We may need to engage in other common equity, debt, or preferred stock financing in the future. As a result of these additional offerings, your rights and the value of your investment in the Common Stock into which the SAFE could be converted, could be reduced. Interest on debt securities could increase costs and negatively impact operating results. Preferred stock could be issued in series from time to time with such designations, rights, preferences, and limitations as needed to raise capital. The terms of preferred stock could be more advantageous to those investors than to the holders of Common Stock. In addition, if we need to raise additional equity capital from the sale of Common Stock, institutional or other investors may negotiate terms at least as, and possibly more, favorable than the terms of your investment, including, a lower purchase price.
Intellectual property could be unenforceable or ineffective.
One of our most valuable assets is our intellectual property, however, companies, organizations or individuals, including our competitors, may hold or obtain patents, trademarks or other proprietary rights that would prevent, limit or interfere with our ability to make, use, develop, sell or market our software, which could make it more difficult for us to operate our business. From time to time, we may receive communications from holders of patents or trademarks regarding their proprietary rights. Companies holding patents or other intellectual property rights may bring suits alleging infringement of such rights or otherwise assert their rights and urge us to take licenses. In addition, if we are determined to have infringed upon a third party's intellectual property rights, we may be required to cease operating our software, pay substantial damages, seek a license from the holder of the infringed intellectual property right, which license may not be available on reasonable terms or at all, and/or establish and maintain alternative branding for our software. We may also need to file lawsuits to protect our intellectual property rights from infringement from third parties, which lawsuits could be expensive, time consuming and distract management's attention from our core operations.
There are several potential competitors who are better positioned.
We compete with larger and more established survey software companies such as Survey Monkey, which have better financial means and marketing/sales and human resources than us. They may succeed in developing and marketing competing equivalent products earlier than us, or superior products than those developed by us. There can be no assurance that competitors will not render our technology or products obsolete or that the software developed by us will be preferred to any existing or newly developed technologies. It should further be assumed that that competition will intensify.
In order to compete, we need to rapidly make updates to our product offerings as the market demands. These product improvements and transitions have no guarantees of success.
Third party providers.
We rely on third-party service providers to operate, such as Microsoft, AWS, MozyPro, Elevaon, Godaddy and potential new third-party services we are not using yet to host our software, DNS, domain names, SSL certificates, IP addresses, off-site backups and merchant services. Any interruption or downtime in these third-party services could have a negative impact on our ability to deliver our software to our users and customers. Unless we become completely independent of third-party services, we remain subject to the risk that third party providers will be unable to meet our needs.
Breaches of our systems.
Any breach of our systems, databases, or other information may have a significant legal and monetary impact on our business and reputation.
We depend on certain key personnel.
Our future success depends on the efforts of key personnel and consultants, especially our founder, Sheryl Briggs. The loss of services of Ms. Briggs or any key personnel may have an adverse effect on us. There can be no assurance that we will be successful in attracting and retaining other personnel we require to successfully grow our business.
Management discretion as to use of proceeds.
Our success will be substantially dependent upon the discretion and judgment of our management team with respect to the application and allocation of the proceeds of this Offering. The use of proceeds described below is an estimate based on our current business plan. We, however, may find it necessary or advisable to re-allocate portions of the net proceeds reserved for one category to another, and we will have broad discretion in doing so.
Limited Transferability and Liquidity.
Each Investor agrees that it will acquire our securities for investment purposes only and not with a view towards distribution. Certain conditions imposed by the Securities Act must be satisfied prior to any sale, transfer, conversion or other disposition of our securities. No public market exists for our securities and no market is expected to develop.
A majority of our Common Stock is owned by our CEO.
As of the date hereof, Sheryl Briggs, our sole officer and director, owns over 98% of the shares of our issued and outstanding Common Stock. Assuming the investors in this offering exercise their SAFE’s, she will still own and control a majority of our outstanding common stock. Therefore, Ms. Briggs will be able to control our management and affairs and most matters requiring stockholder approval, including, but not limited to, the election of directors and approval of significant corporate transactions. This concentration of ownership and voting power may have the effect of delaying or preventing a change in control, which may not be in the best interest of our other stockholders.
There is no current market for our securities.
There is no established public trading market for our securities, however, we do not have plans to apply for or otherwise seek trading or quotation of our securities on an over-the-counter market. Investors should assume that they may not be able to liquidate their investment for some time.
The Company may never receive a future equity financing or elect to convert the Securities upon such future financing. In addition, the Company may never undergo a liquidity event such as a sale of the Company or an IPO. If neither the conversion of the Securities nor a liquidity event occurs, the Purchasers could be left holding the Securities in perpetuity. The Securities have numerous transfer restrictions and will likely be highly illiquid, with no secondary market on which to sell them. The Securities are not equity interests, have no ownership rights, have no rights to the Company’s assets or profits and have no voting rights or ability to direct the Company or its actions.
Sheryl Briggs is the owner of several other businesses which she operates passively. This obligations may distract from her role as full time founder and CEO of ClassApps Inc.