GIFTIFY, INC. 10-K

ITEM 1A. RISK FACTORS Risks Related to Our Company and Our Business There is substantial doubt about our ability to continue as a going concern. We have a history of annual net losses which may continue, and which may negatively impact our ability to achieve our business objectives. Our audited financial statements for the fiscal year ended December 31, 2025 were prepared under the assumption that we will continue as a going concern; however, we have incurred significant losses from operations to date, and we expect our expenses to increase in connection with our ongoing activities. For the year ended December 31, 2025, we recorded a net loss of $10,491,658 and used cash in operating activities of $1,590,074. At December 31, 2025, our cash and cash equivalents balance was $3,654,944. As of December 31, 2025, the outstanding balance on our line of credit facility was $3,212,935; we had $663,589 outstanding in promissory notes and $46,137 in convertible notes payable, including interest. As a result, management has concluded, and our independent registered public accounting firm has agreed with our conclusion that there is substantial doubt regarding our ability to continue as a going concern for a period of at least 12 months beyond the filing of this Annual Report on Form 10-K. As a result, the report of our independent registered public accounting firm on our financial statements for the year ended December 31, 2025, includes an explanatory paragraph regarding the existence of substantial doubt about our ability to continue as a going concern. There can be no assurance that our future operations will result in net income. Our failure to increase revenue or improve gross margins will harm our business. We may not be able to generate profitability on a quarterly or annual basis in the future. If our revenues grow more slowly than we anticipate, our gross margins fail to improve or our operating expenses exceed our expectations, our operating results will suffer. If CardCash is not able to maintain profitability over the next few years, our shareholders will have experienced unnecessary dilution, and our ability to achieve our business plan could be significantly delayed or threatened. CardCash has incurred net losses since its inception. For the years ended December 31, 2024 and 2023, CardCash had net losses of $2,052,198 and $124,546, respectively. During the year ended December 31, 2025, Cash realized net income of $830,197. Our business plan contemplates growth in gross and net revenues to increase our share price and facilitate accretive acquisitions of e-commerce companies. However, CardCash’s inability to be profitable could delay or hinder our efforts to achieve our business goals. The principal risks to CardCash maintaining future profitability are (i) feasibility of the Company’s expense management activities, (ii) government regulations, including the Card Act, privacy concerns and oversight of financial institutions and money transmitters as set forth in the risk factors below, (iii) new competitors, (iv) liability for claims relating to service offerings and branded exchanges, (v) maintaining its network infrastructure as set forth below, (vi) preventing security breaches as set forth below, (vii) limiting fraudulent transactions and chargebacks on gift cards, (viii) payment related risks as set forth below, (ix) overcoming the limited experience of principals in operating a public company, (x) the potential loss of key executives as set forth below, and (xi) future pandemics. If our restaurants and other merchants do not meet the needs and expectations of our customers, our business could suffer. Our business depends on our reputation for providing high-quality discounts, and our brand and reputation may be harmed by actions taken by restaurants and other merchants that are outside our control. Any shortcomings of one or more of our restaurants and other merchants, particularly with respect to an issue affecting the quality of the meals offered or the products or services sold, may be attributed by our customers to us, thus damaging our reputation, brand value, and potentially affecting our results of operations. In addition, negative publicity and subscriber sentiment arising from fraudulent or deceptive conduct by our restaurants and other merchants could damage our reputation, reduce our ability to attract new customers or retain current customers, and diminish the value of our brand. We may be subject to additional unexpected regulation which could increase our costs or otherwise harm our business. The application of certain laws and regulations to our discount certificates and dining cards is uncertain. These include laws and regulations such as the Credit Card Accountability Responsibility and Disclosure Act of 2009, or the CARD Act, and unclaimed and abandoned property laws. The application of the CARD Act will only become less uncertain if current legislation at the federal and state levels is changed to specify that their terms apply to our discount certificates and Discount Dining Passes or from court rulings by federal or state courts that interpret the current legislation to be clearly applicable to our discount program. From time to time, we may also be notified of additional laws and regulations that governmental organizations or others may claim apply to our business. If we are required to alter our business practices due to laws and regulations, our revenue could decrease, our costs could increase, and our business could otherwise be harmed. Further, the costs and expenses associated with defending any actions related to such additional laws and regulations, and any payments of related penalties, judgments, or settlements could adversely impact our profitability. 12 The implementation of the CARD Act and similar state laws may harm our business and results of operations. Our discount certificates and Discount Dining Passes may be considered gift cards, gift certificates, stored value cards, or prepaid cards and, therefore, may be subject to, among other laws, the CARD Act and state laws governing gift cards, stored value cards, and coupons. Many of these laws contain provisions governing the use of gift cards, gift certificates, stored-value cards, or prepaid cards, including specific disclosure requirements, prohibitions or limitations on expiration dates, and the imposition of certain fees. For example, if our discount certificates and Discount Dining Passes are subject to the CARD Act and are not included in the exemption for promotional programs, it is possible that the purchase value, which is the amount equal to the price paid for our certificates and Discount Dining Passes, or the promotional value, which is the add-on value of these items in excess of the price paid, or both, may not expire before the later of (i) five years after the date on which these items were issued; (i) the certificate’s stated expiration date (if any); or (iii) a later date provided by applicable state law. In the event that it is determined that our discount certificates and Discount Dining Passes are subject to the CARD Act or any similar state regulation, and are not within various exemptions that may be available under the CARD Act or under some of the various state jurisdictions, our liabilities with respect to unredeemed certificates and Discount Dining Passes may be materially higher than the amounts shown in our financial statements and we may be subject to additional fines and penalties. In addition, if federal or state laws require that the face value of our discount certificates and Discount Dining Passes have a minimum expiration period beyond the period desired by a merchant for its promotional program, or no expiration period, this may affect the willingness of merchants to issue discount certificates in jurisdictions where these laws apply. If we are required to materially increase the estimated liability recorded in our financial statements with respect to unredeemed discount certificates and Discount Dining Passes, our net income could be materially and adversely affected. If we are required to materially increase the estimated liability recorded in our financial statements with respect to unredeemed discounts and Discount Dining Passes, our net income could be materially and adversely affected. In certain states, our discount certificates and Discount Dining Passes may be treated as gift cards. Some states treat gift cards as unclaimed or abandoned property under their unclaimed and abandoned property laws, which require companies to remit to the government the value of the unredeemed balance on the gift cards after a specified period (generally between one and five years) and impose certain reporting and recordkeeping obligations. We do not remit any amounts for unredeemed discount certificates or Discount Dining Passes, based on our assessment of applicable laws. The analysis of the potential application of the unclaimed and abandoned property laws to discount certificates and Discount Dining Passes is complex, involving an analysis of constitutional and statutory provisions and factual issues, including our relationship with customers and merchants and our role as it relates to the issuance and delivery of such certificates and Discount Dining Passes. In the event that one or more states successfully challenges our position on the application of its unclaimed and abandoned property laws to discount certificates and Discount Dining Passes, or if the estimates that we use in projecting the likelihood of discount certificates and Discount Dining Passes being redeemed prove to be inaccurate, our liabilities with respect to unredeemed discount certificates and Discount Dining Passes may be materially higher than the amounts shown in our financial statements. If we are required to materially increase the estimated liability recorded in our financial statements with respect to unredeemed gift cards, our net income could be materially and adversely affected. Moreover, a successful challenge to our position could subject us to penalties or interest on unreported and unremitted sums, and any such penalties or interest would have a further material adverse impact on our net income. Government regulation of the internet and e-commerce is evolving, and unfavorable changes or failure by us to comply with these regulations could substantially harm our business and results of operations. We are subject to general business regulations and laws as well as regulations and laws specifically governing the internet and e-commerce, including the California Consumer Protection Act, the General Data Protection Regulation, the CAN-SPAM Act, the Digital Millennium Copyright Act, the Electronic Signatures in Global and National Commerce Act, and the Uniform Electronic Transactions Act. Existing and future regulations and laws could impede the growth of the internet or other online services. These regulations and laws may involve taxation, tariffs, subscriber privacy, anti-spam, data protection, content, copyrights, distribution, electronic contracts and other communications, consumer protection, the provision of online payment services, and the characteristics and quality of services. It is not clear how existing laws governing issues such as property ownership, sales and other taxes, libel, and personal privacy apply to the internet, as the vast majority of these laws were adopted prior to the advent of the internet and do not contemplate or address the unique issues raised by the internet or e-commerce. In addition, governments in one or more countries may seek to censor content on our websites and applications, or attempt to block access to our websites. Adverse legal or regulatory developments could substantially harm our business. In particular, in the event that we are restricted, in whole or in part, from operating in one or more countries, our ability to retain or increase our subscriber base may be adversely affected and we may not be able to maintain or grow our revenue as anticipated. 13 Failure to comply with federal and state privacy laws and regulations, or the expansion of current or the enactment of new privacy laws or regulations, could adversely affect our business. A variety of federal and state laws and regulations govern the collection, use, retention, sharing, and security of consumer data. Existing privacy laws and regulations are evolving and subject to varying interpretations. In addition, various federal, state, and foreign legislative and regulatory bodies may expand current laws or enact new laws regarding privacy matters. For example, there have recently been Congressional hearings and increased attention to the capture and use of location-based information from smartphone and other mobile device users. We have posted privacy policies and practices concerning the collection, use, and disclosure of subscriber data on our websites and applications. Several internet companies have incurred penalties for failing to honor the representations in their privacy policies and practices. In addition, several states have enacted legislation requiring businesses to implement and maintain reasonable security procedures and practices to protect sensitive personal information and to provide notice to consumers in the event of a security breach. Any failure, or perceived failure, by us to comply with our posted privacy policies or with any data-related consent orders, Federal Trade Commission requirements or orders or other federal, state or international privacy or consumer protection-related laws, regulations or industry self-regulatory principles could result in claims, proceedings or actions against us by governmental entities or others or other liabilities, which could adversely affect our business. In addition, a failure or perceived failure to comply with industry standards or with our own privacy policies and practices could result in a loss of customers or merchants and adversely affect our business. Federal, state and international governmental authorities continue to evaluate the privacy implications inherent in the use of third-party web “cookies” for behavioral advertising. The regulation of these cookies and other current online advertising practices could adversely affect our business. We may suffer liability as a result of information retrieved from or transmitted over the internet and claims related to our service offerings. We may be sued for defamation, civil rights infringement, negligence, patent, copyright or trademark infringement, invasion of privacy, personal injury, product liability, breach of contract, unfair competition, discrimination, antitrust or other legal claims relating to information that is published or made available on our websites or service offerings we make available (including provision of an application programming interface platform for third parties to access our website, mobile device services and geolocation applications). This risk is enhanced in certain jurisdictions outside the United States, where our liability for such third-party actions may be less clear, and we may be less protected. In addition, we could incur significant costs in investigating and defending such claims, even if we ultimately are not found liable. If any of these events occur, our net income could be materially and adversely affected. We are subject to risks associated with information disseminated through our websites and applications, including consumer data, content that is produced by our editorial staff and errors or omissions related to our product offerings. Such information, whether accurate or inaccurate, may result in our being sued by our merchants, customers, or third parties, and as a result, our revenue and goodwill could be materially and adversely affected. 14 Our business depends on maintaining and scaling the network infrastructure required to operate our websites and applications, and any significant disruption to service could result in a loss of customers or merchants. Customers access our deals through our websites and applications. Our reputation and ability to acquire, retain and serve our customers and merchants who are dependent upon the reliable performance of our websites and applications and the underlying network infrastructure. As our subscriber base and the volume of information shared on our websites and applications continue to grow, we will need more network capacity and computing power. We have spent, and expect to continue to spend, substantial amounts of money on data centers, equipment, and related network infrastructure to handle traffic for our websites and applications. The operation of these systems is expensive and complex, and could lead to operational failures. In the event that our customer base or the amount of traffic on our websites and applications grows more quickly than anticipated, we may be required to incur significant additional costs. Interruptions in these systems, whether due to system failures, computer viruses or physical or electronic break-ins, could affect the security or availability of our websites and applications, and prevent our customers from accessing our services. A substantial portion of our network infrastructure is hosted by third-party providers. Any disruption to these services, or any failure by these providers to handle existing or increased traffic, could significantly harm our business. Any financial or other difficulties these providers face may adversely affect our business, and we exercise limited control over them, which increases our vulnerability to issues with the services they provide. If we do not successfully maintain or expand our network infrastructure, or if we experience operational failures, we could lose current and potential customers and merchants, which could harm our operating results and financial condition. Our business depends on the development and maintenance of the internet infrastructure. The success of our services will largely depend on the development and maintenance of our internet infrastructure. This includes maintaining a reliable network backbone with the necessary speed, data capacity, and security, as well as the timely development of complementary products to provide reliable internet access and services. The internet has experienced, and is likely to continue to experience, significant growth in the number of users and in traffic volume. The internet infrastructure may be unable to support such demands. In addition, increasing numbers of users, higher bandwidth requirements, and issues caused by viruses, worms, malware, and similar programs may degrade internet performance. The backbone computers of the internet have been the targets of such programs. The internet has experienced a range of outages and delays due to damage to parts of its infrastructure, and it could face further disruptions in the future. These outages and delays could reduce overall internet usage and usage of our services, which could adversely impact our business. Our total number of customers may be higher than the number of our actual individual customers and may not be representative of the number of persons who are active potential customers. Our total customer count may exceed the number of individual customers because some customers have multiple registrations, some have died or become incapacitated, and others may have registered under fictitious names. Given the challenges inherent in identifying these customers, we do not have a reliable system to accurately determine the number of individual customers, so we rely on total customers as our measure of subscriber base size. In addition, the customer count includes the total number of individuals who completed registration as of a specific date, less those who have unsubscribed, and should not be considered representative of the number of people who continue to actively consider our deals by reviewing our email offers. Our business may be subject to seasonal sales fluctuations which could result in volatility or have an adverse effect on the market price of our common stock. Our business, like that of our restaurants and merchants, may be subject to some degree of sales seasonality. As our business growth stabilizes, these seasonal fluctuations may become more pronounced. Seasonality may cause our working capital cash flow requirements to vary from quarter to quarter, depending on the variability in the volume and timing of sales. These factors, among others, make forecasting more difficult and may impair our ability to manage working capital and predict financial results accurately, which could adversely affect the market price of our common stock. We depend on the continued growth of online commerce. The business of selling services and goods over the internet, including through discount certificates, raises concerns about fraud, privacy and other problems may discourage additional restaurants, consumers and merchants from adopting the internet as a medium of commerce and make the level of market penetration of our services high, making the acquisition of new customers for our services more difficult and costly than it has been in the past. If these customers prove to be less active than our earlier customers, or we are unable to gain efficiencies in our operating costs, including our cost of acquiring new customers, our business could be adversely impacted. Our business is subject to interruptions, delays or failures resulting from earthquakes, other natural catastrophic events or terrorism. Our services, operations, and the data centers from which we provide our services are vulnerable to damage or interruption from earthquakes, fires, floods, power losses, telecommunications failures, terrorist attacks, acts of war, human errors, break-ins, and similar events. A significant natural disaster, such as an earthquake, fire, or flood, could have a material adverse impact on our business, financial condition, and results of operations, and our insurance coverage may be insufficient to compensate us for any resulting losses. Acts of terrorism could disrupt the internet, our business, or the economy as a whole. We may not have sufficient protection or recovery plans in certain circumstances, such as natural disasters affecting areas where the data centers on which we rely are located, and our business interruption insurance may be insufficient to compensate us for any losses that may occur. Such disruptions could negatively affect our ability to operate our websites, potentially harming our business. 15 Failure to deal effectively with fraudulent transactions and subscriber disputes would increase our loss rate and harm our business. Our discount certificates and Dining Passes are issued as redeemable coupons with unique identifiers. Consumers or third parties may attempt to issue counterfeit certificates to fraudulently obtain discounted goods and services from our restaurants and other merchants. While we use advanced anti-fraud technologies, technically knowledgeable criminals may attempt to circumvent our systems through increasingly sophisticated methods. In addition, our service may be subject to employee fraud or other internal security breaches, and we may be required to reimburse consumers and/or merchants for any funds stolen or revenue lost as a result. Our restaurants and merchants may also request reimbursement or cease using us if they are affected by buyer fraud or other fraud. We may incur significant losses from fraud and counterfeit certificates. We may incur losses from claims that the consumer did not authorize the purchase, from merchant fraud, from erroneous transmissions, and from consumers who have closed bank accounts or have insufficient funds in them to satisfy payments. In addition to the direct costs of such losses, if they are related to credit card transactions and become excessive, they could potentially result in our losing the right to accept credit cards for payment. If we were unable to accept credit cards, we would experience substantial revenue reductions, which would harm our business. While we have taken measures to detect and mitigate fraud risk, these measures must be continually improved and may not be effective against new or evolving fraud or in connection with new product offerings. If these measures do not succeed, our business will suffer. We are subject to payments-related risks. We accept payments using a variety of methods, including credit card, debit card and electronic payment services. As we offer new payment options to consumers, we may be subject to additional regulations, compliance requirements and fraud. For certain payment methods, including credit and debit cards, we pay interchange and other fees that may increase over time, raise our operating costs, and reduce profitability. We rely on third parties to provide payment processing services, including the processing of credit cards and debit cards and it could disrupt our business if these companies become unwilling or unable to provide these services to us. We are also subject to payment card association operating rules, certification requirements and rules governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for us to comply. If we fail to comply with these rules or requirements, we may be subject to fines and higher transaction fees, lose our ability to accept credit and debit card payments from consumers or facilitate other online payments, and our business and operating results could be adversely affected. We are also subject to or voluntarily comply with a number of other laws and regulations relating to money laundering, international money transfers, privacy and information security and electronic fund transfers. If we were found to be in violation of applicable laws or regulations, we could be subject to civil and criminal penalties or forced to cease our payment services business. Federal laws and regulations, such as the Bank Secrecy Act and the USA PATRIOT Act and similar foreign laws, could be expanded to include discount certificates and Discount Dining Passes. Various federal laws, such as the Bank Secrecy Act and the USA PATRIOT Act and foreign laws and regulations, such as the European Directive on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing, impose certain anti-money laundering requirements on companies that are financial institutions or that provide financial products and services. For these purposes, financial institutions are broadly defined to include money services businesses such as money transmitters, check cashers and sellers or issuers of stored value cards. Examples of anti-money laundering requirements imposed on financial institutions include subscriber identification and verification programs, record retention policies and procedures and transaction reporting. We do not believe we are a financial institution subject to these laws and regulations, based in part on the characteristics of discount certificates and Discount Dining Passes and our role in distributing them to customers. However, the Financial Crimes Enforcement Network, a division of the U.S. Treasury Department tasked with implementing the requirements of the Bank Secrecy Act, recently proposed amendments to the scope and requirements for parties involved in stored value or prepaid access cards, including a proposed expansion of financial institutions to include sellers or issuers of prepaid access cards. If this proposal is adopted as proposed, our discount certificates and Discount Dining Passes may be considered financial products, and we may be deemed a financial institution. In the event that we become subject to the requirements of the Bank Secrecy Act or any other anti-money laundering law or regulation imposing obligations on us as a money services business, our regulatory compliance costs to meet these obligations would likely increase which could reduce our net income. 16 State laws regulating money transmission could be expanded to include our discount certificates and Discount Dining Passes. Many states impose licensing and registration requirements on companies engaged in money transmission, with varying definitions of what constitutes money transmission. We do not currently believe we are a money transmitter, given our role and the product terms of our discount certificates and Discount Dining Passes. However, a successful challenge to our position or expansion of state laws could subject us to increased compliance costs and delay our ability to offer discount certificates and Discount Dining Passes in certain jurisdictions pending receipt of any necessary licenses or registrations. Current uncertainty in global economic conditions could adversely affect our revenue and business. Our operations and performance depend primarily on economic conditions in the United States. The current economic environment remains uncertain due to geopolitical conflict. These conditions may make it difficult for our restaurants and other merchants to accurately forecast and plan future business activities and could lead our merchants to terminate their relationships with us or cause our customers to slow or reduce their spending. Furthermore, during challenging economic times, our merchants may face difficulties obtaining timely access to sufficient credit, which could lead them to discontinue our service or impair their ability to make timely payments to us. If that were to occur, we may experience decreased revenue, be required to increase our allowance for doubtful accounts, and see our days receivable outstanding negatively impacted. If we are unable to finance our operations on acceptable terms due to further tightening in the credit markets, we may incur higher costs or be unable to effectively manage our business. We cannot predict the timing, strength, or duration of any worldwide economic slowdown or subsequent recovery, in the United States, or in the restaurant and entertainment industry. These and other economic factors could have a material adverse effect on our financial condition and operating results. Downturns in general economic and market conditions and reductions in spending may reduce demand for our digital dining products. Our revenues, results of operations, and cash flows depend on the overall demand for our discount dining certificates and discount Dining Passes. Negative conditions in the general U.S. economy as well as in other jurisdictions, including conditions resulting from changes in gross domestic product growth, financial and credit market fluctuations construction slowdowns, energy costs, international trade relations and other geopolitical issues, including those caused or may be caused by the Russia Ukraine conflict, and the availability and cost of credit could cause a decrease in consumer discretionary spending and diminish growth expectations for the restaurant, dining and entertainment industries. Moreover, government consumption, socio-economic policies, or objectives pursued by countries where we do business could affect demand for our discount dining certificates and discount Dining Passes. Global inflation also increased during 2022. The Russia-Ukraine conflict and other geopolitical conflicts, as well as related international response, have exacerbated inflationary pressures, including causing increases in the price for goods and services and global supply chain disruptions, which have resulted and may continue to result in shortages in food products, materials, and services. Such shortages have resulted and may continue to result in inflationary increases in labor, fuel, food products, materials, and services, and could also cause costs to rise and lead to shortages of certain materials. We cannot predict future trends in inflation or other negative economic factors, or the associated increases in our operating costs, and how these may impact our business. To the extent that the restaurant customers we serve are unable to recover higher operating costs resulting from inflation or otherwise mitigate the impact of such costs on our and their businesses, our revenues and gross profit could decrease, and our financial condition and results of operations could be adversely affected. Currently, the most significant impact of inflation on us is the increase in employee wages. 17 Our ability to raise capital in the future may be limited, and our failure to raise capital when needed could prevent us from growing. We may in the future be required to raise capital through public or private financing or other arrangements. Such financing may not be available on acceptable terms, or at all, and our failure to raise capital when needed could harm our business. Additional equity financing may dilute the interests of our common stockholders, and debt financing, if available, may involve restrictive covenants and could reduce our profitability. If we cannot raise funds on acceptable terms, we may not be able to grow our business or respond to competitive pressures. We intend to make acquisitions that could disrupt our operations and adversely impact our business and operating results. We intend to acquire complementary e-commerce businesses and support the transition and integration of acquired operations into our ongoing business as part of our growth strategy. Other than as disclosed herein, we currently have no binding commitments or agreements with respect to any such acquisitions and there can be no assurance that we will eventually consummate any acquisitions. The process of integrating acquired assets into our operations may result in unforeseen operating difficulties and expenditures and may absorb significant management attention that would otherwise be available for the ongoing development of our business. In addition, we have limited experience in performing acquisitions and managing growth. There can be no assurance that the anticipated benefits of any acquisition will be realized. In addition, future acquisitions could result in potentially dilutive issuances of equity securities, the incurrence of debt and contingent liabilities and amortization expenses related to goodwill and other intangible assets, any of which could materially and adversely affect our operating results and financial position. In addition, acquisitions involve risks, including those inherent in entering markets with no or limited prior experience and the potential loss of key employees. If the products that we offer on our online marketplaces do not reflect our customers’ tastes and preferences, our sales and profit margins would decrease. Our success depends in part on our ability to offer discount certificates and Discount Dining Passes to restaurants and other merchants that reflect consumers’ tastes and preferences. Consumers’ tastes are subject to frequent, significant, and sometimes unpredictable changes. If our product fails to satisfy customers’ tastes or respond to changes in customer preferences, our sales could suffer which would depress our profit margins. In addition, failing to offer products aligned with customers’ preferences could allow competitors to gain market share. This could adversely affect our business, prospects, financial condition, and results of operations. Our expansion plans cannot be implemented if we lose key personnel or are unable to recruit additional personnel. We depend substantially on the continued services, specialized knowledge and performance of our senior management, particularly Ketan Thakker, our President and Chief Executive Officer, Steve Handy, our Chief Financial Officer, Elliot Bohm, the Chief Executive Officer of our subsidiary, CardCash, and Marc Ackerman, the Chief Operating Officer of our subsidiary, CardCash. These executives may elect to pursue other opportunities at any time. If one or more of these individuals leave our company, we may lose significant supplier relationships and the operating expertise they have developed over many years, both of which would be difficult to replace. The loss of any executive officer or other key employee could harm our business. In addition, as our business expands, we will need to add personnel across information technology and engineering to maintain and expand our website and systems, marketing and sales to attract and retain customers, and customer support to serve our growing customer base. Hiring and retaining qualified executives, engineers and qualified sales representatives are critical to our success, and competition for experienced and well-qualified employees can be intense. To attract and retain executives and other key employees in a competitive marketplace, we must provide a competitive compensation package, including cash and equity-based compensation. We currently utilize a stock incentive plan, including stock options, as a form of share-based incentive compensation. If the anticipated value of such equity-based incentive awards does not materialize, if our equity-based compensation otherwise ceases to be viewed as a valuable benefit or if our total compensation package is not viewed as competitive, our ability to attract, retain and motivate executives and key employees could be weakened. The failure to hire executives and key employees, or the loss of any of them, could significantly impact our operations. If we are unable to hire and successfully train employees or contractors in these areas, users of our website may have negative experiences and we may lose customers, which would diminish the value of our brand and harm our business. The market for recruiting qualified information technology and other personnel is highly competitive, and we may face challenges in attracting and retaining employees. If we fail to retain or attract qualified personnel, we may be unable to compete successfully or implement our expansion plans. 18 To obtain future revenue growth and achieve and sustain profitability, we will have to attract and retain customers on cost-effective terms. Our success depends on our ability to attract and retain customers on cost-effective terms. We have relationships with online services, search engines, affiliate marketing websites, directories, and other websites and e-commerce businesses to provide content, advertising banners, and other links that direct customers to our website. We rely on these relationships as significant sources of traffic to our websites and to generate new customers. Furthermore, many of the parties with whom we may have online advertising arrangements could provide advertising services to other online competitors. As a result, these parties may be reluctant to enter into or maintain relationships with us. Failure to achieve sufficient traffic or generate sufficient revenue from third-party purchases may result in termination of these relationships by third parties. If we are unable to develop or maintain these relationships on acceptable terms, our ability to attract new customers and our financial condition could be harmed. If the underlying technology’s development evolves in a way that is no longer beneficial to us, our financial condition could be adversely affected. In addition, certain online marketing agreements may require us to pay upfront fees and make other payments before any sales are realized, if any. Accordingly, if future relationships or agreements do not generate the sales we anticipate, our results of operations will be adversely affected. We cannot guarantee that we will be able to increase our revenues, if at all, in a cost-effective manner. We rely upon search engines like Google, Bing and Yahoo to rank our product offerings and may at times be subject to changes in search algorithms and ranking penalties if they believe we are not in compliance with their guidelines. We rely on search engines to attract consumer interest in our product offerings. Potential and existing customers use search engines provided by search engine companies, including Google, Bing and Yahoo, which use algorithms and other devices to provide users a natural ranked listing of relevant internet sites matching a user’s search criteria and specifications. Generally, internet sites ranked higher in paid and natural search results attract the largest share of visitors among similar sites. Sites that achieve the highest natural search rankings often see increased sales. Natural search engine algorithms use information from across the internet, including content on our website. Rules and guidelines from these natural search engine companies govern our participation on their sites and how we share relevant online information that may be considered or incorporated into their algorithms. If we fail to present, or improperly present, our website’s information for use by natural search engine companies, or if any of these natural search engine companies determine we have violated their rules or guidelines, or if others improperly present our website’s information to these search engine companies, or if natural search engine companies make changes to their search algorithms, we may fail to achieve an optimum ranking in natural search engine listing results, or we may be penalized in a way that could harm our business, prospects, financial condition and results of operations. More individuals are using mobile devices to access the internet and versions of our service developed or optimized for these devices may not gain widespread adoption by users of such devices. Mobile devices are increasingly used for e-commerce transactions. A significant and growing portion of our users access our platform through mobile devices. We may lose users if we cannot continue to meet our users’ mobile and multi-screen experience expectations. If we are unable to attract and retain a substantial number of mobile device users to our online marketplaces and services, we may fail to capture a sufficient share of an increasingly important segment of the online services market. Our ability to successfully address the challenges posed by the rapidly evolving market for mobile transactions is crucial to our continued success, and any failure to continuously increase the volume of mobile transactions effected through our platforms could harm our business. We rely on third-party systems to conduct our business, and our revenues and market share may decline if these systems are unavailable in the future or no longer perform at a satisfactory level. We rely on third-party computer systems and service providers, including credit card verification and confirmation, to host our website and to advertise and deliver the discount certificates and Discount Dining Passes sold on our website to customers. We also rely on third-party licenses for components of the software underlying our technology platform. Any interruption in our ability to obtain products or services from these or other third parties, or any deterioration in their performance, could impair the timing and quality of our own service. If our service providers fail to deliver high-quality products and services in a timely manner to our customers, our services will not meet the expectations of our customers and our reputation and brand will be damaged. Furthermore, if our arrangements with any of these third parties are terminated, we may not find an alternate source of systems support on a timely basis or on terms as advantageous to us. 19 We are subject to cyber security risks and risks of data loss or other security breaches. Our business involves the storage and transmission of users’ proprietary information, and security breaches could expose us to a risk of loss or misuse of this information, and to resulting claims, fines, and litigation. We have been subjected to a variety of cyber-attacks, which have increased in number and variety over time. We believe our systems are probed by potential hackers virtually 24/7, and we expect the problem will continue to grow worse over time. Cyber-attacks may target us, our customers, our suppliers, banks, credit card processors, delivery services, e-commerce in general or the communication infrastructure on which we depend. Any compromise of our security could result in a violation of applicable privacy and other laws, significant legal and financial exposure, damage to our reputation, and a loss of confidence in our security measures, any of which could have a material adverse effect on our financial results and business. Moreover, any insurance coverage we may carry may be inadequate to cover the expenses and other potential financial exposure we could face as a result of a cyber-attack or data breach. We may not be able to compete successfully against existing or future competitors including larger, well-established and well-financed e-commerce companies and restaurants and merchants increasing their own online operations. The market for discounts at restaurants and other merchants is intensely competitive. We also compete with other companies that offer digital coupons through their websites or mobile applications. In addition, we compete with traditional offline coupon and discount services, as well as newspapers, magazines and other traditional media companies that provide coupons and discounts on services and products. Many of our current and potential competitors have longer operating histories, larger customer bases, greater brand recognition and significantly greater financial, marketing and other resources than we do. Increased competition may result in reduced operating margins, loss of market share and a diminished brand franchise. We cannot provide assurance that we will be able to compete successfully against existing or future competitors. Our competitors may directly increase our marketing costs and also may cause us to decrease certain types of marketing. In addition to competing with us for customers, merchants, and employees, our competitors may directly increase our operating costs, by driving up the cost of various forms of online advertising or otherwise. We may elect to decrease our use of sponsored search or other forms of marketing from time to time to decrease our costs, which may have a material adverse effect on our financial results and business. We may also elect to spend additional amounts on sponsored search or other forms of marketing from time to time to increase traffic to our website, or to take other actions to increase traffic and/or conversion, and the additional expenditures may have a material adverse effect on our financial results and business. Our business depends on effective marketing, including marketing via email and social networking messaging, and we intend to increase our spending on marketing and branding, which may adversely affect our financial results. We depend on effective marketing and high customer traffic. We depend on email to promote our site and offerings and to generate a substantial portion of our revenue. If a significant portion of our target customers no longer utilize email, or if we are unable to effectively and economically deliver email to our potential customers, whether for legal, regulatory or other reasons, it would have a material adverse effect on our business. If email providers or Internet service providers implement new or more restrictive email or content delivery or accessibility policies, including with respect to net neutrality, it may become more difficult to deliver emails to our customers or for customers to access our site and services. For example, certain email providers, including Google, categorize our emails as “promotional,” and these emails are directed to an alternate, and less readily accessible, section of a customer’s inbox. If email providers materially limit or halt the delivery of our emails, or if we fail to deliver emails to customers in a manner compatible with email providers’ email handling or authentication technologies, our ability to contact customers through email could be significantly restricted. In addition, if we are placed on “spam” lists or lists of entities that have been involved in sending unwanted, unsolicited emails, our operating results and financial condition could be substantially harmed. 20 We also rely on social networking messaging services for marketing purposes, and anything that limits our ability or our customers’ ability or desire to utilize social networking services could have a material adverse effect on our business. If we are unable to develop, implement and maintain effective and efficient cost-effective advertising and marketing programs, it would have a material adverse effect on our financial results and business. Further, as part of our growth strategies, we intend to increase our spending on marketing and branding initiatives significantly, which may adversely affect our financial results. There is no assurance that any increase in our marketing or branding expenditures will result in increased market shares or will ultimately have a positive effect on our financial results. We also rely heavily on Internet search engines to generate traffic to our websites, principally through search engine marketing and search engine optimization. The number of consumers we attract from search engines to our platform is due in large part to how and where information from, and links to, our websites are displayed on search engine results pages. The display, including rankings, of search results can be affected by a number of factors, many of which are not in our control and may change at any time. Search engines frequently update and change the logic that determines the placement and display of the results of a user’s search, such that the purchased or algorithmic placement of links to our websites can be negatively affected. In addition, a search engine could, for competitive or other purposes, alter its search algorithms or results causing our websites to place lower in search query results. If a major Internet search engine changes its algorithms in a manner that negatively affects the search engine ranking it could create additional traffic headwinds for us and negatively affect our results of operations. We also rely on mobile marketplace operators (i.e., app store operators) to drive downloads of our mobile application. If any mobile marketplace operator determines that our mobile application is non-compliant with its vendor policies, the operator may revoke our rights to distribute through its marketplace or refuse to permit a mobile application update at any time. These operators may also change their mobile application marketplaces in a way that negatively affects the prominence of, or ease with which users can access, our mobile application. Such actions may adversely impact the ability of customers to access our offerings through mobile devices, which could have a negative impact on our business and results of operations. Our operating results depend on our websites, network infrastructure and transaction-processing systems. Capacity constraints or system failures would harm our business, prospects, financial condition and results of operations. Any system interruptions that result in the unavailability of our website marketplaces or reduced performance of our transaction systems would reduce our transaction volume and the attractiveness of the services that we provide to suppliers and third parties and would harm our business, prospects, financial condition and results of operations. We use internally developed systems for our website and certain aspects of transaction processing, including databases used for internal analytics and order verifications. We have experienced periodic systems interruptions due to server failure and power failure, which we believe will continue to occur from time to time. Our transaction processing systems and network infrastructure may be unable to accommodate increases in traffic in the future. We may be unable to project accurately the rate or timing of traffic increases or successfully upgrade our systems and infrastructure to accommodate future traffic levels on our website. In addition, we may be unable to upgrade and expand our transaction processing systems in an effective and timely manner or to integrate any newly developed or purchased functionality with our existing systems. If we do not keep pace with rapid technological change, our services could become obsolete and we could lose customers. To remain competitive, we must continue to enhance and improve the functionality and features of our e-commerce businesses. We may face material delays in introducing new services, products, and enhancements. If this happens, our customers may forgo using our websites and instead use those of our competitors. The internet and the online commerce industry are rapidly changing. If competitors introduce new products and services using emerging technologies, or if new industry standards and practices emerge, our existing websites and proprietary technology and systems may become obsolete. Our failure to respond to technological change or to adequately maintain, upgrade and develop our computer network and the systems used to process customers’ orders and payments could harm our business, prospects, financial condition and results of operations. 21 Use of social media may adversely impact our reputation. There has been a marked increase in the use of social media platforms and similar channels, including blogs, social media websites, and other forms of internet-based communication, which allow individuals to reach a broad audience of consumers and other interested parties. Consumers value readily available information about retailers, manufacturers, and their goods and services, and often act on it without further investigation, authentication, or regard for its accuracy. The availability of information on social media platforms and devices is virtually immediate, as is its impact. Social media platforms and devices immediately publish content from their users and participants, often without filters or checks on its accuracy. The opportunity to disseminate information, including inaccurate information, is seemingly limitless and readily available. Information concerning our company may be posted on such platforms and devices at any time. Information posted may be adverse to our interests, may be inaccurate, and may harm our performance, prospects, or business. The harm may be immediate, without affording us an opportunity to seek redress or correction. Such platforms could also be used to disseminate trade secret information or otherwise compromise valuable company assets, all of which could harm our business, prospects, financial condition, and results of operations. We may experience unexpected expenses or delays in service enhancements if we are unable to license third-party technology on commercially reasonable terms. We rely on a variety of third-party licensed technologies, such as Microsoft’s. These third-party technology licenses may no longer be available to us on commercially reasonable terms, or at all. If we are unable to obtain or maintain these licenses on favorable terms, or at all, we could experience delays in completing and developing our proprietary software. If we fail to forecast our revenue accurately due to lengthy sales cycles, or if we fail to match our expenditures with corresponding revenue, our operating results could be adversely affected. We may be unable to prepare accurate internal financial forecasts or replace anticipated revenue that we do not receive as anticipated. As a result, our operating results in future reporting periods may be significantly below the expectations of the public market, equity research analysts or investors, which could harm the price of our common stock. We could be subject to additional sales tax or other tax liabilities. We are also subject to U.S. (federal and state) and foreign laws, regulations, and administrative practices that require us to collect information from our customers, vendors, merchants, and other third parties for tax reporting purposes and report such information to various government agencies. The scope of these requirements continues to expand, necessitating the development and implementation of new compliance systems. Failure to comply with such laws and regulations could result in significant penalties. The adoption of tax reform policies, including the enactment of legislation or regulations that change the tax treatment of companies engaged in Internet commerce or the U.S. taxation of international business activities, could materially affect our financial position and results of operations. If we do not begin generating significant revenue, we will still need to raise additional capital to meet our long-term business requirements. Any such capital raising may be costly or difficult to obtain and would likely dilute current stockholders’ ownership interests. If we are unable to secure additional financing in the future, we will not be able to continue as a going concern. If we do not begin generating significant revenue from our operations, we will need additional capital, which may not be available on reasonable terms or at all. Raising additional capital will dilute current stockholders’ ownership interests. We may need to raise additional funds through public or private debt or equity financings to meet various objectives, including, but not limited to: ● maintaining enough working capital to run our business; ● pursuing growth opportunities, including more rapid expansion; ● acquiring complementary businesses and technologies; ● making capital improvements to improve our infrastructure; 22 ● responding to competitive pressures; ● complying with regulatory requirements for advertising or taxation; and ● maintaining compliance with applicable laws. Any additional capital raised through the sale of equity or equity-linked securities may dilute current stockholders’ ownership percentages and could also result in a decrease in the fair market value of our equity securities because our assets would be owned by a larger pool of outstanding equity. The terms of those securities issued by us in future capital transactions may be more favorable to new investors, and may include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect that is different from or in addition to that reflected in the capitalization described in this report. Furthermore, any additional debt or equity financing we may need may not be available on favorable terms, or at all. If we are unable to obtain the required additional capital, we may have to curtail our growth plans or reduce existing business, and we may not be able to continue operating if we do not generate sufficient operating revenue to remain viable. We may incur substantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees and other costs. We may also be required to recognize non-cash expenses related to certain securities we issue, such as convertible notes and warrants, which may adversely affect our financial condition. Our insurance coverage and indemnity rights may not adequately protect us against loss. The types, coverage, or amounts of any insurance coverage we may carry from time to time may not be adequate to compensate us for any losses we may actually incur in the operation of our business. Furthermore, any insurance we may wish to purchase may not be available to us on terms we find acceptable, or at all. We are not indemnified by all of our suppliers, and any indemnification rights we may have may not be enforceable or adequate to cover actual losses we may incur arising from our sales of their products. Actual losses for which we are not insured or indemnified, or which exceed our insurance coverage or the capacity of our indemnitors or our ability to enforce our indemnity agreements, could have a material adverse effect on our business. Our operating results may vary significantly from quarter to quarter. Our operating results may vary significantly from quarter to quarter due to seasonality and other reasons such as the rapidly evolving nature of our business. We believe that our ability to achieve and maintain revenue growth and profitability will depend, among other factors, on our ability to: ● acquire new customers and retain existing customers; ● attract and retain high-quality restaurants and other merchants; ● increase the number, variety, quality, and relevance of discount certificates and Discount Dining Passes, including through third-party business partners and technology integrations, as we attempt to expand our current platform; ● leverage other platforms to display our offerings; ● deliver a modern mobile experience and achieve additional mobile adoption to capitalize on customers continued shift toward mobile device usage; ● increase booking capabilities; ● increase the awareness of, and evolve, our brand to an expanded customer base; ● reduce costs and improve selling, general and administrative (SG&A) leverage; 23 ● successfully achieve the anticipated benefits of business combinations or acquisitions, strategic investments, divestitures and restructuring activities; ● provide a superior customer service experience for our customers; ● avoid interruptions to our services, including as a result of attempted or successful cybersecurity attacks or breaches; ● respond to continuous changes in consumer and merchant use of technology; ● offset declines in email, search engine optimization (“SEO”) and other traffic channels and further diversify our traffic channels; ● react to challenges from existing and new competitors; ● respond to seasonal changes in supply and demand; and ● address challenges from existing and new laws and regulations. In addition, our margins and profitability may depend on our inventory mix, geographic revenue mix, discount rates mix and merchant and third-party business partner pricing terms. Accordingly, our operating results and profitability may vary significantly from quarter to quarter. If we fail to retain our existing customers or acquire new customers, our operating results and business will be harmed. We must continue to retain and acquire customers who make purchases on our platform to increase profitability. Further, as our customer base evolves, the composition of our customer base may change in ways that make it more difficult to generate revenue to offset the loss of existing customers, cover the costs of acquiring and retaining customers, and maintain or increase our customers’ purchase frequency. If customers do not perceive our offerings as attractive, or if we fail to introduce new, more relevant deals, or to increase awareness and understanding of our offerings on our marketplace platform, we may be unable to retain or acquire customers at levels necessary to grow our business and profitability. Further, the traffic to our website and mobile applications, including traffic from consumers responding to our emails and search engine optimization, has declined in recent years, such that an increasing proportion of our traffic is generated from paid marketing channels, such as search engine marketing. In addition, changes to search engine algorithms or similar actions are not within our control and could adversely affect traffic to our website and mobile applications. If we are unable to acquire new customers in numbers sufficient to grow our business and offset the number of existing active customers that have ceased to make purchases, or if new customers do not make purchases at expected levels, our profitability may decrease and our operating results may be adversely affected. Our future success depends upon our ability to attract and retain high-quality merchants and third-party business partners. We must continue to attract and retain high-quality restaurants and other merchants to increase profitability. A key priority of our strategy is to increase our sales and marketing efforts to attract more high-quality restaurants and other merchants. We do not have long-term arrangements to guarantee the availability of deals that offer attractive quality, value and variety to customers or favorable payment terms to us. If merchants decide that using our services no longer effectively attracts new customers or sells their products, they may stop working with us or negotiate lower margins or fees. In addition, current or future competitors may accept lower margins, or negative margins, to secure merchant offers that attract attention and acquire new customers. We may also experience attrition among our merchants, driven by factors such as losses to competitors and closures or bankruptcies. If we are unable to attract and retain high-quality merchants in numbers sufficient to grow our business, or if merchants are unwilling to offer products or services with compelling terms through our marketplace, our operating results may be adversely affected. 24 Risks Related to Our Common Stock Our securities are “Penny Stock” and subject to specific rules governing their sale to investors. The SEC has adopted Rule 15g-9 which establishes the definition of a “penny stock,” for the purposes relevant to the Company, 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 receive 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 SEC 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 the Company’s shareholders to sell shares of our common stock. Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading, and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities, and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market for penny stocks. There is limited recent trading activity in our common stock and there is no assurance that an active market will develop in the future. There is limited trading activity in our common stock. Although our common stock is now trading on the Nasdaq Marketplace, there is no assurance that a more active market for the common stock will develop, or, if one does, that it will be sustained. If a market does not develop or is not sustained, it may be difficult for you to sell your common stock at the time you wish to sell it, at a price that is attractive to you, or at all. You may not be able to sell your common stock at or above the offering price per share. Our second amended and restated bylaws designate specific courts as the exclusive forum for certain litigation that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us. Pursuant to our second amended and restated bylaws, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware is the sole and exclusive forum for any state law claim for (1) any derivative action or proceeding brought on our behalf; (2) any action asserting a claim of or based on a breach of a fiduciary duty owed by any director, officer or other employee of ours to us or our stockholders; (3) any action asserting a claim pursuant to any provision of the Delaware General Corporation Law; or (4) any action asserting a claim governed by the internal affairs doctrine (the “Delaware Forum Provision”). The Delaware Forum Provision will not apply to any causes of action arising under the Securities Act or the Securities and Exchange Act of 1934, as amended (the “Exchange Act”). Our second amended and restated bylaws further provide that unless we consent in writing to the selection of an alternative forum, the United States District Court in Delaware shall be the sole and exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act (the “Federal Forum Provision”). In addition, our second amended and restated bylaws provide that any person or entity purchasing or otherwise acquiring any shares of our common stock is deemed to have notice of and consented to the Delaware Forum Provision and the Federal Forum Provision; provided, however, that stockholders cannot and will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder. 25 We recognize that the Delaware Forum Provision and the Federal Forum Provision in our second amended and restated bylaws may impose additional litigation costs on stockholders in pursuing any such claims, particularly if the stockholders do not reside in or near the State of Delaware. Additionally, the forum selection clauses in our second amended and restated bylaws may limit our stockholders’ ability to bring a claim in a judicial forum that they find favorable for disputes with us or our directors, officers or employees, which may discourage the filing of lawsuits against us and our directors, officers and employees, even though an action, if successful, might benefit our stockholders. In addition, while the Delaware Supreme Court ruled in March 2020 that federal forum selection provisions purporting to require claims under the Securities Act to be brought in federal court were “facially valid” under Delaware law, there is uncertainty about whether other courts will enforce our Federal Forum Provision. If the Federal Forum Provision is found unenforceable, we may incur additional costs to resolve such matters. The Federal Forum Provision may also impose additional litigation costs on stockholders who assert that the provision is not enforceable or invalid. The Court of Chancery of the State of Delaware may also reach different judgments or results than would other courts, including courts where a stockholder considering an action may be located or would otherwise choose to bring the action, and such judgments may be more or less favorable to us than our stockholders. If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or detect fraud. Consequently, investors could lose confidence in our financial reporting and this may decrease the trading price of our stock. We must maintain effective internal controls to provide reliable financial reports and detect fraud. We have been assessing our internal controls to identify areas that need improvement. Failure to identify and implement required changes to our internal controls, or any others we identify as necessary to maintain an effective system of internal controls, if any, could harm our operating results and cause investors to lose confidence in our reported financial information. Any such loss of confidence would negatively affect the trading price of our stock. The price of our common stock may become volatile, which could lead to investor losses and costly securities litigation. The trading price of our common stock is likely to be highly volatile and could fluctuate in response to factors such as: ● actual or anticipated variations in our operating results; ● announcements of developments by us or our competitors; ● regulatory actions regarding our products; ● announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments; ● adoption of new accounting standards affecting our industry; ● additions or departures of key personnel; ● introduction of new products by us or our competitors; ● sales of our common stock or other securities in the open market; and ● other events or factors, many of which are beyond our control. The stock market is subject to significant price and volume fluctuations. In the past, following periods of volatility in a company’s stock price, securities class action litigation has often been initiated against the company. Litigation initiated against the Company, whether or not successful, could result in substantial costs and diversion of its management’s attention and resources, which could harm our business and financial condition. Investors may experience dilution of their ownership interests due to future issuances of additional shares of our common stock. In the future, we may issue additional authorized but previously unissued equity securities, resulting in the dilution of the ownership interests of our present stockholders. We may also issue additional shares of common stock or other securities that are convertible into or exercisable for common stock in connection with hiring or retaining employees, future acquisitions, future sales of our securities for capital raising purposes, or for other business purposes. In addition, conversion of the currently outstanding warrants will further dilute investors’ voting power in this offering and will disproportionately diminish their ability to influence our management, given the large percentage of shares currently held by our directors and officers, as discussed in the risk factor below. The future issuance of any such additional shares of common stock may also create downward pressure on the trading price of our common stock. There can be no assurance that we will not be required to issue additional shares, warrants, or other convertible securities in the future in conjunction with any capital raising efforts, including at a price (or exercise prices) below the price at which shares of our common stock are currently traded. 26 Our common stock is controlled by insiders. Our officers and directors beneficially own approximately 20% of our outstanding shares of common stock. Such concentrated control may adversely affect the price of our common stock. Investors who acquire common stock may have no effective voice in our management, as insiders can influence us through this ownership position. These stockholders may be able to determine all matters requiring stockholder approval. For example, these stockholders, acting together, may be able to control elections of directors, amendments of our organizational documents, or approval of any merger, sale of assets, or other major corporate transaction. This may prevent or discourage unsolicited acquisition proposals or offers for our common stock that you believe are in your best interest as a stockholder. In addition, sales by our insiders or affiliates, along with any other market transactions, could negatively affect the market price of our common stock. The market price of our common stock may fluctuate, and you could lose all or part of your investment. The price of our common stock may decline. The stock market in general, and the market price of our common stock, will likely fluctuate, whether due to or independent of our operating results, financial condition, and prospects. Our financial performance, our industry’s overall performance, changing consumer preferences, technological developments, government regulatory actions, tax laws, and general market conditions could significantly affect the future market price of our common stock. Some of the other factors that could negatively affect our share price or result in fluctuations in our share price include: ● actual or anticipated variations in our periodic operating results; ● increases in market interest rates that lead purchasers of our common stock to demand a higher investment return; ● changes in earnings estimates; ● changes in market valuations of similar companies; ● actions or announcements by our competitors; ● adverse market reaction to any increased indebtedness we may incur in the future; ● additions or departures of key personnel; ● actions by stockholders; ● speculation in the media, online forums, or investment community; and ● our intentions and ability to list our common stock on the NYSE MKT and our subsequent ability to maintain such listing. As a smaller reporting company, we are subject to scaled disclosure requirements that may make it more challenging for investors to analyze our results of operations and financial prospects. Currently, we are a “smaller reporting company,” as defined by Rule 12b-2 of the Exchange Act. As a “smaller reporting company,” we can provide simplified executive compensation disclosures in our filings with the SEC and have reduced disclosure obligations, including being required to provide only two years of audited financial statements in annual reports. Consequently, it may be more challenging for investors to analyze our results of operations and financial prospects. Furthermore, we are a non-accelerated filer as defined by Rule 12b-2 of the Exchange Act, and, as such, are not required to provide an auditor attestation of management’s assessment of internal control over financial reporting, which is generally required for SEC reporting companies under Section 404(b) of the Sarbanes-Oxley Act. Because we are not required to, and have not, had our auditors provide an attestation of our management’s assessment of internal control over financial reporting, a material weakness in internal controls may remain undetected for a longer period. 27