Sun Pacific Holding Corp. 10-K

Item 1A. Risk Factors Generally, as a smaller reporting company, we are permitted to omit risk factors. However, we believe the following Risk Factors are material to our business. These do not encompass all risks related to our operations. You should carefully consider the risks described below together with all of the other information included in this annual report before making an investment decision with regard to our securities. The statements contained in or incorporated herein that are not historic facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. If any of the following risks actually occurs, our business, financial condition or results of operations could be harmed. In that case, you may lose all or part of your investment. In addition to the other information provided in this prospectus, you should carefully consider the following risk factors in evaluating our business before purchasing any of our common stock. 9 Risks Related to Our Financial Condition Since our inception, we have been insolvent and have required debt and equity financing to maintain operations. Since our inception, we have failed to create cashflows from revenues sufficient to cover basic costs. As a result, we have relied heavily on debt and equity financing. Equity financing, in particular, has created a dilutive effect on our common stock, which has hampered our ability to attract reasonable financing terms. For the foreseeable future, we will continue to rely upon debt and equity financing to maintain operation of the Company and its subsidiaries. We have generated minimal revenues from operations, which makes it difficult for us to evaluate our future business prospects and make decisions based on those estimates of our future performance. As of December 31, 2019, we had generated insufficient revenues. As a consequence, it is difficult, if not impossible, to forecast our future results based upon our historical data. Our projections are based upon our best estimates on future growth. Because of the related uncertainties, we may be hindered in our ability to anticipate and timely adapt to increases or decreases in sales, revenues, or expenses. If we make poor budgetary decisions as a result of unreliable data, we may never become profitable or incur losses, which may result in a decline in our stock price. There is substantial doubt about our ability to continue as a going concern and if we are unable to generate significant revenue or secure additional financing, we may be unable to implement our business plan and grow our business. We are just graduating as an emerging growth company and are in the process of selling and developing our products. Consequently, we have not generated enough revenues as of the date of this prospectus. We have an accumulated deficit and have incurred operating losses since our inception and expect losses to continue during the remainder of fiscal 2020. Our independent registered public accounting firm has indicated in their report that these conditions raise substantial doubt about our ability to continue as a going concern for a period of 12 months from the issuance date of this report. The continuation of our business as a going concern is dependent upon the continued financial support from our stockholders. There is uncertainty regarding our ability to grow our business to a greater extent than we can with our existing financial resources, also described above, without additional financing. We have no agreements, commitments, or understandings to secure additional financing at this time. Our long-term future growth and success is dependent upon our ability to continue selling our products and services, generate cash from operating activities and obtain additional financing. There is no assurance that we will be able to continue selling our products and services, generate sufficient cash from operations, sell additional shares of common stock or borrow additional funds. Our inability to obtain additional cash could have a material adverse effect on our ability to grow our business to a greater extent than we can with our existing financial resources, also described above. Expenses required to operate as a public company will reduce funds available to implement our business plan and could negatively affect our stock price and adversely affect our results of operations, cash flow and financial condition. Operating as a public company is more expensive than operating as a private company, including additional funds required to obtain outside assistance from legal, accounting, investor relations, or other professionals that could be costlier than planned. We may also be required to hire additional staff to comply with additional SEC reporting requirements. We anticipate that the cost of SEC reporting will be approximately $100,000 annually. Our failure to comply with reporting requirements and other provisions of securities laws could negatively affect our stock price and adversely affect our results of operations, cash flow and financial condition. If we fail to meet these requirements, we will be unable to secure a qualification for quotation of our securities on the OTCQB, or if we have secured a qualification, we may lose the qualification and our securities would no longer trade on the OTCQB. Further, if we fail to meet these obligations and consequently fail to satisfy our SEC reporting obligations, investors will then own stock in a company that does not provide the disclosure available in quarterly, annual reports and other required SEC reports that would be otherwise publicly available leading to increased difficulty in selling their stock due to our becoming a non-reporting issuer. 10 Risks Related to Our Business We rely on our Chief Executive Officer to operate our business. The loss of our Chief Executive Officer could have a material adverse effect on our business. Our operations are highly dependent upon the efforts of our Chief Executive Officer, Nicholas Campanella. The success of our Company is heavily reliant upon the efforts and resources of Nicholas Campanella. The loss of our Chief Executive Officer would have a material adverse effect on our business, financial condition, and results of operations, particularly if we are unable to hire or relocate and integrate suitable replacements on a timely basis or at all. Further, in order to continue to grow our business, we will need to expand our senior management team. We may be unable to attract or retain these persons. This could hinder our ability to grow our business and could disrupt our operations or otherwise have a material adverse effect on our business. We are unable to attract additional management personnel and members to our Board of Directors. Due to our insolvency, we are unable to dedicate any amount of cashflows to executive salaries and/or directors’ and officers’ insurance, therefore we are unable to attract additional executive personnel or Board Members. Until we can secure, at a minimum directors’ and officers’ insurance, the executive duties shall remain with our Chief Executive Officer. Legal action by disgruntled shareholders and former employees may endanger our ability to raise capital for our ongoing projects through our subsidiary interests and may create additional financial risks. Recently, disgruntled shareholders have filed a derivative suit against the Company which could complicate our ability to secure financing. Specifically, our Rhode Island waste to energy project is being operated through our subsidiary holding, MedRecycler-RI, Inc. and this action could potentially harm our negotiating position with certain authorities that are required to approve the permanent financing for the project. In addition, a former executive of the Company contacted authorities approving the project, availing their potential legal actions to the negotiation process. He has since filed suit. These threated and ongoing legal actions could require the Company to provide additional security or to seek alternative means of financing the project altogether that could necessitate a change in the capital structure of the Subsidiary to allow for the placement of permanent financing. Although the Company has sought alternative means of securing permanent financing, due to the financial condition of the Company, we were unable to overcome the lack of creditworthiness as a major factor contributing to the failure to secure permanent financing. The consequences of these threats and ongoing suits could negatively affect the outcome of the project, including, but not limited to, potential foreclosure by the bridge financier, which could result in the total loss of the project for the Company and a change in control of the Company. As the financier is not likely willing to operate and maintain an insolvent public company, such foreclosure could result in a bankruptcy and/or total restructuring of the Company. In addition, defending any legal action could add additional financial risk to the Company that could result in its bankruptcy and/or total restructuring. Due to the current debt load of the Company, our credit worthiness may endanger our ability to secure financing. Given the financial condition of the Company, securing financing for a project such as our waste to energy project has been a very difficult task, as has been the case for most fund-raising efforts for the Company. The current debt load and financial performance of the Company could raise creditworthiness issues in the eyes of potential lenders. The current state of the Company’s credit could require the Company to evaluate new corporate and capital structures of our subsidiaries in order to shield our subsidiary interests from the liabilities of the Company. If we fail to present lenders with a credit profile that will meet their standards, large projects, such as our subsidiary project in MedRecycler-RI, Inc. or our solar project in Mexico could fail or require new corporate and or capital restructuring. Given that the Company is already heavily in debt, such failure to secure financing and complete the project could require the Company to file for bankruptcy and encumber all of the assets of the Company. 11 Due to delays in securing approval, we risk defaulting on substantial debts held by our subsidiary. Our bridge financing for the Rhode Island waste to energy project comes due in July of 2020. In the event that we are unable to secure permanent financing to pay the balance of principal and accrued interest, we will be in technical default. The holder of the debt, being secured by the project itself, including all equipment and leaseholds, as well as all equity ownership held by our CEO, Nicholas Campanella, in the Company. If the holder of the debt exercises their right to foreclose upon their security interest, they could remove the project in its entirety, including an economic interests, from the Company, and also force a change in control of the Company. The current ownership has the effect of concentrating voting control with our Chief Executive Officer and his family; this limits our other stockholders’ and your ability to influence corporate matters. Nicholas Campanella currently holds 12,000,000 shares of Series A Preferred Stock. Each share of Series A Preferred Stock is entitled to 125 votes per share. As a result, Nicholas Campanella has 1,500,000,000 voting rights. As a result of this concentration of voting power, Nicholas Campanella will have significant influence over the management and affairs of the Company and control over matters requiring stockholder approval, including the election of directors and significant corporate transactions, such as mergers or other sales of the Company or our assets, for the foreseeable future. This concentration of voting control will limit your ability to influence corporate matters and could adversely affect the market price of our Common Stock once a market is established. Our director and officer, Nicholas Campanella will control and make corporate decisions that may differ from those that might be made by the other shareholders. Due to the controlling amount of their share ownership in our Company, Nicholas Campanella will have a significant influence in determining the outcome of all corporate transactions, including the power to prevent or cause a change in control. His interests may differ from the interests of other stockholders and thus result in corporate decisions that are disadvantageous to other shareholders. Our director and officer, Nicholas Campanella, holds substantial debt that is convertible into common stock, resulting in even greater control over the Company. Nicholas Campanella holds convertible promissory notes in excess of $400,000, making Nicholas Campanella the largest creditor of the Company outside of the MedRecycler project. The convertible promissory notes are convertible into common stock at rate of a 50% discount to market. If Nicholas Campanella were to foreclose upon the limited assets of the Company, we would likely have to file for bankruptcy. Alternatively, Nicholas Campanella could convert the promissory note into common stock increasing his control over the Company.