10-K
1
form10-k.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-K
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the Fiscal Year Ended June 30, 2020
Commission
File Number: 000-25668
GLOBAL
TECHNOLOGIES, LTD
(Exact
name of registrant as specified in its charter)
(State or other jurisdiction of incorporation) (IRS Employer Identification No.)
(Address of principal executive offices) (Zip Code)
Registrant’s
telephone number, including area code: (727) 482-1505
A
Registered Agent, Inc.
8
The Green, Suite A
Dover,
DE 19901
(302)
288-0670
(Name,
address, including zip code, and telephone number, including area code, of agent for service)
Securities
registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, $0.0001 par value per share GTLL OTC Markets “PINK”
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [X] Smaller reporting company [X]
Emerging growth company [ ]
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act. [ ] YES
[X] NO
As
of December 17, 2020, there were 12,776,078,996 shares of registrant’s Class A common stock outstanding.
Cautionary
Note Regarding Forward Looking Statements
This
annual report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. The words “believe,” “expect,” “anticipate,” “intend,”
“estimate,” “may,” “should,” “could,” “will,” “plan,”
“future,” “continue, “and other expressions that are predictions of or indicate future events and trends
and that do not relate to historical matters identify forward-looking statements. These forward-looking statements are based largely
on our expectations or forecasts of future events, can be affected by inaccurate assumptions, and are subject to various business
risks and known and unknown uncertainties, a number of which are beyond our control. Therefore, actual results could differ materially
from the forward-looking statements contained in this document, and readers are cautioned not to place undue reliance on such
forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as
a result of new information, future events or otherwise. A wide variety of factors could cause or contribute to such differences
and could adversely impact revenues, profitability, cash flows and capital needs. There can be no assurance that the forward-looking
statements contained in this document will, in fact, transpire or prove to be accurate. These statements are only predictions
and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risk
Factors” that may cause our or our industry’s actual results, levels of activity, performance or achievements to be
materially different from any future results, levels of activity, performance or achievements expressed or implied by any forward-looking
statements.
Important
factors that may cause the actual results to differ from the forward-looking statements, projections or other expectations include,
but are not limited to, the following:
● risks related to commodity price fluctuations;
● the uncertainty of profitability based upon our history of losses;
● risks related to environmental regulation and liability;
● risks related to tax assessments;
Although
we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. You should not place undue reliance on these forward-looking statements, which
speak only as of the date of this report. Except as required by law, we do not undertake to update or revise any of the forward-looking
statements to conform these statements to actual results, whether as a result of new information, future events or otherwise.
As
used in this annual report, “Global Technologies,” the “Company,” “we,” “us,”
or “our” refer to Global Technologies, Ltd. unless otherwise indicated.
TABLE
OF CONTENTS
PAGE
PART I
Item 1. Business 4
Item 1A. Risk Factors 8
Item 1B. Unresolved Staff Comments 20
Item 2. Properties 20
Item 3. Legal Proceedings 20
Item 4. Mine Safety Disclosures 20
PART II
Item 6. Selected Financial Data 22
Item 7A. Quantitative and Qualitative Disclosures about Market Risk 27
Item 8. Financial Statements and Supplementary Data 27
Item 9A. Controls and Procedures 28
Item 9B. Other Information 29
PART III
Item 10. Directors, Executive Officers and Corporate Governance 31
Item 11. Executive Compensation 33
Item 14. Principal Accounting Fees and Services 36
PART IV
Signatures 38
PART
I
Item
1. Business.
Overview
Global
Technologies, Ltd is a publicly quoted company that was incorporated under the laws of the State of Delaware on January 20, 1999
under the name of NEW IFT Corporation. On August 13, 1999, the Company filed an Amended and Restated Certificate of Incorporation
with the State of Delaware to change the name of the corporation to Global Technologies, Ltd. Our principal executive offices
are located at 501 1st Ave N., Suite 901, St. Petersburg, FL 33701 and our telephone number is (727) 482-1505. Our
website address is www.globaltechnologiesltd.info.
COVID-19
COVID-19
has caused and continues to cause significant loss of life and disruption to the global economy, including the curtailment of
activities by businesses and consumers in much of the world as governments and others seek to limit the spread of the disease,
and through business and transportation shutdowns and restrictions on people’s movement and congregation.
As
a result of the pandemic, we have experienced, and continue to experience, weakened demand for our CBD products. Many of our wholesale
and retail customers have been unable to sell our products in their stores due to government-mandated closures and have deferred
or significantly reduced orders for our products. We expect these trends to continue until such closures are significantly curtailed
or lifted. In addition, the pandemic has reduced foot traffic in their stores where our products are sold that remain open,
and the global economic impact of the pandemic has temporarily reduced consumer demand for our products as they focus on purchasing
essential goods.
Given
these factors, the Company anticipates that the greatest impact from the COVID-19 pandemic will occur in the third and fourth
quarters of fiscal 2020 and first quarter of fiscal 2021 and will most likely result in a significant delay in the buildout of
our Markets on Main operations.
In
addition, certain of our suppliers and the manufacturers of certain of our products were adversely impacted by COVID-19. As a
result, we faced delays or difficulty sourcing products, which negatively affected our business and financial results. Even if
we are able to find alternate sources for such products, they may cost more and cause delays in our supply chain, which could
adversely impact our profitability and financial condition.
We
have taken actions to protect our employees in response to the pandemic, including closing our corporate office and requiring
our office employee to work from home. At the manufacturing facility where our HMNRTH CBD products are produced, certain practices
have been taken into effect to safeguard workers, including a staggered work schedule, and shortening of the work week. If this
were to continue, it may significantly delay our ability to have product produced for delivery.
Prior
Operational History
From
inception until March 2011, Global Technologies was a technology portfolio company that acquired nascent technology and related
innovations, inventions and IP assets to enhance their growth and development. The Company built revenues and asset value through
a model of continuous growth, income from or sale of its portfolio holdings, and technology licensing or distribution agreements.
The
Company invested primarily in innovative and promising clean/renewable energy or bio-tech technologies that had reached the stage
in the critical Technology Development & Demonstration phase of the Innovative Cycle, which includes Prototype, Demonstration
and Market Analysis.
In
March 2011, the Company abandoned its operations. Mr. Jimmy Wayne Anderson, our sole officer and director, was appointed a director
of the Company in December 2017 and an officer in January 2018.
Current
Operations
Global
Technologies, Ltd (“Global”) is a holding corporation, which through its subsidiaries, has operations engaged in the
online sales of CBD and hemp related products, the acquisition of intellectual property in the safety and security space and as
a portal for entrepreneurs to provide immediate access to live shopping, e-commerce, product placement in brick and mortar retail
outlets and logistics.
On
November 30, 2019, the Company entered into a Purchase and Sale Agreement (the “Agreement”) for the purchase of TCBM
Holdings, LLC (“TCBM”). Under the terms of the Agreement, the Company issued a Convertible Promissory Note in the
amount of $2,000,000 to Jetco Holdings, LLC for the purchase of all issued and outstanding membership units of TCBM and its subsidiaries,
HMNRTH, LLC and 911 Help Now, LLC.
On
March 11, 2020, the Company, through its two wholly owned subsidiaries, HMNRTH, LLC (the “Seller”) and TCBM Holdings,
LLC (the “Owner”) (together Seller and Owner the “Selling Parties”) entered into an Asset Purchase Agreement
(the “Agreement”) with Edison Nation, Inc. and its wholly owned subsidiary, Scalematix, LLC (together the “Buyer”),
for the sale of certain assets in the health and wellness industry and related consumer products industry. Under the terms of
the Agreement, Buyer was to remit $70,850 via wire transfer at Closing and issue to a representative of the Selling Parties Two
Hundred Thirty-Eight Thousand Seven Hundred and Fifty (238,750) shares of restricted common stock. In addition, the Selling Parties
shall have the right to additional earn out compensation based upon the following metrics: (i) at such time as the purchased assets
achieve cumulative revenue of $2,500,000, the Selling Parties shall earn One Hundred Twenty-Five Thousand (125,000) shares of
common stock; and (ii) at such time as the purchased assets achieve cumulative revenue of $5,000,000, the Selling Parties shall
earn One Hundred Twenty-Five Thousand (125,000) shares of common stock. The Closing of the transaction occurred on March 11, 2020.
As of the date of this filing, the Company has received the 238,750 shares of restricted common stock valued at $477,500 and
the $70,850 in cash compensation due under the terms of the Agreement. The shares and cash compensation were subsequently
transferred to the principal of Jetco Holdings, LLC as payment against the November 30, 2019 convertible note. Please seeNOTE F - NOTES PAYABLE, THIRD PARTIES for further information.
Our
wholly owned subsidiaries:
About
TCBM Holdings, LLC
TCBM
Holdings, LLC (“TCBM”) was formed as a Delaware limited liability company on August 10, 2017. TCBM is a holding corporation,
which operated through its two wholly owned subsidiaries, HMNRTH, LLC and 911 Help Now, LLC.
About
HMNRTH, LLC
HMNRTH,
LLC (“HMN”) was formed as a Delaware limited liability company on July 30, 2019. HMNRTH operates as an online store
selling a variety of hemp and CBD related products. The Company’s business model is to bridge the gap between the lifestyle
and knowledge components within the cannabis industry. The Company’s goal is to educate every consumer while cultivating
an experience by providing quality products, branded cutting-edge content, and diversified product lines for any purpose. Most
importantly, we want our clients to discover their inner HMN, redefine their inner HMN and Empower their inner HMN.
In
September 2019, the Company entered into a Quality Agreement with Nutralife Biosciences for the development and production of
its CBD line of products. The Company’s product line includes hemp derived, full spectrum cannabidiol tinctures and creams
in varying sizes. The Company’s ecommerce website can be found at www.hmnrth.com.
In
order for the Company to generate revenue through HMNRTH, we will need to: (i) produce additional inventory for retail sales through
the Company’s ecommerce site or sales, or (ii) sales to third party distributors, or (iii) direct sales to brick and mortar
CBD retail outlets, or (iv) generate additional CBD formulas to be utilized in new products At present, the Company does not have
the required capital to move forward with any of the options and there is no guarantee that we will be able to raise the required
funds.
Regulation
of HMNRTH products:
The
manufacture, labeling and distribution of our products is regulated by various federal, state and local agencies. These governmental
authorities may commence regulatory or legal proceedings, which could restrict the permissible scope of our product claims or
the ability to sell our products in the future. The FDA regulates our nutraceutical and wellness products to ensure that the products
are not adulterated or misbranded.
We
are subject to additional regulation as a result of our CBD products. The shifting compliance environment and the need to build
and maintain robust systems to comply with different compliance in multiple jurisdictions increase the possibility that we may
violate one or more of the requirements. If our operations are found to be in violation of any of such laws or any other governmental
regulations that apply to us, we may be subject to penalties, including, without limitation, civil and criminal penalties, damages,
fines, the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business
and our financial results.
Failure
to comply with FDA requirements may result in, among other things, injunctions, product withdrawals, recalls, product seizures,
fines and criminal prosecutions. Our advertising is subject to regulation by the FTC under the FTCA. Additionally, some states
also permit advertising and labeling laws to be enforced by private attorney generals, who may seek relief for consumers, seek
class action certifications, seek class wide damages and product recalls of products sold by us. Any actions against us by governmental
authorities or private litigants could have a material adverse effect on our business, financial condition and results of operations.
About
911 Help Now, LLC
911
Help Now, LLC (“911”) was formed as a Delaware limited liability company on February 2, 2018. 911 was a holding company
of intellectual property in the safety and security space. At present, we own no intellectual property within our 911 subsidiary.
In order to generate future revenue within 911, we will need to identify and either acquire or license intellectual property.
In the event of an acquisition, we will then need to either develop products utilizing our intellectual property or license out
our intellectual property to a third party. There is no guarantee that we will be successful with an acquisition or licensing
of any intellectual property.
About
Markets on Main, LLC
Markets
on Main, LLC (“MOM”) was formed as a Florida limited liability company on April 2, 2020. MOM is A full service, sales
and distribution, third-party logistics provider and portal to multi-channel sales opportunities. MOM’s focus is on bringing
small businesses and entrepreneurs to large opportunities and distribution. MOM will provide the following services to its clients:
inventory management, brand management, fulfillment and drop-ship capabilities, retail distribution and customer service. MOM’s
website can be found at www.marketsonmain.com.
Consultants
On
January 2, 2020, the Company entered into a Consulting Agreement (the “Agreement”) with Timothy Cabrera (the “Consultant”).
Under the terms of the Agreement, the Consultant is to provide services to further the business plan of the Company’s subsidiaries,
seek and advise the Company on the acquisition of potential products, seek acquisition candidates and on the sale of any inventory.
The Agreement has a term of one (1) year and the Consultant is to be compensated Two Hundred Fifty Thousand and NO/100 Dollars
($250,000).
On
January 2, 2020, the Company entered into a Consulting Agreement (the “Agreement”) with Brian McFadden (the “Consultant”).
Under the terms of the Agreement, the Consultant is to provide services to manage the Company’s HMNRTH subsidiary, manage
the process of new CBD formulas from development to sale, seek and advise the Company on the acquisition of potential products
and on the sale of any inventory. The Agreement has a term of one (1) year and the Consultant is to be compensated Two Hundred
Fifty Thousand and NO/100 Dollars ($250,000).
On
August 22, 2019, the Company entered into a Consulting Agreement (the “Agreement”) with Sylios Corp (the “Consultant”),
an entity controlled by the Company’s President, Jimmy Wayne Anderson. Under the terms of the Agreement, the Consultant
is to provide services related to acquisitions, mergers and certain day to day tasks of managing a public company. As compensation,
the Company shall pay Consultant $50,000 through the issuance of ten (10) shares of the Company’s Series L Preferred Stock.
The Company issued the shares of Series L Preferred Stock on September 2, 2019. The Agreement has a term of six (6) months or
until the Consultant completes the services requested.
REVENUE
For
the years ended June 30, 2020 and 2019, we had $548,350 and $0 in revenue. Our revenue for the twelve
months ended June 30, 2020 was 100% comprised of the sale of hemp and CBD inventory through our subsidiary. HMNRTH,
LLC.
RESEARCH
AND DEVELOPMENT
For
the twelve months ended June 30, 2020 and 2019, we had $0 and $0 research and development costs, respectively.
Employees
Currently,
Global Technologies has one part-time employee who devotes approximately 10-15 hours per week to the Company’s operations.
We intend on retaining additional officers, ancillary staff and consultants during the calendar year 2020 as our operational subsidiaries
further their business plans.
Our
Business Plan
Our
business plan is to operate through our wholly owned subsidiaries for the foreseeable future, while seeking potential acquisition,
joint venture and merger candidates.
Our
wholly owned subsidiaries:
About
TCBM Holdings, LLC
TCBM
Holdings, LLC (“TCBM”) was formed as a Delaware limited liability company on August 10, 2017. TCBM is a holding corporation,
which operated through its two wholly owned subsidiaries, HMNRTH, LLC and 911 Help Now, LLC.
About
HMNRTH, LLC
HMNRTH,
LLC (“HMN”) was formed as a Delaware limited liability company on July 30, 2019. HMNRTH operates as an online store
selling a variety of hemp and CBD related products. The Company’s business model is to bridge the gap between the lifestyle
and knowledge components within the cannabis industry. The Company’s goal is to educate every consumer while cultivating
an experience by providing quality products, branded cutting-edge content, and diversified product lines for any purpose. Most
importantly, we want our clients to discover their inner HMN, redefine their inner HMN and Empower their inner HMN.
In
September 2019, the Company entered into a Quality Agreement with Nutralife Biosciences for the development and production of
its CBD line of products. The Company’s product line includes hemp derived, full spectrum cannabidiol tinctures and creams
in varying sizes. The Company’s ecommerce website can be found at www.hmnrth.com.
In
order for the Company to generate revenue through HMNRTH, we will need to: (i) produce additional inventory for retail sales through
the Company’s ecommerce site or sales, or (ii) sales to third party distributors, or (iii) direct sales to brick and mortar
CBD retail outlets, or (iv) generate additional CBD formulas to be utilized in new products At present, the Company does not have
the required capital to initiate any of the options and there is no guarantee that we will be able to raise the required funds.
Regulation
of HMNRTH products:
The
manufacture, labeling and distribution of our products is regulated by various federal, state and local agencies. These governmental
authorities may commence regulatory or legal proceedings, which could restrict the permissible scope of our product claims or
the ability to sell our products in the future. The FDA regulates our nutraceutical and wellness products to ensure that the products
are not adulterated or misbranded.
We
are subject to additional regulation as a result of our CBD products. The shifting compliance environment and the need to build
and maintain robust systems to comply with different compliance in multiple jurisdictions increase the possibility that we may
violate one or more of the requirements. If our operations are found to be in violation of any of such laws or any other governmental
regulations that apply to us, we may be subject to penalties, including, without limitation, civil and criminal penalties, damages,
fines, the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business
and our financial results.
Failure
to comply with FDA requirements may result in, among other things, injunctions, product withdrawals, recalls, product seizures,
fines and criminal prosecutions. Our advertising is subject to regulation by the FTC under the FTCA. Additionally, some states
also permit advertising and labeling laws to be enforced by private attorney generals, who may seek relief for consumers, seek
class action certifications, seek class wide damages and product recalls of products sold by us. Any actions against us by governmental
authorities or private litigants could have a material adverse effect on our business, financial condition and results of operations.
About
911 Help Now, LLC
911
Help Now, LLC (“911”) was formed as a Delaware limited liability company on February 2, 2018. 911 was a holding company
of intellectual property in the safety and security space. At present, we own no intellectual property within our 911 subsidiary.
In order to generate future revenue within 911, we will need to identify and either acquire or license intellectual property.
In the event of an acquisition, we will then need to either develop products utilizing our intellectual property or license out
our intellectual property to a third party. There is no guarantee that we will be successful with an acquisition or licensing
of any intellectual property.
About
Markets on Main, LLC
Markets
on Main, LLC (“MOM”) was formed as a Florida limited liability company on April 2, 2020. MOM is A full service, sales
and distribution, third-party logistics provider and portal to multi-channel sales opportunities. MOM’s focus is on bringing
small businesses and entrepreneurs to large opportunities and distribution. MOM will provide the following services to its clients:
inventory management, brand management, fulfillment and drop-ship capabilities, retail distribution and customer service. MOM’s
website can be found at www.marketsonmain.com.
Potential
Future Acquisitions
In
implementing a structure for a particular business acquisition, we may become a party to a merger, consolidation, reorganization,
joint venture, or licensing agreement with another company or entity. We may also acquire stock or assets of an existing business.
Upon consummation of a transaction, it is probable that our present management and stockholders will no longer be in control of
us. In addition, our sole director may, as part of the terms of the acquisition transaction, resign and be replaced by new directors
without a vote of our stockholders, or sell his stock in us. Any such sale will only be made in compliance with the securities
laws of the United States and any applicable state.
It
is anticipated that any securities issued in any such acquisition would be issued in reliance upon exemption from registration
under application federal and state securities laws. In some circumstances, as a negotiated element of the transaction, we may
agree to register all or a part of such securities immediately after the transaction is consummated or at specified times thereafter.
If such registration occurs, it will be undertaken by the surviving entity after it has successfully consummated a merger or acquisition
and is no longer considered an inactive company.
The
issuance of substantial additional securities and their potential sale into any trading market which may develop in our securities
may have a depressive effect on the value of our securities in the future. There is no assurance that such a trading market will
develop.
While
the actual terms of a transaction cannot be predicted, it is expected that the parties to any business transaction will find it
desirable to avoid the creation of a taxable event and thereby structure the business transaction in a so-called “tax-free”
reorganization under Sections 368(a)(1) or 351 of the Internal Revenue Code (the “Code”). In order to obtain tax-free
treatment under the Code, it may be necessary for the owner of the acquired business to own 80% or more of the voting stock of
the surviving entity. In such event, our stockholders would retain less than 20% of the issued and outstanding shares of the surviving
entity. This would result in significant dilution in the equity of our stockholders.
As
part of our investigation, we expect to meet personally with management and key personnel, visit and inspect material facilities,
obtain independent analysis of verification of certain information provided, check references of management and key personnel,
and take other reasonable investigative measures, to the extent of our limited financial resources and management expertise. The
manner in which we participate in an opportunity will depend on the nature of the opportunity, the respective needs and desires
of both parties, and the management of the opportunity.
With
respect to any merger or acquisition, and depending upon, among other things, the target company’s assets and liabilities,
our stockholders will in all likelihood hold a substantially lesser percentage ownership interest in us following any merger or
acquisition. The percentage ownership may be subject to significant reduction in the event we acquire a target company with assets
and expectations of growth. Any merger or acquisition can be expected to have a significant dilutive effect on the percentage
of shares held by our stockholders.
We
will participate in a business opportunity only after the negotiation and execution of appropriate written business agreements.
Although the terms of such agreements cannot be predicted, generally we anticipate that such agreements will (i) require specific
representations and warranties by all of the parties; (ii) specify certain events of default; (iii) detail the terms of closing
and the conditions which must be satisfied by each of the parties prior to and after such closing; (iv) outline the manner of
bearing costs, including costs associated with the Company’s attorneys and accountants; (v) set forth remedies on defaults;
and (vi) include miscellaneous other terms.
As
stated above, we will not acquire or merge with any entity which cannot provide independent audited financial statements within
a reasonable period of time after closing of the proposed transaction. If such audited financial statements are not available
at closing, or within time parameters necessary to insure our compliance within the requirements of the 1934 Act, or if the audited
financial statements provided do not conform to the representations made by that business to be acquired, the definitive closing
documents will provide that the proposed transaction will be voidable, at the discretion of our present management. If such transaction
is voided, the definitive closing documents will also contain a provision providing for reimbursement for our costs associated
with the proposed transaction.
There
are no guarantees that we will be successful in Closing any additional acquisitions or mergers.
Competition
We
believe we are an insignificant participant among the firms, which engage in the acquisition of business opportunities. There
are many established venture capital and financial concerns that have significantly greater financial and personnel resources
and technical expertise than we have. In view of our limited financial resources and limited management availability, we will
continue to be at a significant competitive disadvantage compared to our competitors.
In
reference to our subsidiary 911 Help Now (“911”), the Personal Emergency Response
marketplace is a large and fragmented market, which has many competitors with larger financial resources than us. Our differentiating
factor in this space is our no monthly fee sales model. At present, we own no intellectual property within our 911 subsidiary.
In order to generate future revenue within 911, we will need to identify and either acquire or license intellectual property.
In the event of an acquisition, we will then need to either develop products utilizing our intellectual property or license out
our intellectual property to a third party. There is no guarantee that we will be successful with an acquisition or licensing
of any intellectual property.
In
reference to our subsidiary HMNRTH (“HMNRTH”),the
market for the sale of CBD-based products is fragmented and intensely competitive. Currently, in the United States, we do not
believe that there are any businesses that can demonstrate or claim a dominant market share of the growing CBD products
market. Our competitors in the retail location sales of CBD-based products include Green Roads, PlusCBD, and Select CBD,
and in the digital space include Diamond CBD, CBDistillery, and Lazarus Natural. We expect that the quantity and composition
of the competitive environment will continue to evolve as the industry matures and new customers enter the marketplace. In order
for the Company to generate revenue through HMNRTH, we will need to: (i) produce additional inventory for retail sales through
the Company’s ecommerce site or sales, or (ii) sales to third party distributors, or (iii) direct sales to brick and mortar
CBD retail outlets, or (iv) generate additional CBD formulas to be utilized in new products At present, the Company does not have
the required capital to move forward with any of the options and there is no guarantee that we will be able to raise the required
funds.
In
reference to our newly formed business operation through our subsidiary Markets on Main (“MOM”), the Company’s
goal is to become a leader in sales and distribution of entrepreneur driven products, in a highly competitive industry. We compete
with companies from all industries, some of which have substantially more resources, stronger name recognition, and longer operating
histories than us, and which benefit from greater economies of scale.
We
target products that leverage some sort of intellectual property that we may own or license from the entrepreneurs. Under the
Company’s business plan, we anticipate that certain of our licensors will have reserved the right to manufacture, distribute
and sell similar or identical products. Some of these products could directly compete with our products and could be sold to our
customers or directly to consumers at lower prices than those at which our products are sold. Our competitors for MOM include
Funko, Inc. and Edison Nation, Inc. to name a few. We anticipate generating revenue through MOM during the current fiscal quarter
through our fulfillment relationships with QVC and TBD Safety.
Investment
Company Act 1940
Although
we will be subject to regulation under the Securities Act of 1933, as amended, and the 1934 Act, we believe we will not be subject
to regulation under the Investment Company Act of 1940 (the “1940 Act”) insofar as we will not be engaged in the business
of investing or trading in securities. In the event we engage in business combinations that result in us holding passive investment
interests in a number of entities, we could be subject to regulation under the 1940 Act. In such event, we would be required to
register as an investment company and incur significant registration and compliance costs. We have obtained no formal determination
from the SEC as to our status under the 1940 Act and, consequently, any violation of the 1940 Act would subject us to material
adverse consequences. We believe that, currently, we are exempt under Regulation 3a-2 of the 1940 Act.
Intellectual
Property
We
own no intellectual property.
Factors
Effecting Future Performance
Rather
than an operating business, our goal is to obtain debt and/or equity financing to meet our ongoing operating expenses and attempt
to merge with another entity with experienced management and opportunities for growth in return for shares of our common stock
to create value for our shareholders.
Although
there is no assurance that this series of events will be successfully completed, we believe we can successfully complete an acquisition
or merger which will enable us to continue as a going concern. Any acquisition or merger will most likely be dilutive to our existing
stockholders.
The
factors affecting our future performance are listed and explained below under the section “Risk Factors” below:
Item
1A. Risk Factors.
You
should carefully consider the risks described below and other information in this prospectus, including the financial statements
and related notes that appear at the end of this prospectus, before deciding to invest in our securities. These risks should be
considered in conjunction with any other information included herein, including in conjunction with forward-looking statements
made herein. If any of the following risks actually occur, they could materially adversely affect our business, financial condition,
operating results or prospects. Additional risks and uncertainties that we do not presently know or that we currently deem immaterial
may also impair our business, financial condition, operating results and prospects.
Risks
Relating to Our Company
We
have incurred significant losses and anticipate future losses.
As
of June 30, 2020, we had an accumulated deficit of $160,937,361 and a stockholders’ deficit of approximately
$1,489,010.
Future
losses are likely to occur as, until we are able to merge with another entity with experienced management and opportunities for
growth in return for shares of our common stock to create value for our shareholders as we have no sources of income to meet our
operating expenses. As a result of these, among other factors, we received from our registered independent public accountants
in their report for the financial statements for the years ended June 30, 2020 and 2019, an explanatory paragraph
stating that there is substantial doubt about our ability to continue as a going concern.
Our
existing financial resources are insufficient to meet our ongoing operating expenses.
We
have no sources of income at this time and no existing cash balances to meet our ongoing operating expenses. In the short term,
unless we are able to raise additional debt and/or equity we shall be unable to meet our ongoing operating expenses. On a longer-term
basis, we intend to raise the debt and/or equity to meet our ongoing operating expenses and merge with another entity with experienced
management and opportunities for growth in return for shares of our common stock to create value for our shareholders. There can
be no assurance that this series of events will be successfully completed.
Scarcity
of, and competition for, business opportunities and combinations.
We
believe we are an insignificant participant among the firms which engage in the acquisition of business opportunities. There are
many established venture capital and financial concerns that have significantly greater financial and personnel resources and
technical expertise than we have. Nearly all such entities have significantly greater financial resources, technical expertise
and managerial capabilities than us and, consequently, we will be at a competitive disadvantage in identifying possible business
opportunities and successfully completing a business combination. Moreover, we will also compete in seeking merger or acquisition
candidates with numerous other small public companies. In view of our limited financial resources and limited management availability,
we will continue to be at a significant competitive disadvantage compared to our competitors.
We
may be negatively affected by adverse general economic conditions.
Current
conditions in domestic and global economies are extremely uncertain. Adverse changes may occur as a result of softening global
economies, wavering consumer confidence caused by the threat of terrorism and war, and other factors capable of affecting economic
conditions. Such changes could have a material adverse effect on our business, financial condition, and results of operations.
Because
our principal shareholder controls our activities, he may cause us to act in a manner that is most beneficial to himself and not
to other shareholders which could cause us not to take actions that outside investors might view favorably.
Our
principal shareholder, our sole officer and director, has voting authority for ninety six percent (96%) of our outstanding common
stock. As a result, he effectively controls all matters requiring stockholder approval, including the election of directors, the
approval of significant corporate transactions, such as mergers and related party transaction. These insiders also have the ability
to delay or perhaps even block, by their ownership of our stock, an unsolicited tender offer. This concentration of ownership
could have the effect of delaying, deterring or preventing a change in control of our company that you might view favorably.
Our
director may have conflicts of interest which may not be resolved favorably to us.
Certain
conflicts of interest may exist between our sole director and us. Our sole Director has other business interests to which he devotes
his attention and may be expected to continue to do so although management time should be devoted to our business. As a result,
conflicts of interest may arise that can be resolved only through exercise of such judgment as is consistent with fiduciary duties
to us. See “Directors and Executive Officers” (page 30 below), and “Conflicts of Interest.” (page 31
below).
We
may depend upon outside advisors; who may not be available on reasonable terms and as needed.
To
supplement the business experience of our officers and directors, we may be required to employ accountants, technical experts,
appraisers, attorneys, or other consultants or advisors. Our Board without any input from stockholders will make the selection
of any such advisors. Furthermore, it is anticipated that such persons may be engaged on an “as needed” basis without
a continuing fiduciary or other obligation to us. In the event we consider it necessary to hire outside advisors, we may elect
to hire persons who are affiliates, if they are able to provide the required services.
We
may not be able to meet the filing and internal control reporting requirements imposed by the Securities and Exchange Commission,
which may result in a decline in the price of our common shares and an inability to obtain future financing.
As
directed by Section 404 of the Sarbanes-Oxley Act, as amended by SEC Release No. 33-8934 on June 26, 2008, the SEC adopted rules
requiring each public company to include a report of management on the company’s internal controls over financial reporting
in its annual reports. In addition, the independent registered public accounting firm auditing a company’s financial statements
may have to also attest to and report on management’s assessment of the effectiveness of the company’s internal controls
over financial reporting. We may be required to include a report of management on its internal control over financial reporting.
The internal control report must include a statement
Furthermore,
our independent registered public accounting firm may be required to file its attestation on whether it believes that we have
maintained, in all material respects, effective internal control over financial reporting.
While
we expect to expend significant resources in developing the necessary documentation and testing procedures required by Section
404 of the Sarbanes-Oxley Act, there is a risk that we may not be able to comply timely with all of the requirements imposed by
this rule. In the event that we are unable to receive a positive attestation from our independent registered public accounting
firm with respect to our internal controls, investors and others may lose confidence in the reliability of our financial statements
and our stock price and ability to obtain equity or debt financing as needed could suffer.
In
addition, in the event that our independent registered public accounting firm is unable to rely on our internal controls in connection
with its audit of our financial statements, and in the further event that it is unable to devise alternative procedures in order
to satisfy itself as to the material accuracy of our financial statements and related disclosures, it is possible that we would
be unable to file our Annual Report on Form 10-K with the SEC, which could also adversely affect the market price of our common
stock and our ability to secure additional financing as needed.
Reporting
requirements under the Exchange Act and compliance with the Sarbanes-Oxley Act of 2002, including establishing and maintaining
acceptable internal controls over financial reporting, are costly and may increase substantially.
The
rules and regulations of the SEC require a public company to prepare and file periodic reports under the Exchange Act, which will
require that the Company engage legal, accounting, auditing and other professional services. The engagement of such services is
costly. Additionally, the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) requires, among other things, that
we design, implement and maintain adequate internal controls and procedures over financial reporting. The costs of complying with
the Sarbanes-Oxley Act and the limited technically qualified personnel we have may make it difficult for us to design, implement
and maintain adequate internal controls over financial reporting. In the event that we fail to maintain an effective system of
internal controls or discover material weaknesses in our internal controls, we may not be able to produce reliable financial reports
or report fraud, which may harm our overall financial condition and result in loss of investor confidence and a decline in our
share price.
As
a public company, we will be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank
Act of 2010 and other applicable securities rules and regulations. Despite recent reforms made possible by the JOBS Act, compliance
with these rules and regulations will nonetheless increase our legal and financial compliance costs, make some activities more
difficult, time-consuming or costly and increase demand on our systems and resources. The Exchange Act requires, among other things,
that we file annual, quarterly, and current reports with respect to our business and operating results.
We
are working with our legal, accounting and financial advisors to identify those areas in which changes should be made to our financial
and management control systems to manage our growth and our obligations as a public company. These areas include corporate governance,
corporate control, disclosure controls and procedures and financial reporting and accounting systems. We have made, and will continue
to make, changes in these and other areas. However, we anticipate that the expenses that will be required in order to adequately
prepare for being a public company could be material. We estimate that the aggregate cost of increased legal services; accounting
and audit functions; personnel, such as a chief financial officer familiar with the obligations of public company reporting; consultants
to design and implement internal controls; and financial printing alone will be a few hundred thousand dollars per year and could
be several hundred thousand dollars per year. In addition, if and when we retain independent directors and/or additional members
of senior management, we may incur additional expenses related to director compensation and/or premiums for directors’ and
officers’ liability insurance, the costs of which we cannot estimate at this time. We may also incur additional expenses
associated with investor relations and similar functions, the cost of which we also cannot estimate at this time. However, these
additional expenses individually, or in the aggregate, may also be material.
In
addition, being a public company could make it more difficult or more costly for us to obtain certain types of insurance, including
directors’ and officers’ liability insurance, and we may be forced to accept reduced policy limits and coverage or
incur substantially higher costs to obtain the same or similar coverage. The impact of these events could also make it more difficult
for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers.