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Item 1A. Risk Factors

2021-03-31 compared with 2020-03-25 · 261 added, 290 removed, 18 unchanged (97% of the section changed)

We are exploring various strategic

alternatives to enhance shareholder value, but this strategic review process may not result in the achievement of the desired goal

of enhancing shareholder value.

On October 23, 2019,

the Company issued a press release announcing that its Board of Directors has undertaken a strategic review to identify, review

and explore alternatives for the Company, including a merger, acquisition, or a business combination.

There can be no assurance

that a potential transaction will occur, that any such potential transaction that is pursued will be approved or consummated, or

what a potential transaction would mean for value to the Company’s shareholders.

The Company does not intend to disclose

developments relating to its strategic review unless and until its Board of Directors has approved a specific agreement or transaction.

The Company currently

owns 2,685,500 Sponsor Shares.

A total of 537,100 of the Sponsor Shares are subject to distribution rights to officers and directors

under the 2018 Management Incentive Plan dated March 6, 2018.

Black Ridge is evaluating plans for the remaining Sponsor Shares

which could include a distribution of some or all of the Sponsor Share proceeds after expiration of the lock-up agreement on August

9, 2020, presuming that as of such date AESE has repaid or converted amounts it owes pursuant to the bridge financing Note Purchase

Agreement and Notes dated as of October 11, 2018 and May 17, 2019.

The process of exploring

strategic alternatives may be time consuming and disruptive to our business operations and may impair our ability to retain and

motivate key personnel.

We may incur substantial expenses associated with identifying, evaluating and preparing for any such strategic

alternatives.

Any potential transaction would be dependent upon a number of factors that may be beyond our control, including,

among other factors, market conditions, industry trends, regulatory limitations and the interest of third parties in us and our

There can be no assurance that the exploration of strategic alternatives will result in any specific action or transaction.

Further, any such strategic alternative may not ultimately lead to increased shareholder value.

If we are unable to obtain the additional

capital or joint venture partners that we need to implement our business plan, we may be unable to continue as a going concern.

As of December 31,

2019, our cash balance was $108,756 and total working capital of negative $1,289,995.

We will continue to have general and administrative

expenses to remain a public company and continue with our business plan.

The cash on hand would be insufficient to cover our current

cash needs over the next year.

We continue to pursue

sources of additional capital through various financing transactions or arrangements, including joint venturing of projects, equity

financing or other means.

We may not be successful in identifying suitable funding transactions in a sufficient time period or

at all, and we may not obtain the capital we require by other means.

If we do not succeed in raising additional capital, our resources

may not be sufficient to fund our business.

We may incur substantial

costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance

fees, printing and distribution expenses and other costs.

We may also be required to recognize non-cash expenses in connection

with certain securities we may issue, which may adversely impact our financial condition.

The report of the Company’s

independent registered public accounting firm that accompanies its audited consolidated financial statements in this Annual Report

on Form 10-K contains an explanatory paragraph regarding the substantial doubt about the Company’s ability to continue

as a going concern.

Risks Related to Our Reverse Stock

We effected a reverse stock

split on February of 2020 which may adversely impact the market price of our common stock.

On February 18, 2020,

the Company filed a Certificate of Amendment to its Articles of Incorporation (the “Amended Articles”) with the Secretary

of State of Nevada to effect the Company’s previously announced 300-for-one reverse stock split (the “Reverse Stock

Split”) of the Company’s common stock.

The Reverse Stock Split, effective as of February 21, 2020, converted

every 300 shares of the Company’s issued and outstanding common stock into one share of common stock.

The effect of the Reverse

Stock Split upon the market price of our common stock cannot be predicted with certainty and there is no assurance that our common

stock will trade at a price consistent with such Reverse Stock Split.

Accordingly, it is possible that the market price of

our common stock following the Reverse Stock Split will decline, possibly more than would occur in the absence of a Reverse

The Reverse Stock Split may

decrease the liquidity of the shares of our common stock and the resulting market price of our common stock may not attract or

satisfy the investing requirements of new investors, including institutional investors.

The liquidity of the

shares of our common stock may be affected adversely by the Reverse Stock Split given the reduced number of shares outstanding

following the Reverse Stock Split.

Additionally, the Reverse Stock Split may increase the number of shareholders

who own odd lots (less than 100 shares) of our common stock, creating the potential for such shareholders to experience an increase

in the cost of selling their shares and greater difficulty affecting such sales.

Moreover, there can be no assurance that the Reverse

Stock Split will result in a share price that will attract new investors, including institutional investors, and there can

be no assurance that the market price of our common stock will satisfy the investing requirements of these investors.

Consequently,

the trading liquidity of our common stock may not necessarily improve as a result of the Reverse Stock Split.

The effective increase in the number

of shares of our common stock available for issuance as a result of our Reverse Stock Split could result in further dilution

to our existing stockholders.

The Reverse Stock

Split alone had no effect on our authorized capital stock, and the total number of authorized shares remains the same as before

the Reverse Stock Split.

The Reverse Stock Split of our issued and outstanding shares was effected, increasing the

number of shares of our common stock (or securities convertible or exchangeable for our common stock) available for issuance.

additional available shares are available for issuance from time to time at the discretion of the Company’s board of directors

when opportunities arise, without further stockholder action or the related delays and expenses, except as may be required for

a particular transaction by law, the rules of any exchange on which our securities may then be listed, or other agreements or restrictions

(including rights of first refusal, pursuant to the terms of certain of our outstanding secured convertible notes).

of additional shares of our common stock would increase the number of outstanding shares of our common stock and (unless such issuance

was pro-rata among existing stockholders) the percentage ownership of existing stockholders would be diluted accordingly.

any such issuance of additional shares of our common stock could have the effect of diluting the earnings per share and book value

per share of outstanding shares of our common stock.

operating loss carryforwards may be limited under Section 382 of the Internal Revenue Code by certain changes in the ownership

of our company.

We have net operating

loss (“NOL”) carryforwards that we may use to offset against taxable income for U.S.

federal income tax purposes.

December 31, 2019, we had an estimated NOL carryforward of approximately $27 million for United States federal tax return

However, Section 382 of the Internal Revenue Code of 1986, as amended, may limit the NOLs that we may use in

any year for U.S.

federal income tax purposes in the event of certain changes in ownership of our company.

Any limitation

on our ability to use NOLs could, depending on the extent of such limitation, result in higher U.S.

federal income taxes being

paid (and therefore a reduction in cash) than if such NOLs were available as an offset against such income for U.S.

income tax reporting purposes.

In addition, if the limitation under Section 382 is triggered, it could result in a significant

charge to earnings in the period in which it is triggered.

We are highly dependent on Kenneth

DeCubellis, our chief executive officer and interim chief financial officer, and our other executive officers and employees.

loss of one or more of them, upon whose knowledge, leadership and technical expertise we rely, would harm our ability to execute

our business plan.

success depends heavily upon the continued contributions of Kenneth DeCubellis, our chief executive officer and interim chief financial

officer, whose knowledge, leadership and technical expertise would be difficult to replace, with the support of Michael Eisele,

our chief operating officer.

If we were to lose their services, our ability to execute our business plan would be harmed and we

may be forced to cease operations until such time as we are able to suitably replace them.

Any of our executive officers may terminate

their employment with our company at any time.

Strategic relationships upon which

we may rely are subject to change, which may diminish our ability to conduct business.

Our ability to successfully

develop additional assets for our partners under the umbrella that we manage will depend on developing and maintaining close working

relationships with industry participants.

Our success will also depend on our ability to select and evaluate suitable properties

for our partners and to consummate transactions in a highly competitive environment.

These realities are subject to change and

our inability to maintain close working relationships with industry participants or continue to identify suitable properties may

impair our ability to execute our business plan.

To continue to develop

our business, we will use the business relationships of our management and develop new relationships to enter into strategic relationships.

These relationships may take the form of joint ventures, joint operating agreements, referral agreements and other contractual

arrangements with outside individuals and crude oil and natural gas companies.

We may not be able to establish these strategic

relationships, or if established, we may not be able to maintain them.

In addition, the dynamics of our relationships with strategic

partners may require us to incur expenses or undertake activities that we would not otherwise be inclined to do independent of

these strategic relationships.

If sufficient strategic relationships are not established and maintained, our business prospects,

financial condition and results of operations may be materially adversely affected.

Risks Due to COVID-19

The outbreak of the coronavirus

(“COVID-19”) has negatively impacted and could continue to negatively impact the global economy.

In addition, the COVID-19

pandemic could disrupt or otherwise negatively impact global credit markets, our operations.

The significant outbreak of

COVID-19 has resulted in a widespread health crisis, which has negatively impacted and could continue to negatively impact the global

In addition, the global and regional impact of the outbreak, including official or unofficial quarantines and governmental restrictions

on activities taken in response to such event, could have a negative impact on our operations and our ability to source products and launch

our operations and distribution network.

The COVID-19 outbreak could

disrupt or otherwise negatively impact credit and equity markets, which could adversely affect the availability and cost of capital.

impacts could limit our ability to obtain additional funding through various financing transactions or arrangements, including equity

or debt financing or other means.

Social distancing, travel

bans and quarantines have limited access in certain respects to our management, support staff, professional advisors and our independent

These factors, in turn, may not only impact our operations, financial condition and our overall ability to react timely to mitigate

the impact of this event.

Also, it may hamper our efforts to comply with our filing obligations with the Securities and Exchange Commission.

In addition, it could impact the ability to complete construction and commence operations of the S-FDF business.

The extent and potential short

and long-term impact of the COVID-19 outbreak on our business will depend on future developments, including the duration, severity and

spread of the virus, actions that may be taken by governmental authorities and the impact on the financial markets, all of which are highly

uncertain and cannot be predicted.

These and other potential impacts of an epidemic, pandemic or other health crisis, such as COVID-19,

could therefore materially and adversely affect our business, financial condition and results of operations.

Risks Related to Our Business

Our freeze-dried foods

business is essentially a start-up, and does not have any meaningful history of operations.

The assets we purchased under

the Asset Purchase Agreement were of a development stage business without any major customers or history of operations upon which to forecast

future business trends.

We cannot guarantee that we will become profitable.

As a developing company, we will need to adopt and implement

a plan to increase awareness of our products, secure distribution channels, and foster and strengthen our supply, manufacturing and distribution

relationships.

It is likely our strategic priorities will need to evolve over time and our business would be materially and adversely

effected if we do not properly adapt our strategies to our changing needs and changes in the market.

As our operations develop

and grow, we expect to experience significant increases in our working capital requirements.

These conditions raise doubt over our ability

to meet all of our obligations over the next twelve months if we are unable to obtain additional capital.

Even if we obtain additional

capital and achieve profitability, given the competitive and evolving nature of the industry in which we operate, we may be unable to

sustain or increase profitability and our failure to do so would adversely affect the Company’s business, including our ability

to raise additional funds.

We have very limited internal

distribution and marketing capabilities and are only in the early stages of building our distribution network.

We have not yet launched our

freeze-dried food products commercially.

In order to be successful, we will need to establish a direct-to-consumer platform and/or relationships

with numerous retail outlets through which our products can be sold.

While our products have been introduced into a limited number of

potential consumers and customers on a trial basis, to date, we have not entered into any relationships with distributors and retail outlets

for the sale of our products and have not yet generated revenues through sales.

We have extremely limited internal marketing and distribution

capabilities and resources.

There can be no assurance that we will be successful in establishing a meaningful distribution network or

direct to consumer platform or that if the same is established that such network or platform will result in profitable sales of our products.

We may need additional

financing in the future, which may not be available when needed or may be costly and dilutive.

We may require additional

financing to support our working capital needs in the future.

The amount of additional capital we may require, the timing of our capital

needs and the availability of financing to fund those needs will depend on a number of factors, including our strategic initiatives and

operating plans, the performance of our business and the market conditions for debt or equity financing.

Additionally, the amount of capital

required will depend on our ability to meet our sales goals and otherwise successfully execute our operating plan.

Although we believe

various debt and equity financing alternatives will be available to us to support our working capital needs, financing arrangements on

acceptable terms may not be available to us when needed.

Additionally, these alternatives may require significant cash payments for interest

and other costs or could be highly dilutive to our existing shareholders.

Any such financing alternatives may not provide us with sufficient

funds to meet our long-term capital requirements.

A worsening of economic

conditions or a decrease in consumer spending may adversely impact our ability to implement our business strategy.

Our success depends to a significant

extent on discretionary consumer spending, which is influenced by general economic conditions and the availability of discretionary income.

There is no certainty regarding economic conditions in the United States, and credit and financial markets and confidence in economic

conditions could deteriorate at any time.

Accordingly, we may experience declines in revenue during economic turmoil or during periods

of uncertainty.

Any material decline in the amount of discretionary spending, leading cost-conscious consumers to be more selective in

food products purchased, could have a material adverse effect on our revenue, results of operations, business and financial condition.

Fluctuations in various

food and supply costs, particularly related to fruit, could adversely affect our operating results.

Supplies and prices of the

ingredients that we are going to use to can be affected by a variety of factors, such as weather, seasonal fluctuations, demand, politics

and economics in the producing countries.

These factors subject us to

shortages or interruptions in product supplies, which could adversely affect our revenue and profits.

In addition, the price of fruit,

which is currently our main ingredient in our products, can be highly volatile.

The fruit of the quality we seek tends to trade on a negotiated

basis, depending on supply and demand at the time of the purchase.

An increase in pricing of any fruit that we are going to use in our

products could have a significant adverse effect on our profitability.

We cannot assure you that we will be able to secure our fruit supply.

Our success depends on

our ability to correctly predict, identify, and interpret changes in consumer preferences and demand, to offer new products to meet those

changes, and to respond to competitive innovation.

Consumer preferences for food

and beverage products change continually and rapidly.

Our success depends on our ability to predict, identify, and interpret the tastes

and dietary habits of consumers and to offer products that appeal to consumer preferences, including with respect to health and wellness.

If we do not offer products that appeal to consumers, our sales and market share will decrease, which could materially and adversely affect

our product sales, financial condition, and operating results.

We must distinguish between

short-term trends and long-term changes in consumer preferences.

If we do not accurately predict which shifts in consumer preferences

will be long-term, or if we fail to introduce new and improved products to satisfy those preferences, our sales could decline.

Our business depends substantially

on the continuing efforts of our senior management and other key personnel, and our business may be severely disrupted if we lose their

Our future success heavily

depends on the continued service of our senior management and other key employees.

If one or more of our senior executives is unable or

unwilling to continue to work for us in his or her present position, we may have to spend a considerable amount of time and resources

searching, recruiting, and integrating a replacement into our operations, which would substantially divert management’s attention

from our business and severely disrupt our business.

This may also adversely affect our ability to execute our business strategy.

Our senior management’s

limited experience managing a publicly traded company may divert management’s attention from operations and harm our business.

Our senior management team

has relatively limited experience managing a publicly traded company and complying with federal securities laws, including compliance

with recently adopted disclosure requirements on a timely basis.

Our management will be required to design and implement appropriate programs

and policies in responding to increased legal, regulatory compliance and reporting requirements, and any failure to do so could lead to

the imposition of fines and penalties and harm our business.

We may be unable to attract

and retain qualified, experienced, highly skilled personnel, which could adversely affect the implementation of our business plan.

Our success depends to a significant

degree upon our ability to attract, retain and motivate skilled and qualified personnel.

As we become a more mature company in the future,

we may find recruiting and retention efforts more challenging.

If we do not succeed in attracting, hiring and integrating excellent personnel,

we may be unable to grow effectively.

The loss of any key employee, including members of our senior management team, and our inability

to attract highly skilled personnel with sufficient experience in our industries could harm our business.

Our ability to maintain

and expand our distribution network and attract consumers, distributors, retailers and brokers will depend on a number of factors, some

of which are outside our control.

Some of these factors include:

the level of demand for our brands and products types;

our ability to price our products at levels competitive with those of competing products;

our ability to deliver products in the quantity and at the time ordered by consumers, distributors, retailers

We may not be able to successfully

manage all or any of these factors in any of our current or prospective geographic areas of distribution.

Our inability to achieve success

with regards to any of these factors in a geographic distribution area will have a material adverse effect on our relationships in that

particular geographic area, thus limiting our ability to maintain or expand our market, which will likely adversely affect our revenues

and financial results.

If we do not adequately

manage our inventory levels, our operating results could be adversely affected.

We will need to maintain adequate

inventory levels to be able to deliver products on a timely basis.

Our inventory supply depends on our ability to correctly estimate demand

for our products.

Our ability to estimate demand for our products is imprecise, particularly for new products.

If we materially underestimate

demand for our products or are unable to maintain sufficient inventory of raw materials, we might not be able to satisfy demand on a short-term

If we overestimate demand for our products, we may end up with too much inventory, resulting in higher storage costs and increased

If we fail to manage our inventory to meet demand, we could damage our relationships with our customers and retailers and

could delay or lose sales opportunities, which would unfavorably impact our future sales and adversely affect our operating results.

We are highly dependent

on Ira and Claudia Goldfarb, our Executive Chairman and the chief executive officer, and our other executive officers and employees.

loss of one or more of them, upon whose knowledge, leadership and technical expertise we rely, would harm our ability to execute our business

Our success depends heavily upon the continued

contributions of Ira and Claudia Goldfarb, our executive chairman and chief executive officer, respectively, whose knowledge, leadership

and technical expertise would be difficult to replace, with the support of Brad Burke, our chief financial officer.

If we were to lose

their services, our ability to execute our business plan would be harmed and we may be forced to cease operations until such time as we

are able to suitably replace them.

Any of our executive officers may terminate their employment with our company at any time.

We may not be able to effectively

manage our growth, which may harm our profitability.

Our strategy envisions

the expansion of our business.

Our strategy envisions the

expansion of our business.

If we fail to effectively manage our growth, our financial results could be adversely affected.

Growth may place a strain on our management systems and resources.

We must continue to refine and expand our business capabilities,

our systems and processes and our access to financing sources.

As we grow, we must continue to hire, train, supervise and manage

new employees.

We cannot assure that we will be able to:

place a strain on our management systems and resources.

We must continue to refine and expand our business capabilities, our systems and

processes and our access to financing sources.

As we grow, we must continue to hire, train, supervise and manage new employees.

assure that we will be able to:

meet our capital needs;

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identify and engage qualified employees and consultants, or retain valued employees and consultants;

incorporate effectively the components of any business that we may acquire in our effort to achieve

If we are unable to manage our growth,

our financial condition and results of operations may be materially adversely affected.

The Company may become subject to

the requirements of the Investment Company Act of 1940, which would limit the Company’s business operations and require the

Company to spend significant resources to comply with such act.

The Investment Company

Act of 1940 (the “Investment Company Act”) defines an “investment company”

as an issuer that is engaged

in the business of investing, reinvesting, owning, holding or trading in securities and owns investment securities having a value

exceeding 40 percent of the issuer's unconsolidated assets, excluding cash items and securities issued by the federal government.

While we believe that a reasonable investor would not conclude that we are engaged primarily in investing in securities based on

our continued focus on acquiring, investing in, and managing oil and gas assets, the current composition of our assets, including

our ownership of BRAC shares, could contribute to a conclusion that we meet the threshold definition of an investment company.

While the Investment Company Act also has several exclusions and exceptions that we would seek to rely upon to avoid being deemed

an investment company, our reliance on any such exclusions or exceptions may be misplaced resulting in violation of the Investment

Company Act, the consequences of which can be significant.

For example, investment companies that fail to register under the Investment

Company Act are prohibited from conducting business in interstate commerce, which includes selling securities or entering into

other contracts in interstate commerce.

Section 47(b) of the Investment Company Act provides that a contract made, or whose performance

involves, a violation of the Investment Company Act is unenforceable by either party unless a court finds that enforcement would

produce a more equitable result than non-enforcement.

Similarly, a court may not deny rescission to any party seeking to rescind

a contract that violates the Investment Company Act, unless the court finds that denial of rescission would produce more equitable

result than granting rescission.

If we are be deemed

to be an investment company under the Investment Company Act, Rule 3a-2 of the Investment Company Act provides that inadvertent

or transient investment companies will not be treated as investment companies subject to the provisions of the Investment Company

Act provided the issuer has the requisite intent to be engaged in a non-investment business, evidenced by the issuer’s business

activities and an appropriate resolution of the issuer’s board of directors, within one year from the commencement of the

earlier of (1) the date on which the issuer owns securities and/or cash having a value exceeding 50% of the value of such issuer's

total assets on either a consolidated or unconsolidated basis, or (2) the date on which an issuer owns or proposes to acquire investment

securities (as defined in section 3(a) of the Act) having a value exceeding 40% of the value of such issuer's total assets (exclusive

of government securities and cash items) on an unconsolidated basis.

If the Company becomes an inadvertent investment company,

and fails to meet the requirements of the transient investment company exemption under Rule 3a-2 of the Investment Company Act,

then we will be required to register as an investment company with the SEC.

ramifications of becoming an investment company, both in terms of the restrictions it would have on our company and the cost of

compliance, would be significant.

For example, in addition to expenses related to initially registering as an investment company,

the Investment Company Act also imposes various restrictions with regard to our ability to enter into affiliated transactions,

the diversification of our assets and our ability to borrow money.

If we became subject to the Investment Company Act at some point

in the future, our ability to continue pursuing our business plan would be severely limited.

incorporate effectively the components of any business that we may acquire in our effort to achieve growth.

If we are unable to manage our growth, our financial

condition and results of operations may be materially adversely affected.

Risks Related to Our Industry

The challenges of competing

with other freeze-dried food businesses may result in reductions in our revenue and operating margins.

We will compete with many

companies on the basis of taste, quality and price of product offered, and customer service.

Our success depends, in part, upon the popularity

of our products and our ability to develop new items that appeal to a broad range of consumers.

Shifts in consumer preferences away from

products like ours, our inability to develop new items that appeal to a broad range of consumers, or changes in our offerings that eliminate

products popular with some consumers could harm our business.

We compete with other manufacturers of freeze-dried foods, frozen foods,

convenience foods, health foods and packaged goods.

Many of our competitors or potential competitors have substantially greater financial

and other resources than we do, which may allow them to react to changes in the market quicker than we can.

In addition, aggressive pricing

by our competitors or the entrance of new competitors into our markets, could reduce our revenue and operating margins.

We also compete

with other employers in our markets for workers and may become subject to higher labor costs as a result of such competition.

Concerns over food safety

and public health may affect our operations by increasing our costs and negatively impacting demand for our products.

We could be adversely affected

by diminishing confidence in the safety and quality of certain food products or ingredients.

As a result, we may elect or be required

to incur additional costs aimed at increasing consumer confidence in the safety of our products.

Our success depends on our ability to

maintain the quality of our existing and new products.

Product quality issues, real or imagined, or allegations of product contamination,

even if false or unfounded, could tarnish the image of our brands and may cause consumers to choose other products.

Product liability exposure

may expose us to significant liability.

We may face an inherent business

risk of exposure to product liability and other claims and lawsuits in the event that the development or use of our technology or prospective

products is alleged to have resulted in adverse effects.

We may not be able to avoid significant liability exposure.

Although we believe

our insurance coverage to be adequate, we may not have sufficient insurance coverage, and we may not be able to obtain sufficient coverage

at a reasonable cost.

An inability to obtain product liability insurance at acceptable cost or to otherwise protect against potential

product liability claims could prevent or inhibit the commercialization of our products.

A product liability claim could hurt our financial

Even if we ultimately avoid financial liability for this type of exposure, we may incur significant costs in defending ourselves

that could hurt our financial performance and condition.

Risks Related to our Common Stock

The market price of our common stock

is, and is likely to continue to be, highly volatile and subject to wide fluctuations.

The market price of

our common stock is likely to continue to be highly volatile and could be subject to wide fluctuations in response to a number

of factors, some of which are beyond our control, including but not limited to:

dilution caused by our issuance of additional shares of common stock and other forms of equity

securities, which we expect to make in connection with future capital financings to fund our operations and growth, to attract

and retain valuable personnel and in connection with future strategic partnerships with other companies;

fluctuations in revenue from management services business;

quarterly variations in our revenues and operating expenses;

The market price of our

common stock is, and is likely to continue to be, highly volatile and subject to wide fluctuations.

The market price of our common

stock is likely to continue to be highly volatile and could be subject to wide fluctuations in response to a number of factors, some of

which are beyond our control, including but not limited to:

dilution caused by our issuance of additional shares of common stock and other forms of equity securities, which we expect to make in connection with future capital financings to fund our operations and growth, to attract and retain valuable personnel and in connection with future strategic partnerships with other companies;

quarterly variations in our revenues and operating expenses as we commence our production and sales;

changes in the valuation of similarly situated companies, both in our industry and in other industries;

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fluctuations in interest rates and the availability of capital in the capital markets;

significant sales of our common stock, including sales by selling shareholders following the registration

of shares under a prospectus.

These and other factors

are largely beyond our control, and the impact of these risks, singly or in the aggregate, may result in material adverse changes

to the market price of our common stock and our results of operations and financial condition.

Our operating results may fluctuate

significantly, and these fluctuations may cause the price of our common stock to decline.

Our operating results

will likely vary in the future primarily as the result of fluctuations in our revenues and operating expenses, including the expenses

that we incur and other factors.

If our results of operations do not meet the expectations of current or potential investors, the

price of our common stock may decline.

Shareholders will experience dilution

upon the exercise of outstanding warrants and options and issuance of common stock under our incentive plans.

significant sales of our common stock, including sales by selling shareholders following the registration of shares under a prospectus.

These and other factors are

largely beyond our control, and the impact of these risks, singly or in the aggregate, may result in material adverse changes to the market

price of our common stock and our results of operations and financial condition.

Our operating results may

fluctuate significantly, and these fluctuations may cause the price of our common stock to decline.

Our operating results will

likely vary in the future primarily as the result of fluctuations in our revenues and operating expenses, including the expenses that

we incur and other factors.

If our results of operations do not meet the expectations of current or potential investors, the price of

our common stock may decline.

Shareholders will experience

dilution upon the exercise of outstanding warrants and options and issuance of common stock under our incentive plans.

As of December 31, 2020,

we had options for 22,492 shares of common stock outstanding under our 2012 Amended and Restated Stock Incentive Plan and

options for an additional 11,712 shares of common stock outstanding under our 2016 Non-Qualified Stock Option Plan.

our 2020 Stock Incentive Plan (the “

2020 Equity Plan”) was approved by written consent of

a majority of shareholders of record as of November 12, 2019 and adopted by the Board on December 5, 2019.

O n February 26,

2020, the Board granted an aggregate amount of 240,000 stock options to purchase shares of the Company’s common stock to

several officers, directors, and employees pursuant to the 2020 Equity Plan.

If the holders of outstanding options exercise those

options or our compensation committee or full board of directors determines to grant additional stock awards under our incentive

plan, shareholders may experience dilution in the net tangible book value of our common stock.

Further, the sale or availability

for sale of the underlying shares in the marketplace as a result of the exercise of existing options and the grant of additional

options could depress our stock price.

We do not expect to pay dividends

in the foreseeable future.

We do not intend to

declare dividends for the foreseeable future, as we anticipate that we will reinvest any future earnings in the development and

growth of our business.

In addition, debt arrangements we may enter into in the future will likely preclude us from paying dividends.

Therefore, investors will not receive any funds unless they sell their common stock, and shareholders may be unable to sell their

shares on favorable terms or at all.

Investors cannot be assured of a positive return on investment or that they will not lose

the entire amount of their investment in our common stock.

We may issue additional stock without

shareholder consent.

Our board of directors

has authority, without action or vote of the shareholders, to issue all or part of our authorized but unissued shares.

shares may be issued in connection with future financing, acquisitions, employee stock plans, or otherwise.

Any such issuance will

dilute the percentage ownership of existing shareholders.

We are also currently authorized to issue up to 20,000,000 shares

of preferred stock.

The board of directors can issue preferred stock in one or more series and fix the terms of such stock without

shareholder approval.

Preferred stock may include the right to vote as a series on particular matters, preferences as to dividends

and liquidation, conversion and redemption rights and sinking fund provisions.

The issuance of preferred stock could adversely

affect the rights of the holders of common stock and reduce the value of the common stock.

In addition, specific rights granted

to holders of preferred stock could discourage, delay or prevent a transaction involving a change in control of our company, even

if doing so would benefit our shareholders.

Such issuance could also discourage proxy contests and make it more difficult for you

and other shareholders to elect directors of your choosing and to cause us to take other corporate actions you desire.

There is currently a limited trading

market for our common stock and we cannot ensure that one will ever develop or be sustained.

To date there has not

been a significant liquid trading market for our common stock.

We cannot predict how liquid the market for our common stock might

We currently do not satisfy the initial listing standards for any major securities exchange, although we intend to apply

for such an exchange listing when we are able.

Currently our common stock is traded on the OTCQB.

Should we fail to remain traded

on the OTCQB or not be able to be traded on the OTCQB, the trading price of our common stock could suffer, the trading market for

our common stock may be less liquid and our common stock price may be subject to increased volatility.

Furthermore, for companies

whose securities are quoted on the OTCQB, it may be more difficult (i) to obtain accurate quotations, (ii) to obtain coverage for

significant news events because major wire services generally do not publish press releases about such companies and (iii) to obtain

needed capital.

Offers or availability for sale of

a substantial number of shares of our common stock may cause the price of our common stock to decline.

If our stockholders

sell substantial amounts of our common stock in the public market, or upon the expiration of any statutory holding period under

Rule 144, or issued upon the exercise of outstanding options or warrants, it could create a circumstance commonly referred

to as an “overhang”

and in anticipation of which the market price of our common stock could fall.

The existence of

an overhang, whether or not sales have occurred or are occurring, also could hinder our ability to raise additional financing through

the sale of equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate.

we had options for 12,027 shares of common stock outstanding under our 2012 Amended and Restated Stock Incentive Plan and options

for an additional 8,347 shares of common stock outstanding under our 2016 Non-Qualified Stock Option Plan.

In addition, our 2020 Stock

Incentive Plan (the “

2020 Equity Plan”) was approved by written consent of a majority of shareholders

of record as of November 12, 2019 and adopted by the Board on December 5, 2019, and on October 1, 2020, January 4, 2021 and again on March

19, 2021, the Board approved an increase in the number of shares of common stock reserved under the 2020 Plan, from 320,000 shares to

a total of 814,150 shares.

The increase remains subject to shareholder approval, to be provided, if at all, by October 1, 2021.

of December 31, 2020, we had options for 439,151 shares of common stock outstanding under our 2020 Equity Plan .

If the holders

of outstanding options exercise those options or our compensation committee or full board of directors determines to grant additional

stock awards under our incentive plan, shareholders may experience dilution in the net tangible book value of our common stock.

the sale or availability for sale of the underlying shares in the marketplace as a result of the exercise of existing options and the

grant of additional options could depress our stock price.

UNRESOLVED STAFF COMMENTS

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors