Item 1A.
RISK FACTORS
Investment in our securities involve a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this Annual Report on Form 10-K, including our consolidated financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, before investing in our securities. If any of the following risks are realized, in whole or in part, our business, financial condition, and results of operations could be materially and adversely affected. In that event, the market value of our securities could decline, and you could lose part or all of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair the operation of our business.
Risks Related to Our Business
We have a history of losses and may not achieve profitability in the near term or at all.
If we increase our SaaS and TaaS subscriber and user base, we cannot provide any assurance that our subscribers will maintain their subscription or use our services for any period of time. We expect that our operating expenses will increase as we invest in marketing efforts, hire contractors and employees, and continue to invest in the marketing and development of our product and services. These efforts may be costlier than we expected, and our revenue may not increase sufficiently to offset these expenses. We may continue to take action and make investments that do not generate optimal short- or medium-term financial results and may even result in increased operating losses in the short or medium term with no assurance that we will eventually achieve the intended long-term benefits or profitability. Further, producing television series is both risky and costly, and we cannot provide any assurance that we will successfully syndicate the Unicorn Hunters show or obtain any positive equity value from the issuers featured on the show. These factors, among others set out in this “Risk Factors” section or elsewhere in this Annual Report on Form 10-K, may negatively affect our ability to achieve profitability in the near or medium term, if at all.
We may fail to compete effectively in the market in which we operate.
We face competition from similar software-as-a-service providers, talent-as-a-service providers and media distribution companies. The failure to compete effectively could materially and adversely affect our business, financial condition and our results of operations. There are many providers of services that offer similar functionality, and competition will likely evolve. Our TaaS competitors also offer talent-finding products, some of which are industry-specific. The television, entertainment and streaming video markets are highly competitive, and there are multiple well-established players in this market who may compete against us or have a higher likelihood of gaining viewership for new productions that our Unicorns subsidiary is able to achieve for the Unicorn Hunters show. Our main SaaS competitors primarily include companies that offer project management software, time-tracking software or cloud-based team collaboration software. Our competitors may have greater access to financial and marketing resources than we do and/or, may be able to capitalize on brand recognition in ways that we may not be to, or offer lower subscription fees with which we may not be to compete.
We have a limited operating history.
We have a short operating history upon which to evaluate the viability and sustainability of our platform and services. We achieved only modest revenues. As our businesses expand, our historical results may not be indicative of our future performance, and you should consider our future prospects in light of the risks and uncertainties of early-stage companies operating in the fast-evolving industries of technology, remote work and streaming media. Some of these risks and uncertainties relate to our ability to:
Anticipate and adapt to changing user preferences;
Increase awareness of our brands;
Anticipate and adapt to changing preferences in the TaaS marketplace;
Gain viewership and therefore revenues from Unicorns’ media assets;
Continue to develop additional or successful episodes of the Unicorn Hunters show;
Adapt to competitive market conditions;
Attract and retain qualified personnel and contractor services.
If we are unsuccessful in addressing any of these risks and uncertainties, our business, financial condition and results of operations may be materially and adversely affected.
We need additional capital but may not be able to obtain it on favorable terms or at all.
We need additional cash capital resources to fund future growth and development of our businesses necessary to achieve our vision and strategy, including developing the Unicorn Hunters show and expanding strategic partnership arrangements. There can be no assurance that financing will be available in a timely manner or in amounts or on terms acceptable to us, or at all. Any failure to raise needed funds on terms favorable to us, or at all, could severely restrict our liquidity as well as have a material adverse effect on our business, financial condition and results of operations. Moreover, any issuance of equity or equity-linked securities could result in significant dilution to our existing shareholders.
Although our financial statements have been prepared on a going concern basis, we must raise additional capital to fund our operations in order to continue as a going concern.
Our independent registered public accounting firm for the fiscal years ended December 31, 2025 and 2024, included an explanatory paragraph in their opinion that accompany our audited consolidated financial statements as of and for the years ended December 31, 2025 and 2024, indicating that our current liquidity position raises substantial doubt about our ability to continue as a going concern. If we are unable to improve our liquidity position, we may not be able to continue as a going concern. Our ability to raise the capital needed to improve our financial condition may be hindered by our increasing obligations which may deter investors from purchasing our equity securities, debt instruments or unicoin rights. The consolidated financial statements do not include any adjustments to the carrying amounts and classification of assets, liabilities, and reported expenses that may be necessary if the Company were unable to continue as a going concern.
Unicorn Hunters is as-yet-unproven as a media asset or as a method of marketing our products, which may not be successful, and may be a drain on our management and financial resources.
Streaming and television media and production are highly competitive industries in which our management team has limited experience. There can be no assurance that Unicorn Hunters, the business reality series being produced by Unicorns, will achieve sufficient paid memberships, viewership, or syndication and merchandising revenues to be profitable. In such case, Unicorns may be unable to repay the amounts drawn on its line of credit provided by Unicoin Inc. to produce the first season of the Unicorn Hunters show, and we could incur a loss on the operation of Unicorns. If we produce a second season of Unicorn Hunters prior to generating profit from season one, it will cause an additional drain on our financial resources and the availability of management and other personnel who participate in the production of the show. Finally, if Unicorn Hunters is not successful, we will not be able to fulfil our goal of using Unicoin Inc.’s sponsorship of the show as a means to increase Unicoin Inc.’s brand awareness and awareness of our other products and services.
Our strategy of acquiring equity stakes in private companies featured on Unicorn Hunters may not enhance shareholder value for an extended period of time, if at all.
We plan to require, as a fee for appearing on the Unicorn Hunters show, approximately 5% to 10% equity stakes (or options or warrants to acquire the same) in some or all the companies featured in future episodes. Any such equity acquired will be illiquid and may be difficult to value. When acquired, there will be no public market for such warrants, options or the shares underlying such warrants or options, and there can be no guarantee that a market for such securities will ever develop. If a secondary market or exit opportunity does develop, we cannot be assured that the price at which such securities can be sold will meaningfully contribute to shareholder value for Unicoin Inc. shareholders, or that such value will be in line with our estimates.
We have identified material weaknesses in our internal control over financial reporting. If we fail to develop and maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in Unicoin Inc.
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 a company’s financial statements would not be prevented or detected on a timely basis. These deficiencies could result in additional material misstatements to its financial statements that could not be prevented or detected on a timely basis. As of the year ended December 31, 2025, we have identified un-remediated material weaknesses in connection with our (i) entity-level controls (ii) information technology general controls and segregation of duties and (iii) equity accounting primarily related to issuance of stock to investors. This resulted from a lack of necessary business processes, internal controls, record retention policy, and adequate number of qualified personnel within our accounting function.
The material weaknesses will not be considered remediated until management designs and implements effective controls that operate for a sufficient period of time and management has concluded, through testing, that these controls are effective.
We cannot assure you that the measures will be sufficient to avoid potential future material weaknesses. Accordingly, there could continue to be a possibility that a material misstatement of our financial statements would not be prevented or detected on a timely basis.
We and certain of our current and former directors and officers received Wells Notices from the SEC staff, and the SEC has since commenced a civil enforcement action against us and such individuals, the outcome of which could materially and adversely affect our business, financial condition, results of operations, prospects, and reputation.
On December 10, 2024, we, along with Alex Konanykhin, our Chief Executive Officer and Chairman of our board of directors, Silvina Moschini, one of our directors and Chief Executive Officer of our subsidiary Unicorns, Inc., Alejandro Dominguez, our Chief Investment Officer, and Richard Devlin, our former Senior Vice President and General Counsel, received Wells Notices from the staff of the U.S. Securities and Exchange Commission (the “SEC”). The Wells Notices indicated that the SEC staff had made a preliminary determination to recommend that the SEC bring an enforcement action against us and each such individual in connection with alleged violations of the federal securities laws. On December 31, 2024, we and the named individuals submitted Wells submissions to the SEC staff responding to the matters described in the Wells Notices.
While the Wells Notice was not a formal charge or an adjudication on the merits, as a result of the matters described in the Wells Notices, on May 20, 2025, the SEC filed a civil enforcement action against Unicoin Inc. and certain individuals, including Messrs. Konanykhin, Dominguez, and Devlin and Ms. Moschini, in the United States District Court for the Southern District of New York. The action is captioned Securities and Exchange Commission v. Unicoin Inc. f/k/a TransparentBusiness, Inc., et al. , Case No. 1:25-cv-4245 (S.D.N.Y.).
The SEC’s complaint alleges violations of various provisions of the federal securities laws in connection with our offer and sale of digital assets, including unicoin tokens, as well as alleged material misstatements and omissions in communications with investors. The SEC is seeking injunctive relief, disgorgement of proceeds, civil monetary penalties, officer and director bars, and other equitable relief. We believe the claims asserted by the SEC are without merit and intend to vigorously defend against the allegations.
However, the outcome of this matter is inherently uncertain. If the SEC were to prevail on some or all of its claims, we could be subject to substantial monetary penalties or disgorgement obligations, which could exceed our ability to pay, as well as injunctions or other remedies that could restrict our current or future business activities, capital-raising efforts, or the service of our directors or officers. In addition, this matter could result in increased regulatory scrutiny, diversion of management’s time and attention, significant legal and professional expenses, and reputational harm, any of which could materially and adversely affect our business, financial condition, results of operations, cash flows, and prospects.
Unicoins may or may not be deemed a security by regulators.
Unicoins are designed to qualify as a utility token. Nevertheless, updated regulations and guidance from the SEC may necessitate that the utilities and rights associated with Unicoins may need to be modified. Unicoins, including the utility for which they will be used, are subject to modification by our management as we more fully explore the market opportunities, our need for capital, regulatory and legislative changes, and technological needs and limitations. We can make no assurances that any modifications or adjustments to our plan of operations for unicoins will be more beneficial than our original intentions, and therefore the future value and/or utility of unicoins may decline.
We accept payments for investments in our securities or unicoin rights in the form of cryptocurrencies, including Ether, which could cause the value of those investments to fluctuate.
The prices of blockchain assets such as Ether have historically been subject to dramatic fluctuations and are highly volatile. Therefore, the value initially received upon an investment using cryptocurrencies could fluctuate, causing the value of such investments to be more or less than originally received as we hold onto such blockchain assets. The value of blockchain assets and fluctuations in the price of blockchain assets could materially and adversely affect our business and the value of an investment in our common stock.
We currently generate significant revenue from a limited number of key customers and the loss of any of our key customers may harm our business, results of operations and financial results.
A small number of customers account for a large share of our revenue and accounts receivable. The following table summarizes the Company’s revenues from customers that contributed to at least 10% of total revenues:
Revenues
Total Revenues
Year Ended
December 31,
Customer Reference
Customer A (a TAAS customer)
Customer B (a TAAS customer)
The following table summarizes the Company’s accounts receivable from customers that contributed to at least 10% of total accounts receivable, net:
Accounts Receivable
Accounts Receivable, net
Customer Reference
December 31,
December 31,
Customer A (a TAAS customer)
Customer B (a TAAS customer)
Customer C (a TAAS customer)
TaaS contracts with these customers (similar to contracts with other TaaS customers) are for a duration of less than a year. Each contract is a straightforward time and materials arrangement to provide professional services with monthly billings. The Company’s TaaS operations could be adversely affected if management is not able to obtain significant new customers and retain existing customers.
There are multiple cryptocurrencies in various stages of development with the name Unicoin or a similar variant of Unicoin. Investors may be confused as to which cryptocurrency or digital asset is the one offered by the Company.
Despite the distinguishing characteristics of similarly named cryptocurrency projects, such as the “central bank cash reserve currency” being developed by the Digital Currency Monetary Authority (the “DCMA”), also called “Unicoin,” there remains a risk of investor confusion in the marketplace. We have had initial discussions about trademark coverage with the owner of the DCMA’s cryptocurrency, also called “Unicoin,” although we cannot guarantee that we will come to a favorable resolution with the DCMA on this issue and cannot determine its materiality at this time. Despite the different structure, target audience and features of the DCMA’s coin and other similarly named coins, there remains a risk that potential investors may select the wrong “Unicoin” when attempting to purchase unicoins on an exchange after tokenization.
The Company’s business is exposed to the potential misuse of digital assets and malicious actors.
The security procedures and operational infrastructure of the Company and may be breached due to the actions of outside parties, error or malfeasance of an employee of the Company, or otherwise, and, as a result, an unauthorized party may obtain access to the Company’s digital asset accounts, private keys, data or tokens. Additionally, outside parties may attempt to fraudulently induce employees of the Company to disclose sensitive information in order to gain access to the infrastructure of the Company. As the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently, or may be designed to remain dormant until a predetermined event, and often are not recognized until launched against a target, the Company may be unable to anticipate these techniques or implement adequate preventative measures. If an actual or perceived of the Company’s digital assets account occurs, the market perception of the effectiveness of its security protocols could be and the value of the Company’s common stock could be materially affected. As an example, as discussed in Note 5, the Company concluded that certain digital assets were by an unknown and outside party that bypassed the Company’s security procedures and operational infrastructure. The Company is currently exploring its legal options; however, has been determined it will not be to recover those assets.
We will need to implement strict finance and accounting systems, procedures and controls to operate our business.
We will be required to comply with a variety of reporting, accounting and other rules and regulations. Compliance with these requirements will be expensive. We will need to implement strict finance and accounting systems, procedures and controls to satisfy our reporting requirements and these requirements may increase our costs and require additional management time and resources. If our internal controls have undetected weaknesses or our internal control over financial reporting is determined to be ineffective, such failure could cause investors to lose confidence in our reported financial information, negatively affect the market price of unicoins (and our common stock) and adversely impact our business and financial condition.
Global or regional health pandemics or epidemics could negatively impact our business, financial position and results of operations.
The emergence, severity, magnitude and duration of global or regional pandemics, epidemics or other health crises are uncertain and difficult to predict. A pandemic, epidemic or contagious disease outbreak that affects humans or the food supply, such as the avian flu impact on poultry and egg production could impact our business operations, demand for our products and services, in-stock positions, costs of doing business, access to inventory, supply chain operations, the extent and duration of measures to try to contain the spread of a virus or other disease (such as travel bans and restrictions, quarantines, shelter-in-place orders, limitations on large gatherings, business and government shutdowns and other restrictions on retailers), our ability to predict future performance, exposure to litigation and our financial performance, among other things. In the event of any global or regional health crisis, customer demand for certain products may fluctuate, customer behaviors may change and consumer disposable income could be negatively impacted, which may our ability to anticipate and/or adjust inventory levels to meet that demand. These risks and their impacts are to predict and could otherwise and affect our operations and our financial performance.
To the extent that a future pandemic, epidemic or contagious disease outbreak occurs, such events may also heighten other risks described in this Item 1A, including but not limited to those related to consumer behavior and expectations, competition, our reputation, implementation of strategic initiatives, cybersecurity threats, payment-related risks, technology systems disruption, supply chain disruptions, labor availability and cost, and litigation and regulatory requirements.
Risk Related to Our Management and Control Persons
We depend on key personnel, the loss of any of whom could be detrimental to our business.
Our success depends to a significant degree upon the continued contributions of certain key personnel, including co-founders Alex Konanykhin and Silvina Moschini, who would be difficult to replace. If any of our key personnel were to cease employment with us, our operating results could suffer. We also believe that our future success depends, in large part, upon our ability to attract and retain highly skilled managerial, operational and marketing personnel. Competition for such personnel is intense, and we cannot provide assurance that we will be successful in attracting and retaining such personnel.
The concentration of our capital stock ownership with insiders will likely limit your ability to influence corporate matters.
Our executive officers, directors, and several stockholders and their affiliated entities together beneficially own a majority of our outstanding common stock. In particular, as of December 31, 2025, Silvina Moschini, our Chief Strategy Officer and our Unicorns, Inc. Chief Executive Officer, and Alex Konanykhin, Chairman of the Board of Directors and our Chief Executive Officer, together beneficially own 72.28% of our outstanding common stock. As a result, these stockholders, if they act together or in a block, could have significant influence over most matters that require approval by our stockholders, including the election of directors and approval of significant corporate transactions, even if other stockholders oppose them. This concentration of ownership might also have the effect of delaying or preventing a change of control of our company that other stockholders may view as beneficial.
Certain provisions of our Bylaws provide our Chairman and Chief Executive Officer with control over the Board and grant them discretion over total director compensation.
Our Bylaws provide that our directors have no voting rights during their initial one-year term. As a result of this provision and recent director resignations, our Chairman and Chief Executive Officer is currently the only director with voting rights and thereby controls the Board. In addition, our Bylaws permit the Chairman and Chief Executive Officer, at his discretion, to pay bonuses to directors in recognition of their contributions to the growth of the Company. This provision may result in the Chairman and Chief Executive Officer granting a bonus to himself or to other directors, which gives them discretion over total compensation for each director.
Risks Related to our Unicoin Offering
We may not be able to successfully execute our business strategy if we are deemed to be an investment company under the Investment Company Act of 1940.
In general, under the Investment Company Act, a U.S. company that does not qualify to use one of the “private investment company” (or other specialized) exemptions from investment company status, that has made (or proposes to make) a public offering of its securities and that is, or holds itself out as being, engaged primarily in the business of investing, reinvesting or trading in securities must register, and is subject to regulation, as an investment company under that Act. In addition, in general, investment company status may apply (again, unless a specialized exemption is available) because a company owns “investment securities” (essentially, non-controlling interests in other companies’ securities or controlling interests in companies that have the characteristics of an investment company) constituting more than 40% of the value of the investing company’s unconsolidated assets (disregarding U.S. government securities and “cash items”). The future activities of our Unicorn Hunters show, which is intended to develop a diversified portfolio of startup and emerging growth companies, is likely to cause us or one or more of our subsidiaries to be considered an investment company.
We may accept certain cryptocurrencies, such as Ether (ETH) and USD Coin (USDC) among others, as payment for the purchase of unicoins. The Company intends to hold these cryptocurrencies without converting into fiat currencies, in custodial wallets through Gemini. If these assets constitute more than 40% of the value of the Company’s unconsolidated assets (disregarding U.S. government securities and “cash items”), the Company may need to register and operate as an investment company.
If the Company were deemed to be an “investment company” under the Investment Company Act, applicable restrictions could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business. The Investment Company Act contains substantive legal requirements that regulate the manner in which an “investment company” is permitted to conduct its business activities. If we or one of our subsidiaries are deemed to be, and are required to register as, an investment company under the Investment Company Act, our activities may be restricted, including limitations on our ability to borrow, limitations on our capital structure, limitations on our ability to issue additional common stock, restrictions on acquisitions of interests in associated companies, prohibitions on transactions with affiliates, restrictions on specific investments. In addition, we may have imposed upon us burdensome requirements, including compliance with governance, reporting, record keeping, voting, proxy disclosure and other statutory requirements and related rules and regulations. If and when we are deemed to be an investment company, we would need to arrange our structure and future operations accordingly in order to comply with the foregoing restrictions and requirements. Compliance with the requirements of the Investment Company Act applicable to registered investment companies will add significant costs to our operations and could have a impact on our consolidated revenues and cost of operations. If we were ever deemed to be in with the Investment Company Act, we could also be subject to various , including administrative or judicial proceedings that might result in , fine, civil , -and-desist orders or other consequences, as well as private rights of action, any of which could materially affect our business and the price of our common stock.
We have no operating history in blockchain and tokens, and therefore valuation of the Certificates and unicoins is difficult.
Our operations to date have consisted of developing, marketing and selling our SaaS and TaaS services and the Unicorn Hunters show. Accordingly, we have no operating history in the blockchain and token industries upon which an evaluation of our prospects and future performance with respect to unicoins can be made.
We believe that the value of unicoins will be influenced by the supply of unicoins, the market’s perception of the Unicoin’s value and the liquidity for unicoins on a secondary market. The original purchase price of certificates evidencing the right to receive unicoins and the underlying unicoins may not be indicative of the market price of unicoins after they have been made available for trading on a market. There is also no assurance that the market price of unicoins will not decline below their original purchase price.
The application of distributed ledger technology and reliance on third-party blockchains is novel and untested and may contain inherent flaws or limitations.
Blockchain is an emerging technology that offers new capabilities which are not fully proven in use. There are limited examples of the application of distributed ledger technology. In most cases, software used by blockchain asset issuing entities will be in an early development stage and still unproven. As with other novel software products, the computer code underpinning the unicoins and Ethereum blockchain may contain errors, or function in unexpected ways. Insufficient testing of smart contract code, as well as the use of external code libraries, may cause the software to break or function incorrectly.
If we discover errors or unexpected functionalities in the unicoin smart contract after it has been deployed, we may make a determination that the unicoin smart contract is defective and that its use should be discontinued. Although we intend to replace the unicoins and the unicoin smart contract with a new token using a new smart contract, we may be required to take certain measures, such as freezing digital wallet addresses so that such wallets cannot transfer unicoins, which may disrupt trading in unicoins. Such a determination and our subsequent deployment of a new smart contract and replacement token could have a material effect on the value of any investment in our business.
In addition, since the token utilized the Ethereum-based blockchain, transactions on that blockchain may require a “gas fee,” which is a fee payable in ETH, for verifying a transaction. Further, the cost to tokenize and list unicoins on a trading platform consists of multiple due diligence, technical and setup fees, which are presently unknown, but expected to be between $250 thousand and $1,000 thousand.
Such fees will vary, depending upon the exchange platform chosen and the number of unicoin rights holders to be onboarded onto a platform. The variable amount of gas fees and other expenses presents an undetermined expense for investors and/or the company, which may have an adverse effect on the eventual market value for our unicoins and could negatively impact their liquidity.
The creation and operation of digital platforms for the public trading of blockchain assets will be subject to potential technical, legal and regulatory constraints. There is no warranty that the process for receiving, use and ownership of blockchain assets will be uninterrupted or error-free and there is an inherent risk that the software, network, blockchain assets and related technologies and theories could contain undiscovered technical flaws or weaknesses, the cryptographic security measures that authenticate transactions and the distributed ledger could be compromised, and breakdowns and trading halts could cause the partial or complete inability to use or loss of blockchain assets.
Risks associated with the distributed ledger technology could affect our business directly or the market for blockchain assets generally. In either case, the occurrence of these events could have a materially adverse effect on an investment in the Company.
Because we rely on third-party blockchain technologies, users of Unicoin could be subject to blockchain protocol risks.
Reliance upon other third-party blockchain technologies to create our platform subjects us and our customers to the risk of ecosystem malfunction, unintended function, unexpected functioning of, or attack on, the providers’ blockchain protocol, which may cause our platform to malfunction or function in an unexpected manner, including, but not limited to, slowdown or complete cessation in functionality of the platform.
The unicoins project may ultimately fail, for technical, operational, commercial, regulatory or any other reasons.
It is possible that despite the reasonable endeavors of such persons and their advisors, the unicoin project may fail, e.g., if insufficient funds are received during the unicoin fundraising effort, if unicoins are not ultimately launched on multiple exchanges, or if there are technical, operational, commercial, regulatory or any other reasons.
We cannot guarantee that the trading demand for unicoins will be sufficient to sustain a liquid market, or that Company activity will not negatively affect trading demand.
Unicoins currently trade on the Uniswap platform, and we are working to get unicoins on other platforms. However, there is no assurance that unicoins will benefit from trader demand, and no assurance that current holders of unicoins will be able to sell their holdings at favorable terms.
We may, in the future, take certain steps, including utilizing investor awareness campaigns, press releases, road shows and conferences to increase awareness of our business. We may need to compensate consultants with cash and/or unicoins. There can be no assurance that there will be any awareness generated or that the results of any efforts will result in any impact on unicoin trading volume, or that compensating consultants with unicoins will not result in negative impacts to their trading price.
Blockchain is a nascent and rapidly changing technology and there remains relatively small use of blockchain networks and blockchain assets in the retail and commercial marketplace. The slowing or stopping of the development or acceptance of blockchain networks may adversely affect an investment in our Company.
The development of blockchain networks is a new and rapidly evolving industry that is subject to a high degree of uncertainty. Factors affecting the further development of the blockchain industry include:
continued worldwide growth in the adoption and use of blockchain networks and assets;
the maintenance and development of the open-source software protocol of blockchain networks;
changes in consumer demographics and public tastes and preferences;
the popularity or acceptance of the Bitcoin or Ethereum networks;
the availability and popularity of other forms or methods of buying and selling goods and services, including new means of using fiat currencies;
government and quasi-government regulation of blockchain networks and assets, including any restrictions on access, operation and use of blockchain networks and assets; and
the general economic environment and conditions relating to blockchain networks and assets.
Our business model is dependent on continued investment in and development of the blockchain industry and related technologies. If investments in the blockchain industry become less attractive to investors or innovators and developers, or if blockchain networks and assets do not gain public acceptance or are not adopted and used by a substantial number of individuals, companies and other entities, then it would have a material adverse impact on our prospects and our operations.
The application of distributed ledger technology remains relatively novel and untested and may contain inherent flaws or limitations.
Blockchain, while becoming more prevalent in today’s economy, is still an emerging technology that offers new capabilities which are not fully proven in use. There are limited examples of the application of distributed ledger technology. In most cases, software used by blockchain asset issuing entities will be in an early development stage and still unproven. As with other novel software products, the computer code underpinning unicoins and Ethereum blockchain may contain errors, or function in unexpected ways. Insufficient testing of smart contract code, as well as the use of external code libraries, may cause the software to break or function incorrectly. Any error or unexpected functionality may cause a decline in the value of unicoins after their issuance and result in substantial losses to purchasers of Certificates and the underlying unicoins.
If we discover errors or unexpected functionalities in the unicoin smart contract after it has been deployed, we may make a determination that the unicoin smart contract is defective and that its use should be discontinued. We may be required to take certain measures, such as freezing digital wallet addresses so that such wallets cannot transfer unicoins, which may disrupt trading in unicoins. Such a determination and our subsequent deployment of a new smart contract and replacement token could have a material effect on the value of any investment in our common stock or our business.
The creation and operation of digital platforms for the public trading of blockchain assets will be subject to potential technical, legal and regulatory constraints. There is no guaranty that the process for receiving, use and ownership of blockchain assets will be uninterrupted or error-free and there is an inherent risk that the software, network, blockchain assets and related technologies and theories could contain undiscovered technical flaws or weaknesses, the cryptographic security measures that authenticate transactions and the distributed ledger could be compromised, and breakdowns and trading halts could cause the partial or complete inability to use or loss of blockchain assets.
Risks associated with the distributed ledger technology could affect our business directly or the market for blockchain assets generally. In either case, the occurrence of these events could have a materially adverse effect on the Company.
The open-source structure of blockchain software means that blockchain networks may be susceptible to malicious cyber-attacks or may contain exploitable flaws, which may result in security breaches and the loss or theft of blockchain assets.
Most blockchain networks operate based on some form of open-source software. An open-source project is not represented, maintained or monitored by an official organization or authority. Because of the nature of open-source software projects, it may be easier for third parties not affiliated with the issuer to introduce weaknesses or bugs into the core infrastructure elements of the blockchain network. This could result in the corruption of the open-source code which may result in the loss or theft of blockchain assets.
Blockchain networks may be the target of malicious attacks seeking to identify and exploit weaknesses in the software. Such events may result in a loss of trust in the security and operation of blockchain networks and a decline in user activity which could have a negative impact on the Company.
Each blockchain network, including the Ethereum network, is dependent upon its users and contributors, and actions taken, or not taken, by the users or contributors of a blockchain network could damage its reputation and the reputation of blockchain networks generally.
Developers and other contributors to blockchain network protocols generally maintain or develop those blockchain networks, including the verification of transactions on such networks. Because the networks are decentralized, these contributors are generally not directly compensated for their actions. Therefore, most blockchain networks provide that such contributors receive awards and transfer fees for recording transactions and otherwise maintaining the blockchain network. Such fees are generally paid in the blockchain asset of that network.
The security and integrity of blockchain assets, including the value ascribed to blockchain assets, relies on the integrity of the underlying blockchain networks. Unicoins are issued with the ERC-20 standard. Transfer costs will include exchange fees of the individual exchanges on which unicoin may be traded. Neither the unicoin rights nor the tokenized unicoins grant any intellectual property rights to holders.
The prices of blockchain assets are extremely volatile. Fluctuations in the price of Bitcoin, Ether and/or other blockchain assets could materially and adversely affect the Company and the value of unicoins.
The prices of blockchain assets such as Bitcoin and Ether have historically been subject to dramatic fluctuations and are highly volatile. As relatively new products and technologies, blockchain assets have only recently become accepted as a means of payment for goods and services, and such acceptance and use remains limited. Conversely, a significant portion of demand for blockchain assets is generated by speculators and investors seeking to profit from the short- or long-term holding of blockchain assets.
In addition, some blockchain industry participants have reported that a significant percentage of blockchain asset trading activity is artificial or non-economic in nature and may represent attempts to manipulate the price of certain blockchain assets. Trading platforms or blockchain assets may seek to inflate demand for a specific blockchain assets, or blockchain assets generally, which could increase the volatility of that asset or blockchain asset trading prices generally.
The market price of these blockchain assets, as well as other blockchain assets that may be developed in the future, may continue to be highly volatile. A lack of expansion, or a contraction of adoption and use of blockchain assets, may result in increased volatility or a reduction in the price of blockchain assets.
Several additional factors may influence the market price of blockchain assets, including, but not limited to:
Global blockchain asset supply;
Global blockchain asset demand, which can be influenced by the growth of retail merchants’ and commercial businesses’ acceptance of blockchain assets like cryptocurrencies as payment for goods and services, the security of online blockchain asset trading platforms and digital wallets that hold blockchain assets, the perception that the use and holding of blockchain assets is safe and secure, and the regulatory restrictions on their use;
Changes in the software, software requirements or hardware requirements underlying the blockchain networks;
Changes in the rights, obligations, incentives, or rewards for the various participants in blockchain networks;
The cost of trading and transacting in blockchain assets, and whether such costs may become fixed or standardized;
Investors’ expectations with respect to the rate of inflation;
Interest rates;
Currency exchange rates, including the rates at which blockchain assets may be exchanged for fiat currencies;
Fiat currency withdrawal and deposit policies of blockchain asset trading platforms and liquidity on such platforms;
Interruptions in service or other failures of major blockchain asset trading platforms;
Investment and trading activities of large investors, including private and registered funds, that may directly or indirectly invest in blockchain networks or blockchain assets;
Monetary policies of governments, trade restrictions, currency devaluations and revaluations;
Regulatory measures, if any, that affect the use of blockchain assets;
The maintenance and development of the open-source software utilized in blockchain networks;
Global or regional political, economic or financial events and situations; or
Expectations among blockchain network participants that the value of such blockchain assets will soon change.
A decrease in the price of a single blockchain asset may cause volatility in the entire blockchain industry and may affect other blockchain assets. For example, a security breach that affects investor or user confidence in Ether or Bitcoin may affect the industry as a whole and may also cause the price of other blockchain assets to fluctuate.
The value of blockchain assets and fluctuations in the price of blockchain assets could materially and adversely affect our business and investment in the Company.
The regulatory regimes governing blockchain technologies, blockchain assets and the purchase and sale of blockchain assets, including tokens such as unicoins, are uncertain, and new regulations or policies may materially adversely affect the development of blockchain networks and the use of blockchain assets.
Initially, it was unclear how distributed ledger technologies, blockchain assets and the businesses and activities utilizing such technologies and assets would fit into the current web of government regulation. As blockchain networks and blockchain assets have grown in popularity and in market size, international, federal, state and local regulatory agencies have begun to clarify their position regarding the sale, purchase, ownership and trading of blockchain assets.
Regulation of the trading of blockchain assets has evolved significantly over the past several years. On November 16, 2018, the Division of Corporation Finance, Division of Investment Management, and Division of Trading and Markets issued the Statement on Digital Asset Securities Issuance and Trading, confirming the applicability of the federal securities law framework to new and emerging technologies, such as blockchain assets. The Statement summarized the SEC’s stance on actors and institutions that sell tokens in initial offerings or develop and facilitate the secondary market for tokens, which is that market participants must still adhere to the SEC’s well-established and well-functioning federal securities law framework when dealing with technological innovations, regardless of whether the securities are issued in certificated form or using new technologies, such as blockchain. Although the Statement provides additional guidance to participants in the blockchain asset marketplace, in general the regulation of blockchain assets under the current regulatory framework applicable to currencies or securities remains in its early stages and is subject to uncertainty.
In addition, various legislative and executive bodies in the United States and in other countries have shown that they intend to adopt legislation to regulate the sale and use of blockchain assets. Such legislation may vary significantly among jurisdictions, which may subject participants in the blockchain trading marketplace to different and perhaps contradictory requirements. As of March 2024, thirty-nine states, Puerto Rico and the District of Columbia have addressed legislation regarding cryptocurrency, digital or virtual currencies and other digital assets in the 2024 legislative session, according to the National Conference of State Legislators.
New or changing laws and regulations or interpretations of existing laws and regulations, in the United States and elsewhere, may materially and adversely impact the development and growth of blockchain networks and the adoption and use of blockchain assets. The imposition of restrictions on all blockchain assets, or certain blockchain assets, could affect the value, liquidity and market price of blockchain assets subject to heightened regulation, by limiting access to marketplaces or exchanges on which to trade such blockchain assets, or imposing restrictions on the structure, rights and transferability of such blockchain assets. Some governments may seek to ban transactions in blockchain assets altogether.
The Company may be prevented from entering, or it may be required to cease operations in, a jurisdiction that makes it illegal or commercially unviable or undesirable to operate in such jurisdiction. Enforcement, or the threat of enforcement, may also drive a critical mass of participants and trading activity away from regulated markets, and toward unregulated exchanges. Although it is impossible to predict the positions that will be taken by certain governments, any regulatory changes affecting blockchain assets could be substantial and materially adverse to the development and growth of our business and investment in the Company.
Risks Related to Our Industry
We rely upon the internet infrastructure, cloud service providers and telecommunications networks in the markets in which we operate.
Our product and services are provided as a software-as-a-service and talent-as-a-service, meaning that we contract with third-party providers to host our application and platform. While we take every precaution and use best-in class providers, our business depends on the performance and reliability of our third-party cloud service providers in the markets where we operate. There are risks inherent in all cloud computing that if our platform were affected, could affect the availability of our service or negatively impact our subscribers. Key risks include:
Unauthorized access to or leaks of our customer data;
Security risks in the technology itself;
Unauthorized access to or leaks of our proprietary technology;
Inability to set or reinforce security policy;
Application or system performance; and
Provider’s business continuity and disaster readiness.
In the event of a technology breakdown by our service provider, our subscribers may experience disruptions or failures of, or other problems with use of our platform. In addition, the Internet infrastructure in emerging markets where we operate may hold higher risks of failure.
Any interruptions or delays in services from third parties, including data center hosting facilities, cloud computing platform providers and other hardware and software vendors, or our inability to adequately plan for and manage service interruptions or infrastructure capacity requirements, could impair the delivery of our services and harm our business.
We currently serve our customers from third-party data center hosting facilities and cloud computing platform providers located in the United States, Canada and the United Kingdom. We also rely on computer hardware purchased or leased from, software licensed from, and cloud computing platforms provided by, third parties to offer our services, including database software, hardware and data from a variety of vendors. Any damage to, or failure of our systems generally, including the systems of our third-party platform providers, could result in interruptions in our services. As we increase our reliance on these third-party systems, our exposure to damage from service interruptions may increase. Interruptions in our services may cause us to issue credits or pay penalties, cause customers to make warranty or other claims against us or to terminate their subscriptions and adversely affect our attrition rates and our ability to attract new customers, all of which would reduce our revenue. Our business would also be if our customers and potential customers believe our services are .
Infrastructure capacity requirements may exceed our expectation such that we experience significant strains on our data center capacity, resulting in our customers experiencing performance degradation or service outages that may subject us to financial liabilities and harm our business. As we add data-centers and capacity and continue to utilize cloud computing platform providers, we may move or transfer our data and our customers’ data. Despite precautions taken during this process, any unsuccessful data transfers may impair the delivery of our services, which may damage our business.
We may not have adequate sources of recovery if the digital assets held by us are lost, stolen or destroyed due to third-party digital asset services, which could have a material adverse effect on our business, financial condition and results of operations.
Certain digital assets owned by us are currently held or have previously been held by Coinbase or Gemini. We believe that the security procedures that Coinbase and Gemini utilize, such as dual authentication security at Coinbase, secured facilities, segregated accounts and cold storage, are reasonably designed to safeguard our digital assets from theft, loss, destruction or other issues relating to hackers and technological attack. Nevertheless, the security procedures cannot guarantee the prevention of any loss due to a security breach, software defect or act of God that may be borne by us. In addition, Coinbase’s and Gemini’s limited liability under their services agreements with us may limit our ability to recover losses relating to our digital assets. If such digital assets are lost, stolen or destroyed under circumstances rendering a third party liable to us, it is possible that the responsible third party may not have the financial resources or insurance sufficient to any or all of our the third party, or have the ability to retrieve, restore or replace the , or digital assets due to governing network protocols and the of the cryptographic systems associated with such digital assets. To the extent that we are to recover on any of our any such third party, such could have a material effect on our business, financial condition, and results of operations.
The popularity of content is difficult to predict and can change rapidly, and low public acceptance of the Unicorn Hunters show could adversely affect our results of operations.
The anticipated revenues derived from the sale, distribution and licensing of television and streaming programming, and our ability to acquire our desired portfolio of private equities, depend primarily on widespread public acceptance of the Unicorn Hunters show, which is difficult to predict and can change rapidly. We have invested and must continue to invest substantial amounts in the production and marketing of the Unicorn Hunters show before we learn whether it will reach anticipated levels of popularity with consumers and potential investors. The popularity of the Unicorn Hunters show depends on many factors, only some of which are within our control. Examples include the popularity, quality and amount of competing content (including, in addition to traditional competitors in media and entertainment, locally-produced content internationally and other business-related programming, some of which have large and growing subscriber/user bases and are significantly increasing their programming investments), our ability to maintain or develop strong brand awareness and target key audiences, and our ability to successfully anticipate (and timely adapt to) changes in consumer tastes in the many countries and territories in which we operate. Low public acceptance of the Unicorn Hunters could affect its results of operations and therefore the overall value of Unicoin Inc.
We may be subject to reputational harm, regulatory scrutiny, and financial losses due to the unauthorized use of our brand and the emergence of fraudulent websites and scams impersonating our company.
We have become aware of an increasing number of fake websites, phishing schemes, and other scams that falsely represent themselves as being affiliated with Unicoin Inc. These fraudulent activities often mimic our branding, trademarks, or website design to mislead consumers, divert traffic, or solicit unauthorized investments. Such scams can result in consumer confusion, reputational damage, and potential legal exposure, especially if victims mistakenly associate their losses with our business.
Despite our ongoing efforts to monitor, report, and remove such fraudulent content, we may be unable to fully prevent these activities or mitigate their impact. Any failure to detect or address these impersonation efforts promptly may erode trust in our brand, reduce user engagement, and lead to regulatory or law enforcement investigations. In addition, any public association with these scams, even if we are not responsible for them, may materially and adversely affect our reputation, operations, and financial condition.
Privacy concerns and laws such as the European Union’s General Data Protection Regulation, evolving regulation of cloud computing, cross-border data transfer restrictions and other domestic or foreign regulations may limit the use and adoption of our services and adversely affect our business.
Regulation related to the provision of services over the Internet is evolving, as federal, state and foreign governments continue to adopt new, or modify existing, laws and regulations addressing data privacy and the collection, processing, storage, transfer and use of data. In some cases, data privacy laws and regulations, such as the European Union’s (“EU”) General Data Protection Regulation (“GDPR”) that took effect in May 2018, could impose new obligations directly on us as both a data controller and a data processor, as well as on many of our customers. In addition, domestic data privacy laws, such as the California Consumer Privacy Act (“CCPA”) which took effect in January 2020, continue to evolve and could expose us to further regulatory burdens. Further, laws such as the EU’s proposed e-Privacy Regulation are increasingly aimed at the use of personal information for marketing purposes, and the tracking of individuals’ online activities.
These laws may require us to make additional changes to our services to enable Unicoin Inc. or our customers to meet the new legal requirements and may also increase our potential liability exposure through higher potential penalties for non-compliance. These new or proposed laws and regulations are subject to differing interpretations and may be inconsistent among jurisdictions. These and other requirements could reduce demand for our services, require us to take on more onerous obligations in our contracts, restrict our ability to store, transfer and process data or, in some cases, impact our ability or our customers’ ability to offer our services in certain locations, to deploy our solutions, to reach current and prospective customers, or to derive insights from customer data globally. For example, ongoing legal challenges in Europe to the mechanisms allowing companies to transfer personal data from the European Economic Area to the United States could result in further limitations on the ability to transfer data across borders, particularly if governments are unable or unwilling to reach new or maintain existing agreements that support cross-border data transfers, such as the EU-U.S. and Swiss-U.S. Privacy Shield framework. Additionally, certain countries have passed or are considering passing laws requiring local data residency. The costs of compliance with, and other imposed by, privacy laws, regulations and standards may limit the use and adoption of our services, reduce overall demand for our services, make it more to meet expectations from or commitments to customers, lead to significant , or liabilities for , impact our reputation, or the pace at which we close sales transactions, any of which could our business.
Furthermore, the uncertain and shifting regulatory environment and trust climate may cause concerns regarding data privacy and may cause our customers or our customers’ customers to resist providing the data necessary to allow our customers to use our services effectively. Even the perception that the privacy of personal information is not satisfactorily protected or does not meet regulatory requirements could inhibit sales of our products or services and could limit adoption of our cloud-based solutions.
If we fail to anticipate or identify significant Internet-related and other technology trends and developments early enough, or if we do not devote appropriate resources to adapting to such trends and developments, our business could be harmed.
If we are unable to develop enhancements to and new features for our existing or new services that keep pace with rapid technological developments, our business could be harmed. The success of enhancements, new features and services depends on several factors, including the timely completion, introduction and market acceptance of the feature, service or enhancement by customers, administrators and developers, as well as our ability to seamlessly integrate all of our service offerings and develop adequate selling capabilities in new markets. Failure in this regard may significantly impair our revenue growth as well as negatively impact our operating results if the additional costs are not offset by additional revenues. In addition, because our services are designed to operate over various network technologies and on a variety of operating systems and computer hardware and software platforms using a standard browser, we will need to continuously modify and enhance our services to keep pace with changes in Internet-related hardware, software, communication, browser, and database technologies, as well as continue to maintain and support our services on legacy systems. We may not be in either developing these modifications and or in bringing them to market in a timely manner. Furthermore, uncertainties about the timing and nature of new network platforms or technologies, or modifications to existing platforms or technologies, could increase our research and development or service delivery expenses. Any of our services to operate effectively with future network platforms and technologies could reduce the demand for our services, result in customer and our business.
Our ability to deliver our services is dependent on the development and maintenance of the infrastructure of the Internet by third parties.
The Internet’s infrastructure is comprised of many different networks and services that are highly fragmented and distributed by design. This infrastructure is run by a series of independent third-party organizations that work together to provide the infrastructure and supporting services of the Internet under the governance of the Internet Corporation for Assigned Numbers and Names (“ICANN”) and the Internet Assigned Numbers Authority, now under the stewardship of ICANN.
The Internet has experienced a variety of outages and other delays as a result of damages to portions of its infrastructure, denial-of-service attacks or related cyber incidents, and it could face outages and delays in the future. These outages and delays could reduce the level of Internet usage or result in fragmentation of the Internet, resulting in multiple separate Internets. These scenarios are not under our control and could reduce the availability of the Internet to us or our customers for delivery of our Internet-based services. Any resulting interruptions in our services or the ability of our customers to access our services could result in a loss of potential or existing customers and harm our business.
In addition, certain countries have implemented (or may implement) legislative and technological actions that either do or can effectively regulate access to the Internet, including the ability of Internet Service Providers to limit access to specific websites or content. These actions could potentially limit or interrupt access to our services from certain countries or Internet Service Providers, impede our growth, result in the loss of potential or existing customers and harm our business.
Sales to customers outside the United States expose us to risks inherent in international operations.
We sell our services throughout the world and are subject to risks and challenges associated with international business. We intend to continue to expand our international sales efforts. The risks and challenges associated with sales to customers outside the United States or those that can affect international operations generally, include:
localization of our services, including translation into foreign languages and associated expenses;
regulatory frameworks or business practices favoring local competitors;
evolving domestic and international tax environments;
foreign currency fluctuations and controls, which may make our services more expensive for international customers and could add volatility to our operating results;
compliance with multiple, conflicting, ambiguous or evolving governmental laws and regulations, including employment, tax, privacy, anti-corruption, import/export, antitrust, data transfer, storage and protection, and industry-specific laws and regulations, and our ability to identify and respond timely to compliance issues when they occur;
regional data privacy laws and other regulatory requirements that apply to outsourced service providers and to the transmission of our customers’ data across international borders, which grow more complex as we scale and expand into new markets;
treatment of revenue from international sources, intellectual property considerations and changes to tax codes, including being subject to foreign tax laws and being liable for paying withholding income or other taxes in foreign jurisdictions;
different pricing environments;
natural disasters, acts of war, terrorism, pandemics or security breaches; and
regional economic and political conditions.
Any of these factors could negatively impact our business and results of operations. The above factors may also negatively impact our ability to successfully expand into emerging market countries, where it can be costly and challenging to establish and maintain operations, including hiring and managing required personnel, and difficult to promote our brand, and where we may not otherwise succeed.
Weakened global economic conditions may adversely affect our industry, business and results of operations.
Our overall performance depends in part on worldwide economic and geopolitical conditions. The United States and other key international economies have experienced cyclical downturns from time to time in which economic activity was impacted by falling demand for a variety of goods and services, restricted credit, poor liquidity, reduced corporate profitability, volatility in credit, equity and foreign exchange markets, bankruptcies and overall uncertainty with respect to the economy. These economic conditions can arise suddenly, and the full impact of such conditions can remain uncertain. In addition, geopolitical developments, such as potential trade wars, can increase levels of political and economic unpredictability globally and increase the volatility of global financial markets. Moreover, these conditions can affect the rate of information technology spending and could adversely affect our customers’ ability or willingness to purchase our services, delay prospective customers’ purchasing decisions, reduce the value or duration of their subscription contracts, or affect attrition rates, all of which could affect our future sales and operating results. These conditions may also limit the overall willingness or ability of employers to hire additional staff, contractors or freelancers, and could decrease the willingness of investors to invest in the securities of private companies, such as those featured on our Unicorn Hunters show. All of these conditions could affect our future sales and operating results. Also, the broader consequences in the current between Russia and Ukraine, which may include further , regional and geopolitical shifts; airspace relating to certain routes, or strategic decisions to alter certain routes; and potential action by the Russian government companies, and the extent of the on our business and operating results cannot be predicted. We may incur expenses or relating to such events outside of our control, which could have a material impact on our business, operating results and financial condition.
Our operating results have and will significantly fluctuate, including due to the highly volatile nature of crypto.
Due to the highly volatile nature of the cryptoeconomy and the prices of crypto assets, which have experienced and continue to experience significant volatility, our operating results may fluctuate significantly from quarter to quarter in accordance with market sentiments and movements in the broader cryptoeconomy. Our operating results may fluctuate significantly as a result of a variety of factors, many of which are unpredictable and in certain instances are outside of our control.
In view of the rapidly evolving nature of our business and the cryptoeconomy, periodic comparisons of our operating results may not be meaningful, and you should not rely upon them as an indication of future performance. Quarterly and annual expenses reflected in our financial statements may be significantly different from historical or projected rates. Our operating results in one or more future quarters may fall below the expectations of securities analysts and investors, which may impact the price of our common stock significantly.
Due to unfamiliarity and some negative publicity associated with crypto asset platforms, confidence or interest in crypto asset companies may decline.
Crypto asset companies are relatively new. Many of our competitors are unlicensed, unregulated, operate without supervision by any governmental authorities, and do not provide the public with significant information regarding their ownership structure, management team, corporate practices, cybersecurity, and regulatory compliance. As a result, customers and the general public may lose confidence or interest in crypto asset companies, similar to us.
Since the inception of the cryptoeconomy, numerous crypto asset companies have been sued, investigated, or shut down due to fraud, manipulative practices, business failure, and security breaches. In many of these instances, customers of these companies were not compensated or made whole for their losses. Similar companies like us are more appealing targets for hackers and malware, and may also be more likely to be targets of regulatory enforcement actions. For example, in May 2019, Binance, one of the world’s largest platforms, was hacked, resulting in losses of approximately $40 million, and in February 2021, Bitfinex settled a long-running legal dispute with the State of New York related to Bitfinex’s alleged misuse of over $800 million of customer assets. Most recently the collapse of FTX in the fourth quarter of 2022 drove additional credit related . These events, among others, contributed to an overall market capitalization and resulted in a of confidence in the broader cryptoeconomy, reputational impact to crypto asset companies, increased publicity surrounding crypto more broadly, heightened by regulators and lawmakers and a call for increased regulations of crypto assets and crypto asset companies.
We may be subject to risks related to talent classification in our TaaS businesses in various jurisdictions .
While our terms of service for users of our TaaS services limit all sourced talent to the classification of independent contractor, we cannot be assured that local regulations in all countries into which we place or from which we secure talent will agree with our classification. Therefore, we face the risk that certain jurisdictions will treat our sourced talent as employees of our users/customers, which will subject us to increased regulatory burdens, increased costs, and possibly misclassification penalties. Such classification disputes, or an undesired result of such disputes, could cause our TaaS businesses to become less profitable or unprofitable, or could limit the geographic diversity from which we source talent.
Other Risk Factors
We have historically failed to provide current and timely disclosure as a reporting company under Section 12 under the Exchange Act.
We are required to provide current and timely disclosure, including financial information, as a reporting company under Section 12 under the Exchange Act. We did not timely file our Quarterly Reports on Form 10-Q for the periods ended March 31, 2022, June 30, 2022, September 30, 2022 and March 31, 2025. While these reports were outstanding, investors and shareholders did not have complete and current business and financial information about the Company, including unaudited quarterly financial information. As such, there was inadequate public information available about the Company to properly evaluate its common stock or the prospects of the Company at the time such reports were outstanding. While future compliance with all reporting requirements is a top priority of our current management, no assurances can be provided, given our limited operating history and our inability to comply with reporting requirements in the past, that we will be able to comply with our reporting obligations in the future. Failure to comply with reporting obligations subjects us to possible regulatory action by the SEC, which could adversely affect our business and our results of operations.
We are an “emerging growth company” and a “smaller reporting company,” and the reduced disclosure requirements applicable to emerging growth companies and smaller reporting companies may make our Common Stock less attractive to investors.
We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) and may remain an emerging growth company for up to five years. For so long as we remain an emerging growth company, we are permitted and plan to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended (“Sarbanes-Oxley”), not being required to comply with any requirement for a supplement to the auditor’s report providing additional information about the audit and the financial statements, reduced disclosure obligations regarding executive compensation 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. As a result, the information we provide stockholders will be different than the information that is available with respect to other public companies.
In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of this exemption, and, therefore, while we are an emerging growth company, we will not be subject to the new or revised accounting standards at the same time that they become applicable to other public companies that are not emerging growth companies. As a result of this election, our financial statements may not be comparable to those of other public companies that comply with new or revised accounting pronouncements as of public company effective dates. We may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for private companies.
We are also a “smaller reporting company,” meaning that the market value of our stock held by non-affiliates plus the proposed aggregate amount of gross proceeds to us as a result of this Offering is less than $700 million and our annual revenue is 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 stock held by nonaffiliates is less than $250 million or (ii) our annual revenue is less than $100 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700 million. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to 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, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.
We cannot predict whether investors will find our Common Stock less attractive if we rely on these exemptions. If some investors find our Common Stock less attractive as a result, there may be a less active trading market for our Common Stock and our stock price may be more volatile.
Obligations associated with being a public company will require significant resources and management attention.
As a public company, we are subject to certain reporting requirements, including those of the Exchange Act, which require that we timely file annual, quarterly and current reports with respect to our business and financial condition. The obligations of being a public company in the United States require significant expenditures and will place significant demands on our management and other personnel, including costs resulting from public company reporting obligations under the Exchange Act and the rules and regulations regarding corporate governance practices, including those under the Sarbanes-Oxley Act of 2002, as amended (“Sarbanes-Oxley”) and the Dodd-Frank Wall Street Reform and Consumer Protection Act. These rules require the establishment and maintenance of effective disclosure and financial controls and procedures and internal control over financial reporting among many other complex rules that are often difficult to implement, monitor and maintain compliance with. Moreover, the reporting requirements, rules and regulations will make some activities more time-consuming and costly, particularly after we are no longer deemed an “emerging growth company” or “smaller reporting company.” In addition, we expect these rules and regulations to make it more difficult and more 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. Our management and other personnel will need to devote a substantial amount of time to ensure that we comply with all of these requirements and to keep pace with new regulations, otherwise we may fall out of compliance and risk becoming subject to , among other potential . Compliance with these rules and regulations could also make it more for us to attract and retain qualified members of our Board of Directors.
In addition, we will be required to, among other things, institute more comprehensive financial reporting and disclosure compliance procedures and establish new internal policies, including those relating to disclosure controls and procedures. These rules and regulations, and any future changes thereto, will increase our legal and financial compliance costs compared to our prior operations and will require significant time and attention from our management team.
Our actual results of operations may not meet our guidance and investor expectations, which would likely cause our share price to decline.
From time to time, we may release guidance in our earnings releases, earnings conference calls, or otherwise, regarding our future performance that represent our management’s estimates as of the date of release. If given, this guidance, which will include forward-looking statements, will be based on projections prepared by our management. Projections are based upon a number of assumptions and estimates that, while presented with numerical specificity, are inherently subject to significant business, economic, and competitive uncertainties and contingencies, many of which are beyond our control. The principal reason that we expect to release guidance is to provide a basis for our management to discuss our business outlook with analysts and investors. With or without our guidance, analysts and investors may publish expectations regarding our business, financial condition, and results of operations. We do not accept any responsibility for any projections or reports published by any such third parties. Guidance is necessarily speculative in nature, and it can be expected that some or all of the assumptions of the guidance furnished by us will not materialize or will vary significantly from actual results. If our actual performance does not meet or exceed our guidance or investor expectations, the value of our Common Stock may decline.
We do not expect to declare or pay any dividends on our Common Stock for the foreseeable future.
We do not intend to pay cash dividends on our Common Stock for the foreseeable future. Consequently, investors must rely on sales of their shares after price appreciation, which may never occur, as the only way to realize any future gains on their investment. Any future determination to pay dividends will be at the discretion of our board of directors and subject to, among other things, our compliance with applicable law, and depending on, among other things, our business prospects, financial condition, results of operations, cash requirements and availability, capital expenditure needs, the terms of any preference equity securities we may issue in the future, covenants in the agreements governing any current or future indebtedness, other contractual restrictions, industry trends, and any other factors or considerations our board of directors may regard as relevant. Furthermore, our ability to pay dividends on our Common Stock will depend on our receipt of cash distributions and dividends from our direct and indirect subsidiaries, which may be similarly impacted by, among other things, the terms of any preferred equity securities these subsidiaries may issue in the future, debt agreements, other contractual restrictions, and provisions of applicable law.
Item 1 B .
U NRESOLVED STAFF COMMENTS
The requirements for Item 1B. “Unresolved Staff Comments” are not applicable to the Company, as it is not an accelerated filer, a large accelerated filer (each as defined in Rule 12b-2 of the Exchange Act) or a well-known seasoned issuer (as defined in Rule 405 of the Securities Act).
ITEM 1C.
CYBERSECURITY
We operate in the technology sector, which is subject to various cybersecurity risks that could adversely affect our business, financial condition, and results of operations, including intellectual property theft, fraud, violation of privacy laws, other litigation and legal risk, and reputational risk. We have implemented a risk-based approach to identify and assess the cybersecurity threats that could affect our business and information systems. We use various tools and methodologies to manage cybersecurity risks that are tested on a regular cadence to the best of our ability.
Our business depends on the availability, reliability, and security of our information systems, networks, data, and intellectual property. Any disruption, compromise, or breach of our systems or data due to a cybersecurity threat or incident could adversely affect our operations, research, product development, and competitive position. They may also result in a breach of our contractual obligations or legal duties to protect the privacy and confidentiality of our stakeholders. Such a breach could expose us to business interruption, future lost revenue, ransom payments, remediation costs, liabilities to affected parties, cybersecurity protection costs, lost assets, litigation, regulatory scrutiny and actions, and reputational harm.
Our Chief Information Officer works with others in our information technology department (IT) to assess any reasonably foreseeable internal and external risks to our information systems, including the likelihood of malware, ransomware, cyber espionage, and any other cybersecurity threats. Through these risk assessments, management seeks to determine the likelihood of, and potential damage that could result from, such risks, and the sufficiency of existing systems and safeguards in place to manage them. Our IT continually monitors our systems for any attempted unauthorized entries or breaches. Information gathered from these processes enables our IT to make any necessary adjustments to our systems and address any identified gaps in existing safeguards.
Our IT also provides guidance and support with respect to protecting our information systems from these various threats.
The Company is currently in the process of implementing a more formalized cybersecurity program.
Item 2.
DESCRIPTION OF PROPERTY
The Company has facilities in Nevada, New York, New Mexico, and Texas. These facilities have leases that expire on various dates through 2029 and are subject to periodic changes. We believe that our existing facilities are well-maintained and in good operating condition.
