Real-time Form 4 intelligence. Smarter insider tracking.
YoY shift: Neutral
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is 0.00pp more bearish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
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Flat
Net-tone change vs last year's 10-K.
MD&A
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Flat
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Risk Factors (Item 1A)
8,885 words
Item 1A. Risk Factors
Investing in our securities involves a high degree of risk. You should carefully consider and evaluate all of the information contained in this Form 10-K and the disclosures contained in our registration statement on Form S-1 that was declared effective by the SEC on December 1, 2023 (the “Registration Statement”), before you decide to purchase the Units offered pursuant to the Registration Statement. The risks and uncertainties described herein are not the only ones we may face. Additional risks and uncertainties that we do not presently know about or that we currently believe are not material may also adversely affect our business, business prospects, results of operations or financial condition. Any of the risks and uncertainties set forth herein, could materially and adversely affect our business, results of operations and financial condition.
Risks Related to our Financial Condition
The Company’s IPO Offering this is a “best effort offering,” investors who invest initially will be subject to more risk than later investors.
MD&A (Item 7)
2,274 words
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion should be read in conjunction with our consolidated financial statements and notes to our financial statements included elsewhere in this report. This discussion contains forward-looking statements that involve risks and uncertainties. When the words “believe,” “expect,” “plan,” “project,” “estimate,” and similar expressions are used, they identify forward-looking statements. These forward-looking statements are based on management’s current beliefs and assumptions and information currently available to management, and involve known and unknown risks, uncertainties, and other factors that may cause the actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by these forward-looking statements. Information concerning factors that could cause our actual results to differ materially from these forward-looking statements can be found in our periodic reports filed with the Securities and Exchange Commission (“SEC”). The forward-looking statements included in this report are made only as of the date of this report. We disclaim any obligation to update any forward-looking statements whether as a result of new information, future events, or otherwise.
Pursuant to our Registration Statement declared effective by the SEC on December 1, 2023, and subject to a required post-effective amendment that must be filed with and be declared effective by the SEC containing the audited financial statements of the Company for its fiscal year-ended May 31, 2025, and any applicable interim financial statements, we are seeking to raise gross proceeds of up to $20,000,000 from the sale of 10,000,000 Units, each consisting of one share of common stock and one common stock purchase warrant the “Offering”), at an Offering price of $2.00 per Unit (not including an additional $25,000,000 if all of the Warrants are exercised at the Warrant Exercise Price of $2.50, of which there can be no assurance). This does not include any commissions payable to placement agents, if any, which amount cannot be determined at present but which will not exceed 9% of the gross proceeds of the Units sold as a direct result of the efforts of the placement agents. Our net proceeds from the Offering will be used principally: (i) to expand our crowdfunding operations, including opening in new markets, in addition to the United States, Sweden, Morocco and Brazil (pending Brazil’s license application/approval process) and elsewhere principally in Europe; (ii) to fund the acquisition of US Petrochemical, subject to the agreement with US Petrochemical to waive the January 31, 2025 termination date, of which there can be no assurance; (iii) to pay the expenses of the Unit Offering including any placement agent fees; (iv) for working capital and general corporate purposes; and (v) to fund growth initiatives, including other potential future acquisitions, if any. See “Description of Securities – Unit Offering.” Because this is a best effort Offering, the earlier investors invest in this Offering, the greater degree of risk they will incur. For example, if the Company raises an immaterial amount, investors will be subject to greater risk than if all or substantially all of the Units are sold and gross proceeds of at least $5,000,000 or up to $20,000,000 is raised. If we do not raise a substantial amount of proceeds from the Offering, we may not have sufficient working capital to be able to carry out our business plan including any possible acquisition of US Petrochemical. In that event, we will be required to seek other financing, either debt or equity or a combination thereof, which, if available, of which there can be no assurance, may be very dilutive and expensive or be at terms and conditions not acceptable to the Company. There can be no assurance that we will be successful in selling Units or that our Units, Common Stock and Warrants may become subject to quotation of the OTCQB or that we will become eligible for listing on any NASDAQ or NYSE Exchanges.
Our Independent Registered Public Accounting Firm has expressed substantial doubt as to our ability to continue as a going concern.
The audited financial statements have been prepared assuming that we will continue as a going concern and do not include any adjustments that might result if we cease to continue as a going concern. We believe that to continue as a going concern we will need approximately $250,000 to $400,000 per year simply to cover the administrative, legal and accounting fees, assuming the completion of the US Petrochemical, of which there can be no assurance whatsoever, notwithstanding any positive cash frow from operations that US Petrochemical may generate. We plan to fund these expenses primarily through cash flow from operations, if and when we generate positive cash flow, of which there can be no assurance, the sale of restricted shares of our Common Stock, and the issuance of convertible notes, as well as funds raised from our Offering, if successful, of which there can be no assurance, which Offering will not commence until the Company’s planned post-effective amendment to its Registration Statement is filed with and declared effective by the SEC.
Based on our audited financial statements for the fiscal years ended May 31, 2025 and 2024, our independent registered public accounting firms have expressed substantial doubt as to our ability to continue as a going concern. To date we have not generated any revenue from operations and have had to rely on the infusion of capital from our founders and private investors, from time to time. There can be no assurance that we will, in fact, generate revenues from operations in the near term, if ever, notwithstanding our expectations.
We may need to raise additional capital to fund continuing operations and an inability to raise the necessary capital or to do so on acceptable terms could threaten the success of our business.
To date, our operations have been funded entirely from the proceeds from the private sale of equity and the issuance of notes, including convertible notes, to private accredited investors, as well as loans from our management and founders. We currently anticipate that our available capital resources will be insufficient to meet our expected working capital and capital expenditure requirements for the near future. We anticipate that we will require an additional $2,000,000 during the next twelve months to fulfil our business plan plus an additional $7,000,000 or such other agreed amount to fund the potential acquisition of US Petrochemical, of which there can be no assurance. However, such resources may not be sufficient to fund the long-term growth of our business. If we determine that it is necessary to raise additional funds, we may choose to do so through strategic collaborations, licensing arrangements through our “White Labeling” (defined herein as our source code and intellectual property) strategy, public or private equity or debt financing, a bank line of credit, or other arrangements.
The Company is a holding company that owns intellectual property developed by Raisewise USA and held nominally by its wholly owned and majority owned subsidiaries, Raisewise Sweden, Raisewise Morocco and Raisewise Brazil. This intellectual property consists primarily of source code, maintenance contracts, the Raisewise brand and trademark and associated technologies. Blue Chip will monetize its intellectual property through Franchise contracts, as further described herein. By owning the source code, the Company will be able to develop new platforms and opportunities, including White Labeling opportunities, around the globe to franchise to new clients to further monetize the Company’s assets.
We have a limited operating history; it is difficult to evaluate our business and future prospects and increases the risks associated with investment in our securities.
We only have a limited history and only limited business operations to date, principally related to start-up and formation of our Raisewise USA subsidiary as well as our subsidiaries in Sweden, Morocco and Brazil. We plan to resubmit a crowdfunding application with FINRA through its Funding Portal Gateway for our Raisewise USA crowdfunding subsidiary, which application will follow registering with the SEC as a funding portal. Because of our limited operating history, investors may not have adequate information on which they can base an evaluation of our business and prospects. Investors should be aware of the difficulties, delays, and expenses normally encountered by an enterprise in its early stage, many of which are beyond our control, including unanticipated research and development expenses, employment costs, and administrative expenses. We cannot assure our investors that our proposed business plans as described herein will materialize or prove successful, or that we will be able to finalize development of our products or operate profitably. We may not be successful in addressing these and other challenges we may face in the future, and our business and future prospects may be materially and adversely affected if we do not manage these and other risks successfully. Given our limited operating history, we may be unable to effectively implement our business plan which could materially harm our business or cause us to scale down or cease our operations.
Risks Related to our Business
You should carefully consider the following risk factors that affect our business. Such risk factors could cause our actual results to differ materially from those that are expressed or implied by forward-looking statements contained herein. Some of the risks described relate principally to our business and the industry in which we operate. Others relate principally to the securities market and ownership of our capital stock. The risks and uncertainties described below are not the only ones we face. Additional risks are described elsewhere in this report under the Item 1 – Business, Item 3 – Legal Proceedings, and Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operation sections, among others. Other risks and uncertainties that we are unaware of, or that we currently deem immaterial, also may become important factors that affect us. Our business, financial condition or results of operations could be materially and adversely affected by any of these risks. The discussion of our risk factors should be read in conjunction with the financial statements and notes thereto included herein.
Based on our recurring losses incurred during our startup and early development stage, and limited operating history, we may not be able to successfully implement our business plan; our auditors have included an explanatory paragraph in their opinion as to the substantial doubt about our ability to continue as a going concern.
We are a development stage company and since inception, have sufferedlosses from development stage activities to date, are dependent upon the success of our capital raise from our IPO may need of additional capital. We have experienced net losses in each fiscal quarter since our inception and as of the fiscal year ended May 31, 2025, have an accumulated deficit of $8,256,213. As a result of these factors, our independent auditors have included an explanatory paragraph in their opinion for the year ended May 31, 2025, and 2024 as to the substantial doubt about our ability to continue as a going concern. Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States, which contemplate that we will continue to operate as a going concern. Our financial statements do not contain any adjustments that might result if we are unable to continue as a going concern.
We may not be able to manage our growth, if any, effectively, which could slow or prevent our ability to achieveprofitability.
The ability to manage and operate our business as we execute our development and growth strategy will require effective planning. Any significant growth, which may be unlikely to occur, could strain our internal resources and delay or prevent our efforts to achieveprofitability. We expect that our efforts to grow will place a significant strain on our personnel, management systems, infrastructure, and other resources. Our ability to manage future growth effectively will also require us to successfully attract, train, motivate, retain, and manage new employees and continue to update and improve our operational, financial, and management controls and procedures. If we do not manage our growth effectively, slower growth is likely to occur, thereby slowing or negating our ability to achieve and sustain profitability.
We will operate in a regulatory environment that is evolving and uncertain.
The regulatory framework for online capital formation or crowdfunding is relatively new. The regulations that govern our operations have been in existence for a very few years. Further, there are constant discussions among legislators and regulators with respect to changing the regulatory environment. New laws and regulations could be adopted in the United States and abroad. Further, existing laws and regulations may be interpreted in ways that would impact our operations, including how we communicate and work with investors and the companies that use our platforms’ services. For instance, over the past year, there have been several attempts to modify the current regulatory regime. Some of those suggested reforms could make it easier for anyone to sell securities (without using our services), or could increase our regulatory burden, including requiring us to register as a broker-dealer. Any such changes would have a negative impact on our business.
Risks related to the petrochemical industry.
Until we receive the full due diligence disclosure from and assuming we are able to complete the acquisition of US Petrochemical, of which there can be no assurance because the binding letter of intent had an expiration date of January 31, 2025, we cannot at this time adequatelydisclose the “risk factors” applicable to the business and operations of US Petrochemical and the petrochemical industry generally. If and when we complete the US Petrochemical acquisition, we will be required to make full disclosure of the material facts related to any such acquisition, including the financial statements of US Petrochemical and the risk factors related to its business and operations, among other disclosure.
We operate in a highly regulated industry.
We are subject to extensive regulation and failure to comply with such regulation could have an adverse effect on our business. Further our subsidiary, Raisewise USA will be registered as a funding portal and regulated entities such as us are often subject to FINRA fines. In addition, some of the restriction and rules on our subsidiary could adversely affect and limit some of our business plans.
In the event we are required to register as a broker-dealer, our business model could be harmed.
Under our current structure, we believe we are not required to register as a broker-dealer under federal and state laws. Further, none of our officers or our chairman has previous experience in securities markets or regulations or has passed any related examinations or holds any accreditations. We comply with the rules surrounding funding portals and restrict our activities and services so as to not be deemed a broker-dealer under state and federal regulations, see “Business – Government Regulations.” However, if we were deemed by a relevant authority to be acting as a broker-dealer, we could be subject to a variety of penalties, including fines and rescission offers. Further, we may be required to register as a broker-dealer, which would increase our costs, especially our compliance costs. If in those circumstances we decided not to register as a broker-dealer or act in association with a broker-dealer in our transactions, we may not be able to continue to operate under our current business model.
We may be liable for misstatements made by issuers on our funding portal.
Under the Securities Act and the Exchange Act, issuers making offerings through our funding portal may be liable for including untrue statements of material facts or for omitting information that could make the statements made misleading. This liability may also extend in Regulation Crowdfunding offerings to funding portals, such as our subsidiary. There may also be circumstances in which we are held liable for making misleading statements in connection with Regulation A and Regulation D offerings. See “Regulation – Regulation Crowdfunding – Liability” and “Regulation – Regulation A and Regulation D – Liability.” Even though due diligence defenses may be available, there can be no assurance that if we were sued, we would prevail. Further, even if we do succeed, lawsuits are time consuming and expensive, and being a party to such actions may cause us reputational harm that would negatively impact our business.
Our compliance is focused on U.S. laws and we have not analyzed foreign laws regarding the participation of non-U.S. residents.
Some of the investment opportunities posted on our platform are open to non-U.S. residents. We have not researched all the applicable foreign laws and regulations, and therefore we have not set up our structure to be compliant with all those laws. It is possible that we may be deemed in violation of those laws, which could result in fines or penalties as well as reputational harm. This may limit our ability in the future to assist companies in accessing money from those investors, and compliance with those laws and regulation may limit our business operations and plans for future expansion.
Raisewise’s Crowdfunding products and services are relatively new in an industry that is still quickly evolving.
The principal securities regulations under Regulation A and Regulation Crowdfunding that our United States Crowdfunding operations through our Raisewise USA subsidiary will be subject to have only been in effect in their current form since 2015 and 2016, respectively. Raisewise USA’s ability to operate in the market remains uncertain as potential issuer companies may choose to use different platforms or providers (including, in the case of Regulation A, using their own online platform), or determine alternative methods of financing. Investors may decide to invest their money elsewhere. Further, our potential market may not be as large, or our industry may not grow as rapidly, as anticipated. With a smaller market than expected, we may have fewer customers. Success will likely be a factor of investing in the development and implementation of marketing campaigns, subsequent adoption by issuer companies as well as investors, and favorable changes in the regulatory environment.
We are reliant on one main type of service.
All of current services are variants on one type of service, providing a platform for online capital formation. Our revenues are therefore wholly dependent upon the market for online capital formation and our ability to comply with the regulatory requirements in each such market.
Raisewise and its providers are vulnerable to hackers and cyber-attacks.
As an internet-based business, we may be vulnerable to hackers who may access the data of our investors and the issuer companies that utilize our platform. Further, any significant disruption in service on the StartEngine platform or in its computer systems could reduce the attractiveness of the StartEngine platform and result in a loss of investors and companies interested in using our platform. Further, we rely on a third-party technology provider to provide some of our back-up technology as well as act as our escrow agent. Any disruptions of services or cyber-attacks either on our technology provider or on StartEngine could harm our reputation and materially negatively impact our financial condition and business.
Our business could be negatively affected by any adverse economic developments in the securities markets or the economy in general.
We depend on the interest of individuals in obtaining financial information and securities trading strategies to assist them in making their own investment decisions. Significant downturns in the securities markets or in general economic and political conditions may cause individuals to be reluctant to make their own investment decisions and, thus, decrease the demand for our products. Significant upturns in the securities markets or in general economic and political conditions may cause individuals to be less proactive in seeking ways to improve the returns on their trading or investment decisions and, thus, decrease the demand for our products.
We will need to introduce new products and services and enhance existing products and services to remain competitive.
Our future success depends in part on our ability to develop and enhance our products and services. In addition, the adoption of new Internet, networking, or telecommunications technologies or other technological changes could require us to incur substantial expenditures to enhance or adapt our services or infrastructure. There are significant technical and financial costs and risks in the development of new or enhanced products and services, including the risk that we might be unable to effectively use new technologies, adapt our services to emerging industry standards, or develop, introduce, and market enhanced or new products and services. An inability to develop new products and services, or enhance existing offerings, could have a material adverse effect on our profitability.
We may rely on external service providers to perform certain key functions.
We may rely on a number of external service providers for certain key technology, processing, service, and support functions. External content providers provide us with financial information, market news, charts, option and stock quotes, research reports, and other fundamental data that we offer to clients. These service providers face technological and operational risks of their own. Any significant failures by them, including improper use or disclosure of our confidential client, employee, or company information, could cause us to incur losses and could harm our reputation.
We cannot assure that any external service providers will be able to continue to provide these services in an efficient, cost-effective manner or that they will be able to adequately expand their services to meet our needs. An interruption in or the cessation of service by any external service provider as a result of systems failures, capacity constraints, financial constraints or problems, unanticipated trading market closures, or for any other reason, and our inability to make alternative arrangements in a smooth and timely manner, if at all, could have a material adverse effect on our business, results of operations, and financial condition.
Our business could be negatively affected if we are required to defendallegations that our direct selling activities are fraudulent or deceptive schemes, are against public interest, or are the sale of unregistered securities.
Direct selling activities are regulated by the FTC, as well as various federal, state, and local governmental agencies in the United States and foreign countries. These laws and regulations are generally intended to prevent fraudulent or deceptive schemes, often referred to as “pyramid” schemes, which compensate participants primarily for recruiting additional participants without significant emphasis on product sales. Regulators may take the position that some or all of our products are deemed to be securities, the sale of which has not been registered. The laws and regulations governing direct selling are modified from time to time, and like other direct selling companies, we may be subject from time to time to government investigations related to our direct selling activities. This may require us to make changes to our business model and our compensation plan.
Any independent distributors and subsidiaries could fail to comply with applicable legal requirements or our policies and procedures, which could result in claimsagainst us that could harm our business.
Any independent distributors that we may utilize will be independent contractors and our subsidiaries outside the United States (Raisewise Sweden, Raisewise Morocco and Raisewise Brazil) will rely on local management and controls and, accordingly, we are not in a position to directly provide the same oversight, direction, and motivation as we could if they were our employees. As a result, we cannot assure that our independent distributors and/or our wholly and majority owned foreign subsidiaries in Sweden, Morocco and Brazil will comply with applicable laws or regulations or our distributor policies and procedures.
Extensive federal, state, local, and international laws and authorities regulate our business, products, and direct selling activities. Because we are expanding into foreign countries, our policies and procedures for these foreign operations differ slightly or perhaps significantly in some countries due to the different legal requirements of each country in which we do business.
Our future success is largely dependent on our current management.
Our business was built by the vision, dedication, and expertise of our executive officers and board of directors (collectively, our “Management”), who are responsible for our day-to-day operations and creative development. Our success is dependent upon the continued efforts of these people. If it became necessary to replace them, it is unlikely new management could be found that would have the same level of knowledge and dedication to our success. The loss of the services of these professionals, especially in the development of future proprietary software, patents, or applications, would adversely affect our business.
We are a controlled company.
A “controlled company” refers to a company controlled by another entity or another person by owning more than 50% of the total voting shares. As such, that entity or person has the decisive voice for managing the affairs of the Company. Since the majority of the holding is with a person or group, there is a risk for the interest of minority shareholders of the Company. There is the risk that minority holders might not receive the proportionate shares, and there could be a transfer of the resources of the Company by controlling shareholders for private purposes. The majority of the votes in the Company belongs to the controller in practice. Hence, the decision made by them is the decisions of their own, which might not be good for the Company as a whole. For example, in case the controller decides by giving priority to their motive; then it may prove riskier for the Company, which is being controlled by others. Reference is made to the disclosure under “Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters,” below.
Risks Related to the Company’s Offering and Ownership of the Units, Common Stock and the Warrants
There is no established market for the Units, Common Stock or the Warrants and an active trading market may not develop nor be sustained.
There is no established trading market for the Units, the underlying Common Stock or the Warrants and we do not know if a market will develop on the OTCQB, any other OTC Markets or on NASDAQ or the NYSE (if we become eligible for listing, of which there can be no assurance, based upon our present Offering Price of $2.00 per Unit, among other factors) or, if it does, how active it will be or whether it will be sustained. We cannot assure you that we will meet the quantitative listing requirements for any other market or exchange or that any application will be approved. The liquidity of the market for our Units, Common Stock and the Warrants depends on a number of factors, including prevailing interest rates, our financial condition and operating results, the number of holders of these securities, our compliance with the timely reporting requirements of the Exchange Act, the market for similar securities and the interest of broker dealers in making a market in these securities. The market for the Warrants will be linked to the price and the liquidity of our Common Stock. We cannot predict with certainty the extent of investor interest in the Units, the shares of Common Stock and the Warrants, or how liquid that market will be. Without an active trading market, the liquidity of these securities will be limited.
A market maker, a FINRA registered broker-dealer, must make a Form 211 application to FINRA in order to obtain trading symbols for the Company’s Units, Shares and Warrants.
In order for the Company to obtain ticker symbols for its Units, Common Stock and Warrants, a market maker must submit a Form 211 on behalf of the Company to FINRA. A market maker is a FINRA registered broker-dealer firm that accepts the risks associated holding any number of shares or participating in the offering of shares of any company in an initial public offering or IPO (such as the Company) in the “going public process.” Obtaining ticker symbols for the securities being offered by the Company in its Registration Statement is the last step in the process and only a market maker, not an issuer, may make application to FINRA for ticker symbols. The Company through a market maker has a pending application with FINRA for a trading symbol for its Common Stock. The timing for FINRA approval of a trading symbol cannot be assured.
Our COO will be a “Control Person” and the Company will be a “Controlled Company.”
The Company is a “controlled company,” which is defined to be a company of which more than 50% of the voting power is held by an individual, group or another company. A “Control Person” means any Person or Persons (as defined under Section 2(a)2 of the Act) that possesses directly or indirectly, the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or contract or otherwise. Joseph Richard Moran, our COO and founder, is the control person of NM & RM Corp. and Titan Ventures, Inc. which respectively own 28,125,000 shares and 25,000,000 shares (or a combined total of 53,125,000 shares) of the Company’s 93,919,400 outstanding shares of Common Stock, representing approximately 56.5% of the presently outstanding Common Stock. In addition, RN & NM Corp. and Titan Ventures, Inc. each own 333,333 shares of Series A Voting Preferred Stock, representing 66.67% of the 999,999 outstanding shares of Series A Voting Preferred Stock. The remaining 333,333 shares of Series A Voting Preferred Stock are owned by Ocean Prospect Limited. The holders of the shares of Series A Voting Preferred Stock are entitled to sixty-eight (68%) percent of the total votes on all such matters subject to stockholder vote, regardless of the actual number of shares of Common Stock then outstanding, from time to time. In addition, Mr. Moran, by virtue of his control of 666,666 shares of Series A Voting Preferred Stock through NM & RM Corp. and Titan Ventures, Inc., representing 66.67% of the 999,999 outstanding shares of Series A Voting Preferred Stock, will have voting rights to an additional 63,865,192 votes, representing a total of 116,990,192 votes of the total voting rights of 157,984,592 shares of voting capital stock, which includes the voting rights of the remaining 333,333 shares of Series A Voting Preferred Stock, resulting in Mr. Moran’s control of approximately 74.1%% of the total voting capital stock of the Company.
As a result of Mr. Moran’s ownership, through NM & RM Corp. and Titan Ventures Inc. of 53,125,000 shares of Common Stock and 666,666 shares of Series A Voting Preferred Stock, Mr. Moran may be deemed to be a “Control Person” of the Company, which means any Person or Persons (as defined under Section 2(a)2 of the Act) that possesses directly or indirectly, the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or contract or otherwise. Mr. Moran is deemed to be a “Control Person” of the Company, as defined under Section 2(a)2 of the Act.
Risks Relating to Our Common Stock
We have only a very limited operating history and may expect to report future losses that may cause our stock price to decline.
Since our inception, we have had only limited operating history, principally related to that of any start-up business including the filing with the SEC of our Registration Statement under the Securities Act and our reports under the Exchange Act as well as the organization and planned registration of our Raisewise USA with FINRA. We cannot be certain whether we will begin to generate revenues from operations or ever be profitable, or that any profitability will be sustained. Also, any general economic weakness either in the U.S. or globally may limit our ability to successfully pursue and implement our business plan. Any of these factors could cause our stock price to decline and result in our stockholders losing a portion or all of their investments.
Applicable SEC Rules governing the trading of “penny stocks” limits the trading and liquidity of our Common Stock which may affect the trading price of our Common Stock.
The Commission has adopted Rule 15g-9 which establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require:
That a broker or dealer approve a person’s account for transactions in penny stocks; and
The broker or dealer receives from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.
In order to approve a person’s account for transactions in penny stocks, the broker or dealer must:
Obtain financial information and investment experience objectives of the person; and
Make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Commission relating to the penny stock market, which, in highlight form:
Sets forth the basis on which the broker or dealer made the suitability determination; and
That the broker or dealer received a signed, written agreement from the investor prior to the transaction.
Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of our Common stock and cause a decline in the market value of our stock.
Nevertheless, if our Common Stock qualifies for listing on the NASDAQ or NYSE, which may occur if we successfully complete the acquisition of US Petrochemical, it is our understanding that our Common Stock may not be deemed to be a “penny stock.”
We may need to raise additional capital. If we are unable to raise additional capital, our business may fail.
Because we have no to date, no any assurance when or if we will have revenues from operations, we need to secure ongoing funding to cover expenses. If we are unable to obtain adequate additional financing, we may not be able to successfully market and sell our products, our business operations will most likely be discontinued, and we will cease to be a going concern. To secure additional financing, we may need to borrow money or sell more securities. Under these circumstances, we may be unable to secure additional financing on favorable terms or at all. Selling additional stock or other securities, either privately or publicly, would dilute the equity interests of our stockholders. If we borrow money, we will have to pay interest and may also have to agree to restrictions that limit our operating flexibility. If we are unable to obtain adequate financing, we may have to curtail business operations, which would have a material negative effect on operating results and most likely result in a lower stock price.
The market price of our securities may fluctuate and be extremely volatile.
To date, there has been no trading in any of our securities, including our Units, Common Stock or Warrants. We believe this potential volatility, if and when a trading market develops, of which there can be no assurance, may be caused, in part, by variations in our quarterly operating results, delays in development of our markets for crowdfunding, changes in market valuations of similar companies, and the volume of our stock in the market.
Additionally, in recent years the stock market in general, and the OTC Markets and financial stocks in particular, have experienced extreme price and volume fluctuations. In some cases, these fluctuations are unrelated or disproportionate to the operating performance of the underlying company. These market and industry factors may materially and adversely affect our stock price regardless of our operating performance. The historical trading of other companies involved directly or indirectly in crowdfunding is not necessarily an indicator of how our securities will trade in the future and our trading price will not necessarily an indicator of what the trading price of our Common Stock might be in the future.
In the past, class action litigation has often been brought against companies following periods of volatility in the market price of those companies’ common stock. If we become involved in this type of litigation in the future it could result in substantial costs and diversion of management attention and resources, which could have a further negative effect on our stock price.
Because we have no plans to pay dividends on our Common Stock, stockholders must look solely to appreciation of our Common Stock to realize a gain on their investments.
We do not anticipate paying any dividends on our Common Stock in the foreseeable future. We currently intend to retain future earnings, if any, to finance the expansion of our business. Our future dividend policy is within the discretion of our board of directors and will depend upon various factors, including our business, financial condition, results of operations, capital requirements, and investment opportunities. Accordingly, stockholders must look solely to appreciation of our Common Stock to realize a gain on their investment. This appreciation may not occur.
Certain provisions of Nevada law and of our corporate charter may inhibit a potential acquisition of our Company, and this could depress our stock price.
Nevada corporate law includes provisions that could delay, defer, or prevent a change in control of our company or our management. These provisions could discourage information contests and make it more difficult for our stockholders to elect directors and take other corporate actions. As a result, these provisions could limit the price that investors are willing to pay in the future for shares of our Common Stock. For example:
without prior stockholder approval, our board of directors has the authority to issue one or more classes of preferred stock with rights senior to those of our Common Stock and to determine the rights, privileges, and inference of that preferred stock;
there is no cumulative voting in the election of directors, which would otherwise allow less than a majority of stockholders to elect director candidates; and
(iii)
stockholders cannot call a special meeting of stockholders.
Our indemnification of our directors and officers may limit the rights of our stockholders.
While our board of directors and officers are generally accountable to our stockholders and us, the liability of our directors and officers to all parties is limited in certain respects under applicable Nevada state law and our articles of incorporation and bylaws, as in effect. Further, we have agreed or may agree to indemnify our directors and officers against liabilities not attributable to certain limited circumstances. This limitation of liability and indemnity may limit rights that our stockholders would otherwise have to seek redressagainst our directors and officers.
Additional issuances of convertible notes and warrants will cause additional substantial dilution to our stockholders.
Given our limited cash, liquidity, and revenues, it is likely that in the future, as in the past, we will issue additional equity or debt (including convertible debt) to finance our future business operations as well as potential acquisitions and strategic relationships. The issuance of additional shares of Common Stock, the exercise of warrants, and the conversion of any existing or future convertible debt to shares of our Common Stock could cause additional dilution to our stockholders and could have further adverse effects on the market price for our securities or on our ability to obtain future financing.
The number of authorized shares of Common Stock may result in management implementing anti-takeover procedures by issuing new securities.
The proportion of 306,080,600 unissued but authorized shares of Common Stock compared to the 93,919,400 presently issued shares of Common Stock (prior to the any shares of common stock issued pursuant to out IPO Offering, shares underlying the warrants issued as part of the Units in the IPO Offering and shares underlying the warrants already outstanding that were issued to private investors) could, under certain circumstances, have an anti-takeover effect, for example, by permitting issuances of Common Stock that would dilute the stock ownership of a person seeking to effect a change in the composition of our board of directors or contemplating a tender offer or other transaction for the combination of our company with another entity. Although, we have no current plans to issue additional stock for this purpose, management could use the additional shares that are now available or that may be available after a possible further recapitalization to resist or frustrate a third-party transaction. Generally, no stockholder approval would be necessary for the issuance of all or any portion of the additional shares of Common Stock unless required by law or any rules or regulations to which we are subject.
Depending upon the consideration per share for any subsequent issuance of Common Stock, such issuance could have a dilutive effect on those stockholders who paid a higher consideration per share for their stock. Also, future issuances of Common Stock will increase the number of outstanding shares, thereby decreasing the percentage ownership—for voting, distributions, and all other purposes—represented by existing shares of Common Stock. The availability for issuance of the additional shares of Common Stock may be viewed as having the effect of discouraging an unsolicited attempt by another person or entity to acquire control of us. Although our board has no present intention of doing so, our authorized but unissued Common Stock could be issued in one or more transactions that would make a takeover of us more difficult or costly and, therefore, less likely. Holders of our Common Stock do not have any pre-emptive rights to acquire any additional securities issued by us.
Our stockholders may not recoup all or any portion of their investment in the event of our dissolution.
In the event of a liquidation, dissolution, or winding-up of our Company, whether voluntary or involuntary, our net remaining proceeds and/or assets, after paying all of our debts and liabilities, will be distributed to the holders of Common Stock on a pro-rata basis. We cannot assure that we will have available assets to pay to the holders of Common Stock any amounts upon such a liquidation, dissolution, or winding-up of our company. In this event, our stockholders could lose some or all of their investment.
Financial Industry Regulatory Authority, Inc. (“FINRA”) sales practice requirements may limit a stockholder’s ability to buy and sell our Common Stock.
In addition to the “penny stock” rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our Common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.
Shares eligible for future sale may adversely affect the market.
From time to time, certain of our stockholders who have invested privately in our Common Stock or other securities may become eligible to sell all or some of their shares of Common Stock or other securities by means of ordinary brokerage transactions in the open market pursuant to Rule 144 promulgated by the SEC under the Securities Act, subject to certain limitations. In general, pursuant to amended Rule 144, non-affiliate stockholders may sell freely after six months subject only to the current public information requirement under the Exchange Act. Affiliates may sell after six months subject to the Rule 144 volume, manner of sale (for equity securities), current public information and notice requirements. Any substantial sales of our Common Stock pursuant to Rule 144 may have a material adverse effect on the market price of our Common Stock.
If we fail to maintain effective internal controls over financial reporting, the price of our securities may be adversely affected.
Our internal control over financial reporting may have weaknesses and conditions that could require correction or remediation, the disclosure of which may have an adverse impact on the price of our securities. We are required to establish and maintain appropriate internal controls over financial reporting. Failure to establish those controls, or any failure of those controls once established, could adversely affect our public disclosures regarding our business, prospects, financial condition or results of operations. In addition, management’s assessment of internal controls over financial reporting may identify weaknesses and conditions that need to be addressed in our internal controls over financial reporting or other matters that may raise concerns for investors. Any actual or perceived weaknesses and conditions that need to be addressed in our internal control over financial reporting or disclosure of management’s assessment of our internal controls over financial reporting may have an adverse impact on the price of our Common Stock.
The availability of a large number of authorized but unissued shares of Common Stock may, upon their issuance, lead to dilution of existing stockholders .
We are authorized to issue 400,000,000 shares of Common Stock, of which 71,875,000 shares of Common Stock are presently owned by to our founders and a total of 93,919,400 shares are outstanding as of November 3, 2025, including our founders’ shares. In addition, as of May 31 and August 31, 2025, a total of 1,320,220 and 1,700,000 warrants, respectively, were outstanding. The Company has issued and sold shares of Common Stock and issued convertible notes that included warrants in private transactions to non-affiliate “accredited investors” in reliance upon the exemptions under Regulation D and Regulation S promulgated by the SEC under the Securities Act and Section 4(2) of the Securities Act. Additional shares may be issued by the Company upon the conversion of convertible notes and/or exercise of any outstanding warrants issued to these accredited investors or to be issued by the Company in the future, or otherwise authorized for issuance by our board of directors, from time-to-time, without further stockholder approval. The issuance of large numbers of shares of Common Stock, possibly at below market prices, or warrants having exercise prices below market prices, is likely to result in dilution to the interests of other stockholders, which may be substantial. In addition, issuances of large numbers of shares may adversely affect the market price of our Common stock.
Our Articles of Incorporation authorize 10,000,000 shares of preferred stock and our Board of Directors is authorized to provide for the issuance of unissued shares of preferred stock in one or more series, and to fix the number of shares and to determine the rights, preferences and privileges thereof. As of May 31, 2025, 1,000,000 shares of Series A Voting Preferred Stock are authorized, of which our founders own 999,999 shares of such Series (that have “super voting rights as described more fully in “Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters,” below.
Accordingly, the board of directors may issue preferred stock which may convert into large numbers of shares of Common Stock and consequently lead to further dilution of other shareholders.
The Nevada Revised Statute contains provisions that could discourage, delay or prevent a change in control of our company, prevent attempts to replace or remove current management and reduce the market price of our stock.
Provisions in our articles of incorporation and bylaws may discourage, delay or prevent a merger or acquisition that our stockholders may consider favorable. For example, our certificate of incorporation authorizes our board of directors to issue up to ten million shares of “blank check” preferred stock. As a result, without further stockholder approval, the board of directors has the authority to attach special rights, including voting and dividend rights, to this preferred stock. With these rights, preferred stockholders could make it more difficult for a third party to acquire us.
We are also subject to the anti-takeover provisions of the NRS. Depending on the number of residents in the state of Nevada who own our shares, we could be subject to the provisions of Sections 78.378 et seq. of the Nevada Revised Statutes which, unless otherwise provided in the Company’s articles of incorporation or by-laws, restricts the ability of an acquiring person to obtain a controlling interest of 20% or more of our voting shares. Our articles of incorporation and by-laws do not contain any provision which would currently keep the change of control restrictions of Section 78.378 from applying to us.
We are subject to the provisions of Sections 78.411 et seq. of the Nevada Revised Statutes. In general, this statute prohibits a publicly held Nevada corporation from engaging in a “combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the combination or the transaction by which the person became an interested stockholder is approved by the corporation’s board of directors before the person becomes an interested stockholder. After the expiration of the three-year period, the corporation may engage in a combination with an interested stockholder under certain circumstances, including if the combination is approved by the board of directors and/or stockholders in a prescribed manner, or if specified requirements are met regarding consideration. The term “combination” includes mergers, asset sales and other transactions resulting in a financial benefit to the interested stockholder. Subject to certain exceptions, an “interested stockholder” is a person who, together with affiliates and associates, owns, or within three years did own, 10% or more of the corporation’s voting stock. A Nevada corporation may “opt out” from the application of Section 78.411 et seq. through a provision in its articles of incorporation or by-laws. We have not “opted out” from the application of this section.
Our publicly filed Exchange Act Reports are and will be subject to review by the SEC, and any significant changes or amendments required as a result of any such review may result in material liability to us and may have a material adverse impact on the trading price of the Company’s Common Stock and other securities.
The reports of publicly traded companies are subject to review by the SEC from time to time for the purpose of assisting companies in complying with applicable disclosure requirements, and the SEC is required to undertake a comprehensive review of a company’s reports at least once every three years under the Sarbanes-Oxley Act of 2002. SEC reviews may be initiated at any time. We could be required to modify, amend or reformulate information contained in prior filings as a result of an SEC review. Any modification, amendment or reformulation of information contained in such reports could be significant and result in material liability to us and have a material adverse impact on the trading price of the Company’s Common Stock and other securities.
We are not subject to certain of the corporate governance provisions of the Sarbanes-Oxley Act of 2002.
Since our Common Stock is not presently listed for trading and may never be listed on a national securities exchange, we are not subject to certain of the corporate governance requirements established by the national securities exchanges pursuant to the Sarbanes-Oxley Act of 2002. These include rules relating to independent directors, director nomination, audit and compensation committees, retention of audit committee financial expert and the adoption of a code of ethics. Unless we voluntarily elect to fully comply with those obligations, which we have not to date, the protections that these corporate governance provisions were enacted to provide will not exist with respect to us. While we may make an application to have our securities listed for trading on a national securities exchange, which would require us to fully comply with those obligations, we cannot assure you that we will make such application, that we would be able to satisfy applicable listing standards, or if we did satisfy such standards, that we would be successful in such application.
We are required to comply with Section 404a of the Sarbanes-Oxley Act of 2002 and if we fail to comply in a timely manner, our business could be harmed and our stock price could decline.
Rules adopted by the SEC pursuant to Section 404a of the Sarbanes-Oxley Act of 2002 require annual assessment of our internal controls over financial reporting, Any failure to maintain adequate controls could result in delays or inaccuracies in reporting financial information or non-compliance with SEC reporting and other regulatory requirements, any of which could adversely affect our business and stock price.
Set forth, under the caption “Risk Factors,” where appropriate, the risk factors described in Item 105 of Regulation S-K (§ 229.105 of this chapter) applicable to the registrant. Provide any discussion of risk factors in plain English in accordance with Rule 421(d) of the Securities Act of 1933 (§ 230.421(d) of this chapter). Smaller reporting companies are not required to provide the information required by this item.
Blue Chip Capital Group, Inc., a Nevada corporation (the “Company”) owns subsidiaries that operate independently but are accretive to one another under the name Raisewise USA, Inc., a New York corporation. We are establishing a portfolio of wholly and majority owned subsidiaries delivering what we believe will be leading-edge crowdfunding services in the market. Raisewise USA is a Regulation C crowdfunding platform, which is quite different than other crowdfunding platforms such as: (i) Lending Club, which began as a crowdfunding operation but transitioned to became a peer-to-peer lending company and financial institution that raises money through banks; (ii) Funding Circle Holdings PLC, a public company in the United Kingdom; and (iii) Seed Invest, which is a platform that raises money for equity up to US$75 million and operates like mini IPO for projects holders. Our Raisewise platform operates as a traditional crowdfunding platform with debt, equity, rewards and donations. The ceiling on money raises via crowdfunding platform in the U.S. was formerly USD $1,070,000, until the upper limit was raised in October 2020 to USD $5,000,000. Each investor can find projects that fit their particular business and investor needs from USD $1,000 projects up to USD $5,000,000 and from simple personal loans to real estate equity investments, for example.
The Company has yet to generate revenue from its operations during the fiscal year ended May 31, 2025, nor through the three-month period ended August 31, 2025, and it has not had any revenue since inception November 27, 2019. In order for the Company to maintain and expand its operations through the next 12 months, it may be required to: (1) successfully raise capital from its pending Registration Statement, if and when it is declared effective by the SEC; and/or (2) continue to raise through capital infusions through the issuance of other equity or debt securities, of a minimum of $1 million and up to $5 million.
The Company incurred net losses for the years ended May 31, 2025, and 2024 of ($5,693,136) and ($1,256,667) respectively. Cumulative losses since inception through May 31, 2025 are $(8,256,213). The Company has net negative working capital at its fiscal year ended May 31, 2025 of ($609,363.
During the year ended May 31, 2025, the Company raised $651,0000 from private securities offerings, principally involving the issuance of convertible notes, to third-party “accredited investors,” as that term is defined under Rule 501 of Regulation D promulgated by the Commission under the Act, as compared to $264,825 during the same period of the prior year, which sales were made in reliance upon Regulation S promulgated by the Commission under the Act. The Company reasonably believes that it will be able to continue to raise capital from sales of restricted securities to third-party investors and from advances from related parties. However, the Company has no current arrangements or commitments from third-party investors or related parties nor can there be any assurance that the Company will be able to continue to support its operations through private offerings of its securities or advances from related parties on a long term basis. The Company will be dependent upon the raise of equity capital from the public Offering under it effective Registration Statement, provided that it files and has declared effective by the SEC a post-effective amendment to the Registration Statement. There can be no assurance that the Company will be successful in raising sufficient proceeds from this Offering or the amount of proceeds that are actually raised under the Registration Statement, assuming that the post-effective amendment is filed with and declared effective by the SEC.
This raises doubt about the Company’s ability to continue as a going concern. If additional funds cannot be raised or otherwise generated, the Company may be forced to reduce staff, minimize its research and development activities, or in a worst-case scenario, shut-down operations. However, management is cautiously optimistic that they can continue to improve operations and raise the appropriate funds both privately and publicly, of which there can be no assurance, in order to develop and grow the Company’s underlying business operations. As explained above, the Company has been raising capital to fund its operations by private placements to accredited investors of its securities involving the sale of restricted common stock and convertible notes, certain sales of which have also included warrants. These sales of restricted securities have been made in reliance upon the exemption under Reg D, rule 506(b) promulgated by the Commission under the Act.
Reference is made to the disclosure under “BUSINESS-The Company’s Raisewise Business Plan” above. Despite its limited cash resources, the Company has been able to retain engineering, consulting, legal and accounting personnel partially through the raising of interim working capital from related party advances and private sales of securities to accredited investors, notwithstanding the fact that the Company has substantial Commitments for Capital Expenditures.
The Company believes that it possesses the ability to meet requirements in the short-term (the next 12 months from the most recent fiscal period ended May 31, 2025) as well as in the long-term (beyond the next 12 months).
Results of Operations for the Year Ended May 31, 2025 compared to the Year Ended May 31, 2024
Operating Expenses
Operating expenses incurred for the year ended May 31, 2025, were $5,693,136 compared to operating expenses of $1,256,667 for the year ended May 31, 2024, an increase of $4,436,469, which is principally due the increased legal and accounting fees related to the fees related to the Company’s reporting obligations with the SEC under the Exchange Act, Raisewise USA and its non-U.S. regulatory application processes with their respective jurisdictions and the general and administrative expenses associated with being a small public company.
Liquidity and Capital Resources
At May 31, 2025, the Company had a working capital deficit of $609,363 compared to a working capital deficit of $166,522 at May 31, 2024. The increase in the working capital deficit is due to a increase in payables due to related parties, offset by an increase in accounts payable.
The Company used $653,350 in operating activities for the fiscal year ended May 31, 2025, compared to $263,840 during the same period of the prior fiscal year. The increase is due to general and administrative expenses related to legal and accounting fees during the fiscal year ended May 31, 2025, as discussed under Operating Expenses above.
The Company received $651,000 provided by financing activities during the fiscal year ended May 31, 2025, compared to $264,825 provided by financing activities during the fiscal year ended May 31, 2024. The increase is due to the sale of restricted securities, principally related to the issuance and sale of convertible notes to accredited investors in reliance on Reg D, Rule 506(b) during the year ended May 31, 2025.
Off-Balance Sheet Arrangements.
The Company does not have any off-balance sheet arrangements at this time.
Critical Accounting Policies and Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, contingent assets and liabilities, each as of the date of the financial statements, and revenues and expenses during the periods presented. On an ongoing basis, management evaluates their estimates and assumptions, and the effects of any such revisions are reflected in the financial statements in the period in which they are determined to be necessary. Management bases their estimates on historical experience and on various other factors that they believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual outcomes could differ materially from those estimates in a manner that could have a material effect on our consolidated financial statements.
While our significant accounting policies are more fully described in Note 3 – Summary of Significant Accounting Policies to our consolidated financial statements, we believe that certain of these policies and estimates are deemed critical, as they require management’s highest degree of judgment, estimates and assumptions. We have discussed these accounting policies and estimates with the Audit Committee of our Board of Directors. We believe our most critical accounting policies and estimates are as follows:
Financial Instruments
ASC 820, Fair Value Measurements and Disclosures (ASC “820”) defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3 - Inputs that are both significant to the fair value measurement and unobservable.
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of May 31, 2025. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments.
The Company does not have any assets or liabilities measured at fair value on a recurring basis.
Convertible Notes
The Company evaluated the convertible note under ASC 470-20, Debt with Conversion and Other Options , and ASC 815, Derivatives and Hedging . The conversion feature does not meet the criteria for bifurcation as a derivative due to the illiquid nature of the underlying equity and the absence of a net settlement feature.
Accordingly, the entire instrument is accounted for as a liability at amortized cost. The Company uses the effective interest method to amortize the discount over the term of the note.
The Company accounts for debt instruments issued at a discount in accordance with ASC 835-30, Interest – Imputation of Interest, and ASC 470, Debt. The debt discount is amortized over the term of the debt using the effective interest method, which results in a non-linear recognition of interest expense over time. The amortization of the discount is recorded as interest expense in the consolidated statements of operations.
Stock-Based Compensation
ASC 718 Compensation – Stock Compensation (“ASC 718”) prescribes accounting and reporting standards for all stock-based payments award to employees, including employee stock options, restricted stock, employee stock purchase plans and stock appreciation rights may be classified as either equity or liabilities. The Company determines if a present obligation to settle the share-based payment transaction in cash or other assets exists. A present obligation to settle in cash or other assets exists if: (a) the option to settle by issuing equity instruments lacks commercial substance or (b) the present obligation is implied because of an entity’s past practices or stated policies. If a present obligation exists, the transaction should be recognized as a liability, otherwise, the transaction should be recognized as equity.
The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50 Equity – Based Payments to Non-Employees (“ASC 505-50”). Measurement of share-based payment transactions with non-employees are based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction is determined at the earlier performance commitment date or performance completion date. For stock-based transactions, May 31, 2025, the Company issued shares for services at an established market price of $2,00 discounted.
