimum bid price subject to specific requirements of $1.00 per
+share (the Stockholders Equity Requirement ). There is no assurance that we will be able to maintain compliance
+with the minimum closing price requirement or the minimum stockholders equity requirement. On April 5, 2023, we received
+a notice from Nasdaq notifying us that our stockholders equity as reported in our Annual Report on Form 10-K for the
+period ended December 31, 2022 ( 2022 10-K ) did not satisfy the continued listing requirement under Nasdaq Listing
+Rule 5550(b)(1) for The Nasdaq Capital Market, which requires that a listed company s stockholders equity be at
+least $2,500,000. In our 2022 10-K, we reported stockholders equity of $1,363,000, and as a result, do not currently satisfy
+Nasdaq Marketplace Rule 5550(b)(1). On May 22, 2023, we submitted a plan to regain compliance with the Stockholders 
+Equity Requirement under Nasdaq Listing Rule 5550(b)(1). On June 5, 2023, we received a letter from Nasdaq notifying us
+that we had been granted an additional 180-day period, or until October 2, 2023, to regain compliance with Nasdaq Listing
+Rule 5550(b)(1).
+
+ 
+
+In March 2023, we received a letter from the Listing Qualifications staff of Nasdaq notifying us that we were no longer in compliance with the minimum bid price requirement for continued listing on The Nasdaq Capital Market. Nasdaq Listing Rule 5550(a)(2) requires listed companies to maintain a minimum bid price of $1.00 per share. The letter noted that the bid price of our common stock was below $1.00 for the 30-day period ended March 15, 2023. The notification letter had no immediate effect on our listing on The Nasdaq Capital Market. Nasdaq has provided us with 180 days, or until September 12, 2023, to regain compliance with the minimum bid price requirement by having a closing bid price of at least $1.00 per share for a minimum of 10 consecutive business days.
+
+ 
+
+ 15
+
+ Table of Content
+
+ 
+
+ 
+
+In January 2023, we received a notice from Nasdaq, regarding the fact that we had not yet held an annual meeting of shareholders within 12 months of the end of our fiscal year ended December 31, 2021 and we no longer comply with Listing Rules for continued listing. In February 2023, we provided Nasdaq with a plan to regain compliance. Nasdaq has accepted our plan for compliance, and we now have until June 29, 2023 to conduct our annual meeting of shareholders in order to regain compliance.
+
+ 
+
+Should we fail to comply with the listing standards applicable to issuers listed on Nasdaq, our common stock may be delisted from Nasdaq. If our common stock is delisted from Nasdaq, our common stock would likely then be quoted on a marketplace tier of the OTC Markets Group, which could reduce the price of our common stock and the levels of liquidity available to our stockholders. If our common stock were to be quoted on a marketplace tier of the OTC Markets Group, selling our common stock could be more difficult because smaller quantities of shares would likely be bought and sold, transactions could be delayed, and we could face significant material adverse consequences, including: a limited availability of market quotations for our securities; reduced liquidity with respect to our securities; a determination that our shares are a penny stock, which will require brokers trading in our securities to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for our securities; a reduced amount of news and analyst coverage for our company; and a decreased ability to issue additional securities or obtain additional financing in the future. These factors could result in lower prices and larger spreads in the bid and ask prices for our common stock and would substantially impair our ability to raise additional funds and could result in a loss of institutional investor interest and fewer development opportunities for us.
+
+ 
+
+In addition to the foregoing, if our common stock is delisted from Nasdaq and it trades on the over-the- counter market, the application of the penny stock rules could adversely affect the market price of our common stock and increase the transaction costs to sell those shares. The SEC has adopted regulations which generally define a penny stock as an equity security that has a market price of less than $5.00 per share, subject to specific exemptions. If our common stock is delisted from Nasdaq and it is quoted on a marketplace tier of the OTC Markets Group at a price of less than $5.00 per share, our common stock would be considered a penny stock. The SEC s penny stock rules require a broker-dealer, before 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 must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and the 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 before a transaction in a penny stock occurs, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser s agreement to the transaction. If applicable in the future, these rules may restrict the ability of brokers-dealers to sell our common stock and may affect the ability of investors to sell their shares, until our common stock no longer is considered a penny stock.
+
+ 
+
+Future sales of our common stock, or the perception that future sales may occur, may cause the market price of our common stock to decline, even if our business is doing well.
+
+ 
+
+Sales by our stockholders of a substantial number of shares of our common stock in the public market could occur in the future. These sales, or the perception in the market that the holders of a large number of shares of common stock intend to sell shares, could reduce the market price of our common stock.
+
+ 
+
+We will seek to raise additional funds and may finance acquisitions or develop strategic relationships by issuing securities that would dilute your ownership. Depending on the terms available to us, if these activities result in significant dilution, it may negatively impact the trading price of our shares of common stock.
+
+ 
+
+We have financed our operations, and we expect to continue seeking to finance our operations, acquisitions, if any, and the development of strategic relationships by issuing equity and/or convertible securities, which could significantly reduce the percentage ownership of our existing stockholders. Further, any additional financing that we secure, including any debt financing, may require the granting of rights, preferences or privileges senior to, or pari passu with, those of our common stock. 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 your ownership interest, which could cause the market price of our common stock to decline. We may also raise additional funds through the incurrence of debt or the issuance or sale of other securities or instruments senior to our shares of common stock. The holders of any securities or instruments we may issue may have rights superior to the rights of our common stockholders. If we experience dilution from the issuance of additional securities and we grant superior rights to new securities over common stockholders, it may negatively impact the trading price of our shares of common stock and you may lose all or part of your investment.
+
+ 
+
+ 16
+
+ Table of Content
+
+ 
+
+ 
+
+Our largest single stockholder, Choong Choon Hau, has significant voting power over our common stock and may vote his shares in a manner that is not in the best interest of other stockholders.
+
+ 
+
+Our
+largest single stockholder, Choong Choon Hau, controls approximately 25% of the voting power represented by our outstanding shares
+of common stock. He will be able to exert significant influence over our management and affairs requiring stockholder approval,
+including approval of significant corporate transactions and election of directors. This concentration of ownership may have the effect of delaying or
+preventing a change in control and might adversely affect the market price of our common stock. This concentration of ownership may
+not be in the best interests of all of our stockholders.
+
+ 
+
+We have never paid any cash dividends and have no plans to pay any cash dividends in the future.
+
+ 
+
+Holders
+of shares of our common stock are entitled to receive such dividends as may be declared by our Board. To date, we have paid no cash
+dividends on our shares of our preferred or common stock and we do not expect to pay cash dividends in the foreseeable future. We
+intend to retain future earnings, if any, to provide funds for the operation of our business. Therefore, any return investors in our
+preferred or common stock may have will be in the form of appreciation, if any, in the market value of their shares of common
+stock.
+
+ 
+
+ 17
+
+ Table of Content

parsed_sections/risk_factors/2023/CIK0000931059_rennova_risk_factors.txt

@@ -0,0 +1,1161 @@
+Risk Factors" beginning on page 3, as well
+as, among others, business effects, including the effects of industry, economic or political conditions outside of the Company s
+control; the inherent uncertainty associated with financial projections; the anticipated size of the markets and continued demand for
+the Company s products and services; the impact of competitive services, products and pricing; and access to available financing
+on a timely basis and on reasonable terms. We caution you that the foregoing list of important factors that may affect future results
+is not exhaustive.
+
+ 
+
+When
+relying on forward-looking statements to make decisions with respect to the Company, investors and others should carefully consider the
+foregoing factors and other uncertainties and potential events and read the Company s filings with the SEC for a discussion of
+these and other risks and uncertainties. The Company undertakes no obligation to update or revise any forward-looking statement, except
+as may be required by law. The Company qualifies all forward-looking statements by these cautionary statements.
+
+ 
+
+ 17
+
+ 
+
+ 
+
+ 
+
+USE
+OF PROCEEDS
+
+ 
+
+We
+will incur all costs associated with this registration statement and prospectus, which we anticipate to be approximately $25,500.
+We will not receive any proceeds from the sale of our common stock covered hereby by any of the Selling Stockholders. We may receive
+proceeds from the cash exercise of the Class B Warrants which, if exercised in full in cash, would result in gross proceeds of $__________.
+The shares of common stock to be sold in this offering have not yet been issued and will only be issued upon exercise of the Class B
+Warrants.
+
+ 
+
+MARKET
+PRICE FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
+
+ 
+
+Market
+Information
+
+ 
+
+Since
+October 25, 2017, our common stock has been traded on the OTC Pink under the symbol "RNVA". The following table sets forth
+the high and low closing sales prices per share of our common stock as reported for the periods indicated, as adjusted to reflect all
+applicable reverse stock splits. Such quotations represent inter-dealer prices without retail markup, markdown or commissions and may
+not necessarily represent actual transactions. On May __, 2023, the closing price for our common stock as reported on the
+OTC Pink was $[ ] per share.
+
+ 
+
+ 
+ Quarter
+ Ended 
+ High 
+ Low 
+
+ 
+ March
+ 31, 2020 
+ $20,000,000.00 
+ $10,000,000.00 
+
+ 
+ June
+ 30, 2020 
+ $30,000,000.00 
+ $5,000,000.00 
+
+ 
+ September
+ 30, 2020 
+ $30,000,000.00 
+ $1,700,000.00 
+
+ 
+ December
+ 31, 2020 
+ $2,500,000.00 
+ $130,000.00 
+
+ 
+ March
+ 31, 2021 
+ $380,000.00 
+ $40,800.00 
+
+ 
+ June
+ 30, 2021 
+ $60,000.00 
+ $4,000.00 
+
+ 
+ September
+ 30, 2021 
+ $8,000.00 
+ $2.00 
+
+ 
+ December
+ 31, 2021 
+ $9.00 
+ $0.50 
+
+ 
+ March
+ 31, 2022 
+ $1.00 
+ $0.010 
+
+ 
+ June
+ 30, 2022 
+ $0.0386 
+ $0.0001 
+
+ 
+ September
+ 30, 2022 
+ $0.0002 
+ $0.0001 
+
+ 
+ December
+ 31, 2022 
+ $ 0.0002 
+ $ 0.0001 
+
+ 
+ March 31, 2023 
+ $ 0.0001 
+ $ 0.0001 
+
+ 
+ June 30, 2023 (through May __, 2023) 
+ $ 
+ $ 
+
+ 
+
+ 
+
+As
+of May __, 2023, there were approximately [ ] stockholders of record of our common stock, which excludes stockholders
+whose shares were held in nominee or street name by brokers.
+
+ 
+
+Voting
+Agreement
+
+ 
+
+Mr.
+Diamantis, a former member of our Board of Directors, is the holder of our Series M Preferred Stock. On August 13, 2020, Mr. Diamantis
+entered into a Voting Agreement and Irrevocable Proxy (the "Voting Agreement") with the Company, Seamus Lagan and Alcimede
+LLC (of which Mr. Lagan, the Company s Chief Executive Officer, is the sole manager) pursuant to which Mr. Diamantis granted an
+irrevocable proxy to Mr. Lagan to vote the Series M Preferred Stock held by Mr. Diamantis. Mr. Diamantis has retained all other rights
+under the Series M Preferred Stock. Regardless of the number of shares of Series M Preferred Stock outstanding and so long as at least
+one share of Series M Preferred Stock is outstanding, the outstanding shares of Series M Preferred Stock shall have the number of votes,
+in the aggregate, equal to 51% of all votes entitled to be voted at any meeting of stockholders or action by written consent. This means
+that the holders of Series M Preferred Stock have sufficient votes, by themselves, to approve or defeat any proposal voted on by the
+Company s stockholders, unless there is a supermajority required under applicable law or by agreement.
+
+ 
+
+Dividend
+Policy
+
+ 
+
+Holders
+of the Company s common stock are entitled to dividends when, as, and if declared by the board of directors out of funds legally
+available. The holders of the Rennova Series H Preferred Stock receive dividends at the same time any dividend is paid on shares
+of common stock in an amount equal to the amount such holder would have received if such shares of preferred stock were converted into
+common stock. Except for stock dividends, the holders of Rennova s Series L Preferred Stock are not entitled to receive dividends
+on their shares. For each of Rennova s Series M Preferred Stock, Series N Preferred Stock, Series O Preferred Stock and Series
+P Preferred Stock, dividends at the rate per annum of 10% of the stated value per share accrue on each outstanding share from and after
+the date of the original issuance of such share. Such accruing dividends accrue from day to day, whether or not declared, and are cumulative
+and non-compounding, provided, however, that such accruing dividends are payable only when, as and if declared by the Company s
+Board of Directors. No cash dividends may be paid on the common stock unless these accruing dividends are paid.
+
+ 
+
+ 18
+
+ 
+
+ 
+
+ 
+
+We
+have never declared or paid any cash dividends on our common stock, nor do we anticipate any cash dividends on our common stock in the
+foreseeable future. Certain of our financing agreements prohibit the payment of cash dividends.
+
+ 
+
+The
+Company intends to retain earnings, if any, to finance the development and expansion of its business. Future dividend policy will be
+subject to the discretion of the board of directors and will be contingent upon future earnings, if any, the Company s financial
+condition, capital requirements, general business conditions, restrictions under the Company s financing agreements and other factors.
+Therefore, there can be no assurance that any dividends of any kind will ever be paid on the Company s common stock.
+
+ 
+
+BUSINESS
+
+ 
+
+You
+should read the following discussion and analysis of our financial condition and results of operations together with our financial statements
+and related notes incorporated by reference in this prospectus. This discussion and analysis contains forward-looking statements that
+involve risks, uncertainties and assumptions. The actual results may differ materially from those anticipated in these forward-looking
+statements as a result of certain factors, including those set forth under "Risk Factors" and elsewhere in this prospectus.
+See "Cautionary Note Regarding Forward-Looking Statements."
+
+ 
+
+Rennova
+Health, Inc. ("Rennova" or the "Company") is a provider of healthcare services. We own one operating
+hospital in Oneida, Tennessee, a hospital located in Jamestown, Tennessee that we plan to reopen and operate, and a rural health clinic in Kentucky. The Company s operations consist
+of only one business segment, Hospital Operations.
+
+ 
+
+Hospital
+Operations
+
+ 
+
+We
+believe that the acquisition or development of rural hospitals and related healthcare services assets is a viable business strategy
+and will create a stable revenue base from the provision of a needed service in rural America. These facilities deliver needed
+healthcare services and employment to communities that would otherwise have to travel an hour or more to alternative locations.
+
+ 
+
+Our
+current operations began on August 8, 2017, following the receipt of the required licenses and regulatory approvals to open our
+first hospital in Oneida, Tennessee. We had net revenues of approximately $13.0 million and approximately $3.2 million
+during the years ended December 31, 2022 and 2021, respectively.
+
+ 
+
+Scott
+County Community Hospital (d/b/a Big South Fork Medical Center)
+
+ 
+
+On
+January 13, 2017, we acquired certain assets related to Scott County Community Hospital, based in Oneida, Tennessee (the "Oneida
+Assets"). The Oneida Assets include a 52,000 square foot hospital building and 6,300 square foot professional building on approximately
+4.3 acres. Scott County Community Hospital has 25 beds, a 24/7 emergency department and a laboratory that provides a range of diagnostic
+services. Scott County Community Hospital closed in July 2016 in connection with the bankruptcy filing of its parent company, Pioneer
+Health Services, Inc. We acquired the Oneida Assets out of bankruptcy for a purchase price of $1.0 million. The hospital, which has been
+renamed Big South Fork Medical Center, became operational on August 8, 2017. The hospital became certified as a Critical Access Hospital in December 2021, retroactive to June 30, 2021.
+
+ 
+
+ 19
+
+ 
+
+ 
+
+ 
+
+Jamestown
+Regional Medical Center
+
+ 
+
+On
+June 1, 2018, we acquired from Community Health Systems, Inc. certain assets related to an acute care hospital located in Jamestown,
+Tennessee, referred to as Jamestown Regional Medical Center, for a purchase price of $0.7 million. The hospital is an 85-bed facility
+of approximately 90,000 square feet on over eight acres of land, which offered a 24-hour emergency department with two trauma bays and
+seven private exam rooms, inpatient and outpatient medical services and a progressive care unit which provided telemetry services. The
+acquisition also included a separate physician practice known as Mountain View Physician Practice, Inc.
+
+ 
+
+The
+Company suspended operations at the hospital and physician practice in June 2019, as a result of the termination of the hospital s
+Medicare agreement and other factors. The Company is evaluating whether to reopen the facility as an acute care hospital or as another
+type of healthcare facility. Jamestown is located 38 miles west of Big South fork Medical Center.
+
+ 
+
+Jellico
+Medical Center
+
+ 
+
+On
+March 5, 2019, we acquired certain assets related to a 54-bed acute care hospital that offered comprehensive services located in Jellico,
+Tennessee known as Jellico Community Hospital and an outpatient clinic located in Williamsburg, Kentucky known as the CarePlus Center.
+The hospital and the clinic and their associated assets were acquired from Jellico Community Hospital, Inc. and CarePlus Rural Health
+Clinic, LLC, respectively. On
+March 1, 2021, the Company closed Jellico Community Hospital, after the City of Jellico issued a 30-day termination notice for the lease
+of the building. 
+
+ 
+
+The
+CarePlus Clinic offers compassionate care in a modern, patient-friendly facility. The CarePlus Clinic is located 32 miles northwest of
+our Big South Fork Medical Center.
+
+ 
+
+Discontinued
+Operations
+
+ 
+
+Sale
+of Health Technology Solutions, Inc. and Advanced Molecular Services Group, Inc.
+
+ 
+
+ On
+June 25, 2021, the Company sold its subsidiaries, Health Technology Solutions, Inc. ("HTS") and Advanced Molecular Services
+Group, Inc. ("AMSG"), including their subsidiaries, to InnovaQor, Inc. ("InnovaQor"), formerly known as VisualMED
+Clinical Solutions Corporation. HTS and AMSG held Rennova s software and genetic testing interpretation divisions. In consideration
+for the shares of HTS and AMSG and the elimination of intercompany debt among the Company and HTS and AMSG, InnovaQor issued the Company
+14,950 shares of its Series B-1 Non-Voting Convertible Preferred Stock (the "InnovaQor Series B-1 Preferred Stock"). The
+Company recorded a gain on the sale of HTS and AMSG of $11.3 million in the year ended December 31, 2021, of which $9.1 million
+resulted from the value of the 14,950 shares of the InnovaQor Series B-1 Preferred Stock and $2.2 million resulted from the transfer
+to InnovaQor of the net liabilities of HTS and AMSG. We have
+reflected the financial results of HTS and AMSG prior to the sale, as well as the gain on sales, as discontinued operations in our consolidated
+financial statements incorporated by reference herein. 
+
+ 
+
+ EPIC
+Reference Labs, Inc. 
+
+ 
+
+ During
+the third quarter of 2020, we made a decision to sell EPIC Reference Labs, Inc. ("EPIC") and to discontinue several other
+non-operating subsidiaries, and as a result, EPIC s operations and the other non-operating subsidiaries liabilities have
+been included in discontinued operations in the consolidated financial statements incorporated by reference in this prospectus. We were
+unable to find a buyer for EPIC and, therefore, have ceased all efforts to sell EPIC and closed down its operations. 
+
+ 
+
+ 20
+
+ 
+
+ 
+
+ 
+
+ Outlook 
+
+ 
+
+ Rural
+healthcare facilities provide a much-needed service to their local communities. Furthermore, owning a number of facilities in the same
+geographic location will create numerous efficiencies in management, purchasing and staffing and will enable the provision of additional,
+specialized and more valuable services that are needed by rural communities but cannot be sustained by a standalone facilities. We remain
+confident that this is a sustainable model we can continue to grow through acquisition and development. 
+
+ 
+
+ In
+the second quarter of 2022, we formed a subsidiary, Myrtle Recovery Centers, Inc., to pursue opportunities in the behavioral sector initially
+in our core, rural markets. We intend to focus on leveraging our existing physical locations and corporate and regional infrastructure
+to offer behavioral services including, but not limited to, substance abuse treatment. Services will be provided on either an inpatient,
+residential basis or an outpatient basis. The Company is finalizing its plans for these initiatives, which are subject to many factors,
+including licensure and the hiring of clinical and operational staff. The Company intends to initially offer substance abuse services
+at its Big South Fork Medical Center campus. The Company expects the facility to be open and operating in the second quarter of 2023
+although there is no assurance that the Company will proceed with its plans. 
+
+ 
+
+ Impact
+of the Pandemic 
+
+ 
+
+ The
+COVID-19 pandemic was declared a global pandemic by the World Health Organization on March 11, 2020. We continue to closely monitor
+the COVID-19 pandemic and its impact on our operations and we have taken steps intended to minimize the risk to our employees and
+patients. These steps have increased our costs and our net revenues have been significantly adversely affected. As noted in Notes 1,
+7 and 8 to the consolidated financial statements incorporated by reference in this prospectus, we have received Paycheck Protection
+Program loans ("PPP Notes") as well as Department of Health and Human Services ("HHS") Provider Relief Funds
+and employee retention credits from the federal government. If the COVID-19 pandemic continues for a further extended period, we
+expect to incur significant losses and additional financial assistance may be required. Going forward, we are unable to determine
+the extent to which the COVID-19 pandemic will continue to affect our business. Our ability to make estimates of the effect of the
+COVID-19 pandemic on net revenues, expenses or changes in accounting judgments that have had or are reasonably likely to have a
+material effect on our financial statements is currently limited. The nature and effect of the COVID-19 pandemic on our balance
+sheet and results of operations will depend on the severity and length of the pandemic in our service areas; government activities
+to mitigate the pandemic s effect; regulatory changes in response to the pandemic, especially those affecting rural hospitals;
+existing and potential government assistance that may be provided; and the requirements of Provider Relief Fund receipts, including
+our ability to retain such funds as have been received. 
+
+ 
+
+ The
+COVID-19 pandemic and the steps taken by governments to seek to reduce its spread have severely impacted the economy and the health care
+industry in particular. Hospitals have especially been affected. Small rural hospitals, such as ours, may be overwhelmed by patients
+if conditions worsen in their local areas. Staffing costs, and concerns due to the potential exposure to infections, may increase, as
+may the costs of needed medical supplies necessary to keep the hospitals open. Doctors and patients may defer elective procedures and
+other health care services. Travel bans, social distancing and quarantines may limit access to our facilities. Business closings and
+layoffs in our local areas may result in the loss of insurance and adversely affect demand for our services, as well as the ability of
+patients and other payers to pay for services as rendered. 
+
+ 
+
+ These
+developments have had, and may continue to have, a material adverse effect on us and the operations of our hospitals. 
+
+ 
+
+Corporate
+Information
+
+ 
+
+Effective
+November 2, 2015, the Company, a Delaware corporation, changed its name from "CollabRx, Inc." to "Rennova Health, Inc."
+The Company was previously named Tegal Corporation until 2012 when it acquired a private company named CollabRx, Inc. and changed its
+name to "CollabRx, Inc." Tegal Corporation was formed in December 1989 to acquire the operations of the former Tegal Corporation,
+a division of Motorola, Inc. Tegal s predecessor company was founded in 1972 and was acquired by Motorola, Inc. in 1978. Tegal
+completed its initial public offering in October 1995.
+
+ 
+
+ 21
+
+ 
+
+ 
+
+ 
+
+The
+Company s fiscal year-end is December 31.
+
+ 
+
+Our
+principal executive offices are located at 400 South Australian Avenue, Suite 800, West Palm Beach, Florida 33401 and our telephone number
+is (561) 855-1626. Our website address is www.rennovahealth.com. The information contained on, or that can be accessed through, our website
+is not part of this prospectus.
+
+ 
+
+Competition
+
+ 
+
+The
+healthcare industry is highly competitive among hospitals and other healthcare providers for patients, affiliations with physicians and
+acquisitions. The most significant competition our hospitals, and any other hospitals we may acquire, face comes from hospitals that
+provide more complex services, and other healthcare providers, including outpatient surgery, orthopedic, oncology and diagnostic centers
+that also compete for patients. Our hospitals, our competitors, and other healthcare industry participants are increasingly implementing
+physician alignment strategies, such as acquiring physician practice groups, employing physicians and participating in accountable care
+organizations ("ACOs") or other clinical integration models, which may impact our competitive position. In addition, increasing
+consolidation within the payor industry, vertical integration efforts involving payors and healthcare providers, and cost-reduction strategies
+by large employer groups and their affiliates may impact our ability to contract with payors on favorable terms and otherwise affect
+our competitive position.
+
+ 
+
+Governmental
+Regulation
+
+ 
+
+Overview
+
+ 
+
+The
+healthcare industry is governed by an extremely complex framework of federal, state and local laws, rules and regulations, and there
+continues to be federal and state proposals that would, and actions that do, impose limitations on government and private payments to
+providers. In addition, there regularly are proposals to increase co-payments and deductibles from program and private patients. Facilities
+also are affected by controls imposed by government and private payors designed to reduce admissions and lengths of stay. Such controls
+include what is commonly referred to as "utilization review". Utilization review entails the review of a patient s
+admission and course of treatment by a third party. Historically, utilization review has resulted in a decrease in certain treatments
+and procedures being performed. Utilization review is required in connection with the provision of care which is to be funded by Medicare
+and Medicaid and is also required under many managed care arrangements.
+
+ 
+
+Many
+states have enacted, or are considering enacting, additional measures that are designed to reduce their Medicaid expenditures and to
+make changes to private healthcare insurance. Various states have applied, or are considering applying, for a waiver from current Medicaid
+regulations in order to allow them to serve some of their Medicaid participants through managed care providers. These proposals also
+may attempt to include coverage for some people who presently are uninsured, and generally could have the effect of reducing payments
+to hospitals, physicians and other providers for the same level of service provided under Medicaid.
+
+ 
+
+Healthcare
+Facility Regulation
+
+ 
+
+Certificate
+of Need Requirements
+
+ 
+
+A
+number of states require approval for the purchase, construction or expansion of various healthcare facilities, including findings of
+need for additional or expanded healthcare services. Certificates of Need ("CONs"), which are issued by governmental agencies
+with jurisdiction over applicable healthcare facilities, are at times required for capital expenditures exceeding a prescribed amount,
+changes in bed capacity or the addition of services and certain other matters. Tennessee, the state in which we currently own our hospitals,
+has a CON law that applies to such facilities. States periodically review, modify and revise their CON laws and related regulations.
+Any violation of state CON laws can result in the imposition of civil sanctions or the revocation of licenses for such facilities. We
+are unable to predict whether our hospitals will be able to obtain any CONs that may be necessary to accomplish their business objectives
+in any jurisdiction where such certificates of need are required. In addition, future healthcare facility acquisitions also may occur
+in states that require CONs.
+
+ 
+
+ 22
+
+ 
+
+ 
+
+ 
+
+Future
+healthcare facility acquisitions also may occur in states that do not require CONs or which have less stringent CON requirements than
+the state in which Rennova currently owns hospitals. Any healthcare facility operated by the Company in such states may face increased
+competition from new or expanding facilities operated by competitors, including physicians.
+
+ 
+
+Utilization
+Review Compliance and Hospital Governance
+
+ 
+
+Healthcare
+facilities are subject to, and are required to comply with, various forms of utilization review. In addition, under the Medicare prospective
+payment system, each state must have a peer review organization to carry out a federally mandated system of review of Medicare patient
+admissions, treatments and discharges in hospitals. Medical and surgical services and physician practices are supervised by committees
+of staff doctors at each healthcare facility, are overseen by each healthcare facility s local governing board, the primary voting
+members of which are physicians and community members, and are reviewed by quality assurance personnel. The local governing boards also
+help maintain standards for quality care, develop long-range plans, establish, review and enforce practices and procedures and approve
+the credentials and disciplining of medical staff members.
+
+ 
+
+Emergency
+Medical Treatment and Active Labor Act
+
+ 
+
+The
+Emergency Medical Treatment and Active Labor Act ("EMTALA") is a federal law that requires any hospital that participates
+in the Medicare program to conduct an appropriate medical screening examination of every person who presents to the hospital s
+emergency department for treatment and, if the patient is suffering from an emergency medical condition or is in active labor, to either
+stabilize that condition or make an appropriate transfer of the patient to a facility that can handle the condition. The obligation to
+screen and stabilize emergency medical conditions exists regardless of a patient s ability to pay for treatment. There are severe
+penalties under EMTALA if a hospital fails to screen or appropriately stabilize or transfer a patient or if the hospital delays appropriate
+treatment in order to first inquire about the patient s ability to pay. Penalties for violations of EMTALA include civil monetary
+penalties and exclusion from participation in the Medicare program, the Medicaid program or both. In addition, an injured patient, the
+patient s family or a medical facility that suffers a financial loss as a direct result of another hospital s violation of
+the law can bring a civil suit against that other hospital. Although we believe that we comply with EMTALA, we cannot predict whether
+the Centers for Medicare & Medicaid Services ("CMS") will implement new requirements in the future and whether we will
+be able to comply with any new requirements.
+
+ 
+
+Drugs
+and Controlled Substances
+
+ 
+
+Various
+licenses and permits are required by our hospitals to dispense narcotics. They are required to register our dispensing operations for
+permits and/or licenses with, and comply with certain operating and security standards of, the United States Drug Enforcement Agency
+("DEA"), the Food and Drug Administration ("FDA"), state health departments and other state agencies.
+
+ 
+
+Fraud
+and Abuse, Anti-Kickback and Self-Referral Regulations
+
+ 
+
+Participation
+in the Medicare and/or Medicaid programs is heavily regulated by federal statutes and regulations. If we fail to comply substantially
+with the numerous federal laws governing our businesses, our participation in the Medicare and/or Medicaid programs may be terminated
+and/or civil or criminal penalties may be imposed. For example, a hospital may lose its ability to participate in the Medicare and/or
+Medicaid programs if it:
+
+ 
+
+ 
+ 
+ 
+ makes
+ claims to Medicare and/or Medicaid for services not provided or misrepresents actual services provided in order to obtain higher
+ payments;
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ pays
+ money to induce the referral of patients or the purchase of items or services where such items or services are reimbursable under
+ a federal or state health program;
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ fails
+ to report or repay improper or excess payments; or
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ fails
+ to provide appropriate emergency medical screening services to any individual who comes to a hospital s campus or otherwise
+ fails to properly treat and transfer emergency patients.
+
+ 
+ 
+
+ 23
+
+ 
+
+ 
+
+ 
+
+Hospitals
+continue to be one of the primary focus areas of the federal Office of the Inspector General ("OIG") and other governmental
+fraud and abuse programs and the OIG has issued and periodically updated compliance program guidance for hospitals. Each federal fiscal
+year, the OIG also publishes a General Work Plan that provides a brief description of the activities that the OIG plans to initiate or
+continue with respect to the programs and operations of HHS and details the areas that the OIG believes are prone to fraud and abuse.
+
+ 
+
+Sections
+of the Anti-Fraud and Abuse Amendments to the Social Security Act, commonly known as the "anti-kickback" statute, prohibit
+certain business practices and relationships that might influence the provision and cost of healthcare services reimbursable under Medicare,
+Medicaid, TriCare or other healthcare programs, including the payment or receipt of remuneration for the referral of patients whose care
+will be funded by Medicare or other government programs. Sanctions for violating the anti-kickback statute include criminal penalties
+and civil sanctions, including fines and possible exclusion from future participation in government programs, such as Medicare and Medicaid.
+HHS has issued regulations that create safe harbors under the anti-kickback statute. A given business arrangement that does not fall
+within an enumerated safe harbor is not per se illegal; however, business arrangements that fail to satisfy the applicable safe harbor
+criteria are subject to increased scrutiny by enforcement authorities.
+
+ 
+
+The
+Health Insurance Portability and Accountability Act of 1996 ("HIPAA") broadened the scope of the fraud and abuse laws by
+adding several criminal statutes that are not related to receipt of payments from a federal healthcare program. HIPAA created civil penalties
+for proscribed conduct, including upcoding and billing for medically unnecessary goods or services. These laws cover all health insurance
+programs, private as well as governmental. In addition, HIPAA broadened the scope of certain fraud and abuse laws, such as the anti-kickback
+statute, to include not just Medicare and Medicaid services, but all healthcare services reimbursed under a federal or state healthcare
+program. Finally, HIPAA established enforcement mechanisms to combat fraud and abuse. These mechanisms include a bounty system where
+a portion of the payment recovered is returned to the government agencies, as well as a whistleblower program, where a portion of the
+payment received is paid to the whistleblower. HIPAA also expanded the categories of persons that may be excluded from participation
+in federal and state healthcare programs.
+
+ 
+
+There
+is increasing scrutiny by law enforcement authorities, the OIG, the courts and the U.S. Congress of arrangements between healthcare providers
+and potential referral sources to ensure that the arrangements are not designed as mechanisms to exchange remuneration for patient-care
+referrals and opportunities. Investigators also have demonstrated a willingness to look behind the formalities of a business transaction
+and to reinterpret the underlying purpose of payments between healthcare providers and potential referral sources. Enforcement actions
+have increased, as is evidenced by highly publicized enforcement investigations of certain hospital activities.
+
+ 
+
+In
+addition, provisions of the Social Security Act, known as the Stark Act, also prohibit physicians from referring Medicare and Medicaid
+patients to providers of a broad range of designated health services with which the physicians or their immediate family members have
+ownership or certain other financial arrangements. Certain exceptions are available for employment agreements, leases, physician recruitment
+and certain other physician arrangements. A person making a referral, or seeking payment for services referred, in violation of the Stark
+Act is subject to civil monetary penalties; restitution of any amounts received for illegally billed claims; and/or exclusion from future
+participation in the Medicare program, which can subject the person or entity to exclusion from future participation in state healthcare
+programs.
+
+ 
+
+Further,
+if any physician or entity enters into an arrangement or scheme that the physician or entity knows or should have known has the principal
+purpose of assuring referrals by the physician to a particular entity, and the physician directly makes referrals to such entity, then
+such physician or entity could be subject to a civil monetary penalty. Compliance with and the enforcement of penalties for violations
+of these laws and regulations is changing and increasing. For example, CMS has issued a "self-referral disclosure protocol"
+for hospitals and other providers that wish to self-disclose potential violations of the Stark Act and attempt to resolve those potential
+violations and any related overpayment liabilities at levels below the maximum penalties and amounts set forth in the statute. In light
+of the provisions of the Affordable Care Act that created potential liabilities under the federal False Claims Act (discussed below)
+for failing to report and repay known overpayments and return an overpayment within 60 days of the identification of the overpayment
+or the date by which a corresponding cost report is due, whichever is later, hospitals and other healthcare providers are encouraged
+to disclose potential violations of the Stark Act to CMS. It is likely that self-disclosure of Stark Act violations will increase in
+the future. Finally, many states have adopted or are considering similar legislative proposals, some of which extend beyond the Medicaid
+program, to prohibit the payment or receipt of remuneration for the referral of patients and physician self-referrals regardless of the
+source of the payment for the care.
+
+ 
+
+ 24
+
+ 
+
+ 
+
+ 
+
+The
+Federal False Claims Act and Similar State Laws
+
+ 
+
+The
+federal False Claims Act prohibits providers from, among other things, knowingly submitting false or fraudulent claims for payment to
+the federal government. The False Claims Act defines the term "knowingly" broadly, and while simple negligence generally
+will not give rise to liability, submitting a claim with reckless disregard to its truth or falsity can constitute the "knowing"
+submission of a false or fraudulent claim for the purposes of the False Claims Act. The "qui tam" or "whistleblower"
+provisions of the False Claims Act allow private individuals to bring actions under the False Claims Act on behalf of the government.
+These private parties are entitled to share in any amounts recovered by the government, and, as a result, the number of "whistleblower"
+lawsuits that have been filed against providers has increased significantly in recent years. When a private party brings a qui
+tam action under the False Claims Act, the defendant will generally not be aware of the lawsuit until the government makes a
+determination whether it will intervene and take a lead in the litigation. If a provider is found to be liable under the False Claims
+Act, the provider may be required to pay up to three times the actual damages sustained by the government plus mandatory civil monetary
+penalties for each separate false claim. The government has used the False Claims Act to prosecute Medicare and other government healthcare
+program fraud such as coding errors, billing for services not provided, submitting false cost reports, and providing care that is not
+medically necessary or that is substandard in quality. A qui tam lawsuit has been filed against the Company alleging violations
+of the False Claims Act. See "Legal Proceedings". 
+
+ 
+
+HIPAA
+Transaction, Privacy and Security Requirements
+
+ 
+
+HIPAA
+and federal regulations issued pursuant to HIPAA contain, among other measures, provisions that have required the Company to implement
+modified or new computer systems, employee training programs and business procedures. The federal regulations are intended to encourage
+electronic commerce in the healthcare industry, provide for the confidentiality and privacy of patient healthcare information and ensure
+the security of healthcare information.
+
+ 
+
+A
+violation of the HIPAA regulations could result in civil money penalties per standard violated. HIPAA also provides for criminal penalties
+and one year in prison for knowingly and improperly obtaining or disclosing protected health information, up to five years in prison
+for obtaining protected health information under false pretenses and up to ten years in prison for obtaining or disclosing protected
+health information with the intent to sell, transfer or use such information for commercial advantage, personal gain or malicious harm.
+Since there is limited history of enforcement efforts by the federal government at this time, it is difficult to ascertain the likelihood
+of enforcement efforts in connection with the HIPAA regulations or the potential for fines and penalties, which may result from any violation
+of the regulations.
+
+ 
+
+HIPAA
+Privacy Regulations
+
+ 
+
+HIPAA
+privacy regulations protect the privacy of individually identifiable health information. The regulations provide increased patient control
+over medical records, mandate substantial financial penalties for violation of a patient s right to privacy and, with a few exceptions,
+require that an individual s individually identifiable health information only be used for healthcare-related purposes. These privacy
+standards apply to all health plans, all healthcare clearinghouses and all healthcare providers, such as our hospitals, that transmit
+health information in an electronic form in connection with standard transactions and apply to individually identifiable information
+held or disclosed by a covered entity in any form. These standards impose extensive administrative requirements on our hospitals and
+require compliance with rules governing the use and disclosure of such health information, and they require our facilities to impose
+these rules, by contract, on any business associate to whom we disclose such information in order to perform functions on our behalf.
+In addition, our hospitals are subject to any state laws that are more restrictive than the privacy regulations issued under HIPAA. These
+laws vary by state and could impose stricter standards and additional penalties.
+
+ 
+
+The
+HIPAA privacy regulations also require healthcare providers to implement and enforce privacy policies to ensure compliance with the regulations
+and standards. We believe all of our facilities are in compliance with current HIPAA privacy regulations.
+
+ 
+
+ 25
+
+ 
+
+ 
+
+ 
+
+HIPAA
+Electronic Data Standards
+
+ 
+
+The
+Administrative Simplification Provisions of HIPAA require the use of uniform electronic data transmission standards for all healthcare
+related electronic data interchange. These provisions are intended to streamline and encourage electronic commerce in the healthcare
+industry. Among other things, these provisions require us to use standard data formats and code sets established by HHS when electronically
+transmitting information in connection with certain transactions, including health claims and equivalent encounter information, healthcare
+payment and remittance advice and health claim status.
+
+ 
+
+The
+HHS regulations establish electronic data transmission standards that all healthcare providers and payors must use when submitting and
+receiving certain electronic healthcare transactions. The uniform data transmission standards are designed to enable healthcare providers
+to exchange billing and payment information directly with the many payors thereby eliminating data clearinghouses and simplifying the
+interface programs necessary to perform this function. We believe that our management information systems comply with HIPAA s electronic
+data regulations and standards.
+
+ 
+
+HIPAA
+Security Standards
+
+ 
+
+The
+Administrative Simplification Provisions of HIPAA require the use of a series of security standards for the protection of electronic
+health information. The HIPAA security standards rule specifies a series of administrative, technical and physical security procedures
+for covered entities to use to assure the confidentiality of electronic protected health information. The standards are delineated into
+either required or addressable implementation specifications. We believe we are in compliance with all the aspects of the HIPAA security
+regulations.
+
+ 
+
+HIPAA
+National Provider Identifier
+
+ 
+
+HIPAA
+also required HHS to issue regulations establishing standard unique health identifiers for individuals, employers, health plans and healthcare
+providers to be used in connection with standard electronic transactions. All healthcare providers, including our hospitals, were required
+to obtain a new National Provider Identifier ("NPI") to be used in standard transactions instead of other numerical identifiers
+by May 23, 2007. Our hospitals implemented use of a standard unique healthcare identifier by utilizing their employer identification
+number. HHS has not yet issued proposed rules that establish the standard for unique health identifiers for health plans or individuals.
+Once these regulations are issued in final form, we expect to have approximately one to two years to become fully compliant, but cannot
+predict the impact of such changes at this time. We cannot predict whether our facilities may experience payment delays during the transition
+to the new identifiers. HHS is currently working on the standards for identifiers for health plans; however, there are currently no proposed
+timelines for issuance of proposed or final rules. The issuance of proposed rules for individuals is on hold indefinitely.
+
+ 
+
+Medical
+Waste Regulations
+
+ 
+
+Our
+operations, especially our hospitals, generate medical waste that must be disposed of in compliance with federal, state and local environmental
+laws, rules and regulations. Our operations are also generally subject to various other environmental laws, rules and regulations. Based
+on our current level of operations, we do not anticipate that such compliance costs will have a material adverse effect on our cash flows,
+financial position or results of operations.
+
+ 
+
+Compliance
+Program
+
+ 
+
+The
+Company continuously evaluates and monitors its compliance with all Medicare, Medicaid and other rules and regulations. The objective
+of the Company s compliance program is to develop, implement and update compliance safeguards as necessary. Emphasis is placed
+on developing and implementing compliance policies and guidelines, personnel training programs and various monitoring and audit procedures
+to attempt to achieve implementation of all applicable rules and regulations.
+
+ 
+
+ 26
+
+ 
+
+ 
+
+ 
+
+The
+Company seeks to conduct its business in compliance with all statutes, regulations, and other requirements applicable to its operations.
+The health care industry is, however, subject to extensive regulation, and many of these statutes and regulations have not been interpreted
+by the courts. There can be no assurance that applicable statutes and regulations will not be interpreted or applied by a prosecutorial,
+regulatory or judicial authority in a manner that would adversely affect the Company. Potential sanctions for violation of these statutes
+and regulations include significant civil and criminal penalties, fines, exclusions from participation in government health care programs
+and the loss of various licenses, certificates and authorizations, necessary to operate as well as potential liabilities from third-party
+claims, all of which could have a material adverse effect on the Company s business.
+
+ 
+
+Professional
+Liability
+
+ 
+
+As
+part of our business, our facilities are subject to claims of liability for events occurring in the ordinary course of operations. Professional
+malpractice liability insurance and general liability insurance policies are maintained in amounts which are commercially available
+and believed to be sufficient for operations as currently conducted, although some claims may exceed the scope or amount of the coverage
+in effect.
+
+ 
+
+Environmental
+Regulation
+
+ 
+
+We
+believe we are in substantial compliance with applicable federal, state and local environmental regulations. To date, compliance with
+federal, state and local laws regulating the discharge of material into the environment or otherwise relating to the protection of the
+environment have not had a material effect upon our results of operations, financial condition or competitive position. Similarly, we
+have not had to make material capital expenditures to comply with such regulations.
+
+ 
+
+Payment
+for Services
+
+ 
+
+The
+Company s hospital operations depend significantly on continued participation in the Medicare and Medicaid programs and in other
+government healthcare programs. In recent years, both governmental and private sector payers have made efforts to contain or reduce health
+care costs, including reducing reimbursement for services.
+
+ 
+
+Under
+the Consolidated Appropriations Act of 2021, effective as of January 1, 2022, Congress adopted provisions to help protect patients against
+surprise bills and provide more price transparency. Patients have new billing protections when receiving emergency care and non-emergency
+care from out-of-network providers at in-network facilities. Excessive out-of-pocket costs are restricted and emergency services must
+continue to be covered without any prior authorization and regardless of whether or not a provider or facility is in-network.
+
+ 
+
+Further
+healthcare reform could occur, including changes to the Affordable Care Act and Medicare reform, as well as administrative requirements
+that may affect coverage, reimbursement and utilization of our hospitals in ways that are currently unpredictable.
+
+ 
+
+Employees
+
+ 
+
+On
+March 30, 2023, we had 128 employees, of which 85 were full time. None of the Company s employees are
+represented by a union.
+
+ 
+
+Legal
+Proceedings
+
+ 
+
+From
+time to time, the Company may be involved in a variety of claims, lawsuits, investigations and proceedings related to contractual disputes,
+employment matters, regulatory and compliance matters, intellectual property rights and other litigation arising in the ordinary course
+of business. The Company operates in a highly regulated industry which may inherently lend itself to legal matters. Management is aware
+that litigation has associated costs and that results of adverse litigation verdicts could have a material effect on the Company s
+financial position or results of operations. The Company s policy is to expense legal fees and expenses incurred in connection
+with the legal proceedings in the period in which the expense is incurred. Management, in consultation with legal counsel, has addressed
+known assertions and predicted unasserted claims below.
+
+ 
+
+ 27
+
+ 
+
+ 
+
+ 
+
+Biohealth
+Medical Laboratory, Inc. and PB Laboratories, LLC (the "Companies") filed suit against CIGNA Health in 2015 alleging that
+CIGNA failed to pay claims for laboratory services the Companies provided to patients pursuant to CIGNA - issued and CIGNA - administered
+plans. In 2016, the U.S. District Court dismissed part of the Companies claims for lack of standing. The Companies appealed that
+decision to the Eleventh Circuit Court of Appeals, which in late 2017 reversed the District Court s decision and found that the
+Companies have standing to raise claims arising out of traditional insurance plans as well as self-funded plans. In July 2019, the Companies
+and EPIC filed suit against CIGNA Health for failure to pay claims for laboratory services provided. Cigna Health, in turn, sued for
+alleged improper billing practices. The suit remains ongoing but because the Company did not have the financial resources to see the
+legal action to conclusion it assigned the benefit, if any, from the suit to Mr. Diamantis for his financial support to the Company and
+assumption of all costs to carry the case to conclusion.
+
+ 
+
+On
+September 27, 2016, a tax warrant was issued against the Company by the Florida Department of Revenue (the "DOR") for unpaid
+2014 state income taxes in the approximate amount of $0.9 million, including penalties and interest. The Company entered into a Stipulation
+Agreement with the DOR allowing the Company to make monthly installments until July 2019. The Company has made payments to reduce the
+amount owed. The balance accrued of approximately $0.4 million remained outstanding to the DOR at December 31, 2022.
+
+ 
+
+On
+December 7, 2016, the holders of the Tegal Notes (see Note 8 to the consolidated financial statements incorporated by
+reference in this prospectus) filed suit against the Company seeking payment for the amounts due under the notes in the aggregate principal
+balance of $341,612, and accrued interest of $43,000. A request for entry of default judgment was filed on January 24, 2017. On April
+23, 2018, the holders of the Tegal Notes received a judgment against the Company. As of December 31, 2022, the Company has repaid
+$50,055 of the principal amount of these notes.
+
+ 
+
+The
+Company, as well as many of its subsidiaries, were defendants in a case filed in Broward County Circuit Court by TCA Global Credit Master
+Fund, L.P. The plaintiff alleged a breach by Medytox Solutions, Inc. of its obligations under a debenture and claimed damages of approximately
+$2,030,000 plus interest, costs and fees. The Company and the other subsidiaries were sued as alleged guarantors of the debenture. The
+complaint was filed on August 1, 2018. In May 2020, the SEC appointed a Receiver to close down the TCA Global Credit Master Fund, L.P.
+The Company and the Receiver entered into a settlement agreement dated effective as of September 30, 2021, under which the Company agreed
+to pay $500,000 as full and final settlement of principal and interest, of which $200,000 was paid on November 4, 2021 and the remaining
+$300,000 was due in six consecutive monthly installments of $50,000. Accordingly, the settlement amount was fully paid as of December
+31, 2022 (see Note 8 to the consolidated financial statements incorporated by reference in this prospectus).
+As a result of the settlement, the Company recorded a gain from legal settlement of $2.2 million in the year ended December 31, 2021.
+
+ 
+
+ 28
+
+ 
+
+ 
+
+ 
+
+On
+September 13, 2018, Laboratory Corporation of America sued EPIC, a subsidiary of the Company, in Palm Beach County Circuit Court for
+amounts claimed to be owed. The court awarded a judgment against EPIC in May 2019 for approximately $155,000. The Company has recorded
+the amount owed as a liability as of December 31, 2022.
+
+ 
+
+In
+February 2020, Anthony O Killough sued the Company and Mr. Diamantis, as guarantor, in New York State Supreme Court for the
+County of New York, for approximately $2.0 million relating to the promissory note issued by the Company in September 2019. In May
+2020, the Company, Mr. Diamantis, as guarantor, and Mr. O Killough entered into a Stipulation providing for a payment of a
+total of $2.2 million (which included accrued "penalty" interest as of that date) in installments through November 1,
+2020. The Company made payments totaling $450,000 in 2020. On January 18, 2022, Mr. Diamantis paid $750,000 and the remaining
+balance was due 120 days thereafter. Mr. O Killough agreed to forebear from any further enforcement action until then. On
+various dates during the remainder of 2022, Mr. Diamantis made additional payments to Mr. O Killough totalling $300,000 and
+the Company gave Mr. Diamantis $350,000 for further payment to Mr. O Killough. As a result of these payments, the past due
+balance owed to Mr. O Killough was $1.1 million on December 31, 2022, The Company is obligated to repay Mr. Diamantis for
+any payments, plus interest, that he made to Mr. O,Killough. On January 27, 2023, the parties entered into a final
+settlement wherein the Company and Mr. Diamantis agreed to settle the obligation in full for $580,000. The promissory note,
+forbearance agreement and final settlement are also discussed in Notes 8, 14 and 18 to the consolidated financial statements
+incorporated by reference in this prospectus. 
+
+ 
+
+In
+June 2019, CHSPSC, the former owners of Jamestown Regional Medical Center, obtained a judgment against the Company in the amount of $592,650.
+The Company has recorded this judgment as a liability as of December 31, 2022. However, management believes that a number of insurance
+payments were made to CHSPSC for services provided after the change of ownership and believes that these payments will offset portions of the judgment.
+
+ 
+
+In
+August 2019, Morrison Management Specialists, Inc. obtained a judgment against Jamestown Regional Medical Center and the Company in Fentress
+County, Tennessee in the amount of $194,455 in connection with housekeeping and dietary services. The Company has recorded this liability
+as of December 31, 2022.
+
+ 
+
+In
+November 2019, Newstat, PLLC obtained a judgment against Big South Fork Medical Center in Knox County, Tennessee in the amount of $190,600
+in connection with the provision of medical services. On February 15, 2023, the Company and Newstat agreed to settle the amount owed
+for $210,000 in four equal monthly payments of $52,500 beginning February 2023. The Company has made the payments under the settlement
+agreement to date. The Company has recorded the $210,000 as a liability as of December 31, 2022. 
+
+ 
+
+On
+June 30, 2021, the Company entered into a settlement agreement with the Tennessee Bureau of Workers Compensation. Per the terms
+of the settlement agreement, the Company is obligated to pay a total of $109,739, payable in a lump sum payment of $32,922 on or before
+August 15, 2021 and in 24 consecutive monthly payments of $3,201 each on or before the 15th day of each month beginning September
+15, 2021. The Company has made the required payments due as of December 31, 2022 and has recorded the remaining amounts owed as
+a liability as of December 31, 2022.
+
+ 
+
+In
+July 2021, WG Fund, Queen Funding and Diesel Funding filed legal actions in New York State Supreme Court for Kings County to recover
+amounts claimed to be outstanding on accounts receivable sales agreements entered into in 2020. On September 14, 2021, the Company entered
+into separate stipulation of settlement agreements with the three funding parties under which the Company agreed to repay an aggregate
+of $0.9 million in equal monthly payments totaling $52,941 through January 1, 2023. As of December 31, 2022, the settlement amounts
+were paid in full. 
+
+ 
+
+ 29
+
+ 
+
+ 
+ 
+
+ A sealed
+qui tam lawsuit in the U.S. District Court for the Southern District of Florida against the Company was filed in July 2021. This
+lawsuit was unsealed in November 2022 and Clifford Barron disclosed as the Plaintiff-Relator asserting violations of the False Claims
+Act. Clifford Barron was an employee of CollabRx, Inc. (a San Francisco based, wholly owned subsidiary of the Company) until early 2018.
+Following his resignation on January 17, 2018, Clifford Barron sought and received a judgment against the Company for approximately $253,000
+he claimed was owed to him by the CollabRx subsidiary for severance and payment of COBRA. On receiving the judgment, he collected all
+monies owed to him under this judgment, including from the Company s rural healthcare operations in Tennessee with which he was
+not involved. Payments included approximately $164,000 secured from hospital operating and other bank accounts by garnishments initiated
+by Jonathan Swann Taylor of Taylor & Knight, GP, Knoxville Tennessee, on behalf of Clifford Barron in May 2022. Clifford Barron has
+not been an employee of any subsidiary of the Company since January 2018, is not involved with the Company and has no knowledge of the
+Company s operations, financial status, or controls. On November 21, 2022, the Company was advised that the U.S. Department of
+Justice has intervened in the action filed by the Plaintiff-Relator, Clifford Barron and has requested repayment of HHS Provider Relief
+Funds that certain subsidiaries of the Company obtained and other relief. The Company has retained the services of a specialist third-party
+accounting firm to complete a forensic review of the expenditure of all monies expended since the receipt of HHS Provider Relief Funds.
+It has been discovered that certain filing requirements of the Company s operating subsidiaries were incomplete or contained errors
+that did not accurately reflect the expenditure of HHS Provider Relief Funds received. The Company disputes the allegations made and
+believes that the forensic review of funds expended will address the lawsuit and demonstrate adherence with the applicable rules for
+use of HHS Provider Relief Funds. Accordingly, no amount has been accrued for this potential liability at December 31, 2022. There is
+no assurance that the Company will be able to retain all HHS Provider Relief Funds it has received nor avoid payment of other relief
+sought by the Department of Justice. Any requirement to repay a significant amount of HHS Provider Relief Funds could have a material
+adverse effect on the Company. 
+
+ 
+
+MANAGEMENT S
+DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
+
+AND RESULTS OF OPERATIONS
+
+ 
+
+The
+following discussion and analysis provide information which management believes is relevant to an assessment and understanding of our
+consolidated results of operations and financial condition. This discussion contains forward-looking statements that involve risks and
+uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of numerous
+factors including, but not limited to, those described above under "

parsed_sections/risk_factors/2023/CIK0001043894_wolf_risk_factors.txt

@@ -0,0 +1 @@
+Table of Contents UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Our unaudited pro forma condensed consolidated financial statements consist of an unaudited Pro Forma Condensed Consolidated Statement of Operations for the nine months ended December 31, 2022 and the year ended March 31, 2022, and an unaudited Pro Forma Condensed Consolidated Balance Sheet as of December 31, 2022. The unaudited pro forma condensed consolidated financial statements presented below have been derived from our historical unaudited Condensed Consolidated Statement of Operations for the nine months ended December 31, 2022 and the year ended March 31, 2022 and the historical unaudited Condensed Consolidated Balance Sheet at December 31, 2022. The unaudited pro forma Condensed Consolidated Balance Sheet gives effect to the related transactions described below as if they had occurred on December 31, 2022. The pro forma adjustments to the unaudited Pro Forma Condensed Consolidated Statement of Operations for the nine months ended December 31, 2022 and the year ended March 31, 2022 assume that the related transactions occurred as of April 1, 2021. The transaction adjustments identified below have been separately broken out to clearly identify the adjustments and the disclosure includes the basis for the adjustment. PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED DECEMBER 31, 2022 Other Transaction Historical Adjustments Pro Forma Revenues $ 15,594,424 $ - $ 15,594,424 Cost of revenues 12,380,959 - 12,380,959 Gross profit 3,213,465 - 3,213,465 OPERATING EXPENSES Salaries and salaries related costs 812,148 - 812,148 Professional and consulting fees 9,060 - 9,060 Selling, general and administrative costs 3,510,124 - 3,510,124 Depreciation, amortization, and impairment 3,950,513 - 3,950,513 Total operating expenses 8,281,845 - 8,281,845 Loss from operations before other income (expenses) (5,068,380 ) - (5,068,380 ) OTHER EXPENSE Loss on disposal of fixed assets (971,251 ) - (971,251 ) Interest expense, net of interest income (28,776 ) - (28,776 ) Total other expense (1,000,027 ) - (1,000,027 ) LOSS FROM CONTINUING OPERATIONS BEFORE PROVISION FOR INCOME TAXES (6,068,407 ) - (6,068,407 ) DISCONTINUED OPERATIONS Loss from discontinued operations (156,048 ) - (156,048 ) Loss on disposal of discontinued operations - - - Total discontinued operations (156,048 ) - (156,048 ) LOSS FROM OPERATIONS BEFORE PROVISION FOR INCOME TAXES (6,224,455 ) - (6,224,455 ) Provision for income taxes - - - NET LOSS $ (6,224,455 ) $ - $ (6,224,455 ) NET LOSS PER SHARE Basic and Diluted loss per share: $ (0.10 ) $ (0.08 ) WEIGHTED AVERAGE SHARES OUTSTANDING 61,253,204 78,268,332 Table of Contents Basis of Presentation The Company s unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (GAAP). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (ASC) and Accounting Standards Update (ASU) of the Financial Accounting Standards Board (FASB) All adjustments considered necessary for a fair presentation have been included. These adjustments consist of normal and recurring accruals, as well as non-recurring charges. As the reverse merger transaction resulted in the owner of Banner gaining control over the combined entity after the transaction, and the shareholders of Wolf Energy Services Inc. (formerly Enviro Technologies U.S., Inc.) continuing only as passive investors, the transaction was not considered a business combination under the ASC. Instead, this transaction was considered to be a capital transaction of the legal acquiree (Banner) and was equivalent to the issuance of shares by Banner for the net monetary assets of Wolf Energy Services Inc. (formerly Enviro Technologies U.S., Inc.) accompanied by a recapitalization, except for the purchase of the 22,280,500 shares of issued and outstanding common shares of Wolf Energy Services Inc. (formerly Enviro Technologies U.S., Inc.) which were considered as purchase consideration resulting in $3,613,144 of goodwill that was impaired immediately. As a result, the historical balances represent Banner. See Note 2, Reverse Merger for full details on the accounting for the reverse merger. The condensed consolidated financial statements, and the accompanying notes, are prepared in accordance with GAAP and do not contain certain information included in the Company s Annual Report on Form 10-K for the year ended December 31, 2021, as well as the Banner audited financial statements that are reflected in Form 8-K/A filed by the Company on October 31, 2022. Therefore, the interim condensed consolidated financial statements should be read in conjunction with those reports. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the year due to various factors. Principles of Consolidation The Company prepares its consolidated financial statements on the accrual basis of accounting. The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, all of which have a year end of March 31. All intercompany accounts, balances and transactions have been eliminated in the consolidation. Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenues and expenses during the reporting period. These estimates include, but are not limited to, management s estimate of provisions required for uncollectible accounts receivable, impaired value of equipment and intangible assets, liabilities to accrue, cost incurred in the satisfaction of performance obligations, permanent and temporary differences related to income taxes, to present these consolidated financial statements on a standalone basis and determination of the fair value of stock awards. Actual results could differ from those estimates. Revenue Recognition The Company recognizes revenue under ASC 606, Revenue from Contracts with Customers. The core principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle: Step 1: Identify the contract with the customer Step 2: Identify the performance obligations in the contract Step 3: Determine the transaction price Step 4: Allocate the transaction price to the performance obligations in the contract Step 5: Recognize revenue when the Company satisfies a performance In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify each promised good or service that is distinct. A performance obligation meets ASC 606 s definition of a distinct good or service (or bundle of goods or services) if both of the following criteria are met: The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e., the good or service is capable of being distinct), and the entity s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the context of the contract). If a good or service is not distinct, the good or service is combined with other promised goods or services until a bundle of goods or services is identified that is distinct. F- Table of Contents PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 2022 Other Transaction Historical Adjustments Pro Forma Revenues $ 18,750,053 $ - $ 18,750,053 Cost of revenues 13,447,203 - 13,447,203 Gross profit 5,302,850 - 5,302,850 OPERATING EXPENSES Salaries and salaries related costs 2,494,942 - 2,494,942 Professional and consulting fees 309,825 - 309,825 Selling, general and administrative costs 7,471,525 - 7,471,525 Depreciation, amortization, and impairment 783,324 - 783,324 Total operating expenses 11,059,616 - 11,059,616 Loss from operations before other income (expenses) (5,756,766 ) - (5,756,766 ) OTHER INCOME (EXPENSE) Change in fair value of derivative liabilities 10,975,737 - 10,975,737 Loss on disposal of fixed assets (6,770 ) - (6,770 ) Interest expense, net of interest income (321,159 ) - (321,159 ) Total other income (expense) 10,647,808 - 10,647,808 INCOME FROM CONTINUING OPERATIONS BEFORE PROVISION FOR INCOME TAXES 4,891,042 - 4,891,042 INCOME FROM OPERATIONS BEFORE PROVISION FOR INCOME TAXES 4,891,042 - 4,891,042 Provision for income taxes (85,000 ) - (85,000 ) NET INCOME $ 4,806,042 $ - $ 4,806,042 NET EARNINGS PER SHARE Basic and Diluted earnings per share: $ 0.09 $ 0.06 WEIGHTED AVERAGE SHARES OUTSTANDING 51,987,832 74,268,332 Table of Contents The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both. When determining the transaction price, an entity must consider the effects of all the following: Variable consideration Constraining estimates of variable consideration The existence of a significant financing component in the contract Noncash consideration Consideration payable to a customer Variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. The transaction price is allocated to each performance obligation on a relative standalone selling price basis. The standalone selling price is the price at which the Company would sell a promised service separately to a customer. The relative selling price for each performance obligation is estimated using observable objective evidence if it is available. If observable objective evidence is not available, the Company uses its best estimate of the selling price for the promised service. In instances where the Company does not sell a service separately, establishing standalone selling price requires significant judgment. The Company estimates the standalone selling price by considering available information, prioritizing observable inputs such as historical sales, internally approved pricing guidelines and objectives, and the underlying cost of delivering the performance obligation. The transaction price allocated to each performance obligation is recognized when that performance obligation is satisfied, at a point in time or over time as appropriate. Management judgment is required when determining the following: when variable consideration is no longer probable of significant reversal (and hence can be included in revenue); whether certain revenue should be presented gross or net of certain related costs; when a promised service transfers to the customer; and the applicable method of measuring progress for services transferred to the customer over time. The Company recognizes revenue upon satisfaction of its performance obligation at a point in time or over time in accordance with ASC 606-10-25. The Company accounts for incremental costs of obtaining a contract with a customer and contract fulfilment costs in accordance with ASC 340-40, Other Assets and Deferred Costs. These costs should be capitalized and amortized as the performance obligation is satisfied if certain criteria are met. The Company elected the practical expedient, to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that would otherwise have been recognized is one year or less, and expenses certain costs to obtain contracts when applicable. The Company recognizes an asset from the costs to fulfill a contract only if the costs relate directly to a contract, the costs generate or enhance resources that will be used in satisfying a performance obligation in the future and the costs are expected to be recovered. The Company recognizes the cost of sales of a contract as expense when incurred or when a performance obligation is satisfied. The incremental costs of obtaining a contract are capitalized unless the costs would have been incurred regardless of whether the contract was obtained, are not considered recoverable, or the practical expedient applies. The Company recognizes revenue for their proportionate share of revenue when: (i) the Company receives notification of the successful delivery of a load of frac sand or other material to a buyer; (ii) the buyer will provide a fixed price based on distance between origination and destination point; and (iii) cash is received within one business day from the factoring agent. Cost of sales for the Company includes all direct expenses incurred to produce the revenue for the period. This includes, but is not limited to, direct employee labor, direct contract labor and fuel. Revenue under master service agreements is recorded upon the performance obligation being satisfied. Typically, the satisfaction of the performance obligation occurs upon the frac sand load being delivered to the customer site and this load being successfully invoiced and accepted by the Company s factoring agent. Accounts Receivable and Concentration of Credit Risk The Company considers accounts receivable, net of allowance for doubtful accounts, to be fully collectible. The allowance is based on management s estimate of the overall collectability of accounts receivable, considering historical losses, credit insurance and economic conditions. Based on these same factors, individual accounts are charged off against the allowance when management determines those individual accounts are uncollectible. Credit extended to customers is generally uncollateralized, however credit insurance is obtained for some customers. Past-due status is based on contractual terms. For the Company, accounts receivable is comprised of unsecured amounts due from customers that have been conveyed to a factoring agent for both with and without recourse. The Company receives an advance from the factoring agent of 98% of the amount invoiced to the customer within one business day. The Company recognizes revenue for 100% of the gross amount invoiced, records an expense for the 2% finance charge by the factoring agent, and realizes cash for the 98% net proceeds received. F- Table of Contents PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2022 Other Other Transaction Transaction Historical Adjustments Adjustments Pro Forma (1) ASSETS CURRENT ASSETS Cash $ 342,705 $ - $ - $ 342,705 Accounts receivable 53,038 - - 53,038 Prepaid expenses and other current assets 999,500 - - 999,500 Current assets of discontinued operations 114,049 - - 114,049 Total current assets 1,509,292 - - 1,509,292 NON-CURRENT ASSETS Property and equipment, net 1,071,938 - - 1,071,938 Intangible assets, net 1,523,601 - - 1,523,601 Goodwill 4,900,873 - - 4,900,873 Right of use asset - operating leases 316,271 - - 316,271 Non-current assets of discontinued operations 16,913 - - 16,913 Total non-current assets 7,829,596 - - 7,829,596 TOTAL ASSETS $ 9,338,888 $ - $ - $ 9,338,888 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 169,105 $ - $ - 169,105 Accrued liabilities 1,553,408 - - 1,553,408 Current portion of lease liability - operating leases 72,319 - - 72,319 Notes payable 938,232 - - 938,232 Current liabilities of discontinued operations 314,100 - 314,100 Total current liabilities 3,047,164 - - 3,047,164 NON-CURRENT LIABILITIES Lease liability - operating leases, net of current portion 244,852 - - 244,852 Non-current liabilities of discontinued operations 150,000 - - 150,000 394,852 - - 394,852 Total liabilities 3,442,016 - - 3,442,016 STOCKHOLDERS' EQUITY (DEFICIT) Preferred stock, par value - - - - Common stock, par value 78,268 - - 78,268 Additional paid-in capital 14,869,041 - - 14,869,041 Accumulated deficit (9,050,437 ) - - (9,050,437 ) Total stockholders' equity (deficit) 5,896,872 - - 5,896,872 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 9,338,888 $ - $ - $ 9,338,888 Table of Contents Fair Value Measurements ASC 820 Fair Value Measurements defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosure about fair value measurements. ASC 820 classifies these inputs into the following hierarchy: Level 1 inputs: Quoted prices for identical instruments in active markets. Level 2 inputs: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable. Level 3 inputs: Instruments with primarily unobservable value drivers. The carrying values of the Company s financial instruments such as cash, accounts payable, and accrued expenses approximate their respective fair values because of the short-term nature of those financial instruments. Impairment of Long-lived Assets Management reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the undiscounted future cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Earnings (Loss) Per Share of Common Stock Basic net income (loss) per common share is computed using the weighted average number of common shares outstanding. Diluted earnings (loss) per share ( EPS ) include additional dilution from common stock equivalents, such as convertible notes. The Company as of and for the nine months ended December 31, 2022 and 2021 had no common stock equivalents. Recently Issued Accounting Standards The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures. F- Table of Contents On August 23, 2022 Ecoark and Banner entered into a Share Exchange Agreement (the Agreement ) with the Company. The Agreement provided that, upon the terms and subject to the conditions set forth therein, Ecoark shall acquire 51,987,832 shares of the Company s common stock in exchange for all the capital stock of Banner owned by Ecoark, which represents 100% of the issued and outstanding shares of the Company (the Exchange ). Upon closing of the Agreement, Banner will continue as a wholly owned subsidiary of the Company. On September 7, 2022, the Exchange was completed, and Banner became a wholly owned subsidiary of the Company via a reverse merger. As a result, the historical financial information of the company is that of Banner. The acquisition of Banner was considered a reverse merger. In accordance with ASC 805-40-45-1, the consolidated financial statements prepared following a reverse acquisition are issued under the name of the legal parent (Wolf Energy Services, Inc.) but described in the notes to the financial statements as a continuation of the financial statements of the legal subsidiary (Banner Midstream Corp.), with one adjustment, which is to retroactively adjust the accounting acquirer s legal capital to reflect the legal capital of the accounting acquiree (Wolf Energy Services, Inc.). That adjustment is required to reflect the capital of the legal parent. Comparative information presented in the consolidated financial statements also is retroactively adjusted to reflect the legal capital of the legal parent. Under ASC 805-40-45-2, the consolidated financial statements represent the continuation of the legal subsidiary except for the capital structure, as follows: (a) The assets and liabilities of the legal subsidiary recognized and measured at their precombination carrying amounts; (b) The assets and liabilities of the legal parent recognized and measured in accordance with the guidance in this topic applicable to business combinations (ASC 805); (c) The retained earnings and other equity balances of the legal subsidiary before the business combination;(d) The amount recognized as issued equity interests in the consolidated financial statements determined by adding the issued equity interest of the legal subsidiary outstanding immediately before the business combination to the fair value of the legal parent determined in accordance with the guidance in ASC 805 applicable to business combinations. However, the equity structure reflects the equity structure of the legal parent, including the equity interests the legal parent issued to affect the combination. Accordingly, the equity structure of the legal subsidiary is restated using the exchange ratio established in the acquisition agreement to reflect the number of shares of the legal parent issued in the reverse acquisition. On September 7, 2022, the Company completed its acquisition of Banner. As a result of this transaction, which is accounted for as a reverse merger, Banner is a wholly owned subsidiary of the Company (the Merger ). In accordance with the terms of the Merger, at the effective time of the Merger, each outstanding share of the common stock of Banner was exchanged for the 51,987,832 shares of common stock of the Company. This exchange of shares and the resulting controlling ownership of Wolf Energy Services, Inc. constitutes a reverse acquisition resulting in a recapitalization of Banner and purchase accounting being applied to Wolf Energy Services Inc. under ASC 805 due to Banner being the accounting acquirer and Wolf Energy Services, Inc., being deemed an acquired business. This requires financial reporting from the Merger close date forward to reflect only the historic consolidated results of Banner and to include the consolidated results for Wolf Energy Services Inc. and subsidiaries from September 7, 2022 forward. The primary reasons Banner consummated the merger with Wolf Energy Services Inc. were the opportunity to immediately become a public company without the process of doing its own initial public offering, thereby affording it the opportunity to more quickly raise capital and provide liquidity options to its stockholders, and at the same time acquiring the infrastructure required of a public company run by people experienced in investor relations and the public company regulatory compliance issues and filings required by virtue of appointing certain of Ecoark s executive officers as executive officers of the Company. The previously existing businesses of Wolf Energy Services Inc. at the time of the Merger, consisting of Florida Precision Aerospace, Inc., were determined by Management to be sold as soon as practicable. The unaudited pro forma condensed consolidated financial statements have been prepared to include other transaction adjustments to reflect the financial condition and results of operations as if Banner were operating as a public company for all the periods presented. Our historical financial statements included cost allocations from Ecoark as noted below. Management does not believe there are any transaction accounting or autonomous entity adjustments necessary to be included in the unaudited pro forma information presented herein. We have identified four transaction adjustments as noted below. Additionally, we have provided a presentation of management adjustments that we believe are necessary to enhance an understanding of the pro forma effects of the transaction. Banner has included in their historical columns certain operating expenses and other income (expense) from Ecoark that have been allocated to them in the year ended March 31, 2022, which are part of the Condensed Consolidated Statement of Operations for the year ended March 31, 2022. Commencing April 1, 2022, Banner included in their historical financial statements, all expenses that were previously allocated to them. The allocations represented charges incurred by Ecoark for certain corporate, infrastructure and shared services expenses, including legal, human resources, payroll, finance and accounting, employee benefits, insurance, information technology, telecommunications, treasury, and other expenses. Where possible, these charges were allocated based on direct usage, with the remainder allocated on a pro rata basis of headcount, asset, or other allocation methodologies that are considered to be a reasonable reflection of the utilization of services provided or the benefit received by the Company during the periods presented pursuant to SAB Topic 1.B.1. The allocations may not, however, reflect the expense Banner would have incurred as a standalone company for the periods presented. These costs also may not be indicative of the expenses that Banner will incur in the future or would have incurred if Banner had obtained these services from a third party. The unaudited pro forma condensed financial information is for informational purposes only and does not purport to represent what our financial position and results of operations actually would have been had the reverse merger of Banner not occurred, or to project our financial performance for any future period. Our historical financial statements have been derived from our historical accounting records and reflect certain allocation of expenses as noted above. The unaudited pro forma condensed financial information reported below should be read in conjunction with the Management s Discussion and Analysis of Financial Condition and Results of Operations, the historical financial statements and the corresponding notes included elsewhere in this prospectus. Table of Contents NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Transaction Accounting Adjustments: There were no transaction accounting adjustments identified by Management. Autonomous Entity Adjustments: There were no autonomous entity adjustments identified by Management. Other Transaction Adjustments: We anticipate no tax adjustments as a result of the transactions reflected herein. Management Adjustments: Management adjustments are optional to include. Management determined the following items to be significant to enhance the understanding of the Banner business will have on our financial statements. (1) Pursuant to the Employment Agreement with the Company's CEO, Jimmy Galla dated November 15, 2022, the Company agreed to pay Mr. Galla $250,000 annually, and granted 10,000,000 restricted stock units that vest quarterly for 20 consecutive quarters (500,000 per quarter). The Company has expensed $281,250 ($18,750 is included in the historical column) in these restricted stock units for the nine months ended December 31, 2022, and $400,000 for the year ended March 31, 2022. Mr. Galla had no compensation expense for Wolf Energy Services, Inc. other than the $18,750 in stock-based compensation related to the restricted stock units in December 2022, in either of the periods provided herein. We believe there are no other material adjustments that need to be made to the unaudited pro forma condensed financial statements to enhance an understanding of the pro forma effects of the proposed transaction. The adjustments are limited to the effect of such synergies and dis-synergies on the historical financial statements that form the basis for the pro forma statements of operations as if the synergies and dis-synergies existed as of the beginning of the fiscal year presented. The pro forma financial information reflects all Management s Adjustments that are, in the opinion of management, necessary to a fair statement of the pro forma financial information presented. A reconciliation between pro forma net loss and net loss after management adjustments is as follows. The numbers in the table refer to the notes above. For the year ended March 31, 2022: Pro forma net income $ 4,806,042 Adjustment(1) (400,000 ) Net income after management adjustments $ 4,406,042 For the nine months ended December 31, 2022: Pro forma net loss $ (6,291,662 ) Adjustment(1) (281,250 ) Net loss after management adjustments $ (6,572,912 ) Earnings (Loss) Per Share: The pro forma weighted average number of shares outstanding of our common stock used to compute basic earnings per share are as follows for both the nine months ended December 31, 2022 and year ended March 31, 2022. EPS Reconciliations: For the nine months ended December 31, 2022: Historical weighted average shares outstanding 61,253,204 Adjustment to reflect the acquisition of Banner 17,015,128 Pro forma weighted average shares outstanding 78,268,332 For the year ended March 31, 2022: Historical weighted average shares outstanding 51,987,832 Adjustment to reflect the acquisition of Banner 22,280,500 Pro forma weighted average shares outstanding 74,268,332 Table of Contents NOTE 2: REVERSE MERGER In accordance with ASC 805-40-45-1, the consolidated financial statements prepared following a reverse acquisition are issued under the name of the legal parent (Wolf Energy Services Inc.) but described in the notes to the financial statements as a continuation of the financial statements of the legal subsidiary (Banner), with one adjustment, which is to retroactively adjust the accounting acquirer s legal capital to reflect the legal capital of the accounting acquiree. That adjustment is required to reflect the capital of the legal parent. Comparative information presented in the consolidated financial statements also is retroactively adjusted to reflect the legal capital of the legal parent. Under ASC 805-40-45-2, the consolidated financial statements represent the continuation of the legal subsidiary except for the capital structure, as follows: a. The assets and liabilities of the legal subsidiary recognized and measured at their precombination carrying amounts; b. The assets and liabilities of the legal parent recognized and measured in accordance with the guidance in this topic applicable to business combinations (ASC 805); c. The retained earnings and other equity balances of the legal subsidiary before the business combination; d. The amount recognized as issued equity interests in the consolidated financial statements determined by adding the issued equity interest of the legal subsidiary outstanding immediately before the business combination to the fair value of the legal parent determined in accordance with the guidance in ASC 805 applicable to business combinations. However, the equity structure reflects the equity structure of the legal parent, including the equity interests the legal parent issued to affect the combination. Accordingly, the equity structure of the legal subsidiary is restated using the exchange ratio established in the acquisition agreement to reflect the number of shares of the legal parent issued in the reverse acquisition. Wolf Energy Services Inc, (formerly Enviro Technologies U.S., Inc.) issued Ecoark Holdings, Inc. 51,987,832 shares of common stock valued at $5,328,753 in the reverse merger transaction. On September 7, 2022, the Company completed the reverse merger transaction of Banner Midstream. As a result of this transaction, which is accounted for as a reverse merger, Banner is a wholly owned subsidiary of Wolf Energy Services Inc. (formerly Enviro Technologies U.S., Inc). In accordance with the terms of the Merger, at the effective time of the Merger, each outstanding share of the common stock of Banner was acquired by the Company in consideration of 51,987,832 shares of Common Stock of the Company. This exchange of shares and the resulting controlling ownership of Banner constitutes a reverse acquisition resulting in a recapitalization of Banner and purchase accounting being applied to Wolf Energy Services Inc. (formerly Enviro Technologies U.S., Inc.) under ASC 805 due to Banner being the accounting acquirer and Wolf Energy Services, Inc. (formerly Enviro Technologies U.S., Inc.) being deemed an acquired business as they were not a shell corporation. This requires financial reporting from the Merger close date forward to reflect only the historic consolidated results of Banner and to include the consolidated results for Wolf Energy Services (formerly Enviro Technologies U.S., Inc.) from September 7, 2022, forward. The primary reason Banner consummated the Merger with Wolf Energy Services Inc. (formerly Enviro Technologies U.S., Inc.) was the opportunity for the Banner subsidiary previously wholly owned by Ecoark to immediately become a standalone public company without the process of doing its own initial public offering, affording it the opportunity to raise capital more quickly. Following the closing of the Merger, management of the Company determined to discontinue the historical and existing business of Wolf Energy Services (formerly Enviro Technologies U.S., Inc.) The estimated allocation of the purchase price of the assets acquired and liabilities assumed for the acquisition by Banner of Wolf Energy Services Inc. (formerly Enviro Technologies U.S., Inc.) via the reverse acquisition are set forth below in accordance with the guidance under ASC 805: Purchase Price Allocation of Wolf Energy Services, Inc. (formerly Enviro Technologies U.S., Inc.) Current assets $124,760 Fixed assets 6,912 Right of use assets 128,755 Other non-current assets 10,000 Notes payable (436,471) Lease liabilities (128,755) Accounts payable and accrued expenses (1,034,594) Goodwill 3,613,144 Purchase price $2,283,751 This allocation is based on management s estimated fair value of the Wolf Energy Services (formerly Enviro Technologies U.S., Inc.) assets and liabilities as of September 7, 2022, utilizing the guidance in ASC 820-10-35 which included the measurement based on a known level one input regarding the applicable share price as well as the level of activity in the Company. Wolf Energy Services Inc. (formerly Enviro Technologies U.S., Inc.) net liabilities were derived from a total value of $2,283,751, based on 22,280,500 shares of common stock on September 7, 2022, and the price of $0.10 per share which was a price on September 6, 2022. The Company impaired the goodwill effective with the Exchange on September 7, 2022, as they had decided at that time to sell the FPA business. The following pro forma balance sheet reflects the details of the March 31, 2022 consolidated balance sheet as presented in the Company s financial statements as a result of the reverse merger. F- Table of Contents THE SPIN-OFF Background Ecoark plans to effect a Spin-Off, which will be a distribution of the 51,987,823 shares of Wolf Energy common stock held by it, which are referred to herein as the Spin-Off Shares, pursuant to this Prospectus. The Ecoark Board has fixed the Record Date for the Spin-Off at September 30, 2022. The ratio, based on 51,987,832 Spin-Off Shares divided by the 32,614,151 shares of Ecoark common stock outstanding and underlying the outstanding Ecoark convertible preferred stock (without taking into account the beneficial ownership limitations in the Ecoark preferred stock) as of the Record Date, is 1.594 Wolf Energy Spin-Off Shares per Ecoark share of common stock. The estimated distribution date for the Spin-Off is June 30, 2023 (the Distribution Date ). However, because of a 4.99% beneficial ownership blocker (the Blocker ) applicable to the holder of the Ecoark convertible preferred stock, not all of the shares that otherwise would have been distributable will be issued on the Distribution Date; the balance will be distributed to the Ecoark preferred stockholder in the future in compliance with the Blocker. See below under Number of Shares Ecoark Stockholders Will Receive. Completion of the Spin-Off is subject to the satisfaction, or the Ecoark Board s waiver, to the extent permitted by law, of a number of conditions. In addition, Ecoark may at any time, until the distribution, decide to abandon the distribution or modify or change the terms of the distribution. For a more detailed discussion, see below under Conditions to the Spin-Off. We have not entered into any agreements with Ecoark that would govern the relationship between the Company and Ecoark after the Spin-Off. Reasons for the Spin-Off The Ecoark Board has reviewed various factors, including the company s portfolio and capital allocation options with the goal of enhancing long-term stockholder value and determined that the Spin-Off is in the best interests of Ecoark and its stockholders. The potential benefits considered by the Ecoark Board in making the determination to consummate the Spin-Off include the following: Greater Focus and Enhanced Operational Agility. The Spin-Off will permit both us and Ecoark and the respective management teams to more effectively focus on pursuing their own distinct operating priorities and strategies. Separate Capital Structures and Allocation of Financial Resources. Each of Ecoark and Wolf Energy has different cash flow structures and capital requirements. The separation will permit each company to allocate its financial resources to meet the unique needs of its businesses and intensify the focus on its distinct operating and strategic priorities. The separation will also give each business its own capital structure and allow it to manage capital allocation and adopt distinct capital return strategies. Further, the separation will eliminate internal competition for capital between the two businesses which are under common management control and enable each business to implement a capital structure tailored to its strategy and business needs. Improved Alignment of Management Incentives and Performance. The separation will allow each company to more effectively recruit, retain and motivate employees, including through the use of equity-based compensation that more closely reflects and aligns management and employee incentives with specific business objectives, financial goals and business attributes. To the extent that the separate equity awards are more attractively valued, this would further benefit each company. Enhanced Strategic Opportunities. The separation will provide each of Ecoark and Wolf Energy with its own capital structure and asset base that can be used to facilitate capital raising and to pursue potential acquisitions, strategic transactions and other opportunities that are more closely aligned with each company s strategic goals and expected growth opportunities. To the extent that the separate attributes are more attractively valued and aligned with the respective goals of each company, this would further increase these benefits to each company. Changes to Ecoark. Ecoark has publicly disclosed that it intends to spin-off each of its operating subsidiaries, although it may not spin-off of Agora Digital Holdings, Inc., which previously was a Bitcoin mining company until it ceased operations when the Bitcoin market crashed earlier in 2022, or Zest Labs, Inc. which holds technology and intellectual property rights which are the subject of ongoing litigation. Either prior to or after the Distribution Date, Ecoark expects to enter into a reverse merger with Ault Alliance, Inc. [NYSE: AULT] ( Ault ). On June 8, 2022, Ecoark raised $12 million from the sale of convertible preferred stock to a subsidiary of Ault. Ault is receiving 5,749,810 shares from the Spin-Off subject to the effect of the Blocker. Clearer Investment Identities. The separation will allow investors to more clearly understand the separate business models, financial profiles and investment identities of the two companies and to invest in each based on a better appreciation of these characteristics. Each company may appeal to different types of investors who may differ from Ecoark s current investors. Following the separation, the separate management teams of each of the two companies are expected to be better positioned to implement goals and evaluate strategic opportunities in light of the expectations of the specific investors in that individual company s market. Table of Contents PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS MARCH 31, 2022 Historical Wolf Banner Other Other Energy Midstream Transaction Transaction ASSETS Services Inc. Corp. Adjustments Adjustments Pro Forma (1) (2) CURRENT ASSETS Cash $10,879 $99,452 $- $(10,879) $99,452 Accounts receivable 6,397 164,388 - (6,397) 164,388 Prepaid expenses and other current assets 2,679 382,373 - (2,679) 382,373 Inventory 114,614 - - (114,614) - Current assets held for sale - - - - - Total current assets 134,569 646,213 - (134,569) 646,213 NON-CURRENT ASSETS Property and equipment, net 7,119 2,506,738 - (7,119) 2,506,738 Intangible assets, net - 1,716,331 - - 1,716,331 Right of use asset - financing leases - 301,126 - - 301,126 Right of use asset - operating leases 141,388 64,094 - (141,388) 64,094 Other assets 10,143 - - (10,143) - Goodwill - 4,900,873 - - 4,900,873 Non-current assets held for sale - - - - - Total non-current assets 158,650 9,489,162 - (158,650) 9,489,162 TOTAL ASSETS $293,219 $10,135,375 $- $(293,219) $10,135,375 LIABILITIES AND STOCKHOLDERS EQUITY CURRENT LIABILITIES Accounts payable and accrued expenses $358,859 $373,697 $- $(358,859) $373,697 Accrued expenses - related party 840,565 1,116,698 - (840,565) 1,116,698 Current portion of lease liability - financing leases - 145,174 - - 145,174 Current portion of lease liability - operating leases 51,835 45,004 - (51,835) 45,004 Current portion of long-term debt - 572,644 - - 572,644 Due to Ecoark Holdings - - - - - Loans payable, current portion 114,155 - - (114,155) - Loans payable - related parties 53,000 - - (53,000) - Current liabilities held for sale - - - - - Total current liabilities 1,418,414 2,253,217 - (1,418,414) 2,253,217 NON-CURRENT LIABILITIES Long-term debt, net of current portion - 67,511 - - 67,511 Loan payable, net of current portion 147,816 - - (147,816) - Lease liability - financing leases, net of current portion - 149,884 - - 149,884 Lease liability - operating leases, net of current portion 89,553 22,519 - (89,553) 22,519 Non-current liabilities held for sale - - - - - 237,369 239,914 - (237,369) 239,914 Total liabilities 1,655,783 2,493,131 - (1,655,783) 2,493,131 STOCKHOLDERS EQUITY (DEFICIT) Preferred stock, $0.001 par value - - - - - Common stock, $0.001 par value 22,288 2,228 27,472 - 51,988 Additional paid-in capital 15,373,836 10,398,789 (16,786,160) 1,362,564 10,349,029 Accumulated deficit (16,758,688) (2,758,773) 16,758,688 - (2,758,773) Total stockholders equity (deficit) (1,362,564) 7,642,244 - 1,362,564 7,642,244 TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $293,219 $10,135,375 $- $(293,219) $10,135,375 Adjustments: (1) To reflect the retained earnings and other equity balances of Banner Midstream Corp., recombination with Wolf Energy Services Inc. (2) To reclassify assets held for sale of FPA. F- Table of Contents When and How You Will Receive Our Shares Ecoark will distribute to its common and preferred stockholders, as a pro rata dividend, 1.594 shares of our common stock for every share of Ecoark common stock outstanding on a fully diluted basis as of September 30, 2022, the Record Date for the Spin-Off. Prior to the Spin-Off, Ecoark will deliver the Spin-Off Shares of our common stock to the distribution agent. Worldwide Stock Transfer, LLC will serve as distribution agent in connection with the distribution and as transfer agent and registrar for our common stock. Because the 51,987,832 shares of our common stock is in excess of the number of shares of Ecoark common stock entitled to receive our shares on a fully diluted basis, Ecoark stockholders will receive our shares at a ratio of 1.594. However, as more fully described below under Treatment of Fractional Shares, any fractional shares that would have otherwise been distributable to Ecoark stockholders in the Spin-Off by virtue of that ratio will instead be rounded down and may be returned to the status of unauthorized and unissued shares of our common stock, or may be held by us as treasury shares, as may be determined by our Board. If you own Ecoark common stock or preferred stock as of the close of business on the Record Date, the shares of our common stock that you are entitled to receive in the Spin-Off will be issued to your account as follows: Registered stockholders. If you own your shares of Ecoark common stock or preferred stock directly through Ecoark s transfer agent, you are a registered stockholder. In this case, the distribution agent will credit the shares of our common stock you receive in the distribution by way of direct registration in book-entry form to a new account with our transfer agent. Registration in book-entry form refers to a method of recording share ownership where no physical stock certificates are issued to stockholders, as is the case in the distribution. You will be able to access information regarding your book-entry account for our shares at ecoark.info or by calling 1-800-762-7293. Commencing on or shortly after the Distribution Date, the distribution agent will mail to you an account statement that indicates the number of shares of our common stock that have been registered in book-entry form in your name. We expect it will take the distribution agent up to two weeks after the Distribution Date to complete the distribution of the shares of our common stock and mail statements of holding to all registered stockholders. Street name or beneficial stockholders. If you own your shares of Ecoark common stock or preferred stock beneficially through a bank, broker or other nominee, the bank, broker or other nominee holds the shares in street name and records your ownership on its books. In this case, your bank, broker or other nominee will credit your account with the shares of our common stock that you receive in the distribution on or shortly after the Distribution Date. We encourage you to contact your bank, broker or other nominee if you have any questions concerning the mechanics of having shares held in street name. If you sell any of your shares of Ecoark stock on or before the Distribution Date, the buyer of those shares may in some circumstances be entitled to receive the shares of our common stock to be distributed in respect of the Ecoark shares you sold. See Trading Prior to the Distribution Date for more information. We are not asking Ecoark stockholders to take any action in connection with the Spin-Off. We are not asking you for a proxy and request that you not send us a proxy. We are also not asking you to make any payment or surrender or exchange any of your shares of Ecoark common stock or preferred stock for shares of our common stock. The number of outstanding shares of Ecoark common stock or preferred stock will not change as a result of the Spin-Off. Number of Shares Ecoark Stockholders Will Receive On the Distribution Date, each record holder of Ecoark common stock will be entitled to receive 1.594 shares of our common stock for every share of Ecoark common stock held as of the Record Date. Table of Contents With respect to the Ecoark convertible preferred stockholder, because of the 4.99% beneficial ownership limitation contained in the Certificate of Designation for that series of preferred stock, the holder will initially only receive approximately 2,897,542 shares of our common stock, and the remaining approximately 4,176,902 shares of our common stock to which it is or may become entitled will be held by us or the distribution agent in abeyance until the earlier to occur of (i) such time as the preferred stockholder s receipt of all or any portion of those shares would not cause it to exceed the 4.99% beneficial ownership limitation, in which case the additional shares will not cause the holder to exceed that percentage, and (ii) such time as the preferred stockholder as provided us and Ecoark with 61 days notice of its intent to increase its beneficial ownership to up to 9.99%, in which case the additional shares receivable by the holder on or after the end of the 61 day-period will not cause the holder exceed that increased percentage. Treatment of Fractional Shares Because the 51,987,832 Spin-Off Shares of our common stock issuable to Ecoark upon conversion of the Series A is in excess of the number of shares of Ecoark common stockholders are entitled to receive on a fully diluted basis, Ecoark stockholders will receive our shares at a ratio of 1.594-for-one. By virtue of this ratio, some or most of the Spin-Off Shares would have needed to be divided into fractions to affect that Spin-Off ratio for some of the Ecoark stockholders. However, inside of dividing and distributing fractional Spin-Off Shares, any fractions of Spin-Off Shares that would have otherwise been distributable to Ecoark stockholders in the Spin-Off by virtue of that ratio will instead be rounded down and may be returned to the status of unauthorized and unissued shares of our common stock, or may be held by us as treasury shares, as may be determined by our Board. Ecoark has informed us that in lieu of distributing fractional shares, it intends to pay each Ecoark stockholder who would have otherwise received the fractions of shares a cash amount equal to the product of (i) $0.10 multiplied by (B) the fraction of a share that each such Ecoark stockholder would have otherwise received in the Spin-Off. Results of the Spin-Off After the Spin-Off, we will continue as an independent, publicly traded company. We will continue to have approximately 78,268,332 shares of our common stock outstanding. This amount does not give effect to 10,000,000 RSUs, options to purchase 40,000 shares of common stock and 56,371,000 shares issuable upon conversion of convertible promissory notes in the aggregate principal amounts of $845,565 held by our former directors. Following the distribution, the equity value of Ecoark will no longer reflect the value of the Wolf Energy capital stock it held prior to the Spin-Off, including any value that may have been ascribed to that amount based on the Company s business. Although Ecoark believes that the Spin-Off offers its stockholders greater long-term value, there can be no assurance that the combined trading prices of the Ecoark common stock and the Company s common will equal or exceed what the trading price of Ecoark common stock would have been in absence of the Spin-Off. Trading Prior to the Distribution Date It is possible that a when-issued market in our common stock may develop prior to the Distribution Date. When-issued trading refers to a sale or purchase made conditionally on or before the Distribution Date because the securities of the spun-off entity have not yet been distributed. If you own shares of Ecoark common stock or preferred stock at the close of business on the Record Date, you will be entitled to receive shares of our common stock in the Distribution. You may trade this entitlement to receive our Shares, without the shares of Ecoark common stock or preferred stock you own, on the when-issued market. We expect when-issued trades of our common stock to settle within two trading days after the Distribution Date. On the first trading day following the Distribution Date, we expect that any when-issued trading of our common stock will end and regular-way trading will begin. We also anticipate that if a when-issued market develops prior to the Distribution Date, there may be two markets in Ecoark common stock: a regular-way market and an ex-distribution market. Shares of Ecoark common stock that trade on the regular-way market will trade with an entitlement to receive shares of our common stock in the distribution. Shares that trade on the ex-distribution market will trade without an entitlement to receive shares of our common stock in the distribution. Therefore, if you sell shares of Ecoark common stock in the regular-way market up to and including the Distribution Date, you will be selling your right to receive shares of our common stock in the distribution. However, if you own shares of Ecoark common stock at the close of business on the Record Date and sell those shares on the ex-distribution market up to and including the Distribution Date, you will still receive the shares of our common stock that you would otherwise be entitled to receive in the distribution. Table of Contents If when-issued trading occurs, the quotation for our common stock is expected to be under a trading symbol different from our regular-way trading symbol. We will announce our when-issued trading symbol when and if it becomes available. If the Spin-Off does not occur, all when-issued trading will be null and void. Conditions to the Spin-Off We expect that the Spin-Off will be effective on the Distribution Date (although there may be a delay in the delivery of the spun-off shares to Ecoark stockholders), provided that the following conditions shall have been satisfied or waived by the Ecoark Board (if any such waiver permitted by law): The Ecoark Board shall have approved the Distribution and not withdrawn such approval and shall have declared the dividend of our common stock to Ecoark stockholders. The Registration Statement, of which this Prospectus is a part, shall be effective under the Securities Act, and no stop order suspending the effectiveness of the Registration Statement shall be in effect and no proceedings for that purpose shall be pending before or threatened by the SEC. No order, injunction or decree issued by any governmental authority of competent jurisdiction or other legal restraint or prohibition preventing consummation of the distribution shall be in effect, and no other event outside the control of Ecoark shall have occurred or failed to occur that prevents the consummation of the distribution. No other events or developments shall have occurred prior to the distribution that, in the judgment of the Ecoark Board, would result in the distribution having a material adverse effect on Ecoark or its stockholders. Any of the above conditions may be waived by the Ecoark Board to the extent such waiver is permitted by law. If the Ecoark Board waives any condition prior to the effective date of this Registration Statement, of which the Prospectus forms a part, or change the terms of the Distribution, and the result of such waiver or change is material to Ecoark stockholders, we will file an amendment to the Registration Statement to revise the disclosure in this Prospectus accordingly. In the event that Ecoark waives a condition or changes the terms of the distribution after the Registration Statement becomes effective and such waiver or change is material to Ecoark stockholders, we expect Ecoark would communicate such waiver or change to Ecoark s stockholders by filing a Current Report on Form 8-K with the SEC and/or a press release describing the waiver or change. The fulfillment of the above conditions will not create any obligation on Ecoark s part to complete the Spin-Off. We are not aware of any material federal, foreign or state regulatory requirements with which we must comply, other than SEC rules and regulations, or any material approvals that we must obtain, in connection with the distribution. Ecoark may, at any time until the distribution, decide to abandon the distribution or modify or change the terms of the distribution. Consequences to U.S. Holders of Ecoark Capital Stock The following is a summary of the material U.S. federal income tax consequences to holders of Ecoark capital stock in connection with their receipt of shares of our common stock in the Spin-Off. This summary is based on the Internal Revenue Code of 1986 (the Code ), the Treasury Regulations promulgated under the Code and judicial and administrative interpretations of those laws, in each case as in effect and available as of the date of this Prospectus and all of which are subject to change at any time, possibly with retroactive effect. Any such change could affect the tax consequences described below. This summary is limited to holders of Ecoark capital stock that are U.S. Holders, as defined immediately below, that hold their Ecoark capital stock as a capital asset. A U.S. Holder is a beneficial owner of Ecoark capital stock that is, for U.S. federal income tax purposes: an individual who is a citizen or a resident of the United States; a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized under the laws of the United States or any state thereof or the District of Columbia; Table of Contents an estate the income of which is subject to U.S. federal income taxation regardless of its source; or a trust if (1) a court within the United States is able to exercise primary jurisdiction over its administration and one or more U.S. persons have the authority to control all of its substantial decisions or (2) in the case of a trust that was treated as a domestic trust under law in effect before 1997, a valid election is in place under applicable Treasury Regulations. This summary is for general information only and is not tax advice. It does not discuss all tax considerations that may be relevant to stockholders in light of their particular circumstances, nor does it address the consequences to stockholders subject to special treatment under the U.S. federal income tax laws, such as: dealers or traders in securities or currencies; tax-exempt entities; banks, financial institutions or insurance companies; real estate investment trusts, regulated investment companies or grantor trusts; persons who acquired Ecoark capital stock pursuant to the exercise of employee stock options or otherwise as compensation; stockholders who own, or are deemed to own, 10% or more, by voting power or value, of Ecoark equity; stockholders owning Ecoark capital stock as part of a position in a straddle or as part of a hedging, conversion, synthetic security, integrated investment, constructive sale transaction or other risk reduction transaction for U.S. federal income tax purposes; persons who are subject to the alternative minimum tax; persons whose functional currency is not the U.S. dollar; certain former citizens or long-term residents of the United States; persons who are subject to special accounting rules under Section 451(b) of the Code; persons who own Ecoark capital stock through partnerships or other pass-through entities; or persons who hold Ecoark capital stock through a tax-qualified retirement plan. This summary is not a complete analysis or description of all potential U.S. federal income tax consequences of the distribution. It does not address any tax consequences arising under the Medicare tax on net investment income or the Foreign Account Tax Compliance Act (including the Treasury Regulations promulgated thereunder and intergovernmental agreements entered into pursuant thereto or in connection therewith). In addition, it does not address any U.S. state or local or foreign tax consequences or any estate, gift or other non-income tax consequences of the distribution. If a partnership, or any other entity treated as a partnership for U.S. federal income tax purposes, holds Ecoark capital stock, the tax treatment of a partner in that partnership will generally depend on the status of the partner and the activities of the partnership. Such a partner or partnership is urged to consult its own tax advisor as to its tax consequences. EACH HOLDER OF ECOARK CAPITAL STOCK IS URGED TO CONSULT ITS OWN TAX ADVISOR WITH RESPECT TO THE U.S. FEDERAL, STATE AND LOCAL AND FOREIGN TAX CONSEQUENCES OF THE DISTRIBUTION. General Ecoark anticipates that the distribution of the Spin-Off Shares and any cash received in lieu of a fractional share will constitute a taxable transaction for U.S. federal income tax purposes. Neither the Company nor Ecoark expect to obtain a private letter ruling from the IRS, or an opinion of counsel, on whether the distribution will qualify for non-recognition of gain or loss under Section 355 and related provisions of the Code or any other provisions of the Code or Treasury Regulations. Table of Contents If the distribution is determined to be a taxable event, each U.S. Holder who receives our common stock in the distribution would generally be treated as receiving a distribution in an amount equal to the fair market value of our common stock received, which would generally result in: a taxable dividend to the U.S. Holder to the extent of that U.S. Holder s pro rata share of Ecoark s current or accumulated earnings and profits; a reduction in the U.S. Holder s basis (but not below zero) in Ecoark capital stock to the extent the amount received exceeds the shareholder s share of Ecoark earnings and profits; and a taxable gain from the exchange of Ecoark capital stock to the extent the amount received exceeds the sum of the U.S. Holder s share of Ecoark s earnings and profits and the U.S. Holder s basis in its Ecoark capital stock. Further, if a U.S. Holder receives cash in lieu of a fractional share of common stock as part of the Spin-Off, the U.S. Holder will be treated as though it first received a distribution of the fractional share in the Spin-Off and then sold it for the amount of cash actually received. Provided the fractional share is considered to be held as a capital asset on the date of the Spin-Off, the U.S. Holder will generally recognize capital gain or loss measured by the difference between the cash received for such fractional share and the U.S. Holder s tax basis in that fractional share, as determined above. Such capital gain or loss will be long-term capital gain or loss if the U.S. Holder s holding period for the Ecoark capital stock is more than one year on the date of the Spin-Off. U.S. Holders that have acquired different blocks of Ecoark capital stock at different times or at different prices are urged to consult their tax advisors regarding the allocation of their aggregate adjusted tax basis among, and the holding period of, shares of our common stock distributed with respect to such blocks of Ecoark capital stock. Alternatively, if the distribution were determined to qualify as a tax-free distribution, then subject to the qualifications and limitations set forth herein, for U.S. federal income tax purposes: no gain or loss will be recognized by, or be includible in the income of, a U.S. Holder as a result of the distribution, except with respect to any cash received in lieu of fractional shares; the aggregate tax basis of the Ecoark capital stock and our capital stock held by each U.S. Holder immediately after the distribution will be the same as the aggregate tax basis of the Ecoark capital stock held by the U.S. Holder immediately before the distribution, allocated between the Ecoark capital stock and our common stock in proportion to their relative fair market values on the date of the distribution (subject to reduction upon the deemed sale of any fractional shares); and the holding period of our common stock received by each U.S. Holder will include the holding period of their Ecoark capital stock, provided that such Ecoark capital stock is held as a capital asset on the date of the distribution. Information Reporting Treasury Regulations require each Ecoark shareholder that, immediately before the distribution, owned 5% or more (by vote or value) of the total outstanding stock of Ecoark or stockholders whose basis in their Ecoark capital stock equals or exceeds $1,000,000 to attach to such shareholder s U.S. federal income tax return for the year in which the distribution occurs a statement setting forth certain information related to the distribution. Consequences to Ecoark The following is a summary of the material U.S. federal income tax consequences to Ecoark in connection with the Spin-Off that may be relevant to holders of Ecoark capital stock. If the distribution is determined not to qualify for non-recognition of gain or loss under Section 355 and related provisions of the Code, then Ecoark will recognize gain equal to the excess of the fair market value of our common stock distributed to Ecoark stockholders over Ecoark s tax basis in our common stock. If the distribution were to qualify for non-recognition of gain or loss under Section 355 and related provisions of the Code, no gain or loss would be recognized by Ecoark as a result of the distribution (other than income or gain arising from any imputed income or other adjustment to Ecoark, us or our respective subsidiaries if and to the extent that the Spin-Off is determined to have terms that are not at arm s length). Table of Contents As discussed above, Ecoark has not received a private letter ruling from the IRS or an opinion of counsel concerning the tax consequences of the distribution. BUSINESS Pinnacle Frac Through Pinnacle Frac, the Company provides transportation of frac sand and logistics services to major hydraulic fracturing and drilling operations. Our transportation services entail using third party drivers who assist in transporting sand and related materials to customers locations for the customers hydraulic fracturing, or fracking. The logistics services Pinnacle Frac provides for its customers fracking and drilling enterprises, include the operation of a 24/7 dispatch service center based in Texas through which we dispatch the trucks for hauling frac sand and related equipment. Pinnacle Frac uses independent third-party owner-operators of trucks to service its customers in their fracking operations by transporting materials, mainly frac sand. Our transportation and logistics services operations are primarily centered in the Southern United States, although we also occasionally service fracking operations in the Northeastern United States. Pinnacle Frac uses a third party s licensed software known as Sandbox to monitor and execute its transportation and logistics operations. Use of this service offers the following benefits for customers and other industry participants: Reduced road traffic. Reduced personnel on frac site. Eliminate silica dust particles. By operating a call center and using specialized licensed software to meet customers demand for timely delivery and movement of fracking materials, Pinnacle Frac facilitates customers fracking operations through the life cycle of the drilling process. Business Model With time, Pinnacle has developed and plans to continue to develop the following business characteristics that we believe enable us to operate effectively and efficiently: Focused Business. We employ a focused business model that enables us to maintain a relatively narrow scope in terms of both the services we offer and our geographic reach. Our central location is in Kilgore, Texas, within relatively close proximity to multiple states in which a large proportion of U.S. oil and gas basins and drilling activities takes place, allows us to strategically deploy our contractors to meet customer demand and plan routes in a manner that efficiently manages limited time and resources. While our limited focus and scope limits our diversification and exposes us to potential risk, management believes at this stage of our business such a structure and focus also enhances our ability to meet our customers needs and maintain efficient and sustainable sources of revenue. This model is supplemented by our relatively low employee count, as we instead rely on outside third-party owner-operate truck drivers which are independent contractors to assist us in performing services. Long-Standing Relationships. As mentioned above, we rely on a network of independent contractors to provide quality and timely transportation services to our customers. We enter into contracts with these individuals what enable us to promptly call upon them to perform work when needed. Similarly, we have established long-term relationships with oil and gas companies and adjacent services providers who consistently give us revenue-producing work. We believe these relationships will enable us to create a brand and reputation as a reliable service provider who can consistently provide quality, compliant and timely transportation and delivery services. Because third party drivers supply the vehicles and equipment used to perform the services, we also believe this arrangement causes us to be relatively insulated from supply chain issues when compared to companies who depend on a steady supply of materials and equipment from that they purchase or lease directly. Any issues with shortages on the part of our contractors are frequently solved by the volume of available truck owner-drivers we have available to deploy. Table of Contents Industry Knowledge and Systems. Our personnel have gained valuable experience in operating an oil and gas transportation and logistics company, including an understanding of customers operations in the hydraulic fracturing and the energy industry and the roles we play within those processes. We have also developed an understanding of the transportation infrastructure we and our contractors use in the territory in which our operations are focused. Similarly, the certification and compliances processes impacting the transportation and oil and gas businesses in which we are involved are complex and require constant monitoring and awareness of the requirements and ramifications. Finally, our call center and technology systems that we use to provide these services as described elsewhere in this prospectus are an integral part of our operations and enable us to monitor and supply punctual and complete delivery services while servicing multiple clients and projects throughout the territories in which we provide those services. Business Strategy Our principal business objective is to deliver high-quality services that help enable our customers to unlock valuable sources of energy for the American people and economy. By contributing to our customers success, as well as those of the oil and gas drilling activities assisted thereby, we in turn position our Company to generate revenue and create opportunity for growth. We believe that by successfully deploying this strategy, we can establish and sustainable business model and enhance stockholder value. We maintain a focus on developing, managing, and growing mutually rewarding relationships with our current and prospective customers in the oil and gas space as well as our contractors and other personnel, and maintaining and improving upon cost-effective and efficient systems and customer-centric solutions. We plan to achieve these objectives through: developing and expanding our relationships with existing and new customers; continuing to focus on providing consistent quality, timing and safety performance; investing further in enhancing efficiencies and strategic growth initiatives; generating revenue organically and raising capital as needed to sustain and grow our operations; and evaluate potential opportunities to expand or enter into strategic alliances and transaction that strengthen our capabilities, increase our geographic scope and create stockholder value. As described above, we believe our focused business model, concentrating efforts on a single step in the oil and gas exploration and drilling process, limiting our scope to a small number of connected states, and nurturing existing operational relationships, positions us well for organic growth within an industry characterized with consistent demand, we also face challenges for some of the same reasons, as described in more detail elsewhere in this prospectus, particularly under

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+RISK FACTORS Investing in our securities involves a high degree of risk. You should consider carefully the risks described below, together with all of the other information included or incorporated by reference in this prospectus, including the risks and uncertainties discussed under Risk Factors in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, which has been filed with the SEC and is incorporated by reference in this prospectus, as well as any updates thereto contained in subsequent filings with the SEC or any free writing prospectus, before deciding whether to purchase our securities in this offering. All of these risk factors are incorporated herein in their entirety. The risks described below and incorporated by reference are material risks currently known, expected or reasonably foreseeable by us. However, 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, operating results, prospects or financial condition. If any of these risks actually materialize, our business, prospects, financial condition, and results of operations could be seriously harmed. This could cause the trading price of our common stock and the value of the warrants to decline, resulting in a loss of all or part of your investment. Risks Relating to This Offering If you purchase our securities in this offering, you may incur immediate and substantial dilution in the book value of your shares. The combined public offering price per share of our common stock and accompanying warrants may be substantially higher than the net tangible book value per share of our common stock immediately prior to the offering. After giving effect to the assumed sale of 1,457,194 shares of our common stock and accompanying warrants in this offering, at an assumed combined public offering price of $5.49 per share and accompanying warrant (the last reported sale price of our common stock on The Nasdaq Capital Market on May 18, 2023), and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us and attributing no value to the warrants sold in this offering, purchasers of our common stock in this offering will incur immediate dilution of $1.00 per share in the net tangible book value of the common stock they acquire. In the event that you exercise your warrants, you may experience additional dilution to the extent that the exercise price of the warrants is higher than the tangible book value per share of our common stock. For a further description of the dilution that investors in this offering may experience, see Dilution. In addition, to the extent that outstanding stock options or warrants have been or may be exercised or other shares issued, you may experience further dilution. We have broad discretion in the use of the net proceeds we receive from this offering and may not use them effectively. Our management will have broad discretion in the application of the net proceeds we receive in this offering, 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 our management is using the net proceeds appropriately. Because of the number and variability of factors that will determine our use of our 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 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 short-term, investment-grade, interest-bearing securities. Future sales of substantial amounts of our common stock could adversely affect the market price of our common stock. We may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. If additional capital is raised through Table of Contents the sale of equity or convertible debt securities, or perceptions that those sales could occur, the issuance of those securities could result in further dilution to investors purchasing our common stock in this offering or result in downward pressure on the price of our common stock, and our ability to raise capital in the future. Holders of our warrants and Pre-Funded Warrants will have no rights as a common stockholder until they acquire our common stock. Until you acquire shares of our common stock upon exercise of your warrants or Pre-Funded Warrants, you will have no rights with respect to shares of our common stock issuable upon exercise of your warrants or Pre-Funded Warrants. Upon exercise of your warrants or Pre-Funded Warrants, you 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. The warrants may not have any value. Each warrant will have an exercise price of not less than 100% of the last reported sale price of our common stock as of the close of the trading day immediately preceding the pricing of this offering and will expire on the fifth anniversary of the date they first become exercisable. In the event our common stock price does not exceed the exercise price of the warrants during the period when the warrants are exercisable, the warrants may not have any value. There is no public market for the warrants to purchase shares of our common stock or Pre-Funded Warrants being offered in this offering. There is no established public trading market for the warrants or Pre-Funded Warrants being offered in this offering, and we do not expect a market to develop. In addition, we do not intend to apply to list the warrants or Pre-Funded Warrants on any national securities exchange or other nationally recognized trading system, including The Nasdaq Capital Market. Without an active trading market, the liquidity of the warrants and Pre-Funded Warrants will be limited. There is substantial doubt about our ability to continue as a going concern. Even if we complete this offering, we will need to raise additional capital to fund our operations in the future. Based on our existing resources prior to this offering, we expect that our resources will only be sufficient to fund our planned operations and expenditures into the third quarter of 2023. If we were to receive net proceeds of $6.8 million from this offering, we believe that the net proceeds from this offering, together with our existing cash, cash equivalents and short-term investments, would be sufficient to fund our planned operations through the end of 2023. If we were to receive net proceeds of $4.9 million from this offering, we believe that the net proceeds from this offering, together with our existing cash, cash equivalents and short-term investments, would be sufficient to fund our planned operations through the end of October 2023. In addition, potentially changing circumstances may also result in the depletion of our capital resources more rapidly than we currently anticipate. These circumstances raise substantial doubt about our ability to continue as a going concern. Management intends to continue its efforts to contain costs and to raise additional capital until we can generate sufficient cash from commercial sales to support operations, if ever. Until we can generate significant cash from operations, including product and assay revenues, we expect to continue to fund our operations with the proceeds from offerings of our equity securities or debt, or transactions involving product development, technology licensing or collaboration. We can provide no assurances that any sources of a sufficient amount of financing will be available to us on favorable terms, if at all. General market conditions resulting from high inflation, high interest rates, global supply chain issues, the Russia-Ukraine conflict, COVID-19, bank failures, general economic uncertainty and other macroeconomic factors, as well as market conditions affecting companies in the life sciences industry in general, may make it difficult for us to obtain financing from the capital markets on attractive terms, or at all. Failure to raise additional capital in sufficient amounts when needed would significantly impact our ability to continue as a going concern. The actual amount of funds that we will need and Table of Contents the timing of any such investment will be determined by many factors, some of which are beyond our control. To fund our current and planned operations in the short- and long-term, we may seek to raise additional capital through public or private equity offerings, debt financings, borrowings or strategic partnerships coupled with an investment in our company or a combination thereof. If we raise additional funds through the issuance of convertible debt securities, or other debt securities, these securities could be secured and could have rights senior to those of our common stock. In addition, any new debt incurred by us could impose covenants that restrict our operations. The issuance of any new equity securities will also dilute the interest of our current stockholders. Given the risks associated with our business, including our unprofitable operating history and our ability or inability to develop additional assays, and the current volatility in the equity markets, additional capital may not be available when needed on acceptable terms, or at all. There is no assurance that we will be able to raise adequate funds when needed or on favorable terms. If adequate funds are not available when needed, we will need to delay, scale back or discontinue one or more product development programs, curtail our commercialization activities, significantly reduce expenses (through reductions in our workforce or otherwise), sell assets (potentially at a discount to their fair value or carrying value), enter into relationships with third parties to develop or commercialize products or technologies that we otherwise would have sought to develop or commercialize independently, pursue an acquisition of our company at a price that may result in a significant loss on investment to our stockholders, file for bankruptcy, seek other protection from creditors, or liquidate all of our assets. Table of Contents

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+Risk Factors in our Annual Report on Form 10-K for the fiscal year ended March 31, 2023, which is incorporated by reference into this prospectus, and as may be updated or supplemented by our subsequent filings with the Securities and Exchange Commission. Any forward-looking statement in this prospectus and the documents incorporated by reference herein and therein reflects our current view with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, industry and future growth. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future. Table of Contents CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This prospectus and the documents incorporated by reference herein and therein include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the Securities Act ), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act ). All statements other than statements of historical fact are forward-looking statements for purposes of this prospectus, the accompanying prospectus and the documents incorporated by reference herein and therein. In some cases, you can identify forward-looking statements by terminology such as may, could, will, would, should, could, expect, plan, aim, anticipate, believe, estimate, intend, predict, seek, contemplate, project, continue, potential, ongoing, goal, or the negative of these terms or other comparable terminology. Important factors that could cause actual results to differ materially from our forward-looking statements include, but are not limited to: our ability to timely acquire inventory that meets our quality control standards from sole source foreign manufacturers at acceptable costs; changes in consumer fitness trends; changes in the media consumption habits of our target consumers or the effectiveness, availability and price of media time consistent with our cost and audience profile parameters; greater than anticipated costs or delays associated with launch of new products; weaker than expected demand for new or existing products; a decline in consumer spending due to unfavorable economic conditions; softness in the retail marketplace or the availability from retailers of heavily discounted competitive products; an adverse change in the availability of credit for our customers who finance their purchases; our ability to pass along vendor raw material price increases and other cost pressures, including increased shipping costs and unfavorable foreign currency exchange rates, tariffs, risks associated with current and potential delays, work stoppages, or supply chain disruptions; our ability to hire and retain key management personnel; our ability to effectively develop, market and sell future products; the availability and timing of capital for financing our strategic initiatives, including being able to raise capital on favorable terms or at all; changes in the financial markets, including changes in credit markets and interest rates that affect our ability to access those markets on favorable terms; the impact of any future impairments; our ability to protect our intellectual property; the introduction of competing products; and our ability to get foreign-sourced product through customs in a timely manner. Additional factors that may cause actual results to differ materially from current expectations include, among other things, those set forth in the section titled Risk Factors in our Annual Report on Form 10-K for the fiscal year ended March 31, 2023, which is incorporated by reference into this prospectus, and as may be updated or supplemented by our subsequent filings with the Securities and Exchange Commission. Any forward-looking statement in this prospectus and the documents incorporated by reference herein and therein reflects our current view with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, industry and future growth. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future. Table of Contents USE OF PROCEEDS We will not receive any proceeds from the sale of shares of Common Stock offered by the selling shareholder under this prospectus. However, we will receive the proceeds of any cash exercise of the Warrants. If all of the Warrants were exercised for cash, we would receive aggregate proceeds of approximately $5.5 million. We intend to use the net proceeds from any cash exercise of the Warrants for working capital and general corporate purposes. Table of Contents SELLING SHAREHOLDER This prospectus covers the resale or other disposition by the selling shareholder identified in the table below of up to an aggregate of 4,098,362 shares of Common Stock issuable upon the exercise of our outstanding Warrants. The selling shareholder acquired its securities in the transactions described above under the heading Prospectus Summary Recent Developments Registered Direct Offering and Private Placement. The Warrants held by the selling shareholder contain limitations which prevent the holder from exercising such Warrants if such exercise would cause the selling shareholder, together with certain related parties, to beneficially own a number of shares of Common Stock which would exceed 4.99% of our then outstanding Common Stock following such exercise. The table below sets forth, as of August 16, 2023, the following information regarding the selling shareholder: the name of the selling shareholder; the number of shares of Common Stock owned by the selling shareholder prior to this offering, without regard to any beneficial ownership limitations contained in the Warrants; the number of shares of Common Stock to be offered by the selling shareholder in this offering; the number of shares of Common Stock to be owned by the selling shareholder assuming the exercise of all of the Warrants and the sale of all of the shares of Common Stock covered by this prospectus; and the percentage of our issued and outstanding Common Stock to be owned by the selling shareholder assuming the exercise of all of the Warrants and the sale of all of the shares of Common Stock covered by this prospectus based on the number of shares of Common Stock issued and outstanding as of August 4, 2023. Except as described above, the number of shares of Common Stock beneficially owned by the selling shareholder has been determined in accordance with Rule 13d-3 under the Exchange Act and includes, for such purpose, shares of Common Stock that the selling shareholder has the right to acquire within 60 days of August 4, 2023. All information with respect to the Common Stock ownership of the selling shareholder has been furnished by or on behalf of the selling shareholder. We believe, based on information supplied by the selling shareholder, that except as may otherwise be indicated in the footnotes to the table below, the selling shareholder has sole voting and dispositive power with respect to the shares of Common Stock reported as beneficially owned by it. Because the selling shareholder identified in the table may sell some or all of the shares of Common Stock beneficially owned by it and covered by this prospectus, and because there are currently no agreements, arrangements or understandings with respect to the sale of any of the shares of Common Stock, no estimate can be given as to the number of shares of Common Stock available for resale hereby that will be held by the selling shareholder upon termination of this offering. In addition, the selling shareholder may have sold, transferred or otherwise disposed of, or may sell, transfer or otherwise dispose of, at any time and from time to time, the Common Stock they beneficially own in transactions exempt from the registration requirements of the Securities Act after the date on which they provided the information set forth in the table below. We have, therefore, assumed for the purposes of the following table, that the selling shareholder will sell all of the Common Stock owned beneficially by it that are covered by this prospectus, but will not sell any other shares of Common Stock that they presently own. The selling shareholder has not held any position or office, or has otherwise had a material relationship, with us or any of our subsidiaries within the past three years other than as a result of the ownership of our Common Stock or other securities. Name of Selling Shareholder Shares Owned prior to Offering Shares Offered by this Prospectus Shares Owned after Offering Percentage of Shares Beneficially Owned after Offering (1) Armistice Capital Master Fund Ltd. (2) 7,338,362 4,098,362 3,240,000 8.06 % Table of Contents (1) Percentage is based on 36,089,978 shares of Common Stock outstanding as of August 4, 2023, assuming the exercise of all of the Warrants and the resale of all of the shares of Common Stock covered by this prospectus. (2) Consists of (i) 3,240,000 shares of Common Stock, and (ii) Warrants to purchase up to 4,098,362 shares of Common Stock (the Warrants ). The exercise of the Warrants held by Armistice Capital Master Fund Ltd. (the Master Fund ) are subject to a 4.99% beneficial ownership limitation, which prohibits the Master Fund from exercising any portion of those Warrants to the extent that, following such exercise, the Master Fund would own a number of shares of our Common Stock exceeding the applicable beneficial ownership limitation. The number of shares of Common Stock listed in the second and fourth columns are based on the number of shares of Common Stock and Warrants held by the Master Fund, assuming exercise in full of the Warrants and without regard to any limitations on exercise. The securities are directly held by the Master Fund, a Cayman Islands exempted company, and may be deemed to be indirectly beneficially owned by Armistice Capital, LLC ( Armistice ), as the investment manager of the Master Fund; and (ii) Steven Boyd, as the Managing Member of Armistice. Armistice and Steven Boyd disclaim beneficial ownership of the reported securities except to the extent of their respective pecuniary interest therein. The address of Armistice Capital Master Fund Ltd. is c/o Armistice Capital, LLC, 510 Madison Avenue, 7th Floor, New York, NY 10022. Table of Contents DESCRIPTION OF SECURITIES Authorized Capital Shares Our authorized capital shares consist of 75,000,000 shares of Common Stock stock, no par value per share. As of August 4, 2023, we had outstanding 36,089,978 shares of common stock. Common Stock Voting Rights The holders of Common Stock are entitled to one vote per share on all matters voted on by the shareholders, including the election of directors. Our common stock does not have cumulative voting rights. Dividend Rights The holders of common stock are entitled to receive dividends, if any, as may be declared from time to time by the board of directors in its discretion out of funds legally available for the payment of dividends. Fully Paid and Nonassessable All outstanding shares of our common stock are fully paid and non-assessable. Liquidation Rights The holders of common stock will share ratably in all assets legally available for distribution to our shareholders in the event of dissolution. Anti-Takeover Effects of Washington Law and our Articles of Incorporation and Bylaws Certain provisions of Washington law, our Amended and Restated Articles of Incorporation (the Articles of Incorporation ) and our Amended and Restated Bylaws, as amended (the Bylaws ) contain provisions that may delay, defer or discourage another party from acquiring control of us. These provisions, which are summarized below, are expected to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed, in part, to encourage persons seeking to acquire control of us to first negotiate with our board of directors. We believe that the benefits of increased protection of our potential ability to negotiate with an unfriendly or unsolicited acquiror outweigh the disadvantages of discouraging a proposal to acquire us because negotiation of these proposals could result in an improvement of their terms. Anti-Takeover Provisions of Washington Law Certain provisions of Washington law could have the effect of delaying, deferring, or discouraging another person from acquiring control of our company. These provisions, which are summarized below, may have the effect of discouraging takeover bids. We are subject to the Washington Business Corporation Act ( WBCA ) which imposes restrictions on certain transactions between a corporation and certain significant shareholders. The WBCA generally prohibits a target corporation (as defined in the WBCA) from engaging in certain significant business transactions with an acquiring person, which is defined as a person or group of persons that beneficially owns 10% or more of the voting securities of the target corporation, for a period of five years after such acquisition, unless the transaction or acquisition of shares is approved (1) prior to the time of the acquisition, by a majority of the members of the target corporation s board of directors or (2) at or subsequent to the acquiring person s share acquisition time, by Table of Contents a majority of the members of the target corporation s board of directors and authorized at an annual or special meeting of shareholders, and not by written consent, by the affirmative vote of at least 66-2/3% of the outstanding voting shares, except for shares beneficially owned by or under the voting control of the acquiring person. Such prohibited transactions include, among other things: a merger or consolidation with, disposition of assets to, or issuance or redemption of stock to or from the acquiring person; termination of 5% or more of the employees of the target corporation employed in Washington, whether at one time or over a five-year period as a result of the acquiring person s acquisition of 10% or more of the shares; or allowing the acquiring person to receive any disproportionate benefit as a shareholder. After the five-year period, a significant business transaction may occur if it complies with fair price provisions specified in the statute or are approved at an annual or special meeting of shareholders by a majority of the outstanding shares other than those of which the acquiring person has beneficial ownership. As a result, Chapter 23B.19 of the WBCA could have the effect of delaying, deferring, or preventing a change in control. Limits on Ability of Shareholders to Act by Written Consent Our Bylaws require unanimous consent for a shareholder action by written consent to be effective. This limit on the ability of our shareholders to act by less than unanimous written consent may lengthen the amount of time required to take shareholder actions. As a result, a holder controlling a majority of our capital stock who is unable to obtain unanimous written consent from all of our shareholders would not be able to amend our Bylaws or remove directors without holding a shareholders meeting. Requirements for Advance Notification of Shareholder Nominations and Proposals Our Bylaws establish advance notice procedures with respect to shareholder proposals and the nomination of candidates for election as directors, other than nominations made by or at the direction of the board of directors or a committee of the board of directors. The Bylaws do not give the board of directors the power to approve or disapprove shareholder nominations of candidates or proposals regarding business to be conducted at a special or annual meeting of the shareholders. However, our Bylaws may have the effect of precluding the conduct of certain business at a meeting if the proper procedures are not followed. These provisions may also discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror s own slate of directors or otherwise attempting to obtain control of us. No Cumulative Voting Our Articles of Incorporation provide that shareholders are not entitled to cumulate votes in the election of directors. Transfer Agent and Registrar Our transfer agent and registrar is Computershare Trust Company, N.A. Listing Our common stock is traded on the New York Stock Exchange under the trading symbol NLS. Warrants The Warrants were issued in the Private Placement on June 15, 2023 in connection with a registered direct offering of our Common Stock and pre-funded warrants to purchase shares of our Common Stock. As of August 4, 2023, the Warrants were exercisable for an aggregate of 4,098,362 shares of Common Stock. Table of Contents Exercisability. The Warrants are exercisable on December 20, 2023 and expire on December 20, 2028. The Warrants are exercisable, at the option of each holder, in whole or in part by delivering to us a duly executed exercise notice and, at any time a registration statement registering the issuance of the shares of Common Stock underlying the Warrants under the Securities Act is effective and available for the issuance of such shares, or an exemption from registration under the Securities Act is available for the issuance of such shares, by payment in full in immediately available funds for the number of shares of Common Stock purchased upon such exercise. If at the time of exercise there is no effective registration statement registering, or the prospectus contained therein is not available for the issuance of the shares of Common Stock underlying the Warrants, then the Warrants may also be exercised, in whole or in part, at such time by means of a cashless exercise, in which case the holder would receive upon such exercise the net number of shares of Common Stock determined according to the formula set forth in the Warrant. Exercise Limitation. A holder will not have the right to exercise any portion of the Warrant if the holder (together with its affiliates) would beneficially own in excess of 4.99% of the number of shares of Common Stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the Warrants. However, any holder may increase or decrease such percentage, provided that any increase will not be effective until the 61st day after such election. Exercise Price. The Warrants have an exercise price of $1.35 per share of Common Stock. The exercise price is subject to appropriate adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting our Common Stock and also upon any distributions of assets, including cash, stock or other property to our shareholders. Transferability. Subject to applicable laws, the Warrants may be offered for sale, sold, transferred or assigned without our consent. Exchange Listing. There is no established public trading market for the Warrants. We do not intend to apply for listing of the Warrants on any securities exchange or other nationally recognized trading system. Without an active trading market, the liquidity of the Warrants is limited. Fundamental Transactions. In the event of any fundamental transaction, as described in the Warrants and generally including any merger with or into another entity, sale of all or substantially all of our assets, tender offer or exchange offer, or reclassification of our Common Stock, then upon any subsequent exercise of a Warrant, the holder will have the right to receive as alternative consideration, for each share of Common Stock that would have been issuable upon such exercise immediately prior to the occurrence of such fundamental transaction, the number of shares of Common Stock of the successor or acquiring corporation or of our company, if it is the surviving corporation, and any additional consideration receivable upon or as a result of such transaction by a holder of the number of shares of Common Stock for which the Warrant is exercisable immediately prior to such event. Notwithstanding the foregoing, in the event of a fundamental transaction, the holders of the Warrants have the right to require us or a successor entity to redeem the Warrants for cash in the amount of the Black Scholes Value (as defined in each Warrant) of the unexercised portion of the Warrants concurrently with or within 30 days following the consummation of a fundamental transaction. Rights as a Shareholder. Except as otherwise provided in the Warrants or by virtue of such holder s ownership of our Common Stock, the holder of a Warrant does not have the rights or privileges of a holder of our Common Stock, including any voting rights, until the holder exercises the Warrant. Registration Rights. We have filed this registration statement with the SEC that includes this prospectus to register for resale under the Securities Act of 1933, the shares of Common Stock issuable upon exercise of the Warrants to satisfy our obligations in connection with the Private Placement. We will use commercially reasonable efforts to keep registration statement effective at all times until the selling shareholder no longer owns any Warrants or shares of Common Stock issuable upon exercise thereof. Table of Contents PLAN OF DISTRIBUTION The selling shareholder, which as used herein includes donees, pledgees, transferees or other successors-in-interest selling the shares of Common Stock, or interests in the shares of Common Stock received after the date of this prospectus from a selling shareholder as a gift, pledge, partnership distribution or other transfer, may, from time to time, sell, transfer or otherwise dispose of any or all of their shares of Common Stock or interests in the shares of Common Stock on any stock exchange, market or trading facility on which the shares of Common Stock are traded or in private transactions. The selling shareholder may sell all or a portion of the shares of Common Stock held by it and offered hereby from time to time directly or through one or more underwriters, broker-dealers or agents. If the shares of Common Stock are sold through underwriters or broker-dealers, the selling shareholder will be responsible for underwriting discounts or commissions or agent s commissions. The shares of Common Stock 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, pursuant to one or more of the following methods: 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 or settlement of options or other hedging transactions, 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 effected after the date the registration statement of which this prospectus is a part was declared effective by the SEC; broker-dealers may agree with a selling shareholder 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. The aggregate proceeds to the selling shareholder from the sale of the shares of Common Stock offered by it will be the purchase price of the shares of Common Stock less discounts or commissions, if any. The selling shareholder reserves the right to accept and, together with their agents from time to time, to reject, in whole or in part, any proposed purchase of shares of Common Stock to be made directly or through agents. We will not receive any of the proceeds from sales of shares of Common Stock by the selling shareholder. The selling shareholder may also sell shares of Common Stock under Rule 144 promulgated under the Securities Act, if available, rather than under this prospectus. In addition, the selling shareholder may transfer the Common Stock by other means not described in this prospectus. If the selling shareholder effects such transactions by selling shares of Common Stock 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 Table of Contents selling shareholders or commissions from purchasers of the shares of Common Stock 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 but, except as set forth in a supplement to this prospectus to the extent required, in the case of an agency transaction will not be in excess of a customary brokerage commission in compliance with FINRA Rule 5110). In connection with sales of the shares of Common Stock or otherwise, the selling shareholder may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the shares of Common Stock in the course of hedging in positions they assume. The selling shareholder may also sell shares of Common Stock short and deliver shares of Common Stock covered by this prospectus to close out short positions and to return borrowed shares in connection with such short sales. The selling shareholder may also loan or pledge shares of Common Stock to broker-dealers that in turn may sell such shares. The selling shareholder 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 such broker-dealer or other financial institution of shares of Common Stock offered by this prospectus, which shares of Common Stock such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction). The selling shareholder may pledge or grant a security interest in some or all of the shares of Common Stock owned by it and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of Common Stock 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 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 shareholder also may transfer and donate the shares of Common Stock in other circumstances as permitted by applicable law, in which case the transferees, donees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus. To the extent required by the Securities Act and the rules and regulations thereunder, the selling shareholder and any broker-dealer participating in the distribution of the shares of Common Stock may be deemed to be underwriters within the meaning of the Securities Act. In such event, 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. Selling shareholders who are deemed to be underwriters under the Securities Act (if any) will be subject to the prospectus delivery requirements of the Securities Act and may be subject to certain statutory liabilities of, including but not limited to, Sections 11, 12 and 17 of the Securities Act and Rule 10b-5 under the Exchange Act. Each selling shareholder has informed us that it is not a registered broker-dealer and does not have any written or oral agreement or understanding, directly or indirectly, with any person to engage in a distribution of the shares of Common Stock. Upon us being notified in writing by a selling shareholder that any material arrangement has been entered into with a broker-dealer for the distribution of shares of Common Stock, a prospectus supplement, if required, will be distributed, which will set forth the aggregate amount of shares of Common Stock being distributed 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 shareholder and any discounts, commissions or concessions allowed or re-allowed or paid to broker-dealers. Under the securities laws of some states, the Common Stock may be sold in such states only through registered or licensed brokers or dealers. In addition, in some states the Common Stock may not be sold unless such shares have been registered or qualified for sale in such state or an exemption from registration or qualification is available and is complied with. The selling shareholder may sell all, some or none of the shares of Common Stock registered pursuant to the registration statement of which this prospectus forms a part. If sold under the registration statement of which this Table of Contents prospectus forms a part, the shares of Common Stock registered hereunder will be freely tradable in the hands of persons other than our affiliates that acquire such shares. We have advised the selling shareholder that the anti-manipulation rules of Regulation M under the Exchange Act may apply to sales of shares of Common Stock in the market and to the activities of the selling shareholder and its affiliates. In addition, to the extent applicable, we will make copies of this prospectus (as it may be supplemented or amended from time to time) available to the selling shareholder for the purpose of satisfying the prospectus delivery requirements of the Securities Act. The selling shareholder may indemnify any broker-dealer that participates in transactions involving the sale of the shares of Common Stock against certain liabilities, including liabilities arising under the Securities Act. Table of Contents LEGAL MATTERS The validity of the shares of Common Stock offered hereby will be passed upon for us by Hillis Clark Martin & Peterson P.S., Seattle, Washington. EXPERTS The audited financial statements incorporated by reference in this prospectus and elsewhere in the registration statement have been so incorporated by reference in reliance upon the report of Grant Thornton LLP, independent registered public accountants, upon the authority of said firm as experts in accounting and auditing. INFORMATION INCORPORATED BY REFERENCE The SEC allows us to incorporate by reference information that we have filed with it into this prospectus, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is an important part of this prospectus. The information incorporated by reference is considered to be a part of this prospectus, and information that we file later in any prospectus supplement or free writing prospectus will automatically update and supersede information contained in this prospectus. We incorporate by reference the documents listed below that we have previously filed with the SEC: Our Annual report on Form 10-K for the fiscal year ended March 31, 2023, filed with the SEC on June 1, 2023; Our Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, filed with the SEC on August 9, 2023; Our Definitive Proxy Statement on Schedule 14A filed with the SEC on June 16, 2023; and The Description of Securities Registered Under Section 12 of the Exchange Act (included as Exhibit 4.1 of our Annual Report on Form 10-K for the fiscal year ended March 31, 2023, filed with the Commission on June 1, 2023). We will provide you without charge, upon your oral or written request, with a copy of any or all reports, proxy statements and other documents incorporated by reference in this prospectus or the registration statement (other than exhibits to such documents unless such exhibits are specifically incorporated by reference into such documents). Requests for such copies should be directed to: Nautilus, Inc. Attention: Investor Relations 17750 S.E. 6th Way Vancouver, Washington 98683 (646) 277-1254 john.mills@icrinc.com Table of Contents TABLE OF CONTENTS Summary 2 Risk Factors 5

parsed_sections/risk_factors/2023/CIK0001102942_innovaqor_risk_factors.txt

@@ -0,0 +1,1311 @@
+Risk Factors" beginning on page 2, as well
+as, among others, business effects, including the effects of industry, economic or political conditions outside of the Company s
+control; the inherent uncertainty associated with financial projections; the anticipated size of the markets and continued demand for
+the Company s products and services; the impact of competitive services, products and pricing; and access to available financing
+on a timely basis and on reasonable terms. We caution you that the foregoing list of important factors that may affect future results
+is not exhaustive.
+
+ 
+
+When
+relying on forward-looking statements to make decisions with respect to the Company, investors and others should carefully consider the
+foregoing factors and other uncertainties and potential events and read the Company s filings with the SEC for a discussion of
+these and other risks and uncertainties. The Company undertakes no obligation to update or revise any forward-looking statement, except
+as may be required by law. The Company qualifies all forward-looking statements by these cautionary statements.
+
+ 
+
+USE
+OF PROCEEDS
+
+ 
+
+We
+will incur all costs associated with this registration statement and prospectus, which we anticipate to be approximately $23,000.
+We will not receive any proceeds from the sale of our common stock covered hereby by the Selling Stockholder. The shares of common
+stock to be sold in this offering have not yet been issued and will only be issued upon conversion of the shares of the Series B-1 Preferred
+Stock.
+
+ 
+
+MARKET
+PRICE FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
+
+ 
+
+Market
+Information
+
+ 
+
+Our
+Common Stock is not listed on any stock exchange and is quoted on the OTC Pink Market under the symbol "INQR". Because our
+Common Stock is not listed on a securities exchange and its quotation on the OTC Pink is limited and sporadic, there is currently no
+established public trading market for our Common Stock. The following table sets forth the high and low closing sales prices per share
+of our Common Stock as reported for the periods indicated. Such quotations represent inter-dealer prices without retail markup, markdown
+or commissions and may not necessarily represent actual transactions. On July __, 2023, the closing price for our Common Stock
+as reported on the OTC Pink was $[ ] per share.
+
+ 
+
+ 
+
+ 
+ Quarter
+ Ended
+ 
+ High
+ 
+ 
+ Low
+ 
+
+ 
+ March
+ 31, 2020
+ 
+ $
+ 0.0025
+ 
+ 
+ $
+ 0.0013
+ 
+
+ 
+ June
+ 30, 2020
+ 
+ $
+ 0.0022
+ 
+ 
+ $
+ 0.0010
+ 
+
+ 
+ September
+ 30, 2020
+ 
+ $
+ 0.0036
+ 
+ 
+ $
+ 0.0018
+ 
+
+ 
+ December
+ 31, 2020
+ 
+ $
+ 0.0027
+ 
+ 
+ $
+ 0.0012
+ 
+
+ 
+ March
+ 31, 2021
+ 
+ $
+ 0.0064
+ 
+ 
+ $
+ 0.0016
+ 
+
+ 
+ June
+ 30, 2021
+ 
+ $
+ 0.0308
+ 
+ 
+ $
+ 0.0027
+ 
+
+ 
+ September
+ 30, 2021
+ 
+ $
+ 0.0162
+ 
+ 
+ $
+ 0.0088
+ 
+
+ 
+ December
+ 31, 2021
+ 
+ $
+ 0.0126
+ 
+ 
+ $
+ 0.0049
+ 
+
+ 
+ March
+ 31, 2022
+ 
+ $
+ 0.0065
+ 
+ 
+ $
+ 0.0029
+ 
+
+ 
+ June
+ 30, 2022
+ 
+ $
+ 0.0069
+ 
+ 
+ $
+ 0.0027
+ 
+
+ 
+ September
+ 30, 2022
+ 
+ $
+ 0.0085
+ 
+ 
+ $
+ 0.0023
+ 
+
+ 
+ December
+ 31, 2022
+ 
+ $
+ 0.0080
+ 
+ 
+ $
+ 0.0030
+ 
+
+ 
+ March
+ 31, 2023
+ 
+ $
+ 0.0077
+ 
+ 
+ $
+ 0.0040
+ 
+
+ 
+ June
+ 30, 2023
+ 
+ $
+ 0.0073
+ 
+ 
+ $
+ 0.0030
+ 
+
+ 
+ September 30, 2023 (through
+___, 2023)
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+
+ 
+ 
+
+ 17 
+
+ 
+
+ 
+
+ 
+
+As
+of July 25, 2023, there were approximately 81 shareholders of record of our common stock, which excludes shareholders whose
+shares were held in nominee or street name by brokers.
+
+ 
+
+The
+transfer agent for our Common Stock is Olde Monmouth Stock Transfer Co., Inc., 200 Memorial Parkway, Atlantic Heights, New Jersey 07716.
+Their telephone number is (732) 872-2727.
+
+ 
+
+Dividend
+Policy
+
+ 
+
+We
+have never paid cash dividends on our Common Stock and have no plans to do so in the foreseeable future. Our future dividend policy will
+be determined by our Board of Directors and will depend on a number of factors, including our financial condition and performance, our
+cash needs, income tax consequences and any restrictions that applicable laws, our preferred stock and any future credit or other agreements
+may then impose.
+
+ 
+
+Dividends
+on our Series B-1 Preferred Stock and Series C-1 Preferred Stock are only payable when and if declared by our Board of Directors. Dividends
+are payable on the Series D Preferred Stock based on the monthly gross sales collected by the Company or any subsidiary on a consolidated
+basis. See "Description of Capital Stock – Preferred Stock – Preferred Stock Series D".
+
+ 
+
+Penny
+Stock
+
+ 
+
+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 $5.00. Excluded from the penny stock designation are securities
+registered on certain national securities exchanges or quoted on NASDAQ, provided that current price and volume information with respect
+to transactions in such securities is provided by the exchange/system or sold to established customers or accredited investors.
+
+ 
+
+The
+penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a
+standardized risk disclosure document 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 connection with the transaction, and the 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 must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the
+purchaser s written agreement to the transaction.
+
+ 
+
+These
+disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for a stock that becomes
+subject to the penny stock rules. As our Common Stock has become subject to the penny stock rules, investors may find it more difficult
+to sell their shares.
+
+ 
+
+Equity
+Compensation Plans
+
+ 
+
+The
+Company currently has no compensation plans under which the Company s equity securities are authorized for issuance.
+
+ 
+
+ 18 
+
+ 
+
+ 
+
+ 
+
+BUSINESS
+
+ 
+
+Overview
+
+ 
+
+The
+Company provides information technology solutions and services to healthcare and laboratory customers in the United States. Our goal
+is to develop and deliver a technology-based communication platform to a broad range of healthcare professionals and businesses using
+a subscription revenue model with added value bolt on services. The Company, through an acquisition that closed on June 25, 2021, has
+a number of fully developed products and services which it offers through three operating wholly-owned subsidiaries that provide
+medical support services primarily to clinical laboratories, corporate operations, rural hospitals, physician practices and behavioral
+health/substance abuse centers.
+
+ 
+
+The
+Company has the following operating wholly-owned subsidiaries, which it purchased on June 25, 2021: Health Technology Solutions, Inc.,
+Medical Mime, Inc., and ClinLab, Inc. These subsidiaries provided products and services to 25 and 36 customers in the United States and
+generated $343,440 and $468,883 (including $191,517 and $237,551 from a related party) in net revenues during the years ended December
+31, 2022 and 2021, respectively. Net revenues amounted to $175,915 and $95,893 (including $84,703 and $53,555 from a related party) for
+the three months ended March 31, 2023 and 2022, respectively. 
+
+ 
+
+Health
+Technology Solutions, Inc. ("HTS"): HTS provides virtual chief information officer (vCIO), IT managed services and data analytics
+dashboards to our subsidiaries and outside medical service providers. HTS operates from the corporate offices in West Palm Beach, Florida.
+
+ 
+
+Medical
+Mime, Inc. ("Mime"): Mime was formed on May 9, 2014. It specializes in electronic health records (EHR) software and subscription
+services for the behavioral health and rehabilitation market segments. It currently serves 10 behavioral health/substance abuse facilities.
+
+ 
+
+ClinLab,
+Inc. ("ClinLab"): ClinLab develops and markets laboratory information management systems to mid-size clinical laboratories.
+It currently services eight clinical laboratories across the country.
+
+ 
+
+As
+part of the acquisition the Company also acquired three inactive entities, Advanced Molecular Services Group, Inc. ("AMSG"),
+CollabRx, Inc. ("CollabRx") and Genomas, Inc. ("Genomas").
+AMSG owns CollabRx, and Genomas.
+
+ 
+
+Genomas
+operated a diagnostics lab until December 31, 2019, and was focused solely on the pharmacogenomics technology and platform, MedTuning,
+to interpret diagnostics outcomes and translate these outcomes into easily usable information to indicate the effectiveness of medications
+for a patient. This solution would require minimum effort to be back in operation. CollabRx owns a technology platform and database for
+interpreting diagnostics outcomes from cancer patients that could match the result to known treatments and or clinical trials. This solution
+has been dormant for a number of years and to be viable in the marketplace will require updates to the technology and the database.
+
+ 
+
+Each
+of the subsidiaries is wholly owned by the Company and complements each other, allowing for cross selling of products and services. The
+Company believes the current solutions will become an added value option to a technology-based communication platform to a broad range
+of healthcare professionals and businesses using a subscription revenue model with added value bolt on services the Company plans to
+develop.
+
+ 
+
+The
+Company has initiated a new project in the second quarter of 2023 to develop its planned technology-based communication platform
+for the healthcare sector and is working with a Canadian-based development company to create a minimum viable
+product (MVP) to demonstrate the peer-to-peer communication capabilities. The Company will launch this new platform under the name
+Curallo.
+
+ 
+
+Company
+History
+
+ 
+
+The
+Company was originally incorporated in the State of Nevada on September 7, 1999, under the name Ancona Mining Corporation.
+
+ 
+
+The
+Company s name was changed to VisualMED Clinical Solutions Corporation on November 30, 2004, from Ancona Mining Corporation.
+
+ 
+
+The
+Company s name was changed to InnovaQor, Inc. on September 8, 2021, from VisualMED Clinical Solutions Corporation.
+
+ 
+
+ 19
+
+ 
+
+ 
+
+ 
+
+VisualMED
+was a medical information company that used technology to assist physicians and nurses streamline the mass of patient information in
+a coherent and usable manner. Its clinical information systems were designed for use in hospitals, healthcare delivery organizations
+and regional and national healthcare authorities. In response to changes in the marketplace, the Company then sought to take its applications
+originally created for clinicians and make them available to patients and individuals concerned about their health. As part of this process
+the Company partnered with various consultants to consider the medical applications, develop a marketing strategy and investigate how
+best to transition its existing applications to upgraded versions, including integrating artificial intelligence for data assessment
+and outcomes. With the onset of the COVID-19 pandemic, however, it became apparent that this business opportunity would require more
+capital, management capability and time than what was available to the Company.
+
+ 
+
+In
+late 2020, the majority of shareholders and the Board of Directors charged management of VisualMED to find a new business opportunity
+for the Company that would allow it to leverage its healthcare, software and IT experience. At the beginning of 2021, the Company initiated
+measures that would facilitate a new opportunity for the Company. Subsequently, in May 2021, then CEO Gerard Dab entered into an agreement
+with and engaged the services of Epizon Limited ("Epizon"), a Nassau, Bahamas, based management consulting company specializing
+in the provision of management services to secure financing and opportunities for growth. Seamus Lagan, the Chief Executive Officer of
+Rennova Health, Inc. ("Rennova"), the company we ultimately completed a transaction with, is also the managing director of
+Epizon.
+
+ 
+
+The
+objective of the agreement with Epizon was to help VisualMED find a new opportunity in its core healthcare technology business. The Company
+needed to find and develop new products that would be more relevant for a changing healthcare marketplace. Epizon was engaged to assist
+VisualMED with its capital structure, and to look for new business opportunities and/or acquisitions that could result in improved shareholder
+value. The terms of the agreement with Epizon called for the transfer to Epizon of 1,000 shares of Series A-1 Supermajority Voting Preferred
+Stock (the "Series A-1 Preferred Stock"), with a stated value of $10.00 each, personally owned by Gerard Dab, on the successful
+completion of a transaction as defined in the agreement. It was determined that an agreement with Rennova was the most viable opportunity
+available to VisualMED. The conditions of the Epizon agreement were met and the transfer of shares of Series A-1 Preferred Stock was
+completed. This transfer resulted in a change of voting control of VisualMED, as the Series A-1 Preferred Stock, in the aggregate, has
+the right to the number of votes equal to 51% of the votes entitled to be cast at a meeting or to vote by written consent. As the owner
+of the Series A-1 Preferred Stock, Epizon will be able to exercise control over all matters submitted for stockholder approval.
+
+ 
+
+In
+May 2021, VisualMED entered into an acquisition agreement with Rennova to acquire certain subsidiaries owned by Rennova. This has been
+accounted for as a reverse acquisition in the financial statements incorporated by reference in this prospectus.
+
+ 
+
+On
+June 25, 2021, VisualMED closed the acquisition agreement with Rennova. These subsidiaries are Health Technology Solutions, Inc., Medical
+Mime, Inc., ClinLab, Inc., Advanced Molecular Services Group, Inc., Genomas, Inc. and CollabRx, Inc., and combined are referred to herein
+as HTS and AMSG (the "HTS Group").
+
+ 
+
+Products
+offered by the acquired entities include vCIO services, IT managed services, healthcare finance and operational business intelligence
+analytics dashboards, an EHR (electronic health records software), an LIS (laboratory information system), and a lab ordering and reporting
+software. The CollabRx and Genomas subsidiaries provided actionable data analytics and reporting for oncologists to enhance cancer diagnoses
+and treatment and PhyzioType Systems for DNA-guided management and prescription of drugs, respectively. These subsidiaries are not currently
+operating.
+
+ 
+
+ 20
+
+ 
+
+ 
+
+ 
+
+The
+Company operates its subsidiaries under the following structure:
+
+ 
+
+ 
+
+In
+consideration for the shares of HTS and AMSG and the elimination of inter-company debt between Rennova and HTS and AMSG, the Company
+issued 14,000 shares of its Series B-1 Convertible Redeemable Preferred Stock (the "Series B-1 Preferred Stock") to Rennova.
+The number of shares of Series B-1 Preferred Stock was subject to a post-closing adjustment which resulted in 950 additional shares of
+Series B-1 Preferred Stock due Rennova which were issued in September 2021. Each share of Series B-1 Preferred Stock has a stated value
+of $1,000 and is convertible into that number of shares of the Company s common stock equal to the product of the stated value
+divided by 90% of the average closing price of the common stock during the 10 trading days immediately prior to the conversion date.
+Conversion of the Series B-1 Preferred Stock, however, is subject to the limitation that no conversion can be made to the extent the
+holder s beneficial interest (as defined pursuant to the terms of the Series B-1 Preferred Stock) in the common stock of the Company
+would exceed 4.99%. The shares of Series B-1 Preferred Stock may be redeemed by the Company upon payment of the stated value of the shares
+plus any accrued declared and unpaid dividends. In addition, prior to the acquisition the Company s former CEO, Gerard Dab, forgave
+$300,000 owed to him by the Company in exchange for the issuance of 1,000 shares of Series A-1 Preferred Stock. These shares of Series
+A-1 Preferred Stock were subsequently transferred to Epizon. Mr. Dab also forgave another $200,000 owed to him from the Company in exchange
+for 200 shares of Series C-1 Convertible Redeemable Preferred Stock (the "Series C-1 Preferred Stock") with each share having
+a stated value of $1,000 and convertible into that number of shares of common stock equal to the product of the stated value divided
+by 90% of the average closing price of the common stock during the 10 trading days immediately prior to the conversion date. Conversion
+of the Series C-1 Preferred Stock is also subject to a similar 4.99% beneficial ownership limitation. Shares of the Series B-1 Preferred
+Stock and Series C-1 Preferred Stock were not convertible prior to the first anniversary of their issuance without the consent of the
+holders of a majority of the then outstanding shares, if any, of the Series A-1 Preferred Stock. Because these shares of Series B-1 Preferred
+Stock and Series C-1 Preferred Stock are convertible, at the option of the holder, into a variable number of common shares based solely
+on a fixed dollar amount (stated value) known at issuance of the shares, they have been recorded as a long-time liability at the date
+of issuance in accordance with ASC 480, Distinguishing Liabilities from Equity.
+
+ 
+
+The
+following table represents the Company s issued shares at March 31, 2023:
+
+ 
+
+ 
+ Common Shares 
+ 244,953,286 
+
+ 
+ Series A-1 Preference Shares 
+ 1,000 
+
+ 
+ Series B-1 Preference Shares 
+ 14,950 
+
+ 
+ Series C-1 Preference Shares 
+ 225 
+
+ 
+
+ 
+
+On
+May 12, 2023, the Company issued 300 shares of a newly-authorized Series D Non-Convertible Preferred Stock. See "Description of
+Capital Stock".
+
+ 
+
+ 21
+
+ 
+
+ 
+
+ 
+
+Subsidiaries
+
+ 
+
+The
+Company has three operating wholly-owned subsidiaries that provide medical support services primarily to clinical laboratories,
+corporate operations, rural hospitals, physician practices and behavioral health/substance abuse centers.
+
+ 
+
+Health
+Technology Solutions, Inc. ("HTS"): HTS provides vCIO, IT managed services and data analytics dashboards to our subsidiaries
+and outside medical service providers. HTS operates from the corporate offices in West Palm Beach, Florida.
+
+ 
+
+Medical
+Mime, Inc. ("Mime"): Mime was formed on May 9, 2014. It specializes in electronic health records (EHR) software and subscription
+services for the behavioral health and rehabilitation market segments. It currently serves 10 behavioral health/substance abuse
+facilities.
+
+ 
+
+ClinLab,
+Inc. ("ClinLab"): ClinLab develops and markets laboratory information management systems to mid-size clinical laboratories.
+It currently services eight clinical laboratories across the country.
+
+ 
+
+AMSG
+owns CollabRx, Inc. ("CollabRx") and Genomas, Inc. ("Genomas"), each of which is an inactive operation. Genomas
+operated a diagnostics lab until December 31, 2019, and was focused solely on the pharmacogenomics technology and platform, MedTuning,
+to interpret diagnostics outcomes and translate these outcomes into easily usable information to indicate the effectiveness of medications
+for a patient. This solution would require minimum effort to be back in operation. CollabRx owns a technology platform and database for
+interpreting diagnostics outcomes from cancer patients that could match the result to known treatments and or clinical trials. This solution
+has been dormant for a number of years and to be viable in the marketplace will require updates to the technology and the database.
+
+ 
+
+Each
+of the subsidiaries is wholly owned by the Company and complements each other, allowing for cross selling of products and services. The
+Company believes the current solutions will become an added value option to a technology-based communication platform to a broad range
+of healthcare professionals and businesses using a subscription revenue model with added value bolt on services the Company plans to
+develop.
+
+ 
+
+The
+Company has initiated a new project in the second quarter of 2023 to develop its planned technology-based communication platform
+for the healthcare sector and is working with a Canadian-based development company to create a minimum viable
+product (MVP) to demonstrate the peer-to-peer communication capabilities. The Company will launch this new platform under the name
+Curallo.
+
+ 
+
+Company
+Information
+
+ 
+
+The
+address of our principal executive offices is 400 S. Australian Avenue, Suite 800, West Palm Beach, Florida 33401 and our telephone number
+at that location is (561) 421-1900.
+
+ 
+
+Our
+website is www.innovaqor.com. The information contained on, or that may be obtained from, our website is not a part of this registration
+statement. We have included our website address herein solely as an inactive textual reference.
+
+ 
+
+Terms
+of the acquisition
+
+ 
+
+Background
+
+ 
+
+On
+June 25, 2021, the Company completed the acquisition agreement with Rennova, and acquired 100% ownership of certain subsidiaries of Rennova.
+The acquired businesses are now the main business of the Company.
+
+ 
+
+ 22
+
+ 
+
+ 
+
+ 
+
+Reasons
+for the Acquisition
+
+ 
+
+The
+previous business model of the Company had not generated revenue for over five years. The Board of Directors and majority shareholders
+had determined the Company should pursue other opportunities for acquisition of technology and services that were similar in nature to
+the existing business of the Company. The Company had limited resources of cash and management and believed that an acquisition that
+could be completed without cash and that had its own management team would provide the best opportunity for a successful closing. The
+Company believes that the acquired assets and new management team create a new opportunity for the Company in a sector in which the Company s
+solutions and services are in demand and should generate profitable revenue. The Company believes the acquisition brings the following
+benefits for shareholders:
+
+ 
+
+ 
+ 
+ 
+ Enhanced
+ strategic and management focus – The acquisition provides the Company with a well-established and accomplished management team
+ to more effectively pursue its distinct operating priorities and strategies and enable the management to quickly and efficiently
+ make decisions and concentrate efforts on the unique needs of each business and pursue opportunities for long-term growth and profitability.
+ In this way, the Company s management will be able to focus exclusively on its IT products and services business and productize
+ its services to third parties.
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ Direct
+ access to capital markets – The acquisition provides the Company with a variety of existing product lines, some already generating
+ revenue. These constitute a firm basis for supporting the Company s business expansion. This should also mean that the Company
+ will achieve better access to the capital markets to support a credible expansion plan.
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ Alignment
+ of incentives with performance objectives – The acquisition will facilitate incentive compensation arrangements for employees
+ more directly tied to the performance of the business, and may enhance employee hiring and retention by, among other things, improving
+ the alignment of management and employee incentives with performance and growth objectives.
+
+ 
+ 
+
+The
+Company cannot assure you that, as a result of the acquisition, any of the benefits described above or otherwise will be realized to
+the extent anticipated or at all and would highlight that the acquisition adds increased risk to the Company with the following;
+
+ 
+
+ 
+ 
+ 
+ Increased
+ costs – the Company assumed increased costs related to the business operations and development plan and saw an immediate increase
+ in legal and accounting costs associated with the acquisition and the Company s plans to become fully reporting and compliant
+ with the SEC reporting requirements. If the Company fails to raise additional capital it may fail to deliver its business plan.
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ The
+ Company may experience disruptions to the business of the acquired entities as a result of the acquisition. The acquired entities
+ had enjoyed revenue and financial assistance from related parties under its previous structure. There is no guarantee that these
+ revenues can be retained and the acquired entities will no longer be able to rely on the support and services received prior to acquisition.
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ One-time
+ costs of the acquisition may be significant. The Company incurred costs in connection with the acquisition that included accounting,
+ tax, legal and other professional services costs, recruiting, and relocation costs associated with hiring or reassigning personnel,
+ costs related to establishing a new brand identity in the marketplace and costs to separate information systems.
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ Inability
+ to realize anticipated benefits of the acquisition – the Company may not achieve the anticipated benefits of the acquisition
+ for a variety of reasons, including, among others: following the acquisition, the Company may be more susceptible to market fluctuations
+ and other adverse events.
+
+ 
+ 
+
+The
+prior Board of Directors concluded that the potential benefits of the acquisition outweighed the risks and concluded that it was in the
+best interest of the Company and its shareholders to complete the acquisition as described.
+
+ 
+
+Business
+
+ 
+
+InnovaQor
+has expertise in the areas of IT involving the design, development, creation, use and maintenance of information systems for the healthcare
+industry. These applications and systems will continue to improve patient care, lower costs, increase efficiency, reduce errors and improve
+patient outcomes. In addition, these applications and systems will accelerate and maximize reimbursements for healthcare providers.
+
+ 
+
+ 23
+
+ 
+
+ 
+
+ 
+
+InnovaQor
+also recognizes the future in interoperability (sharing data between multiple various health IT systems), telemedicine (the ability to
+access and interact with health data and practitioners/patients via mobile devices) and the increasing use of blockchain technologies
+to protect access to medical records.
+
+ 
+
+We
+intend to develop, acquire or license and offer a medical professional s network communication platform that includes talent search
+and a telehealth solution through corporate partnerships in the emerging health technology sector.
+
+ 
+
+Existing
+products offered by the Company s subsidiaries are as follows:
+
+ 
+
+"M2Select"
+is a custom built, cloud based, electronic health record which meets the needs of substance abuse
+treatment and behavioral health providers. M2Select s specialized clinical workflow provides intuitive prompts for symptoms and
+enables you to quickly select problems and create master treatment plans with goals, objectives, and interventions. M2Select provides
+best-in-class patient lifecycle management for Behavioral Health/Substance Abuse (BH/SA) treatment centers. From pre-admission to billing
+and aftercare, M2Select is an electronic health record and patient management software that seamlessly integrates into the natural workflow
+of day-to-day operations.
+
+ 
+
+"M2Pro"
+is a custom built, cloud based, electronic health record for ambulatory physician practices that meets meaningful use stage 2 and no
+further. Its unique dictation services further automate the workflow process for physicians allowing them to focus on their continuum
+of patient care. This product is not currently offered in the United States market but could be distributed outside of the United States.
+
+ 
+
+"ClinLab"
+is a turnkey client/server lab information system for mid-range laboratories. ClinLab supports interfaces to all major reference labs
+and the ClinLab team can provide an interface to any system with that capability. ClinLab also features an optional package which enables
+interfacing with the most popular EHR systems allowing lab test results to integrate seamlessly into a lab s
+EHR for an improved patient record and to fulfill the federal government requirements.
+
+ 
+
+"Qira"
+is our healthcare business analytics service powered by PowerBI. It is a culmination of healthcare financial and revenue cycle management
+plus clinical operations oversight needs. It aggregates data from multiple healthcare systems to produce a single source business intelligence
+tool with executive level daily briefing to deep dive operational management of claims and operational efficiencies. There are many other
+analytical services available that customize solutions but none that has a proven template for success. Our competitive advantage comes
+from having created these tools to identify the deficiencies in the real world for the former parent Rennova from its former national
+laboratory operations to its more recent rural hospitals.
+
+ 
+
+"vCIO
+Services". Based on the skills and experience inherent within InnovaQor and resulting from work undertaken on behalf of the former
+parent, Rennova, InnovaQor offers a range of CIO services centered on our ability to link IT systems to business objectives combined
+with our knowledge of technology trends likely to impact our sector. The CIO services would include (but not be limited to):
+
+ 
+
+ 
+ 
+ 
+ Program
+ and Project Management
+
+ 
+ 
+ 
+ Vendor
+ Management
+
+ 
+ 
+ 
+ Business
+ Continuity and Disaster Recovery
+
+ 
+ 
+ 
+ Security
+ Services
+
+ 
+ 
+ 
+ Network
+ Infrastructure Management
+
+ 
+ 
+ 
+ Helpdesk
+ Provision
+
+ 
+ 
+
+"MedTuning"
+is the technology and platform owned by Genomas. It utilized proprietary biomarkers, treatment algorithms, and a web-based interactive
+physician portal delivery system to provide clinical decision support for physicians and personalized drug treatment for patients. Products
+were DNA-guided to improve the therapeutic benefit of widely used prescription drugs while also reducing the risk of significant side
+effects for patients.
+
+ 
+
+Medical
+Informatics: Our technology platform, proprietary algorithms and physician interface portal can be extended to a wide range of drug categories.
+
+ 
+
+ 24
+
+ 
+
+ 
+
+ 
+
+Research
+and Development: Technology platform applicable to numerous disease states; current pipeline in mental health, pain management, cardiovascular
+and diabetes.
+
+ 
+
+"Advantage"
+is a proprietary HIPAA compliant software developed to eliminate the need for paper requisitions by providing an easy to use and efficient
+web-based system that lets customers securely place lab orders, track samples and view test reports in real time from any web-enabled
+laptop, notepad or smart phone.
+
+ 
+
+Brands
+
+ 
+
+We
+intend to trademark both InnovaQor and its products and services, i.e. ClinLab, M2Select, Qira, vCIO and Health Technology Solutions.
+
+ 
+
+Sales
+
+ 
+
+The
+HTS Group provided products and services to 25 and 36 customers in the United States and generated $343,440 and $468,883 in net revenues
+during the years ended December 31, 2022 and 2021, respectively. Included in net revenues were sales made to the former parent and related
+entities of $191,517 and $237,551 for the years ended December 31, 2022 and 2021, respectively. Net revenues amounted to $175,915 and
+$95,893 for the three months ended March 31, 2023 and 2022, respectively. Included in net revenues were sales to the former parent
+and related entities of $84,703 and $53,555 for the three months ended March 31, 2023 and 2022, respectively.
+
+ 
+
+Distribution
+
+ 
+
+InnovaQor
+intends to sell its Health Technology Solutions, Medical Mime and ClinLab products and services directly to customers through internal
+sales and digital marketing. InnovaQor intends to identify strategic partnerships that sell into the sectors it is targeting. InnovaQor
+intends to promote these products and services to the strategic partnerships existing clientele coming to agreement on a recurring
+revenue based on cash collected for closed sales of these products and services.
+
+ 
+
+Competitive
+Position
+
+ 
+
+The
+healthcare software, IT and vCIO consulting services industry is extremely competitive, highly fragmented, and subject to rapid change.
+The industry includes a large number of participants with a variety of skills and industry expertise, including other strategy, business
+operations, technology, technical advisory firms, regional and specialty consulting firms, and the internal professional resources of
+organizations. We compete with a large number of service and technology providers in all of our segments. Our competitors often vary,
+depending on the particular practice area. We expect to continue to face competition from new entrants.
+
+ 
+
+We
+believe the principal competitive factors in our market include reputation, the ability to attract and retain top talent, and the capacity
+to manage engagements effectively to drive high value to clients. There is also competition on price, although to a lesser extent due
+to the criticality of the issues that many of our services address. Our competitors often have a greater geographic footprint, a broader
+international presence, and more resources than we do, but we believe that our industry experience and reputation, ability to deliver
+meaningful client results, and balanced portfolio of services enable us to compete favorably in the consulting marketplace.
+
+ 
+
+Our
+rehab EHR product, Medical Mime, is a main competitor in its sector and our immediate competition is provided by KIPU, BestNotes, Zencharts,
+Sunwave, and TherapyNotes. Our competitive advantage is a system developed with and for facilities practicing in this sector along with
+customized reports and forms. Our system offers partially automated implementation and fully automated billing files that restrict billing
+until all required documentation is available while flagging operational deficiencies.
+
+ 
+
+Our
+LIS, ClinLab, is a small player in its sector and our immediate competitors are LabDaq, Schuyler House and RelayMed. Our competitive
+advantage is a select feature set and affordability.
+
+ 
+
+ 25
+
+ 
+
+ 
+
+ 
+
+Our
+vCIO services are just launching and have the experience of being the internal IT team for the former parent company, Rennova. With a
+10-year experience in providing complete services, consulting, project management, software management, vendor management and network
+engineering, vCIO will specialize in healthcare facilities.
+
+ 
+
+Qira
+is our healthcare business analytics tool powered by PowerBI. It is a culmination of healthcare financial and revenue cycle management
+plus clinical operations operational oversight needs. It aggregates data from multiple healthcare systems to produce a single source
+business intelligence tool with executive level daily briefing to deep dive operational management of claims and operational efficiencies.
+There are many other analytical services available that customize solutions but none that has a proven template for success. Our competitive
+advantage comes from having created these tools to identify the deficiencies in the real world for the former parent Rennova from its
+former national laboratory operations to its more recent rural hospitals. This product easily pays for itself as it immediately eliminates
+the need for accountants monthly delivery of numbers that can cost upwards of $25,000 a month.
+
+ 
+
+Research
+and Development
+
+ 
+
+The
+industries and market segments in which we plan to operate and compete are subject to rapid technological developments, evolving industry
+standards, changes in customer requirements and competitive new products and features. As a result, we believe our success, in part,
+will depend on our ability to build and enhance our products in a timely and efficient manner and to develop and introduce new products
+that meet our clients needs and help our clients reduce their total cost of operation. To achieve these objectives, we plan to
+make research and development investments through internal and third-party development activities, third-party licensing agreements and
+potentially through joint ventures and acquisitions.
+
+ 
+
+Research
+and Intellectual Property
+
+ 
+
+Our
+future success and ability to compete will depend on our ability to develop and maintain our intellectual property and proprietary technology
+and to operate without infringing on the proprietary rights of others. Software products are generally licensed to customers on a non-exclusive
+basis for internal use in a customer s organization. We plan to also grant rights in intellectual property that we plan on developing
+or acquiring to third parties to allow them to market certain of our future products on a non-exclusive or limited-scope exclusive basis
+for an application of such product or to a specific geographic region.
+
+ 
+
+InnovaQor
+plans to protect its intellectual property in its subsidiaries through a combination of trademarks and copyrights in the coming year.
+InnovaQor will evaluate the possibility of acquiring or developing patents that are related to healthcare services and products.
+
+ 
+
+Our
+IP strategy encompasses protection on composition of matter and method for DNA markers, marker ensembles, and predictive biostatistical
+algorithms.
+
+ 
+
+Platform
+Technology
+
+ 
+
+Trademarks
+and Copyrights
+
+ 
+
+U.S.
+Copyright (Registration Number VA 1-797-692): Personalized Health Portal with design, user interface and algorithm
+
+ 
+
+While
+we believe our intellectual property will be an asset, and our ability to maintain and protect our intellectual property rights is important
+to our success, we do not anticipate that our business will be materially dependent on any patent, trademark, license, or other intellectual
+property right.
+
+ 
+
+Employees
+
+ 
+
+As
+of March 30, 2023, we have six employees, five of whom are working on maintenance and customer service of our existing products. We expect
+to grow with a focus on sales and business development eventually expanding our technical team to support the growth. We plan to hire
+a team of employees and contractors to deliver on the goal of developing and delivering a technology-based communication platform to
+a broad range of healthcare professionals and businesses using a subscription revenue model with added value bolt on services.
+
+ 
+
+ 26
+
+ 
+
+ 
+
+ 
+
+Cyclical
+Nature of the Business
+
+ 
+
+We
+have found that our business is not very cyclical but it does exhibit certain seasonality around holiday periods.
+
+ 
+
+Regulatory
+Matters
+
+ 
+
+The
+healthcare industry is subject to extensive government regulation, most notably the Health Insurance Portability and Accountability Act
+(HIPAA) and Protected Health Information (PHI).
+
+ 
+
+HIPAA
+helps protect the privacy of patient information by:
+
+ 
+
+ 
+ 
+ 
+ Providing
+ the ability to transfer and continue health insurance coverage for millions of American workers and their families when they change
+ or lose their jobs;
+
+ 
+ 
+ 
+ Reducing
+ health care fraud and abuse;
+
+ 
+ 
+ 
+ Mandating
+ industry-wide standards for health care information on electronic billing and other processes; and
+
+ 
+ 
+ 
+ Requiring
+ the protection and confidential handling of protected health information
+
+ 
+ 
+
+PHI
+is a HIPAA Privacy Rule that provides federal protections for personal health information held by covered entities and gives patients
+an array of rights with respect to that information. At the same time, the Privacy Rule is balanced so that it permits the disclosure
+of personal health information needed for patient care and other important purposes.
+
+ 
+
+Although
+the standards are challenging, we believe that our products are compliant with HIPAA and PHI regulations. Nonetheless, our Company could
+be adversely affected if a third party is impacted by HIPAA or PHI related software defects.
+
+ 
+
+Emerging
+Growth Company Status of InnovaQor
+
+ 
+
+An
+emerging growth company (EGC) is any company that meets the following requirements and will lose its emerging growth status should it
+exceed any of these:
+
+ 
+
+ 
+ 
+ 
+ The
+ company has less than $1.07 billion or more of total gross revenue in a consecutive 12-month period;
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ Is
+ within five years of its original IPO;
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ The
+ company cannot have issued more than $1 billion in non-convertible bonds within the last three years; and
+
+ 
+ 
+ 
+ 
+
+ 
+ 
+ 
+ The
+ company does not qualify as a large accelerated filer, meaning having a public float of over $700 million.
+
+ 
+ 
+
+InnovaQor
+is an "emerging growth company" as defined in the Jumpstart our Business Startups Act (the "JOBS Act"). As such,
+InnovaQor will be eligible to take advantage of certain exemptions from various reporting requirements that apply to other public companies
+that are not emerging growth companies, including compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley
+Act and the requirements to hold a non-binding advisory vote on executive compensation and any golden parachute payments not previously
+approved. If InnovaQor does take advantage of some or all of these exemptions, some investors may find its common stock less attractive.
+The result may be a less active trading market for the common stock and its stock price may be more volatile.
+
+ 
+
+In
+addition, Section 107 of the JOBS Act provides that an emerging growth company may take advantage of the extended transition period provided
+in Section 13(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), for complying with new or revised
+accounting standards, meaning that InnovaQor, as an emerging growth company, can delay the adoption of certain accounting standards until
+those standards would otherwise apply to private companies. It is InnovaQor s present intention to adopt any applicable accounting
+standards timely. If at some time InnovaQor delays adoption of a new or revised accounting standard, our financial statements may not
+be comparable to those of companies that comply with such new or revised accounting standards.
+
+ 
+
+ 27
+
+ 
+
+ 
+
+ 
+
+Legal
+Proceedings
+
+ 
+
+From
+time to time, the Company may be involved in a variety of claims, lawsuits, investigations and proceedings related to contractual disputes,
+employment matters, regulatory and compliance matters, intellectual property rights and other litigation arising in the ordinary course
+of business. The Company operates in a highly regulated industry which may inherently lend itself to legal matters. Management is aware
+that litigation has associated costs and that results of adverse litigation verdicts could have a material effect on the Company s
+consolidated financial position or results of operations. Management, in consultation with legal counsel, has addressed known assertions
+and predicted unasserted claims below.
+
+ 
+
+P2P
+Staffing Corp. received a judgment against HTS during 2018 in the amount of $58,784 plus accrued interest and court costs for amounts
+owed. As of each of March 31, 2023 and December 31, 2022, $10,464 was outstanding and owed for this judgment and included in accounts
+payable in the consolidated balance sheets incorporated by reference in this prospectus.
+
+ 
+
+Two
+former employees of CollabRx, Inc., one of the acquired subsidiaries, filed suits in a California state court against the former Parent,
+Rennova, and CollabRx, Inc., in connection with amounts claimed to be owed under their respective employment agreements with CollabRx,
+Inc. One former employee received a judgment for approximately $253,000, which Rennova has paid in full. The other former employee received
+a judgment for approximately $173,000.
+
+ 
+
+MANAGEMENT S
+DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
+
+AND RESULTS OF OPERATIONS
+
+ 
+
+The
+following discussion and analysis provide information which management believes is relevant to an assessment and understanding of our
+consolidated results of operations and financial condition. This discussion contains forward-looking statements that involve risks and
+uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of numerous
+factors including, but not limited to, those described above under "

parsed_sections/risk_factors/2023/CIK0001127203_nationwide_risk_factors.txt

@@ -0,0 +1 @@
+Risk Factors

parsed_sections/risk_factors/2023/CIK0001138608_bloomios_risk_factors.txt

@@ -0,0 +1,644 @@
+RISK FACTORS
+ 
+Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below together with all of the other information contained in this prospectus, including our financial statements and the related notes in our Quarterly and Annual Reports along with our other SEC filings, before deciding to invest in our common stock. If any of the following risks actually occur, our business, prospects, operating results and financial condition could suffer materially, the trading price of our common stock could decline, and you could lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business.
+ 
+Risks Related to Offering of Shares by Arena Issued or Issuable Pursuant to the Arena Transaction
+ 
+It is not possible to predict the actual number of shares we will issue and sell under the Arena Purchase Agreement, or the actual gross proceeds resulting from those sales. Further, we may not have access to the full amount available under the Arena Purchase Agreement.
+ 
+On February 7, 2023, we entered into the Arena Purchase Agreement pursuant to which ABR has agreed to purchase up to an aggregate of $20,000,000 of our common stock (subject to certain limitations) from time to time over the term of the Arena Purchase Agreement. Per the terms of the Arena Purchase Agreement, we may direct ABR to purchase, at our discretion, up to $20,000,000 worth of shares of our common stock under our agreement over a 36-month period. 
+ 
+We generally have the right to control the timing and amount of any sales of shares to Arena under the Arena Purchase Agreement. Sales of Common Shares, if any, to Arena under the Arena Purchase Agreement will depend upon market conditions and other factors to be determined by us. We may ultimately decide to sell to such selling security holder all, some or none of the shares of Common Shares that may be available for us to sell to such selling security holder pursuant to the Arena Purchase Agreement. Depending on market liquidity at the time, resales of those shares by the selling security holder may cause the public trading price of common stock to decrease.
+ 
+Because the purchase price per share to be paid by the selling security holder for the Common Shares that we may elect to sell to the selling security holder under the Arena Purchase Agreement, if any, will fluctuate based on the market prices of the Common Shares during the applicable Pricing Period for each sale made pursuant to the Arena Purchase Agreement, if any, it is not possible for us to predict, as of the date of this prospectus and prior to any such sales, the number of shares of common stock that we will sell to the selling security holder under the Arena Purchase Agreement, the purchase price per share that the selling security holder will pay for shares purchased from us under the Arena Purchase Agreement, or the aggregate gross proceeds that we will receive from those purchases by the selling security holder under the Arena Purchase Agreement, if any.
+ 
+Moreover, although the Arena Purchase Agreement provides that we may, in our discretion, from time to time during the term of the Arena Purchase Agreement, direct the selling security holder to purchase Common Shares from us in one or more purchases under the Arena Purchase Agreement, up to $20,000,000, only 22,400,000 shares of Common Stock (2,400,000 of which represent the commitment fee shares) are being registered for resale under this registration statement, which this prospectus forms a part. Because the market prices of common stock may fluctuate from time to time after the date of this prospectus and, as a result, the actual purchase prices to be paid by the selling security holder for Common Shares that we direct it to purchase under the Arena Purchase Agreement, if any, also may fluctuate because they will be based on such fluctuating market prices of Common Shares, it is possible that we may need to issue and sell more than the number of shares being registered for resale under this prospectus to the selling security holder under the Arena Purchase Agreement in order to receive aggregate gross proceeds equal to the selling security holder s $20,000,000 commitment amount under the Arena Purchase Agreement.
+ 
+If it becomes necessary for us to issue and sell to the selling security holder under the Arena Purchase Agreement more Common Shares than are being registered for resale under this prospectus in order to receive aggregate gross proceeds equal to $20.0 million from sales of Common Shares to Arena under the Arena Purchase Agreement, we must first file with the SEC one or more additional registration statements to register under the Securities Act the resale by the selling security holder of any such additional Common Shares we wish to sell to Arena from time to time under the Arena Purchase Agreement, and the SEC must declare such additional registration statements effective before we may elect to sell any additional Common Shares to the selling security holder under the Arena Purchase Agreement. In addition, pursuant to the terms of the Arena Purchase Agreement if the Company is listed on a national exchange, we will not sell to Arena Common Shares in excess of the Exchange Cap which is 19.99% of the total outstanding Common Shares of the Company as of the date of the Arena Purchase Agreement, unless we obtain stockholder approval to issue shares of common stock in excess of the Exchange Cap. The number of Common Shares ultimately offered for resale by Arena is dependent upon the number of Common Shares, if any, we ultimately sell to Arena under the Arena Purchase Agreement.
+ 
+ 
+20
+
+Table of Contents
+ 
+Any issuance and sale by us under the Arena Purchase Agreement of a substantial amount of shares of common stock in addition to the 20,000,000 shares of common stock being registered for resale under this prospectus could cause additional substantial dilution to our stockholders.
+ 
+Our inability to access a portion or the full amount available under the Arena Purchase Agreement, in the absence of any other financing sources, could have a material adverse effect on our business.
+ 
+The sale and issuance of Common Shares to Arena will cause dilution to our existing stockholders, and the sale of Common Shares by Arena, or the perception that such sales may occur, could cause the price of common stock to fall.
+ 
+The purchase price for the shares that we may sell to Arena under the Arena Purchase Agreement will fluctuate based on the price of the Common Shares. Depending on market liquidity at the time, sales of such shares may cause the trading price of common stock to fall.
+ 
+If and when we do sell shares to Arena, after Arena has acquired the shares, Arena may resell all, some, or none of those shares at any time or from time to time in its discretion. Therefore, sales to Arena by us could result in substantial dilution to the interests of other holders of common stock. Additionally, the sale of a substantial number of shares of common stock to Arena, or the 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.
+ 
+Investors who buy shares at different times will likely pay different prices.
+ 
+Pursuant to the Arena Purchase Agreement and subject to market demand, we will have discretion to vary the timing, prices, and numbers of shares sold to Arena. If and when we do elect to sell shares of common stock Arena pursuant to the Arena Purchase Agreement, after Arena has acquired such shares, Arena may resell all, some or none of such shares at any time or from time to time in its discretion and at different prices. As a result, investors who purchase shares from Arena in this offering at different times will likely pay different prices for those shares, and so may experience different levels of dilution and in some cases substantial dilution and different outcomes in their investment results. Investors may experience a decline in the value of the shares they purchase from Arena in this offering as a result of future sales made by us to Arena at prices lower than the prices such investors paid for their shares in this offering. In addition, if we sell a substantial number of shares to Arena under the Arena Purchase Agreement, or if investors expect that we will do so, the actual sales of shares or the mere existence of our arrangement with Arena may 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 such sales.
+ 
+Arena will pay less than the then-prevailing market price for common stock, which could cause the price of common stock to decline.
+ 
+The purchase price of common stock sold to Arena under the Arena Purchase Agreement is derived from the market price of common stock on the OTCQB. Shares to be sold to Arena pursuant to the Arena Purchase Agreement will be purchased at a discounted price. As a result of the pricing structure, Arena may sell the shares it receives immediately after receipt of the shares, which could cause the price of common stock to decrease.
+ 
+Our management team will have broad discretion over the use of the net proceeds from our sale of shares of common stock to Arena, if any, and you may not agree with how we use the proceeds and the proceeds may not be invested successfully.
+ 
+Our management team will have broad discretion as to the use of the net proceeds from our sale of shares of common stock to Arena, if any, and we could use such proceeds for purposes other than those contemplated at the time of commencement of this offering. Accordingly, you will be relying on the judgment of our management team with regard to the use of those net proceeds, and you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. It is possible that, pending their use, we may invest those net proceeds in a way that does not yield a favorable, or any, return for us. The failure of our management team to use such funds effectively could have a material adverse effect on our business, financial condition, operating results and cash flows.
+ 
+ 
+21
+
+Table of Contents
+ 
+Risks Related to Our Business and Industry
+ 
+We have a history of operating losses and expect to incur additional losses in the future.
+ 
+We have sustained losses in recent years, which as of December 31, 2022, accumulated to $20,109,557, including an operating net loss of $13,774,165 and $2,011,327 for the years ended December 31, 2022, and 2021, respectively. The accumulated operating net loss of March 31, 2023, was $22,844,403 including $2,734,84 for the period. We are likely to continue to incur net losses as we pursue our strategy, which is currently focused on developing our sales channels and distribution partnerships. Our losses have had, and will continue to have, an adverse effect on our shareholders equity and working capital. Any failure to achieve and maintain profitability would continue to have an adverse effect on our shareholders equity and working capital and could result in a decline in our share price or cause us to cease operations. To date, the Company has not made any sales. Also, our auditor has expressed substantial doubt as to the Company s ability to continue as a going concern. 
+ 
+Our auditors have issued a going concern opinion, and we may not be able to achieve our objectives and may have to cease operations if we cannot adequately fund our operations.
+ 
+Our auditors issued a going concern opinion in connection with the audit of our annual financial statements for the fiscal year ended December 31, 2022. A going concern opinion means that there is substantial doubt that the company can continue as an ongoing business for the next year. If we are unable to continue as a going concern, we might have to liquidate our assets and the values we receive for our assets in liquidation or dissolution could be significantly lower than the values reflected in our financial statements. In addition, the inclusion of an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern and our lack of cash resources may materially adversely affect our share price and our ability to raise new capital or to enter into critical contractual relations with third parties. There is no assurance that we will be able to adequately fund our operations in the future.
+ 
+We will need significant additional capital, which we may be unable to obtain.
+ 
+Our capital requirements have been and will continue to be significant. We will require additional funds to develop sales channels and market our products. There can be no assurance that financing will be available in amounts or on terms acceptable to us, if at all. In either of the aforementioned situations, we may not be able to fully implement our growth plans.
+ 
+Additional financings that we may require in the future will dilute the percentage ownership interests of our stockholders and may adversely affect our earnings and net book value per share. In addition, we may not be able to secure any such additional financing on terms acceptable to us, if at all. Moreover, if we are unable to obtain such additional capital as discussed above, we will be required to stop our operations, and will resume our activities, only after capital is raised.
+ 
+To facilitate ongoing operations and product development, on February 7, 2023, the Company entered into the Arena Purchase Agreement pursuant to which ABR has agreed to purchase up to an aggregate of $20,000,000 of common stock of the Company (subject to certain limitations) from time to time over the term of the Arena Purchase Agreement. The Arena Purchase Agreement was further amended on June 13, 2023, to further restrict the Beneficial Ownership Cap and adjust the number of Commitment Fee Shares payable to ABR. 
+ 
+ 
+22
+
+Table of Contents
+ 
+Per the terms of the Arena Purchase Agreement, we may, from time to time and at our sole discretion, direct ABR to purchase shares of our common stock in amounts up to the Maximum Advance Amount shall be calculated as follows: (a) if the Advance Notice is received by 8:30 a.m. Eastern Time, the lower of: (i) an amount equal to forty percent (40%) of the average of the Daily Value Traded of the Common Shares on the ten trading days immediately preceding an Advance Notice, or (ii) $20 million; and (b) if the Advance Notice is received after 8:30 a.m. Eastern Time but prior to 10:30 a.m. Eastern Time, the lower of (i) an amount equal to thirty percent (30%) of the average of the Daily Value Traded of the Common Shares on the ten trading days immediately preceding an Advance Notice, or (ii) $15 million. For purposes hereof, Daily Value Traded is the product obtained by multiplying the daily trading volume of the Company s Common Shares on the Principal Market during regular trading hours as reported by Bloomberg L.P., by the VWAP for such Trading Day. For the avoidance of doubt, the daily trading volume shall include all trades on the Principal Market during regular trading hours. The purchase price of the shares shall mean the price per Share obtained by multiplying the Market Price by 94%. If the total day s VWAP price at the end of any given 1-hour interval has changed by +/- 6% versus the previous 1-hour interval, the Purchase Price will be 94% of Arena s sale execution for that day. The last 30 minutes of trading will count as the final 1-hour interval. Market Price shall mean the simple average of the daily VWAP of the Common Shares during the Pricing Period.
+ 
+The extent to which we rely on ABR as a source of funding will depend on a number of factors including, without limitation, the prevailing market price of our common stock and the extent to which we are able to secure working capital from other sources. If obtaining sufficient funding from ABR were to prove unavailable or prohibitively dilutive, we may need to secure another source of funding in order to satisfy our working capital needs. Even if we sell all $20,000,000 under the Arena Purchase Agreement to ABR, we will most likely still need additional capital to fully implement our business, operating and development plans. Should the financing we require to sustain our working capital needs be unavailable or prohibitively expensive when we require it, the consequences could be a material adverse effect on our business, operating results, financial condition and prospects.
+ 
+Because of our limited operating history, we may not be able to successfully operate our business or execute our business plan.
+ 
+Since 2021, under our new leadership team, we went through a strategy change, which shifted the focus of the company to the manufacturing, private labeling and white labeling of hemp-derived products. Given our limited operating history, it is hard to evaluate our proposed business and prospects. Our proposed business operations will be subject to numerous risks, uncertainties, expenses and difficulties associated with early- stage enterprises. Such risks include, but are not limited to, the following:
+ 
+ 
+ 
+the absence of a lengthy operating history;
+
+ 
+ 
+insufficient capital to fully realize our operating plan;
+
+ 
+ 
+expected losses for the foreseeable future;
+
+ 
+ 
+operating in multiple currencies;
+
+ 
+ 
+our ability to anticipate and adapt to a developing market(s);
+
+ 
+ 
+acceptance of our products;
+
+ 
+ 
+limited marketing experience;
+
+ 
+ 
+a competitive environment characterized by well-established and well-capitalized competitors;
+
+ 
+ 
+the ability to identify, attract and retain qualified personnel; and
+
+ 
+ 
+operating in an environment that is highly regulated by a number of agencies.
+
+ 
+Because we are subject to these risks, evaluating our business may be difficult, our business strategy may be unsuccessful and we may be unable to address such risks in a cost-effective manner, if at all. If we are unable to successfully address these risks our business could be harmed.
+ 
+The commercial success of our products as well as any future products depends upon the degree of market acceptance by the consumer public of the hemp industry.
+ 
+Our success depends on our products being generally and commercial accepted by consumers. We are aware of this key factor and are focusing our efforts on ensuring that our products appeal to consumers. However, there remain no assurances that we will succeed, nor is it clear how long it will take until we receive market recognition.
+ 
+Any product that we bring to the market may or may not gain market acceptance by prospective customers. The commercial success of our products and any future product depends in part on the hemp industry and potential regulations may occur. If our products or any future product do not achieve an adequate level of acceptance, we may not generate significant product revenue and may not become profitable. The degree of market acceptance of our products will depend on a number of factors, including:
+ 
+ 
+ 
+The cost, safety, efficacy, and convenience of our products;
+
+ 
+ 
+the acceptance of our products in the hemp industry;
+
+ 
+ 
+the effectiveness of our sales and marketing efforts;
+
+ 
+ 
+the strength of marketing and distribution support for, and timing of market introduction of, competing products; and
+
+ 
+ 
+publicity concerning our products or competing products.
+
+ 
+Our efforts to penetrate the hemp industry and educate the marketplace on the benefits of our products may require significant resources and may never be successful.
+ 
+ 
+23
+
+Table of Contents
+ 
+We may face significant competition from other companies looking to expand their line of products.
+ 
+We expect to face significant competition in every aspect of our business, and particularly from other companies that carry the same types of products.
+ 
+We believe that many of our competitors spend significantly more on research and development-related activities than we do. Our competitors may discover new products or refine existing products to compete with our products. Our commercial opportunities will be reduced or eliminated if these competing products are more effective, are more convenient or are less expensive than our products.
+ 
+We may be unable to respond effectively to technological changes in our industry, which could reduce the demand for our products.
+ 
+Our future business success will depend upon our ability to maintain and enhance our product portfolio with respect to advances in technological improvements for certain diagnostic products and market products that meet customer needs and market conditions in a cost-effective and timely manner. Maintaining and enhancing our product portfolio may require significant investments in licensing fees and royalties. We may not be successful in gaining access to new products that successfully compete or are able to anticipate customer needs and preferences, and our customers may not accept one or more of our products. If we fail to keep pace with evolving technological innovations or fail to modify our products and services in response to customers needs or preferences, then our business, financial condition and results of operations could be adversely affected.
+ 
+Certain conditions or events could disrupt the Company s supply chains, disrupt operations, and increase operating expenses.
+ 
+Conditions or events including, but not limited to, the following could disrupt the Company s supply chains and in particular its ability to deliver its products, interrupt operations at its facilities, increase operating expenses, resulting in loss of sales, delayed performance of contractual obligations or require additional expenditures to be incurred: (i) extraordinary weather conditions or natural disasters such as hurricanes, tornadoes, floods, fires, extreme heat, earthquakes, etc.; (ii) a local, regional, national or international outbreak of a contagious disease, including the COVID-19 coronavirus, Middle East Respiratory Syndrome, Severe Acute Respiratory Syndrome, H1N1 influenza virus, avian flu, or any other similar illness could result in a general or acute decline in economic activity; (iii) political instability, social and labor unrest, war or terrorism, including the current conflict between Russia and Ukraine; or (iv) interruptions in the availability of basic commercial and social services and infrastructure including power and water shortages, and shipping and freight forwarding services including via air, sea, rail and road.
+ 
+Demand for our products could be adversely affected and significantly influenced by scientific research or findings, regulatory proceedings, litigation, media attention or other research findings.
+ 
+Our industry is at a relatively early stage of its development. Consumer perceptions regarding legality, morality, consumption, safety, efficacy and quality of hemp are mixed and evolving and can be significantly influenced by scientific research or findings, regulatory investigations, litigation, media attention and other publicity regarding the consumption of medicinal cannabis products. There can be no assurance that future scientific research, findings, regulatory proceedings, litigation, media attention or other research findings or publicity will be favorable to the hemp derived product market or any particular product, or consistent with earlier publicity. Future research reports, findings, regulatory proceedings, litigation, media attention or other publicity that are perceived as less favorable than, or that question, earlier research reports, findings or publicity, could have a material adverse effect on the demand for medicinal cannabis and on our business, results of operations, financial condition and cash flows. Further, adverse publicity reports or other media attention regarding hemp derived products in general or associating the consumption of the products with illness or other negative effects or events, could have such a material adverse effect. Public opinion and support for hemp derived product use has traditionally been inconsistent and varies from jurisdiction to jurisdiction. Our ability to gain and increase market acceptance of our business may require substantial expenditures on investor relations, strategic relationships and marketing initiatives. There can be no assurance that such initiatives will be successful and their failure to materialize into significant demand may have an adverse effect on our financial condition.
+ 
+Damage to the Company s reputation can be the result of the actual or perceived occurrence of any number of events, and could include any negative publicity, whether such publicity is accurate or not.
+ 
+The increased usage of social media and other web-based tools used to generate, publish and discuss user-generated content and to connect with other users has made it increasingly easier for individuals and groups to communicate and share opinions and views regarding the Company and its activities, whether true or not. Although the Company believes that it operates in a manner that is respectful to all stakeholders and that it takes pride in protecting its image and reputation, it does not ultimately have direct control over how it is perceived by others. Reputational loss may result in decreased ability to enter into new customer, distributor or supplier relationships, retain existing customers, distributors or suppliers, reduced investor confidence and access to capital, increased challenges in developing and maintaining community relations and an impediment to our overall ability to advance our projects, thereby having a material adverse effect on our financial performance, financial condition, cash flows and growth prospects.
+ 
+ 
+24
+
+Table of Contents
+ 
+We are subject to the inherent risk of exposure to product liability claims, actions and litigation.
+ 
+As a manufacturer of products designed to be ingested by humans, we face an inherent risk of exposure to product liability claims, regulatory action and litigation if our products are alleged to have caused bodily harm or injury. In addition, the sale of our products involves the risk of injury to consumers due to tampering by unauthorized third parties or product contamination. Adverse reactions resulting from human consumption of our products alone or in combination with other medications or substances could occur. We may be subject to various product liability claims, including, among others, that our products caused injury or illness, include inadequate instructions for use or include inadequate warnings concerning health risks, possible side effects or interactions with other substances. Product liability claims or regulatory actions against us could result in increased costs, could adversely affect our reputation with our clients and consumers generally, and could have a material adverse effect on our results of operations and financial condition. There can be no assurances that we will be able to obtain or maintain product liability insurance on acceptable terms or with adequate coverage against potential liabilities. Such insurance is expensive and may not be available in the future on acceptable terms, or at all. The inability to obtain sufficient insurance coverage on reasonable terms or to otherwise protect against potential product liability claims could prevent or inhibit the commercialization of our potential products.
+ 
+We are subject to the inherent risks involved with product recalls.
+ 
+Manufacturers and distributors of products are sometimes subject to the recall or return of their products for a variety of reasons, including product defects, such as contamination, unintended harmful side effects or interactions with other substances, packaging safety and inadequate or inaccurate labeling disclosure. If any of our products are recalled due to an alleged product defect or for any other reason, we could be required to incur the unexpected expense of the recall and any legal proceedings that might arise in connection with the recall. We may lose a significant amount of sales and may not be able to replace those sales at an acceptable margin, or at all. In addition, a product recall may require significant management attention. There can be no assurance that any quality, potency or contamination problems will be detected in time to avoid unforeseen product recalls, regulatory action or lawsuits. Additionally, if our products are subject to recall, our reputation could be harmed. A recall for any of the foregoing reasons could lead to decreased demand for our products and could have a material adverse effect on our results of operations and financial condition. Additionally, product recalls may lead to increased scrutiny of our operations by regulatory agencies, requiring further management attention, potential loss of applicable licenses, and potential legal fees and other expenses.
+ 
+The Company s products could have unknown side effects.
+ 
+If the products the Company sells are not perceived to have the effects intended by the end user, its business may suffer and the business may be subject to products liability or other legal actions. Many of the Company s products contain innovative ingredients or combinations of ingredients. There is little long-term data available with respect to efficacy, unknown side effects and/or interaction with individual human biochemistry, or interaction with other drugs. Moreover, there is little long-term data available with respect to efficacy, unknown side effects and/or its interaction with individual animal biochemistry. As a result, the Company s products could have certain side effects if not taken as directed or if taken by an end user that has certain known or unknown medical conditions.
+ 
+The Company may be unable to anticipate changes in its potential client requirements that could make the Company s existing products and services obsolete. The Company s success will depend, in part, on its ability to continue to enhance its product and service offerings so as to address the increasing sophistication and varied needs of the market and respond to technological and regulatory changes and emerging industry standards and practices on a timely and cost-effective basis.
+ 
+Research regarding the medical benefits, viability, safety, efficacy, use and social acceptance of isolated cannabinoids such as CBD remains in early stages.
+ 
+There have been relatively few clinical trials on the benefits of isolated cannabinoids (such as CBD). Although the Company believes that the articles, reports and studies support its beliefs regarding the medical benefits, viability, safety, efficacy, dosing and social acceptance of hemp derived products, future research and clinical trials may prove such statements to be incorrect, or could raise concerns regarding, and perceptions relating to, cannabis. Given these risks, uncertainties and assumptions, investors should not place undue reliance on such articles and reports. Future research studies and clinical trials may draw opposing conclusions to those stated herein or reach negative conclusions related to hemp derived products, which could have a material adverse effect on the demand for the Company s products, which could result in a material adverse effect on our business, financial condition and results of operations or prospects.
+ 
+Fluctuations in the cost and availability of raw materials, equipment, labor, and transportation could cause manufacturing delays or increase our costs.
+ 
+The price and availability of key components used to manufacture our products has been increasing and may continue to fluctuate significantly. In addition, the cost of labor within our company or at our third-party manufacturers could increase significantly due to regulation or inflationary pressures. Additionally, the cost of logistics and transportation fluctuates in large part due to the price of oil, and availability can be limited due to political and economic issues. Any fluctuations in the cost and availability of any of our raw materials, packaging, or other sourcing or transportation costs could harm our gross margins and our ability to meet customer demand. If we are unable to successfully mitigate a significant portion of these product cost increases or fluctuations, our results of operations could be harmed.
+ 
+ 
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+ 
+We rely on third-parties for raw materials and to manufacture and compound some of our products. We have no control over these third parties and if these relationships are disrupted our results of operations in future periods will be adversely impacted.
+ 
+We currently have short term supply contracts with unaffiliated third-party vendors for our critical raw materials. In addition, some of our products are manufactured or compounded by unaffiliated third parties and the use of these third-party co-packers changes from time to time due to customer demand and the composition of our product mix and product portfolio. We do not have any long-term contracts with any of these third parties, and we expect to compete with other companies for raw materials, production and imported packaging material capacity. If we experience significant increased demand or need to replace an existing raw material supplier or third-party manufacturer, there can be no assurances that replacements for these third-party vendors will be available when required on terms that are acceptable to us, or at all, or that any manufacturer or compounder would allocate sufficient capacity to us in order to meet our requirements. In addition, even if we are able to expand existing or find new sources, we may encounter delays in production and added costs as a result of the time it takes to engage third parties. Any delays, interruption or increased costs in raw materials and/or the manufacturing or compounding of our products could have an adverse effect on our ability to meet retail customer and consumer demand for our products and result in lower revenues and net income both in the short and long-term.
+ 
+The Company s inventory has a shelf life and may reach its expiration and not be sold.
+ 
+The Company holds finished goods in inventory and its inventory has a shelf life. The Company s inventory may reach its expiration and not be sold. Although management regularly reviews the quantity and remaining shelf life of inventory on hand, and estimates manufacturing and sales lead times in order to manage its inventory, write-downs of inventory may still be required. Any such write-down of inventory could have a material adverse effect on the Company s business, financial condition, and results of operations.
+ 
+The Company may not be able to maintain effective quality control systems.
+ 
+The Company may not be able to maintain an effective quality control system. The Company ascribes its early successes, in part, on its commitment to product quality and its effective quality control system. The effectiveness of the Company s quality control system and its ability to obtain or maintain good manufacturing practice ( GMP ) certification with respect to its manufacturing, processing and testing facilities depend on a number of factors, including the design of its quality control procedures, training programs, and its ability to ensure that its employees adhere to the Company s policies and procedures. The Company also depends on service providers such as toll manufacturers and contract laboratories to manufacture, process or test its products that are subject to GMP certification requirements.
+ 
+We expect that regulatory agencies will periodically inspect our and our service providers facilities to evaluate compliance with applicable GMP requirements. Failure to comply with these requirements may subject us or our service providers to possible regulatory enforcement actions. Any failure or deterioration of the Company s or its service providers quality control systems, including loss of GMP certification, may have a material adverse effect on the Company s business, results of operations and financial condition.
+ 
+We currently rely on a limited number of suppliers to produce certain key components of our products.
+ 
+If any of our suppliers failed to comply with Current Good Manufacturing Practices, the Company would have to find new suppliers and the price difference may be too much for the Company to remain competitive thereby having a potentially adverse impact on the Company s operations and profitability.
+ 
+We are subject to the risks inherent in an agricultural business.
+ 
+While the Company does directly grow hemp, our business involves the growing of hemp in the United States, which is an agricultural product. The occurrence of severe adverse weather conditions, especially droughts, fires, storms or floods is unpredictable and may have a potentially devastating impact on agricultural production and may otherwise adversely affect the supply of hemp. Adverse weather conditions may be exacerbated by the effects of climate change and may result in the introduction and increased frequency of pests and diseases. Additionally, higher than average temperatures and rainfall can contribute to an increased presence of insects and pests, which could negatively affect crops. 
+ 
+The Company is subject to wholesale price volatility that could expose the Company to lower than anticipated revenues, gross margins, net income and cash flows.
+ 
+The Company is a margin-based business in which gross profits depend 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, government regulations and demand), taxes, government programs and policies, and other market conditions, all of which are factors beyond our control. The Company s operating income may be significantly and adversely affected by a decline in the price of its products and will be sensitive to changes in the price of active ingredients and the overall condition of the industry. These prices are affected by numerous factors beyond our control. Any material change in price may have a material adverse effect on the Company s business, financial condition and results of operations.
+ 
+ 
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+Table of Contents
+ 
+The Company could face competitive risks from the development and distribution of synthetic products.
+ 
+The industry and others may attempt to enter the industry through the development and distribution of synthetic products that emulate the effects of, and treatment provided by, naturally occurring cannabis. If synthetic products are widely adopted, the widespread popularity of such synthetic products could change the demand, volume and profitability of the industry. This could adversely affect our ability to secure long-term profitability and success through the sustainable and profitable operation of our business.
+ 
+The Company is reliant on third party transportation services to deliver its products to customers.
+ 
+The Company relies on third party transportation services to deliver its products to its customers. The Company is exposed to the inherent risks associated with relying on third party transportation service-providers, including logistical problems, delays, loss or theft of product and increased shipping and insurance costs. Any delay in transporting the product, breach of security or loss of product, could have a material adverse effect on the Company s business, financial performance and results of operations. 
+ 
+The Company is dependent on suppliers to supply equipment, parts and components for the operation of its business.
+ 
+The Company s ability to compete and grow will be dependent upon having access, at a reasonable cost and in a timely manner, to equipment, parts and components. No assurances can be given that the Company will be successful in maintaining the required supply of equipment, parts and components. It is also possible that costs of the equipment may be significantly greater than anticipated or available, in which circumstance there could be a materially adverse effect on the Company s financial results.
+ 
+We may not be able to renew certain of our leases.
+ 
+Several of the properties or facilities that we utilize in our operations are leased for a specific term. There is a risk that we may not be able to extend the term on some or all of such leases or, if we do so, that the terms of any such lease extension will be favorable. Likewise, there is a risk that some leases may expire and we will be required to relocate our operations to another location, thereby incurring costs. 
+ 
+The Company may incur significant costs to defend its intellectual property and other proprietary rights.
+ 
+The ownership and protection of trademarks, patents, trade secrets and intellectual property rights are significant aspects of the Company's future success. Unauthorized parties may attempt to replicate or otherwise obtain and use the Company's products and technology. Policing the unauthorized use of the Company's current or future trademarks, patents, trade secrets or intellectual property rights could be difficult, expensive, time-consuming and unpredictable, as may be enforcing these rights against unauthorized use by others.
+ 
+If we are unable to establish sales, marketing and distribution capabilities or enter into successful relationships with third parties to perform these services, we may not be successful in commercializing our products.
+ 
+We have a limited sales and marketing infrastructure and have limited experience in the sale, marketing or distribution of products. To achieve commercial success for any of our products, we will need to establish a sales and marketing infrastructure or outsource these activities.
+ 
+In the future, we may consider building a focused sales and marketing infrastructure to market our products in the United States or elsewhere in the world. There are risks involved with establishing our own sales, marketing and distribution capabilities. For example, recruiting and training a sales force could be expensive and time consuming and could delay any product launch. This may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.
+ 
+Factors that may inhibit our efforts to commercialize our products on our own include:
+ 
+ 
+ 
+our inability to recruit, train and retain adequate numbers of effective sales and marketing personnel;
+
+ 
+ 
+the inability of sales personnel to obtain access to potential customers;
+
+ 
+ 
+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
+
+ 
+ 
+unforeseen costs and expenses associated with creating an independent sales and marketing organization.
+
+ 
+If we are unable to establish our own sales, marketing and distribution capabilities or enter into successful arrangements with third parties to perform these services, our revenues and our profitability may be materially adversely affected.
+ 
+In addition, we may not be successful in entering into arrangements with third parties to sell, market and distribute our products inside or outside of the United States or may be unable to do so on terms that are favorable to us. We likely will have little control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our products effectively. If we do not establish sales, marketing and distribution capabilities successfully, either on our own or in collaboration with third parties, we will not be successful in commercializing our products.
+ 
+Our success is dependent upon our ability to maintain regulatory compliance in the United States of America.
+ 
+We are subject to extensive national, state and local government regulation. A critical key to our success and ability to expand our business is our ability to maintain regulatory compliance in United States of America and in other countries, should we decided to sell our products abroad, for the use of our products. We do not anticipate any significant problems in obtaining any future required licenses, permits or approvals that are necessary to expand our business, however such registration or filing might take longer period than expected, and it might delay obtaining such regulatory approvals, or might cause delay in starting operations in potential other countries or jurisdictions. 
+ 
+ 
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+ 
+Conditions in the global economy may adversely affect our business, financial condition and results of operations.
+ 
+Although demand for hemp products is growing rapidly, the market for our products may be affected by material changes in supply, market prices, exchange rates and general economic conditions. Delays or reductions in our customers purchasing or shifts to lower-cost alternatives that result from tighter economic market conditions would reduce demand for our products and services and could, consequently, have a material adverse effect on our business, financial condition and results of operations.
+ 
+Our industry may become subject to expanded regulation and increased enforcement by the Food and Drug Administration (FDA) and the Federal Trade Commission (FTC)
+ 
+The FDA under the Federal Food, Drug, and Cosmetic Act regulates the formulation, manufacturing, packaging, labeling, and distribution of food, dietary supplements, drugs, cosmetic, medical devices, biologics, and tobacco products. Our hemp-derived products are not intended to fall within and do not fall within the purview of the FDA. Accordingly, we have not been required to obtain FDA approval for our existing hemp-derived products. Moreover, the regulatory status of hemp-derived products are currently in a state of flux as FDA attempts to determine the appropriate manner in which to regulate these products. Thus, the regulatory approach is still evolving, and we may be required to seek FDA s approval to market food and dietary supplements containing hemp. It is also possible that the FDA may simply issue a regulation setting forth the conditions in which such products may be marketed, or it may simply prohibit these products. However, because the FDA s regulatory process is in its infancy, we cannot predict the likely outcome. In addition, the FTC under the Federal Trade Commission Act ( FTC Act ) requires that product advertising is truthful, substantiated and non-misleading. We believe that our advertising meets these requirements. However, the FTC may bring a challenge at any time to evaluate our compliance with the FTC Act. In addition, most states where hemp-derived products are legal provide their own regulatory guidelines and regulations. While some states are silent on the issue, the Company researches each state regulation guidelines to ensure compliance with such laws and regulations, and will continue to do so in the future. However, any failure by us to remain current on state regulatory changes could negatively affect our ability to operate our business.
+ 
+While the Company s hemp-derived products are not intended to fall within and do not fall within the purview of the FDA, certain public statements by the FDA interpret the Federal Food, Drug, and Cosmetic Act (FDCA) as prohibiting the sale of food products that contain cannabinoids; and that the FDCA prohibits the introduction or delivery for introduction into interstate commerce of any food that contains an approved drug or a drug for which substantial clinical investigations have been instituted and made public, unless a statutory exemption applies, and that none of the statutory exceptions has been met for hemp. 
+ 
+Government regulations
+ 
+On December 20, 2018, the President of the United States signed the Farm Bill into law. Among other things, this new law changed certain federal authorities relating to the production and marketing of hemp, defined as cannabis (Cannabis sativa L.), and derivatives of cannabis with extremely low (less than 0.3 percent on a dry weight basis) concentrations of the psychoactive compound delta-9-tetrahydrocannabinol (THC). These changes include removing hemp and derivatives of hemp from the Controlled Substances Act, which means that it is no longer an illegal substance under federal law which has paved the way for the growth of the industry. On October 31, 2019, the USDA issued an interim final rule regarding the Establishment of a Domestic Hemp Production Program which authorized hemp to be grown and processed legally in the United States and made it legal to transport in interstate commerce. Although this interim final rule became effective on the date of publication, there is a possibility it will be modified from its current application.
+ 
+The Farm Bill recognizes hemp as distinct from its genetic cousin, marijuana, and specifically industrial hemp has been excluded from U.S. drug laws. The Farm Bill allows for each individual state to regulate industrial hemp and industrial hemp-based products or accept the USDA rules. Although no longer a controlled substance under federal law, cannabinoids derived from industrial hemp (other than THC) are still subject to a patchwork of state regulations. We are actively monitoring the regulations and proposed regulations in each state to ensure our operations are compliant.
+ 
+In conjunction with the enactment of the Farm Bill, the FDA released a statement about the status of hemp-derived cannabinoids and the agency s actions in the short term with regards to hemp-derived cannabinoids will guide the industry. The statement noted that the Farm Bill explicitly preserved the FDA s authority to regulate products containing cannabis or cannabis-derived compounds under the FDCA and Section 351 of the Public Health Service Act. This authority allows the FDA to continue enforcing the law to protect patients and the public while also providing potential regulatory pathways for products containing cannabis and cannabis-derived compounds. The statement also noted the growing public interest in cannabis and cannabis-derived products, including cannabinoids, and informed the public that the FDA will treat products containing cannabis or cannabis-derived compounds as it does any other FDA-regulated products meaning the products will be subject to the same authorities and requirements as FDA-regulated products containing any other substance, regardless of the source of the substance, including whether the substance is derived from a plant that is classified as hemp under the Farm Bill.
+ 
+As of the date of this report, and based upon publicly available information, to our knowledge the FDA has not taken any enforcement actions against hemp companies. The FDA, however, has sent warning letters to companies demanding they cease and desist from the production, distribution, or advertising of hemp-derived products, mostly relating to instances that such hemp companies have made misleading and unapproved label claims. The Company received a warning letter from the FDA regarding Infusionz, LLC. The company addressed the concerns of the FDA and responded to them. We will continue to monitor the FDA s position on hemp-derived cannabinoids.
+ 
+We are subject to federal and state consumer protection laws, including laws protecting the privacy of customer non-public information and the handling of customer complaints and regulations prohibiting unfair and deceptive trade practices. The growth and demand for online commerce has and may continue to result in more stringent consumer protection laws that impose additional compliance burdens on online companies. These laws may cover issues such as user privacy, spyware and the tracking of consumer activities, marketing e-mails and communications, other advertising and promotional practices, money transfers, pricing, product safety, content and quality of products and services, taxation, electronic contracts and other communications and information security.
+ 
+ 
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+Table of Contents
+ 
+There is also great uncertainty over whether or how existing laws governing issues such as sales and other taxes, auctions, libel, and personal privacy apply to the internet and commercial online services. These issues may take years to resolve. For example, tax authorities in a number of states, as well as a Congressional advisory commission, are currently reviewing the appropriate tax treatment of companies engaged in online commerce, and new state tax regulations may subject us to additional state sales and income taxes. New legislation or regulation, the application of laws and regulations from jurisdictions whose laws do not currently apply to our business or the application of existing laws and regulations to the internet and commercial online services could result in significant additional taxes or regulatory restrictions on our business. These taxes or restrictions could have an adverse effect on our cash flows, results of operations and overall financial condition. Furthermore, there is a possibility that we may be subject to significant fines or other payments for any past failures to comply with these requirements.
+ 
+State Regulations
+ 
+The USDA s final rule establishes a federal licensing plan for regulating U.S. hemp producers in states that do not have their own USDA-approved plans. In the absence of a state plan, U.S. hemp producers will be subject to regulation directly by the USDA unless the state prohibits hemp production. Additionally, the final rule includes requirements for maintaining information on the land where U.S. hemp is produced, testing U.S. hemp for THC levels, disposing of product with more than 0.3 percent THC on a dry-weight basis and licensing for U.S. hemp producers. The USDA s final rule requires hemp producers to use a laboratory that is registered with the DEA, although the USDA is delaying enforcement of this requirement. The final rule also includes provisions for producers to dispose or remediate violative hemp plants without the use of a DEA-registered reverse distributor or law enforcement.
+ 
+States may adopt regulatory schemes that impose different levels of regulation and costs on the production of U.S. hemp. Moreover, the 2018 Farm Bill provides that its provisions do not pre-empt or limit state laws that regulate the production of U.S. hemp. Accordingly, some states may choose to restrict or prohibit some or all U.S. hemp production or sales within the state and variances in states laws and regulations on U.S. hemp are likely to persist.
+ 
+Further, each state has discretion to develop and implement its own laws and regulations governing the manufacturing, marketing, labeling and sale of U.S. hemp products, which has created a patchwork of different regulatory schemes applicable to such products.
+ 
+Impact of State regulations relating to the sampling and testing for THC, and the disposal of non-compliant product. 
+ 
+The Company currently only handles hemp-based products in the state of Florida and abides by the recently passed regulations. Rule 5K-4.034 became effective on September 27, 2021 and the full Rule can be found at https://www.flrules.org/gateway/reference.asp?No=Ref-11452. In compliance with Rule 5K-4.034, the Company tests all hemp extract that is receives for compliance with the Rule, meaning that it does not contain in excess of 0.3% THC on a dry weight basis. To date, the Company has never received product that is not in compliance.
+ 
+If any hemp extract is found to be out of compliance with the Rule, it is then quarantined and retested. If the product is still out of compliance, the product is detained pursuant to Section 500.172, F.S. The Company will hold the quarantined product until it receives permission from the appropriate governmental authority or a court of competent jurisdiction. Upon receipt of permission from the appropriate governmental authority or a court of competent jurisdiction, the Company will dispose of the product in accordance with the Hemp Waste Disposal Manual FDACS-08115, 12/9, incorporated in paragraph 5B-57.014(6)(b), F.A.C. or in a manner approved by a court of competent jurisdiction. 
+ 
+To the extent that the Company receives non-compliant hemp extract, it could have a negative impact on the Company both financially and legally.
+ 
+We may operate with some agricultural risks.
+ 
+Plant cultivation is subject to various agricultural risks, such as pests, diseases, adverse weather conditions, and crop failure. These risks can impact the availability and quality of our raw materials, leading to disruptions in the supply chain of our extracts and byproducts, and therefore potential financial losses.
+ 
+There are risks associated with product quality and safety. 
+ 
+Ensuring consistent product quality and safety is crucial for the success of a company dealing in our products. Risks may include contamination, product recalls, adverse reactions, or negative publicity associated with the use of hemp-based products. Failure to maintain quality standards can harm our reputation and lead to legal liabilities.
+ 
+There are risks associated with evolving health and safety regulations.
+ 
+Hemp products intended for human or animal consumption may be subject to health and safety regulations. Risks may include the need for compliance with good manufacturing practices (GMP), product testing, labeling requirements, and potential liability claims arising from the use of our products.
+ 
+We operate in highly regulated sectors where the regulatory environment is rapidly developing and we may not always succeed in complying fully with applicable regulatory requirements in all (States) jurisdictions where we carry on business.
+ 
+Our business and activities are heavily regulated in all (States) jurisdictions where we carry on business. Our operations are subject to various laws, regulations and guidelines by governmental authorities (including the FDA, DEA and FTC and analogous state agencies) relating to the manufacture, marketing, management, transportation, storage, sale, pricing and disposal of hemp-derived cannabinoids, and also including laws, regulations and guidelines relating to health and safety, insurance coverage, the conduct of operations and the protection of the environment (including relating to emissions and discharges to water, air and land, and the handling and disposal of hazardous and non-hazardous materials and wastes). Our operations may also be affected in varying degrees by government regulations with respect to, but not limited to, price controls, export controls, controls on currency remittance, increased income taxes, restrictions on foreign investment and government policies rewarding contracts to local competitors or requiring domestic producers or vendors to purchase supplies from a particular jurisdiction. Laws, regulations and guidelines, applied generally, grant government agencies and self-regulatory bodies broad administrative discretion over our activities, including the power to limit or restrict business activities as well as impose additional disclosure requirements on our products and services.
+ 
+ 
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+Table of Contents
+ 
+Achievement of our business objectives is contingent, in part, upon compliance with regulatory requirements enacted by these governmental authorities and obtaining all necessary regulatory approvals for the production, storage, transportation, sale, import and export, as applicable, of our products. The U.S. hemp industry is still a new industry. The effect of relevant governmental authorities administration, application and enforcement of their respective regulatory regimes and delays in obtaining, or failure to obtain, applicable regulatory approvals which may be required may significantly delay or impact the development of markets, products and sales initiatives and could have a material adverse effect on our business, financial condition and results of operations.
+ 
+The regulatory environment for our products is rapidly developing, and the need to build and maintain robust systems to comply with different and changing regulations in multiple jurisdictions increases the possibility that we may violate one or more applicable requirements. While we endeavor to comply with all relevant laws, regulations and guidelines, any failure to comply with the regulatory requirements applicable to our operations could subject us to negative consequences, including, civil and criminal penalties, damages, fines, the curtailment or restructuring of our operations, asset seizures, revocation or imposition of additional conditions on licenses to operate our business, the denial of regulatory applications (including other regulatory regimes that rely on the positions of the DEA and FDA in the application of their respective regimes), the suspension or expulsion from a particular market or jurisdiction of our key personnel, or the imposition of additional or more stringent inspection, testing and reporting requirements, any of which could materially adversely affect our business and financial results. In the U.S., failure to comply with FDA requirements (and analogous state agencies) may result in, among other things, injunctions, product withdrawals, recalls, product seizures, fines and criminal prosecutions. The outcome of any regulatory or agency proceedings, investigations, audits, and other contingencies could harm our reputation, require us to take, or refrain from taking, actions that could harm our operations or require us to pay substantial amounts of money, harming our results of operations, financial condition and cash flows. There can be no assurance that any pending or future regulatory or agency proceedings, investigations and audits will not result in substantial costs or a diversion of management s attention and resources, negatively impact our future growth plans and opportunities or have a material adverse impact on our business, financial condition and results of operations.
+ 
+If the Company s hemp business activities are found to be in violation of any of U.S. federal, state or local laws or any other governmental regulations, in addition to the items described above:
+ 
+ 
+the Company may be subject to Warning Letters, fines, penalties, administrative sanctions, settlements, injunctions, product recalls and/or other enforcement actions arising from civil, administrative or other proceedings initiated that could adversely affect the Company s business, financial condition, operating results, liquidity, cash flow and operational performance;
+
+ 
+ 
+
+ 
+the profits or revenues derived therefrom could be subject to money laundering statutes, including the Money Laundering Control Act, which could result in significant disruption to our U.S. hemp business operations and involve significant costs, expense or other penalties; and
+
+ 
+ 
+
+ 
+the Company s suppliers, service providers and distributors may elect, at any time, to breach or otherwise cease to participate in supply, service or distribution agreements, or other relationships, on which the Company s operations rely.
+
+ 
+The presence of trace amounts of THC in our U.S. hemp products may cause adverse consequences to users of such products that will expose us to the risk of litigation, liability and other consequences.
+ 
+Some of our products that are intended to primarily contain U.S. hemp-derived cannabinoids, or other products, may contain trace amounts of THC. THC is a controlled substance in many (States) jurisdictions, including under the federal laws of the U.S. Whether or not ingestion of THC (at low levels or otherwise) is permitted in a particular jurisdiction, there may be adverse consequences to consumers of our U.S. hemp products who test positive for any amounts of THC because of the presence of trace amounts of THC in our U.S. hemp products. In addition, certain metabolic processes in the body may negatively affect the results of drug tests. Positive tests for THC may expose us to litigation from our consumers, adversely affect our reputation, our ability to obtain or retain customers and individuals participation in certain athletic or other activities. A claim or regulatory action against us based on such positive test results could materially and adversely affect our business, financial condition, operating results, liquidity, cash flow and operational performance.
+ 
+Our relationship with our employees could deteriorate, and certain key employees could leave, which could adversely affect our business and results of operations.
+ 
+Our business involves complex operations and demands a management team to determine and implement our strategy and workforce that is knowledgeable and expert in many areas necessary for our operations. We rely on our ability to attract and retain skilled employees, consultants and contractors, including our specialized job functions. As of December 31, 2022, we have 25 full-time employees. The departure of a significant number of our highly skilled employees, consultants or contractors or one or more employees who hold key management positions could have an adverse impact on our operations, including customers choosing to follow a regional manager to one of our competitors.
+ 
+ 
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+ 
+In addition, to execute our growth plan we must attract and retain highly qualified personnel. Competition for these employees exists; new members of management must have significant expertise when they join us or engage in significant training which, in many cases, requires significant time before they achieve full productivity. If we fail to attract, train, retain, and motivate our key personnel, our business and growth prospects could be severely harmed.
+ 
+Furthermore, we are dependent upon the managers to oversee our operations. Thus, there can be no assurance that the managers experience will be sufficient to successfully achieve our business objectives. All decisions regarding the management of our affairs will be made exclusively by our officers and directors. In the event these persons are ineffective, our business and results of operations would likely be adversely affected.
+ 
+Increases in the cost of ingredients, labor and other costs could adversely affect our operating results.
+ 
+Our principal products contain hemp-derived oil. Increases in the cost of ingredients in our products could have a material adverse effect on our operating results. Significant price increases, market conditions, weather, acts of God and other disasters could materially affect our operating results. An increase in our operating costs could adversely affect our profitability. Factors such as inflation, increased labor and employee benefit costs and increased energy costs may adversely affect our operating costs. Many of the factors affecting costs are beyond our control and we may not be able to pass along these increased costs to our customers.
+ 
+Our operating results may fluctuate, which makes our results difficult to predict and could cause our results to fall short of expectations.
+ 
+Our operating results may fluctuate as a result of a number of factors, many of which are outside of our control. As a result, comparing our operating results on a period-to-period basis may not be meaningful, and you should not rely on our past results as an indication of our future performance. Our quarterly, year-to-date and annual expenses as a percentage of our revenues may differ significantly from our historical or projected rates. Our operating results in future quarters may fall below expectations. Any of these events could cause our stock price to fall. Each of the risk factors listed in the section Risk Factors, and the following factors may affect our operating results:
+ 
+ 
+ 
+our ability to penetrate the hemp industry with our products;
+
+ 
+ 
+our ability to generate revenue from our products;
+
+ 
+ 
+the amount and timing of operating costs and capital expenditures related to the maintenance and expansion of our businesses and operations;
+
+ 
+ 
+our focus on long-term goals over short-term results; and
+
+ 
+ 
+global economic situation.
+
+ 
+Failure to comply with anti-bribery, anti-corruption and anti-money laundering laws could subject us to penalties and other adverse consequences.
+ 
+We are subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended, or the FCPA, and other anticorruption, anti-bribery and anti-money laundering laws in the jurisdictions in which we do business, both domestic and abroad. Although we do not have any operations abroad at this time. These laws generally prohibit us and our employees from improperly influencing government officials or commercial parties in order to obtain or retain business, direct business to any person or gain any advantage. The FCPA and other applicable anti-bribery and anti-corruption laws also may hold us liable for acts of corruption and bribery committed by our third-party business partners, representatives and agents. In addition to our own sales force, we may utilize third-parties to sell our products and conduct our business abroad in the future. We and third-party business partners, representatives and agents may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities and we may be held liable for the corrupt or other illegal activities of these third-party business partners and intermediaries, our employees, representatives, contractors, channel partners and agents, even if we do not explicitly authorize such activities. These laws also require that we keep accurate books and records and maintain internal controls and compliance procedures designed to prevent any such actions. While we have policies and procedures to address compliance with such laws, we cannot assure you that our employees and agents will not take actions in violation of our policies or applicable law, for which we may be ultimately held responsible and our exposure for violating these laws increases as our international presence expands and as we increase sales and operations in foreign jurisdictions. Any violation of the FCPA or other applicable anti-bribery, anti-corruption laws and anti-money laundering laws could result in whistleblower complaints, adverse media coverage, investigations, imposition of significant legal fees, loss of export privileges, severe criminal or civil sanctions or suspension or debarment from U.S. government contracts, substantial diversion of management s attention, a decline in the market price of our common stock or overall adverse consequences to our reputation and business, all of which may have an adverse effect on our results of operations and financial condition. The Company does not have any sales or operations abroad at this time.
+ 
+ 
+31
+
+Table of Contents
+ 
+There is no assurance that the Company s insurance coverage will be sufficient to cover all claims to which the Company may become subject.
+ 
+Our production is, in general, subject to different risks and hazards, including adverse weather conditions, fires, plant diseases and pest infestations, other natural phenomena, industrial accidents, labor disputes, changes in the legal and regulatory framework applicable to us and environmental contingencies.
+ 
+We are in the process of obtaining insurance coverage over our production and facilities. We may not be able to maintain or obtain insurance of the type and amount desired at a reasonable cost. If we were to incur significant liability for which we were not fully insured, it could have an adverse effect on our business, financial condition and results of operations.
+ 
+We do not currently maintain key-person insurance on the lives of any of our key employees.
+ 
+Disruptions to our information technology systems due to cyber-attacks or our failure to upgrade and adjust our information technology systems, may materially impair our operations, hinder our growth and materially and adversely affect our business and results of operations.
+ 
+We believe that an appropriate information technology, or IT, infrastructure is important in order to support our daily operations and the growth of our business. If we experience difficulties in implementing new or upgraded information systems or experience significant system failures, or if we are unable to successfully modify our management information systems or respond to changes in our business needs, we may not be able to effectively manage our business, and we may fail to meet our reporting obligations. Additionally, if our current back-up storage arrangements and our disaster recovery plan are not operated as planned, we may not be able to effectively recover our information system in the event of a crisis, which may materially and adversely affect our business and results of operations.
+ 
+In the current environment, there are numerous and evolving risks to cybersecurity and privacy, including criminal hackers, hacktivists, state-sponsored intrusions, industrial espionage, employee malfeasance and human or technological error. High-profile security breaches at other companies and in government agencies have increased in recent years, and security industry experts and government officials have warned about the risks of hackers and cyber-attacks targeting businesses such as ours. Computer hackers and others routinely attempt to breach the security of technology products, services and systems, and to fraudulently induce employees, customers, or others to disclose information or unwittingly provide access to systems or data. We can provide no assurance that our current IT system or any updates or upgrades thereto and the current or future IT systems of our potential distributors use or may use in the future, are fully protected against third-party intrusions, viruses, hacker attacks, information or data theft or other similar threats. Legislative or regulatory action in these areas is also evolving, and we may be unable to adapt our IT systems or to manage the IT systems of third parties to accommodate these changes. We have experienced and expect to continue to experience actual or attempted cyber-attacks of our IT networks. Although none of these actual or attempted cyber-attacks has had a material adverse impact on our operations or financial condition, we cannot guarantee that any such incidents will not have such an impact in the future.
+ 
+ 
+32
+
+Table of Contents
+ 
+Risks Related to our common stock and Corporate Governance
+ 
+The market price of our securities may be highly volatile.
+ 
+The market price of our common stock is likely to be volatile. Our common stock price could be subject to wide fluctuations in response to a variety of factors, including the following:
+ 
+ 
+ 
+reports of adverse events with respect to the commercialization and distribution of our products;
+
+ 
+ 
+inability to obtain additional funding;
+
+ 
+ 
+failure to successfully sell our products;
+
+ 
+ 
+changes in laws or regulations applicable to future products;
+
+ 
+ 
+inability to obtain adequate product supply for our products or the inability to do so at acceptable prices;
+
+ 
+ 
+introduction of new products or technologies by our competitors;
+
+ 
+ 
+failure to meet or exceed financial projections we may provide to the public;
+
+ 
+ 
+failure to meet or exceed the financial expectations of the investment community;
+
+ 
+ 
+announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by our competitors;
+
+ 
+ 
+additions or departures of key management personnel;
+
+ 
+ 
+significant lawsuits;
+
+ 
+ 
+changes in the market valuations of similar companies;
+
+ 
+ 
+sales of our securities by us or our shareholders in the future; and
+
+ 
+ 
+trading volumes of our securities.
+
+ 
+In addition, companies trading in the stock market have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors may negatively affect the market price of our common stock, regardless of our actual operating performance.
+ 
+Sales of a substantial number of shares of our common stock in the public market by our existing stockholders could cause our share price to fall.
+ 
+Sales of a substantial number of shares of our common stock in the public market, or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities. We are unable to predict the effect that sales may have on the prevailing market price of our common stock.
+ 
+Our principal stockholders, officers and directors beneficially own approximately 78.17% of our outstanding shares of common stock. They will therefore be able to exert significant control over matters submitted to our stockholders for approval.
+ 
+As of April 12, 2023, our principal stockholders, officers and directors beneficially own approximately 78.17% of our outstanding common stock. This significant concentration of share ownership may adversely affect the trading price for our common stock because investors often perceive disadvantages in owning shares in companies with controlling stockholders. As a result, these stockholders, if they acted together, could significantly influence or even unilaterally approve matters requiring approval by our stockholders, including the election of directors and the approval of mergers or other business combination transactions. The interests of these stockholders may not always coincide with our interests or the interests of other stockholders.
+ 
+We face risks related to compliance with corporate governance laws and financial reporting standards.
+ 
+The Sarbanes-Oxley Act of 2002, as well as related new rules and regulations implemented by the Securities and Exchange Commission and the Public Company Accounting Oversight Board, require changes in the corporate governance practices and financial reporting standards for public companies. These new laws, rules and regulations, including compliance with Section 404 of the Sarbanes-Oxley Act of 2002 relating to internal control over financial reporting, have materially increased the legal and financial compliance costs of small companies and have made some activities more time-consuming and more burdensome.
+ 
+ 
+33
+
+Table of Contents
+ 
+Increased costs associated with corporate governance compliance may significantly impact our results of operations.
+ 
+As a public company, we incur significant legal, accounting, and other expenses due to our compliance with regulations and disclosure obligations applicable to us, including compliance with the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, as well as rules implemented by the SEC, and NASDAQ. The SEC and other regulators have continued to adopt new rules and regulations and make additional changes to existing regulations that require our compliance. In July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, was enacted. There are significant corporate governance and executive compensation related provisions in the Dodd-Frank Act that have required the SEC to adopt additional rules and regulations in these areas. Stockholder activism, the current political environment, and the current high level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional compliance costs and impact, in ways we cannot currently anticipate, the manner in which we operate our business. Our management and other personnel devote a substantial amount of time to these compliance programs and monitoring of public company reporting obligations, and as a result of the new corporate governance and executive compensation related rules, regulations, and guidelines prompted by the Dodd-Frank Act, and further regulations and disclosure obligations expected in the future, we will likely need to devote additional time and costs to comply with such compliance programs and rules. These rules and regulations will cause us to incur significant legal and financial compliance costs and will make some activities more time-consuming and costly.
+ 
+The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal control over financial reporting. We are continuing to develop and refine our disclosure controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file with the SEC is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive and financial officers. Our current controls and any new controls that we develop may become inadequate, and weaknesses in our internal control over financial reporting may be discovered in the future. Any failure to develop or maintain effective controls could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting, which we may be required to include in our periodic reports that we file with the SEC under Section 404 of the Sarbanes-Oxley Act, and could harm our operating results, cause us to fail to meet our reporting obligations, or result in a restatement of our prior period financial statements. If we are not able to demonstrate compliance with the Sarbanes-Oxley Act, that our internal control over financial reporting is perceived as inadequate, or that we are unable to produce timely or accurate financial statements, investors may lose confidence in our operating results, and the price of our common stock could decline.
+ 
+We are required to comply with certain of the SEC rules that implement Section 404 of the Sarbanes-Oxley Act, which requires management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of our internal control over financial reporting. This assessment needs to include the disclosure of any material weaknesses in our internal control over financial reporting identified by our management or our independent registered public accounting firm. During the evaluation and testing process, if we identify one or more material weaknesses in our internal control over financial reporting or if we are unable to complete our evaluation, testing, and any required remediation in a timely fashion, we will be unable to assert that our internal control over financial reporting is effective.
+ 
+These developments could make it more difficult for us to retain qualified members of our Board of Directors, or qualified executive officers. We are presently evaluating and monitoring regulatory developments and cannot estimate the timing or magnitude of additional costs we may incur as a result. To the extent these costs are significant, our general and administrative expenses are likely to increase.
+ 
+We may not have effective internal controls.
+ 
+In connection with Section 404 of the Sarbanes-Oxley Act of 2002, we need to assess the adequacy of our internal control, remedy any weaknesses that may be identified, validate that controls are functioning as documented and implement a continuous reporting and improvement process for internal controls. We may discover deficiencies that require us to improve our procedures, processes and systems in order to ensure that our internal controls are adequate and effective and that we are in compliance with the requirements of Section 404 of the Sarbanes-Oxley Act. If the deficiencies are not adequately addressed, or if we are unable to complete all of our testing and any remediation in time for compliance with the requirements of Section 404 of the Sarbanes-Oxley Act and the SEC rules under it, we would be unable to conclude that our internal controls over financial reporting are designed and operating effectively, which could adversely affect investor confidence in our internal controls over financial reporting.
+ 
+We do not currently have independent Directors which could create a conflict of interests and pose a risk from a corporate governance perspective.
+ 
+Our Board of Directors consists of only three directors, none of which is an independent director. The lack of independent directors may prevent the Board from being independent from management in its judgments and decisions and its ability to pursue the Board responsibilities without undue influence. For example, an independent Board can serve as a check on management, which can limit management taking unnecessary risks. Furthermore, the lack of independent directors creates the potential for conflicts between management and the diligent independent decision-making process of the Board. Furthermore, our lack of outside directors deprives our company of the benefits of various viewpoints and experience when confronting the challenges that we face. With no independent director sitting on the Board of Directors, it may be difficult for the Board to fulfill its traditional role as overseeing management.
+ 
+ 
+34
+
+Table of Contents
+ 
+We may be subject to securities litigation, which is expensive and could divert management attention.
+ 
+In the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Litigation of this type could result in substantial costs and diversion of management s attention and resources, which could seriously hurt our business. Any adverse determination in litigation could also subject us to significant liabilities.
+ 
+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 common stock, our stock price and trading volume could decline.
+ 
+The trading market for our common stock will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our 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 stock 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 stock price or trading volume to decline.
+ 
+The issuance of our common stock to our convertible note holders, if they choose to convert may cause significant dilution and the sale of the shares of common stock by those convertible note holders, or the perception that such sales may occur, could cause the price of our common stock to fall.
+ 
+During the 4th quarter of 2022, the Company closed on an offering of Debentures (the Debenture Offering ). The Debentures have an aggregate principal amount of approximately $15,485,613 (including a 15% original issue discount). The proceeds were used for the acquisition of Infusionz, LLC and refinancing of existing loans. 
+ 
+The Debentures have a maturity date of October 26, 2024, have an interest rate of ten percent (10.00%) per annum, and are convertible into shares of Common Stock. The conversion price: (i) prior to the date of a Qualified Offering (an offering the Company enters into in connection with an Uplisting) is eighty percent (80%) of the lowest VWAP of the Common Stock during the five (5) trading day period immediately prior to the applicable Conversion Date; (ii) at the Qualified Offering, at the Qualified Offering Conversion Price (the effective price per share paid by investors per share of Common Stock that is sold to the public in the Qualified Offering); or (ii) following the date of the Qualified Offering, eighty percent (80%) of the lowest VWAP of the Common Stock during the ten (10) trading day period immediately prior to the three (3) month anniversary of date of the Qualified Offering.
+ 
+On the date of the Qualified Offering, the Company will need to repay the lesser of the outstanding principal and an amount equal to the A) the outstanding principal sum on such date, multiplied by (B) the quotient obtained by dividing (1) the gross proceeds of the Qualified Offering by (2) the outstanding principal sum of all Debentures issued and any interest on the aggregate unconverted and then outstanding principal amount of the Debentures. By way of example, if the principal amount outstanding of a Debenture is $500,000, the gross proceeds of the Qualified Offering is $5,000,000 and total amount outstanding of all the Debentures is $10,000,000, then the holder of the $500,000 Debenture shall receive $250,000: $500,000 x $5,000,000/ $10,000,000.
+ 
+In addition, pursuant to the SPA, the holders of the Debentures were each issued a warrant to purchase shares of the Common Stock (the Warrant ). Each Warrant provides for the purchase by the applicable holder of Debentures of a number shares of Common Stock equal to the total principal amount of the Debenture purchased by such holder divided by the average of the VWAP of the Common Stock during the ten (10) trading day period immediately prior to the Closing Date (the Warrant Shares ). The exercise price of the Warrants is 125% of the conversion price of the Debentures. A total of 8,594,424 Warrants were issued.
+ 
+Pursuant to the SPA, the holders of the Debentures were each issued a number of shares of Common Stock (the Incentive Shares ) equal to 35% of such holder s subscription amount (without regard for any beneficial ownership limitations) divided by the lower of (i) the closing price of the Common Stock on the Closing Date or (ii) the average of the VWAP of the Common Stock during the ten (10) trading day period immediately prior to the Closing Date. A total of 2,941,717 shares of Common Stock were issued on the Closing Date.
+ 
+ 
+35
+
+Table of Contents
+ 
+Pursuant to the SPA, the Company agreed to use its commercially reasonable efforts to complete a Qualified Offering within six months of the Closing Date. The Company agreed to use its commercially reasonable efforts to cause the filing of a registration statement with the Commission covering the resale of the Incentive Shares, the Warrant Shares, and the shares of Common Stock underlying the Debentures (collectively, the Underlying Shares ) at the same time as the Qualified Offering and shall use its commercially reasonable efforts to cause such registration statement to become effective at the time of the Qualified Offering. Notwithstanding the foregoing, in the event the Qualified Offering is not completed on or before the six-month anniversary of the Closing Date, (1) the Company shall file a separate registration statement with the Commission covering the resale of the Underlying Shares (a Separate Registration Statement ), and shall use its commercially reasonable efforts to cause such Separate Registration Statement to become effective within nine months of the Closing Date.
+ 
+Convertible Secured Subordinated Promissory Note
+ 
+In connection with the closing of the purchase of Infusionz LLC and the transfer of the Assets, the Company issued a Note to the Seller. The Note has an interest rate of eight and one-half percent (8.5%) per annum, requires the Company to remit in repayment of amounts outstanding pursuant to the Note an amount equal to forty percent (40%) of the net proceeds received by the Company in connection with any offering by the Company of the Company s securities conducted in connection with the Uplisting. The Company shall pay the Seller interest on a monthly basis. The Note is convertible, at the Seller s option, into shares of Common Stock at a conversion price of $5.00 per share subject to adjustment: (i) if the Uplisting does not occur prior to the one-year anniversary of the Closing Date or (ii) upon an event of default as described in the Note.
+ 
+The Note is secured by a subordinated security interest in all assets of Infusionz pursuant to that certain Pledge and Security Agreement, dated as of October 26, 2022, by and between Infusionz as pledgor and the Seller as pledgee (the Pledge and Security Agreement ), which security interest shall rank junior to all liens and security interests granted by the Company and each of its subsidiaries (including without limitation Infusionz), to the holders of the Debentures.
+ 
+Our preferred stock may have rights senior to those of our common stock which could adversely affect holders of common stock.
+ 
+Our articles of incorporation give our Board of Directors the authority to issue additional series of preferred stock without a vote or action by our stockholders. The Board also has the authority to determine the terms of preferred stock, including price, preferences and voting rights. The rights granted to holders of preferred stock in the future may adversely affect the rights of holders of our common stock. Any such authorized class of preferred stock may have a liquidation preference - a pre-set distribution in the event of a liquidation - that would reduce the amount available for distribution to holders of common stock or superior dividend rights that would reduce the amount of dividends that could be distributed to common stockholders. In addition, an authorized class of preferred stock may have voting rights that are superior to the voting right of the holders of our common stock.
+ 
+ 
+36
+
+Table of Contents
+ 
+Our common stock is an illiquid investment as there is presently limited market for our common stock, and transferability of our common stock is subject to significant restriction.
+ 
+There is presently a limited market for our common stock, and we cannot be certain that a public market will become available, or that there will be sufficient liquidity to allow for sale or transferability of our common stock within the near future. Therefore, the purchase of our common stock must be considered a long-term investment acceptable only for prospective investors who are willing and can afford to accept and bear the substantial risk of the investment for an indefinite period of time. There is a limited public market for the resale of our common stock. A prospective investor, therefore, may not be able to liquidate its investment, even in the event of an emergency, and common stock may not be acceptable as collateral for a loan.
+ 
+Because We May Be Subject to the Penny Stock Rules, You May Have Difficulty in Selling Our common stock.
+ 
+If market activity develops for our common stock and our stock price is less than $5.00 per share, our stock may be subject to the SEC s penny stock rules. These rules impose additional sales practice requirements and restrictions on broker-dealers that sell our stock to persons other than established customers and institutional accredited investors. The application of these rules may affect the ability of broker-dealers to sell our common stock and may affect your ability to sell any common stock you may own. According to the SEC, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include:
+ 
+ 
+ 
+Control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer;
+
+ 
+ 
+Manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases;
+
+ 
+ 
+ Boiler room practices involving high pressure sales tactics and unrealistic price projections by inexperienced salespersons;
+
+ 
+ 
+Excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and
+
+ 
+ 
+The wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses.
+
+ 
+If we are subject to penny stock rules, you may have difficulty selling your shares of common stock. For more information about penny stocks, please visit http://www.sec.gov/answers/penny.htm.
+ 
+CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
+ 
+This prospectus, including the sections entitled

parsed_sections/risk_factors/2023/CIK0001173281_neubase_risk_factors.txt

@@ -0,0 +1,434 @@
+Risk Factors beginning on page 5
+of this prospectus and the financial statements and other information incorporated by reference in this prospectus.
+
+ 
+
+Overview
+
+ 
+
+We have designed, built,
+and validated a new technology platform (a peptide nucleic acid antisense oligonucleobase platform, which we call PATrOL ) that
+can uniquely Drug the Genome to address the three disease-causing mechanisms (i.e., gain-of-function, change-of-function,
+or loss-of-function of a gene), without the limitations of early precision genetic medicines. The technology is predicated on synthetic
+peptide nucleic acid ( PNA ) chemistry and can directly engage the genome in a sequence-specific manner and address root
+causality of diseases. These compounds operate by temporarily engaging the genome (or single and double-stranded RNA targets, if desired)
+and interacting with cellular machinery that processes mutant genes to halt their ability to manifest a disease.
+
+ 
+
+We have repeatedly demonstrated
+in proof-of-concept preclinical animal studies the ability to address multiple disease-causing genes, and different causal mechanisms,
+to resolve the disease state without the limitations of early genetic medicine technologies. As further validation of our PATrOL 
+platform s capabilities, in FY2021 and FY2022, we described data illustrating that our first-in-class platform technology can address
+various types of causal insults by Drugging the Genome in animal models of a variety of human diseases after patient-friendly
+routes of administration and does so in a well-tolerated manner.
+
+ 
+
+We are developing precision
+genetic medicines targeting rare, monogenic diseases for which there are no approved therapies, as well as more common genetic disorders,
+including cancers that are resistant to current therapeutic approaches. Our disclosed pipeline includes therapeutic candidates for the
+treatment of DM1, HD, as well as cancer-driving point mutations in KRAS, G12V and G12D, which are involved in many tumor types
+and have historically been undruggable . In October 2022, we announced plans to expand our focus to include the advancement
+of the differentiated gene editing capabilities of its platform. We are currently identifying and evaluating multiple indications for
+potential future development.
+
+ 
+
+Recent Developments
+
+ 
+
+Change in Year End
+
+ 
+
+On April 21, 2023, our Board
+of Directors approved a change in our fiscal year end from September 30 to December 31, effective for the fiscal year beginning January
+1, 2023 and ending December 31, 2023. As a result of the change in year end, we filed a Transition Report on Form 10-QT for the period
+from October 1, 2022 through December 31, 2022. Our 2023 fiscal year will run from January 1, 2023 through December 31, 2023.
+
+ 
+
+Reverse Stock Split
+
+ 
+
+As previously disclosed on
+a Current Report on Form 8-K filed on June 14, 2023, on June 14, 2023, we filed a Certificate of Amendment to our Amended and Restated
+Certificate of Incorporation with the Secretary of State of the State of Delaware to effect a 1-for-20 reverse stock split of our shares
+of Common Stock.
+
+ 
+
+June 2023 Offerings
+
+ 
+
+On June 28, 2023, we
+entered into a securities purchase agreement (the Registered Direct Purchase Agreement ) with the selling
+stockholders identified herein (the Selling Stockholders ) in connection with a registered direct offering (the
+ Registered Direct Offering ) and concurrent private placement with an institutional investor (the
+ Registered Direct Purchaser ). On June 28, 2023, we also entered into a securities purchase agreement (the
+ PIPE Purchase Agreement and, together with the Registered Direct Purchase Agreement, the Purchase
+Agreements ) and a registration rights agreement (the Registration Rights Agreement ) with the Selling
+Stockholders in connection with a concurrent private placement (the PIPE Private Placement ) with the same
+institutional investor (the PIPE Purchaser and, together with the Registered Direct Purchaser, the
+ Purchaser ).
+
+ 
+
+ 1
+
+ 
+
+ 
+
+ 
+
+Pursuant to the Registered
+Direct Purchase Agreement, we agreed to offer and sell in the Registered Direct Offering 187,700 shares of Common Stock and
+pre-funded warrants (the Pre-Funded Warrants ) to purchase up to an aggregate of 390,997 shares of Common Stock.
+The Pre-Funded Warrants have an exercise price of $0.001 per share, are immediately exercisable and can be exercised at any time after
+their original issuance until such Pre-Funded Warrants are exercised in full. Each share of Common Stock is being sold at an offering
+price of $2.57 per share, and each Pre-Funded Warrant is being sold at an offering price of $2.569, which is equal to the purchase price
+per share of Common Stock less $0.001.
+
+ 
+
+Pursuant
+to the Registered Direct Purchase Agreement, in a concurrent private placement, we also agreed to issue the RD Series A Warrants to purchase
+up to an aggregate of 578,697 shares of Common Stock and the RD Series B Warrants to purchase up to an aggregate of 578,697 shares of
+Common Stock. Each RD Series A Warrant has an exercise price of $2.32 per share, is exercisable immediately upon issuance, and will expire
+five and one-half years following the date of issuance. Each RD Series B Warrant has an exercise price of $2.32 per share, is exercisable
+immediately upon issuance, and will expire 18 months following the date of issuance.
+
+ 
+
+Pursuant
+to the PIPE Purchase Agreement, we agreed to offer and sell in the PIPE Private Placement unregistered pre-funded warrants (the PIPE
+Pre-Funded Warrants ) to purchase up to an aggregate of 1,366,829 shares of Common Stock, at an offering price of $2.569. The
+PIPE Pre-Funded Warrants have an exercise price of $0.001 per share, are immediately exercisable and can be exercised at any time after
+their original issuance until such PIPE Pre-Funded Warrants are exercised in full. Pursuant to the PIPE Purchase Agreement, we also agreed
+to issue to the PIPE Purchaser unregistered long-term warrants to purchase up to 1,366,829 shares of Common Stock (the PIPE
+Series A Warrants ) and unregistered short-term warrants to purchase up to 1,366,829 shares of Common Stock (the PIPE
+Series B Warrants ). Each PIPE Series A Warrant has an exercise price of $2.32 per share, is exercisable immediately upon issuance,
+and will expire five and one-half years following the date of issuance. Each PIPE Series B Warrant has an exercise price of $2.32 per
+share, is exercisable immediately upon issuance, and will expire 18 months following the date of issuance.
+
+ 
+
+We
+received aggregate gross proceeds of $5.0 million from the Registered Direct Offering and PIPE Private Placement (collectively, the Offerings ),
+before deducting placement agent fees and other estimated offering expenses payable by us.
+
+ 
+
+Pursuant
+to an engagement letter, dated as of June 12, 2023, as amended on June 28, 2023 (as amended, the Engagement Letter ),
+between us and the Placement Agent, we agreed to pay the Placement Agent a cash fee equal to 8.0% of the gross proceeds received from
+the Purchaser (including a 1.0% management fee) and also agreed to issue to the Placement Agent (or its designees) Placement Agent Warrants
+to purchase up to 136,187 shares of Common Stock (which represents 7.0% of the aggregate number of shares of Common Stock, Pre-Funded
+Warrants and PIPE Pre-Funded Warrants sold in the Offerings) on substantially the same terms as the PIPE Series A Warrants and the PIPE
+Series B Warrants except that the exercise price of the Placement Agent Warrants is $3.2125 (or 125% of the offering price per share
+of Common Stock in the Registered Direct Offering) and an expiration date of June 28, 2028, which is the five-year anniversary of the
+commencement of the sales pursuant to the Offerings. We have also agreed to pay the Placement Agent in connection with the Offerings
+$75,000 for non-accountable expenses and $7,388.85 for clearing fees. Pursuant to the Engagement Letter, we also agreed that, upon exercise
+of any of the RD Series B Warrants or the PIPE Series B Warrants, we will pay the Placement Agent a cash fee equal to 8.0% of the gross
+proceeds received from the exercise of the RD Series B Warrants or the PIPE Series B Warrants (including a 1.0% management fee) and will
+also issue to the Placement Agent (or its designees) additional Placement Agent Warrants to purchase a number of shares of Common Stock
+equal to 7.0% of the aggregate number of shares of Common Stock issued upon such exercise of the RD Series B Warrants or the PIPE Series
+B Warrants.
+
+ 
+
+ 2
+
+ 
+
+ 
+
+ 
+
+Pursuant
+to the terms of the Registration Rights Agreement and the Engagement Letter we have agreed to register for resale the shares of
+Common Stock issuable upon the exercise of the RD Series A Warrants, the RD Series B Warrants, the PIPE Pre-Funded Warrants,
+the PIPE Series A Warrants, the PIPE Series B Warrants and the Placement Agent Warrants, in each case on or prior to July 28, 2023.
+We shall use commercially reasonable efforts to cause the registration statement covering the aforementioned securities to be
+declared effective as promptly as possible after the filing thereof, but in any event no later than the 60th calendar day following
+the date of the Registration Rights Agreement (or in the event of a full review by the Securities and Exchange Commission (the
+ SEC ), the 90th calendar day following the date of the Registration Rights Agreement). Failure by us to meet the
+filing deadlines and other requirements set forth in the Registration Rights Agreement may subject us to certain liquidated
+damages.
+
+ 
+
+The
+Offerings closed on June 30, 2023.
+
+ 
+
+Corporate Information
+
+ 
+
+We were incorporated under
+the laws of the State of Delaware on August 4, 2009, as successor to BBM Holdings, Inc. (formerly known as Prime Resource, Inc., which
+was organized March 29, 2002 as a Utah corporation) pursuant to a reincorporation merger. On August 4, 2009, we reincorporated in Delaware
+as Ohr Pharmaceutical, Inc. On July 12, 2019, we completed a reverse merger transaction (the Merger )
+with NeuBase Corporation (formerly known as NeuBase Therapeutics, Inc.), a Delaware corporation, and, upon completion of the Merger,
+we changed our name to NeuBase Therapeutics, Inc. Shares of our Common Stock commenced trading on the Nasdaq Capital Market
+under the ticker symbol NBSE as of market open on July 15, 2019.
+
+ 
+
+Our principal executive offices
+are located at 350 Technology Drive, Fourth Floor, Pittsburgh, PA 15219, and our telephone number is (412) 763-3350. Our website is located
+at www.neubasetherapeutics.com. Any information contained on, or that can be accessed through, our website is not incorporated
+by reference into, nor is it in any way part of, this prospectus and should not be relied upon in connection with making any decision
+with respect to an investment in our securities. We are required to file annual, quarterly and current reports, proxy statements and
+other information with the SEC. You may obtain any of the documents filed by us with the SEC at no cost from the SEC s website
+at http://www.sec.gov.
+
+ 
+
+We are a smaller reporting
+company as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the Exchange Act ), and
+have elected to take advantage of certain of the scaled disclosure available for smaller reporting companies in this prospectus as well
+as our filings under the Exchange Act.
+
+ 
+
+ 3
+
+ 
+
+ 
+
+ 
+
+The Offering
+
+ 
+
+The Selling Stockholders
+identified in this prospectus are offering on a resale basis a total of 5,394,068 shares of Common Stock, consisting of (a) 578,697 shares
+of Common Stock underlying the RD Series A Warrants, (b) 578,697 shares of Common Stock underlying the RD Series B Warrants, (c) 1,366,829
+shares of Common Stock underlying the PIPE Pre-Funded Warrants, (d) 1,366,829 shares of Common Stock underlying the PIPE Series A Warrants,
+(e) 1,366,829 shares of Common Stock underlying the PIPE Series B Warrants and (f) 136,187 shares of Common Stock underlying the Placement
+Agent Warrants, as more fully described below.
+
+ 
+
+ 
+ Common Stock to be offered
+ by the Selling Stockholders
+ Up to 5,394,068 shares
+ of Common Stock
+
+ 
+ 
+ 
+
+ 
+ Common Stock outstanding prior to this
+ offering
+ 2,083,143 shares of Common Stock
+ as of July 21, 2023
+
+ 
+ 
+ 
+
+ 
+ Common Stock to be outstanding after
+ this offering
+ 7,477,211 shares of Common Stock,
+ assuming the exercise of all of the Warrants.
+
+ 
+ 
+ 
+
+ 
+ Use of proceeds
+ We will not receive any proceeds
+ from the sale of the shares of Common Stock by the Selling Stockholders, except for the Warrant exercise price paid for the Common
+ Stock offered hereby and issuable upon the exercise of the Warrants. See Use of Proceeds on page 6 of
+ this prospectus.
+
+ 
+ 
+ 
+
+ 
+ Risk factors
+ You should read the Risk Factors section beginning on page 5 of this prospectus for a discussion of factors to consider carefully before deciding to
+ invest in shares of our securities.
+
+ 
+ 
+ 
+
+ 
+ Nasdaq Capital Market symbol
+ Our Common Stock is listed on The
+ Nasdaq Capital Market under the symbol NBSE. We do not intend to apply for listing of the Warrants on any securities
+ exchange or nationally recognized trading system.
+
+ 
+ 
+
+The number of shares of Common Stock to be outstanding
+after this offering is based on 2,083,143 shares of Common Stock outstanding as of July 21, 2023 and excludes the following as of such
+date:
+
+ 
+
+ 
+ 
+ 
+ 314,672 shares of Common Stock issuable upon exercise of options outstanding as of July 21, 2023, with a weighted average exercise
+ price of $55.91 per share;
+
+ 
+ 
+
+ 
+ 
+ 
+ 189,750 shares of Common Stock issuable upon exercise of warrants outstanding as of July 21, 2023, with a weighted average exercise
+ price of $2.57 per share;
+
+ 
+ 
+
+ 
+ 
+ 
+ 19,823 shares of Common Stock issuable upon vesting of restricted stock unit awards outstanding as
+ of July 21, 2023, with a weighted-average grant date fair value of $4.00 per share;
+
+ 
+ 
+
+ 
+ 
+ 
+ 13,334 shares of Common Stock available for issuance pursuant to our 2016 Consolidated Stock Incentive Plan; and
+
+ 
+ 
+
+ 
+ 
+ 
+ 122,328 shares of Common Stock available for issuance pursuant to our 2019 Stock Incentive Plan.
+
+ 
+
+ 
+
+ 4
+
+ 
+
+ 
+
+ 
+
+Risk Factors
+
+ 
+
+Investing in our securities
+involves a high degree of risk. Before investing in our securities, you should carefully consider the risks, uncertainties and assumptions
+contained in this prospectus and discussed under the heading Risk Factors included in our Annual Report on Form 10-K for
+the year ended September 30, 2022, as revised or supplemented by subsequent filings, which are on file with the SEC and are incorporated
+herein by reference, and which may be amended, supplemented or superseded from time to time by other reports we file with the SEC in
+the future. The risks described in these documents are not the only ones we face, but those that we consider to be 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. Our business, financial condition, results of operations and future growth prospects could be materially and adversely
+affected by any of these risks. In these circumstances, the market price of our Common Stock could decline, and you may lose all or part
+of your investment.
+
+ 
+
+ 5
+
+ 
+
+ 
+
+ 
+
+Use of Proceeds
+
+ 
+
+We will not receive any of
+the proceeds from the sale of the Common Stock by the Selling Stockholders. Certain of the shares offered hereby are issuable upon the
+exercise of the Warrants. Upon exercise of such Warrants for cash, we will receive the applicable cash exercise price paid by the holders
+of the Warrants for gross proceeds of approximately $9.5 million (assuming the full exercise of the Warrants). However, we cannot predict
+when and in what amounts or if the Warrants will be exercised by payments of cash and it is possible that the Warrants may expire and
+never be exercised, in which case we would not receive any cash proceeds. In addition, upon exercise of any of the RD Series B Warrants
+or the PIPE Series B Warrants, we will pay the Placement Agent a cash fee equal to 8.0% of the gross proceeds received from the exercise
+of the RD Series B Warrants or the PIPE Series B Warrants (including a 1.0% management fee) and will also issue to the Placement Agent
+(or its designees) additional Placement Agent Warrants to purchase a number of shares of Common Stock equal to 7.0% of the aggregate
+number of shares of Common Stock issued upon such exercise of the RD Series B Warrants or the PIPE Series B Warrants.
+
+ 
+
+We intend to use any proceeds
+received by us from the cash exercise of the Warrants for working capital and general corporate purposes.
+
+ 
+
+ 6
+
+ 
+
+ 
+
+ 
+
+Dividend Policy
+
+ 
+
+We have never paid cash dividends
+on our Common Stock and we do not anticipate paying cash dividends in the foreseeable future, but intend to retain our capital resources
+for reinvestment in our business. Any future determination to pay cash dividends on our Common Stock will be at the discretion of our
+board of directors and will be dependent upon our financial condition, results of operations, capital requirements and other factors
+as the board of directors deems relevant.
+
+ 
+
+Determination
+of Offering Price
+
+ 
+
+The prices at which the shares
+of Common Stock covered by this prospectus may actually be sold will be determined by the prevailing public market price for shares of
+our Common Stock or by negotiations between the Selling Stockholders and buyers of our Common Stock in private transactions or as otherwise
+described in Plan of Distribution. 
+
+ 
+
+ 7
+
+ 
+
+ 
+
+ 
+
+Selling Stockholders
+
+ 
+
+The Common Stock being offered
+by the Selling Stockholders are those previously issued to the Selling Stockholders, and those issuable to the Selling Stockholders,
+upon exercise of the Warrants. For additional information regarding the issuances of those shares of Common Stock and Warrants, see