An investment in our shares involves a high degree of risk and many uncertainties. You should carefully consider the specific factors listed below, together with the other information included in this offering circular, before purchasing our shares in this offering. If one or more of the possibilities described as risks below actually occur, our operating results and financial condition would likely suffer and the trading price, if any, of our shares could fall, causing you to lose some or all of your investment. The following is a description of what we consider the key challenges and material risks to our business and an investment in our securities.
We face intense competition, and many of our competitors have substantially greater resources than we do.
We compete with many companies in the snoring reduction space, including, PureSleep, ZQuiet and SnoreRX. Many of our competitors have greater market recognition and customer bases, longer operating histories and substantially greater financial, technical, marketing, distribution, purchasing, manufacturing, personnel and other resources than we do. As a result, they may be able to respond more quickly to changing customer demands or to devote greater resources to the development, promotion and sales of snore reduction products than we can. If we fail to compete successfully, our business would suffer and we may lose or be unable to gain market share.
If we do not retain key personnel, our business will suffer.
The success of our business is heavily dependent on the leadership of our key management personnel, specifically Dr. Jonathan Greenburg, the inventor of our product and our President, CEO, Secretary and sole director, and Owen Gonzales, our Chief Operating Officer. If either Mr. Gonzales or Dr. Greenburg were to leave us, it would be difficult to replace them, and our business would be harmed. We will also need to retain additional highly-skilled individuals if we are to effectively grow. Our future success depends on our continuing ability to identify, hire, develop, motivate and retain highly skilled personnel for all areas of our organization. Competition in our industry for qualified employees is intense, and we anticipate that certain of our competitors may directly target our employees and officers. Our continued ability to compete effectively depends on our ability to attract new employees and to retain and motivate our existing employees and officers.
We do not own our intellectual property.
We do not own the intellectual property related to our product. We license our intellectual property pursuant to a License Agreement dated March 2, 2012 between us and Always More Marking, Inc., a Nevada corporation. A portion of Always More Marking, Inc., is owned by Dr. Jonathan Greenburg, our President, Secretary, CEO, sole director and majority owner, who also serves as President of Always More Marking, Inc. Under the License Agreement, we have an exclusive, worldwide right to use the intellectual property related to our product. The license is for a period of 5 years, and automatically renews for successive 3 year terms unless the licensee provides us with notice of termination at least 60 days prior to the expiration of any renewal term. The current term of our license agreement expires on March 2, 2020. If the license agreement is not renewed or the license agreement is terminated as a result of our default, we will be required to cease selling our products and you could lose your investment.
Our competitive position depends in part on maintaining intellectual property protection.
Our ability to compete and to achieve and maintain profitability depends in part on our ability to protect our proprietary discoveries and product. Always More Marketing, Inc. and us rely on a combination of patent applications, trademarks and trade secret laws to protect our intellectual property rights. The patent might be challenged by third parties as being invalid or unenforceable, or third parties may independently develop similar or competing products that avoids our patents. We cannot be certain that the steps we take will prevent the misappropriation and use of such intellectual property, particularly in foreign countries where the laws may not protect our proprietary rights as fully as in the United States.
We may face intellectual property infringement claims that could be time-consuming and costly to defend and could result in our loss of significant rights and the assessment of damages.
If we receive notice of claims of infringement, misappropriation or misuse of other parties’ proprietary rights, some of these claims could lead to litigation. We cannot assure you that we will prevail in these actions. We may also initiate claims to defend our intellectual property. Intellectual property litigation, regardless of outcome, is expensive and time-consuming, could divert management’s attention from our business and have a material negative effect on our business, operating results or financial condition. If there is a successful claim of infringement against us, we may be required to pay substantial damages (including treble damages if we were to be found to have willfully infringed a third party’s patent) to the party claiming infringement, develop non-infringing products, stop selling our products or using technology that contains the allegedly infringing intellectual property or enter into royalty or license agreements that may not be available on acceptable or commercially practical terms, if at all. Our failure to develop non-infringing products or license the proprietary rights on a timely basis could harm our business. Parties making infringement claims on future issued patents may be able to obtain an injunction that would prevent us from selling our products that contains the allegedly infringing intellectual property, which could harm our business.
We are exposed to risks associated with product liability claims in the event that the use of our products results in injury, death or damage.
Since our products are medical devices, it is possible that users, could be injured or killed by our products, whether by product malfunctions, defects, improper use or other causes. As a manufacturer of products that are used by consumers, we will face an inherent risk of exposure to product liability claims or class action suits in the event that the use of the products we sell results in injury or death. Moreover, we may not have adequate resources in the event a successful claim is asserted against us. We will rely on general liability insurance to cover product liability claims and may not obtain separate product liability insurance. The successful assertion of product liability claims against us could result in potentially significant monetary damages and, if our insurance protection is inadequate, could require us to make significant payments.
Terms of subsequent financings may adversely impact your investment.
We will likely need to engage in common equity, debt, or preferred stock financing in the future, which may reduce the value of your investment in the Series A Preferred Stock. 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 designation, rights, preferences, and limitations as needed to raise capital, and without that approval of the holders of the Series A Preferred stock. The terms of new classes of preferred stock could be more advantageous to those investors than to the holders of Series A Preferred Stock. In addition, if we need to raise more equity capital from the sale of Common Stock, preferred stock, or other convertible securities, 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.
We have Substantial Debt and there are Risks of Borrowing.
We have outstanding loans in the amount of $784,829 as of October 31, 2017 owed to a third party, and owe Always More Marketing, Inc., the licensor of our intellectual property, Dr. Greenburg and Owen Gonzales, approximately, $2,264,912 for prior payments under the License Agreement and deferred compensation, which we intend to commence repaying at such time as we have $1,000,000 in cash reserves, excluding the proceeds of this Offering. In addition, we may have to seek additional loans from financial institutions to fund our ongoing operations. Typical loan agreements might contain restrictive covenants which may impair our operating flexibility. A default under any loan agreement could result in a charging order that would have a material adverse effect on our business, results of operations or financial condition.
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 herein 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 Series A Preferred Stock 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 or other disposition of our Series A Preferred Stock or the Class B Common Stock into which the Series A Preferred Stock is convertible, and no market is expected to develop.
Control by Majority Stockholders.
Even if this offering is fully subscribed, Dr. Jonathan Greenburg, who serves as our President, Secretary, Chief Financial Officer and sole Director, holds a substantial majority of our common stock. Therefore, investors will not be able to control our management or elect any of our directors.
Projections: Forward Looking Information.
Any projections or forward looking statements regarding our anticipated financial or operational performance are hypothetical and are based on management’s best estimate of the probable results of our operations, and will not have been reviewed by our independent accountants. These projections will be based on assumptions which management believes are reasonable. Some assumptions invariably will not materialize due to unanticipated events and circumstances beyond management’s control. Therefore, actual results of operations will vary from such projections, and such variances may be material. Any projected results cannot be guaranteed.
Because this transaction is a private offering and not registered under the U.S. Securities Act of 1933 or state securities laws, it has not been reviewed by the Securities and Exchange Commission (the “SEC”) or the state securities regulators. Review may have resulted in additional disclosures by us.
WE ARE OFFERING THE SHARES PURSUANT TO AVAILABLE EXEMPTIONS FROM REGISTRATION UNDER FEDERAL AND STATE SECURITIES LAWS. WE ARE UNDER NO OBLIGATION AND HAVE NO INTENTION, TO REGISTER THE SECURITIES AND ARE UNDER NO OBLIGATION TO ATTEMPT TO SECURE AN EXEMPTION FOR ANY SUBSEQUENT SALE. THE SHARES, WHEN ISSUED, WILL BE RESTRICTED SECURITIES AND GENERALLY MUST BE HELD INDEFINITELY. THEY MAY NOT BE TRANSFERRED UNLESS PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR AN AVAILABLE EXEMPTION FROM REGISTRATION WITH AN OPINION FROM LEGAL COUNSEL TO THAT EFFECT SATISFACTORY TO US.
GENERALLY, IN ADDITION TO THE ABOVE RISKS, BUSINESSES ARE OFTEN SUBJECT TO RISKS NOT FORESEEN OR FULLY APPRECIATED BY MANAGEMENT. IN REVIEWING THIS INVESTMENT, POTENTIAL INVESTORS SHOULD KEEP IN MIND OTHER POSSIBLE RISKS THAT COULD BE IMPORTANT.