Item 1A. Risk Factors.
Investing in our common stock involves a high degree of risk. You should not invest in our stock unless you are able to bear the complete loss of your investment. You should carefully consider the risks described below, as well as other information provided to you in this Annual Report, including information in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Cautionary Note Regarding Forward-Looking Information and Factors That May Affect Future Results” before making an investment decision. The risks and uncertainties described below are not the only ones facing TLSS. Additional risks and uncertainties not presently known to us or that we currently believe are immaterial may also impair our business operations. If any of the following risks actually occur, our business, financial condition or results of operations could be materially adversely affected, the value of our common stock could decline, and you may lose all or part of your investment.
RISKS RELATED TO OUR BUSINESS AND INDUSTRY
We currently have no operating business and cannot determine, at this time, if we will be able to execute a go-forward restructuring of the Company.
Due to our inability to secure the requisite operating capital to meet our obligations, we ceased operations in the first quarter of 2024. Multiple of our operating subsidiaries have filed for bankruptcy under Chapter 7 of the United States Bankruptcy Code and the remaining former operating subsidiaries and the Company remain insolvent. In order to pursue a possible go-forward restructuring plan, the Company must maintain its compliance with its periodic reporting obligations. Our limited operating history and our proposed restructuring is subject to numerous risks, uncertainties, expenses, and difficulties associated with an insolvent company. Such risks include, but are not limited to:
the absence of a significant operating history;
an inability to raise capital to continue to maintain compliance with our periodic reporting obligations, fund ongoing costs, restructure the Company’s business, and/or secure a new business opportunity;
the inability to negotiate a satisfactory restructuring of our debts and obligations with creditors;
expected continual losses for the foreseeable future; and
reliance on key personnel.
Because we are subject to these and other risks, you may have a difficult time evaluating the Company and your investment in the Company. We may be unable to successfully overcome these risks which could harm the Company further.
Our restructuring strategy may be unsuccessful, and we may be unable to address the risks we face in a cost-effective manner, if at all. If we are unable to successfully address these risks the Company will be further harmed.
We may be unable to successfully find a new business opportunity.
During 2025, we restructured our existing debts and obligations and are currently exploring new business opportunities. Exploration of potential new business opportunities, mergers or acquisitions requires significant attention to source and evaluate. In addition, we can expect to compete for new business opportunities with other companies, some of which may have greater financial and other resources than we do. We cannot ensure that we will have sufficient cash to start a new business, consummate a merger or acquisition, or otherwise be able to obtain financing under acceptable terms, or obtain financing at all, for any new business venture. If we are unable to access sufficient funding for a new business venture, we may not be able to complete transactions that we otherwise find advantageous. Any such acquisition will entail numerous risks, including:
● we may not achieve anticipated levels of revenue, efficiency, cash flows and profitability;
● we may experience difficulties managing and integrating new businesses;
● we may underestimate the resources required to support a new business opportunity;
● we may incur unanticipated costs to support a new business;
● liabilities we assume could be greater than our original estimates or may not be disclosed to us at the time of closing a new business opportunity; and
● we may incur additional indebtedness, or we may issue additional equity to finance a new business venture or acquisitions, which could be dilutive to our stockholders.
To the extent we do not successfully avoid or overcome the risks or problems resulting from any new business opportunity we undertake, there could be a material adverse effect on our Company.
We have ongoing capital requirements that necessitate obtaining financing on favorable terms.
We have depended primarily on convertible and nonconvertible debt and equity financing to fund the Company. Unless financing is secured, we will continue to face liquidity constraints and may have to seek protection under the United States Bankruptcy Code. Lack of funding will adversely impact our ability to implement a business plan.
We have never been profitable and, given the cessation of our business operations, may continue to not be profitable.
Historically, the Company has never been profitable and is currently insolvent and has no operating business. There can be no assurance that we will be able to implement a business plan, generate sustainable revenue or ever achieve consistently profitable operations. If the Company continues to be insolvent, the Company may need to seek protection under the United States Bankruptcy Code or otherwise liquidate its remaining assets.
RISKS RELATED TO OUR GENERAL OPERATIONS
We incur significant costs as a result of operating as a public company, and our management is required to devote substantial time to compliance initiatives.
As a public company, we incur significant legal, accounting, and other expenses. In addition, the Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the SEC, have imposed various requirements on public companies, including requiring establishment and maintenance of effective disclosure and financial controls as well as mandating certain corporate governance practices. In the past, our management and other personnel have devoted a substantial amount of time and financial resources to these compliance initiatives. However, due to significant cost cutting measures, the Company currently lacks the depth of management and personnel to meet such requirements.
We currently do not have a sufficiently staffed accounting and finance function to maintain internal control systems adequate to meet the demands that are placed upon us as a public company. As a result, we have been unable to report our financial results accurately or in a timely manner and our business and stock price, assuming that a market for our stock develops, has suffered, and may continue to suffer. The costs of being a public company, as well as the lack of management depth, may have a material adverse effect on our future business and financial condition.
We currently lack the funds to develop a business, which may adversely affect our future growth.
The Company currently has no operations that generate revenue. Unless and until we can generate a sufficient amount of revenue, if ever, we can only expect to finance our capital needs through public or private equity offerings or debt financings. Additional funds may not be available when we need them on terms that are acceptable to us, or at all. If adequate funds are not available, we may be required to delay, reduce the scope of, our plans to grow our revenues or to consummate one or more strategic acquisitions or otherwise to scale back or abandon our business plans. In addition, we could be forced to reduce or forego any new business opportunities or file for bankruptcy. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience significant dilution. In addition, debt financing, if available, may involve restrictive covenants. We may seek to access the public or private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time. Our access to the financial markets and the pricing and terms we receive in the financial markets could be impacted by various factors, including changes in financial markets and interest rates.
Our forecasts regarding the sufficiency of our financial resources to support our current and planned operations are forward-looking statements and involve significant risks and uncertainties, and actual results could vary because of a number of factors, including the factors discussed elsewhere in this “Risk Factors” section. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect. Our future capital requirements may be substantial and will depend on many factors including:
revenue received from sales and operations, if any, in the future;
the cost of merger, acquisitions, or new business opportunity; and
the costs associated with being a public company.
Raising capital in the future could cause dilution to our existing stockholders or require us to relinquish rights.
In the future, we may seek additional capital through a combination of private and public equity offerings and debt financings. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a stockholder. Debt financing, if available, would result in increased fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions such as incurring additional debt, making capital expenditures, or declaring dividends.
If we are unable to attract and retain qualified executive officers and managers, we will be unable to operate efficiently, which could adversely affect our business, financial condition, results of operations and prospects.
Currently, we depend on the continued efforts and abilities of our sole executive officer, Sebastian Giordano (“Mr. Giordano”), to oversee the completion of the Company’s SEC filings, restructuring, manage day-to-day business, and identify strategic opportunities. The loss of him could negatively affect our ability to execute our business strategy and adversely affect our business, financial condition, and business prospects. Competition for managerial talent with significant industry experience is high and we may lose access to executive officers for a variety of reasons, including more attractive compensation packages offered by our competitors. Although we had entered into an employment agreement with Mr. Giordano, we cannot guarantee that he or other key management personnel will remain employed by us for any length of time, especially since such employment agreement is and remains in default for nonpayment. Our inability to adequately fill vacancies in our senior executive positions on a timely basis could affect our ability to implement our business strategy, which could impact our results of operations and prospects.
Adverse publicity in connection with our Subsidiaries bankruptcy cases may negatively affect our current and future business prospects.
Adverse publicity or news coverage relating to us or our business, including, but not limited to, publicity or news coverage in connection with our Subsidiaries that have filed for bankruptcy, may negatively impact our efforts to establish and promote our business, including with respect to our prospective customers, suppliers, and service providers.
RISKS RELATED TO OUR FINANCIAL RESULTS AND FINANCING PLANS
We have a history of losses and may continue to incur losses in the future.
The accompanying consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business.
Historically, we have primarily funded our operations with proceeds from sales of convertible debt, notes, and convertible preferred stock. Since our inception, we have incurred recurring losses. During the year ended December 31, 2025, we had net income of $33,833, which was caused by the recording of a gain on debt extinguishment of $1,988,931. During the year ended December 31, 2024, we had a net loss of $3,824,470. Until such time that we implement business operations, either internally or through an acquisition, we expect to continue to generate net losses in the foreseeable future, mostly due to corporate overhead and costs of being a public company. These losses may increase, and we may never achieve profitability for a variety of reasons, including due to a lack of revenue generating operations, and other factors described elsewhere in this “Risk Factors” section.
As of March 27, 2026 and December 31, 2025, we had a cash balance of $11,246 and $15,835, respectively. Our cash balance as of March 27, 2026, will not be sufficient to fund our operations for at least the next twelve months from the date of this Annual Report and we will need to raise additional working capital.
We have identified material weaknesses in our internal control over financial reporting, and we cannot assure you that additional material weaknesses or significant deficiencies will not occur in the future. If our internal control over financial reporting or our disclosure controls and procedures are not effective, we may not be able to accurately report our financial results or prevent fraud, which may cause investors to lose confidence in our reported financial information and may lead to a decline in our stock price.
We have historically had a small internal accounting and finance staff with limited experience in public reporting. This lack of adequate accounting resources has resulted in the identification of material weaknesses in our internal controls over financial reporting. A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our consolidated financial statements will not be prevented or detected on a timely basis. In connection with the preparation of our consolidated financial statements for the years ended December 31, 2025 and 2024, our management team identified material weaknesses relating to, among other matters:
We currently lack multiple levels of management review on complex business, accounting, and financial reporting issues; and
We currently lack adequate segregation of duties as a result of our limited financial resources to support hiring of personnel.
We plan to take steps to seek to remediate these material weaknesses and to improve our financial reporting systems and implement new policies, procedures, and controls. However, as of the date of this Annual Report, due to cost cutting measures, we only have one employee dedicated to our financial and other public reporting obligations and have been untimely in reporting our financial results. If we continue to be unsuccessful in remediating the material weaknesses described above, or if other material weaknesses or other deficiencies arise in the future, we continue to be unable to accurately report our financial results on a timely basis. In addition, due to our lack of accounting and finance personnel, our reported financial results may be materially misstated and require restatement which could result in the loss of investor confidence, and/or cause the market price of our common stock to .
The control deficiencies in our internal control over financial reporting, until remedied, may cause errors in our financial statements or cause our filings with the SEC to not be timely.
There may be errors in our consolidated financial statements that could require a restatement, or our filings may not be timely made with the SEC. Based on the work undertaken and performed by us, however, we believe the consolidated financial statements contained in our reports filed with the SEC are fairly stated in all material respects in accordance with generally accepted accounting principles (“GAAP”) for each of the periods presented. At present, our internal control over financial reporting or disclosure controls and procedures are not effective. We identified material weaknesses including lack of sufficient internal accounting personnel in order to ensure complete documentation of complex transactions and adequate financial reporting.
We intend to implement additional corporate governance and control measures to strengthen our control environment as we are able, but we may not achieve our desired objectives. We may identify material weaknesses and control deficiencies in our internal control over financial reporting in the future that may require remediation and could lead investors to lose confidence in our reported financial information, which could lead to a decline in our stock price.
Our preferred stock securities purchase agreements impose restrictions on us that may prevent us from engaging in beneficial transactions.
We have entered into preferred stock securities purchase agreements that contain covenants that restrict our ability to, among other things:
make certain payments, including the payment of dividends;
redeem or repurchase our capital stock;
incur additional indebtedness and issue additional preferred stock;
make investments or create liens;
merge or consolidate with another entity;
sell certain assets; and
enter into transactions with affiliates.
Actual results could differ from the estimates and assumptions that we use to prepare our consolidated financial statements.
To prepare consolidated financial statements in conformity with GAAP, management is required to make estimates and assumptions as of the date of the consolidated financial statements that affect the reported values of assets and liabilities, revenues and expenses, and disclosures of contingent assets and liabilities.
At the time the estimates and assumptions are made, we believe they are accurate based on the information available. However, our actual results could differ from and could require adjustments to, those estimates.
A further decline in our available cash could result in our liquidation.
If we were to sustain a further decline in our available cash, we could experience future difficulties in complying with our various financial obligations. The failure to comply with such obligations could result in an event of default under the various financial instruments that may then become immediately due and payable. In addition, should an event of default occur, such lenders could elect to terminate their commitments thereunder, cease making loans and institute foreclosure proceedings against our assets.
RISKS RELATED TO OUR STATUS AS A SHELL COMPANY
We are a “shell company” as defined under Rule 12b-2 of the Securities Exchange Act of 1934, which imposes significant restrictions and limitations on our ability to raise capital, attract investors, and execute a business combination or acquisition.
Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) defines a “shell company” as a registrant that has no or nominal operations and either no or nominal assets, assets consisting solely of cash and cash equivalents, or assets consisting of any amount of cash and cash equivalents and nominal other assets. As of the date of this Annual Report, the Company has no revenue-generating operations, one employee, and assets consisting of approximately $11,246 in cash. These characteristics cause the Company to meet the definition of a shell company. Our status as a shell company materially restricts our ability to raise capital from investors who require shorter liquidity timelines, may deter potential business combination partners, and imposes ongoing regulatory burdens that may be difficult for us to satisfy given our limited resources and personnel. There can be no assurance that the Company will be able to cease being a shell company within a timeframe, or at all, that would be acceptable to current or prospective investors.
Holders of our restricted shares of common stock will not be able to use Rule 144 to resell their shares for so long as we remain a shell company, and for twelve months thereafter, even if we cease to be a shell company in the future.
Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”), provides a safe harbor from the registration requirements of the Securities Act for the resale of restricted and control securities. However, Rule 144 is not available for the resale of securities initially issued by a shell company, or a former shell company, unless and until: (i) the issuer is no longer a shell company; (ii) the issuer has been subject to the reporting requirements of Section 13 or Section 15(d) of the Exchange Act for at least twelve months; (iii) the issuer has filed all required reports under Section 13 or Section 15(d) of the Exchange Act during the preceding twelve months; and (iv) at least one year has elapsed from the date that the issuer filed current “Form 10 information” with the SEC reflecting its status as an entity that is no longer a shell company. As a result, for so long as we remain a shell company, holders of our restricted shares of common stock will have no ability to resell their shares pursuant to Rule 144, regardless of how long they have held such shares or the volume of shares involved. Even after we cease to be a shell company, holders of restricted shares will not be able to rely on Rule 144 until all four of the conditions described above have been satisfied. This restriction significantly impairs the liquidity available to existing stockholders holding restricted shares and may make it substantially more for the Company to attract future investors who would otherwise rely on the Rule 144 safe harbor for resale of their securities.
As a shell company, we are subject to significant restrictions on our ability to register the resale of our securities, which may adversely affect the liquidity and marketability of our securities and our ability to raise capital.
Under the SEC’s rules and interpretive guidance, a company that is currently a shell company, or that was formerly a shell company and has not yet satisfied all of the conditions for reliance on Rule 144(i)(2) of the Securities Act of 1933, as amended (the “Securities Act”), is subject to significant restrictions on its ability to effect a registered resale of its securities. While Rule 415(a)(1)(i) under the Securities Act generally permits the registration of securities for resale on a continuous or delayed basis by persons other than the issuer – without restriction as to the form of registration statement used – the SEC staff has consistently taken the position that, where an issuer is a shell company, a purported resale registration statement filed on Form S-1 on behalf of selling stockholders is likely to be recharacterized as an indirect primary offering by the issuer. If so recharacterized, the registered offering cannot be made at prevailing market prices on a continuous basis unless the issuer is eligible to use Form S-3 for primary offerings, which generally requires a public float of at least $75 million – eligibility that we do not currently satisfy. In making this determination, the SEC staff applies the multi-factor analysis set forth in Compliance and Disclosure Interpretation 612.09 of the Securities Act Rules C&DIs (the “C&DI Analysis”), which requires an assessment of, among other factors, whether the selling stockholders are acting as conduits for the issuer and whether the offering is in substance a distribution of securities on behalf of the issuer rather than a genuine secondary transaction.
The combined effect of our shell company status under Rule 144(i) and the SEC staff’s recharacterization risk under the C&DI Analysis is that, for so long as we remain a shell company and have not satisfied all of the Rule 144(i)(2) conditions, we will not be able to provide a conventional registered resale path – whether pursuant to Form S-1 or pursuant to Rule 144 – for the holders of our restricted securities, including holders of our Series J Senior Convertible Preferred Stock (the “Series J Preferred”) and the shares of our common stock issuable upon the conversion thereof. As of March 2026, an aggregate of approximately 11,042,400,000 shares of our common stock were issuable upon conversion of the then-outstanding shares of Series J Preferred, not including dividends accrued as of such date. Holders of our restricted securities who wish to resell those securities during this period may need to rely on other available exemptions from registration, such as Section 4(a)(7) of the Securities Act, offshore resales pursuant to Regulation S, or Rule 144A resales to Qualified Institutional Buyers, each of which is subject to its own material conditions, limitations, and investor eligibility requirements and may significantly constrain the universe of potential purchasers.
The unavailability of both a registered resale path and the Rule 144 safe harbor may have a material adverse effect on us and our securityholders. In particular, the inability to register the shares of common stock issuable upon conversion of the Series J Preferred may adversely affect the marketability and liquidity of the Series J Preferred and the underlying common stock, impair our ability to raise additional capital through the issuance of securities that require registration rights as a condition of investment, increase the cost and complexity of any future capital-raising efforts, and require us to offer more favorable economic terms to future investors to compensate for the lack of a registration pathway, resulting in greater dilution to our existing stockholders.
Our shell company status may deter potential acquisition or merger targets from entering into a business combination with us and may complicate or delay the Company’s ability to complete any such transaction.
We are currently exploring the possibility of replacing our discontinued businesses and entering into new lines of business, whether by acquisition, merger, or otherwise. Our status as a shell company may make it more difficult to attract suitable acquisition or merger candidates, as many target companies and their shareholders may be unwilling to become a publicly traded entity through a business combination with a shell company due to the regulatory burdens, investor perception, and securities law restrictions associated with shell company status described herein. In addition, a business combination with the Company would not cause us to cease being a shell company absent the filing with the SEC of “Form 10 information” reflecting our status as a non-shell company, which would trigger an additional one-year waiting period before former shell company restrictions are lifted under Rule 144(i). Target companies and their advisors may view these conditions as overly burdensome and elect to pursue other transaction structures or counterparties. There can be no assurance that we will be able to identify or consummate a business combination with a suitable candidate on acceptable terms, or at all, and our shell company status may be a contributing factor in our to do so.
SEC enforcement and regulatory scrutiny may be heightened as a result of our shell company status, which could result in delays in the filing of SEC reports or adverse regulatory consequences.
The SEC has historically devoted significant enforcement and review resources to the regulation of shell companies, including companies that have checked “Yes” to shell company status on Exchange Act periodic reports. SEC Staff review of Annual Reports or other filings by shell companies may be more frequent or more extensive than for operating companies. In addition, the SEC has broad authority under Exchange Act Section 12(j) to revoke the registration of a security if the issuer has failed to comply with provisions of the Exchange Act, a risk that is heightened in the context of shell companies that have limited resources to maintain reporting compliance. Given our current financial condition – including an accumulated deficit of $147,165,109 and a working capital deficit of $7,934,095 as of December 31, 2025 – our ability to maintain timely and complete SEC reporting is uncertain. Any SEC inquiry, comment letter, or enforcement action arising from our shell company status or related disclosures could materially divert management’s limited attention and financial resources and could have an adverse effect on our ability to consummate a business combination or raise capital.
The Company’s shell company status may adversely affect the trading market for, and the price of, our common stock.
Investors and market participants are generally aware of the restrictions and risks associated with shell companies, including the limitations on the use of Rule 144 and the restriction on the use of Form S-1 registration statements described above. This awareness may cause some investors to avoid purchasing shares of our common stock in the secondary market, reduce the overall demand for and liquidity of our common stock, and further depress the already limited trading market that exists for our shares. Our common stock is currently traded on the OTCID Basic Market under the symbol “TLSS,” and there can be no assurance that the trading market for our shares will improve or be sustained. A reduced investor base, combined with the regulatory restrictions associated with our shell company status, may result in greater volatility in the trading price of our common stock, increased difficulty in selling shares at or above the price at which they were acquired, and a higher risk of loss of the entire value of your investment.
RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCK
Our stockholders will experience significant dilution as a result of the issuance of shares of our Common Stock upon conversion of shares of Series J Preferred.
Our outstanding shares of Series J Preferred are each initially convertible for 100,000 shares of common stock based on the conversion price of $0.001 per share of common stock and a stated value per share of Series J Preferred of $100. Furthermore, the shares of Series J Preferred accrue dividends on a daily basis at a rate of 10% per annum, which may be paid in cash or shares of common stock, thereby increasing the number of shares of common stock issuable upon conversion. The conversion of some or all of the Series J Preferred Stock will result in the issuance of a substantial number of shares of common stock and, as a result, the percentage ownership and voting power held by our existing stockholders will be significantly reduced and our stockholders will experience significant dilution. As of March 30, 2026, an aggregate of 11,042,400,000 shares of common stock were issuable upon conversion of the then-outstanding Series J Preferred, not including all dividends accrued as of such date.
Our shares of common stock are currently quoted on the OTCID basic market and there is a limited trading market for our common stock.
We were previously quoted on the OTC PINK beginning on August 21, 2022, but were downgraded to the OTC Expert Market on July 17, 2024. As of March 30, 2026, our shares of common stock are trading on the OTCID basic market.
There is currently a trading market for our common stock, but our common stock has traded in recent years only on a limited basis. Although there is a trading market for our common stock, there are no assurances that trading activity or volume will be sustained or will increase.
The public market for our common stock may be volatile. This may affect the ability of our investors to sell their shares as well as the price at which they sell their shares.
The market price for shares of our common stock may be significantly affected by factors such as variations in quarterly and yearly operating results, general trends in the transportation and logistics industry, and changes in state or federal regulations affecting us and our industry. Furthermore, in recent years the stock market has experienced extreme price and volume fluctuations that are unrelated or disproportionate to the operating performance of the affected companies. Such broad market fluctuations may adversely affect the market price of our common stock if a market for it develops.
Our common stock price has fluctuated in recent years, and the trading price of our common stock is likely to continue to reflect changes, which could result in losses to investors and litigation.
In addition to changes to market prices based on our results of operations and the factors discussed elsewhere in this “Risk Factors” section, the market price of and trading volume for our common stock may change for a variety of other reasons, not necessarily related to our actual operating performance. The capital markets have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock. In addition, the average daily trading volume of the securities of small companies can be very low, which may contribute to future volatility. Factors that could cause the market price of our common stock to fluctuate significantly include:
the results of operating and financial performance and prospects of other companies in our industry;
strategic actions by us or our competitors, such as acquisitions or restructurings;
the public’s reaction to our press releases, media coverage and other public announcements, and filings with the SEC;
lack of securities analyst coverage or speculation in the press or investment community about us or opportunities in the markets in which we compete;
changes in government policies in the United States;
changes in earnings estimates or recommendations by securities or research analysts who track our common stock or failure of our actual results of operations to meet those expectations;
dilution caused by the conversion into common stock of preferred shares and exercise of warrants;
market and industry perception of our success, or lack thereof, in pursuing our growth strategy;
changes in accounting standards, policies, guidance, interpretations, or principles;
any lawsuit involving us or our services;
arrival and departure of key personnel;
sales of common stock by us, our investors, or members of our management team; and
changes in general market, economic and political conditions in the United States and global economies or financial markets, including those resulting from natural or man-made disasters and armed conflicts.
Any of these factors, as well as broader market and industry factors, may result in large and sudden changes in the trading volume of our common stock and could seriously harm the market price of our common stock, regardless of our operating performance. This may prevent stockholders from being able to sell their shares at or above the price they paid for shares of our common stock, if at all. In addition, following periods of volatility in the market price of a company’s securities, stockholders often institute securities class action litigation against that company. Our involvement in any class action suit or other legal proceeding, including the existing lawsuits filed against us and described elsewhere in this report, could divert our senior management’s attention, and could adversely affect our business, financial condition, results of operations and prospects.
FINRA sales practice requirements may also limit a stockholder’s ability to buy and sell our common stock.
The Financial Industry Regulatory Authority (“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.
We could issue “blank check” preferred stock without stockholder approval with the effect of diluting then current stockholder interests and impairing their voting rights; and provisions in our charter documents could discourage a takeover that stockholders may consider favorable.
Our Articles of Incorporation, as amended (the “Articles of Incorporation”) authorizes the issuance of “blank check” preferred stock with designations, rights and preferences as may be determined from time to time by the Board. The Board is empowered, without stockholder approval, to issue a series of preferred stock with dividend, liquidation, conversion, voting or other rights which could dilute the interest of, or impair the voting power of, our common stockholders. The issuance of a series of preferred stock could be used as a method of discouraging, delaying or preventing a change in control. For example, it would be possible for the Board to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change control of our Company.
We do not intend to pay cash dividends in the foreseeable future.
We have never paid dividends on our common stock and do not presently intend to pay any dividends in the foreseeable future. We anticipate that any funds available for payment of dividends will be re-invested into our company to further its business strategy. Because we do not anticipate paying dividends in the future, the only opportunity for our stockholders to realize value in our common stock will likely be through a sale of those shares.
If securities or industry analysts do not publish research or reports about our business, or publish negative reports about our business, our common stock price and trading volume could decline.
The trading market for our common stock may depend in part on the research and reports that securities or industry analysts may publish about us or our business, our market and our competitors. We do not have any control over such analysts. If one or more such analysts downgrade or publish a negative opinion of our common stock, the common stock price would likely decline. If analysts do not cover us or do not regularly publish reports on us, we may not be able to attain visibility in the financial markets, which could have a negative impact on our common stock price or trading volume.
You may experience future dilution as a result of issuance of the Shares, issuance of shares of common stock pursuant to any price protection features under the terms of our outstanding securities, future equity offerings by us and other issuances of our common stock or other securities. In addition, the issuance of the Shares and future equity offerings and other issuances of our common stock or other securities may adversely affect our common stock price.
In order to raise additional capital, we may in the future offer additional shares of our Common Stock or other securities convertible into or exchangeable for our common stock at prices that may not be the same as the price per share as prior issuances of common stock. We may not be able to sell shares or other securities in any other offering at a price per share that is equal to or greater than the price per share previously paid by investors, the terms of certain of our outstanding securities may contain price protection features that allow holders of such securities to acquire the same number of shares of common stock at a lower price if certain events occur, and investors purchasing shares or other securities in the future could have rights superior to existing stockholders. The price per share at which we sell additional shares of our common stock or securities convertible into common stock in future transactions may be higher or lower than the prices per share for previous issuances of common stock or securities convertible into common stock paid by certain investors. You will incur dilution upon exercise of any outstanding stock options, warrants or upon the issuance of shares of common stock under our equity incentive programs. In addition, the issuance of the Shares, the issuance of shares of common stock pursuant to our outstanding securities, and any future sales of a substantial number of shares of our common stock in the public market, or the perception that such issuances or sales may occur, could affect the price of our common stock. We cannot predict the effect, if any, that market sales of those shares of common stock or the availability of those shares for sale will have on the market price of our common stock.
Substantial future sales of shares of our common stock could cause the market price of our common stock to decline.
We expect that significant additional capital will be needed in the near future to continue our planned operations. Sales of a substantial number of shares of our common stock in the public market, or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities. We are unable to predict the effect that such sales may have on the prevailing market price of our shares.
We have financed our operations, and we expect to continue to finance our operations, acquisitions, if any, and the development of strategic relationships by issuing equity, warrants and/or convertible securities, which could significantly reduce the percentage ownership of our existing stockholders. Further, any additional financing that we secure may require the granting of rights, preferences or privileges senior to, or pari passu with, those of common stock. Additionally, we may acquire other technologies or finance strategic alliances by issuing our equity or equity-linked securities, which may result in additional dilution. Any issuances by us of equity securities may be at or below the prevailing market price of our common stock and in any event may have a dilutive impact on your ownership interest, which could cause the market price of our common stock to decline. We may also raise additional funds through the incurrence of debt or the issuance or sale of other securities or instruments senior to our shares of common stock. The holders of any securities or instruments we may issue may have rights superior to the rights of our holders of our common stock. If we experience dilution from issuance of additional securities and we grant superior rights to new securities over common stockholders, it may negatively impact the trading price of our shares of common stock.
